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As filed with the U.S. Securities and Exchange Commission on August 22, 2025.

Registration No. 333-   

 

 
 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

LB Pharmaceuticals Inc

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   2834   81-1854347

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

LB Pharmaceuticals Inc

One Pennsylvania Plaza, Suite 1025

New York, NY 10119

Tel: (212) 605-0300

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

Heather Turner

Chief Executive Officer

One Pennsylvania Plaza, Suite 1025

New York, NY 10119

Tel: (212) 605-0300

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

 

 

Copies to:

 

Divakar Gupta

Brandon Fenn

Marc Recht

Minkyu Park

Cooley LLP

55 Hudson Yards

New York, NY 10001

Tel: (212) 479-6000

 

Gad Soffer

Chief Business Officer

One Pennsylvania Plaza, Suite 1025

New York, NY 10119

Tel: (212) 605-0300

 

William C. Hicks

John T. Rudy

Alok A. Choksi

Samantha M. Silver

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

One Financial Center

Boston, MA 02111

Tel: (617) 542-6000

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

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. ☐

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, a 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   ☒    Smaller reporting company   ☒
     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 Securities and Exchange Commission acting pursuant to said section 8(a), may determine.

 

 
 


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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 declared effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion. Dated    , 2025

    Shares

 

LOGO

Common Stock

 

 

This is the initial public offering of LB Pharmaceuticals Inc. We are offering      shares of our common stock. The initial public offering price is expected to be between $   and $   per share.

Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on the Nasdaq Global Market, or Nasdaq, under the symbol “LBRX.” We believe that upon the completion of this offering, we will meet the standards for listing on Nasdaq, and the completion of this offering is contingent upon such listing.

We are an “emerging growth company” and a “smaller reporting company” under applicable Securities and Exchange Commission rules and have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.

Investing in our common stock involves a high degree of risk. See the section titled “Risk Factors” beginning on page 12 to read about factors you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission nor any other state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

     Per Share      Total  

Initial public offering price

   $           $       

Underwriting discounts and commissions(1)

   $           $       

Proceeds, before expenses, to us

   $           $       
 
  (1)

See the section titled “Underwriting” for additional information regarding compensation payable to the underwriters.

 

 

We have granted the underwriters an option for a period of 30 days to purchase up to      additional shares of common stock from us at the initial public offering price, less the underwriting discounts and commissions.

The underwriters expect to deliver the shares of common stock to purchasers on    , 2025 through the book-entry facilities of The Depository Trust Company.

 

 

 

Leerink Partners  

Piper Sandler

  Stifel

 

 

Prospectus Dated    , 2025


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TABLE OF CONTENTS

 

Prospectus Summary

     1  

The Offering

     8  

Summary Financial Information

     10  

Risk Factors

     12  

Special Note Regarding Forward-Looking Statements

     82  

Market and Industry Data

     84  

Use of Proceeds

     85  

Dividend Policy

     87  

Capitalization

     88  

Dilution

     91  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     94  

Business

     112  

Management

     176  

Executive Compensation

     184  

Certain Relationships and Related Party Transactions

     204  

Principal Stockholders

     208  

Description of Capital Stock

     211  

Shares Eligible for Future Sale

     219  

Material U.S. Federal Income Tax Consequences to Non-U.S. Holders

     222  

Underwriting

     227  

Legal Matters

     235  

Experts

     235  

Where You Can Find Additional Information

     235  

Index to Financial Statements

     F-1  

 

 

We have not, and the underwriters have not, authorized anyone to provide you with information other than in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for and cannot provide any assurance as to the reliability of any other information others may give you. We are not, and the underwriters are not, making an offer to sell shares of our common stock in any jurisdiction where the offer or sale is not permitted. The information in this prospectus or any free writing prospectus is accurate only as of its date, regardless of its time of delivery or of any sale of shares of our common stock. Our business, financial condition, results of operations, and prospects may have changed since that date.

For investors outside the United States: We have not, and the underwriters have not, done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of our common stock and the distribution of this prospectus outside of the United States.

 


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PROSPECTUS SUMMARY

This summary highlights selected information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus. You should carefully consider, among other things, the sections titled Risk Factors,” “Special Note Regarding Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements and the related notes included elsewhere in this prospectus. Unless the context otherwise requires, the terms the “Company,” “LB Pharmaceuticals,” “we,” “us,” “our,” and similar references in this prospectus refer to LB Pharmaceuticals Inc.

Overview

We are a clinical-stage biopharmaceutical company developing novel therapies for the treatment of schizophrenia, bipolar depression, and other neuropsychiatric diseases. We are building a pipeline that leverages the broad therapeutic potential of our lead product candidate, LB-102, which we believe has the potential to be the first benzamide antipsychotic drug approved for neuropsychiatric disorders in the United States. LB-102 is a new chemical entity and a methylated derivative of amisulpride, a second-generation antipsychotic drug approved in over 50 countries, not including the United States, because the development and regulatory requirements of the U.S. Food and Drug Administration, or FDA, for amisulpride were incompatible with patent coverage on the drug. Amisulpride is a generic drug that has been extensively used in clinical practice following its initial approval in France in the 1980s, generating at least two million monthly prescriptions in 2023 in a subset of 16 continental European countries. Among these European prescriptions for amisulpride, our data suggest that approximately 60% are for schizophrenia and schizoaffective disorders, approximately 20% are for mood disorders, approximately 14% are for anxiety, and the remainder are for a variety of other indications. We developed LB-102 in order to address the limitations of amisulpride with a differentiated therapeutic profile and strong intellectual property protection. We believe LB-102’s mechanism of action, data from our recently completed Phase 2 trial of LB-102 in acute schizophrenia, and the legacy of clinical experience with amisulpride support the continued development of LB-102 in schizophrenia and bipolar depression. If successful in treating bipolar depression, we may also develop LB-102 in the treatment of major depressive disorder, or MDD. In the future, we may also develop LB-102 for the treatment of other neuropsychiatric disorders, including schizophrenia with predominantly negative symptoms, Alzheimer’s disease-related agitation and psychosis, manic episodes associated with bipolar disorder, and cognitive impairment associated with schizophrenia, or CIAS. We believe that LB-102, if approved, can become a mainstay of psychiatric practice by offering a potentially attractive alternative to branded and generic therapeutics for the treatment of schizophrenia, bipolar depression, and other neuropsychiatric diseases.

Our product candidate, LB-102, is a Phase 3-ready oral, small molecule for the treatment of acute schizophrenia, defined as a sudden and severe episode of psychotic symptoms, characterized by hallucinations, delusions, and other positive symptoms. Schizophrenia is a chronic, severe, complex, and debilitating psychiatric disorder that affects approximately 1% of the U.S. population and is a leading cause of disability. Symptoms are divided into three categories: (i) psychotic or positive symptoms, which include delusions, hallucinations, thought disorder, and movement disorder; (ii) negative symptoms, which include lack of motivation, interest, or enjoyment in daily activities, withdrawal from social life, and difficulty showing emotions; and (iii) cognitive symptoms, which encompass problems with attention, concentration, and memory. The disease is associated with increased mortality, with approximately 5% of schizophrenia patients dying by suicide, and average overall life expectancy decreasing by as much as 29 years compared to the general population. There is currently no cure for schizophrenia, which means the disease must be managed with life-long therapy, increasing the importance of therapies that can improve compliance rates and dosing challenges.

In January 2025, we announced positive data from our four-week placebo-controlled, double-blinded, Phase 2 trial in the United States, which assessed the safety and efficacy of LB-102 in patients with acute

 

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schizophrenia. Results from the trial demonstrated (i) statistically significant clinical activity at all LB-102 doses tested; (ii) a significant average change in overall symptoms (effect size); (iii) a potentially class-leading tolerability profile among D2/D3 antagonists and partial agonists; and (iv) a potentially differentiated impact on cognition as measured by CogState Computerized Schizophrenia Battery of Tests. The trial achieved its primary endpoint of change in the Positive and Negative Syndrome Scale, or PANSS, a 30-item scale that measures the severity of schizophrenia symptoms, from baseline to Week 4. A statistically significant decrease in symptoms was observed for all three dose cohorts (50 mg, 75 mg, and 100 mg) compared to placebo. Additionally, our Phase 2 trial data showed a statistically significant impact on negative symptoms versus placebo at the 50 mg dose even though the inclusion criteria enriched for patients experiencing predominantly positive symptoms of schizophrenia. An exploratory post-hoc analysis of our Phase 2 data on the treatment effect in patients with negative symptoms at baseline (i.e., those patients with a PANSS Negative Subscore greater than or equal to 24) yielded similar results with a statistically significant impact on negative symptoms versus placebo at the 50 mg dose. LB-102 was generally well tolerated in the clinical trial, with adverse events being mostly transient and mild to moderate in severity. If replicated in our planned Phase 3 trial, we believe this tolerability profile has the potential to be class-leading among D2/D3 antagonists and partial agonists specifically with respect to the rate of sedation and extrapyramidal symptoms, or EPS, a group of movement disorders including involuntary movements, muscle stiffness, and tremors, that, together with sedation, are quite burdensome to patients and can result in discontinuation of treatments. The impact of LB-102 on cognitive function was also evaluated as an exploratory endpoint in this trial. After four weeks of treatment with LB-102, a robust, dose-dependent, and significant treatment effect size was identified in a post-hoc analysis in the completer population for all doses of LB-102 compared with placebo.

We designed our Phase 2 acute schizophrenia trial to be potentially registrational by including a large sample size (n=359), robust statistical analyses, as well as numerous sensitivity analyses. Based on positive end-of-Phase 2 feedback from the FDA, as well as historical precedent, we believe that our Phase 2 acute schizophrenia trial may serve as one of the two pivotal trials required for approval of a new drug application, or NDA, in the United States. As a result, we believe there is a viable path to approval of LB-102 in the United States for the treatment of schizophrenia with a single, six-week Phase 3 trial alongside other planned NDA-enabling studies. However, there is no guarantee that our Phase 2 trial may serve as one of the two pivotal trials required for FDA approval, and in such case, we may be required to conduct an additional pivotal trial in acute schizophrenia. The adequacy of our Phase 2 trial to support registration will be a matter of review by the FDA at the time of NDA submission and will depend on the totality of the data included in our submission, including the results of our planned Phase 3 trial. We are planning to initiate a six-week Phase 3 trial of LB-102 in acute schizophrenia patients in the first quarter of 2026, which we believe, if positive, could be sufficient to support a regulatory application for approval in the United States along with our completed Phase 2 trial and other planned NDA-enabling studies. The Phase 3 trial is anticipated to be a three-arm, inpatient, double-blinded, placebo-controlled, oral once-daily dose of LB-102 in patients with acute schizophrenia, with a six-week treatment duration. We plan to study the effects of 50 mg LB-102 or 100 mg LB-102 versus placebo in this trial, and patients will be randomized in a 1:1:1 ratio across the three arms of the trial. The sample size will be approximately 400 patients, and we plan to conduct this trial at approximately 25 sites entirely in the United States. The primary endpoint of the trial is anticipated to be change from baseline in PANSS at Day 42. We expect to disclose topline data from this Phase 3 trial in the second half of 2027 and, if positive, meet with the FDA in the first quarter of 2028 to discuss the potential for submission of an NDA.

In addition to our clinical development program in schizophrenia, we plan to leverage our expertise in neuropsychiatry and the unique mechanism of action of LB-102 to develop our product candidate in other indications, starting with bipolar depression. Most people living with bipolar depression experience dramatic shifts in mood, energy, and behavior, alternating between manic and depressive states. It is estimated that 2.8%, or approximately seven million Americans, experience bipolar disorder in a year, and approximately 40 million people live with bipolar disorder worldwide. Our initial Phase 2 trial will explore the utility of LB-102 in

 

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controlling the depressive symptoms of the disease. We plan to initiate this potentially registrational Phase 2 trial in bipolar depression in the first quarter of 2026, with topline data expected in the first quarter of 2028.

We believe LB-102’s strong antagonism of the D2, D3, and 5HT7 receptors makes it well suited for treating bipolar depression, providing potential to control psychosis and mania through its effects on D2 and potential for antidepressive and pro-cognitive effects through its antagonism of 5HT7 and D3. Our Phase 2 trial of LB-102 in acute schizophrenia demonstrated strong antipsychotic activity and suggests opportunities for potential differentiation in bipolar depression given the observed tolerability profile (low rates of EPS, sedation, and gastrointestinal side effects) and positive impact on cognition. Amisulpride is approved for the treatment of dysthymia, a form of depression, in certain countries outside of the United States and has been shown to be as effective as certain approved agents for MDD and dysthymia. We believe that results in dysthymia and MDD provide strong scientific and clinical rationale for development of LB-102 in the treatment of depressive episodes associated with bipolar disorder or bipolar depression because episodes of major depression, whether unipolar (as in MDD) or bipolar (as in bipolar depression), are typically characterized by a similar imbalance in the neurotransmitters serotonin, noradrenaline, and dopamine, regardless of the underlying pathophysiology of the disease. There is wide use of amisulpride in bipolar disorder with approximately 3.4% of at least two million monthly prescriptions written for this indication in a select group of European countries including Germany, France, Italy, Spain, and several others. A non-racemic form of amisulpride also showed antidepressant activity in two independent third-party, placebo-controlled bipolar depression trials with an approximately 17- to 18-point reduction in Montgomery–Åsberg Depression Rating Scale, or MADRS, from baseline observed across these studies. Additionally, among the four antipsychotics approved for schizophrenia and MDD or treatment resistant depression that were also studied in late-stage bipolar depression trials (quetiapine, cariprazine, aripiprazole, and olanzapine), three out of four, or 75%, generated positive data for the treatment of bipolar depression. Our planned Phase 2 trial for bipolar depression will utilize a fixed-flexible dose of LB-102. This trial design allows us to evaluate two doses of LB-102 in the trial, thereby increasing the chances for a patient to derive clinical benefit from treatment with LB-102, while retaining the advantages of a two-arm trial, which is known to mitigate the risk of a high placebo rate. Additionally, flexible dose trials typically have better signal detection than fixed dose trials for depression, as flexible dose trials lower the magnitude of symptom reduction with placebo. We believe LB-102 has the potential to provide improved tolerability and clinical activity in bipolar depression compared to currently available treatments worldwide, which are associated with troubling adverse events and insufficient efficacy for certain symptoms, including cognitive impairment associated with the disease.

We are also developing a long-acting injectable, or LAI, formulation of LB-102, which may improve compliance, a common issue in patients with schizophrenia and bipolar disorder. We believe an effective LAI form of LB-102 has the potential to benefit patients worldwide, as relatively few approved agents are available as long-acting formulations and there are no benzamide class LAIs currently available or in development worldwide. The American Psychiatric Association recommends injectable formulations in circumstances where doing so will improve adherence, decrease mortality, reduce hospitalization risk, and decrease treatment discontinuation rates. We have commenced LAI formulation development and expect to continue these efforts in 2026.

The U.S. market for branded antipsychotic drugs was approximately $12 billion as of 2024. Despite the widespread use of generic antipsychotic drugs, several of these branded drugs each generate U.S. sales in excess of $1 billion annually. Additionally, while available therapeutics to treat schizophrenia and bipolar depression demonstrate clinical benefit, a significant unmet need remains for a treatment that balances tolerability with clinically meaningful efficacy for the chronic management of symptoms related to both psychosis and mood disorders.

 

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Our Team and History

Our leadership and advisors are composed of individuals with extensive experience in the discovery, development, and commercialization of neuropsychiatric therapeutics.

Heather Turner, J.D., our Chief Executive Officer, was previously President and Chief Executive Officer of Carmot Therapeutics Inc., prior to its acquisition by Roche Pharmaceuticals for $3.1 billion. Anna Eramo, M.D., our Chief Medical Officer, previously led U.S. clinical and medical affairs at Lundbeck A/S, where her primary responsibilities extended across its U.S. neurology and psychiatric portfolio of products, including brexpiprazole (which is approved in schizophrenia, MDD, and agitation associated with Alzheimer’s disease), vortioxetine (which is approved for MDD), and Abilify Maintena (an LAI form of aripiprazole that is approved for schizophrenia and bipolar 1). Other members of our team held various positions at Celgene Corporation, Genzyme Corporation, and ImmunoGen, Inc., with experience working on late-stage development and commercial products.

Our Chairman of our board of directors, Scott Garland, most recently served as Chief Executive Officer of PACT Pharma, Inc. Previously, Scott was the Chief Executive Officer of Portola Pharmaceuticals, Inc., which Alexion Pharmaceuticals, Inc. acquired for $1.4 billion in 2020. Prior to that, he was President of Relypsa Inc., which Vifor Pharma AG acquired for $1.5 billion in 2016. He is joined on our board of directors by Robert Ruffolo, Ph.D., who previously served as President of Research and Development at Wyeth Pharmaceuticals, Inc., Zachary Prensky, co-founder of LB Pharmaceuticals and former manager of a family office with a heavy focus on investing in the biotechnology and pharmaceutical sectors, and other board representatives from our major investors.

We are advised by renowned experts in treating neuropsychiatric diseases. John Kane, M.D., is a Professor of Psychiatry and Molecular Medicine at the Donald and Barbara Zucker School of Medicine at Hofstra/Northwell and served as Chair of Psychiatry at The Zucker Hillside Hospital for 34 years. Christoph U. Correll, M.D., is a Professor of Psychiatry at the Donald and Barbara Zucker School of Medicine at Hofstra/Northwell. Maurizio Fava, M.D., is the Psychiatrist-In-Chief, Department of Psychiatry and Director, Division of Clinical Research at Mass General Research Institute. Dr. Fava is also the Executive Director of the Clinical Trials Network & Institute, as well as the Associate Dean for Clinical & Translational Research and Slater Family Professor of Psychiatry at Harvard Medical School. Luca Pani, M.D. is Professor of Clinical Psychiatry at the University of Miami and Pharmacology at the University of Modena & Reggio Emilia, former Italy’s AIFA Director General and EMA CHMP/SAWP Representative, with expertise in pre-clinical and clinical CNS drug development strategies.

Since our inception, we have raised over $120 million from a leading syndicate of investors, including Deep Track Capital, Pontifax, TCG Crossover Fund, and Vida Ventures. Prospective investors should not rely on the investment decisions of our existing investors, as these investors may have different risk tolerances and have received their shares in prior offerings at prices lower than the price offered to the public in this offering.

Our Strategy

Our strategy is to develop LB-102 for the treatment of schizophrenia and mood disorders initially and subsequently for other neuropsychiatric disorders in the United States and internationally. Key elements of our strategy include:

 

  •  

Achieve regulatory approval for LB-102 for the treatment of schizophrenia.

 

  •  

Advance LB-102 as a potential treatment across the spectrum of disease for patients with schizophrenia.

 

  •  

Expand development of LB-102 into bipolar depression and other psychosis and mood disorders.

 

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  •  

Extend the life-cycle and global reach of LB-102 by advancing alternate formulations.

 

  •  

Maximize the commercial opportunity of LB-102.

Risk Factor Summary

Investing in our common stock involves significant risks. You should carefully consider the risks described in the section titled “Risk Factors” immediately following this prospectus summary and elsewhere in this prospectus before making a decision to invest in our common stock. If we are unable to successfully address these risks and challenges, our business, financial condition, results of operations, or prospects could be materially and adversely affected. In such case, the trading price of our common stock would likely decline, and you may lose all or part of your investment. Below is a summary of some of the risks we face.

 

  •  

We are a clinical-stage biopharmaceutical company with a limited operating history and no history of commercializing products, which may make it difficult to evaluate our approach to the discovery and development of our product candidate and the prospects for our future viability.

 

  •  

We have incurred substantial losses since our inception. We anticipate incurring substantial and increasing losses for the foreseeable future and may never achieve or maintain profitability.

 

  •  

As a result of our history of losses and negative cash flows from operations, our consolidated financial statements contain a statement regarding a substantial doubt about our ability to continue as a going concern.

 

  •  

We will require substantial additional financing in addition to the proceeds of this offering to achieve our goals, and failure to obtain additional capital when needed, or on acceptable terms to us, could cause us to delay, limit, reduce, or terminate our product development or future commercialization efforts.

 

  •  

We have concentrated our research and development efforts on the treatment of psychiatric and neurological conditions, a field that faces certain challenges in drug development.

 

  •  

Preclinical and clinical development involves a lengthy and expensive process, with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial or real-world results. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our current product candidate or any future product candidates.

 

  •  

Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming, and uncertain and may prevent us or any future collaboration partners from obtaining approvals for the commercialization of our product candidate.

 

  •  

Even if our product candidate receives regulatory approval, it may fail to achieve the degree of market acceptance by physicians, patients, and others in the medical community necessary for commercial success, in which case we may not generate significant revenues or become profitable.

 

  •  

The successful commercialization of our product candidate, if approved, will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels, and favorable pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our product candidate could limit our ability to market those products and decrease our ability to generate revenue.

 

  •  

Our business depends on the success of our product candidate. If we are ultimately unable to successfully commercialize our product candidate, or experience significant delays in doing so, our business will be materially harmed.

 

  •  

We rely on, and intend to continue to rely on, our internal clinical development expertise to conduct our current and future clinical trials. This model includes internal teams and systems as well as external vendors and CROs to comprise a full clinical trial team. If our clinical trial team does not comply with

 

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applicable regulatory requirements, meet expected deadlines, or run trials effectively, our development programs and our ability to seek or obtain regulatory approval for or commercialize our product candidate may be delayed.

 

  •  

The loss of our third-party manufacturers or suppliers, or their failure to comply with applicable regulatory requirements or to supply sufficient quantities at acceptable quality levels or prices, within acceptable timeframes, or at all, would materially and adversely affect our business.

 

  •  

The obligations from our royalty agreements may be a drain on our cash resources or may cause us to incur debt obligations to satisfy the payment obligations.

 

  •  

Competitive products may reduce or eliminate the commercial opportunity for our product candidate for our current or future indications. If our competitors develop technologies or product candidates more rapidly than we do, or their technologies are more effective or safer than ours, our ability to develop and successfully commercialize our current products may be adversely affected.

 

  •  

We are dependent on the services of our management and other clinical and scientific personnel, and if we are not able to retain these individuals or recruit additional management or clinical and scientific personnel, our business will suffer.

 

  •  

If we are unable to obtain and maintain sufficient intellectual property protection for our technologies, and product candidate and any future product candidates we may develop, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors or other third parties could develop and commercialize products similar or identical to ours, and our ability to successfully develop and commercialize our product candidate may be adversely affected.

 

  •  

Patent terms may be inadequate to protect our competitive position on our product candidate for a sufficient amount of time.

Corporate Information and Trademarks

LB Pharmaceuticals Inc was incorporated under the laws of the State of Delaware in September 2015. Our principal executive office is located at One Pennsylvania Plaza, Suite 1025, New York, NY 10119. Our telephone number is (212) 605-0300. Our website address is https://lbpharma.us. Information contained in, or accessible through, our website does not constitute a part of, and is not incorporated into, this prospectus.

The LB Pharmaceuticals logo, the name LB Pharmaceuticals, and other trademarks of LB Pharmaceuticals Inc appearing in this prospectus are the property of LB Pharmaceuticals Inc. Solely for convenience, trade names, trademarks, and service marks contained in this prospectus may appear without the “®” or “™” symbols. Such references are not intended to indicate, in any way, that the respective owners will not assert, to the fullest extent possible under applicable law, their rights to those trade names, trademarks, and service marks.

Implications of Being an Emerging Growth Company and a Smaller Reporting Company

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, and we may remain an emerging growth company for up to five years following the completion of this offering. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation-related information that would be

 

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required if we were not an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period and, therefore, we are not subject to the same requirements to adopt new or revised accounting standards as other public companies that are not emerging growth companies; however, we may adopt certain new or revised accounting standards early. We would cease to be an emerging growth company upon the earliest to occur of: (i) the last day of the fiscal year in which we have $1.235 billion or more in annual revenue; (ii) the date on which we first qualify as a large accelerated filer under the rules of the SEC; (iii) the date on which we have, in any three-year period, issued more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of this offering.

We are also a “smaller reporting company” as defined in the Securities Exchange Act of 1934, as amended, or Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year, and the market value of our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

 

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THE OFFERING

 

Common stock offered by us

    shares.

 

Option to purchase additional shares of common stock

The underwriters have a 30-day option to purchase up to     additional shares of our common stock at the initial public offering price less the underwriting discounts and commissions.

 

Total common stock to be outstanding immediately after this offering

    shares, or    shares if the underwriters exercise their option to purchase additional shares of our common stock in full.

 

Use of proceeds

We estimate that our net proceeds from this offering will be approximately $  (or approximately $  if the underwriters exercise in full their option to purchase additional shares of our common stock), based on the assumed initial public offering price of $  per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

 

  We intend to use the net proceeds of this offering, together with our existing cash and cash equivalents, to advance the clinical development of LB-102 to treat acute schizophrenia and bipolar depression and utilize the remainder for general corporate purposes.

 

  See the section titled “Use of Proceeds” for additional information.

 

Risk factors

You should carefully read and consider the information set forth in the section titled “Risk Factors,” together with all of the other information set forth in this prospectus, before deciding whether to invest in our common stock.

 

Proposed Nasdaq trading symbol

“LBRX.”

The number of shares of our common stock to be outstanding after this offering is based on 85,094,050 shares of common stock outstanding as of June 30, 2025, after giving effect to the conversion of all outstanding shares of our convertible preferred stock into 78,072,306 shares of common stock upon the closing of this offering and excludes:

 

  •  

11,923,082 shares of common stock issuable upon the exercise of outstanding stock options under our 2023 Stock Incentive Plan, as amended, or the 2023 Plan, as of June 30, 2025, at a weighted-average exercise price of $1.50 per share;

 

  •  

779,500 shares of common stock issuable upon the exercise of outstanding stock options under our 2018 Stock Incentive Plan, or the 2018 Plan, as of June 30, 2025, at a weighted-average exercise price of $2.38 per share;

 

  •  

290,000 shares of common stock issuable upon the exercise of outstanding stock options under our 2017 Stock Incentive Plan, or the 2017 Plan, as of June 30, 2025, at a weighted-average exercise price of $1.79 per share;

 

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  •  

    shares of common stock issuable upon the exercise of outstanding stock options granted subsequent to June 30, 2025, at a weighted-average exercise price of $     per share;

 

  •  

695,961 shares of our common stock issuable upon the exercise of Class A common stock warrants outstanding as of June 30, 2025, with an exercise price of $0.01 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—Class A Warrants;”

 

  •  

882,948 shares of our common stock issuable upon the exercise of Class B common stock warrants outstanding as of June 30, 2025, with an exercise price of $0.01 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—Class B Warrants;”

 

  •  

1,528,632 shares of our common stock issuable to Maxim Partners LLC upon the exercise of common stock warrants outstanding as of June 30, 2025, with an exercise price of $0.01 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—Maxim Warrants;”

 

  •  

71,761 shares of our common stock issuable upon the exercise of Series B-1 common stock warrants outstanding as of June 30, 2025, with an exercise price of $0.01 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—Series B-1 Warrants;”

 

  •  

98,456 shares of our common stock issuable upon the exercise of New Series B common stock warrants outstanding as of June 30, 2025, with an exercise price of $1.50 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—New Series B Warrants;”

 

  •  

    shares of common stock reserved for future issuance under our 2025 Equity Incentive Plan, or 2025 Plan, which became effective upon the execution and delivery of the underwriting agreement for this offering, as well as any future automatic annual increases in the number of shares of common stock reserved for issuance under our 2025 Plan, as more fully described in the section titled “Executive Compensation—Equity Benefit Plans;” and

 

  •  

    shares of common stock reserved for future issuance under our 2025 Employee Stock Purchase Plan, or ESPP, which became effective upon the execution and delivery of the underwriting agreement for this offering, as well as any future automatic annual increases in the number of shares of common stock reserved for future issuance under our ESPP, as more fully described in the section titled “Executive Compensation—Equity Benefit Plans.”

Unless otherwise indicated, all information contained in this prospectus assumes or gives effect to:

 

  •  

a      -for-      reverse stock split of our common stock to be effected prior to the closing of this offering;

 

  •  

the filing of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws immediately prior to the closing of this offering;

 

  •  

no exercise of the outstanding options or warrants described above subsequent to June 30, 2025; and

 

  •  

no exercise by the underwriters of their option to purchase additional shares of our common stock.

 

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SUMMARY FINANCIAL INFORMATION

The following tables set forth a summary of our financial data as of, and for the periods ended on, the dates indicated. We have derived the summary statements of operations data for the years ended December 31, 2024 and 2023 from our audited financial statements included elsewhere in this prospectus. The following summary condensed statements of operations data for the six months ended June 30, 2025 and 2024, and the summary condensed balance sheet data as of June 30, 2025 have been derived from our unaudited condensed financial statements included elsewhere in this prospectus. Our financial statements appearing elsewhere in this prospectus have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. Our unaudited condensed financial statements were prepared on a basis consistent with our audited consolidated financial statements and include, in our opinion, all adjustments of a normal and recurring nature that are necessary for the fair statement of the financial information set forth in those statements included elsewhere in this prospectus.

Our historical results are not necessarily indicative of results that should be expected in any future period. You should read the following summary financial data together with our financial statements and related notes included elsewhere in this prospectus and in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

    Year Ended
December 31,
    Six Months Ended
June 30,
 
    2024     2023     2025     2024  
    (in thousands, except share and per share data)  

Statements of Operations Data

       

Operating expenses:

       

Research and development

  $ 51,171     $ 7,845     $ 5,842     $ 40,131  

General and administrative

    13,659       3,531       5,446       3,077  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total operating loss

  $ (64,830 )    $ (11,376 )    $ (11,288 )    $ (43,208 ) 

Non-operating income (expense):

       

Interest income

    1,721       811       413       1,039  

Interest expense

    —        (4,825 )      —        —   

Loss on extinguishment of debt

    —        (7,435 )      —        —   

Realized gain on sale of marketable securities, net

    955       328       119       90  

(Loss) gain on change in fair value of derivative instruments

    (947 )      16,257       579       (1,771 ) 

Other expenses

    —        (34 )      —        —   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total non-operating income

  $ 1,729     $ 5,102     $ 1,111     $ (642 ) 
 

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax

  $ (63,101 )    $ (6,274 )    $ (10,177 )    $ (43,850 ) 

Income tax provision

    1       1       —        —   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

  $ (63,102 )    $ (6,275 )    $ (10,177 )    $ (43,850 ) 
 

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share, basic and diluted

  $ (6.20 )    $ (0.78 )    $ (1.02 )    $ (4.40 ) 

Weighted average shares outstanding used in calculating net loss per share, basic and diluted

    10,175,580       8,011,802       10,023,891       9,972,771  
 

 

 

   

 

 

   

 

 

   

 

 

 

Pro forma net loss per share, basic and diluted (unaudited)(1)

  $         $      
 

 

 

     

 

 

   

Pro forma weighted average shares outstanding used in calculating net loss per share, basic and diluted (unaudited)(1)

       
 

 

 

     

 

 

   
 
(1)

The unaudited basic and diluted pro forma net loss per share were computed using the weighted-average shares

 

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  of common stock outstanding, including the pro forma effect of the conversion of all outstanding redeemable convertible preferred stock into shares of common stock. Pro forma basic and diluted net loss per share does not include the shares expected to be sold in this offering.

 

     As of June 30, 2025  
     Actual     Pro Forma(1)      Pro Forma As
Adjusted(2)(3)
 
     (in thousands)  

Balance Sheet Data

       

Cash and cash equivalents

   $ 14,225     $         $    

Working capital(4)

     10,875       

Total assets

     19,248       

Derivative liability – warrants

     1,925       

Total liabilities

     8,862       

Redeemable convertible preferred stock

     114,259       

Total stockholders’ (deficit) equity

     (103,873 )      
 
(1)

The pro forma balance sheet data gives effect to (i) the automatic conversion of all of our outstanding shares of redeemable convertible preferred stock into an aggregate of 78,072,306 shares of common stock immediately upon the closing of this offering and the related reclassification of the carrying value of the redeemable convertible preferred stock and preferred stock warrant liability to stockholders’ equity upon the closing of this offering and (ii) the filing of our amended and restated certificate of incorporation immediately prior to the closing of this offering.

(2)

The pro forma as adjusted balance sheet data gives effect to (i) the pro forma adjustments set forth in footnote (1) above and (ii) the issuance and sale of     shares of common stock in this offering at the assumed initial public offering price of $   per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. Each $1.00 increase (decrease) in the assumed initial public offering price of $   per share would increase (decrease) each of our pro forma as adjusted cash and cash equivalents and marketable securities, total assets, working capital, and total stockholders’ (deficit) equity by approximately $   million, assuming that the number of shares offered, as set forth on the cover of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions payable by us. Each increase (decrease) of 1.0 million shares in the number of shares offered by us would increase (decrease) each of our pro forma cash and cash equivalents and marketable securities, total assets, working capital, and total stockholders’ (deficit) equity by approximately $   million, assuming the assumed initial public offering price per share remains the same and after deducting the estimated underwriting discounts and commissions payable by us.

(3)

This pro forma as adjusted information is illustrative only and will depend on the actual initial public offering price and other terms of this offering determined at pricing.

(4)

Working capital is defined as current assets less current liabilities. See our financial statements and the related notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities.

 

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information contained in this prospectus, including our financial statements and their related notes included elsewhere in this prospectus and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before making an investment decision. If any of the following risks actually occurs, our business, prospects, operating results, and financial condition could suffer materially, the trading price of our common stock could decline, and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial also may materially and adversely affect our business, prospects, operating results, and financial condition.

Risks Related to Our Limited Operating History, Financial Position, and Need for Capital

We are a clinical-stage biopharmaceutical company with a limited operating history and no history of commercializing products, which may make it difficult to evaluate our approach to the discovery and development of our product candidate and the prospects for our future viability.

We are a clinical-stage biopharmaceutical company with a limited operating history. We were formed in 2015 and our operations to date have been limited to organizing, staffing, and financing our company, conducting research and development activities, conducting clinical trials for our product candidate, and establishing our intellectual property portfolio. If we are successful in achieving regulatory approval for our product candidate in the future, we will eventually need to transition from a company with a development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.

Our approach to the discovery and development of our product candidate is unproven, and we do not know whether we will be able to develop any product candidate that succeeds in clinical development or products of commercial value. Moreover, as an organization, we have not yet demonstrated an ability to obtain regulatory approvals, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, conduct sales and marketing activities necessary for successful product commercialization, or generate revenues. We may encounter unforeseen expenses, difficulties, complications, delays, and other known or unknown factors in achieving our business objectives. Accordingly, you should consider our prospects in light of the costs, uncertainties, delays, and difficulties frequently encountered by companies in clinical development, especially clinical-stage biopharmaceutical companies such as ours. Any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.

We have incurred substantial losses since our inception. We anticipate incurring substantial and increasing losses for the foreseeable future and may never achieve or maintain profitability.

Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate efficacy or an acceptable safety profile, gain regulatory approval, and become commercially viable. We have no products approved for commercial sale and have not generated any revenue from product sales to date. As a result, we are not profitable, have incurred substantial losses in each period since our inception, and we expect to incur significant losses for the foreseeable future.

For the years ended December 31, 2024 and 2023, and the six months ended June 30, 2025, our net losses were approximately $63.1 million, $6.3 million, and $10.2 million, respectively. As of June 30, 2025, we had an accumulated deficit of approximately $114.5 million. Substantially all of our losses have resulted from expenses incurred in connection with the development of our pipeline, research and development, clinical trial costs, and from general and administrative costs associated with our operations. We expect to incur significant losses for

 

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the foreseeable future, and we expect these losses to increase as we continue our development of our product candidate. We anticipate that our expenses will increase substantially if, and as, we:

 

  •  

conduct further clinical trials for LB-102 in patients with schizophrenia, initiate clinical development of LB-102 in bipolar depression and other neuropsychiatric indications, and advance our preclinical programs into the clinic;

 

  •  

identify additional product candidates and acquire rights from third parties to those product candidates through licenses or other acquisitions, and conduct development activities, including preclinical studies and clinical trials;

 

  •  

procure the manufacturing of preclinical, clinical, and commercial supply of our current and future product candidates;

 

  •  

seek regulatory approvals for our product candidate or any future product candidates;

 

  •  

commercialize our current product candidate or any future product candidates, if approved;

 

  •  

take steps toward our goal of being an integrated biopharmaceutical company capable of supporting commercial activities, including establishing sales, marketing and distribution infrastructure;

 

  •  

attract, hire, and retain qualified clinical, scientific, operations, and management personnel;

 

  •  

add and maintain operational, financial, and information management systems;

 

  •  

protect, maintain, enforce, and defend our rights in our intellectual property portfolio;

 

  •  

defend against third-party interference, infringement, and other intellectual property claims, if any;

 

  •  

address any competing therapies and market developments;

 

  •  

experience any delays in our preclinical studies or clinical trials and regulatory approval for our product candidate due to macroeconomic conditions, geopolitical conflicts, or other global events, including any health epidemics and their residual effects; and

 

  •  

incur additional costs, including legal, accounting, and other expenses, associated with operating as a public company following the completion of this offering.

We have no product candidates approved for commercial sale and have not generated any revenue from the sale of products. Our ability to become and remain profitable depends on our ability to generate revenue. We do not expect to generate significant revenue, if any, unless and until we, either alone or with a collaborator, are able to obtain regulatory approval for, and successfully commercialize, our product candidate for its initial and potential additional indications, or any other product candidates we may develop in the future.

Successful commercialization will require achievement of many key milestones, including demonstrating each product candidate’s safety and efficacy in clinical trials, obtaining regulatory approval for these product candidates, manufacturing, marketing, and selling those products for which we, or any of our future collaborators, may obtain regulatory approval, satisfying any post-marketing requirements, and obtaining reimbursement for our products from private insurance or government payors. Because of the uncertainties and risks associated with these activities, we are unable to accurately and precisely predict the timing and amount of revenues, the extent of any further losses, or if or when we might achieve profitability. We and any future collaborators may never succeed in these activities and, even if we do, or any future collaborators do, we may never generate revenues that are large enough for us to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Additionally, our expenses could increase if we are required by the FDA or any comparable foreign regulatory authority to perform clinical trials in addition to those currently expected, or if there are any delays in completing our clinical trials or in the nonclinical or manufacturing-related activities associated with the development of our product candidate.

Even if we succeed in commercializing LB-102, we expect to incur substantial development costs and other expenditures to develop and market additional product candidates. We may also encounter unforeseen expenses,

 

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difficulties, complications, delays, and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue or raise additional capital. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and our working capital. Our failure to become and remain profitable may depress the market price of our common stock and could impair our ability to raise capital, expand our business, diversify our product offerings, or continue our operations. If we continue to suffer losses as we have in the past, you may not receive any return on your investment and may lose your entire investment.

As a result of our history of losses and negative cash flows from operations, our financial statements contain a statement regarding a substantial doubt about our ability to continue as a going concern.

Our history of operating losses and negative cash flows from operations combined with our anticipated use of cash to fund operations raises substantial doubt about our ability to continue as a going concern as our existing cash and cash equivalents of $14.2 million as of June 30, 2025 will not be sufficient to meet operating and capital requirements for at least 12 months from the date of issuance of our audited financial statements. Based on our current operating plan, we will need to raise additional financing to continue our products’ development for the foreseeable future, and until we become profitable. Our future viability as an ongoing business is dependent on our ability to generate cash from our operating activities or to raise additional capital to finance our operations.

If we are unable to raise additional capital as and when needed, our business, financial condition and results of operations will be materially and adversely affected, and we may be forced to delay our development efforts, limit our activities and reduce research and development costs. If we are unable to continue as a going concern, we may have to liquidate our assets, and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements. The inclusion of a going concern explanatory paragraph by our independent registered public accounting firm, our lack of cash resources and our potential inability to continue as a going concern may materially adversely affect our share price and our ability to raise new capital, enter into licensing and collaboration arrangements or other contractual relationships with third parties and otherwise execute our development strategy.

We will require substantial additional financing in addition to the proceeds of this offering to achieve our goals, and failure to obtain additional capital when needed, or on acceptable terms to us, could cause us to delay, limit, reduce, or terminate our product development or future commercialization efforts.

Our operations have consumed substantial amounts of cash since our inception. We expect to continue to spend substantial amounts of cash to conduct further research and development, preclinical studies, and clinical trials of our current and any future product candidates, to seek regulatory approvals for our product candidate, and to launch and commercialize any products if we receive regulatory approval.

As of June 30, 2025, we had $14.2 million of cash and cash equivalents. Based upon our current operating plan, we believe that our existing cash and cash equivalents as of the date of this prospectus will enable us to fund our operating expenses and capital expenditure requirements for at least the next twelve months. In addition, based upon our current operating plan, we believe that the net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements through. Our future capital requirements and the period for which our existing resources will support our operations may vary significantly from what we expect, and we will, in any event, require additional capital in order to complete clinical development of our current program. Our monthly spending levels will vary based on new and ongoing development and corporate activities. Because the length of time and activities associated with development of our programs and product candidate are highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing and future commercialization activities, if any. Our future capital requirements will depend on many factors, including:

 

  •  

the scope, timing, progress, costs, and results of discovery, preclinical development, and clinical trials for our current or future product candidates;

 

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  •  

the number of clinical trials required for regulatory approval of our current or future product candidates, which may differ between the United States and other countries or regions;

 

  •  

the costs, timing, and outcome of regulatory review of any of our current or future product candidates;

 

  •  

the costs associated with acquiring or licensing additional product candidates, technologies, or assets, including the timing and amount of any milestones, royalties, or other payments due in connection with our acquisitions and licenses;

 

  •  

the cost of manufacturing clinical and commercial supplies and any other activities related thereto of our current or future product candidates;

 

  •  

the costs and timing of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights, and defending any intellectual property-related claims, including any claims by third parties that we are infringing upon their intellectual property rights;

 

  •  

our ability to maintain existing, and establish new, strategic collaborations or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty, or other payments due under any such agreement;

 

  •  

the costs and timing of future commercialization activities, including manufacturing, marketing, sales, and distribution, for any product candidate for which we receive marketing approval;

 

  •  

the revenue, if any, received from commercial sales of the product candidate(s) for which we receive marketing approval;

 

  •  

expenses to attract, hire, and retain skilled personnel for us to grow as an organization and achieve our business objectives;

 

  •  

the costs of operating as a public company;

 

  •  

our ability to establish a commercially viable pricing structure and obtain approval for coverage and adequate reimbursement from third-party and government payors for any products that receive marketing approval;

 

  •  

our ability to mitigate the impact of adverse macroeconomic conditions or geopolitical events, including any health epidemics and their residual effects, the ongoing conflicts between Ukraine and Russia and between Israel and Hamas, bank failures, or inflation and increased interest rates, on our preclinical and clinical development or operations;

 

  •  

the effect of competing technological and market developments; and

 

  •  

the extent to which we acquire or invest in businesses, products, and technologies.

We will require substantial additional capital in addition to the proceeds of this offering to achieve our business objectives. Additional funds may not be available on a timely basis, on favorable terms or at all, and such funds, if raised, may not be sufficient to enable us to continue to implement our long-term business strategy. Market volatility resulting from adverse macroeconomic conditions or geopolitical events, including the ongoing war between Ukraine and Russia and the war in the Middle East, bank failures, inflation, increased interest rates, or other factors, may further adversely impact our ability to access capital as and when needed. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings, or other capital sources, including potential collaborations, licenses, and other similar arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a holder of our common stock. Any future debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, selling or licensing our assets, making capital expenditures, declaring dividends, or encumbering our assets to secure future indebtedness. Such restrictions could adversely impact our ability to conduct our operations and execute our business plan.

 

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If we raise additional funds through future collaborations, licenses, and other similar arrangements, we may have to relinquish valuable rights to our future revenue streams or product candidates, or grant licenses on terms that may not be favorable to us and/or that may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed or on terms acceptable to us, we would be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We have concentrated our research and development efforts on the treatment of psychiatric and neurological conditions, a field that faces certain challenges in drug development.

We have focused our research and development efforts on the treatment of psychiatric and neurological conditions. Efforts by biotechnology and pharmaceutical companies in this field have faced certain challenges in drug development. In particular, clinical trials focused on many neuroscience diseases, such as schizophrenia and bipolar depression, rely on subjective patient-reported outcomes as key endpoints. This makes these trials more difficult to evaluate than indications with more objective endpoints. Furthermore, these indications are often subject to a higher placebo effect, which may make it more challenging to isolate the beneficial effects of our product candidate. While a product candidate may show clinical activity or therapeutic benefit, a high placebo effect in a clinical trial will make it difficult to ascertain that benefit or to show a statistically significant effect of the product candidate as compared to the control arm, which may ultimately cause a clinical trial to fail or otherwise not translate to actual clinical benefit. Moreover, the risk for this higher placebo effect can increase from successful completion of a Phase 2 trial to a Phase 3 trial, as there is clinical evidence of therapeutic benefit to which patients would already be aware of. There can be no guarantee that we will successfully overcome these challenges in our ongoing or any future clinical trials of our product candidate or that we will not encounter other challenges in the development of our product candidate. In addition, negative investor perception of our clinical trial results due to a high placebo effect may adversely affect our stock price.

For example, certain of our primary or secondary endpoints in our clinical trials, including our completed Phase 2 trial of LB-102 in patients with acute schizophrenia, involve subjective assessments by physicians and/or patients, which can increase the uncertainty of clinical trial outcomes. The primary endpoint of our proposed Phase 3 acute schizophrenia trial is to evaluate the efficacy of LB-102 compared to the placebo, as measured by change from baseline in PANSS total score at six weeks, which requires patients and raters to undertake a questionnaire regarding symptoms at protocol specified timepoints in the trial. This and other assessments are inherently subjective, which can increase the variability of clinical results across clinical trials and create a significant degree of uncertainty in determining overall clinical benefit. Accordingly, these subjective assessments can complicate clinical trial design, adversely impact the ability of a study to show a statistically significant improvement, and generally adversely impact a clinical development program by introducing additional uncertainties.

The obligations from our royalty agreements may be a drain on our cash resources or may cause us to incur debt obligations to satisfy the payment obligations.

In August 2023, contemporaneously with the closing of our Series C financing, we entered into several amended and restated royalty participation agreements, or the Amended and Restated Royalty Agreements, with certain of our existing investors, co-founders, former and current directors, and former and current executive officers, including Zachary Prensky, Andrew Vaino, Ph.D., and Marc Panoff, none of whom were new investors of our Series C preferred stock. We received no consideration as part of the Amended and Restated Royalty Agreements. Pursuant to the Amended and Restated Royalty Agreements, we are obligated to pay royalties to all of the holders in an aggregate amount up to 2.75% of net sales arising from LB-102 worldwide through December 31, 2035. Thereafter, we are obligated to pay royalties to such holders in an aggregate amount up to 3.25% in perpetuity. Future sales are defined in these agreements as the gross payments received on total commercial sales of LB-102, whether by us or by any licensee of LB-102. See the section titled “Business—License and Other Agreements” elsewhere in this prospectus for additional information regarding these agreements.

 

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In order to satisfy our obligations to make these payments, if and when they are triggered, we may need to issue equity or convertible debt securities that may cause dilution to our stockholders, or we may use our existing cash and cash equivalents or incur debt obligations to satisfy the payment obligations in cash, which may adversely affect our financial position. In addition, these obligations may impede our ability to raise money in future public offerings of debt or equity securities, to obtain a third-party line of credit, or to license, sell or otherwise monetize our rights in LB-102.

Risks Related to Product Candidate Development and Commercialization

Preclinical and clinical development involves a lengthy and expensive process, with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial or real-world results. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our current product candidate or any future product candidates.

LB-102 is in clinical development and its risk of failure is high. It is impossible to predict when or if our product candidate will receive regulatory approval. To obtain the requisite regulatory approvals to commercialize our product candidate, we must demonstrate through lengthy, complex, and expensive clinical trials that our product candidate is safe and effective in patient populations for the relevant indication(s) for use. Preclinical and clinical testing can take many years to complete, and its outcome is inherently uncertain. There is typically a high rate of failure of product candidates proceeding through clinical trials, and failure can occur at any time during the preclinical study or clinical trial process, despite promising preclinical or clinical results. The results of preclinical studies and early clinical trials of our product candidate may not be predictive of the results of later-stage clinical trials, and results in one indication may not be predictive of results to be expected for the same product candidate in another indication. Differences in trial design between early-stage clinical trials and later-stage clinical trials make it difficult to extrapolate the results of earlier clinical trials to later clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unfavorable safety profiles, notwithstanding promising results in earlier trials. For example, emraclidine was previously being developed by Cerevel Therapeutics Holdings, Inc. for the indication of schizophrenia and ceased development due to, among other reasons, not achieving a statistically significant outcome for the primary endpoint in two completed six-week clinical trials. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates achieved promising results have nonetheless failed to obtain marketing approval of such product candidates or, upon commercialization, achieve or maintain positive real-world results. We may be unable to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful.

Commencing any future clinical trials is subject to finalizing the trial protocol and submitting an IND to the FDA or a similar application to initiate a clinical study to a comparable foreign regulatory authority. Even after we make our submission, the FDA or comparable foreign regulatory authorities could disagree that we have satisfied their requirements to commence our clinical trials or disagree with our study design, which may require us to complete additional preclinical studies (including additional carcinogenicity studies in animal models) or amend our protocols or impose stricter conditions on the commencement of clinical trials, which may lead to delays and increase the costs of our preclinical development programs. The FDA also has the authority to require a panel of experts, referred to as an Advisory Committee, to deliberate on the adequacy of the safety and efficacy data to support approval. The opinion of such an Advisory Committee, although not binding on the FDA, could have a significant impact on our ability to obtain approval of our product candidate in the future. Similar decisions may also be made by foreign regulatory authorities and have a similar impact.

Most product candidates that commence clinical trials are never approved as commercial products and there can be no assurance that any of our current or future clinical trials will ultimately be successful or support the approval of our current or any future product candidates.

We expect to continue to rely on our clinical trial sites and clinical trial teams to ensure the proper and timely conduct of our clinical trials, including the participant enrollment process, and we have limited influence

 

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over their performance. In addition, we may in the future enter into collaboration agreements pursuant to which our collaborator would be responsible for clinical development. We or our collaborators may experience delays in initiating or completing clinical trials due to unforeseen events or otherwise, which could delay or prevent our ability to receive marketing approval or commercialize our current and any future product candidates, including:

 

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regulators, such as the FDA or comparable foreign regulatory authorities, Institutional Review Boards, or IRBs, or ethics committees may impose additional requirements before permitting us to initiate a clinical trial, may not authorize us or our investigators to commence or conduct a clinical trial at a prospective trial site, may not allow us to amend trial protocols, or regulators may disagree as to the design or implementation of our clinical trials and require that we modify or amend our clinical trial protocols, statistical analysis plans, or diversity action plans developed for recruitment in pivotal clinical trials;

 

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we may experience delays in reaching, or fail to reach, agreement on acceptable terms with contract research organizations, or CROs, or with individual clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among trial sites;

 

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delays in identifying, recruiting, and training suitable clinical investigators;

 

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IRBs refusing to approve, suspending, or terminating the trial at an investigational site, precluding enrollment of additional patients, or withdrawing their approval of the trial;

 

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changes or amendments to the clinical trial protocol;

 

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clinical trial sites may deviate from the trial protocol, fail to ensure the integrity of the data being collected at the site, or drop out of a trial;

 

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failure by any of our third-party contractors to perform in accordance with good clinical practices, or GCP, requirements or applicable regulatory rules and guidelines in other countries;

 

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the number of participants required for clinical trials may be larger than we anticipate, we may experience difficulty in finding and enrolling sufficient qualified patients for our trials, enrollment in clinical trials may be slower than we anticipate, or participants may drop out or fail to return for post-treatment follow-up at a higher rate than we anticipate;

 

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patients may fail to enroll or remain in our trials at the rate we expect, or fail to return for post-treatment follow-up, including patients failing to remain in our trials;

 

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patients choosing an alternative product for the indications for which we are developing our product candidate, or participating in competing clinical trials;

 

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the cost of clinical trials may be greater than we anticipate;

 

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the quality or quantity of data relating to our product candidate or other materials necessary to conduct our clinical trials may be inadequate to initiate or complete a given clinical trial;

 

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we may experience difficulties in manufacturing, or fail to manufacture, sufficient quantities of our product candidate for use in clinical trials;

 

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patients experiencing severe or serious unexpected drug-related adverse effects;

 

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reports from clinical testing conducted by other companies of other therapies in the same class of agents that could be considered similar to our product candidate may raise safety, tolerability, or efficacy concerns about our product candidate;

 

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we may lack adequate funding to initiate or continue one or more of our clinical trials;

 

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a facility manufacturing our product candidate or any of their components being ordered by the FDA or comparable foreign regulatory authorities to temporarily or permanently shut down due to violations of current good manufacturing practice, or cGMP, regulations or other applicable requirements, or cross-contaminations of product candidates in the manufacturing process;

 

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  •  

changes to our manufacturing processes may be necessary or desired;

 

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clinical investigators may lose the licenses or permits necessary to perform our clinical trials and may fail to perform our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, GCPs, or other regulatory requirements;

 

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third-party contractors being unwilling or unable to satisfy their contractual obligations to us in a timely or accurate manner;

 

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third-party contractors could become debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications; and

 

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clinical trials of our product candidate may fail to show appropriate safety, tolerability, or efficacy, may produce negative or inconclusive results, or may otherwise fail to improve on the existing standard of care, and we may decide, or regulators may require us, to conduct additional clinical trials or we may decide to abandon product development programs.

Clinical trials must be conducted in accordance with the FDA and other applicable regulatory authorities’ legal requirements, regulations, and guidelines, and remain subject to oversight by these governmental agencies as well as ethics committees or IRBs responsible for overseeing the conduct of clinical trials and ensuring the welfare of patients participating in the research. We could encounter delays if a clinical trial is suspended or terminated by us, the IRBs of the institutions in which such trials are being conducted, the FDA or comparable foreign regulatory authorities, or the Data Safety Monitoring Board, for such trial. A suspension or termination may be imposed due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical trial protocols, adverse findings from inspection of the clinical trial operations or trial site by the FDA or comparable foreign regulatory authorities, unforeseen safety issues or adverse side effects, failure to establish or achieve clinically meaningful trial endpoints, changes in governmental regulations or administrative actions, or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our clinical trial protocols to regulators or to IRBs for reexamination, which may impact the costs, timing, or successful completion of a clinical trial. Clinical trials may also be delayed or terminated as a result of ambiguous or negative interim results.

Many of the factors that cause, or lead to, a delay in the commencement or completion of, or the termination or suspension of, clinical trials may also ultimately lead to the denial of regulatory approval of our product candidate. Further, the FDA may disagree with our interpretation of data from clinical trials, or may change the requirements for approval even after it has reviewed and commented on the design for our clinical trials.

We may, in the future, conduct preclinical and clinical research in collaboration with other academic, pharmaceutical, and biotechnology entities in which we combine our development efforts with those of our collaborators. Such collaborations may be subject to additional delays because of the management of the trials, contract negotiations, and the need to obtain agreement from multiple parties, which may increase our future costs and expenses.

Our product development costs will increase if we experience delays in clinical testing or marketing approvals. We do not know whether any of our clinical trials will begin as planned, will need to be restructured, or will be completed on schedule, or at all. Significant clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidate and may allow our competitors to bring products to market before we do, potentially impairing our ability to successfully commercialize our product candidate, if approved. Any delays or increase in costs in our clinical development programs may harm our business, financial condition, results of operations, and prospects.

 

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Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming, and uncertain and may prevent us or any future collaboration partners from obtaining approvals for the commercialization of our product candidate.

Any product candidate we may develop and the activities associated with their development and commercialization, including their design, testing, manufacture, recordkeeping, labeling, storage, approval, advertising, promotion, import, export, marketing, and distribution, are subject to comprehensive regulation by the FDA and other regulatory authorities in the United States and by comparable foreign regulatory authorities. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate in a given jurisdiction. We have not received approval to market any product candidates from regulatory authorities in any jurisdiction and none of the product candidates we may seek to develop in the future may ever obtain regulatory approval. We have no experience in filing and supporting the applications necessary to gain marketing approvals. Although we believe that we have the capabilities to conduct preclinical studies and clinical trials and complete these applications using our internal resources and the necessary personnel we intend to hire in the future, we selectively employ and may in the future rely on CRO or consultants to assist us in this process. Securing regulatory approval requires the submission of extensive preclinical and clinical data and supporting information to the various regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. The FDA may also not agree with our determination that our Phase 2 acute schizophrenia trial may serve as one of the two pivotal trials required for approval of an NDA in the United States. Securing regulatory approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatory authority. Any product candidates we develop may not be effective, may be only moderately effective, or may prove to have undesirable or unintended side effects, toxicities, or other characteristics that may preclude our ability to obtain marketing approval for such product candidates or prevent or limit future commercial use.

The process of obtaining marketing approvals, both in the United States and abroad, is expensive, often takes many years following the commencement of clinical trials, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity, and novelty of the product candidates involved, as well as the target indications and patient populations. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for each submitted product application, may cause delays in the approval or rejection of an application. Prior to obtaining approval to commercialize a product candidate in the U.S. or abroad, we must demonstrate with substantial evidence from adequate and well-controlled clinical trials, and to the satisfaction of the FDA or comparable foreign regulatory authorities, that such product candidates are safe and effective for their intended uses. The FDA and comparable foreign regulatory authorities have substantial discretion in the approval process and may delay, limit, or deny approval of a product candidate for many reasons, or may decide that our data are insufficient for approval and require additional preclinical, clinical, or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit, or prevent marketing approval of a product candidate. Despite the time and expense invested in clinical development of product candidates, regulatory approval of a product candidate is never guaranteed. Of the large number of drugs in development, only a small percentage successfully complete the FDA or foreign regulatory approval processes and are commercialized.

With respect to foreign markets, approval procedures vary among countries and, in addition to the foregoing risks, may involve additional product testing, administrative review periods, and agreements with pricing authorities.

Even if we eventually complete clinical trials and receive approval of an NDA or comparable foreign marketing application for our product candidate, the FDA or comparable foreign regulatory authority may grant approval contingent on the performance of costly additional clinical trials and/or the implementation of REMS, which may be required because the FDA believes it is necessary to ensure safe use of the product after approval.

 

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If we experience delays in obtaining approval or if we fail to obtain approval of any product candidates we may develop, the commercial prospects for those product candidates, including for other indications, may be harmed, and our ability to generate revenues will be materially impaired.

Even if our product candidate receives regulatory approval, it may fail to achieve the degree of market acceptance by physicians, patients, and others in the medical community necessary for commercial success, in which case we may not generate significant revenues or become profitable.

We have never commercialized a product candidate for any indication. Even if our product candidate is approved by the appropriate regulatory authorities for marketing and sale, our product candidate may not gain acceptance among physicians, patients, third-party payors, and others in the medical community. If our product candidate for which we obtain regulatory approval does not gain an adequate level of market acceptance, we may not generate sufficient product revenue or become profitable. Further, the number of patients that our product candidate is designed to treat may be smaller than expected.

The degree of market acceptance of our product candidate, if approved and commercialized, will depend on a number of factors, some of which are beyond our control, including:

 

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the pricing and cost-effectiveness of our product candidate, as well as the ease of administration, time burden, and market acceptance;

 

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the safety, efficacy, and tolerability of our product candidate;

 

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acceptance of our approach to precision psychiatry by patients, the medical community, and third-party payors;

 

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changes in the standard of care for targeted indications and the reluctance of physicians to switch their patients’ current standard of care;

 

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the reluctance of patients to switch from their existing therapy regardless of the safety and efficacy of newer products;

 

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the clinical indications for which our product is approved and the scope of efficacy/safety claims that we may make for the product;

 

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any restrictions on the use of our product, and the prevalence and severity of any adverse effects;

 

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any distribution and use restrictions imposed by the FDA as part of a mandatory REMS with respect to such product candidate or to which we agree under a voluntary risk management plan;

 

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the availability of adequate coverage and reimbursement by third parties, such as insurance companies and other healthcare payors, and by government healthcare programs, including Medicare and Medicaid;

 

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the willingness of patients to pay all, or a portion of, out-of-pocket costs associated with our products in the absence of sufficient third-party coverage and adequate reimbursement;

 

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the extent and strength of our marketing and distribution of such product candidate;

 

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the timing of market introduction of such product candidate, as well as competitive products;

 

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our ability to offer our product candidate for sale at competitive prices;

 

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the competitiveness of existing approved therapies;

 

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adverse publicity about our product or favorable publicity about competitive products; and

 

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potential product liability claims.

In addition, our lead product candidate, LB-102, is an N-methylated version of amisulpride, a drug already approved in certain parts of Europe for the treatment of schizophrenia, predominantly negative symptoms of

 

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schizophrenia and dysthymia. While we are developing LB-102 for acute schizophrenia initially in the United States and potentially in other jurisdictions where amisulpride is not approved, we currently plan to develop LB-102 to treat bipolar depression globally and if there is a recall, safety concern, or adverse regulatory action with respect to amisulpride in Europe, it could prevent us from achieving or maintaining market acceptance of LB-102 or otherwise adversely affect our ability to successfully commercialize LB-102. Furthermore, although LB-102 is structurally similar to amisulpride, which is an approved product in many countries outside of the United States, there can be no assurance that our ongoing and future clinical trials will show similar results with respect to safety and/or efficacy.

Our efforts to educate the medical community and third-party payors about the benefits of our product candidate may require significant resources and may never be successful. Even if our product candidate, if approved, is safe and effective for its approved indications, physicians and patients may not immediately be receptive to such product candidate and may be slow to adopt it as an accepted treatment for the approved indications. If our current or future product candidates are approved, but do not achieve an adequate level of acceptance among physicians, patients, and third-party payors, we may not generate meaningful revenue from our product candidate and may never become profitable.

We may find it difficult to enroll patients in our clinical trials. If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

Patient enrollment is a significant factor in the timing of clinical trials, and the timing of our clinical trials depends, in part, on the speed at which we can recruit and enroll patients to participate in our trials, as well as completion of required follow-up periods. We may not be able to initiate or continue clinical trials for our product candidate if we are unable to identify and enroll a sufficient number of eligible patients to participate in these trials to such trial’s conclusion as required by the FDA or comparable foreign regulatory authorities. Patient enrollment is affected by many factors including the size and nature of the patient population, competing clinical trials in the same or similar indications or at the same trial site, the severity of the disease or condition under investigation, the availability and efficacy of approved drugs and diagnostics for the disease or condition under investigation, the number and location of clinical sites, the proximity of patients to clinical sites, willingness of patients to participate in a decentralized clinical trial that may involve remote monitoring technologies, the inclusion and exclusion criteria for the trial, perceived risks and benefits of the product candidate under study, the design of the clinical trial, continued enrollment of prospective patients by clinical trial sites, the risk that enrolled patients will not complete a clinical trial, our ability to recruit clinical trial investigators with the appropriate competencies and experience, efforts to facilitate timely enrollment in clinical trials, patient referral practices of physicians, the ability to monitor patients adequately during and after treatment, competing clinical trials, and clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available therapies, including any new products that may be approved for, or any product candidates under investigation for, the indications we are investigating. Clinical trial recruitment and enrollment activities may also be delayed as a result of macro-factors such as public health emergencies or pandemics, natural disasters, acts of terror or war, or staffing shortages.

We will be required to identify and enroll a sufficient number of patients for each of our clinical trials. We may not be able to initiate or continue clinical trials if we are unable to locate a sufficient number of eligible patients to participate in the clinical trials required by the FDA or comparable foreign regulatory authorities. In addition, the process of finding eligible patients may prove costly.

Historically, clinical trials in acute schizophrenia and bipolar depression have experienced significant participant withdrawals or discontinuations. There is no guarantee that our estimated withdrawal rate in any of our clinical trials will be accurate, and if we experience a withdrawal rate larger than expected, this may compromise the quality of our data. Withdrawal of participants from our clinical trials, including participants in any control groups, may compromise the quality of our data. Even if we are able to enroll a sufficient number of participants in our clinical trials, we may have difficulty maintaining enrollment of such patients, and delays in

 

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enrollment may result in increased costs or may affect the timing or outcome of our clinical trials. Any of these conditions may negatively impact our ability to complete such trials or include results from such trials in regulatory submissions, which could adversely affect our ability to advance the development of our product candidate. Additionally, participants with neuropsychiatric disorders, including schizophrenia, constitute a vulnerable patient population and may withdraw from the clinical trial if they are not experiencing improvement in their underlying disease or condition or if they experience other difficulties or issues relating to their underlying disease or condition or otherwise.

Further, other biopharmaceutical companies targeting these same diseases are recruiting clinical trial patients from similar patient populations, which may make it more difficult to fully enroll any clinical trials. Our inability to enroll a sufficient number of patients for any of our future clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. In addition, we expect to rely on clinical trial sites to ensure proper and timely conduct of our future clinical trials and, while we intend to enter into agreements governing their services, we will have limited influence over their actual performance.

We cannot assure you that our assumptions used in determining expected clinical trial timelines are correct or that we will not experience delays in enrollment, which would result in the delay of completion of such trials beyond our expected timelines.

Use of our product candidate could be associated with adverse side effects, adverse events, or other safety risks, which could delay or preclude the candidate’s approval, cause us to suspend or discontinue clinical trials, cause us to abandon the product candidate, limit the commercial profile of any future approved product, or result in other significant negative consequences that could severely harm our business, prospects, operating results, and financial condition.

Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics related to our product candidate. Undesirable side effects caused by our product candidate could cause us, the IRB, or regulatory authorities to interrupt, delay, or halt clinical trials or cause the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities, or, if such product candidate is approved, result in a more restrictive label and other post-approval requirements. Any treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trial or could result in potential product liability claims. Any of these occurrences may harm our business, financial condition, and prospects significantly.

If our product candidate is associated with undesirable side effects or has unexpected characteristics in clinical trials, we may need to interrupt, delay, or abandon their development or limit development to more narrow uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe, or more acceptable from a risk-benefit perspective. To date, TEAEs from our Phase 1 and Phase 2 trials were generally mild or moderate. TEAEs included events typically associated with dopamine antagonists. In the Phase 2 trial the most frequently occurring TEAEs were insomnia, headache, anxiety and agitation. Low rates of adverse events associated with EPS and modest increases in QT prolongation were observed. Consistent with other antipsychotics, use of LB-102 resulted in elevated serum prolactin levels, but these elevations were associated with very few adverse events associated with that increase. In our Phase 2 acute schizophrenia trial, 10 participants reported TEAEs leading to withdrawal, including two in each of the placebo and 50 mg cohorts, as well as three in each of the 75 mg and 100 mg cohorts. There were five reported serious adverse events, or SAEs, overall with two SAEs in the placebo cohort (psychotic disorder and death), one SAE in the 50 mg cohort (suicidal ideation—deemed possibly related to treatment), one SAE in the 75 mg cohort (dystonia—deemed possibly related to treatment) and one SAE in the 100 mg cohort (psychotic disorder—deemed not related to treatment). The incidence of TEAEs was similar across groups, with most events being mild or moderate. For additional information, see the section titled “Business—Our Solution: LB-102 for the Treatment of Schizophrenia—LB-102 Clinical Data.”

 

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Patients in our ongoing and planned clinical trials may in the future suffer significant adverse events or other side effects not observed in our preclinical studies or previous clinical trials. Even if such side effects do not preclude the product candidate from obtaining or maintaining regulatory approval, undesirable side effects may inhibit market acceptance due to tolerability concerns as compared to other available therapies. Any of these developments could materially harm our business, financial condition, and prospects.

Additionally, if our product candidate receives regulatory approval, and we or others later identify undesirable side effects caused by such product, a number of potentially significant negative consequences could result. For example, the FDA could require us to adopt a Risk Evaluation and Mitigation Strategy, or REMS, to ensure that the benefits of treatment with such product candidate outweigh the risks for each potential patient, which may include, among other things, a communication plan to health care practitioners, patient education, extensive patient monitoring, or distribution systems and processes that are highly controlled, restrictive, and more costly than what is typical for the industry. Other potentially significant negative consequences associated with post-marketing identification of adverse events or other safety risks include:

 

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we may be required to suspend marketing of a product, or we may decide to remove such product from the marketplace;

 

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regulatory authorities may withdraw or modify their approvals of a product;

 

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regulatory authorities may require additional warnings or new contraindications on the label, or may limit access of a product to selective specialized centers with additional safety reporting and with requirements that patients be geographically close to these centers for all or part of their treatment;

 

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we may be required to create a medication guide outlining the risks of a product for patients, or to conduct post-marketing studies;

 

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we may be required to change the way a product is distributed or administered;

 

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we could be subject to fines, injunctions, or the imposition of criminal or civil penalties, or be sued and held liable for harm caused to subjects or patients; and

 

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a product may become less competitive, and our reputation may suffer.

In addition, participants with neuropsychiatric disorders, including schizophrenia and bipolar depression, constitute a vulnerable patient population, and any adverse side effects or adverse events may be exacerbated in such patient population. Any of these events could diminish the usage or otherwise limit the commercial success of our product candidate and prevent us from achieving or maintaining market acceptance of our product candidate, if approved by the FDA or other regulatory authorities.

We have never commercialized a product candidate and may experience delays or unexpected difficulties in obtaining, or fail to obtain, regulatory approval for our product candidate.

We have never obtained regulatory approval for, or commercialized, a drug product in the United States or elsewhere.

Our clinical trial results may not support regulatory approval. In addition, our product candidate could fail to receive regulatory approval for many reasons, including the following:

 

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the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials, such as our determination that our Phase 2 acute schizophrenia trial may serve as one of the two pivotal trials required for approval of an NDA in the United States;

 

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we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that our product candidate is safe and effective for any of their proposed indications;

 

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we may have negative or ambiguous results from our clinical trials, or results may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

 

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  •  

the population studied in the clinical trial may not be sufficiently broad or representative to assure safety in the full population for which we seek approval;

 

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regulatory authorities may not accept clinical data from trials that are conducted at clinical facilities or in countries where the standard of care is potentially different from that of their own country;

 

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serious and unexpected drug-related side effects may be experienced by participants in our clinical trials or by individuals using drugs similar to our product candidate;

 

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the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

 

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the data collected from clinical trials of our product candidate may not be sufficient to the satisfaction of the FDA or comparable foreign regulatory authorities to support the submission of an NDA, or other comparable submission in foreign jurisdictions or to obtain regulatory approval in the United States or elsewhere, and such authorities may impose requirements for additional preclinical studies or clinical trials;

 

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such authorities may disagree with us regarding the formulation, labeling, and/or release/stability specifications of our product candidate;

 

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approval may be granted only for indications that are significantly more limited than those sought by us, and/or may include significant restrictions on distribution and use;

 

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regulatory authorities may not accept a submission due to, among other reasons, the content or formatting of the submission; and

 

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the FDA or comparable foreign regulatory authorities may find deficiencies in or fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies.

In addition, our lead product candidate, LB-102, is an N-methylated version of amisulpride, a drug already approved in certain parts of Europe for the treatment of schizophrenia, predominantly negative symptoms of schizophrenia and dysthymia. While we are developing LB-102 for acute schizophrenia initially in the United States and potentially in other jurisdictions where amisulpride is not approved, we currently plan to develop LB-102 to treat bipolar depression globally and if there is a recall, safety concern, or adverse regulatory action with respect to amisulpride in Europe, it could adversely affect our ability to obtain regulatory approval for LB-102.

Finally, the FDA and comparable foreign regulatory authorities may change their approval policies and new regulations may be enacted, which could delay or prevent our ability to obtain approval. If our product candidate fails to achieve regulatory approval due to the above factors, or otherwise, any such failure would adversely affect our business, results of operations, and financial condition. In addition, difficulties in obtaining approval of a product candidate in any of the initial indications for which we are developing it could adversely affect our efforts to seek approval from regulatory authorities for other indications.

Interim, “top-line,” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose preliminary or top-line data from our preclinical studies and clinical trials, which are based on preliminary analyses of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular preclinical study or clinical trial. We also make assumptions, estimations, calculations, and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the top-line or preliminary results that we report may differ from future results of the same studies or trials, or different conclusions or considerations may qualify such results, once additional data have been received

 

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and fully evaluated. Top-line and preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the top-line or preliminary data we previously published. As a result, top-line and preliminary data should be viewed with caution until the final data are available.

From time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as participant enrollment continues and more participant data become available or as participants from our clinical trials continue other treatments for their disease. Adverse differences between interim data and final data could significantly harm our business prospects.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions, or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and could adversely affect the success of our business. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

If the interim, top-line or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidate may be harmed, which could harm our business, financial condition, results of operations, and prospects. Further, disclosure of interim, top-line, or preliminary data by us or by our competitors could result in volatility in the price of our common stock after this offering.

Furthermore, if we fail to replicate the positive results from our preclinical studies or clinical trials in our future clinical trials, we may be unable to successfully develop, obtain regulatory approval for, and commercialize our current or future product candidates.

If we fail to develop and commercialize our current product candidate for additional indications or fail to discover, develop, and commercialize other product candidates, we may be unable to grow our business and our ability to achieve our strategic objectives would be impaired.

Although the development and commercialization of our current product candidate for the treatment of schizophrenia and bipolar depression is our primary focus, as part of our longer-term growth strategy, we plan to evaluate our current product candidates in other indications (such as MDD, negative symptoms of schizophrenia, bipolar mania, and Alzheimer’s disease psychosis and agitation) and develop other product candidates. We intend to evaluate internal opportunities from our current product candidate or other potential product candidates, and also may choose to in-license or acquire other product candidates as well as commercial products to treat patients suffering from other disorders with significant unmet medical needs and limited treatment options. These other potential product candidates will require additional, time-consuming development efforts prior to commercial sale, including preclinical studies, clinical trials, and approval by the FDA and/or comparable foreign regulatory authorities. All product candidates are prone to the risks of failure that are inherent in pharmaceutical product development, including the possibility that the product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, we cannot assure you that any such products, if approved, will be manufactured or produced economically, successfully commercialized, or widely accepted in the marketplace, or be more effective than other commercially available alternatives.

Research programs to identify product candidates require substantial technical, financial, and human resources, whether or not any product candidates are ultimately identified. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for many reasons, including the following:

 

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the research methodology used may not be successful in identifying potential product candidates;

 

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  •  

competitors may develop alternatives that render our product candidate(s) obsolete;

 

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product candidates that we develop may nevertheless be covered by third parties’ patents or other exclusive rights;

 

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a product candidate may, on further study, be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;

 

  •  

a product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and

 

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a product candidate may not be accepted as safe and effective by patients, the medical community, or third-party payors.

If we are unsuccessful in identifying and developing additional product candidates, our potential for growth and achieving our strategic objectives may be impaired.

We may expend our resources to pursue a particular product candidate or indication and forgo the opportunity to capitalize on product candidates or indications that may ultimately be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we intend to focus on developing product candidate for specific indications that we identify as most likely to succeed, in terms of both their potential for regulatory approval and commercialization. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that may prove to have greater commercial potential.

Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on research and development programs and product candidate for specific indications may not yield any commercially viable product candidate. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing, or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to the product candidate.

Obtaining and maintaining regulatory approval of LB-102 or any future product candidates we may develop in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of such product candidate in other jurisdictions.

We may seek regulatory approval for LB-102 or any future product candidates we may develop outside the United States. Foreign regulatory authorities have requirements for approval of product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining and maintaining regulatory approval of LB-102 or any future product candidates we may develop in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction. However, a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions also must approve the manufacturing, marketing, and promotion of the product candidate in those jurisdictions. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials, as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In addition, in some jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties, and costs for us and could delay or prevent the introduction of our products in

 

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certain countries. If we fail to comply with the regulatory requirements in international markets and/or receive and maintain applicable marketing approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of our product candidate will be harmed, which could adversely affect our business, results of operations, and financial condition.

The successful commercialization of our product candidate, if approved, will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels, and favorable pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our product candidate could limit our ability to market those products and decrease our ability to generate revenue.

The availability of coverage and the adequacy of reimbursement by governmental healthcare programs such as Medicare and Medicaid, private health insurers, and other third-party payors are essential for most patients to be able to afford prescription medications such as our product candidate, if approved. Our ability to achieve coverage and acceptable levels of reimbursement for our product by third-party payors will have an effect on our ability to successfully commercialize the product and any future products we may successfully develop. Even if we obtain coverage for a given product by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. We cannot be sure that coverage and reimbursement in the United States, the European Union, or the EU, or elsewhere will be available for any product that we may develop, and any reimbursement that may become available may be decreased or eliminated in the future.

Third-party payors increasingly are challenging prices charged for pharmaceutical products and services, and many third-party payors may refuse to provide coverage and reimbursement for particular drugs when an equivalent generic drug or a less expensive therapy is available. It is possible that a third-party payor may consider our product candidate as substitutable and only offer to reimburse patients for the less expensive product. These payors may deny or revoke the reimbursement status of a given product or establish prices for new or existing marketed products at levels that are too low to enable us to realize an appropriate return on our investment in product development. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize our products, if approved, and may not be able to obtain a satisfactory financial return on products that we may develop.

There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved products. Regulatory approvals, pricing, and reimbursement for new drug products vary widely from country to country. In the United States, third-party payors, including private and governmental payors, such as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs will be covered. Some third-party payors may require pre-approval of coverage for new or innovative drug therapies before they will reimburse healthcare providers who use such therapies. It is difficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for our products, if approved.

Obtaining and maintaining reimbursement status is time-consuming, costly, and uncertain. The Medicare and Medicaid programs increasingly are used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs. However, no uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases at short notice, and we believe that changes in these rules and regulations are likely.

Under currently applicable U.S. law, certain products not usually self-administered (including injectable drugs) may be eligible for coverage under Medicare through Medicare Part B. Medicare Part B is part of original

 

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Medicare, the federal health care program that provides health care benefits to the aged and disabled, and covers outpatient services and supplies, including certain biopharmaceutical products, that are medically necessary to treat a beneficiary’s health condition. As a condition of receiving Medicare Part B reimbursement for a manufacturer’s eligible drugs, the manufacturer is required to participate in other government healthcare programs, including the Medicaid Drug Rebate Program and the 340B Drug Pricing Program. The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the U.S. Department of Health and Human Services, or HHS, as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid patients. Under the 340B Drug Pricing Program, the manufacturer must extend discounts to entities that participate in the program.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe and other countries has and will continue to put pressure on the pricing and usage of pharmaceutical products. In many countries, the prices of medicinal products are subject to varying price control mechanisms as part of national health systems. Other countries allow companies to fix their own prices for medical products but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidate, if approved. Accordingly, in markets outside the United States, the reimbursement for our product candidate may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits. See “—EU drug marketing and reimbursement regulations may materially affect our ability to market and receive coverage for our products in the EU member states” below for further discussion of risks related to foreign marketing and reimbursement regulations.

Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our products. We expect to experience pricing pressures in connection with the sale of our product candidate, if approved for marketing, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.

Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay.

As product candidates are developed through pre-clinical to late-stage clinical trials towards approval and commercialization, it is common that various aspects of the development program, such as manufacturing methods and formulation (including raw materials and starting materials), are altered in an effort to optimize processes and results. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause our product candidate to perform differently and affect the results of planned clinical trials or future clinical trials to be conducted with the altered materials. Such changes may also require additional testing, notification to the FDA or comparable foreign regulatory authorities or approval from the FDA or comparable foreign regulatory authorities. This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of our product candidate and/or jeopardize our ability to commence product sales and generate revenue.

We may conduct certain of our clinical trials for our product candidate outside of the United States in the future. However, the FDA may not accept data from such trials, in which case our development plans may be delayed, which could materially harm our business.

Although we currently conduct all of our clinical trials in the United States, in the future we may conduct one or more of our clinical trials for our product candidate outside the United States. Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of these data is subject to certain

 

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conditions imposed by the FDA. For example, to accept data from a clinical trial that was conducted only at sites outside of the United States and not subject to an IND, the FDA requires such clinical trial to have been conducted in accordance with GCPs, and the FDA must be able to validate the data from the clinical trial through an on-site inspection if the FDA deems such inspection necessary. In cases where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice; (ii) the trials were performed by clinical investigators of recognized competence and pursuant to GCP regulations; and (iii) the data may be considered valid without the need for an on-site inspection by the FDA, or if the FDA considers such inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. For studies not subject to an IND, the FDA generally does not review clinical protocols for the studies, and therefore there is an additional potential risk that the FDA could determine that the study design, protocol, and/or results from a non-U.S. clinical trial were inadequate for the purposes we intend, which could require us to conduct additional clinical trials. Many foreign regulatory authorities have similar requirements for clinical data gathered outside of their respective jurisdictions. In addition, such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance the FDA or any comparable foreign regulatory authority will accept data from clinical trials conducted outside of the United States or the relevant jurisdiction. If the FDA or any comparable foreign regulatory authority does not accept data from our clinical trials of our product candidate, it may result in the need for additional clinical trials, which would be costly and time-consuming and could delay or permanently halt our development of our product candidate.

Risks Related to Our Business and Operations

Neuroscience drug development is a field that has seen limited success. The ability to successfully develop drugs in this field is difficult and is subject to a number of unique challenges.

Drug development in the field of brain diseases, neuropsychiatric disorders and neurodegenerative diseases in particular, has seen limited success historically. Developing a successful product candidate for treatment of these brain diseases is difficult and subjects us to a number of unique challenges, including obtaining regulatory approval from the FDA and other regulatory authorities who have only a limited set of precedents to rely on.

We intend to work closely with the FDA and comparable foreign regulatory authorities to perform the requisite scientific analyses and evaluation in an effort to obtain regulatory approval for our product candidate; however, the process of developing our product candidate may be more complex and time-consuming relative to other more well-known approaches to drug development. We cannot be certain that our approach will lead to the development of a product candidate that effectively and safely addresses the underlying brain diseases.

Moreover, given the history of clinical failures in this field, future clinical or regulatory failures by us or others may result in further negative perception of the likelihood of success in this field, which may significantly and adversely affect the market price of our common stock.

Our business depends on the success of our product candidate. If we are ultimately unable to successfully commercialize our product candidate, or experience significant delays in doing so, our business will be materially harmed.

We currently have no products approved for commercial sale or for which regulatory approval to market has been sought. We have invested a significant portion of our efforts and financial resources in the development of our product candidate, which is still in clinical development, and expect that we will continue to invest heavily in such product candidate, as well as in any future product candidates we may develop. Our business and our ability to generate revenue, which we do not expect will occur for many years, if ever, are substantially dependent on our ability to develop, obtain regulatory approval for, and then successfully commercialize LB-102, which may never occur.

 

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If approved for marketing by applicable regulatory authorities, our ability to generate revenue from our product candidate will depend on our ability to:

 

  •  

achieve market acceptance of our future approved product by patients, the medical community, and third-party payors;

 

  •  

create market demand for our approved product through our own marketing and sales activities, and any other arrangements to promote the approved product that we may otherwise establish in the future;

 

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receive regulatory approval for the targeted patient populations and efficacy/safety claims that are necessary or desirable for successful marketing;

 

  •  

price our product competitively such that third-party and government reimbursement permits broad product adoption;

 

  •  

manufacture our product candidate through contract development and manufacturing organizations, or CDMOs, in sufficient quantities and at acceptable quality and manufacturing cost to meet commercial demand at launch and thereafter;

 

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establish and maintain agreements with wholesalers, distributors, pharmacies, and group purchasing organizations on commercially reasonable terms;

 

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obtain, maintain, protect, and enforce patent and other intellectual property protection and regulatory exclusivity for our product, if approved;

 

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maintain compliance with applicable laws, regulations, and guidance specific to commercialization including interactions with health care professionals, patient advocacy groups, and communication of health care economic information to payors and formularies; and

 

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assure that our product candidate, if approved, will be used as directed and that additional unexpected safety risks will not arise.

We rely on, and intend to continue to rely on, our internal clinical development expertise to conduct our current and future clinical trials. This model includes internal teams and systems as well as external vendors and CROs to comprise a full clinical trial team. If our clinical trial team does not comply with applicable regulatory requirements, meet expected deadlines, or run trials effectively, our development programs and our ability to seek or obtain regulatory approval for or commercialize our product candidate may be delayed.

We conduct much of our clinical trial work (e.g., clinical and medical monitoring, data management, and project management) with CROs as well as utilizing internal personnel to augment and oversee our CROs. Although we believe that our CROs currently have the capabilities to conduct clinical trials in collaboration with our internal staff, we may need to rely on additional third party CROs to conduct clinical trials if our internal and existing CRO capabilities cannot scale as we work to progress LB-102 through development, as we potentially expand our product candidate portfolio, or if we do not have sufficient personnel to support our clinical program. Our failure or the failure of any CROs we may employ to conduct the trials in compliance with FDA regulations could result in a delay or failure in obtaining FDA approval and could require us to repeat any preclinical studies or clinical trials we or the CRO administered.

Further, as part of our engagement with CROs, we have to negotiate budgets and contracts with them and/or each trial site, which may result in delays to our development timelines and increased costs. If any of our relationships with CROs and/or trial sites terminate, we may not be able to enter into arrangements with alternative trial sites or do so on commercially reasonable terms. Switching or adding additional trial sites can also involve additional costs and requires time and focus of our clinical trial operations management team.

 

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Competitive products may reduce or eliminate the commercial opportunity for our product candidate for our current or future indications. If our competitors develop technologies or product candidates more rapidly than we do, or their technologies are more effective or safer than ours, our ability to develop and successfully commercialize our current products may be adversely affected.

The biopharmaceutical industry is characterized by rapid innovation and intense competition. While we believe that our clinical program provides us with competitive advantages, we face competition from multiple biopharmaceutical and biotechnology companies that are similarly working to develop therapeutics targeting neuropsychiatry and, central nervous system, or CNS, disorders, as well as from academic institutions, governmental agencies, and public and private research institutions. Many of our potential competitors, either alone or with collaboration partners, have significantly greater financial resources than we do, as well as equal or greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products, and the commercialization of those products. Accordingly, our potential competitors may be more successful than we are in achieving regulatory approvals and commercializing their products. We anticipate that we will face intense and increasing competition from existing, approved drugs, as well as new drugs entering the market and emerging technologies that become available.

We are developing LB-102 for the treatment of schizophrenia and bipolar depression. While there remains significant unmet need in schizophrenia and bipolar depression, we believe LB-102, if approved, may face competition from product candidates also being developed for treatment of schizophrenia and bipolar depression. See “Business—Competition” for additional information relating to our competitors.

We believe the key competitive factors affecting the success of our product candidate that we develop to address schizophrenia, bipolar depression and other CNS disorders, if approved, are likely to be efficacy, safety, convenience, price, the level of generic competition, and the availability of reimbursement from government and other third-party payors. Our profitability and financial position will suffer if our product candidate receives regulatory approval but cannot compete effectively in the marketplace.

We will need to grow our organization, and we may experience difficulties in managing our growth and expanding our operations, which could adversely affect our business.

As of August 15, 2025, we had 16 employees. As our development and commercialization plans and strategies develop, and as we transition into operating as a public company, we expect to expand our employee base for managerial, operational, financial, and other resources. In addition, we have limited experience in manufacturing and commercialization. As our product candidate enters and advances through clinical trials, we will need to expand our development and regulatory capabilities and contract with other organizations to provide manufacturing and other capabilities for us. In the future, we expect to have to manage additional relationships with collaborators or partners, suppliers and other organizations. Our ability to manage our operations and future growth will require us to continue to improve our operational, financial, and management controls, reporting systems and procedures, which may lead to significant costs and may divert management attention. We may not be able to implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls.

Our inability to successfully manage our growth and expand our operations could adversely affect our business, financial condition, results of operations, and prospects.

We are dependent on the services of our management and other clinical and scientific personnel, and if we are not able to retain these individuals or recruit additional management or clinical and scientific personnel, our business will suffer.

Our success depends in part on our continued ability to attract, retain, and motivate highly qualified management, clinical, and scientific personnel. We are highly dependent upon our Chief Executive Officer, Heather

 

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Turner, and other members of our management team. The loss of services of any of these individuals could delay or prevent the successful development and commercialization of our product candidate. Although we have executed employment agreements or offer letters with each member of our senior management team, these agreements are terminable at will with or without notice and, therefore, we may not be able to retain their services as expected.

Additionally, in light of our insourced clinical trial model, we are heavily reliant on the expertise of our clinical trial team, and the loss of even a small number of those employees could have a significant adverse impact on our ability to conduct our clinical trials in a compliant and timely manner. Additionally, as we expand our clinical trial operations, or if we experience turnover within our clinical trial team, even if we are able to recruit qualified personnel to support our insourced clinical trial model, the onboarding and integration process takes time and can result in delays to our clinical development timeline.

We will need to expand and effectively manage our managerial, operational, financial, and other resources in order to successfully pursue our clinical development and commercialization efforts. We may not be successful in maintaining our company culture and continuing to attract or retain qualified management and scientific and clinical personnel in the future due to the intense competition for qualified personnel among biopharmaceutical, biotechnology, and other businesses, particularly in the greater New York Area. If we are not able to attract and grow our headcount with the appropriate personnel or integrate, retain, and motivate necessary personnel to accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our development objectives, our ability to raise additional capital, and our ability to implement our business strategy.

Our employees, independent contractors, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of employee fraud or other illegal activity by our current and any future employees, independent contractors, consultants, commercial partners, CROs, CDMOs, and vendors. Misconduct by these parties could include intentional, reckless, and/or negligent conduct that fails to comply with FDA or other regulations, provide true, complete and accurate information to the FDA, European Medicines Agency, and other comparable foreign regulatory authorities, comply with manufacturing standards we may establish, comply with healthcare fraud and abuse laws and regulations, report financial information or data accurately, or disclose unauthorized activities to us. If we obtain FDA approval of our product candidate and begin commercializing the product in the United States, our potential exposure under these laws will increase significantly, and our costs associated with compliance with these laws are likely to increase. In particular, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. Additionally, we are subject to the risk that a person could allege such fraud or other misconduct, even if none occurred. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a material and adverse effect on our business, financial condition, results of operations, and prospects, including the imposition of significant civil, criminal, and administrative penalties, damages, fines, disgorgement, imprisonment, the curtailment or restructuring of our operations, loss of eligibility to obtain approvals from the FDA, exclusion from participation in government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, integrity oversight and reporting obligations, or reputational harm.

 

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Our business entails a significant risk of product liability and our ability to obtain sufficient insurance coverage could adversely affect our business, financial condition, results of operations, and prospects.

As we conduct clinical trials of our current or future product candidates, we are exposed to significant product liability risks inherent in the development, testing, manufacturing, and marketing of new treatments. Product liability claims could delay or prevent completion of our development programs. If we succeed in obtaining approval for, and marketing products, such claims or certain adverse event trends could result in an investigation by the FDA, comparable foreign regulatory authorities, or other regulators into the safety and efficacy of our future approved products, our manufacturing processes and facilities, or our marketing programs and potentially a recall of our products or more serious enforcement action, limitations on the approved indications for which they may be used, or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our future approved products, termination of clinical trial sites or entire trial programs, withdrawal of clinical trial participants, injury to our reputation and significant negative media attention, significant costs to defend the related litigation, a diversion of management’s time and our resources from our business operations, substantial monetary awards to trial participants or patients, loss of revenue, the inability to commercialize any products that we may develop, and a decline in our stock price. We may need to obtain higher levels of product liability insurance for later stages of clinical development or marketing our product candidate. Any insurance we may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could adversely affect our business, financial condition, results of operations, and prospects.

We do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include property, general liability, clinical trials, and directors’ and officers’ liability insurance. We do not know, however, if we will be able to maintain insurance with adequate levels of coverage. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our business, financial condition, results of operations, and prospects.

If our information technology systems or those of third parties with whom we work, or our data are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse consequences.

In the ordinary course of business, we and the third parties with whom we work, collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share, or collectively, process, personal data and other sensitive information, including proprietary and confidential business information, trade secrets, intellectual property, information we collect about trial participants in connection with clinical trials, and sensitive third-party information, or collectively, sensitive data. As a result, we and the third parties with whom we work face a variety of evolving threats that could cause security incidents. Cyber-attacks, malicious internet-based activity, online and offline fraud, and other similar activities threaten the confidentiality, integrity, and availability of our sensitive data and information technology systems, and those of the third parties with whom we work. Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.

Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we and the third parties upon with whom we work may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our services.

 

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We and the third parties with whom we work are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, attacks enhanced or facilitated by artificial intelligence, or AI, telecommunications failures, earthquakes, fires, floods, and other similar threats.

In particular, severe ransomware attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, ability to provide our products or services, loss of sensitive data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

It may be difficult and/or costly to detect, investigate, mitigate, contain, and remediate a security incident. Our efforts to do so may not be successful. Actions taken by us or the third parties with whom we work to detect, investigate, mitigate, contain, and remediate a security incident could result in outages, data losses, and disruptions of our business. Threat actors may also gain access to other networks and systems after a compromise of our networks and systems.

Remote work has increased risks to our information technology systems and data, as more of our personnel utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit or in public locations. Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

In addition, our reliance on third parties could introduce new cybersecurity risks and vulnerabilities, including supply-chain attacks, and other threats to our business operations. We rely on various third parties and technologies to operate critical business systems to process sensitive data in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, personnel email, and other functions. We also rely on third parties to provide other products, services, parts, or otherwise to operate our business, including with respect to our cybersecurity infrastructure. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. If the third parties with whom we work experience a security incident or other interruption, we could experience adverse consequences. While we may be entitled to damages if such third parties fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award. In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or that of the third parties with whom we work have not been compromised.

While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We may not, however, detect and remediate all such vulnerabilities including on a timely basis. Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. Vulnerabilities could be exploited and result in a security incident.

Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration,

 

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encryption, disclosure of, or access to our sensitive data or our information technology systems, or those of the third parties with whom we work. A security incident or other interruption could disrupt our ability (and that of third parties with whom we work) to provide our services.

We may expend significant resources or modify our business activities (including our clinical trial activities) to try to protect against security incidents. Additionally, certain data privacy and security obligations may require us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive data.

Applicable data privacy and security obligations may require us, or we may voluntarily choose, to notify relevant stakeholders, including affected individuals, regulators, and investors, of security incidents, or take other actions, such as providing credit monitoring and identity theft protection services. Such disclosures and related actions can be costly, and the disclosure or the failure to comply with such applicable requirements could lead to adverse consequences.

If we (or a third party with whom we work) experience a security incident or are perceived to have experienced a security incident, we may experience material adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive data (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations (including availability of data); financial loss; and other similar harms. Security incidents and attendant material consequences may negatively impact our ability to grow and operate our business.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. We cannot be sure that our insurance coverage, if any, will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive data about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position. Additionally, sensitive data that we possess could be leaked, disclosed, or revealed as a result of or in connection with our personnel’s or vendors’ use of generative AI technologies.

We have identified material weaknesses in our internal control over financial reporting. If we fail to remediate these material weaknesses, or if we experience additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

As of December 31, 2024, we had limited accounting personnel and other resources to address our internal control over financial reporting. In connection with the preparation of our financial statements for the year ended December 31, 2024, material weaknesses were identified in the design and operating effectiveness of our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

 

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Based on our assessment, we did not appropriately design and maintain entity-level controls impacting the control environment, control activities, information and monitoring activities to prevent or detect material misstatements to the financial statements. These material weaknesses relate to:

(i) an insufficient number of qualified resources to ensure adequate oversight and accountability over the performance of controls, including:

 

  •  

proper segregation of duties,

 

  •  

controls over the completeness and accuracy of information used in the operation of control activities across substantially all financial statement areas, and

 

  •  

retention of control evidence, and

(ii) improper access and a lack of review over user access and user provisioning as it relates to our information technology environment and general controls over information systems that support the financial reporting process.

These material weaknesses could result in a misstatement of our accounts or disclosures in our annual or interim financial statements that would not be prevented or detected on a timely basis.

These material weaknesses have not been remediated as of the date of this prospectus. To remediate the material weaknesses, we continue to hire finance and accounting personnel, as well as improve our financial controls and accounting systems. We continue using services of a third-party firm to assist in the design and implementation of controls. We intend to continue to take further steps to remediate these material weaknesses through formalizing documentation of policies and procedures and further evolving the accounting processes. The material weaknesses will not be considered remediated until management completes the design and implementation of the measures described above and the controls operate for a sufficient period of time and management has concluded, through testing, that these controls are effective. Although we currently expect to remediate these material weaknesses by December 31, 2025, we cannot assure you that we will be able to successfully do so on this timeline.

The measures we have taken to date, and those that we are continuing to design and implement, may not be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses. If the steps we take do not correct these material weaknesses in a timely manner, we will be unable to conclude that we maintain effective internal control over financial reporting. Accordingly, there could continue to be a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis.

If we fail to remediate our existing material weaknesses or identify new material weaknesses in our internal control over financial reporting, if we are unable to comply with the disclosure and attestation requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to conclude that our internal control over financial reporting is effective when we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. As a result, we could also become subject to investigations by Nasdaq, the SEC or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation and financial condition or divert financial and management resources from our regular business activities.

Our projections regarding the market opportunities for our product candidate may not be accurate, and the actual market for our products may be smaller than we estimate.

The precise incidence and prevalence for all the conditions we aim to address with our product candidate are unknown. Our projections of both the number of people who have these diseases, as well as the subset of people

 

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with these diseases who have the potential to benefit from treatment with our product candidate, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including sales of our competitors, scientific literature, surveys of clinics, patient foundations, or market research, and may prove to be incorrect in general, or as to their applicability to our company. Further, new trials may change the estimated incidence or prevalence of these diseases. The total addressable market of our product candidate, if approved, will ultimately depend upon, among other things, the diagnosis criteria included in the final label for our product candidate approved for sale for these indications, if any, the ability of our product candidate to improve on the safety, convenience, cost, and efficacy of competing therapies or therapies in development, acceptance by the medical community and patients, drug pricing, and reimbursement. The number of patients in the United States and other major markets and elsewhere may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our product, if approved, and our product candidate or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect our business, financial condition, results of operations, and prospects.

Our business could be adversely affected by the effects of health pandemics or epidemics, such as the COVID-19 pandemic, which could cause significant disruptions in our operations and those of our current or future CDMOs, CROs, and other third parties upon whom we rely.

Health pandemics or epidemics, such as the COVID-19 pandemic, have in the past and could again in the future result in quarantines, stay-at-home orders, remote work policies, or other similar events that may disrupt businesses, delay our research and development programs and timelines, negatively impact productivity and increase risks associated with cybersecurity, the future magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations. More specifically, these types of events may negatively impact personnel at third-party manufacturing facilities or the availability or cost of materials, which could disrupt our supply chain. Moreover, our clinical trials may be negatively affected. Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources. Some patients may not be able or willing to comply with trial protocols if quarantines impede patient movement or interrupt healthcare services. Our ability to recruit and retain patients, principal investigators, and site staff (who as healthcare providers may have heightened exposure) may be hindered, which would adversely affect our trial operations. Disruptions or restrictions on our ability to travel to monitor data from our trials, or to conduct trials, or the ability of patients enrolled in our trials or staff at trial sites to travel, as well as temporary closures of our trial partners and CDMOs’ facilities, would negatively impact our trial activities. In addition, we rely on independent clinical investigators, CROs, and other third-party service providers to assist us in managing, monitoring, and otherwise carrying out certain of our preclinical studies and clinical trials, including the collection of data from our trials, and the effects of health pandemics or epidemics, such as the COVID-19 pandemic, may affect their ability to devote sufficient time and resources to our programs or to travel to sites to perform work for us. Similarly, our trials could be delayed and/or disrupted. As a result, the expected timeline for data readouts, including incompleteness in data collection and analysis and other related activities, and certain regulatory filings may be negatively impacted, which would adversely affect our ability to obtain regulatory approval for and to commercialize our product candidate, if approved, increase our operating expenses, and adversely affect our business, financial condition, results of operations, and prospects. In addition, impact on the operations of the FDA or comparable foreign regulatory authorities could negatively affect our planned trials and approval processes. Finally, economic conditions and business activity may be negatively impacted and may not recover as quickly as anticipated.

Our future growth may depend, in part, on our ability to operate in foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.

Our future growth may depend, in part, on our ability to develop and commercialize our product candidate in foreign markets, including in the European Union, United Kingdom and Japan, for which we may rely on collaboration with third parties. We are not permitted to market or promote our product candidate before we receive regulatory approval from the applicable regulatory authority in that foreign market and may never receive

 

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such regulatory approval for our product candidate. To obtain separate regulatory approval in many other countries, we must comply with numerous and varying regulatory requirements of such countries regarding safety and efficacy and governing, among other things, clinical trials and commercial sales, pricing, and distribution of our product candidate, and we cannot predict success in these jurisdictions. If we fail to comply with the regulatory requirements in international markets and receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidate will be harmed and our business will be adversely affected. We may not obtain foreign regulatory approvals on a timely basis, if at all. Our failure to obtain approval of our product candidate by regulatory authorities in another country may significantly diminish the commercial prospects of that product candidate and our business, financial condition, results of operations, and prospects could be adversely affected. Moreover, even if we obtain approval of our product candidate and ultimately commercialize our product candidate in foreign markets, we would be subject to the risks and uncertainties, including the burden of complying with complex and changing foreign regulatory, tax, accounting, and legal requirements, and reduced protection of intellectual property rights in some foreign countries.

Risks Related to Intellectual Property, Collaborations, and Related Agreements

If we are unable to obtain and maintain sufficient intellectual property protection for our technologies, and product candidate and any future product candidates we may develop, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors or other third parties could develop and commercialize products similar or identical to ours, and our ability to successfully develop and commercialize our product candidate may be adversely affected.

We rely upon a combination of patents, know-how, trade secrets, and confidentiality agreements, to protect the intellectual property related to our technologies, and product candidate and to prevent third parties from copying and surpassing our achievements, thus eroding our competitive position in our market. We may also rely on protection afforded by in-licensed intellectual property rights and proprietary technology of third parties in the future.

Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries for our product candidate and its uses, as well as our ability to operate without infringing, misappropriating, or otherwise violating the proprietary rights of others. We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our novel discoveries and technologies that are important to our business. Although we own issued patents, our pending and future patent applications may not result in patents being issued. Even if our patent applications result in issued patents, we cannot assure you that such issued patents will afford sufficient protection of our product candidate or its intended uses against competitors, nor can there be any assurance that the patents issued will not be infringed, designed around, invalidated by third parties, or that they will effectively prevent others from commercializing competitive technologies, products, or product candidates.

Obtaining and enforcing patents is expensive and time-consuming, and we may not be able to file, prosecute, maintain, enforce, or license all necessary or desirable patent applications or maintain and/or enforce patents that may issue based on our patent applications at a reasonable cost or in a timely manner. We may not be able to obtain or maintain patent applications and patents due to the subject matter claimed in such patent applications and patents being in disclosures in the public domain. It is also possible that we will fail to identify patentable aspects of our research and development results before it is too late to obtain patent protection. Therefore, patents and applications that are relevant to our product candidate may not be prosecuted and enforced in a manner consistent with the best interests of our business. Although we enter into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, CROs, CDMOs, consultants, advisors, and other third parties, any of these parties may breach these agreements and disclose such results before a patent application is filed, thereby jeopardizing our ability to seek patent protection.

 

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Consequently, we may not be able to prevent any third parties from using any of our technologies that are in the public domain to compete with our technologies or product candidate.

Composition of matter patents for pharmaceutical product candidates often provide a strong form of intellectual property protection for those types of products, as such patents provide protection without regard to any method of use or preparation. However, we cannot be certain that the claims in any of our patent applications directed to composition of matter of our product candidate will be considered patentable by the United States Patent and Trademark Office, or the USPTO, or by patent offices in foreign countries, or that the claims in any of our issued patents will be considered valid and enforceable by courts in the United States or foreign countries. Further, our issued composition of matter patents covering our pharmaceutical product candidate may expire at such a date that our patents may not prevent competitors from developing, making and marketing a product that is identical to our product candidate after expiration of any applicable regulatory exclusivities. Similarly, patents for pharmaceutical formulations containing pharmaceutical product candidates may provide an additional form of intellectual property protection, as such patents provide protection without regard to any method of use. However, we cannot be certain that the claims in our pending patent applications directed to pharmaceutical formulations containing our product candidate will be considered patentable by the USPTO or by patent offices in foreign countries, or that the claims in any of our issued patents will be considered valid and enforceable by courts in the United States or foreign countries. In addition, we cannot be certain that the claims of such patents, if granted, will be sufficiently broad to effectively prevent competitors from working around our claimed inventions by developing alternative compounds and thereby competing with us without infringing our patent rights. Method of use patents protect the use of a product for the specified method or indication. In the absence of separate composition of matter protection, this type of patent does not prevent a competitor from making and marketing a product that is identical to our product candidate for an indication that is outside of the methods of use claimed in our patents. Moreover, even if competitor products are not approved for use in our patented indications, and our competitors do not actively promote their products for indications that are covered by our patents, clinicians may prescribe these competitor products “off-label.” Although off-label prescriptions may infringe or contribute to the infringement of method of use patents, such infringement is difficult to prevent or prosecute.

The patent position of pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions, and has in recent years been the subject of much litigation, resulting in court decisions, including Supreme Court decisions, which have increased uncertainties as to the ability to enforce patent rights in the future. As a result, the issuance, scope, validity, enforceability, and commercial value of any patent rights are highly uncertain. Our pending and future owned and in-licensed patent applications may not result in patents being issued that protect our technologies or product candidate, effectively prevent others from commercializing our technologies or product candidate or otherwise provide any competitive advantage. In fact, patent applications may not issue as patents at all. The coverage claimed in a patent application can also be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States, or vice versa.

The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in protecting our product candidate by obtaining and defending patents. For example, we may not be aware of all third-party intellectual property rights potentially relating to our product candidate or its intended uses, and as a result the impact of such third-party intellectual property rights upon the patentability of our patents and patent applications, as well as the impact of such third-party intellectual property upon our freedom to operate, is highly uncertain. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing or, in some cases, not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions. If a third party can establish that we were not the first to make or the first to file for patent protection of such inventions, our patent applications may not issue as patents

 

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and even if issued, may be challenged and invalidated or rendered unenforceable. As a result, the issuance, inventorship, scope, validity, enforceability, and commercial value of our patent rights are highly uncertain.

The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability, and our pending patent applications may be challenged in patent offices in the United States and abroad. Even issued patents may later be found invalid or unenforceable or may be modified or revoked in proceedings instituted by third parties before various patent offices or in courts. For example, our pending patent applications may be subject to third-party pre-issuance submissions of prior art to the USPTO, and our issued patents may be subject to post-grant review, proceedings, oppositions, derivations, reexaminations, interferences, inter partes review proceedings, or other similar proceedings, in the United States or elsewhere, challenging our patent rights. Such submissions may also be made prior to a patent’s issuance, precluding the granting of a patent based on one or more of our pending patent applications. An adverse determination in any such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated, or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technologies and product candidates, or limit the duration of the patent protection of our technologies and product candidate. Such challenges also may result in substantial cost and require significant time from our scientists and management, even if the eventual outcome is favorable to us. Any of the foregoing could impair our competitive position and adversely affect our business, financial condition, results of operations, and prospects.

A third party may also claim that our patent rights are invalid or unenforceable in a litigation. We can also be accused of infringement by a third party in a litigation. The outcome following legal assertions of invalidity, unenforceability, or infringement is unpredictable. An adverse result in any legal proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly and could allow third parties to commercialize our products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize our technology, products, or product candidate without infringing third-party patent rights.

In addition, given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. The degree of future protection for our proprietary rights is uncertain. Only limited protection may be available and may not adequately protect our rights or permit us to gain or keep any competitive advantage. Any failure to obtain or maintain patent protection with respect to our product candidate or its uses could adversely affect our business, financial condition, results of operations, and prospects.

Issued patents covering our product candidate, or the method of use of our product candidate could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad.

If we initiate legal proceedings against a third party to enforce a patent covering our product candidate, or our other proprietary technologies, the defendant could counterclaim that such patent is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement, insufficient written description, or failure to claim patent-eligible subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. In addition to such counterclaims, third parties may raise claims challenging the validity or enforceability of a patent before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post-grant review, inter partes review, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in the revocation of, cancellation of, or amendment to our patent rights in such a way that they no longer cover our product candidate, therapeutic programs, and other proprietary technologies we may develop. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no

 

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invalidating prior art of which we and the patent examiner were unaware during prosecution. If a third party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection provided to our product candidate, proprietary technologies, or other components of our therapeutic programs, as applicable. Such a loss of patent protection could have a material adverse impact on our business, financial condition, results of operations, and prospects.

We may not be successful in obtaining or maintaining necessary rights to third party patents for our product candidate through acquisitions and in-licenses.

The growth of our business may depend in part on our ability to acquire, in-license, or use third-party intellectual property and proprietary rights. Other pharmaceutical companies and academic institutions may own patents or may have filed, or be planning to file, patent applications potentially relevant to our business. In order to avoid infringing such patent rights, we may find it necessary or prudent to obtain licenses to such patent rights from such third parties. For example, we may be required by the FDA or comparable foreign regulatory authorities to provide a specific companion diagnostic test or tests with our product candidate, any of which could require us to obtain rights to use patents or know-how owned or controlled by third parties. In addition, with respect to any patent or other intellectual property rights we may co-own with third parties in the future, we may require licenses to such co-owners’ interest to such patent or other intellectual property rights. We may be unable to acquire or in-license any compositions, methods of use, processes, or other third-party intellectual property rights from third parties that we identify as necessary or important to our business operations. In addition, we may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. Were that to happen, we may need to cease use of the compositions or methods covered by those third-party intellectual property rights and may need to seek to develop alternative approaches that do not infringe, misappropriate, or otherwise violate those intellectual property rights, which may entail additional costs and development delays, even if we were able to develop such alternatives, which may not be feasible. Even if we are able to obtain a license, it may be non-exclusive, which means that our competitors may also receive access to the same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or license replacement technology.

The licensing and acquisition of third-party intellectual property rights is a competitive area, and companies that may be more established or have greater resources than we do may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive in order to commercialize our product candidate. More established companies may have a competitive advantage over us due to their size, resources, and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. There can be no assurance that we will be able to successfully complete these types of negotiations and ultimately acquire the rights to the intellectual property related to the products or product candidate that we may seek to develop or market. If we are unable to successfully obtain rights to required third-party intellectual property or to maintain the existing intellectual property rights we have, we may have to abandon development of certain programs and our business, financial condition, results of operations, and prospects could suffer.

We may enter into license agreements in the future with others to advance our existing or future research or allow commercialization of our existing or future product candidates. These licenses may not provide exclusive rights to use such intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technologies and product candidate in the future. In that event, we may be required to expend significant time and resources to redesign our product candidate, or the methods for manufacturing them, all of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected product candidate, which could harm our business, financial condition, results of operations, and prospects significantly. We cannot provide any assurances that third-party patents do not exist which might be enforced against our current manufacturing methods, product candidate, or future methods or product candidates resulting in either an injunction prohibiting

 

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our manufacture or future sales, or, with respect to our future sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties, which could be significant.

We may form or seek collaborations or strategic alliances, enter into licensing arrangements or other business transactions in the future, and we may not realize the benefits of such transactions.

We may enter into licensing arrangements and strategic transactions to acquire and advance new assets or product candidates in the future, including strategic partnerships, in-licensing of product candidates, strategic collaborations, joint ventures, restructurings, divestitures, acquisitions of companies, asset purchases, business combinations, and investments.

Any future transactions that we enter into may not be successful. In particular, the success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborations are subject to numerous risks, which may include that:

 

  •  

collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations;

 

  •  

collaborators may not pursue development and commercialization of our product candidate or may elect not to continue or renew development or commercialization programs based on trial or test results, changes in their strategic focus due to the acquisition of competitive products, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities;

 

  •  

collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidate;

 

  •  

a collaborator with marketing, manufacturing, and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities;

 

  •  

we could grant exclusive rights to our collaborators that would prevent us from collaborating with others;

 

  •  

collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;

 

  •  

disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of our future product candidates or that results in costly litigation or arbitration that diverts management attention and resources;

 

  •  

collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable future product candidates;

 

  •  

collaborators may own or co-own intellectual property covering our product candidate that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and

 

  •  

a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.

In addition, any future transactions could increase our near and long-term expenditures, result in potentially dilutive issuances of our equity securities, including our common stock, or the incurrence of debt, contingent liabilities, amortization expenses, or acquired in-process research and development expenses, any of which could affect our financial condition, liquidity, and results of operations.

 

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Future acquisitions may also require us to obtain additional financing, which may not be available on favorable terms or at all. These transactions may never be successful and may require significant time and attention of our management. In addition, the integration of any business that we may acquire in the future may disrupt our existing business and may be a complex, risky, and costly endeavor for which we may never realize the full benefits of the acquisition. Accordingly, although there can be no assurance that we will undertake or successfully complete any additional transactions of the nature described above, any additional transactions that we do complete could adversely affect our business, financial condition, results of operations, and prospects.

We may not be able to protect our intellectual property rights throughout the world.

Patents are of national or regional effect. Filing, prosecuting, and defending patents on all of our research programs and product candidate in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States, even in jurisdictions where we do pursue patent protection. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, even in jurisdictions where we do pursue patent protection, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These competitor products may compete with our product candidate, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws. Additionally, laws of some countries outside of the United States and Europe do not afford intellectual property protection to the same extent as the laws of the United States and Europe. Various companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of many countries do not favor the enforcement of patents or other intellectual property protection, particularly those relating to pharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights.

Various countries outside the United States have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. As a result, a patent owner may have limited remedies in certain circumstances, which could materially diminish the value of such patent. If we are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Further, the standards applied by the USPTO and foreign patent offices in granting patents are not always applied uniformly or predictably. As such, we do not know the degree of future protection that we will have on our technologies and product candidate. While we will endeavor to try to protect our technologies and product candidate with intellectual property rights such as patents, as appropriate, the process of obtaining patents is time-consuming, expensive, and unpredictable.

In addition, geopolitical actions in the United States and in foreign countries could increase the uncertainties and costs surrounding the prosecution or maintenance of our patent applications or those of any future licensors and the maintenance, enforcement, or defense of our issued patents or those of any future licensors. As a result, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected.

 

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Intellectual property rights do not necessarily address all potential threats to our competitive advantage.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:

 

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others may be able to make or use product candidates that are similar to ours, but that are not covered by the claims of our patents or pending patent applications;

 

  •  

we or future collaborators might not have been the first to make the inventions covered by the pending patent application that we own or have exclusively licensed;

 

  •  

we or future collaborators might not have been the first to file patent applications covering certain of our or their inventions;

 

  •  

others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing or otherwise violating our intellectual property rights;

 

  •  

it is possible that noncompliance with the USPTO and foreign governmental patent agencies’ requirements for a number of procedural, documentary, fee payment, and other provisions during the patent process can result in abandonment or lapse of a patent or patent application, and partial or complete loss of patent rights in the relevant jurisdiction;

 

  •  

it is possible that our pending patent applications or those that we may own or license in the future will not lead to issued patents;

 

  •  

issued patents, if any arise in the future, that we either own or have exclusively licensed may be revoked, modified, or held invalid or unenforceable, as a result of legal challenges by our competitors or other third parties;

 

  •  

others may have access to the same intellectual property rights licensed to us in the future on a non-exclusive basis;

 

  •  

our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

 

  •  

we may not develop additional proprietary technologies that are patentable;

 

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we cannot predict the scope of protection of any patent issuing based on our patent applications, including whether the patent applications that we own, or, in the future, in-license will result in issued patents with claims that directed to our product candidate or uses thereof in the United States or in other foreign countries;

 

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there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns;

 

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countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop, and market competing product candidates;

 

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the claims of any patent issuing based on our patent applications may not provide protection against competitors or any competitive advantages, or may be challenged by third parties;

 

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if enforced, a court may not hold that our patents, if they issue in the future, are valid, enforceable, and infringed;

 

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we may need to initiate litigation or administrative proceedings to enforce and/or defend our patent rights which will be costly whether we win or lose;

 

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  •  

we may choose not to file a patent application in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent application covering such intellectual property;

 

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our trade secrets or proprietary know-how may be unlawfully disclosed, thereby losing their trade secret or proprietary status;

 

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we may fail to adequately protect and police our trademarks and trade secrets; and

 

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the patents of others may have an adverse effect on our business, including if others obtain patents claiming subject matter similar to or improving that covered by our patent applications.

Even if we receive regulatory approval for our product candidate, the regulatory authorities may also approve generic products that compete directly with our product candidate. Once an NDA is approved, the product covered thereby becomes a “listed drug” which can, in turn, be cited by potential competitors in support of approval of an Abbreviated New Drug Application, or ANDA. The FDA regulations and other applicable regulations and policies provide incentives to manufacturers to create modified, non-infringing versions of a listed drug to facilitate the approval of an ANDA for generic substitutes. These manufacturers might only be required to conduct a relatively inexpensive study to show that their product has the same active ingredient(s), dosage form, strength, route of administration and conditions of use or labeling as our product candidate and that the generic product is bioequivalent to our product candidate. These generic equivalents could be significantly less costly than ours to bring to market and companies that produce generic equivalents may be able to offer their products at lower prices. Accordingly, competition from generic equivalents of our product candidate could materially adversely impact our ability to successfully commercialize our product candidate.

Should any of these or similar events occur, they could significantly harm our business, financial condition, results of operations, and prospects.

We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope, or expiration of a third-party patent, which might adversely affect our ability to develop and market our product candidate.

As the pharmaceutical industry expands and more patents are issued, the risk increases that our product candidate may be subject to claims of infringement of the patent rights of third parties. There can be no assurance that our operations do not, or will not in the future, infringe, misappropriate, or otherwise violate existing or future third-party patents or other intellectual property rights. Identification of third-party patent rights that may be relevant to our operations is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases, and the difficulty in assessing the meaning of patent claims. We cannot guarantee that any of our patent searches or analyses, including the identification of relevant patents, the scope of patent claims, or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States and abroad that is relevant to or necessary for the commercialization of our product candidate in any jurisdiction.

Numerous U.S. and foreign patents and pending patent applications exist in our market that are owned by third parties. Our competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in patent portfolios and competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to make, use, and sell our product candidate. We do not always conduct independent reviews of pending patent applications of and patents issued to third parties. Patent applications in the United States and elsewhere are typically published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Certain United States applications that will not be filed outside the United States can remain confidential until patents issue. In addition, patent applications in the United States and elsewhere can be pending for many years before issuance, or unintentionally abandoned patents or applications can be revived. Furthermore, pending patent applications

 

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that have been published can, subject to certain limitations, be later amended in a manner that could cover our technologies, product candidate, or the use of our product candidate. As such, there may be applications of others now pending or recently revived patents of which we are unaware. These patent applications may later result in issued patents, or the revival of previously abandoned patents, that may be infringed by the manufacture, use, or sale of our technologies or product candidate or will prevent, limit, or otherwise interfere with our ability to make, use, or sell our technologies and product candidate.

The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent, and the patent’s prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect. For example, we may incorrectly determine that our product candidate is not covered by a third-party patent or may incorrectly predict whether a third-party’s pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect. Our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our product candidate.

We cannot provide any assurances that third-party patents and other intellectual property rights do not exist which might be enforced against our current technology, including our product candidate, its respective methods of use, manufacture, and formulations thereof, and could result in either an injunction prohibiting our manufacture or future sales, or, with respect to our future sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties, which could be significant.

We may be involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful.

Competitors or other third parties may infringe, misappropriate, or violate our patents, trademarks, or other intellectual property. To counter infringement, misappropriation, or unauthorized use, we or one of our licensing partners may be required to file infringement claims, which can be expensive and time-consuming and divert the time and attention of our management and scientific personnel. Our pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement, insufficient written description, or failure to claim patent-eligible subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution. The outcome following legal assertions of invalidity and unenforceability is unpredictable. In any patent infringement proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue. There is also a risk that, even if the validity of such patent is upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the other party’s use of our invention, or decide that the other party’s use of our patented technology falls under the safe harbor to patent infringement under 35 U.S.C. §271(e). An adverse outcome in a litigation or proceeding involving our patents could limit our ability to assert our patents against those parties or other competitors and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products. Any of these occurrences could adversely affect our competitive position, and our business, financial condition, results of operations, and prospects. Similarly, if we assert trademark infringement claims, a court may determine that the marks to be asserted are invalid or unenforceable, or that the party against whom trademark infringement to be asserted has superior rights to the marks in question. In this case, we could ultimately be forced to cease use of such trademarks.

 

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Even if we establish infringement, misappropriation, or violation, the court may decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could adversely affect the price of shares of our common stock. Moreover, we cannot assure you that we will have sufficient financial or other resources to file and pursue such infringement, misappropriation, or violation claims, which typically last for years before they are concluded. Even if we ultimately prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel could outweigh any benefit we receive as a result of the proceedings.

Intellectual property rights of third parties could adversely affect our ability to commercialize our product candidate or any future product candidates, and we, or any future licensors, collaborators or strategic partners may become subject to third party claims or litigation alleging infringement of patents or misappropriation or violation of our other proprietary rights or seeking to invalidate patents or other proprietary rights. We might be required to litigate or obtain licenses from third parties in order to develop or market our product candidate or any future product candidates. Such litigation or licenses could be costly or not available on commercially reasonable terms.

Our commercial success depends, in part, on our ability to develop, manufacture, market, and sell our product candidate and use our proprietary technologies without infringing, misappropriating, or otherwise violating the intellectual property and other proprietary rights of third parties. Third parties may allege that we have infringed, misappropriated, or otherwise violated their intellectual property. Litigation or other legal proceedings relating to intellectual property claims, with or without merit, is unpredictable and generally expensive and time-consuming and, even if resolved in our favor, is likely to divert significant resources from our core business, including distracting our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could adversely affect our ability to compete in the marketplace.

There is a substantial amount of intellectual property litigation in the pharmaceutical industry, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our product candidate. We cannot be certain that our product candidate will not infringe existing or future patents owned by third parties. Third parties may assert infringement claims against us based on existing or future intellectual property rights, regardless of their merit. We may decide in the future to seek a license to such third-party patents or other intellectual property rights, but we might not be able to do so on reasonable terms. Proving patent invalidity may be difficult. For example, in the United States, proving invalidity in court requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. As this burden is a high one, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such United States patent or find that our technologies or product candidate does not infringe any such claims. If we are found to infringe, misappropriate, or otherwise violate a third party’s intellectual property rights, we could be forced, including by court order, to cease developing, manufacturing, or commercializing the infringing technology or product candidate. Further, we may be required to redesign the technology or product candidate in a non-infringing manner, which may not be commercially feasible.

 

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Alternatively, we may be required to obtain a license from such third party in order to use the infringing technology and continue developing, manufacturing, or marketing the infringing product candidate. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our technologies or product candidate or force us to cease some of our business operations, which could materially harm our business. Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our business.

We may not be aware of patents that have already been issued and that a third party, for example, a competitor in the fields in which we are developing our product candidate, might assert are infringed by our current or future product candidates, including claims to compositions, formulations, methods of manufacture, or methods of use or treatment that cover our current or future product candidates. It is also possible that patents owned by third parties of which we are aware, but which we do not believe are relevant to our current or future product candidates, could be found to be infringed by our current or future product candidates. In addition, because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our current or future product candidates may infringe. Our competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in patent portfolios and competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit, or otherwise interfere with our ability to make, use, and sell our current or future product candidates. The pharmaceutical industry has produced a considerable number of patents, and it may not always be clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we were sued for patent infringement, we would need to demonstrate that our current or future product candidates or methods of use either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. Proving invalidity may be difficult. For example, in the United States, proving invalidity in court requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents, and there is no assurance that a court of competent jurisdiction would invalidate the claims of any such United States patent. Even if we are successful in these proceedings, we may incur substantial costs, and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could adversely affect our business and operations. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation. In addition, we may not have sufficient resources to bring these actions to a successful conclusion.

We may choose to challenge the enforceability or validity of claims in a third party’s United States patent by requesting that the USPTO review the patent claims in an ex-parte re-exam, inter partes review, or post-grant review proceedings. These proceedings are expensive and may consume our time or other resources. We may choose to challenge a third party’s patent in patent opposition proceedings in the European Patent Office, or EPO, or other foreign patent office. The costs of these opposition proceedings could be substantial and may consume our time or other resources. If we fail to obtain a favorable result at the USPTO, EPO, or other patent office then we may be exposed to litigation by a third party alleging that the patent may be infringed by our product candidate.

Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our product candidate.

As is the case with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining, defending, maintaining, and enforcing patents in the pharmaceutical

 

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industry involves both technological and legal complexity and is therefore costly, time-consuming and inherently uncertain. Changes in either the patent laws or interpretation of the patent laws in the United States could increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents, and may diminish our ability to protect our inventions, obtain, maintain, enforce and protect our intellectual property rights and, more generally, could affect the value of our intellectual property or narrow the scope of our future owned and licensed patents. For example, patent reform legislation in the United States and other countries, such as the Leahy-Smith America Invents Act, or the Leahy-Smith Act, signed into law on September 16, 2011, could increase those uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our future issued patents. The Leahy-Smith Act included a number of significant changes to United States patent law. These changes included provisions that affected the way patent applications are prosecuted, redefined prior art, and provided more efficient and cost-effective avenues for competitors to challenge the validity of patents. These included allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings.

Further, because of a lower evidentiary standard in these USPTO post-grant proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Thus, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our future issued patents, all of which could adversely affect our business, financial condition, results of operations, and prospects.

After March 2013, under the Leahy-Smith Act, the United States transitioned to a first inventor to file system in which, assuming that the other statutory requirements are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third-party was the first to invent the claimed invention. Consequently, if a third party that files a patent application in the USPTO before we file an application covering the same invention, the third party could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we were the first to either (i) file any patent application related to our product candidate and other proprietary technologies we may develop or (ii) invent any of the inventions claimed in our patents or patent applications. Even where we have a valid and enforceable patent, we may not be able to exclude others from practicing the claimed invention where the other party can show that they used the invention in commerce before our filing date or the other party benefits from a compulsory license. Thus, the changes to the United States patent system by the Leahy-Smith Act introduces uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents, all of which could adversely affect our business, financial condition, results of operations, and prospects.

In addition, the patent positions of companies in the development and commercialization of pharmaceuticals are particularly uncertain. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. Depending on future actions by the United States Congress, the United States courts, the USPTO, and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents and patents that we might obtain in the future. For example, recent decisions raise questions regarding the award of patent term adjustment, or PTA, for patents where related patents have issued without PTA. Thus, it cannot be said with certainty how PTA will or will not be viewed in future and whether patent expiration dates may be impacted.

 

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Similarly, changes in patent law and regulations in other countries or jurisdictions or changes in governmental bodies that enforce them or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we may obtain in the future. For example, the complexity and uncertainty of European patent laws have also increased in recent years. In Europe, a new unitary patent system took effect on June 1, 2023, which will significantly impact European patents, including those granted before the introduction of such a system. Under the unitary patent system, all European patents, including those issued prior to June 1, 2023, now by default automatically fall under the jurisdiction of a new European Unified Patent Court, or the UPC, for litigation involving such patents. As the UPC is a new court system, there is no precedent for the court, increasing the uncertainty of any litigation. Our European patent applications, if issued, could be challenged in the UPC. During the first seven years of the UPC’s existence, the UPC legislation allows a patent owner to opt its European patents out of the jurisdiction of the UPC. We may decide to opt out our future European patents from the UPC, but doing so may preclude us from realizing the benefits of the UPC. Moreover, if we do not meet all of the formalities and requirements for opt-out under the UPC, our future European patents could remain under the jurisdiction of the UPC. The UPC will provide our competitors with a new forum to centrally revoke our European patents, and allow for the possibility of a competitor to obtain pan-European injunction. It is uncertain how the UPC will impact granted European patents in the pharmaceutical industry. We cannot predict how future decisions by the courts, the United States Congress, or the USPTO may impact the value of our patents. Any similar adverse change in the patent laws of other jurisdictions could also adversely affect our business, financial condition, results of operations, and prospects.

We may become subject to claims challenging the inventorship or ownership of our or our future licensors’ patents and other intellectual property.

We may be subject to claims that former employees, collaborators, or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor. The failure to name the proper inventors on a patent application can result in the patents issuing thereon being unenforceable. Inventorship disputes may arise from conflicting views regarding the contributions of different individuals named as inventors, the effects of foreign laws where foreign nationals are involved in the development of the subject matter of the patent, conflicting obligations of third parties involved in developing our product candidate, or as a result of questions regarding co-ownership of potential joint inventions. Litigation may be necessary to resolve these and other claims challenging inventorship or ownership. Alternatively, or additionally, we may enter into agreements to clarify the scope of our rights in such intellectual property. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could adversely affect our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Our future licensors may have relied on third-party consultants or collaborators or on funds from third parties, such as the United States government, such that our licensors are not the sole and exclusive owners of the patents we in-license in the future. If other third parties have ownership rights or other rights to our future in-licensed patents, they may be able to license such patents to our competitors, and our competitors could market competing products and technology. This could adversely affect our competitive position, business, financial condition, results of operations, and prospects.

In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. Such claims could adversely affect our business, financial condition, results of operations, and prospects.

 

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Patent terms may be inadequate to protect our competitive position on our product candidate for a sufficient amount of time.

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest United States non-provisional or international patent application filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidate are obtained, once the patent life has expired, we may be open to competition from competitive products, including generics. Given the amount of time required for the development, testing, and regulatory review of a product candidate, patents protecting such candidate might expire before or shortly after such candidate is commercialized. As a result, our owned patent portfolio may not provide us with sufficient and continuing rights to exclude others from commercializing products similar or identical to ours.

If we do not obtain patent term extension for our product candidate, our business may be materially harmed.

Depending upon the timing, duration, and specifics of any FDA marketing approval of our product candidate, one or more of our issued United States patents or issued United States patents that we may own in the future may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Action of 1984, or the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. Similar patent term restoration provisions to compensate for commercialization delay caused by regulatory review are also available in certain foreign jurisdictions, such as the EU Regulation (EC) No 469/2009 concerning the Supplementary Protection Certificate for medicinal products. However, we may not be granted any extensions for which we apply because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. In addition, to the extent we wish to pursue patent term extension based on a patent that we in-license from a third party, we would need the cooperation of that third party. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension, or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations, and prospects could be materially harmed.

Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated as a result of noncompliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and/or applications will be due to be paid to the USPTO and various government patent agencies outside of the United States over the lifetime of our patents and patent applications. We rely on our outside counsel or third party vendors to pay these fees due to United States and non-United States patent agencies. The USPTO and various non-United States government patent agencies require compliance with several procedural, documentary, fee payment, and other similar provisions during the patent application process. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. There are situations, however, in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market and this circumstance could adversely affect our business, financial condition, results of operations, and prospects.

 

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If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce, and any other elements of our discovery and development processes that involve proprietary know-how, information, or technology that is not covered by patents. We may also rely on trade secret protection as temporary protection for concepts that may be included in a future patent filing. However, trade secret protection will not protect us from innovations that a competitor develops independently of our proprietary know-how. If a competitor independently develops a technology that we protect as a trade secret and files a patent application on that technology, then we may not be able to patent that technology in the future, may require a license from the competitor to use our own know-how, and if the license is not available on commercially viable terms, then we may not be able to launch our product candidate. Additionally, trade secrets can be difficult to protect and some courts inside and outside the United States are less willing or unwilling to protect trade secrets. The laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws within the United States. We may need to share our trade secrets and proprietary know- how with current or future partners, collaborators, contractors, and others located in countries at heightened risk of theft of trade secrets, including through direct intrusion by private parties or foreign actors, and those affiliated with or controlled by state actors. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. Additionally, although we require all of our employees to assign their inventions to us, and require all of our employees, consultants, advisors, and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets. If our trade secrets are not adequately protected, our business, financial condition, results of operations, and prospects could be adversely affected.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our trademarks or trade names may be challenged, infringed, circumvented, or declared generic or determined to be infringing on other marks. During trademark registration proceedings, we may receive rejections of our applications by the USPTO or in other foreign jurisdictions. Although we are given an opportunity to respond to such rejections, we may be unable to overcome them. In addition, in the USPTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, which may not survive such proceedings. Moreover, any name we propose to use with our product candidate in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. Similar requirements exist in Europe. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA or an equivalent administrative body in a foreign jurisdiction objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties, and be acceptable to the FDA. Furthermore, in many countries, owning and maintaining a trademark registration may not provide an adequate defense against a subsequent infringement claim asserted by the owner of a senior trademark.

We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors or other third parties may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish

 

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name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade names, domain name, or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely affect our business, financial condition, results of operations, and prospects.

We may be subject to claims asserting that our employees, consultants, or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.

Certain of our employees, consultants, or advisors have in the past and may in the future be employed at universities or other pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that these individuals or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. An inability to incorporate such technologies or features would harm our business and may prevent us from successfully commercializing our technologies or product candidate. In addition, we may lose personnel as a result of such claims and any such litigation or the threat thereof may adversely affect our ability to hire employees or contract with independent contractors. A loss of key personnel or their work product could hamper or prevent our ability to commercialize our technologies or product candidate, which could adversely affect our business, financial condition, results of operations, and prospects. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

In addition, we may in the future be subject to claims by former employees, consultants, or other third parties asserting an ownership right in our patents or patent applications. An adverse determination in any such submission or proceeding may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated, or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar technology and therapeutics, without payment to us, or could limit the duration of the patent protection covering our technologies and product candidate. Such challenges may also result in our inability to develop, manufacture, or commercialize our technologies and product candidate without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop, or commercialize current or future technologies and product candidates. Any of the foregoing could adversely affect our business, financial condition, results of operations, and prospects.

We may develop or license intellectual property for which development was funded or otherwise assisted by, the U.S. government and/or government agencies, such as the National Institutes of Health, for development of our technology and product candidates. Failure to meet our own obligations to future licensors or upstream licensors, including such government agencies, may result in the loss of our rights to such intellectual property, which could harm our business.

The U.S. government and/or government agencies in the future may provide, funding, facilities, personnel or other assistance in connection with the development of the intellectual property rights owned by or licensed to us. The U.S. government and/or government agencies may retain rights in such intellectual property, including the right to grant or require us to grant mandatory licenses or sublicenses to such intellectual property to third parties under certain specified circumstances, including if it is necessary to meet health and safety needs that we are not reasonably satisfying or if it is necessary to meet requirements for public use specified by federal regulations, or to manufacture products in the United States. Any exercise of such rights, including with respect to any such required sublicense of these licenses, could result in the loss of significant rights and could harm our ability to commercialize licensed products. For example, research resulting in future in-licensed patent rights and

 

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technology that was funded in part by the U.S. government could result in the government having certain rights, or march-in rights, to such patent rights and technology which may permit the government to disclose our confidential information to third parties and to exercise march-in rights to use or allow third parties to use our licensed technology.

Risks Related to Our Reliance on Third Parties

We have relied and expect to continue to rely on third parties to conduct certain aspects of our clinical trials. If those third parties do not perform as contractually required, fail to satisfy legal or regulatory requirements, miss expected deadlines, or terminate the relationship, our development programs could be delayed, more costly, or unsuccessful, and we may never be able to seek or obtain regulatory approval for or commercialize our product candidate.

We rely on our internal, proprietary systems for data collection and our own clinical trial team to conduct our clinical trials in addition to external vendors and CROs to comprise a full clinical trial team. If our clinical trial team does not comply with applicable regulatory requirements, meet expected deadlines, or run trials effectively, our development programs and our ability to seek or obtain regulatory approval for or commercialize our product candidate may be delayed. Because we currently rely and intend to continue to rely on these third parties, we will have less control over the timing, quality, and other aspects of clinical trials than we would have had we conducted them independently. These parties are not, and will not be, our employees and we will have limited control over the amount of time and resources that they dedicate to our programs. Additionally, such parties may have contractual relationships with other entities, some of which may be our competitors, which may draw time and resources from our programs and harm our competitive position. As a result, delays may occur, which could negatively impact our ability to meet our expected clinical development timelines and harm our business, financial condition, and prospects.

We also rely on other third parties to store and distribute drug supplies for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or regulatory approval of our product candidate or commercialization of any resulting products, producing additional losses and depriving us of potential product revenue.

Our reliance on these third parties for development activities will reduce our control over these activities. Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable trial protocol and applicable legal, regulatory, and scientific standards, and our reliance on clinical trial sites and other third parties does not relieve us of these responsibilities. For example, we will remain responsible for ensuring that each of our preclinical studies is conducted in accordance with good laboratory practices, or GLPs, and clinical trials are conducted in accordance with GCPs. Moreover, the FDA and comparable foreign regulatory authorities require us to comply with GCPs for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity, and confidentiality of trial participants are protected. Regulatory authorities enforce these requirements through periodic inspections (including pre-approval inspections once an NDA is submitted to the FDA) of trial sponsors, clinical investigators, clinical trial sites, and IRBs. If we, our clinical trial sites, or other third parties fail to comply with applicable GLP, GCP, or other regulatory requirements, we or they may be subject to enforcement or other legal actions, the clinical data generated in our clinical trials may be deemed unreliable, and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications, if ever. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCPs. Moreover, our business may be significantly impacted if our clinical investigators or other third parties violate federal or state healthcare fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.

In addition, principal investigators for our clinical trials may be asked to serve as scientific advisors or consultants to us from time to time and may receive cash or equity compensation in connection with such

 

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services. If these relationships and any related compensation result in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship may have affected the interpretation of the study, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay or rejection by the FDA of any NDA we submit. Any such delay or rejection could prevent us from commercializing our product candidate.

Further, if our third party contractors do not successfully carry out their contractual duties, meet expected deadlines, or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, our clinical trials may need to be repeated, extended, delayed, or terminated and we may not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidate, and we may not be able to, or may be delayed in our efforts to, successfully commercialize our product candidate(s) or we or they may be subject to regulatory enforcement actions. As a result, our results of operations and the commercial prospects for our product candidate would be harmed, our costs could increase and our ability to generate revenue could be delayed. To the extent we are unable to successfully identify and manage the performance of third-party service providers in the future, our business may be materially and adversely affected.

If any of our relationships with these third parties terminate, we may not be able to enter into alternative arrangements or do so on commercially reasonable terms. Switching or adding additional contractors involves additional cost and time and requires management time and focus. In addition, there is a natural transition period when a new third party commences work. As a result, delays could occur, which could compromise our ability to meet our desired development timelines. Though we work to carefully manage our relationships with our third-party investigators and other third parties, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition, and prospects. In addition, if an agreement with any of our collaborators terminates, our access to technology and intellectual property licensed to us by that collaborator may be restricted or terminate entirely, which may delay our continued development of our product candidate utilizing the collaborator’s technology or intellectual property or require us to stop development of such product candidate completely.

We rely on third-party manufacturers and suppliers to supply our product candidate. The loss of our third-party manufacturers or suppliers, or their failure to comply with applicable regulatory requirements or to supply sufficient quantities at acceptable quality levels or prices, within acceptable timeframes, or at all, would materially and adversely affect our business.

We do not own or operate facilities for drug manufacturing, storage, distribution, or quality testing and have no current plans to develop our own clinical or commercial-scale manufacturing capabilities. We currently rely, and expect to continue to rely, on third-party contract developers and manufacturers to manufacture bulk drug substances, drug products, raw materials, and other components for our product candidate and delivery devices, as well as for commercial manufacture if our product candidate receives regulatory approval. Reliance on third-party manufacturers may expose us to different risks than if we were to manufacture the product candidate ourselves. There can be no assurance that our clinical development product supplies will not be limited, interrupted, terminated, or will be of satisfactory quality or be available at acceptable prices. In addition, any replacement of our manufacturer could require significant effort and time because there may be a limited number of qualified replacements.

The manufacturing process for our product candidate is subject to the FDA’s review and, in the future, may be subject to comparable foreign regulatory authority review. We, our suppliers and our manufacturers must meet applicable manufacturing requirements and undergo rigorous facility and process validation tests required by regulatory authorities in order to comply with regulatory standards, such as cGMPs, and to ensure the quality and safety of drug products. Securing marketing approval also requires the submission of detailed information about the product manufacturing process to, and inspection of manufacturing facilities by, the FDA and, in the future, comparable foreign regulatory authorities. If our CDMOs cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or comparable foreign

 

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regulatory authorities, they will not be able to secure and/or maintain regulatory approval for the use of their manufacturing facilities to produce our product candidate. Moreover, we do not conduct the manufacturing process ourselves and are completely dependent on our CDMOs for manufacturing our product candidate in compliance with cGMP and other applicable requirements. In the event that any of our manufacturers fails to comply with such requirements or to perform its obligations in relation to quality, timing, or otherwise, or if our projected manufacturing capacity or supply of materials becomes limited, interrupted, or more costly than anticipated, we may be forced to enter into an agreement with another third party, which we may not be able to do timely or on reasonable terms, if at all.

In some cases, the technical skills or technology required to manufacture our product candidate may be unique or proprietary to the original manufacturer and we may have difficulty transferring such to another third party. These factors would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to enable us, or to have another third party, manufacture our product candidate. If we are required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with applicable quality standards and regulations and guidelines; and we may be required to repeat some of the development program with the new manufacturer. The delays and costs associated with the verification of a new manufacturer could negatively affect our ability to develop product candidate in a timely manner or within budget, or obtain regulatory approval for or market our product candidate.

We expect to continue to rely on third-party manufacturers if we receive regulatory approval for any product candidate. To the extent that we have existing, or enter into future, manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely manner consistent with contractual and regulatory requirements, including those related to quality control and assurance. Any manufacturing facilities used to produce our product candidate will be subject to periodic review and inspection by the FDA and comparable foreign regulatory authorities, including for continued compliance with cGMP requirements, quality control, quality assurance, and corresponding maintenance of records and documents. If we are unable to obtain or maintain third-party manufacturing for our product candidate, or to do so on commercially reasonable terms, we may not be able to develop and commercialize our product candidate successfully. Our or a third party’s failure to execute on our manufacturing requirements, comply with cGMPs, or maintain a compliance status acceptable to the FDA or comparable foreign regulatory authorities could adversely affect our business in a number of other ways, including:

 

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an inability to initiate or complete clinical trials of product candidate in a timely manner;

 

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delay in submitting regulatory applications, or receiving regulatory approvals, for product candidate;

 

  •  

subjecting third-party manufacturing facilities to additional inspections by regulatory authorities;

 

  •  

loss of the cooperation of existing or future collaborators;

 

  •  

requirements to cease development or to recall batches of our product candidate; and

 

  •  

in the event of approval to market and commercialize a product candidate, an inability to meet commercial demands for our products.

Reliance on third-party manufacturers entails additional risks such as limitations on supply availability resulting from capacity and scheduling constraints of third parties; the possible breach of manufacturing agreements by third parties because of factors beyond our control; the possible termination or non-renewal of the manufacturing agreements by the third party, at a time that is costly or inconvenient to us; failure to manufacture our product according to our schedule or at all; and the possible misappropriation of our proprietary information, including our trade secrets and know-how. Additionally, our CDMOs may experience difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If any of our CDMOs were to encounter any of these difficulties, our ability to provide our product candidate to participants in clinical trials, or to provide product for treatment of patients if approved, would be jeopardized. Any performance failure on the

 

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part of our existing or future manufacturers could delay clinical development or marketing approval, and any related remedial measures may be costly or time-consuming to implement, which would have a material adverse impact on our financial position.

If any third-party manufacturer of our product candidate is unable to increase the scale of its production of our product candidate, and/or increase the product yield of its manufacturing, then our costs to manufacture product candidate may increase and commercialization may be delayed.

In order to produce sufficient quantities to meet the demand for clinical trials and, if approved, subsequent commercialization of our products, our third-party manufacturers will be required to increase their production and optimize their manufacturing processes while maintaining the quality of the output. The transition to larger scale production could prove difficult. In addition, if our third-party manufacturers are not able to optimize their manufacturing processes to increase the product yield for our product candidate, or if they are unable to produce increased amounts of our product candidate while maintaining the quality of the product, then we may not be able to meet the demands of clinical trials or market demands, which could decrease our ability to generate profits and have a material adverse impact on our business and results of operation.

We depend on limited source suppliers for certain drug substances, drug products, raw materials, components, and other materials used in our product candidate. If we are unable to source these supplies on a timely basis, we will not be able to complete our clinical trials on time and the development of our product candidate may be delayed.

We depend on limited source suppliers for certain drug substances, drug products, raw materials, samples, components, and other materials used in our product candidate. Currently, there are limited sources of raw materials and starting materials used in the manufacture of LB-102, and we rely on a single CDMO for the manufacture of LB-102 drug substance. Any change in our relationships with our CDMOs or changes to contractual terms of our agreements with them could adversely affect our business, financial condition, results of operations, and prospects.

Furthermore, any of the limited source suppliers upon whom we rely could stop producing our supplies, cease operations or be acquired by, or enter into exclusive arrangements with, our competitors. Establishing additional or replacement suppliers for these supplies, and obtaining regulatory clearance or approvals that may result from adding or replacing suppliers, could take a substantial amount of time, result in increased costs and impair our ability to produce our products, which would adversely impact our business, financial condition, results of operations, and prospects. Any such interruption or delay may force us to seek similar supplies from alternative sources, which may not be available at reasonable prices, or at all. Any interruption in the supply of limited source components for our product candidate would adversely affect our ability to meet scheduled timelines and budget for the development and commercialization of our product candidate, could result in higher expenses and would harm our business. Although we have not experienced any significant disruption as a result of our reliance on limited suppliers, we have a limited operating history and cannot assure you that we will not experience disruptions in our supply chain in the future as a result of such reliance or otherwise.

The operations of our suppliers that are located outside of the United States are subject to additional risks that are beyond our control and that could harm our business, financial condition, results of operations, and prospects.

Currently, some of our suppliers are located outside of the United States. As a result of our global suppliers, we are subject to risks associated with doing business abroad, including:

 

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political unrest, terrorism, labor disputes, and economic instability resulting in the disruption of trade from foreign countries in which our products are manufactured;

 

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the imposition of new laws and regulations, including those relating to labor conditions, quality, and safety standards, imports, duties, taxes, and other charges on imports, as well as trade restrictions and

 

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restrictions on currency exchange or the transfer of funds, particularly new or increased tariffs imposed on imports from countries where our suppliers operate;

 

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greater challenges and increased costs with enforcing and periodically auditing or reviewing our suppliers’ and manufacturers’ compliance with cGMPs or status acceptable to the FDA or comparable foreign regulatory authorities;

 

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reduced protection for intellectual property rights, including trademark protection, in some countries;

 

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disruptions in operations due to global, regional, or local public health crises or other emergencies or natural disasters;

 

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disruptions or delays in shipments; and

 

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changes in local economic conditions in countries where our manufacturers or suppliers are located.

These and other factors beyond our control could interrupt our suppliers’ production, influence the ability of our suppliers to export our clinical supplies cost-effectively or at all, and inhibit our suppliers’ ability to procure certain materials, any of which could harm our business, financial condition, results of operations, and prospects.

We may have conflicts with our current or future licensors or collaborators that could delay or prevent the development or commercialization of our product candidate.

We may have conflicts with our current or future collaborators, such as conflicts concerning the interpretation of preclinical or clinical data, the achievement of milestones, the interpretation of contractual obligations, payments for services, development obligations, or the ownership of intellectual property developed during our collaboration. Moreover, a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products. If any conflicts arise with any of our collaborators, such collaborator may act in a manner that is adverse to our best interests. Any such disagreement could result in one or more of the following, each of which could delay or prevent the development or commercialization of our product candidate, and in turn prevent us from generating revenue: disputes regarding milestone payments or royalties; uncertainty regarding ownership of intellectual property rights arising from our collaborative activities, which could prevent us from entering into additional collaborations; unwillingness by the collaborator to cooperate in the development or manufacture of a product candidate, including providing us with data or materials; unwillingness on the part of a collaborator to keep us informed regarding the progress of its development and commercialization activities or to permit public disclosure of the results of those activities; initiating of litigation or alternative dispute resolution options by either party to resolve the dispute; or attempts by either party to terminate the agreement. Collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.

Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

Because we currently rely on third parties to manufacture our product candidate and to perform quality testing, we must, at times, share our proprietary technology and confidential information, including trade secrets, with them. We seek to protect our proprietary technology, in part, by entering into confidentiality agreements, and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements, or other similar agreements with our collaborators, advisors, employees, and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are intentionally or inadvertently incorporated into the technology of others or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on

 

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our know-how and trade secrets and despite our efforts to protect our trade secrets, a competitor’s discovery of our proprietary technology and confidential information or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business, financial condition, results of operations, and prospects.

We may engage third party collaborators to market and commercialize our product candidate, who may fail to effectively commercialize our product candidate.

We may utilize strategic partners or contract sales forces, where appropriate, to assist in the commercialization of our product candidate, if approved. We currently possess limited resources and may not be successful in establishing collaborations or co-promotion arrangements on acceptable terms, if at all. We also face competition in our search for collaborators and co-promoters. By entering into strategic collaborations or similar arrangements, we will rely on third parties for financial resources and for development, commercialization, sales and marketing and regulatory expertise. Any collaborators may fail to develop or effectively commercialize our product candidate because they cannot obtain the necessary regulatory approvals, they lack adequate financial or other resources or they decide to focus on other initiatives. Any failure to enter into collaboration or co-promotion arrangements or the failure of our third party collaborators to successfully market and commercialize our product candidate would diminish our revenues and harm our results of operations. In addition, conflicts may arise with our collaborators, such as conflicts concerning the interpretation of clinical data, the achievement of milestones, the interpretation of financial provisions or the ownership of intellectual property. If any conflicts arise with our collaborators, they may act in their self-interest, which may be adverse to our best interest.

Risks Related to Government Regulation

Our relationships with healthcare providers and physicians and third-party payors may be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, and diminished profits and future earnings.

Healthcare providers, physicians and third-party payors in the United States and elsewhere play a primary role in the recommendation and prescription of pharmaceutical products. Our current and future arrangements with healthcare providers, third-party payors, and customers can expose us to broadly applicable fraud and abuse and other healthcare laws and regulations, which may constrain the business or financial arrangements and relationships through which we research, and if approved, sell, market, and distribute our products. In particular, the research of our product candidate, as well as the promotion, sales, and marketing of a future approved product, is subject to extensive laws designed to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring, and commission(s), certain customer incentive programs, and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials. The applicable federal, state, and foreign healthcare laws and regulations laws that may affect our ability to operate now or in the future include, but are not limited to:

 

  •  

the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering, or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order, or recommendation of any good, facility, item, or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. The federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers on the other. The civil monetary penalties statute which imposes penalties against any person or entity who, among other things, is

 

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determined to have presented or caused to be presented a claim to, among others, a federal healthcare program that the person knows or should know is for a medical or other item or service that was not provided as claimed or is false or fraudulent;

 

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the federal civil and criminal false claims laws, including the federal False Claims Act, or FCA, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false or fraudulent claims for payment to, or approval by Medicare, Medicaid, or other federal healthcare programs, knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim or an obligation to pay or transmit money to the federal government, or knowingly and improperly avoiding or decreasing or concealing an obligation to pay money to the federal government. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government healthcare programs if they are deemed to “cause” the submission of false or fraudulent claims. In addition, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. The FCA also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery;

 

  •  

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private), and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact, or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items, or services relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating the health care fraud statute under HIPAA without actual knowledge of the statute or specific intent to violate it;

 

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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, which also imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy and security of individually identifiable health information of covered entities subject to the rule, including health plans, healthcare clearinghouses and certain healthcare providers and their business associates, independent contractors of a covered entity that perform certain services involving the use or disclosure of individually identifiable health information for or on their behalf, as well as their covered subcontractors;

 

  •  

the federal Physician Payments Sunshine Act and its implementing regulations, which require some manufacturers of drugs, devices, biologicals, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) to report annually to the HHS information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician practitioners (such as physician assistants and nurse practitioners), and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members;

 

  •  

federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and

 

  •  

analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and may be broader in scope than their federal equivalents; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state laws

 

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that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state and local laws that require the registration of pharmaceutical sales representatives.

The distribution of pharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage, and security requirements intended to prevent the unauthorized sale of pharmaceutical products. Distribution of prescription drug samples to licensed prescribers is also highly regulated within the United States.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform. Federal, state, and foreign enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions, significant fines and penalties, and settlements in the healthcare industry. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and may divert our management’s attention from the operation of our business.

It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations, or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal, and administrative penalties, damages, fines, disgorgement, individual imprisonment, possible exclusion from participation in federal and state funded healthcare programs, contractual damages, and the curtailment or restricting of our operations, as well as additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws. Any action for violation of these laws, even if successfully defended, could cause us to incur significant legal expenses and divert management’s attention from the operation of our business. Prohibitions or restrictions on sales or withdrawal of future marketed products could adversely affect our business, results of operations, and financial condition.

EU drug marketing and reimbursement regulations may materially affect our ability to market and receive coverage for our products in the EU member states.

We intend to seek approval to market our product candidate in the United States and we may also seek to do so in selected foreign jurisdictions, including the European Union. If we obtain approval in one or more foreign jurisdictions for our product candidate, we will be subject to rules and regulations in those jurisdictions. In some foreign countries, particularly those in the European Union, the pricing of medicinal products is subject to governmental control and other market regulations which could put pressure on the pricing and usage of our product candidate. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval of a product candidate. Some countries provide that products may be marketed only after a reimbursement decision has been taken by the relevant regulatory authority. In addition, market acceptance and sales of our product candidate will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for our product candidate and may be affected by existing and future health care reform measures.

Much like the federal Anti-Kickback Statute prohibition in the United States, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order, or use of medicinal products is also prohibited in the European Union. The provision of benefits or advantages to physicians is governed by the national anti-bribery laws of EU member states and the industry codes of conduct. Infringement of these laws or codes of conduct could result in substantial fines and imprisonment.

 

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Payments made to healthcare professionals, healthcare organizations, students, or patient organizations in EU member states must increasingly be publicly disclosed. Moreover, agreements with healthcare professionals must be the subject of a prior written agreement between the parties and often must be the subject of prior notification and/or approval by the healthcare professional’s employer, his or her competent professional organization, and/or the regulatory authorities of the individual EU member states. These requirements are provided in the national laws, industry codes, or professional codes of conduct applicable in the EU member states. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, or fines.

In addition, in most foreign countries, including the EU member states, the requirements governing drug pricing and reimbursement vary widely from country to country. For example, EU member states may restrict the range of medicinal products for which their national health insurance systems provide reimbursement and control the prices of medicinal products for human use. Reference pricing used by various EU member states and parallel distribution, or arbitrage between low-priced and high-priced EU member states, can further reduce prices. An EU member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. In some countries, we may be required to conduct a clinical study or other studies that compare the cost-effectiveness of our product candidate to other available therapies in order to obtain or maintain reimbursement or pricing approval. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for our product. Historically, products launched in the European Union do not follow price structures of the United States and generally prices tend to be significantly lower. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If pricing is set at unsatisfactory levels or if reimbursement of our products is unavailable or limited in scope or amount, our revenues from sales by us or our strategic partners and the potential profitability of our product candidate in those countries would be negatively affected.

In December 2021, Regulation No. 2021/2282 on Health Technology Assessment, or HTA, amending Directive 2011/24/EU, was adopted. This regulation, which will apply from January 12, 2025 is intended to boost cooperation among EU member states in assessing health technologies, including new medicinal products, and providing the basis for cooperation at the EU level for joint clinical assessments in these areas. The regulation foresees a three-year transitional period individual EU member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technologies, and making decisions on pricing and reimbursement. Entry into application of the HTA regulation is anticipated to increase reliance by competent national authorities on reference pricing mechanisms, the mechanism whereby countries reflect the reimbursement price in other EU member states. This has the potential to result in a decrease in reimbursement price in a number of EU member states to reflect the price fixed in the EU member state with the lowest reimbursement price.

Even if we receive regulatory approval of our product candidate, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidate.

If our product candidate is approved, it will be subject to extensive and ongoing regulatory requirements for manufacturing, labeling, packaging, distribution, storage, advertising, promotion, import, export, sampling, record-keeping, conduct of post-marketing studies and submission of safety, efficacy, and other post-market information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities. In addition, we will be subject to continued compliance with cGMPs and similar requirements outside the United States and GCP requirements for any clinical trials that we conduct post-approval.

 

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Manufacturers and manufacturers’ facilities are required to comply with extensive FDA and comparable foreign regulatory authority requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs or similar regulations. As such, we and our contract manufacturers will be subject to continual review and periodic, unannounced inspections by the FDA and other regulatory authorities to assess compliance with cGMPs or similar requirements and adherence to commitments made in any NDA, other marketing application, and previous responses to inspection observations. Accordingly, we and others with which we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.

Any regulatory approvals that we may receive for our product candidate will require the submission of reports to regulatory authorities and surveillance to monitor the safety and efficacy of the product candidate, and such approvals may be subject to significant limitations on the approved indicated uses for which the product may be marketed (e.g., use restrictions for specified age groups, warnings, precautions or contraindications), and may include burdensome post-approval study or risk management requirements. For example, the FDA may require a REMS program as a condition of approval of our product candidate or similar risk management measures, which could entail requirements for long-term patient follow-up, a medication guide, physician training and communication plans, or additional elements to ensure safe use, such as restricted distribution methods, patient registries, and other risk minimization tools.

The FDA or comparable foreign regulatory authorities may impose consent decrees or withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with our product candidate, such as adverse events of unanticipated severity or frequency, or problems with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in restrictions on that product, the manufacturing facility or us, including revisions to the approved labeling to add new safety information, contraindications or a “black box” warning, imposition of post-market studies or clinical trials to assess new safety risks, or imposition of distribution restrictions or other restrictions under a REMS. Other potential consequences include, among other things:

 

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restrictions on the marketing or manufacturing of our products, withdrawal of the product from the market, or product recalls;

 

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fines, restitutions, disgorgement of profits or revenues, warning letters, untitled letters, or holds on clinical trials;

 

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refusal by the FDA or comparable foreign regulatory authorities to approve pending applications or supplements to approved applications submitted by us or suspension or revocation of approvals;

 

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product seizure or detention or refusal to permit the import or export of our products; and

 

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injunctions or the imposition of civil or criminal penalties.

The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidate and generate revenue and could require us to expend significant time and resources in response and could generate negative publicity.

The policies of the FDA and comparable regulatory authorities may change and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval of our product candidate. We cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be subject to enforcement action and our business, results of operations, and financial condition could be adversely affected.

 

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The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.

The FDA and comparable foreign regulatory authorities strictly regulate marketing, labeling, advertising, and promotion of prescription drugs. These regulations include standards for direct-to-consumer advertising (in the United States only), industry-sponsored scientific and educational activities, and promotional activities involving the internet, as well as restrictions on promoting approved drugs for unapproved uses or patient populations (known as “off-label promotion”). Products may be promoted only for the approved indications and in accordance with the provisions of the approved label. While physicians in the United States may choose, and are generally permitted, to prescribe drugs for off-label uses, manufacturers may not market or promote such uses. However, companies may share truthful and not misleading information that is not inconsistent with the labeling, and the FDA has recently published a draft guidance with recommendations for how drug manufacturers can share scientifically sound and clinically relevant information on unapproved uses with health care providers so long as such presentations are not promotional.

If we are found to have promoted any off-label uses of our future approved products, or to have engaged in the promotion of an unapproved product candidate, we may become subject to significant liability. The U.S. federal government has levied large civil and criminal fines against companies for alleged improper promotion of off-label use and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion of our future approved products, we could become subject to significant liability, which would materially adversely affect our business, results of operations, and financial condition.

Ongoing healthcare legislative and regulatory reform measures may adversely affect our business, results of operations, and financial condition.

Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example, changes to our manufacturing arrangements; additions or modifications to product labeling; the recall or discontinuation of our products; or additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, and we may not achieve or sustain profitability.

The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that could prevent or delay marketing approval of our product candidate(s), restrict or regulate post-approval activities and affect our ability to profitably sell any product for which we obtain marketing approval.

The Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, or, collectively, the ACA, includes measures that have significantly changed the way healthcare is financed by both governmental and private insurers. There have been judicial, executive and congressional challenges and amendments to certain aspects of the ACA. For example, the Inflation Reduction Act of 2022, or IRA, among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how any such challenges and the healthcare reform measures of the second Trump administration will impact the ACA and our business.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. For example, on July 4, 2025, the annual reconciliation bill, the “One Big Beautiful Bill Act,” or OBBBA, was signed into law which is expected to reduce Medicaid spending and enrollment by implementing work

 

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requirements for some beneficiaries, capping state-directed payments, reducing federal funding, and limiting provider taxes used to fund the program. OBBBA also narrows access to ACA marketplace exchange enrollment and declines to extend the ACA enhanced advanced premium tax credits, set to expire in 2025, which, among other provisions in the law, are anticipated to reduce the number of Americans with health insurance. The Budget Control Act of 2011, among other things, created the Joint Select Committee on Deficit Reduction to recommend Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit reduction, which triggered the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of, on average, 2% per fiscal year until 2032 unless Congress takes additional action. Additionally, the American Rescue Plan Act of 2021 eliminated the statutory Medicaid drug rebate cap, previously set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, effective January 1, 2024.

Recently, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. presidential executive orders, congressional inquiries and legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drugs. For example, at the federal level, the IRA, among other things, (1) directs the HHS to negotiate the price of certain high-expenditure, single-source drugs covered under Medicare that have been on the market for at least 7 years, or the “Medicare Drug Price Negotiation Program, and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation.

These provisions took effect progressively starting in fiscal year 2023. On August 15, 2024, HHS announced the agreed-upon prices of the first ten drugs that were subject to price negotiations, although the Medicare Drug Price Negotiation Program is currently subject to legal challenges. On January 17, 2025, HHS selected fifteen additional drugs covered under Part D for price negotiation in 2025. Each year thereafter more Part B and Part D products will become subject to the Medicare Drug Price Negotiation Program. On February 14, 2023, HHS released a report outlining three new models for testing by the Center for Medicare and Medicaid Innovation which will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care. It is unclear whether the models will be utilized in any health reform measures in the future.

Further, in 2023, an initiative to control the price of prescription drugs through the use of march-in rights under the Bayh-Dole Act was announced. Also in 2023, the National Institute of Standards and Technology published for comment a Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights, which for the first time includes the price of a product as one factor an agency can use when deciding to exercise march-in rights. While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. For example, in January 2024, the FDA approved Florida’s Section 804 Importation Program, or SIP, proposal to import certain drugs from Canada for specific state healthcare programs. It is unclear how this program will be implemented, including which drugs will be chosen, and whether it will be subject to legal challenges in the United States or Canada. Other states have also submitted SIP proposals that are pending review by the FDA. Any such approved importation plans, when implemented, may result in lower drug prices for products covered by those programs.

We are unable to predict the future course of federal or state healthcare legislation in the United States directed at broadening the availability of healthcare and containing or lowering the cost of healthcare, particularly in light of the recent U.S. Presidential and Congressional elections. The current Trump administration is pursuing policies to

 

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reduce regulations and expenditures across government including at HHS, the FDA, the Centers for Medicare & Medicaid Services, or CMS, and related agencies. These actions, presently directed by executive orders or memoranda from the Office of Management and Budget, may propose policy changes that create additional uncertainty for our business. These actions and proposals include, for example, include (1) directives to reduce agency workforce and cut programs; (2) rescinding a Biden administration executive order tasking the Center for Medicare and Medicaid Innovation to consider new payment and healthcare models to limit drug spending; (3) eliminating the Biden administration’s executive order that directed HHS to establishing establish an AI task force and developing develop a strategic plan; (4) directing HHS and other agencies to lower prescription drug costs through a variety of initiatives, including by improving upon the Medicare Drug Price Negotiation Program and establishing Most-Favored-Nation pricing for pharmaceutical products; (5) imposing tariffs of imported pharmaceutical products; and (6) directing certain federal agencies to enforce existing law regarding hospital and price plan price transparency and by standardizing prices across hospitals and health plans. Additionally, in its June 2024 decision in Loper Bright Enterprises v. Raimondo, or Loper Bright, the U.S. Supreme Court overturned the longstanding Chevron doctrine, under which courts were required to give deference to regulatory agencies’ reasonable interpretations of ambiguous federal statutes. The Loper Bright decision could result in additional legal challenges to current regulations and guidance issued by federal agencies applicable to our operations, including those issued by the FDA. Congress may introduce and ultimately pass health care related legislation that could, among others, impact the drug approval process and make changes to modify the Medicare Drug Price Negotiation Program created under the IRA, and expand the orphan drug exclusion in the IRA.

We expect that the healthcare reform measures that have been adopted and may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product and could significantly harm our future revenues. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products, if approved.

Disruptions at the FDA and other national and foreign government authorities caused by funding shortages or global health concerns could hinder their ability to hire, retain, or deploy key leadership and other personnel, or prevent new or modified products from being developed, reviewed, approved, or commercialized in a timely manner or at all, which could negatively impact our business.

The ability of the FDA and comparable foreign regulatory authorities to review and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s and comparable foreign regulatory authorities’ ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s and comparable foreign regulatory authorities’ ability to perform routine functions. Average review times at the FDA and foreign regulatory authorities have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other national and foreign authorities also may slow the time necessary for review and/or approval by necessary government authorities, which would adversely affect our business.

For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities, including as a result of current administration budget cutting activities and significant reductions in force across federal agencies, such as FDA and CMS. During the COVID-19 pandemic, moreover, FDA was required to prioritize resources, which resulted in the slowdown of certain operations including manufacturing facility inspections. If a prolonged government shutdown or slowdown occurs, or if future global health concerns prevent or delay the FDA or other comparable foreign regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other comparable

 

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foreign regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

We and the third parties with whom we work are subject to stringent and evolving U.S. and foreign laws, regulations, and rules, contractual obligations, industry standards, policies and other obligations related to data privacy and security. Our (or the third parties with whom we work) actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation (including class claims) and mass arbitration demands; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse business consequences.

In the ordinary course of business, we process sensitive data, and such data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements and other obligations relating to data privacy and security. Further, our use of AI and/or machine learning technologies in the future may require additional privacy considerations. Sensitive, proprietary, personal, or confidential data and information could be leaked, disclosed, or revealed as a result of or in connection with our or our vendors’ use, if any, of AI and/or machine learning technologies. The rapid development of artificial intelligence and/or machine learning technologies tools could render obsolete certain technologies or tools we currently use, or otherwise provide competitors with a technological edge. New or evolving legislation or regulations might impose restrictions on how AI and/or machine learning technologies can be used and impose various penalties for any noncompliance (such as disgorgement).

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws). For example, HIPAA, as amended by HITECH, imposes specific requirements relating to the privacy, security, and transmission of individually identifiable protected health information. In addition, other federal and state laws establish and may in the future establish requirements for protecting the privacy and security of health information that is not protected by HIPAA.

Additionally, numerous U.S. states have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data. These state laws allow for statutory fines for noncompliance. For example, the California Consumer Privacy Act of 2018, or CCPA, applies to personal data of California residents and requires businesses subject to the CCPA to provide specific disclosures in privacy notices and respond to requests of such individuals to exercise certain privacy rights. Although there are minimum revenue or personal data processing thresholds for entities to be subject to many of these laws and there are limited exemptions for clinical trial data under the CCPA and similar U.S. state comprehensive privacy laws, such laws may impact (possibly significantly) our business activities depending on how they are interpreted, should we become subject to the CCPA or other such state comprehensive privacy laws in the future. In addition, similar laws are being considered in other states, as well as at the international, federal and local levels, and we expect more laws related to personal data to become effective in the future. These developments may further complicate compliance efforts and increase our legal risk and compliance costs.

Outside the United States, an increasing number of laws, regulations, and industry standards govern data privacy and security. For example, the European Union’s General Data Protection Regulation, or EU GDPR, the United Kingdom’s GDPR, or UK GDPR, Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or LGPD) (Law No. 13,709/2018), and China’s Personal Information Protection Law, or PIPL, impose strict requirements for processing personal data.

For example, under GDPR, companies may face private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their

 

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interests, temporary or definitive prohibitions on data processing and other corrective actions, or fines of up to the greater of 20 million Euros under the EU GDPR / 17.5 million pounds under the UK GDPR, or 4% of their worldwide annual revenue, whichever is higher.

In addition, we may be unable to transfer personal data from Europe and other jurisdictions to the United States or other countries due to data localization requirements or limitations on cross-border data flows. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. In particular, the European Economic Area, or EEA, and the UK have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it generally believes are inadequate. Other jurisdictions may adopt or have already adopted similarly stringent data localization and cross-border data transfer requirements. If there is no lawful manner for us to transfer personal data from the EEA, the UK, or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations (including future clinical trials), the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe) at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business. Regulators in the United States such as the Department of Justice are also increasingly scrutinizing certain personal data transfers and have enacted cross-border data transfer restrictions.

In addition to data privacy and security laws, we are and may become contractually subject to industry standards adopted by industry groups. We are also bound by other contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.

We may also publish privacy policies, marketing materials, and other statements, such as compliance with certain certifications or self-regulatory principles, regarding data privacy and security. Regulators are increasingly scrutinizing these statements, and if these policies, materials, or statements are found to be deficient, lacking in transparency, deceptive, unfair, misleading, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators, or other adverse consequences.

Obligations related to data privacy and security (and individuals’ data privacy expectations) are quickly changing, becoming increasingly stringent, and creating uncertainty. Additionally, these obligations are subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions. Preparing for and complying with these obligations requires us to devote significant resources and may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal data on our behalf.

We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third parties with whom we work (such as contract research organizations and clinical trial sites) may fail (or be perceived to have failed) to comply with such obligations, which could negatively impact our business operations. If we or the third parties with whom we work fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans or restrictions on processing personal data (including clinical trial data); orders to destroy or not use personal data; and imprisonment of company officials. In particular, plaintiffs have become increasingly more active in bringing privacy-related claims against companies, including class claims and mass arbitration demands. Some of these claims allow for the recovery of statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of violations. Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: interruptions or stoppages in our business operations (including, as relevant, clinical trials); inability

 

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to process sensitive data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.

Additional laws and regulations governing international operations could adversely affect our business, results of operations and financial condition.

If we further expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. The U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, prohibits any U.S. individual or business from paying, offering, authorizing payment, or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate, and other related parties for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

Various laws, regulations, and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing, or selling certain products and product candidates outside of the United States, which could limit our growth potential and increase our research and development costs.

The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The SEC also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.

We are subject to certain U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations. We can face serious consequences for violations.

We are subject to U.S. and foreign anti-corruption, anti-money laundering, export control, sanctions, and other trade laws and regulations, which are collectively referred to as Trade Laws. Among other things, Trade Laws prohibit companies and their employees, agents, clinical research organizations, contractors, and other partners from authorizing, promising, offering, providing, soliciting, or receiving directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector. Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences. We have direct or indirect interactions with officials and employees of government authorities or government-affiliated hospitals, universities, and other organizations. We also expect our non-U.S. activities to increase over time. We may engage third parties for clinical trials and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals, and we can be held liable for the corrupt or other illegal activities of our personnel, agents, or partners, even if we do not explicitly authorize or have prior knowledge of such activities, and any training or compliance programs or other initiatives we undertake to prevent such activities may not be effective.

 

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If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Even if we contract with third parties for the disposal of these materials and waste products, we cannot completely eliminate the risk of contamination or injury resulting from these materials. In the event of contamination or injury resulting from the use or disposal of our hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

We maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees, but this insurance may not provide adequate coverage against potential liabilities. However, we do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us.

In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Environmental laws and regulations may impair our research, development or production efforts. In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions.

Risks Related to this Offering and Ownership of Our Common Stock

An active and liquid trading market for our common stock may not develop, or we may in the future fail to satisfy the continued listing requirements of Nasdaq and our stock may be delisted, and you may not be able to resell your shares of common stock at or above the public offering price, if at all.

Prior to this offering, no market for shares of our common stock existed. We have applied to list our common stock on Nasdaq under the symbol “LBRX.” Assuming that our common stock is listed and after the consummation of this offering, an active or liquid trading market for our common stock may never develop or be sustained following this offering. To the extent certain of our existing stockholders and their affiliated entities participate in this offering, such purchases would reduce the non-affiliated public float of our shares, meaning the number of shares of our common stock that are not held by officers, directors, and affiliated stockholders. A reduction in the public float could reduce the number of shares that are available to be traded at any given time, thereby adversely impacting the liquidity of our common stock and depressing the price at which you may be able to sell your shares. Moreover, the initial public offering price for our common stock will be determined through negotiations with the underwriters and may vary from the market price of our common stock following this offering. As a result of these and other factors, you may be unable to resell your shares of our common stock at or above the initial public offering price, at the time you wish to sell them, or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. Furthermore, an inactive market may also impair our ability to raise capital by selling shares of our common stock in the future and may impair our ability to enter into strategic collaborations or acquire companies or products by using our shares of common stock as consideration.

In addition, if, after listing, we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with the listing requirements of Nasdaq.

 

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Our quarterly and annual operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts or any guidance we may publicly provide, each of which may cause our stock price to fluctuate or decline.

We expect our operating results to be subject to quarterly and annual fluctuations which may, in turn, cause the price of our common stock to fluctuate substantially. Our net loss and other operating results will be affected by numerous factors, including:

 

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variations in the level of expense related to the ongoing development of LB-102 or future development programs;

 

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results and timing of preclinical studies and ongoing and future clinical trials, or the addition or termination of any such clinical trials;

 

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the timing of payments we may make or receive under existing license and collaboration arrangements or the termination or modification thereof;

 

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our execution of any strategic transactions, including acquisitions, collaborations, licenses, or similar arrangements, and the timing and amount of payments we may make or receive in connection with such transactions;

 

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any intellectual property infringement lawsuit or opposition, interference, or cancellation proceeding in which we may become involved;

 

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recruitment and departures of key personnel;

 

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if our product candidate receives regulatory approval in the future, the terms of such approval, and market acceptance and demand for such products;

 

  •  

regulatory developments affecting our product candidate or those of our competitors;

 

  •  

global or regional public health emergencies, including any health epidemics and their residual effects, natural disasters, or major catastrophic events;

 

  •  

adverse macroeconomic conditions or geopolitical events, including the conflict between Ukraine and Russia, the conflict between Israel and Hamas, high levels of inflation, heightened interest rates, and bank failures;

 

  •  

the impacts of inflation and rising interest rates on our business and operations; and

 

  •  

changes in general market and economic conditions.

If our quarterly or annual operating results fall below the expectations of investors or securities analysts or any forecasts or guidance we may provide to the market, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated guidance we may provide. We believe that quarterly or annual comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

Our stock price may be volatile, which could result in substantial losses for investors purchasing shares in this offering.

The market price of our common stock is likely to be volatile and could fluctuate widely in response to many factors, including but not limited to:

 

  •  

volatility and instability in the financial and capital markets;

 

  •  

adverse macroeconomic conditions or geopolitical events, including any health epidemics and their residual effects, the conflict between Ukraine and Russia, the conflict between Israel and Hamas, high levels of inflation, heightened interest rates, and bank failures;

 

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  •  

announcements relating to our product candidate, including the results of clinical trials by us or our collaborators and the timing thereof;

 

  •  

announcements by competitors that impact our competitive outlook;

 

  •  

negative developments with respect to our product candidate, or similar products or product candidates with which we compete;

 

  •  

developments with respect to patents or intellectual property rights;

 

  •  

announcements of technological innovations, new product candidates, new products or new contracts by us or our competitors;

 

  •  

announcements relating to strategic transactions, including acquisitions, collaborations, licenses, or similar arrangements;

 

  •  

actual or anticipated variations in our operating results due to the level of development expenses and other factors;

 

  •  

changes in financial estimates by equities research analysts and whether our earnings (or losses) meet or exceed such estimates;

 

  •  

announcement or expectation of additional financing efforts and receipt, or lack of receipt, of funding in support of conducting our business;

 

  •  

sales of our common stock by us, our insiders, or other stockholders, or issuances by us of shares of our common stock in connection with strategic transactions;

 

  •  

expiration of market standoff or lock-up agreements described in the section titled “Underwriting”;

 

  •  

conditions and trends in the pharmaceutical, biotechnology, and other industries;

 

  •  

recruitment and departures of key personnel;

 

  •  

regulatory developments within, and outside of, the United States, including changes in the structure of health care payment systems;

 

  •  

litigation or arbitration;

 

  •  

general economic, political, and market conditions and other factors; and

 

  •  

the occurrence of any of the risks described in this section titled “Risk Factors”.

In recent years, the stock market in general, and the market for pharmaceutical and biotechnology companies in particular, has experienced significant price and volume fluctuations that have often been unrelated or disproportionate to changes in the operating performance of the companies whose stock is experiencing those price and volume fluctuations. Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly following this offering.

We do not intend to pay dividends on our common stock for the foreseeable future, so any returns will be limited to the value of our stock.

We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to support operations and to finance the growth and development of our business. We do not intend to declare or pay any cash dividends on our capital stock in the foreseeable future. As a result, any investment return on our common stock will depend upon increases in the value for our common stock, which is not certain.

 

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Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

Based on 85,094,050 shares of our common stock outstanding as of June 30, 2025, after giving effect to the conversion of all outstanding shares of our convertible preferred stock into 78,072,306 shares of our common stock, prior to this offering, our executive officers, directors, holders of 5% or more of our capital stock, and their respective affiliates beneficially owned approximately     % of our voting stock. Immediately following the completion of this offering, our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates will beneficially hold, in the aggregate, approximately      % of our outstanding common stock (assuming no exercise of the underwriters’ option to purchase additional shares of our common stock, no exercise of outstanding options, and no purchases of shares in this offering). These stockholders, acting together, would be able to significantly influence all matters requiring stockholder approval. For example, these stockholders would be able to significantly influence elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This level of control may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares.

The initial public offering price will be substantially higher than the pro forma as adjusted net tangible book value per share of our common stock after this offering. Investors purchasing common stock in this offering will pay a price per share that substantially exceeds the pro forma as adjusted net tangible book value per share after this offering. As a result, investors purchasing common stock in this offering will incur immediate dilution of $   per share, based on an assumed initial public offering price of $   per share, which is the midpoint of the price range set forth on the cover page of this prospectus, representing the difference between our pro forma as adjusted net tangible book value per share after giving effect to this offering and the assumed initial public offering price. Further, investors purchasing common stock in this offering will contribute approximately  % of the total amount invested by stockholders since our inception but will own only approximately  % of the shares of common stock outstanding after this offering.

This dilution is due to our investors who purchased shares prior to this offering having paid substantially less when they purchased their shares than the price offered to the public in this offering. To the extent outstanding options or warrants are exercised, there will be further dilution to new investors. As a result of the dilution to investors purchasing shares in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of our liquidation. For a further description of the dilution that you will experience immediately after this offering, see the section titled “Dilution.”

We are an emerging growth company and a smaller reporting company, and the reduced reporting requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.

We are an “emerging growth company” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (ii) reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements, and (iii) exemptions from the requirements of holding nonbinding advisory stockholder votes on executive compensation and stockholder approval of any golden parachute payments not approved previously. In addition, as an emerging growth company, we are only required to provide two years of audited financial statements and two years of selected financial data in this prospectus.

 

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We could be an emerging growth company for up to five years following the year in which we complete this offering, although circumstances could cause us to lose that status earlier. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.235 billion and (c) in which we are deemed to be a large accelerated filer, which requires the market value of our common stock that is held by non-affiliates to exceed $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. Investors may find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Under the JOBS Act, emerging growth companies also can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this exemption, and, as a result, our operating results and financial statements may not be comparable to the operating results and financial statements of companies who have adopted the new or revised accounting standards.

We also are a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result of this offering is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our annual report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Conflicts of interest may arise because some members of our board of directors are representatives of our principal stockholders.

Certain of our principal stockholders or their affiliates are venture capital funds or other investment vehicles that could invest in entities that directly or indirectly compete with us. As a result of these relationships, when conflicts arise between the interests of the principal stockholders or their affiliates and the interests of other stockholders, members of our board of directors that are representatives of the principal stockholders may not be disinterested.

Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.

If our stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up and other legal restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline. Based on 85,094,050 shares of common stock outstanding as of June 30, 2025, after giving effect to the conversion of all of our outstanding shares of convertible preferred stock into 78,072,306 shares of common stock upon the closing of this offering, we will have outstanding a total of      shares of common stock. Of these shares, only the shares of common stock sold in this offering by us, plus any shares sold upon exercise of the underwriters’ option to purchase additional shares, will be freely tradable without restriction in the public market immediately following this offering.

Our directors, our executive officers, and the holders of substantially all of our common stock or securities convertible into, exercisable for, or exchangeable for our common stock have entered into lock-up agreements

 

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and/or agreements containing market stand-off provisions imposing restrictions on the ability of such security holders to offer, sell, or transfer such securities for a period of 180 days following the date of this prospectus. After the lock-up agreements and market stand-off provisions expire, based upon the number of shares of common stock, on an as-converted basis, outstanding as of June 30, 2025, up to an additional     shares of common stock will be eligible for sale in the public market. Approximately  % of these additional shares are beneficially held by directors, executive officers, and their affiliates and will be subject to certain limitations of Rule 144 under the Securities Act.

In addition, shares of common stock that are either subject to outstanding options or reserved for future issuance under our existing equity compensation plans will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements, and Rule 144 and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

After this offering, the holders of      shares of our common stock will be entitled to rights with respect to the registration of their shares under the Securities Act as provided under the terms of our investors’ rights agreement between us and the holders of our convertible preferred stock and our outstanding warrants, as applicable, subject to the 180-day lock-up agreements and market stand-off provisions described above. See the section titled “Description of Capital Stock—Registration Rights.” Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares held by affiliates, as defined in Rule 144 under the Securities Act. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.

We have broad discretion in how we use the net proceeds of this offering and may not use these proceeds effectively, which could affect our results of operations and cause our stock price to decline.

We will have considerable discretion in the application of the net proceeds of this offering, including for any of the purposes described in the section titled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. As a result, investors will be relying upon management’s judgment with only limited information about our specific intentions for the use of the balance of the net proceeds of this offering. We may use the net proceeds for purposes that do not yield a significant return or any return at all for our stockholders. In addition, pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our amended and restated certificate of incorporation, as they will be in effect immediately prior to the closing of this offering, and our amended and restated bylaws, as they will be in effect immediately prior to the closing of this offering, may have the effect of delaying or preventing a change of control or changes in our board of directors and management. Our amended and restated certificate of incorporation and amended and restated bylaws will include provisions that:

 

  •  

authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock;

 

  •  

require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

 

  •  

specify that special meetings of our stockholders can be called only by directors representing a majority of the total authorized size of our board of directors, the chairperson of our board of directors, or our chief executive officer;

 

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  •  

establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;

 

  •  

establish that our board of directors is divided into three classes, with each class serving three-year staggered terms;

 

  •  

prohibit cumulative voting in the election of directors, therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose;

 

  •  

provide that our directors may be removed for cause only upon the vote of at least 66 2/3% of our outstanding shares of voting stock;

 

  •  

provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and

 

  •  

require the approval of our board of directors or the holders of at least 66 2/3% of our outstanding shares of voting stock to amend our bylaws and certain provisions of our certificate of incorporation.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or DGCL, which generally, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that holders of our common stock would receive a premium for their shares of our common stock in an acquisition.

Our amended and restated certificate of incorporation that will become effective immediately prior to the closing of this offering will provide that the Court of Chancery of the State of Delaware and the federal district court for the District of Delaware of the United States will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

Our amended and restated certificate of incorporation that will become effective immediately prior to the closing of this offering will provide that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:

 

  •  

any derivative action or proceeding brought on our behalf;

 

  •  

any action asserting a breach of fiduciary duty;

 

  •  

any action asserting a claim against us arising under the DGCL, our amended and restated certificate of incorporation, or our amended and restated bylaws;

 

  •  

any action seeking to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation, or our amended and restated bylaws;

 

  •  

any action to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; and

 

  •  

any action asserting a claim against us that is governed by the internal-affairs doctrine.

This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all

 

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such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. Additionally, investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation will further provide that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid and several state trial courts have enforced such provisions and required that suits asserting Securities Act claims be filed in federal court, there is no guarantee that courts of appeal will affirm the enforceability of such provisions and a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and the provisions may not be enforced by a court in those other jurisdictions. If a court were to find either exclusive forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with litigating Securities Act claims in state court, or both state and federal court, which could seriously harm our business, results of operations, and financial condition.

This exclusive forum provision may result in increased costs to stockholders to bring a claim. Further, this exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. If a court were to find either exclusive forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business.

General Risk Factors

Our ability to use our net operating loss carryforwards and certain other tax attributes to offset taxable income or taxes may be limited.

We have incurred significant losses during our history and do not expect to become profitable in the near future, and we may never achieve profitability. As of December 31, 2024, we had federal gross net operating loss, or NOL, carryforwards of $37.2 million and state gross NOL carryforwards of $41.9 million. The federal NOL carryforwards, if not utilized, will begin to expire in 2036. The state NOL carryforwards are expected to begin to expire in 2036, although not all states conform to the federal NOL carryforward period and occasionally limit the use of NOLs for a period of time. As of December 31, 2024 and 2023, we had federal research and development credits of approximately $2.7 million and $0.8 million, respectively. The research and development credits, if not utilized, will expire between 2036 through 2042. Certain of these NOL carryforwards could expire unused and be unavailable to offset future income tax liabilities. Under the Internal Revenue Code of 1986, as amended, or the Code, federal NOL carryforwards arising in taxable years beginning after December 31, 2017 will not expire and may be carried forward indefinitely, but the deductibility of such federal NOL carryforwards in a taxable year is generally limited to no more than 80% of current year taxable income (with certain adjustments in such year).

In addition, under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and certain other pre-change tax attributes (such as research tax credits) to offset its post-change income or taxes may be limited. We have not completed a Section 382 study to assess whether one or more ownership changes have occurred since our formation, due to the complexity and cost associated with such a study. In addition, we also may experience ownership changes in the future including in connection with this offering or as a result of

 

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subsequent changes in our stock ownership, some of which may be outside of our control. As a result, if we undergo (or already have undergone) an ownership change, and our ability to use our pre-change NOL carryforwards and other pre-change tax attributes (such as research tax credits) to offset our post-change income or taxes is limited, it could harm our future results of operations by effectively increasing our future tax obligations. Similar provisions of state tax law also may apply to limit our use of accumulated state tax attributes. In addition, at the state level, there may be periods during which the use of net operating losses is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. Even if we attain profitability, we may be unable to use all or a material portion of our net operating losses and other tax attributes, which could adversely affect our future cash flows. As a result of the foregoing, we have a full valuation allowance for deferred tax assets, including our NOL carryforwards.

Recent and future changes to tax laws could materially adversely affect our company.

The tax regimes we are subject to or operate under, including with respect to income and non-income taxes, are unsettled and may be subject to significant change. Changes in tax laws, regulations, or rulings, or changes in interpretations of existing laws and regulations, could materially adversely affect our company. For example, on July 4, 2025, the U.S. government passed the OBBBA, which made permanent certain of the tax law changes originally enacted under previous tax reform legislation, in addition to other changes that may impact our tax liability. For example, the OBBBA reinstated immediate expensing of certain research and experimental expenses incurred in tax years beginning after December 31, 2024 if incurred in the United States (though the requirement to amortize foreign research and experimental expenses over 15 years remains unchanged). In addition, previous tax reform legislation includes provisions that impacts the U.S. federal income taxation of certain corporations, including imposing a 1% excise tax on corporations that repurchase their stock in certain transactions. Future guidance from the Internal Revenue Service and other tax authorities with respect to this and other legislation may affect us, and certain aspects thereof could be repealed or modified in future legislation.

Unstable economic and market conditions may have serious adverse consequences on our business, financial condition, and stock price.

Global economic and business activities continue to face widespread uncertainties, and global credit and financial markets have experienced extreme volatility and disruptions in the past several years, including severely diminished liquidity and credit availability, rising inflation and monetary supply shifts, tariffs, rising interest rates, bank failures, labor shortages, declines in consumer confidence, declines in economic growth, increases in unemployment rates, recession risks, and uncertainty about economic and geopolitical stability (for example, related to the ongoing Russia-Ukraine and Israel-Hamas wars). For example, there is currently significant uncertainty about the future relationship between the United States and various other countries, including, without limitation, China, Brazil, Mexico, and Canada, with respect to trade policies, treaties, tariffs, taxes, and other limitations on cross-border operations.

The extent of the impact of these conditions on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected timeframe, as well as that of third parties upon whom we rely, will depend on future developments which are uncertain and cannot be predicted. There can be no assurance that further deterioration in economic or market conditions will not occur, or how long these challenges will persist. If the current equity and credit markets further deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Furthermore, our stock price may decline due in part to the volatility of the stock market and the general economic downturn.

If securities or industry analysts do not publish research or reports about our business, or if they publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will be influenced in part by the research and reports that industry or securities analysts publish about us or our business. We do not have any control over the industry or securities

 

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analysts, or the content and opinions included in their reports and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, or if analysts cease coverage of us, we could lose visibility in the financial markets, and the trading price for our common stock could be impacted negatively. If any of the analysts who cover us publish inaccurate or unfavorable research or opinions regarding us, our business model, our intellectual property, or our stock performance, or if our clinical trials and operating results fail to meet the expectations of analysts, our stock price would likely decline.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

After the completion of this offering, as a public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company. The Securities Act, the Exchange Act, Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, we expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain sufficient coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees, or as executive officers. The increased costs may require us to reduce costs in other areas of our business. Moreover, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Failure to establish and maintain effective internal control over financial reporting could adversely affect our business and if investors lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be negatively affected.

We are not currently required to comply with the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal control over financial reporting. Although we will be required to disclose changes made in our internal control over financial reporting on a quarterly basis, we will not be required to make our first annual assessment of our internal control over financial reporting until our second annual report on Form 10-K. However, as an emerging growth company, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until the later of the year following our first annual report required to be filed with the SEC or the date we are no longer an emerging growth company. When we lose our status as an “emerging growth company” and reach an accelerated filer threshold, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation. To comply with the requirements of being a reporting company under the Exchange Act, we may need to upgrade our information technology systems; implement additional financial and management controls, reporting systems, and procedures; and hire additional

 

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accounting and finance staff. If we or, if required, our auditors are unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in our financial reporting and the trading price of our common stock may decline.

As a private company, we do not currently have any internal audit function. To comply with the requirements of being a public company, we have undertaken various actions, and will need to take additional actions, such as implementing numerous internal controls and procedures and hiring additional accounting or internal audit staff or consultants. Additionally, in connection with the preparation of our financial statements for the year ended December 31, 2024, material weaknesses were identified in the design and operating effectiveness of our internal control over financial reporting. If we are unable to remediate these material weaknesses, or we identify more material weaknesses that we are not able to timely remediate to meet the applicable compliance deadline for the disclosure and attestation requirements of Section 404 of the Sarbanes-Oxley Act, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting once we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources. In addition, if we fail to remedy any material weakness, our financial statements could be inaccurate, and we could face restricted access to capital markets.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

Upon the completion of this offering, we will become subject to the periodic reporting requirements of the Exchange Act. We must design our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC. Any disclosure controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. For example, our directors or executive officers could inadvertently fail to disclose a new relationship or arrangement causing us to fail to make any related party transaction disclosures. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected. In addition, we do not have a formal risk management program for identifying and addressing risks to our business in other areas.

We may be subject to securities litigation, which is expensive and could divert management attention.

The market price of our common stock is likely to be volatile. The stock market in general, and Nasdaq and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation (including the cost to defend against, and any potential adverse outcome resulting from any such proceeding) can be expensive, time-consuming, damage our reputation, and divert our management’s attention from other business concerns, which could seriously harm our business.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this prospectus, including statements regarding our plans, objectives, goals, strategies, future events, future revenues or performance, financing needs, plans, or intentions relating to product candidates and markets and business trends are forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “can,” “contemplate,” “continue,” “could,” “design,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “plan,” “potential,” “predict,” “project,” “shall,” “should,” “target,” “will,” or “would,” or the negative of these words or other similar terms or expressions.

These statements involve known and unknown risks, uncertainties, and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

 

  •  

the initiation, timing, progress, potential registrational quality, and results of our research and development programs, preclinical studies, any clinical trials, Investigational New Drug, or IND, and other regulatory submissions;

 

  •  

the ability of our approach to reproducibly predict treatment outcomes for LB-102 amongst identified patient populations and achieve clinical success;

 

  •  

the timing of and costs involved in obtaining and maintaining regulatory approval of LB-102 and any future product candidates that we may identify or develop;

 

  •  

the beneficial characteristics, including potential safety, efficacy, and therapeutic effects, of LB-102;

 

  •  

our ability to efficiently and cost-effectively conduct our current and future clinical trials;

 

  •  

our ability to obtain funding for our operations necessary to complete further development and commercialization of LB-102, if approved;

 

  •  

our ability to maintain existing, and establish new, strategic collaborations, licensing, or other arrangements, including our ability to comply with our financial obligations pursuant to the terms of such agreements;

 

  •  

the timing and likelihood of the achievement of milestones pursuant to our existing collaboration and licensing agreements;

 

  •  

our ability to identify and develop LB-102 for treatment of additional indications;

 

  •  

the performance of our third-party service providers, including our suppliers and manufacturers;

 

  •  

the rate and degree of market acceptance and clinical utility for LB-102 and any other product candidates we may develop;

 

  •  

the effects of competition with respect to LB-102 or any of our future product candidates, as well as innovations by current and future competitors in our industry;

 

  •  

our estimates regarding the potential market opportunities and the number of patients for LB-102 and any future product candidates, if approved for commercial use;

 

  •  

the implementation of our strategic plans for our business, LB-102, and any future product candidates we may develop;

 

  •  

our intellectual property position, including the scope of protection we are able to establish, maintain, defend and enforce for intellectual property rights covering LB-102 and any future product candidates we may develop;

 

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  •  

our ability to attract and retain key scientific or management personnel;

 

  •  

regulatory and legal developments in the United States and foreign countries;

 

  •  

our ability to attract and retain employees and collaborators with development, regulatory, and commercialization expertise;

 

  •  

our ability to comply with the terms of our term loan agreement and our expectations regarding our ability to access additional tranches thereunder;

 

  •  

the accuracy of our estimates regarding future expenses, future revenue, capital requirements, and need for additional financing;

 

  •  

the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements;

 

  •  

our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act; and

 

  •  

our anticipated use of the proceeds from this offering.

These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this prospectus and are subject to risks and uncertainties. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. We discuss many of the risks associated with the forward-looking statements in this prospectus in greater detail under the heading “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

You should carefully read this prospectus and the documents that we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in this prospectus by these cautionary statements.

Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, whether as a result of new information, future events, or otherwise.

 

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MARKET AND INDUSTRY DATA

This prospectus contains estimates, projections, and other information concerning our industry, our business, and the markets for our product candidate, including data regarding the estimated size of such markets and the incidence of certain medical conditions. Unless otherwise expressly stated, we obtained the industry, market, and similar data set forth in this prospectus from our internal estimates and research and from academic and industry research, publications, surveys, and studies conducted by third parties, including governmental agencies. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of information in any paragraph, you should assume that other information of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

Information that is based on estimates, forecasts, projections, market research, or similar methodologies is inherently subject to uncertainties and involves a number of assumptions and limitations; as a result, actual events or circumstances may differ materially from events and circumstances that are assumed in this information. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors.” Although we are responsible for all of the disclosure contained in this prospectus and we believe that the data we use from third parties are reliable, we have not separately verified this data. Further, while we believe that our internal research is reliable, such research has not been verified by any third party. You are cautioned not to give undue weight to any such information, projections, and estimates.

 

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USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $   million (or approximately $   million if the underwriters’ option to purchase additional shares is exercised in full) from the sale of the shares of common stock offered by us in this offering, based on the assumed initial public offering price of $   per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

Each $1.00 increase (decrease) in the assumed initial public offering price of $   per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $   million, assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions payable by us. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, would increase (decrease) our net proceeds from this offering by approximately $   million, assuming the assumed initial public offering price of $   per share, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions payable by us.

The principal purposes of this offering are to obtain additional capital to support our operations, to create a public market for our common stock and to facilitate our future access to the public equity markets. We intend to use the net proceeds of this offering, together with our existing cash and cash equivalents and marketable securities, primarily as follows:

 

  •  

approximately $      million to advance the clinical development of LB-102 to treat acute schizophrenia through a Phase 3 trial, the open label safety trial designed to accrue the requisite safety population required to support approval, and other NDA-enabling studies,

 

  •  

approximately $        million to advance the clinical development of LB-102 to treat bipolar depression through a Phase 2 trial, and

 

  •  

the remainder for general corporate purposes.

We may also use a portion of the net proceeds from this offering to in-license, acquire, or invest in complementary businesses, technologies, products, or assets. However, we have no current plans, commitments, or obligations to do so.

Based on our current operating plan, we believe that our existing cash and cash equivalents and marketable securities, together with the estimated net proceeds from this offering, will be sufficient to fund our operating expenses and capital expenditure requirements through        . 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. The expected net proceeds from this offering, together with our existing cash and cash equivalents and marketable securities, will not be sufficient for us to fund our product candidate through regulatory approval and commercialization, and we will need to raise substantial additional capital in order to do so. To obtain the capital necessary to fund our programs through regulatory approval and commercialization, we expect to finance our cash needs primarily through equity offerings and potentially through debt financings, collaborations, licenses, and development agreements.

Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering, or the amounts that we will spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending on numerous factors, including the progress, cost, and results of our preclinical and clinical

 

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development programs, our ability to obtain additional financing, and other factors described under “Risk Factors” in this prospectus, as well as the amount of cash used in our operations and any unforeseen cash needs. We may find it necessary or advisable to use the net proceeds for other purposes, and 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. In addition, we might decide to postpone or not pursue clinical trials or preclinical activities if the net proceeds from this offering and the other sources of cash are less than expected.

Pending the use of the proceeds from this offering, we plan to invest the proceeds in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit, or direct or guaranteed obligations of the U.S. government.

 

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DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and future earnings, if any, to support our operations and finance the growth and development of our business. We have no present intention to pay cash dividends on our common stock for the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions (including any restrictions in our then-existing debt arrangements), business prospects, and other factors our board of directors may deem relevant, and subject to the restrictions contained in any future financing instruments.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and marketable securities and our capitalization as of June 30, 2025:

 

  •  

on an actual basis;

 

  •  

on a pro forma basis to reflect (i) the conversion of all outstanding shares of our redeemable convertible preferred stock into 78,072,306 shares of our common stock and the related reclassification of the carrying value of the redeemable convertible preferred stock to stockholders’ equity upon the closing of this offering, and (ii) the filing of our amended and restated certificate of incorporation immediately prior to the closing of this offering; and

 

  •  

on a pro forma as adjusted basis to reflect (i) the pro forma adjustments set forth above and (ii) our issuance and sale of      shares of common stock in this offering at the assumed initial public offering price of $   per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

The pro forma and pro forma as adjusted information below is illustrative only, and our cash and cash equivalents and marketable securities and capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.

You should read this information in conjunction with our audited financial statements and the related notes included elsewhere in this prospectus and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information contained in this prospectus.

 

     (Unaudited)
As of June 30, 2025
 
     Actual      Pro Forma      Pro Forma
As Adjusted
 
     (in thousands, except share and per share amounts)  

Cash and cash equivalents

   $ 14,225      $           $       
  

 

 

    

 

 

    

 

 

 

Derivative liability – warrants

   $ 1,925        

Redeemable convertible preferred stock:

        

Series Seed preferred stock, $0.0001 par value; 295,467 shares authorized, issued and outstanding, actual; no shares authorized, issued, or outstanding, pro forma and pro forma as adjusted

     435        —         —   

Series A preferred stock, $0.0001 par value; 3,655,374 shares authorized, issued and outstanding, actual; no shares authorized, issued, or outstanding, pro forma and pro forma as adjusted

     6,179        —         —   

Series B preferred stock, $0.0001 par value; 301,119 shares authorized, issued and outstanding, actual; no shares authorized, issued, or outstanding, pro forma and pro forma as adjusted

     580        —         —   

Series C preferred stock, $0.0001 par value; 75,000,000 shares authorized, 73,820,346 shares issued and outstanding, actual; no shares authorized, issued, or outstanding, pro forma and pro forma as adjusted

     107,065        —         —   

 

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     (Unaudited)
As of June 30, 2025
 
     Actual     Pro Forma      Pro Forma
As Adjusted
 
     (in thousands, except share and per share amounts)  

Stockholders’ (deficit) equity:

       

Preferred stock, $0.0001 par value: no shares authorized, issued, or outstanding, actual;      shares authorized and no shares issued and outstanding, pro forma and pro forma as adjusted

   $ —      $ —       $ —   

Common stock, $0.0001 par value; 105,000,000 shares authorized, 7,021,744 shares issued and outstanding, actual;      shares authorized,      shares issued and outstanding pro forma;     shares authorized,      shares issued and outstanding, pro forma as adjusted

     1        

Additional paid-in capital

     10,626       

Accumulated deficit

     (114,500 )      

Accumulated other comprehensive income

     —        
  

 

 

   

 

 

    

 

 

 

Total stockholders’ (deficit) equity

   $ (103,873 )    $        $    
  

 

 

   

 

 

    

 

 

 

Total capitalization

   $ 12,311     $           $      
  

 

 

   

 

 

    

 

 

 

Each $1.00 increase or decrease in the assumed initial public offering price of $     , the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease each of the pro forma as adjusted cash and cash equivalents and marketable securities, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $     million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase or decrease of 1.0 million in the number of shares we are offering would increase or decrease each of the pro forma as adjusted cash and cash equivalents and marketable securities, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $     million, assuming an initial public offering price of $     , the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The pro forma and pro forma as adjusted information are illustrative only and following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing.

You should read this information in conjunction with our financial statements and the related notes included elsewhere in this prospectus, the section of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information contained in this prospectus.

The number of shares of our common stock to be outstanding after this offering is based on 85,094,050 shares of common stock outstanding as of June 30, 2025, after giving effect to the conversion of all outstanding shares of our convertible preferred stock into 78,072,306 shares of common stock upon the closing of this offering and excludes:

 

  •  

11,923,082 shares of common stock issuable upon the exercise of outstanding stock options under our 2023 Plan as of June 30, 2025, at a weighted-average exercise price of $1.50 per share;

 

  •  

779,500 shares of common stock issuable upon the exercise of outstanding stock options under our 2018 Plan as of June 30, 2025, at a weighted-average exercise price of $2.38 per share;

 

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  •  

290,000 shares of common stock issuable upon the exercise of outstanding stock options under our 2017 Plan as of June 30, 2025, at a weighted-average exercise price of $1.79 per share;

 

  •  

    shares of common stock issuable upon the exercise of outstanding stock options granted subsequent to June 30, 2025, at a weighted-average exercise price of $     per share;

 

  •  

695,961 shares of our common stock issuable upon the exercise of Class A common stock warrants outstanding as of June 30, 2025, with an exercise price of $0.01 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—Class A Warrants;”

 

  •  

882,948 shares of our common stock issuable upon the exercise of Class B common stock warrants outstanding as of June 30, 2025, with an exercise price of $0.01 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—Class B Warrants;”

 

  •  

1,528,632 shares of our common stock issuable to Maxim Partners LLC upon the exercise of common stock warrants outstanding as of June 30, 2025, with an exercise price of $0.01 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—Maxim Warrants;”

 

  •  

71,761 shares of our common stock issuable upon the exercise of Series B-1 common stock warrants outstanding as of June 30, 2025, with an exercise price of $0.01 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—Series B-1 Warrants;”

 

  •  

98,456 shares of our common stock issuable upon the exercise of New Series B common stock warrants outstanding as of June 30, 2025, with an exercise price of $1.50 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—New Series B Warrants;”

 

  •  

    shares of common stock reserved for future issuance under our 2025 Plan, which became effective upon the execution and delivery of the underwriting agreement for this offering, as well as any future automatic annual increases in the number of shares of common stock reserved for issuance under our 2025 Plan, as more fully described in the section titled “Executive Compensation—Equity Benefit Plans;” and

 

  •  

    shares of common stock reserved for future issuance under our ESPP, which became effective upon the execution and delivery of the underwriting agreement for this offering, as well as any future automatic annual increases in the number of shares of common stock reserved for future issuance under our ESPP, as more fully described in the section titled “Executive Compensation—Equity Benefit Plans.”

 

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering.

Our historical net tangible book value as of June 30, 2025 was $10.4 million, or $1.48 per share of common stock. Our historical net tangible book value (deficit) per share represents the amount of our total tangible assets less our total liabilities, divided by the total number of shares of common stock outstanding as of June 30, 2025.

Our pro forma net tangible book value as of June 30, 2025 was $   million, or $   per share of our common stock. Pro forma net tangible book value per share represents the amount of our total tangible assets less our total liabilities, after giving effect to the automatic conversion of all outstanding shares of our redeemable convertible preferred stock and the related reclassification of the carrying value of the redeemable convertible preferred stock and preferred stock warrant liability to stockholders’ equity upon the closing of this offering.

After giving further effect to the sale of      shares of common stock that we are offering at the assumed initial public offering price of $   per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of June 30, 2025 would have been $   million, or approximately $   per share of common stock. This amount represents an immediate increase in pro forma net tangible book value of $   per share to our existing stockholders and an immediate dilution in pro forma net tangible book value of approximately $   per share to new investors participating in this offering.

Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the initial public offering price per share paid by new investors. The following table illustrates this dilution on a per share basis to new investors:

 

Assumed initial public offering price per share

      $       

Historical net tangible book value per share as of June 30, 2025

   $ 1.48     

Increase in historical net tangible book value per share attributable to pro forma adjustments described above

     
  

 

 

    

Pro forma net tangible book value per share as of June 30, 2025

     

Increase in pro forma net tangible book value per share attributable to new investors purchasing shares from us in this offering

     
  

 

 

    

Pro forma as adjusted net tangible book value per share after this offering

     
     

 

 

 

Dilution per share to new investors participating in this offering

      $    
     

 

 

 

The dilution information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase (decrease) in the assumed initial public offering price of $   per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by approximately $  , and dilution in pro forma net tangible book value per share to new investors by approximately $  , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions payable by us. Each increase of 1.0 million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase our pro forma as adjusted net tangible book value per share after this offering by approximately $   and decrease the dilution to investors participating in this offering by approximately $   per share, assuming that the assumed initial public offering price remains the same, and

 

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after deducting the estimated underwriting discounts and commissions. Similarly, each decrease of 1.0 million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would decrease the pro forma as adjusted net tangible book value per share after this offering by approximately $   and increase the dilution to investors participating in this offering by approximately $   per share, assuming that the assumed initial public offering price remains the same, and after deducting the underwriting discounts and commissions payable by us.

If the underwriters exercise their option to purchase additional shares of our common stock in full in this offering, the pro forma as adjusted net tangible book value after the offering would be $   per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $   per share, and the dilution per share to new investors would be $   per share, in each case assuming the assumed initial public offering price of $   per share, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions payable by us.

The following table summarizes on a pro forma as adjusted basis as of June 30, 2025, the number of shares of common stock purchased or to be purchased from us, the total consideration paid or to be paid to us in cash and the average price per share paid by existing stockholders for shares issued prior to this offering and the price to be paid by new investors in this offering. The calculation below is based on the assumed initial public offering price of $   per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting the underwriting discounts and commissions and estimated offering expenses payable by us. As the table below shows, investors participating in this offering will pay an average price per share substantially higher than our existing stockholders paid.

 

     Shares Purchased     Total Consideration     Weighted-
Average
Price Per
Share
 
     Number      Percent     Amount      Percent  

Existing stockholders

           %    $                %    $       

New investors(1)

                    
  

 

 

    

 

 

   

 

 

    

 

 

   

Total

                100 %      $        100 %   
  

 

 

    

 

 

   

 

 

    

 

 

   
 
(1)

The presentation in this table regarding ownership by existing stockholders does not give effect to any purchases that existing stockholders may make in this offering.

Each $1.00 increase (decrease) in the assumed initial public offering price of $   per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors in this offering by $   million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions payable by us. Similarly, each 1.0 million share increase (decrease) in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by investors participating in this offering, total consideration paid by all stockholders and the average price per share paid by all stockholders by $   million, assuming the assumed initial public offering price of $   per share, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions payable by us.

The table above assumes no exercise of the underwriters’ option to purchase additional shares of common stock in this offering. If the underwriters were to fully exercise their option to purchase additional shares of common stock from us, the percentage of our common stock held by existing stockholders after this offering would be reduced to  % of the total number of shares of our common stock outstanding after this offering, and the percentage of our common stock held by new investors would be increased to  % of the total number of shares of our common stock outstanding after this offering.

 

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The number of shares of our common stock to be outstanding after this offering is based on 85,094,050 shares of common stock outstanding as of June 30, 2025, after giving effect to the conversion of all outstanding shares of our convertible preferred stock into 78,072,306 shares of common stock upon the closing of this offering and excludes:

 

  •  

11,923,082 shares of common stock issuable upon the exercise of outstanding stock options under our 2023 Plan as of June 30, 2025, at a weighted-average exercise price of $1.50 per share;

 

  •  

779,500 shares of common stock issuable upon the exercise of outstanding stock options under our 2018 Plan as of June 30, 2025, at a weighted-average exercise price of $2.38 per share;

 

  •  

290,000 shares of common stock issuable upon the exercise of outstanding stock options under our 2017 Plan as of June 30, 2025, at a weighted-average exercise price of $1.79 per share;

 

  •  

    shares of common stock issuable upon the exercise of outstanding stock options granted subsequent to June 30, 2025, at a weighted-average exercise price of $     per share;

 

  •  

695,961 shares of our common stock issuable upon the exercise of Class A common stock warrants outstanding as of June 30, 2025, with an exercise price of $0.01 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—Class A Warrants;”

 

  •  

882,948 shares of our common stock issuable upon the exercise of Class B common stock warrants outstanding as of June 30, 2025, with an exercise price of $0.01 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—Class B Warrants;”

 

  •  

1,528,632 shares of our common stock issuable to Maxim Partners LLC upon the exercise of common stock warrants outstanding as of June 30, 2025, with an exercise price of $0.01 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—Maxim Warrants;”

 

  •  

71,761 shares of our common stock issuable upon the exercise of Series B-1 common stock warrants outstanding as of June 30, 2025, with an exercise price of $0.01 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—Series B-1 Warrants;”

 

  •  

98,456 shares of our common stock issuable upon the exercise of New Series B common stock warrants outstanding as of June 30, 2025, with an exercise price of $1.50 per share, as more fully described in the section titled “Description of Capital Stock—Warrants—New Series B Warrants;”

 

  •  

    shares of common stock reserved for future issuance under our 2025 Plan, which became effective upon the execution and delivery of the underwriting agreement for this offering, as well as any future automatic annual increases in the number of shares of common stock reserved for issuance under our 2025 Plan, as more fully described in the section titled “Executive Compensation—Equity Benefit Plans;” and

 

  •  

    shares of common stock reserved for future issuance under our ESPP, which became effective upon the execution and delivery of the underwriting agreement for this offering, as well as any future automatic annual increases in the number of shares of common stock reserved for future issuance under our ESPP, as more fully described in the section titled “Executive Compensation—Equity Benefit Plans.”

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our current plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this prospectus, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the “Risk Factors” section of this prospectus to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage biopharmaceutical company developing novel therapies for the treatment of schizophrenia, bipolar depression, and other neuropsychiatric diseases. We are building a pipeline that leverages the broad therapeutic potential of our lead product candidate, LB-102, which we believe has the potential to be the first benzamide antipsychotic drug approved for neuropsychiatric disorders in the United States. LB-102 is a new chemical entity and a methylated derivative of amisulpride, a second-generation antipsychotic drug approved in over 50 countries, not including the United States, because the development and regulatory requirements of the U.S. Food and Drug Administration, or FDA, for amisulpride were incompatible with patent coverage on the drug. Amisulpride is a generic drug that has been extensively used in clinical practice following its initial approval in France in the 1980s, generating at least two million monthly prescriptions in 2023 in a subset of 16 continental European countries. Among these European prescriptions for amisulpride, our data suggest that approximately 60% are for schizophrenia and schizoaffective disorders, approximately 20% are for mood disorders, approximately 14% are for anxiety, and the remainder are for a variety of other indications. We developed LB-102 in order to address the limitations of amisulpride with a differentiated therapeutic profile and strong intellectual property protection. We believe LB-102’s mechanism of action, data from our recently completed Phase 2 trial of LB-102 in acute schizophrenia, and the legacy of clinical experience with amisulpride support the continued development of LB-102 in schizophrenia and bipolar depression. If successful in treating bipolar depression, we may also develop LB-102 in the treatment of major depressive disorder, or MDD. In the future, we may also develop LB-102 for the treatment of other neuropsychiatric disorders, including schizophrenia with predominantly negative symptoms, Alzheimer’s disease-related agitation and psychosis, manic episodes associated with bipolar disorder, and cognitive impairment associated with schizophrenia, or CIAS. We believe that LB-102, if approved, can become a mainstay of psychiatric practice by offering a potentially attractive alternative to branded and generic therapeutics for the treatment of schizophrenia, bipolar depression, and other neuropsychiatric diseases.

Our product candidate, LB-102, is a Phase 3-ready oral, small molecule for the treatment of acute schizophrenia, defined as a sudden and severe episode of psychotic symptoms, characterized by hallucinations, delusions, and other positive symptoms. Schizophrenia is a chronic, severe, complex, and debilitating psychiatric disorder that affects approximately 1% of the U.S. population and is a leading cause of disability. Symptoms are divided into three categories: (i) psychotic or positive symptoms, which include delusions, hallucinations, thought disorder, and movement disorder; (ii) negative symptoms, which include lack of motivation, interest, or enjoyment in daily activities, withdrawal from social life, and difficulty showing emotions; and (iii) cognitive symptoms, which encompass problems with attention, concentration, and memory. The disease is associated with increased mortality, with approximately 5% of schizophrenia patients dying by suicide, and average overall life expectancy decreasing by as much as 29 years compared to the general population. There is currently no cure for schizophrenia, which means the disease must be managed with life-long therapy, increasing the importance of therapies that can improve compliance rates and dosing challenges.

 

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In addition to our clinical development program in schizophrenia, we plan to leverage our expertise in neuropsychiatry and the unique mechanism of action of LB-102 to develop our candidate in other indications, starting with bipolar depression. Most people living with bipolar depression experience dramatic shifts in mood, energy and behavior, alternating between manic and depressive states. It is estimated that 2.8%, or approximately seven million Americans, experience bipolar disorder in a year, and approximately 40 million people live with bipolar disorder worldwide. Our initial Phase 2 trial will explore the utility of LB-102 in controlling the depressive symptoms of the disease. We plan to initiate this potentially registrational Phase 2 trial in bipolar depression in the first quarter of 2026 with topline data expected in the first quarter of 2028.

We believe LB-102’s strong antagonism of the D2, D3, and 5HT7 receptors makes it well suited for treating bipolar depression, providing potential to control psychosis and mania through its effects on D2 and potential for antidepressive and pro-cognitive effects through its antagonism of 5HT7 and D3. Our Phase 2 trial of LB-102 in acute schizophrenia demonstrated strong antipsychotic activity and suggests opportunities for potential differentiation in bipolar depression given the observed tolerability profile (low rates of EPS, sedation, and gastrointestinal side effects) and positive impact on cognition. Amisulpride is approved for the treatment of dysthymia, a form of depression, in certain countries outside of the United States and has been shown to be as effective as certain approved agents for MDD and dysthymia. We believe that results in dysthymia and MDD provide strong scientific and clinical rationale for development of LB-102 in the treatment of depressive episodes associated with bipolar disorder or bipolar depression because episodes of major depression, whether unipolar (as in MDD) or bipolar (as in bipolar depression), are typically characterized by a similar imbalance in the neurotransmitters serotonin, noradrenaline, and dopamine regardless of the underlying pathophysiology of the disease. There is wide use of amisulpride in bipolar disorder with approximately 3.4% of at least 2 million prescriptions written for this indication in a select group of European countries including Germany, France, Italy, Spain, and several others. A non-racemic form of amisulpride also showed antidepressant activity in two independent third-party, placebo-controlled bipolar depression trials with an approximately 17- to 18-point reduction in Montgomery—Åsberg Depression Rating Scale, or MADRS, from baseline observed across these studies. Additionally, among the four antipsychotics approved for schizophrenia and MDD or treatment resistant depression that were also studied in late-stage bipolar depression trials (quetiapine, cariprazine, aripiprazole, and olanzapine), three out of four, or 75%, generated positive data for the treatment of bipolar depression. Our planned Phase 2 trial for bipolar depression will utilize a fixed-flexible dose of LB-102. This trial design allows us to evaluate two doses of LB-102 in the trial, thereby increasing the chances for a patient to derive clinical benefit from treatment with LB-102, while retaining the advantages of a two-arm trial, which is known to mitigate the risk of a high placebo rate. Additionally, flexible dose trials typically have better signal detection than fixed dose trials for depression, as flexible dose trials lower the magnitude of symptom reduction with placebo. We believe LB-102 has the potential to provide improved tolerability and clinical activity in bipolar depression compared to currently available treatments worldwide, which are associated with troubling adverse events and insufficient efficacy for certain symptoms, including cognitive impairment associated with the disease.

Since our inception in 2015, we have devoted substantially all of our resources to the research and development of LB-102 by conducting clinical trials and preclinical studies and recruiting management and technical staff to support these operations. To date, we have funded our operations primarily through the aggregate gross proceeds of approximately $121.7 million from the sales of our redeemable convertible preferred stock, common stock, and convertible notes.

We have not generated any revenue from product sales and we have incurred recurring losses since our inception. Our net losses were $10.2 million and $43.9 million for the six months ended June 30, 2025 and 2024, respectively. As of June 30, 2025, we had an accumulated deficit of $114.5 million. We expect to continue to generate operating losses and negative operating cash flows for the foreseeable future. We anticipate that our operating expenses and capital expenditures will increase substantially with our ongoing activities, particularly as we:

 

  •  

continue to progress the clinical development of LB-102 in acute schizophrenia, bipolar depression and other indications;

 

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  •  

advance additional product candidates through clinical development;

 

  •  

require the manufacture of larger quantities of LB-102 and any additional product candidates to support future clinical trials or potential commercialization;

 

  •  

seek marketing authorizations for LB-102 and any of our future product candidates that successfully complete clinical development, if any;

 

  •  

acquire or license other product candidates or technologies;

 

  •  

make milestone, royalty, or other payments under our current royalty agreements or any future license agreements;

 

  •  

obtain, maintain, protect, and enforce our intellectual property portfolio;

 

  •  

seek to attract and retain new and existing skilled personnel; and

 

  •  

add operational, legal, financial, and management information systems and personnel to support our product development and clinical execution, as well as to support our transition to a public company.

We will not generate any revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for one or more of our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our internal commercialization capability to support product sales, marketing, and distribution.

As a result, we will need substantial additional funding to support our operating activities as we advance our product candidates through clinical development, seek regulatory approval, and prepare for and, if any of our product candidates are approved, proceed to commercialization. Until such time, if ever, as we can generate substantial revenue from product sales to support our cost structure, we expect to finance our operating activities through a combination of public or private sales of equity, government or private party grants, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. Adequate funding may not be available to us on acceptable terms, or at all.

If we are unable to obtain funding, we will be forced to delay, reduce, or eliminate some or all of our research and development programs, product portfolio expansion, or commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations. Although we continue to pursue these plans, there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.

As of June 30, 2025, we had cash and cash equivalents of $14.2 million. Based on our current plans, we believe that our existing cash and cash equivalents, together with the net proceeds from this offering, will be sufficient to meet our anticipated operating and capital expenditure requirements through    . See “—Liquidity and Capital Resources.”

In May 2025, we initiated a reduction in force, or RIF, as part of a strategic realignment to streamline operations and extend our cash runway. The RIF impacted several positions, including the Chief Financial Officer and Chief Scientific Officer, while prioritizing continuity in key programs and minimizing operational disruptions. This initiative is intended to enhance our ability to allocate resources efficiently as we focus on advancing LB-102 and other high-priority development programs. We estimate the total cost of the RIF will be approximately $0.7 million in one-time restructuring charges, primarily related to severance and termination benefits, including a reduction in stock-based compensation expenses arising from equity award modifications. We anticipate completing all actions related to the RIF by May 30, 2026. See Note 11 Restructuring in the accompanying unaudited condensed financial statements for additional information.

 

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Royalty Agreements

In August 2023, contemporaneously with the closing of the Series C financing, we entered into several Amended and Restated Royalty Agreements with certain of our existing investors, co-founders, former and current directors, and former and current executive officers, including Zachary Prensky, Andrew Vaino, Ph.D., and Marc Panoff, none of whom were new investors of our Series C preferred stock. We received no consideration as part of the Amended and Restated Royalty Agreements. Pursuant to the Amended and Restated Royalty Agreements, we are obligated to pay royalties to all of the holders in an aggregate amount up to 2.75% of net sales arising from LB-102 worldwide through December 31, 2035. Thereafter, we are obligated to pay royalties to such holders in an aggregate amount up to 3.25% in perpetuity. Future sales are defined in these agreements as the gross payments received on total commercial sales of LB-102, whether by us or by any licensee of LB-102. For additional information, see “Business—License and Other Agreements—Royalty Agreements.” As of June 30, 2025, certain of our former and current officers and their affiliates held 1.13% of the future royalties.

Components of Results of Operations

Revenue

To date, we have not recognized any revenues, including revenues from product sales. We do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for LB-102 or any future product candidates are successful and result in regulatory approval, or license agreements with third parties, we may generate revenue in the future from product sales. However, there can be no assurance as to when we will generate such revenue, if at all.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for the development of LB-102, which include:

 

  •  

personnel expenses, including salaries, benefits, and stock-based compensation expense for our employees engaged in research and development functions;

 

  •  

expenses incurred in connection with the preclinical and clinical development of LB-102, including under agreements with clinical sites and CROs;

 

  •  

formulation costs and chemistry, manufacturing and controls, or CMC, costs including formulation and active pharmaceutical ingredients, process development, analytical and quality infrastructure build-out, and validation support;

 

  •  

expenses incurred under agreements with consultants engaged in research and development functions; and

 

  •  

expenses related to regulatory affairs.

We expense research and development costs in the periods in which they are incurred. Costs for certain activities are recognized based on an evaluation of the progress to completion of specific tasks, using information provided to us by our vendors and analyzing the progress of our clinical trials or other services performed. Significant judgment and estimates are made in determining the accrued expense balances at the end of any reporting period.

Research and development activities are central to our business model. We expect our research and development expenses to increase substantially for the foreseeable future as we advance LB-102 and any of our future product candidates into and through later stage clinical trials, pursue regulatory approval of our product

 

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candidates, build our operational and commercial capabilities for supplying and marketing our products, if approved, and expand our pipeline of product candidates.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. Furthermore, product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. The actual probability of success for our product candidates may be affected by a variety of factors, including the safety and efficacy of our product candidates, conduct of clinical trials, investment in our clinical programs, competition, manufacturing capability, and commercial viability. We may never succeed in achieving regulatory approval for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion of costs of our research and development projects or if, when, and to what extent we will generate revenue from the commercialization and sale of LB-102 or any future product candidates, if approved by the FDA and other applicable regulatory authorities.

Our future research and development costs may vary significantly based on factors such as:

 

  •  

the timing and progress of our clinical development activities;

 

  •  

the number and scope of preclinical and clinical programs we decide to pursue;

 

  •  

the amount and timing of any milestone payment due under an existing, or any future, license or collaboration agreement or asset acquisition;

 

  •  

the number of patients that participate in our clinical trials, and per participant clinical trial costs;

 

  •  

the number and duration of clinical trials required for approval of our product candidates;

 

  •  

the number of sites included in our clinical trials, and the locations of those sites;

 

  •  

delays or difficulties in adding trial sites and enrolling participants in our clinical trials;

 

  •  

patient drop-out or discontinuation rates;

 

  •  

potential additional safety monitoring requested by regulatory authorities;

 

  •  

the phase of development of our product candidates;

 

  •  

the efficacy and safety profile of our product candidates;

 

  •  

the timing, receipt, and terms of any approvals from applicable regulatory authorities, including the FDA and non-U.S. regulators;

 

  •  

maintaining a continued acceptable safety profile of our product candidates following approval, if any, of our product candidates;

 

  •  

hiring and retaining additional personnel such as clinical, quality control, scientific, commercial, and administrative;

 

  •  

maintain, expand, and protect our intellectual property portfolio;

 

  •  

establish sales, marketing, distribution, manufacturing, supply chain, and other commercial infrastructure in the future to commercialize various products for which we may obtain regulatory approval;

 

  •  

changes in the competitive outlook;

 

  •  

the extent to which we establish additional strategic collaborations or other arrangements; and

 

  •  

the impact of any business interruptions to our operations or to those of the third parties with whom we work.

 

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A change in the outcome of any of these variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate.

We also expect to incur significant manufacturing costs as our CDMOs develop scaled commercial manufacturing processes. However, we do not believe that it is possible at this time to accurately project expenses through commercialization. There are numerous factors associated with the successful commercialization of LB-102 or any future product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will impact our clinical development programs and plans.

General and Administrative Expenses

General and administrative expenses consist primarily of:

 

  •  

personnel expenses, including salaries, benefits and stock-based compensation, for personnel in our executive, finance, corporate and business development, and administrative functions;

 

  •  

professional fees for legal, patent, accounting and audit, information technology, and tax;

 

  •  

consulting services including fees paid to our board of directors; and

 

  •  

other expenses including travel expenses, rent expense, and other operating costs.

We expect that our general and administrative expenses will increase in the future as we expand our headcount to support our continued research and development of our product candidates. We also expect to incur increased expenses associated with operating as a public company including:

 

  •  

costs related to accounting, audit, legal, compliance, regulatory, and tax-related services;

 

  •  

costs related to compliance with the rules and regulations of the SEC and listing standards applicable to companies listed on a national securities exchange;

 

  •  

director and officer insurance costs; and

 

  •  

investor and public relations costs.

In addition, if we obtain regulatory approval for any of our product candidates and do not enter into a third-party commercialization collaboration, we expect to incur significant expenses related to building a sales and marketing team to support product sales, marketing, and distribution activities.

Non-operating Income (Expense)

Non-operating income (expense) consists primarily of interest income on our cash and cash equivalents and marketable securities, interest expense on borrowings under our convertible note agreements, and non-cash changes in the fair value of our outstanding preferred stock warrant liability and conversion feature derivative liability related to our convertible notes.

 

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Results of Operations

Comparison of the Years Ended December 31, 2024 and 2023

The following table summarizes our results of operations for the years ended December 31, 2024 and 2023 (in thousands):

 

     Year Ended December 31,  
     2024      2023      Change  

Operating expenses

        

Research and development

   $  51,171      $ 7,845      $ 43,326  

General and administrative

     13,659        3,531        10,128  
  

 

 

    

 

 

    

 

 

 

Total operating loss

     (64,830 )       (11,376 )       53,454  

Non-operating income (expense)

        

Interest income

     1,721        811        910  

Interest expense

     —         (4,825 )       4,825  

Loss on extinguishment of debt

     —         (7,435 )       7,435  

Realized gain on sale of marketable securities, net

     955        328        627  

(Loss) gain on change in fair value of derivative instruments

     (947 )       16,257        (17,204 ) 

Other expense

     —         (34 )       34  
  

 

 

    

 

 

    

 

 

 

Total non-operating income

     1,729        5,102        (3,373 ) 
  

 

 

    

 

 

    

 

 

 

Loss before income tax

     (63,101 )       (6,274 )       (56,827 ) 
  

 

 

    

 

 

    

 

 

 

Income tax provision

     1        1        —   
  

 

 

    

 

 

    

 

 

 

Net loss

   $ (63,102 )     $ (6,275 )     $ (56,827 ) 
  

 

 

    

 

 

    

 

 

 

Revenue

We generated no revenue during the year ended December 31, 2024 or 2023.

Research and Development Expenses

The following table summarizes our research and development expenses for the periods presented (in thousands):

 

     Year Ended December 31,  
     2024      2023      Change  

Direct research and development expenses

        

Clinical trial

   $ 42,369      $ 5,408      $ 36,961  

Formulation and CMC

     2,270        469        1,801  

Preclinical

     1,845        251        1,594  

Indirect and unallocated expenses

        

Personnel-related

     3,689        1,552        2,137  

Consulting and other

     998        165        833  
  

 

 

    

 

 

    

 

 

 

Total research and development expenses

   $ 51,171      $ 7,845      $ 43,326  
  

 

 

    

 

 

    

 

 

 

Research and development expenses were $51.2 million for the year ended December 31, 2024, compared to $7.8 million for the year ended December 31, 2023 . The increase of $43.4 million was primarily due to: (i) a $37.0 million increase in clinical trial expenses related to the conduct of our Phase 2 trial of LB-102 in the treatment of patients with acute schizophrenia, the majority of which took place in 2024; (ii) a $2.1 million

 

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increase in personnel-related expenses related to an increase in headcount; (iii) a $1.8 million increase in formulation and CMC expenses due to the scale-up and production of LB-102 to be used for clinical and preclinical development; and (iv) a $1.6 million increase in preclinical research expenses related to the continued clinical development of LB-102 for schizophrenia and other indications.

General and Administrative Expenses

General and administrative expenses were $13.7 million for the year ended December 31, 2024, compared to $3.5 million for the year ended December 31, 2023. The increase of $10.1 million was primarily due to: (i) a $3.2 million increase related to the write off of deferred offering costs; (ii) a $2.3 million increase in stock-based compensation primarily related to modifications of outstanding stock options of our former chief executive officer; (iii) a $1.3 million increase in personnel-related costs related to increased headcount (including the hiring of a chief executive officer and chief financial officer) and merit increases; (iv) a $0.8 million increase in termination benefits related to the resignation of our former chief executive officer; (v) a $0.7 million increase in consulting expenses primarily related to industry market research; (vi) a $0.6 million increase in accounting and audit expenses related to preparation of public company-compliant financial statements; and (vii) a $0.5 million increase in office and rent expense primarily related to relocation of our corporate office in the third quarter of 2024.

Non-operating Income (Expense)

Non-operating income was $1.7 million for the year ended December 31, 2024, compared to $5.1 million for the year ended December 31, 2023. The decrease of $3.4 million was primarily due to: (i) a $17.2 million decrease in the gain (loss) on change in fair value of derivative instruments, resulting from a loss on the change in fair value on warrant liabilities of $0.9 million during 2024 and a $16.3 million gain on the change in fair value of derivative liabilities during 2023; (ii) a $7.4 million loss on extinguishment of debt related to the conversion of the convertible notes to Series C preferred stock in August 2023; (iii) a $4.8 million decrease in interest expense related to the convertible notes converted to Series C preferred stock in August 2023; and (iv) a $1.5 million increase in interest income and realized gain related to the increased investment in marketable securities.

Comparison of the Six Months Ended June 30, 2025 and 2024

The following table summarizes our results of operations for the six months ended June 30, 2025 and 2024 (in thousands):

 

     (Unaudited)
Six Months Ended June 30,
 
     2025      2024      Change  

Operating expenses

        

Research and development

   $ 5,842      $ 40,131      $ (34,289 ) 

General and administrative

     5,446        3,077        2,369  
  

 

 

    

 

 

    

 

 

 

Total operating loss

     (11,288 )       (43,208 )       (31,920 ) 

Non-operating income (expense)

        

Interest income

     413        1,039        (626 ) 

Realized gain on sale of marketable securities, net

     119        90        29  

Gain (loss) on change in fair value of derivative instruments

     579        (1,771 )       2,350  
  

 

 

    

 

 

    

 

 

 

Total non-operating income

     1,111        (642 )       1,753  
  

 

 

    

 

 

    

 

 

 

Loss before income tax

     (10,177 )       (43,850 )       33,673  
  

 

 

    

 

 

    

 

 

 

Income tax provision

     —         —         —   
  

 

 

    

 

 

    

 

 

 

Net loss

   $ (10,177 )     $ (43,850 )     $ 33,673  
  

 

 

    

 

 

    

 

 

 

 

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Revenue

We generated no revenue during the six months ended June 30, 2025 or 2024.

Research and Development Expenses

The following table summarizes our research and development expenses for the periods presented (in thousands):

 

     (Unaudited)
Six Months Ended June 30,
 
     2025      2024      Change  

Direct research and development expenses

        

Clinical trial

   $ 487      $ 36,330      $ (35,843 ) 

Formulation and CMC

     1,673        917        756  

Preclinical

     117        722        (605 ) 

Indirect and unallocated expenses

        

Personnel-related

     2,317        1,861        456  

Consulting and other

     1,248        301        947  
  

 

 

    

 

 

    

 

 

 

Total research and development expenses

   $ 5,842      $ 40,131      $ (34,289 ) 
  

 

 

    

 

 

    

 

 

 

Research and development expenses were $5.8 million for the six months ended June 30, 2025, compared to $40.1 million for the six months ended June 30, 2024. The decrease of $34.3 million was primarily due to: (i) a $35.8 million decrease in clinical trial expenses related to the conduct of our Phase 2 trial of LB-102 in the treatment of patients with acute schizophrenia, the majority of which took place in 2024; and (ii) a $0.6 million decrease in preclinical research expenses related to the completion of preclinical studies in 2024, partially offset by (a) a $0.9 million increase in consulting and other expenses primarily due to engagement of regulatory and industry experts to analyze Phase 2 clinical trial results and planning for future clinical trials; (b) a $0.8 million increase in formulation and CMC expenses due to the scale-up and production of LB-102 to be used for clinical and preclinical development, and (c) a $0.5 million increase in personnel-related expenses primarily due to termination benefits related to the RIF in May 2025, as well as the hiring of the Senior Vice President of Technical Operations in February 2025.

General and Administrative Expenses

General and administrative expenses were $5.4 million for the six months ended June 30, 2025, compared to $3.1 million for the six months ended June 30, 2024. The increase of $2.3 million was primarily due to: (i) a $0.6 million increase in stock-based compensation primarily related to the grant of 5.1 million stock options to our Chief Executive Officer in November 2024; (ii) a $0.7 million increase in personnel-related costs primarily related to the hiring of our Chief Executive Officer in November 2024 and our Chief Business Officer in February 2025; (iii) a $0.4 million increase in termination benefits related to the RIF in May 2025; and (iv) a $0.3 million increase in market research expense to assess product marketability.

Non-operating Income (Expense)

Non-operating income was $1.1 million for the six months ended June 30, 2025, compared to $(0.6) million for the six months ended June 30, 2024. The increase of $1.7 million was primarily due to: a $2.3 million increase in the gain (loss) on change in fair value of derivative instruments, resulting from a gain on the change in fair value on warrant liabilities of $0.6 million during 2025 and a $1.7 million loss on the change in fair value of derivative liabilities during 2024, partially offset by a $0.6 million decrease in interest income related to the decreased investment in marketable securities and money market funds.

 

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Liquidity and Capital Resources

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future. To date, we have funded our operations primarily with proceeds from issuances of our redeemable convertible preferred stock, common stock and convertible notes. Through June 30, 2025, our operations have been financed primarily by gross proceeds of $35.7 million from the issuance of convertible notes and $84.8 million from the sales of shares of redeemable convertible preferred stock. As of June 30, 2025 and December 31, 2024, we had cash and cash equivalents and marketable securities of $14.2 million and $28.0 million, respectively. Until required for use in our business, we typically invest our cash, in accordance with our investment policy, in money market funds and fixed income securities including U.S. treasury bills and government securities. We attempt to minimize credit risk related to our cash and cash equivalents and marketable securities by maintaining a well-diversified portfolio that limits the amount of exposure as to maturity and investment type.

Our primary use of cash has been to fund operating expenses, which consist of research and development and general and administrative expenditures. As we progress through the phases of development of LB-102 and any of our future product candidates, we anticipate that we will incur increasing losses in future quarters and years compared to historical periods.

Cash Flows

The following table sets forth a summary of the net cash flow activity for the years ended December 31, 2024 and 2023 and the six months ended June 30, 2025 and 2024 (in thousands):

 

     Year Ended December 31,      (Unaudited)
Six Months Ended June 30,
 
     2024      2023      2025      2024  

Net cash used in operating activities

   $ (53,052 )     $ (12,094 )     $ (13,732 )     $ (25,350 ) 

Net cash provided by (used in) investing activities

     23,234        (28,010 )       4,989        (19,178 ) 

Net cash provided by financing activities

     38,315        33,679        —         38,295  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

   $ 8,497      $ (6,425 )     $ (8,743 )     $ (6,233 ) 
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating Activities

Cash used in operating activities for the six months ended June 30, 2025 was $13.7 million, consisting of net loss of $10.2 million adjusted for non-cash items, including $0.6 million related to gain from the change in the fair value of the warrant liabilities, partially offset by a $1.0 million charge for stock-based compensation expense. Additionally, we had outflows of $4.0 million due to a change in our net operating assets and liabilities from the year ended December 31, 2024, including a $4.4 million decrease in accounts payable and accrued expense primarily related to timing of payments and clinical trial expenses, partially offset by a $0.3 million decrease in prepaid expenses primarily related to decreased payments to our CRO due to the completion of the Phase 2 acute schizophrenia trial.

Cash used in operating activities for the six months ended June 30, 2024 was $25.4 million, consisting of net loss of $43.9 million partially offset by non-cash items, including (i) the change in fair value of the warrant liabilities of $1.8 million, (ii) stock-based compensation expense of $0.3 million, and (iii) amortization of premiums on investments of $0.2 million. Additionally, we had inflows of $16.2 million due to a change in our net operating assets and liabilities from the year ended December 31, 2023, including a $18.2 million increase in

 

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accounts payable and accrued expense primarily related to timing of payments and clinical trial expenses, partially offset by a $1.9 million increase in prepaid expenses primarily related to advance payments to our CRO for the Phase 2 acute schizophrenia trial.

Cash used in operating activities for the year ended December 31, 2024 was $53.1 million, consisting of net loss of $ 63.1 million adjusted for non-cash items, including the realized gain on marketable securities of $1.0 million, partially offset by non-cash items, including: (i) stock-based compensation expense of $3.1 million; (ii) write off of deferred offering costs of $3.2 million; (iii) change in fair value of the warrant derivative liabilities of $0.9 million; and (iv) lease expense of $0.3 million related to the lease agreement executed in May 2024. Additionally, we had inflows of $3.3 million due to a change in our net operating assets and liabilities from the year ended December 31, 2023, including a $5.0 million increase in accounts payable and accrued expense related to timing of payments, clinical trial expenses and compensation and termination expenses, partially offset by a $1.7 million increase in prepaid expenses primarily related to advance payments to our CRO.

Cash used in operating activities for the year ended December 31, 2023 was $12.1 million, consisting of net loss of $6.3 million and non-cash items, including the change in fair value of conversion feature and warrant derivative liabilities of $16.3 million and realized gain on marketable securities of $0.3 million, partially offset by non-cash items including: (i) loss on extinguishment of debt of $7.4 million related to the conversion of the convertible notes in August 2023; (ii) amortization of deferred financing fees related to the convertible notes of $3.9 million; (iii) amortization of premiums on investments, net of $0.4 million; and (iv) stock-based compensation expense of $0.3 million. Additionally, we had outflows of $1.3 million due to a change in our net operating assets and liabilities from the year ended December 31, 2022, including a $2.2 million increase in prepaid expenses primarily related to advance payments to our CRO and a $0.2 million increase in accrued interest on marketable securities, partially offset by a $1.1 million increase in accounts payable and accrued expenses related to timing of payments and clinical trial expenses.

Investing Activities

Cash provided by investing activities for the six months ended June 30, 2025 was $5.0 million primarily related to proceeds from the sales and maturities of marketable securities.

Cash used in investing activities for the six months ended June 30, 2024 was $19.2 million primarily related to $29.7 million for the purchase of marketable securities to invest our excess cash, partially offset by $10.7 million in maturities of marketable securities.

Cash provided by investing activities for the year ended December 31, 2024 was $23.2 million primarily related to proceeds from the sales and maturities of marketable securities, partially offset by the purchase of marketable securities to invest our excess cash.

Cash used in investing activities for the year ended December 31, 2023 was $28.0 million related to the purchase of marketable securities to invest our excess cash, partially offset by maturities of marketable securities.

Financing Activities

Cash provided by financing activities for the six months ended June 30, 2024 was $38.3 million primarily related to the proceeds from the issuance of redeemable convertible Series C preferred stock, net of issuance costs.

Cash provided by financing activities for the year ended December 31, 2024 was $38.3 million primarily related to the proceeds from the issuance of redeemable convertible Series C preferred stock, net of issuance costs.

 

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Cash provided by financing activities for the year ended December 31, 2023 was $33.7 million related to $33.0 million in proceeds from the issuance of redeemable convertible Series C preferred stock, net of issuance costs, and $0.6 million in proceeds from the issuance of convertible notes, net of issuance costs.

Future Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities, in particular as we continue to advance LB-102 and any of our future product candidates through clinical trials. In addition, upon the completion of this offering, we expect to incur additional costs associated with operating as a public company.

As of June 30, 2025, we had cash and cash equivalents of $14.2 million. Based on our current plans, we believe that our existing cash and cash equivalents and marketable securities, together with the net proceeds from this offering, will be sufficient to meet our anticipated operating and capital expenditure requirements through    .

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with research, development, and commercialization of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including:

 

  •  

the scope, progress, results, and costs of researching and developing LB-102 for our current and future indications, as well as other product candidates we may develop;

 

  •  

the timing of, and the costs involved in, obtaining marketing approvals for LB-102 for our current and future indications, as well as future product candidates we may develop and pursue;

 

  •  

the number of future indications and product candidates that we pursue and their development requirements;

 

  •  

if approved, the costs of commercialization activities for LB-102 for the treatment of acute schizophrenia, bipolar depression or any other approved indication, or any other product candidate that receives regulatory approval to the extent such costs are not the responsibility of any future collaborators, including the costs and timing of establishing product sales, marketing, distribution, and manufacturing capabilities;

 

  •  

subject to receipt of regulatory approval, revenue, if any, received from commercial sales of LB-102 for any program or revenues received from any future product candidates;

 

  •  

the extent to which we in-license or acquire rights to other products, product candidates, or technologies;

 

  •  

our headcount growth and associated costs as we expand our organization to achieve our objectives;

 

  •  

the costs of preparing, filing, and prosecuting patent applications, and maintaining and protecting our intellectual property rights, including enforcing and defending intellectual property related claims; and

 

  •  

the costs of operating as a public company.

A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity financings, debt financings, collaborations with other companies or other strategic transactions. We do not currently have any committed external source of funds. To the extent that we

 

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raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures, or declaring dividends. If we raise additional funds through collaborations, strategic alliances, or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce, or terminate our research, product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development activities. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs.

Contractual Obligations and Commitments

Leases

In June 2018, we entered into an operating lease agreement for office space in New York, New York. The lease agreement was month-to-month and could be terminated by either party with three months’ written notice. We terminated the lease effective as of September 30, 2024.

In May 2024, we entered into a new lease agreement for office space in New York, New York totaling approximately 8,900 square feet. The term of this lease commenced on June 21, 2024, which is the date we took control over the leased premises. The lease term continues through March 2032. See Note 7 to our audited financial statements for more information regarding such leases.

Funding Commitments

We enter into contracts in the normal course of business with CROs, CDMOs, and other third parties for clinical trials, preclinical research studies, and testing and manufacturing services. These contracts are cancelable by us upon prior written notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation. These payments are not included in the preceding table as the amount and timing of such payments are not known.

In September 2023, we entered into a work order with a third-party CRO to provide services with respect to our Phase 2 trial of LB-102 in acute schizophrenia. Minimum advances will be kept by the CRO throughout the duration of the clinical trial.

Recently Issued Accounting Pronouncements

A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations, or cash flows is disclosed in Note 2 of our audited financial statements included elsewhere in this prospectus.

 

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Critical Accounting Estimates

This management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. In accordance with GAAP, we evaluate our estimates and judgments on an ongoing basis, including those related to accrued research and development expenses, preferred stock warrant liabilities, and stock-based compensation. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We define our critical accounting estimates as those that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations. While our significant accounting policies are more fully described in Note 2 to our audited financial statements appearing elsewhere in this prospectus, we believe the following are the critical accounting policies used in the preparation of our financial statements that require significant estimates and judgments.

Accrued Research and Development Expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, including our site contracts for sites that are participating in our ongoing clinical trials, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary.

We base our expenses related to research and development activities on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors that conduct research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid balance accordingly. Non-refundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

Although we do not expect our estimates to be materially different from amounts incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period.

Costs incurred in obtaining technology licenses through asset acquisitions or in-licensing arrangements are charged to research and development expense if the acquired technology has not reached technological feasibility and has no alternative future use.

 

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Stock-Based Compensation

We account for our stock-based compensation awards in accordance with the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 718, Compensation—Stock Compensation, or ASC Topic 718. We have issued stock-based compensation awards including stock options and restricted stock awards and we also account for certain issuances of warrants in accordance with ASC Topic 718.

We measure the cost of employee, nonemployee, and director services received in exchange for an award of equity instruments based on the fair value of the award on the date of grant and recognize the related expense over the period during which the employee, nonemployee or director is required to provide service in exchange for the award on a straight-line basis.

We estimate the fair value of each award on the date of grant using the Black-Scholes option-pricing model. This model requires the use of highly subject assumptions to determine the fair value of each stock-based award, including:

 

  •  

Fair value of common stock. See “—Determination of the Fair Value of Common Stock” below.

 

  •  

Expected term. The expected term represents the period that the stock-based awards are expected to be outstanding. The expected term for our stock options was calculated based on the weighted-average vesting term of the awards and the contract period, or simplified method.

 

  •  

Expected volatility. Since we are not yet a public company and do not have any trading history for our common stock, the expected volatility was estimated based on the average historical volatilities of common stock of comparable publicly traded entities over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their size, stage of their life cycle, or area of specialty. We will continue to apply this process until enough historical information regarding the volatility of our stock price becomes available.

 

  •  

Risk-free interest rate. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options.

 

  •  

Expected dividend yield. We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero.

Changes in the foregoing assumptions can materially affect the fair value and ultimately how much stock-based compensation expense is recognized. These inputs are subjective and generally require significant analysis and judgment to develop.

Determination of the Fair Value of Common Stock

There are significant judgments and estimates inherent in the determination of the fair value of our common stock. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, the prices at which we sold shares of our redeemable convertible preferred stock, the superior rights and preferences of securities senior to our common stock at the time of, and the likelihood of, achieving a liquidity event, such as an IPO or sale of us.

As there has been no public market for our common stock prior to this offering, the estimated fair value of our common stock underlying our stock-based awards has been determined by our board of directors as of each option grant date with input from management, considering our most recently available third-party valuations of common stock and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant.

These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or the Practice Aid. In accordance with Practice Aid, we

 

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currently use a hybrid method, which is a hybrid between the option pricing method, or OPM, and the probability-weighted expected return method, or PWERM. The OPM treats common securities and preferred securities as call options on our total equity value, with exercise prices based on the value thresholds at which the allocation among the various holders of our securities changes. Under this method, the common stock has value only if the funds available for distribution to members are expected to exceed the value of the preferred security liquidation preference at the time of the liquidity event, such as a strategic sale or a merger. The PWERM employs additional information not used in the OPM, including various market approach calculations depending upon the likelihood of various discrete future liquidity scenarios, such as an initial public offering or sale of our company, as well as the probability of remaining a private company. In a hybrid method, various exit scenarios are analyzed. A discount for lack of marketability of our common stock is then applied to arrive at an indication of value for the common stock.

We performed common stock valuations, with the assistance of an independent third-party valuation specialist, as of June 30, 2025, March 31, 2025, December 31, 2024, September 30, 2024, June 30, 2024, March 31, 2024, December 31, 2023 and August 29, 2023, which resulted in valuations of our common stock of $1.02, $0.79, $1.26, $1.12, $1.78, $1.50, $0.83, and $0.76, per share, respectively. In conducting the valuations, the independent third-party valuation specialist considered all objective and subjective factors that it believed to be relevant for each valuation conducted in accordance with the Practice Aid, including our best estimate of our business condition, prospects, and operating performance at each valuation date. Other significant factors included:

 

  •  

the prices of our redeemable convertible preferred stock sold to outside investors in arm’s length transactions, and the rights, preferences and privileges of our preferred stock as compared to those of our common stock, including the liquidation preferences of our preferred stock;

 

  •  

the progress of our research and development programs, including the status of preclinical studies and clinical trials for LB-102;

 

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the valuation of publicly traded companies in the life sciences and biotechnology sectors, as well as recently completed mergers and acquisitions of guideline companies;

 

  •  

our results of operations, including cash on hand, and our historical and forecasted performance and operating results;

 

  •  

the lack of liquidity of our common stock and redeemable convertible preferred stock;

 

  •  

any external market conditions affecting the life sciences and biotechnology industry sectors;

 

  •  

the likelihood of achieving a liquidity event for the holders of our common stock and stock options, such as an IPO or a sale of our company, given prevailing market conditions; and

 

  •  

the state of the IPO market for similarly situated privately held life sciences companies.

The dates of our contemporaneous valuations have not always coincided with the dates of our stock option grants. In determining the exercise prices of the stock options, our board of directors considered, among other things, the most recent valuation of our common stock and their assessment of additional objective and subjective factors that were relevant as of the grant dates. The additional factors considered when determining whether any changes in the fair value of our common stock had occurred between the most recent valuation and the grant dates included our stage of research and development, our operating and financial performance, and current business conditions.

The estimates of fair value of our common stock are highly complex and subjective. There are significant judgments and estimates inherent in the determination of the fair value of our common stock. These judgments and estimates include assumptions regarding our future operating performance, the time to completing an IPO or other liquidity event, the related valuations associated with these events, and the determinations of the appropriate valuation methods at each valuation date. The assumptions underlying these valuations represent

 

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management’s best estimates, which involve inherent uncertainties and the application of management judgment. If we had made different assumptions, our stock-based compensation expense, net loss, and net loss per share applicable to common stockholders could have been materially different.

For valuations after the completion of this offering, our board of directors will determine the fair value of each share of underlying common stock based on the closing price of our common stock as reported on the Nasdaq Global Market on the date of grant.

Warrants

We review the terms of debt instruments, equity instruments, and other financing arrangements to determine whether there are embedded derivative features, including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. Additionally, in connection with the issuance of financing instruments, we may issue freestanding warrants.

We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC Topic 480, Distinguishing Liabilities from Equity, or ASC Topic 480, and FASB ASC Topic 815, Derivatives and Hedging, or ASC Topic 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC Topic 480, meet the definition of a liability pursuant to ASC Topic 480, and whether the warrants meet all of the requirements for equity classification under ASC Topic 815, including whether the warrants are indexed to our own stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of our control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For warrants that meet all criteria for equity classification, the warrants are recorded as a component of additional paid-in capital, on the statement of stockholders’ deficit at the time of issuance. For warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and on each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss in other expense, net, on the statements of operations. The fair value of the warrants was estimated using the Black-Scholes option pricing model, which requires the use of highly subjective and unobservable assumptions to determine the fair value of the warrants, including the fair value of common stock, expected term, expected volatility, risk-free interest rate and expected dividend yield.

Emerging Growth Company and Smaller Reporting Company Status

We are an “emerging growth company” as defined in the JOBS Act, and we may remain an emerging growth company for up to five years following the completion of this offering. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation-related information that would be required if we were not an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply

 

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to private companies. We have elected to take advantage of the benefits of this extended transition period, and therefore, we are not subject to the same requirements to adopt new or revised accounting standards as other public companies that are not emerging growth companies; however, we may adopt certain new or revised accounting standards early. We will remain an “emerging growth company” until the earliest to occur of: (i) the last day of the fiscal year in which we have $1.235 billion or more in annual revenue; (ii) the date on which we first qualify as a large accelerated filer under the rules of the SEC; (iii) the date on which we have, in any prior three-year period issued more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year following the fifth anniversary of the consummation of this offering.

We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

Internal Control Over Financial Reporting

In preparation for our initial public offering, we did not appropriately design and maintain entity-level controls impacting the control environment, risk assessment, control activities, information and communication and monitoring activities to prevent or detect material misstatements to the financial statements. These material weaknesses related to: (i) an insufficient number of qualified resources to ensure adequate oversight and accountability over the performance of controls, including proper segregation of duties; controls over the completeness and accuracy of information used in the operation of control activities across substantially all financial statement areas; management review controls at a sufficient level of precision to detect a material misstatement across substantially all financial statement areas that involve complex and judgmental areas of accounting and disclosure; and retention of control evidence, and (ii ) improper access and a lack of review over user access and user provisioning as it relates to our information technology environment and general controls over information systems that support the financial reporting process. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

We are in the process of implementing our remediation plans with respect to the material weaknesses. We will continue to increase the number of resources (internal or third-party) dedicated to our accounting and finance team, including personnel with additional knowledge, experience, and training, to ensure we have adequate staff, to segregate key duties, and to comply with company policies and procedures. We have engaged a third-party provider to assist in designing and implementing internal control activities, including over information technology.

The process of designing and implementing an effective accounting and financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain an accounting and financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may determine to take additional actions to address control deficiencies or determine to modify certain of the remediation measures described above. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses.

Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

 

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BUSINESS

Overview

We are a clinical-stage biopharmaceutical company developing novel therapies for the treatment of schizophrenia, bipolar depression, and other neuropsychiatric diseases. We are building a pipeline that leverages the broad therapeutic potential of our lead product candidate, LB-102, which we believe has the potential to be the first benzamide antipsychotic drug approved for neuropsychiatric disorders in the United States. LB-102 is a new chemical entity and a methylated derivative of amisulpride, a second-generation antipsychotic drug approved in over 50 countries, not including the United States, because the development and regulatory requirements of the U.S. Food and Drug Administration, or FDA, for amisulpride were incompatible with patent coverage on the drug. Amisulpride is a generic drug that has been extensively used in clinical practice following its initial approval in France in the 1980s, generating at least two million monthly prescriptions in 2023 in a subset of 16 continental European countries. Among these European prescriptions for amisulpride, our data suggest that approximately 60% are for schizophrenia and schizoaffective disorders, approximately 20% are for mood disorders, approximately 14% are for anxiety, and the remainder are for a variety of other indications. We developed LB-102 in order to address the limitations of amisulpride with a differentiated therapeutic profile and strong intellectual property protection. We believe LB-102’s mechanism of action, data from our recently completed Phase 2 trial of LB-102 in acute schizophrenia, and the legacy of clinical experience with amisulpride support the continued development of LB-102 in schizophrenia and bipolar depression. If successful in treating bipolar depression, we may also develop LB-102 in the treatment of major depressive disorder, or MDD. In the future, we may also develop LB-102 for the treatment of other neuropsychiatric disorders, including schizophrenia with predominantly negative symptoms, Alzheimer’s disease-related agitation and psychosis, manic episodes associated with bipolar disorder, and cognitive impairment associated with schizophrenia, or CIAS. We believe that LB-102, if approved, can become a mainstay of psychiatric practice by offering a potentially attractive alternative to branded and generic therapeutics for the treatment of schizophrenia, bipolar depression, and other neuropsychiatric diseases.

Our product candidate, LB-102, is a Phase 3-ready oral, small molecule for the treatment of acute schizophrenia, defined as a sudden and severe episode of psychotic symptoms, characterized by hallucinations, delusions, and other positive symptoms. Schizophrenia is a chronic, severe, complex, and debilitating psychiatric disorder that affects approximately 1% of the U.S. population and is a leading cause of disability. Symptoms are divided into three categories: (i) psychotic or positive symptoms, which include delusions, hallucinations, thought disorder, and movement disorder; (ii) negative symptoms, which include lack of motivation, interest, or enjoyment in daily activities, withdrawal from social life, and difficulty showing emotions; and (iii) cognitive symptoms, which encompass problems with attention, concentration, and memory. The disease is associated with increased mortality, with approximately 5% of schizophrenia patients dying by suicide, and average overall life expectancy decreasing by as much as 29 years compared to the general population. There is currently no cure for schizophrenia, which means the disease must be managed with life-long therapy, increasing the importance of therapies that can improve compliance rates and dosing challenges.

In January 2025, we announced positive data from our four-week placebo-controlled, double-blinded, Phase 2 trial in the United States, which assessed the safety and efficacy of LB-102 in patients with acute schizophrenia. Results from the trial demonstrated (i) statistically significant clinical activity at all LB-102 doses tested; (ii) a significant average change in overall symptoms (effect size); (iii) a potentially class-leading tolerability profile among D2/D3 antagonists and partial agonists; and (iv) a potentially differentiated impact on cognition as measured by CogState Computerized Schizophrenia Battery of Tests. The trial achieved its primary endpoint of change in the Positive and Negative Syndrome Scale, or PANSS, a 30-item scale that measures the severity of schizophrenia symptoms, from baseline to Week 4. A statistically significant decrease in symptoms was observed for all three dose cohorts (50 mg, 75 mg, and 100 mg) compared to placebo. Additionally, our Phase 2 trial data showed a statistically significant impact on negative symptoms versus placebo at the 50 mg dose even though the inclusion criteria enriched for patients experiencing predominantly positive symptoms of schizophrenia. An exploratory post-hoc analysis of our Phase 2 data on the treatment effect in patients with

 

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negative symptoms at baseline (i.e., those patients with a PANSS Negative Subscore greater than or equal to 24) yielded similar results with a statistically significant impact on negative symptoms versus placebo at the 50 mg dose. LB-102 was generally well tolerated in the clinical trial, with adverse events being mostly transient and mild to moderate in severity. If replicated in our planned Phase 3 trial, we believe this tolerability profile has the potential to be class-leading among D2/D3 antagonists and partial agonists specifically with respect to the rate of sedation and extrapyramidal symptoms, or EPS, a group of movement disorders including involuntary movements, muscle stiffness, and tremors, that, together with sedation, are quite burdensome to patients and can result in discontinuation of treatments. The impact of LB-102 on cognitive function was also evaluated as an exploratory endpoint in this trial. After four weeks of treatment with LB-102, a robust, dose-dependent, and significant treatment effect size was identified in a post-hoc analysis in the completer population for all doses of LB-102 compared with placebo.

We designed our Phase 2 acute schizophrenia trial to be potentially registrational by including a large sample size (n=359), robust statistical analyses, as well as numerous sensitivity analyses. Based on positive end-of-Phase 2 feedback from the FDA, as well as historical precedent, we believe that our Phase 2 acute schizophrenia trial may serve as one of the two pivotal trials required for approval of a new drug application, or NDA, in the United States. As a result, we believe there is a viable path to approval of LB-102 in the United States for the treatment of schizophrenia with a single, six-week Phase 3 trial alongside other planned NDA-enabling studies. However, there is no guarantee that our Phase 2 trial may serve as one of the two pivotal trials required for FDA approval, and in such case, we may be required to conduct an additional pivotal trial in acute schizophrenia. The adequacy of our Phase 2 trial to support registration will be a matter of review by the FDA at the time of NDA submission and will depend on the totality of the data included in our submission, including the results of our planned Phase 3 trial. We are planning to initiate a six-week Phase 3 trial of LB-102 in acute schizophrenia patients in the first quarter of 2026, which we believe, if positive, could be sufficient to support a regulatory application for approval in the United States along with our completed Phase 2 trial and other planned NDA-enabling studies. The Phase 3 trial is anticipated to be a three-arm, inpatient, double-blinded, placebo-controlled, oral once-daily dose of LB-102 in patients with acute schizophrenia, with a six-week treatment duration. We plan to study the effects of 50 mg LB-102 or 100 mg LB-102 versus placebo in this trial, and patients will be randomized in a 1:1:1 ratio across the three arms of the trial. The sample size will be approximately 400 patients, and we plan to conduct this trial at approximately 25 sites entirely in the United States. The primary endpoint of the trial is anticipated to be change from baseline in PANSS at Day 42. We expect to disclose topline data from this Phase 3 trial in the second half of 2027 and, if positive, meet with the FDA in the first quarter of 2028 to discuss the potential for submission of an NDA.

In addition to our clinical development program in schizophrenia, we plan to leverage our expertise in neuropsychiatry and the unique mechanism of action of LB-102 to develop our product candidate in other indications, starting with bipolar depression. Most people living with bipolar depression experience dramatic shifts in mood, energy, and behavior, alternating between manic and depressive states. It is estimated that 2.8%, or approximately seven million Americans, experience bipolar disorder in a year, and approximately 40 million people live with bipolar disorder worldwide. Our initial Phase 2 trial will explore the utility of LB-102 in controlling the depressive symptoms of the disease. We plan to initiate this potentially registrational Phase 2 trial in bipolar depression in the first quarter of 2026, with topline data expected in the first quarter of 2028.

We believe LB-102’s strong antagonism of the D2, D3, and 5HT7 receptors makes it well suited for treating bipolar depression, providing potential to control psychosis and mania through its effects on D2 and potential for antidepressive and pro-cognitive effects through its antagonism of 5HT7 and D3. Our Phase 2 trial of LB-102 in acute schizophrenia demonstrated strong antipsychotic activity and suggests opportunities for potential differentiation in bipolar depression given the observed tolerability profile (low rates of EPS, sedation, and gastrointestinal side effects) and positive impact on cognition. Amisulpride is approved for the treatment of dysthymia, a form of depression, in certain countries outside of the United States and has been shown to be as effective as certain approved agents for MDD and dysthymia. We believe that results in dysthymia and MDD provide strong scientific and clinical rationale for development of LB-102 in the treatment of depressive episodes

 

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associated with bipolar disorder or bipolar depression because episodes of major depression, whether unipolar (as in MDD) or bipolar (as in bipolar depression), are typically characterized by a similar imbalance in the neurotransmitters serotonin, noradrenaline, and dopamine, regardless of the underlying pathophysiology of the disease. There is wide use of amisulpride in bipolar disorder with approximately 3.4% of at least two million monthly prescriptions written for this indication in a select group of European countries including Germany, France, Italy, Spain, and several others. A non-racemic form of amisulpride also showed antidepressant activity in two independent third-party, placebo-controlled bipolar depression trials with an approximately 17- to 18-point reduction in Montgomery–Åsberg Depression Rating Scale, or MADRS, from baseline observed across these studies. Additionally, among the four antipsychotics approved for schizophrenia and MDD or treatment resistant depression that were also studied in late-stage bipolar depression trials (quetiapine, cariprazine, aripiprazole, and olanzapine), three out of four, or 75%, generated positive data for the treatment of bipolar depression. Our planned Phase 2 trial for bipolar depression will utilize a fixed-flexible dose of LB-102. This trial design allows us to evaluate two doses of LB-102 in the trial, thereby increasing the chances for a patient to derive clinical benefit from treatment with LB-102, while retaining the advantages of a two-arm trial, which is known to mitigate the risk of a high placebo rate. Additionally, flexible dose trials typically have better signal detection than fixed dose trials for depression, as flexible dose trials lower the magnitude of symptom reduction with placebo. We believe LB-102 has the potential to provide improved tolerability and clinical activity in bipolar depression compared to currently available treatments worldwide, which are associated with troubling adverse events and insufficient efficacy for certain symptoms, including cognitive impairment associated with the disease.

We are also developing a long-acting injectable, or LAI, formulation of LB-102, which may improve compliance, a common issue in patients with schizophrenia and bipolar disorder. We believe an effective LAI form of LB-102 has the potential to benefit patients worldwide, as relatively few approved agents are available as long-acting formulations and there are no benzamide class LAIs currently available or in development worldwide. The American Psychiatric Association recommends injectable formulations in circumstances where doing so will improve adherence, decrease mortality, reduce hospitalization risk, and decrease treatment discontinuation rates. We have commenced LAI formulation development and expect to continue these efforts in 2026.

The U.S. market for branded antipsychotic drugs was approximately $12 billion as of 2024. Despite the widespread use of generic antipsychotic drugs, several of these branded drugs each generate U.S. sales in excess of $1 billion annually. Additionally, while available therapeutics to treat schizophrenia and bipolar depression demonstrate clinical benefit, a significant unmet need remains for a treatment that balances tolerability with clinically meaningful efficacy for the chronic management of symptoms related to both psychosis and mood disorders.

Our Product Candidate LB-102: Leveraging a Proven Mechanism with Efficacious Data to Bolster Development for a Broad Range of Indications

LB-102 is a novel, patent-protected benzamide antipsychotic drug that was designed using amisulpride as a starting point. Amisulpride is one of the most effective and commonly used antipsychotic drugs currently approved outside the United States. Amisulpride was ranked as the second most effective antipsychotic drug in the 2019 Lancet meta-analysis of clinical trials on antipsychotic drugs. In this meta-analysis, amisulpride was ranked the most effective antipsychotic drug in treating positive symptoms and the third most effective in addressing negative symptoms of schizophrenia. Despite amisulpride’s efficacy and tolerability profile, it has not received regulatory approval in the United States for the treatment of any neuropsychiatric disorders, including schizophrenia, because the development and regulatory requirements of the FDA were incompatible with patent coverage on the drug.

The modifications we incorporated into LB-102 were designed to improve the tolerability and efficacy profile of amisulpride by addressing its shortcomings, such as limited blood-brain barrier, or BBB, permeability and dosing frequency. Enhanced BBB permeability was expected to improve the potency of the molecule with respect to dopamine receptor binding and enable the use of lower doses compared with amisulpride. The use of

 

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lower doses was hypothesized to improve the tolerability profile. We also aimed to create a new chemical entity with strong composition of matter intellectual property protection. We believe that the methylation of amisulpride addresses these design goals, and we aimed to demonstrate in our clinical trials that LB-102’s improved BBB penetration would confer benefits over amisulpride and other antipsychotic drugs, including lower dosing levels, a wider therapeutic window, improved tolerability, and once-daily dosing. Use of lower doses may also improve the feasibility of developing an LAI formulation.

Because amisulpride was used as the starting point in the creation of LB-102, we have conducted preclinical head-to-head studies with the compound to determine superiority as well as to assess whether the clinical development path of amisulpride may provide a risk-mitigated path for our development of LB-102. We have not conducted head-to-head clinical trials to date comparing LB-102 to amisulpride; however, our head-to-head preclinical studies that compared amisulpride to LB-102 in animal models of schizophrenia demonstrated that LB-102 had equivalent or better results than similar doses of amisulpride and that LB-102 bound similarly to the dopamine D2 and D3 receptors, with a Ki (inhibition constant) of 0.82 nM compared to amisulpride’s reported Ki of 1.1 nM, and had a similar affinity for the 5-HT7 receptor with a Ki of 31 nM compared to amisulpride’s reported Ki of 44 nM. Our Phase 1 trials in healthy volunteers showed that LB-102 was generally well-tolerated, and in our Phase 1b imaging trial, we observed that LB-102 achieved a level of dopamine receptor occupancy in the brain of approximately 70% (50 mg dose) and approximately 80% (100 mg dose) under steady-state conditions; typically, 60% to 80% dopamine receptor occupancy is the target range for efficacy in treating schizophrenia. The dopamine receptor occupancy levels seen in the imaging trial at 50 mg of LB-102 are approximately equivalent to those observed with 300 to 400 mg of amisulpride. By dosing LB-102 at a lower level, we are aiming to decrease side effects common to amisulpride and other antipsychotic drugs currently used to treat schizophrenia. We believe that fewer side effects of a drug may lead to stronger adherence, continued use of the drug, and therefore, better efficacy results and long-term control of the disease. Because each relapse of psychotic symptoms can result in a functional deterioration from which the patient does not fully recover, long-term control of the disease is a key treatment goal.

While our current Phase 3 trial is designed to investigate LB-102 as a treatment for people experiencing the acute phase, or positive symptoms, of schizophrenia, we believe LB-102 also has potential to address predominantly negative symptoms, an indication with significantly fewer treatment options as well as CIAS, an indication for which there are no approved therapies. We believe that our data with LB-102 as well as data previously generated with amisulpride support the further investigation of LB-102 in these settings and that, if positive, such data have the potential to further differentiate LB-102 from other drugs available for schizophrenia. Amisulpride demonstrated a statistically significant benefit versus placebo in three independent third-party placebo-controlled trials in patients with predominantly negative symptoms with treatment durations ranging from six weeks to six months. Additionally, our Phase 2 trial data showed a statistically significant impact on negative symptoms versus placebo at the 50 mg dose even though the inclusion criteria enriched for patients experiencing predominantly positive symptoms of schizophrenia. An exploratory post-hoc analysis of our Phase 2 data on the treatment effect in patients with negative symptoms at baseline (i.e., those patients with a PANSS Negative Subscore greater than or equal to 24) yielded similar results with a statistically significant impact on negative symptoms versus placebo at the 50 mg dose. We find these results highly encouraging and plan to explore options to advance LB-102 in this indication. For example, we have developed a synopsis for a Phase 2 trial in patients with predominantly negative symptoms of schizophrenia and expect to seek regulatory guidance on the design of this trial in 2026 to establish a clinical registration path in this setting. We also expect to generate additional negative symptoms data in our planned Phase 3 trial. We also plan to further explore the impact of LB-102 on cognition in patients with schizophrenia both clinically and pre-clinically. For example, concurrently with our Phase 3 trial in patients with acute schizophrenia, we expect to initiate an open label trial in patients with stable schizophrenia that will enroll both patients who participated in the Phase 3 trial as well as patients who did not. Although the primary objective of this trial is to collect the requisite safety data required for an NDA submission, we also expect to collect efficacy data in certain subsets of patients enrolled in this trial. Efficacy measures will include periodic assessments of cognition as well as open label assessments of improvements in positive and negative symptoms, including in patients with prominent negative symptoms at enrollment in the trial. Although we do not expect data from this open label trial to lead to product label claims

 

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without additional randomized clinical trials, we believe these data have the potential to further support the differentiation of LB-102 and expect these data to provide publishable valuable insights as we consider further investigating LB-102 as a potential treatment for CIAS as well as in patients with predominantly negative symptoms of schizophrenia. Following the potential approval for the treatment of schizophrenia, we may also consider conducting another Phase 3 trial in acute schizophrenia where LB-102 is used as an adjunctive therapy.

Beyond the potential advantages in treating schizophrenia, we believe there is significant potential for LB-102 as a treatment for mood disorders and other neuropsychiatric diseases. Based on existing third-party data investigating amisulpride and a non-racemic form of the drug as a treatment for several types of depression, including bipolar depression, and the approval of amisulpride in multiple countries outside of the United States for the treatment of dysthymia, a form of depression, we have identified bipolar depression as our next development opportunity for LB-102. There is wide use of amisulpride in bipolar disorder with approximately 3.4% of at least two million monthly prescriptions written for this indication in a select group of European countries including Germany, France, Italy, Spain, and several others. A non-racemic form of amisulpride showed antidepressant activity in two independent third-party, placebo-controlled bipolar depression trials with an approximately 17- to 18-point reduction in MADRS from baseline observed across these studies. The non-racemic form of amisulpride was also shown to be substantially similar to amisulpride in preclinical models. We also believe that the strength and selectivity of our binding profile for each of the D2, D3, and 5HT7 receptors suggests that LB-102 is potentially well suited for development in bipolar depression since D2 mediates effects on psychosis and mania and 5HT7 and D3 mediate effects on depression and cognition.

There are two types of bipolar disorder, distinguished as bipolar 1 and 2, which are characterized by chronically occurring episodes of mania or hypomania alternating with depression. A person diagnosed with bipolar 1 disorder experiences a manic episode defined as a distinct period of persistently elevated or irritable mood with increased activity or energy lasting for at least seven days or requiring hospitalization. The manic episode may be preceded or followed by a hypomanic or major depressive episode. A bipolar 2 disorder diagnosis is based on experiencing a hypomanic episode and major depressive episode without a manic episode. Manic episodes are markedly more severe than hypomanic episodes. It is estimated that 2.8%, or approximately seven million Americans, experience bipolar disorder in a year. For those living with bipolar disorder, an estimated 82.9% have serious impairment due to the disease, the highest percent of serious impairment among all mood disorders, indicating there is significant need for new and better treatment options.

In a 2022 placebo-controlled proof-of-concept trial conducted by a third party in 341 patients across U.S., European, and Japanese clinical sites, non-racemic amisulpride demonstrated meaningful improvement over placebo on the MADRS in treating bipolar depression. Although the trial did not meet its primary endpoint, which was defined as MADRS delta versus placebo in United States and European patients, the results when analyzed for all patients across all geographies demonstrated a statistically significant benefit versus placebo in favor of non-racemic amisulpride with a 3.4 to 3.7-point MADRS delta versus placebo and an approximately 18-point reduction in MADRS versus baseline in each of the two treatment arms. The mean reduction from baseline in the placebo arm in this trial was 14.3 points. The placebo rate observed in this trial was higher than the average placebo rate from a recent set of bipolar depression trials which was an approximately 12-point reduction in MADRS from baseline. We believe that the high placebo rate in this trial was in part a result of poor trial design and conduct. A Phase 3 trial was subsequently initiated by the same third party with non-racemic amisulpride and though the trial was terminated prior to completion, results from 82 patients enrolled in the trial were reported. These results showed a 4.0 to 6.4-point MADRS delta versus placebo and an approximately 14 to 17-point reduction in MADRS versus baseline in the two treatment arms. Amisulpride and the non-racemic form studied in these two trials have been shown to be substantially similar in pre-clinical models. Additionally, amisulpride has been shown to be effective in clinical trials addressing other forms of depression, such as in a 1999 head-to-head trial conducted by a third party in dysthymia and major depression which showed amisulpride and another study drug each leading to a statistically significant improvement over placebo on the MADRS. A 2001 head-to-head trial conducted by a third party also found amisulpride to be as clinically effective as sertraline, a commonly used antidepressant, in treating dysthymia, and a 2002 head-to-head trial conducted by a third party found amisulpride to be as clinically effective as paroxetine, another commonly used antidepressant.

 

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It is widely recognized that episodes of major depression whether unipolar (as in MDD) or bipolar (as in bipolar depression) are characterized by a similar imbalance in the neurotransmitters serotonin, noradrenaline, and dopamine, regardless of the underlying pathophysiology of the disease. Among the four antipsychotics approved for schizophrenia and MDD or treatment resistant depression that were also studied in late-stage bipolar depression trials (quetiapine, cariprazine, aripiprazole, and olanzapine), three out of four, or 75%, generated positive data for the treatment of bipolar depression. We believe that the approval of amisulpride in the United Kingdom for the treatment of psychosis and mania serves as additional supportive evidence for the broader utility of LB-102 to treat neuropsychiatric disorders.

We plan to initiate this potentially registrational Phase 2 trial in bipolar depression in the first quarter of 2026, upon the clearance of an Investigational New Drug, or IND, application for that indication. We are designing this clinical trial to be of registrational quality and if successful, we expect to ask the FDA if this trial could serve as one of two adequate well-controlled trials needed to obtain approval of LB-102 in bipolar depression. Following a successful Phase 2 trial, we may also consider conducting two Phase 3 trials in bipolar depression, one as a monotherapy and one as an adjunctive therapy in combination with mood stabilizers, a commonly used treatment for bipolar depression.

Based on the extensive third-party research that has been conducted on amisulpride and a non-racemic form of the drug and our research indicating a comparable or even improved clinical activity and tolerability profile, including with respect to rates of EPS, sedation and gastrointestinal side effects, of LB-102, we believe there is broad potential for the development of LB-102 for a variety of psychiatric indications and mood disorders. We believe the extensive body of research on amisulpride provides a potential road map for future development opportunities for LB-102, including the potential for development of LB-102 in MDD, negative symptoms of schizophrenia, bipolar mania, and Alzheimer’s disease psychosis and agitation.

Our Team and History

Our leadership and advisors are composed of individuals with extensive experience in the discovery, development, and commercialization of neuropsychiatric therapeutics.

Heather Turner, J.D., our Chief Executive Officer, was previously President and Chief Executive Officer of Carmot Therapeutics Inc., prior to its acquisition by Roche Pharmaceuticals for $3.1 billion. Anna Eramo, M.D., our Chief Medical Officer, previously led U.S. clinical and medical affairs at Lundbeck A/S, where her primary responsibilities extended across its U.S. neurology and psychiatric portfolio of products, including brexpiprazole (which is approved in schizophrenia, MDD, and agitation associated with Alzheimer’s disease), vortioxetine (which is approved for MDD), and Abilify Maintena (an LAI form of aripiprazole that is approved for schizophrenia and bipolar 1). Other members of our team held various positions at Celgene Corporation, Genzyme Corporation, and ImmunoGen, Inc., with experience working on late-stage development and commercial products.

Our Chairman of our board of directors, Scott Garland, most recently served as Chief Executive Officer of PACT Pharma, Inc. Previously, Scott was the Chief Executive Officer of Portola Pharmaceuticals, Inc., which Alexion Pharmaceuticals, Inc. acquired for $1.4 billion in 2020. Prior to that, he was President of Relypsa Inc., which Vifor Pharma AG acquired for $1.5 billion in 2016. He is joined on our board of directors by Robert Ruffolo, Ph.D., who previously served as President of Research and Development at Wyeth Pharmaceuticals, Inc., Zachary Prensky, co-founder of LB Pharmaceuticals and former manager of a family office with a heavy focus on investing in the biotechnology and pharmaceutical sectors, and other board representatives from our major investors.

We are advised by renowned experts in treating neuropsychiatric diseases. John Kane, M.D., is a Professor of Psychiatry and Molecular Medicine at the Donald and Barbara Zucker School of Medicine at Hofstra/Northwell and served as Chair of Psychiatry at The Zucker Hillside Hospital for 34 years. Christoph U. Correll,

 

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M.D., is a Professor of Psychiatry at the Donald and Barbara Zucker School of Medicine at Hofstra/Northwell. Maurizio Fava, M.D., is the Psychiatrist-In-Chief, Department of Psychiatry and Director, Division of Clinical Research at Mass General Research Institute. Dr. Fava is also the Executive Director of the Clinical Trials Network & Institute, as well as the Associate Dean for Clinical & Translational Research and Slater Family Professor of Psychiatry at Harvard Medical School. Luca Pani, M.D. is Professor of Clinical Psychiatry at the University of Miami and Pharmacology at the University of Modena & Reggio Emilia, former Italy’s AIFA Director General and EMA CHMP/SAWP Representative, with expertise in pre-clinical and clinical CNS drug development strategies.

Since our inception, we have raised over $120 million from a leading syndicate of investors, including Deep Track Capital, Pontifax, TCG Crossover Fund, and Vida Ventures. Prospective investors should not rely on the investment decisions of our existing investors, as these investors may have different risk tolerances and have received their shares in prior offerings at prices lower than the price offered to the public in this offering.

Our Strategy

Our strategy is to develop LB-102 for the treatment of schizophrenia and mood disorders initially and subsequently for other neuropsychiatric disorders in the United States and internationally. Key elements of our strategy include:

 

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Achieve regulatory approval for LB-102 for the treatment of schizophrenia. The regulatory pathway for antipsychotic drug development in schizophrenia is well-established and provides precedent for regulatory approval requirements. Based on recent positive feedback from the FDA, our current strategy is to utilize our recently completed Phase 2 trial in acute schizophrenia to serve as one of two adequate and well controlled trials required for FDA approval. In this Phase 2 trial, LB-102 was generally well tolerated and resulted in a statistically significant decrease in symptoms related to schizophrenia as measured by PANSS after four weeks of treatment. These results have informed the design of our Phase 3 trial, which we aim to commence in the first quarter of 2026.

 

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Advance LB-102 as a potential treatment across the spectrum of disease for patients with schizophrenia. We believe LB-102 has the potential to treat a broad range of patients living with schizophrenia by addressing positive symptoms experienced during the acute phase of the disease, negative symptoms experienced between acute crises, and cognitive symptoms, such as memory deficit, decision making and attention deficit. We plan to initiate a Phase 3 trial for LB-102 in patients with acute schizophrenia while developing our clinical development strategy for other unmet needs within schizophrenia. Negative symptoms and cognitive issues are core symptoms of schizophrenia where more than 80% of people with schizophrenia have cognitive impairment of some kind up to 60% may experience predominantly, clinically relevant negative symptoms that require treatment. Based on our own clinical results and the breadth of third-party data, we believe LB-102 has the potential to become a cornerstone therapy for schizophrenia.

 

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Expand development of LB-102 into bipolar depression and other psychosis and mood disorders. Based on the extensive body of third-party research that has been conducted on amisulpride and a non-racemic form of the drug as well as our data with LB-102 in schizophrenia, we believe there is significant opportunity in the clinical development and commercial potential of LB-102 in other mood disorders and other psychosis-related indications. We have identified bipolar depression as the next indication for which we intend to develop LB-102. If successful in bipolar depression, we may also develop LB-102 in MDD. We believe the mechanism of LB-102 as well as preclinical and clinical data for amisulpride and the non-racemic version of amisulpride support development of LB-102 in bipolar depression and MDD. Our mechanism and clinical trials to date support our belief that LB-102 has the potential to benefit people living with other psychosis-related diseases such as bipolar mania and Alzheimer’s disease-related psychosis. We continue to assess other mood disorders and neuropsychiatric diseases for potential future development.

 

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Extend the life-cycle and global reach of LB-102 by advancing alternate formulations. We are investigating alternate LAI formulations of LB-102. We believe that such formulations have the potential to provide improved clinical results and treatment adherence for schizophrenia and bipolar depression patients compared to oral formulations, for which compliance may be lower. We believe that the success of the 50 mg dose in our schizophrenia Phase 2 trial affords the opportunity to develop an LAI. Additionally, we believe that an LAI formulation of LB-102, if approved, could have additional advantages, including extending the commercial protection for LB-102, potentially providing a better alternative to the currently limited option set of approved LAI antipsychotic drugs for other neuropsychiatric disorders, such as bipolar disorder or Alzheimer’s psychosis, and potentially enhancing LB-102’s competitive positioning outside of the United States.

 

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Maximize the commercial opportunity of LB-102. We currently own global rights to LB-102 and intend to retain commercialization rights in the United States. If approved for schizophrenia, we expect to commercialize the oral formulation of LB-102 in jurisdictions where amisulpride is unavailable as a generic, and we expect to commercialize an LAI form of LB-102 worldwide. If approved for bipolar depression, we expect to commercialize both the oral and LAI forms of LB-102 worldwide. We expect to expand our team and develop internal resources to support the potential commercialization of LB-102. Additionally, we may opportunistically evaluate potential commercial collaborations outside of the United States to maximize the value of LB-102.

Schizophrenia

Overview and Disease Background

Schizophrenia is a chronic, severe, complex, and debilitating psychiatric disorder that affects approximately 1% of the U.S. population and is a leading cause of disability. Symptoms of schizophrenia are typically grouped into three categories:

 

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Psychotic or positive symptoms, such as hallucinations, delusions, thought disorder, and movement disorder;

 

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Negative symptoms, such as loss of motivation, interest, or enjoyment in daily activities, withdrawal from social life, and difficulty in showing emotions; and

 

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Cognitive symptoms, such as problems in attention, concentration, and memory.

While antipsychotic drugs are commonly used to treat schizophrenia, there is currently no cure for schizophrenia, which means the disease must be managed with life-long therapy, increasing the importance of therapies that can improve compliance rates and dosing challenges.

Schizophrenia is typically diagnosed in the late teen years to early thirties and tends to emerge earlier in males than in females. The estimated average potential life expectancy for individuals living with schizophrenia in the United States is reduced by as much as 29 years in comparison to the general population. This significant reduction is believed to be due to multiple factors, including a high rate of other comorbidities and an increased risk of accidental death and suicide. An estimated 5% of people with acute schizophrenia die by suicide, which is a rate approximately 350 times higher than the general population.

The progression of schizophrenia usually follows a typical pattern. The prodromal phase refers to the early stage of the disease where subtle changes in behavior and cognitive function occur but before psychotic symptoms, such as hallucinations or delusions. This is the stage when the first warning signs of the disease can be identified. The prodromal phase ends when the patient experiences the first active phase which is characterized by positive symptoms, including hallucination, delusions, and disordered thinking. Recent studies have shown that if treated properly early in the course of their illness, most patients recover from this first episode and have a substantial reduction, or even remission of psychotic symptoms. While in this “stable” phase after recovery from an acute episode, it is estimated that 13% to 48% of patients continue to have residual symptoms. At this point, the patient may experience cycles of active disease, characterized by positive

 

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symptoms, and periods of stability, potentially with persistent negative symptoms. A meta-study showed that 55% of people with schizophrenia required hospitalization over an average follow-up of seven years after their first episode. With each relapse, the disease worsens, and the patient typically is unable to recover to the same level of health as prior to the active episode. Over years of experiencing these cycles, most patients deteriorate, experiencing worsening symptoms and health outcomes. A therapy that reduces the number of relapses a patient experiences has the potential to provide a significant and life-long benefit. The figure below depicts a graphic illustration of these phases.

 

LOGO

Pathophysiology of Schizophrenia

One of the main hypotheses for the pathophysiology leading to schizophrenia is an imbalance in neurochemical signaling in the brain, including serotonin, dopamine, and glutamate. Specifically, schizophrenia is associated with an imbalance of dopaminergic pathways at the D2 receptor subtype. Increased dopamine activity in certain parts of the brain can contribute to positive symptoms of schizophrenia. In contrast, reduced dopamine activity in other parts of the brain may cause negative and cognitive symptoms. Detailed understanding of the specific changes in dopamine signaling that lead to schizophrenia is limited by the relative inaccessibility of methods to assess signaling pathways in the brain, the heterogeneity of psychological responses, and the lack of highly translatable animal models. Since the 1970s, clinical trials with haloperidol, risperidone, and olanzapine, among others, have conclusively demonstrated that antagonism of the dopamine D2 receptor can improve symptoms of schizophrenia.

Schizophrenia with Predominantly Negative Symptoms

Negative symptoms are a core component of schizophrenia and are distinct from positive symptoms. They account for a large part of the long-term morbidity and poor functional outcomes. It is estimated that up to 60% of people with schizophrenia may have predominantly negative symptoms that are clinically relevant and require treatment equating to approximately 1.3 million people in the United States. In a meta-analysis for 20 placebo-controlled trials of second generation antipsychotic drugs, 62% of patients were experiencing predominantly negative symptoms and after six weeks of treatment. Negative symptoms are linked to worse functional outcomes in occupational and academic performance, household integration, social functioning, participation in activities and quality of life.

People living with negative symptoms of schizophrenia are considered to have a higher burden of illness, which may be partially attributed to the limited number of effective treatment options for this population. To date, there are no FDA approved treatments for predominantly negative symptoms in schizophrenia.

 

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Cognitive Impairment Associated with Schizophrenia

CIAS is a major burden for patients and negatively impacts many aspects of a patient’s life. Cognitive impairment is a core feature and leading cause of functional disability in schizophrenia and other neuropsychiatric disorders. Antipsychotic drugs are the standard-of-care treatment for schizophrenia but typically only address positive symptoms. So far there are no approved pharmacotherapies for the treatment of CIAS. More than 80% of people with schizophrenia have cognitive symptoms of some kind, equating to approximately 1.8 million patients in the United States.

Limitations of Current Treatments for Schizophrenia

Antipsychotic drugs are commonly classified as first-or second-generation drugs. First-generation antipsychotic drugs function primarily as antagonists or partial agonists of dopamine receptors. These drugs, some of which were discovered in the 1950s, primarily address positive symptoms of schizophrenia. Current literature suggests a high correlation between dopamine receptor binding and clinical potency; typically, 60% to 80% dopamine receptor occupancy is the target range for efficacy in treating schizophrenia. Second-generation antipsychotic drugs are typically dual serotonin and dopamine antagonists. The multimodal mechanism of action of these drugs allows them to treat symptoms of schizophrenia with a lower incidence of EPS.

Existing antipsychotic drugs fall short of the ideal profile, as most currently approved medications have significant side effects, primarily address positive symptoms of schizophrenia, and are often not effective in treating negative and cognitive symptoms. Negative symptoms are a core component of the disease, and it is estimated that up to 60% of patients may experience clinically relevant negative symptoms that require treatment. Negative symptom severity has been linked to worse functional outcomes in areas such as impaired occupational and academic performance, social functioning, and quality of life. Despite the prevalence and seriousness of this component of schizophrenia, there are few treatment options that effectively address negative symptoms. Additionally, cognitive impairment affects approximately 80% of schizophrenia patients. There are currently no approved drugs for cognitive impairment.

Both first- and second-generation antipsychotic drugs are often associated with sedation, dry mouth, constipation, EPS including akathisia (inability to remain still), and sexual dysfunction. Some side effects are severe or even life-threatening, such as dystonia, a form of EPS (involuntary muscular contraction), tardive dyskinesia (movement disorder that causes involuntary facial tics), and weight gain, which can lead to hyperlipidemia (high levels of lipids in the blood) and cardiac arrhythmias (abnormal heart rhythms). The combination of side effect profile, as well as poor efficacy and tolerability, results in approximately half of all schizophrenia patients not adequately responding to current antipsychotic drugs. High rates of failure in achieving a clinically meaningful response with existing therapeutics, the evolution of patient symptoms over time, inconvenient dosing regimens and significant side effects cause patients with schizophrenia to switch medications or layer on additional antipsychotic drugs frequently. Aside from suboptimal efficacy and tolerability, some current therapies also accompany inconvenient administration profiles, such as twice-a-day dosing or the need to be taken with food.

Together, these limitations lead to significant issues with patient adherence. One study showed that one-third of patients admitted to the hospital after their first psychotic episode of schizophrenia were non-adherent to their treatment six months after discharge. A multitude of studies have shown the serious outcomes that accompany non-adherence to medication, including impairment, hospitalization, higher risk of suicide, longer time to remission, poorer prognosis, loss of job, dangerous behavior, arrest, violence, drug and alcohol consumption, psychiatric emergences, poor mental performance, and low satisfaction with life. Interruptions in treatment as short as one to 10 days has been associated with an increased risk of hospitalization.

Nearly 50% of all schizophrenia patients fail to respond adequately to existing therapies, many of which have limited efficacy against the range of symptoms associated with the disease. Most antipsychotic drugs are

 

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associated with significant side effects that drive high rates of treatment discontinuation. Approximately 74% of schizophrenia patients discontinue their medications within 18 months of starting treatment due to their perceived lack of efficacy or burdensome side effects. Since these medications only treat symptoms of schizophrenia and cannot eliminate the underlying pathology, their discontinuation results in symptom recurrence. As a result of these high rates of discontinuation, there is a significant amount of switching therapeutic treatments. A therapy with sufficient efficacy, tolerability and ease of use which would support a patient’s efforts to remain compliant could provide significant benefit over currently available therapies.

In the table below, we show the efficacy and side effect profiles of branded antipsychotic drugs approved for treatment of schizophrenia based on the approved labels.

 

Drug

 

Mechanism of
Action

 

Baseline
PANSS

 

Reduction in

PANSS
vs. Baseline

 

Placebo-Corrected
Reduction in
  PANSS  

 

Notable Lab

Findings and

Side Effects

 

Recommended
Dosage

 

Dosing
Frequency

Caplyta   Dopamine Receptor Antagonist  

88.1 (Trial 1)

90.0 (Trial 2)

 

13.2 (Trial 1)

14.5 (Trial 2)

 

5.8 (Trial 1)

4.2 (Trial 2)

  Sedation (24%), dry mouth (6%); EPS (6.7%)   42 mg   Once-daily, with food
Cobenfy   M1/M4 Muscarinic Receptor Agonist  

98.2 (Trial 1)

96.9 (Trial 2)

 

21.2 (Trial 1)

20.6 (Trial 2)

 

9.6 (Trial 1)

8.4 (Trial 2)

  Nausea (19%), dyspepsia (18%), constipation (17%), vomiting (15%), hypertension (11%), EPS (non-akathisia, 2%)   Up to 125 mg/30 mg   Twice-daily, 1 hour before or at least 2 hours after meals
Rexulti   Dopamine Receptor Partial Agonist  

94.7 (Trial 1)

95.0 (Trial 2)

 

19.7 (Trial 1)

20.0 (Trial 2)

 

7.6 (Trial 1)

6.5 (Trial 2)

  Akathisia (6%), weight increase (4%), diarrhea (3%), dyspepsia (3%), tremor (3%), blood creatinine phosphokinase increase (2%); sedation (2%)   4 mg   Once-daily
Vraylar   Dopamine Receptor Partial Agonist  

97.1 – 96.7 (Trial 1)

96.1 – 95.7 (Trial 2)

96.3 (Trial 3)

 

19.4 – 22.3 (Trial 1)

20.2 – 23.0 (Trial 2)

22.8 – 25.9 (Trial 3)

 

7.6 – 10.4 (Trial 1)

6.0 – 8.8 (Trial 2)

6.8 – 9.9 (Trial 3)

  EPS (15-19%)*, akathisia (9-13%)   1.5 - 6 mg   Once-daily

Note: Characteristics of antipsychotic drugs approved for the treatment of schizophrenia. PANSS is a measure of symptoms in schizophrenia patients including positive and negative symptoms, and general psychopathology, and reduction in PANSS v. baseline is a measure of efficacy of antipsychotic drugs. The change in PANSS score has been used as the primary endpoint in many registrational trials of antipsychotic drugs, as it provides a comparative measure against baseline; a higher change from baseline can suggest greater improvement in patient symptoms. As this assessment requires patients or raters to undertake a questionnaire regarding symptoms at protocol specified timepoints in the trial, it is, however, inherently subjective, which can increase the variability of clinical results across clinical trials and creates a significant degree of uncertainty in

 

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determining overall clinical benefit. Caplyta efficacy data is based on four-week data from one Phase 2 trial and one Phase 3 trial (n=335; n=450). Cobenfy data is based on five-week data from two Phase 3 trials (n=236; n=234). Rexulti data is based on six-week data from two Phase 3 trials (n=674 total). Vraylar data is based on six-week data from three Phase 3 trials (n=1,655 total). Akathisia is a form of EPS but is reported separately in a number of product labels.

Because of the fragility of the patient population and high rates of non-adherence, tolerability and ease of use is an important factor for schizophrenia medications. Studies have shown that medication-related obesity, distress related to weight gain, and cognitive impairment are associated with increased rates of nonadherence. Caplyta, Rexulti and Vraylar all contain warnings in their labels regarding metabolic changes, including weight gain. Somnolence, or sedation, are among the most frequent adverse events observed with Caplyta and Rexulti. Despite the burdensome side effects associated with these antipsychotic drugs, they are still commonly used, with patients frequently switching between different medications in search of the right balance of tolerability and efficacy. We believe a medication with an improved tolerability profile, increased efficacy, including with respect to negative symptoms or cognition, or both, have the potential to provide a much-needed alternative to currently available therapies. We also believe a simple administration profile, once-daily dosing with no food effect, would provide a significant advantage as it has the potential to improve patient adherence and, therefore, improve long-term outcomes. Additionally, an LAI has the potential to further simplify the patient experience and improve medication adherence. Currently, there are no LAIs available for Caplyta, Rexulti or Vraylar although several are in development. In addition, there are no LAIs among the benzamide class of antipsychotic drugs currently available or in development worldwide.

Despite the availability of several generic and branded treatments for schizophrenia, there remains a significant unmet need. Only 20% of people with schizophrenia report favorable treatment outcomes. The remaining population experiences numerous psychotic episodes, chronic symptoms and a poor response to antipsychotic drugs. Additionally, patients who experience predominantly negative symptoms and those with treatment-resistant schizophrenia live with a significant disease burden that cannot be sufficiently alleviated with currently available treatments, and there are no approved therapies for cognitive impairment associated with schizophrenia. We believe a treatment that is effective, tolerable, supports adherence in a fragile population and can address negative and resistant symptoms could become a cornerstone of schizophrenia treatment. We believe LB-102 has the potential to meet this profile.

Development of LB-102: Improving upon Amisulpride

Amisulpride Overview

Amisulpride is a dopamine receptor antagonist originally developed in France in the 1980s and is approved in more than 50 countries worldwide (not including the United States) for the treatment of schizophrenia and, in certain countries outside of the United States, for the treatment of dysthymia, a form of depression, and predominantly negative symptoms of schizophrenia. In 2000, Sanofi S.A., the manufacturer of Solian, the branded version of amisulpride, announced it would not pursue approval for schizophrenia in the United States because the development and regulatory requirements of the FDA were incompatible with its patent coverage on the drug.

Amisulpride in Schizophrenia

In multiple third-party studies comparing the clinical efficacy of antipsychotic drugs on schizophrenia, amisulpride consistently scored near the top. For example, a 2019 Lancet meta-analysis of clinical trials, which included over 54,000 subjects and 32 medications, found that amisulpride had the highest efficacy as measured by effect on positive symptoms and was second only to clozapine at reducing overall symptoms of schizophrenia. This analysis also found that amisulpride was 20% more effective at reducing overall symptoms of schizophrenia compared to risperidone, which is a first-line treatment for schizophrenia in the United States. A 2020 Lancet Psychiatry report of a head-to-head long-term study showed amisulpride to have greater reduction in PANSS

 

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score from baseline compared to first-line treatments of aripiprazole and olanzapine. In addition, a 2018 systematic review and meta-analysis across 21 randomized, controlled third-party trials showed that in their analysis across these trials, amisulpride was the only antipsychotic drug that outperformed placebo in the treatment of patients who suffer from predominantly negative symptoms.

The following chart shows the antipsychotic efficacy as measured by overall average change in symptoms from the 2019 Lancet meta-analysis of clinical trials on antipsychotic drugs.

 

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Amisulpride was ranked as one of the most effective antipsychotic drugs in the 2019 Lancet meta-analysis of clinical trials on antipsychotic drugs.

The following chart shows the antipsychotic efficacy as measured by average change in positive symptoms (left) and negative symptoms, a notoriously difficult aspect of the disease to treat, (right) from the 2019 Lancet meta-analysis of clinical trials on antipsychotic drugs.

 

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Amisulpride was ranked the most effective antipsychotic drug in treating positive symptoms and third most effective in addressing negative symptoms of schizophrenia.

 

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In 2024, Cobenfy was approved for use in schizophrenia. A 2025 third-party study in European Neuropsychopharmacology highlighted that its overall treatment effect on symptoms was 0.56 using an approach similar to that which was used in the 2019 Lancet meta-analysis. In the table below, we have included the treatment effect of Cobenfy together with those antipsychotic drugs reviewed in the 2019 Lancet meta-analysis for comparison purposes. This table shows how amisulpride’s effect size compares with Cobenfy’s and the other approved schizophrenia drugs.

 

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Amisulpride’s effect size was greater than that of Cobenfy.

 

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EUFEST, a European clinical trial published in 2005 in which 498 first-episode schizophrenia patients were randomized to receive haloperidol, amisulpride, olanzapine, quetiapine, or ziprasidone over 12 months, evaluated the primary endpoint of all-cause discontinuation rate, which is the number of patients who stopped taking their medications for any reason. Besides olanzapine, amisulpride had the lowest all-cause discontinuation rate over 12 months out of all drugs evaluated in this head-to-head comparison, supporting a favorable tolerability profile.

 

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Amisulpride had a low discontinuation rate in the head-to-head EUFEST trial.

 

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Amisulpride has also been shown to have a relatively low rate of EPS (11%), long-term weight gain, and cardiovascular risk compared with other second-generation antipsychotic drugs. In a 2014 head-to-head meta-analysis conducted by a third party comparing weight gain among antipsychotics, amisulpride had lower weight gain compared with other antipsychotic drugs across various outcome measures including body weight gain (in kg). The results comparing weight gain for amisulpride with that of other antipsychotics are highlighted in the chart below.

 

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FGA = first generation antipsychotics; SGA = second generation antipsychotics; st= number of studies

Amisulpride had a lower weight gain compared with other antipsychotic drugs.

Additionally, in a third-party head-to-head trial completed in 2002 that compared long-term weight gain of amisulpride over six months to that of olanzapine, amisulpride weight gain exceeded that of olanzapine over the first 30 days of the study, and plateaued at approximately 1 kg, whereas weight gain with olanzapine continued to increase throughout the six-month period reaching a weight gain of approximately 5 kg, as shown in the graph below:

 

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Amisulpride had lower weight gain than olanzapine in a third-party head-to-head trial.

 

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In addition, pharmacovigilance data on amisulpride from the United Kingdom covering 16,000 patient exposure years had 8 incidences of QT prolongation with all 8 events occurring in patients concurrently taking clozapine, a drug known to prolong the QT interval.

According to market research in 2024, amisulpride continues to be widely used in Europe. Among a select group of European countries including Germany, France, Italy, Spain, and several others, there were at least two million monthly prescriptions per year for amisulpride. Among these European prescriptions for amisulpride, our data suggest that approximately 60% are for schizophrenia and schizoaffective disorders (a mental health condition that includes symptoms of both schizophrenia and mood disorders), approximately 20% are for mood disorders, approximately 14% are for anxiety, and the remainder are for a variety of other indications.

Amisulpride has also been studied for the treatment of predominantly negative symptoms of schizophrenia in three independent placebo-controlled trials conducted by third parties. A trial conducted in 1995 evaluated two doses of amisulpride, 100 and 300 mg per day, versus placebo for six weeks of treatment. In this trial, the two amisulpride-treated arms showed a reduction in the Scale for the Assessment of Negative Symptoms, or SANS, of approximately 39 to 45 points compared with a reduction of 22 points in the placebo arm (p = less than 0.02). P refers to “p-value,” the conventional method for determining the statistical significance of a result, which represents the probability that random chance caused the result (e.g., a p-value = 0.01 means that there is a 1% probability that the difference between the control group and the treatment group is purely due to random chance). Generally, a p-value less than 0.05 is considered statistically significant. The SANS scale is a 25-item scale that assesses negative symptoms across five domains: affective blunting, alogia, avolition-apathy, anhedonia-asociality, and attentional impairment. A trial conducted in 1999 evaluated two doses of amisulpride, 50 and 100 mg per day, versus placebo for 12 weeks of treatment. In this trial, the two amisulpride-treated arms showed a reduction in SANS of approximately 25 points compared with a reduction of 13 points in the placebo arm (p = 0.0002). A trial conducted in 1997 evaluated 100 mg per day of amisulpride versus placebo for 6 months of treatment. In this trial, the amisulpride-treated arm showed a reduction in SANS of approximately 34 points compared with a reduction of 17 points in the placebo arm (p = less than 0.0005).

Amisulpride in Mood Disorders

Amisulpride has been studied extensively in mood disorders. A 2002 head-to-head trial conducted by a third party found amisulpride to show similar reductions in mean MADRS scores as paroxetine (Paxil), a commonly used antidepressant and a 2001 head-to-head trial conducted by a third party found amisulpride to show higher reduction in mean MADRS scores compared to sertraline (Zoloft), a commonly used antidepressant, in treating dysthymia, as shown below:

 

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Amisulpride was demonstrated to be as effective as paroxetine and more effective than sertraline in third-party head-to-head trials.

 

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Amisulpride has also been shown to be effective versus placebo, such as in a 1999 head-to-head trial conducted by a third party in dysthymia and major depression, which showed amisulpride and another study drug each leading to a statistically significant improvement over placebo on MADRS.

 

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Amisulpride had an approximately 4.8-point MADRS delta versus placebo in a randomized controlled third-party trial in patients with MDD.

A non-racemic version of amisulpride was studied in bipolar depression. In a 2022 placebo-controlled proof-of-concept trial conducted by a third party in 341 patients across U.S., European, and Japanese clinical sites, non-racemic amisulpride demonstrated meaningful improvement over placebo on the MADRS in treating bipolar depression. Although the trial did not meet its primary endpoint, which was defined as MADRS delta versus placebo in United States and European patients, when results were analyzed for all patients across all geographies, a statistically significant benefit versus placebo in favor of non-racemic amisulpride was noted with a 3.4 to 3.7-point MADRS delta versus placebo and an approximately 18-point reduction in MADRS versus baseline in each of the two treatment arms. The mean reduction from baseline in the placebo arm in this trial was 14.3 points.

 

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Non-racemic amisulpride demonstrated anti-depressant activity in two independent placebo controlled trials.

 

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The placebo rate observed in this trial was higher than the average placebo rate from a recent set of bipolar depression trials, which was an approximately 12-point reduction in MADRS from baseline. We believe that the high placebo rate in this trial was in part a result of poor trial design and conduct. A Phase 3 trial was subsequently initiated by the third party with non-racemic amisulpride and though the trial was terminated prior to completion, results from 82 patients enrolled in the trial were reported. These results showed a 4.0 to 6.4-point MADRS delta versus placebo and an approximately 14 to 17-point reduction in MADRS versus baseline in the two treatment arms. Amisulpride and the non-racemic form studied in these two trials have been shown to be substantially similar in pre-clinical models.

It is widely recognized that episodes of major depression whether unipolar (as in MDD) or bipolar (as in bipolar depression) are characterized by a similar imbalance in the neurotransmitters serotonin, noradrenaline, and dopamine, regardless of the underlying pathophysiology of the disease. Additionally, third party prescription data which we analyzed suggests that in 2023, there were at least two million monthly prescriptions of amisulpride in a subset of 16 continental European countries with considerable use in depression and approximately 3.4% of prescriptions were written for bipolar disorder despite the absence of an approval for this indication.

Limitations of Amisulpride to be Addressed by LB-102

While amisulpride is a clinically effective and well-tolerated drug, it has low BBB permeability that limits the amount of drug that can reach its desired target. As reported in a 2014 third-party study of 30 psychiatric drugs tested in an in vitro assay to estimate BBB permeability, amisulpride was the least effective at crossing a model of the BBB. This low permeability is one of the main factors that lead to high dosing of amisulpride, compared to other antipsychotic drugs, to achieve clinically meaningful BBB penetration. The recommended dose of amisulpride for acute schizophrenia ranges from 400 mg to 800 mg per day, which may be increased up to 1,200 mg per day. By comparison, clinically effective doses of other antipsychotic drugs with similar affinities for dopamine receptors are often much lower (e.g., 1.5 mg of Vraylar and 4 mg of Rexulti).

The high doses of amisulpride increase systemic exposure to the drug, contribute to some of its side effects, and limit its ability to be formulated into an LAI – there are currently no LAIs approved among the benzamide class of antipsychotics. Another drawback of amisulpride is that it is typically dosed twice-daily, which can lead to lower adherence relative to therapies with less frequent dosing schedules. Lower adherence can, in turn, lead to less efficacy of a drug in treating schizophrenia which can result in relapses.

Our Solution: LB-102 for the Treatment of Schizophrenia

LB-102 Overview

LB-102 is a patented benzamide designed to improve upon the safety and efficacy of amisulpride. In creating LB-102, we have added a methyl group to the chemical structure of amisulpride with the intention of improving its permeability of BBB while only minimally affecting receptor binding. We believe that making this chemical change allows LB-102 to be dosed at lower amounts than amisulpride. By dosing at a lower level, we are aiming to decrease side effects common to amisulpride. This change to the chemical structure also allows us to differentiate the dosing frequency of LB-102 from that of amisulpride. We are developing LB-102 for once-daily dosing, in contrast to the typical twice-daily dosing of amisulpride.

 

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The following chart shows the molecular structures of amisulpride and LB-102.

 

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LB-102 is a methylated and patented derivative of amisulpride.

In Vitro Receptor Binding of LB-102

In vitro binding of LB-102 to target central nervous system, or CNS, receptors was found to be similar to that of amisulpride. LB-102 bound most strongly to the dopamine D2 and D3 receptors, with a Ki of 0.82 nM (compared to amisulpride’s reported Ki of 1.1 nM), and had a similar affinity for the 5-HT7 receptor with a Ki of 31 nM (compared to amisulpride’s reported Ki of 44 nM). Compared to other commonly prescribed antipsychotic drugs, both LB-102 and amisulpride have weaker binding to other off-target CNS receptors that are commonly associated with adverse side effects such as anxiety, weight gain, or metabolic syndrome such as 5HT2C.

In Vivo Activity of LB-102 is Similar to Amisulpride

We evaluated LB-102 in the Locomotor Activity, or LMA, rat model of hyperactivity, often used to predict clinical activity in treating positive symptoms of schizophrenia. In the LMA, rats dosed with amphetamine alone displayed hypermobility, while rats additionally dosed with antipsychotic drugs showed more normal, calmer activity.

LB-102 had equivalent or better results than similar doses of amisulpride in the LMA model of hyperactivity. In our head-to-head preclinical rat model of cognition, the Novel Object Recognition model, and in a mouse model of stereotypy or excessive repetition, the Apomorphine Induced Climbing model, we observed that the effects of treatment with LB-102 were statistically indistinguishable from that of amisulpride.

Brain Penetration and Dopamine Receptor Occupancy of LB-102

The ability of LB-102 to cross the BBB was estimated using a standard in vitro membrane permeability assay. In this assay, the permeability of LB-102 was approximately 200-fold greater than that of amisulpride.

An in vivo head-to-head study in mice using positron emission tomography, or PET, demonstrated that at a dose of 100 mg/kg of both LB-102 and amisulpride, LB-102 had greater dopamine receptor occupancy in the brain than amisulpride, as shown below. We believe these results supported dosing LB-102 at much lower levels than amisulpride to achieve the desired effect on symptoms of schizophrenia.

 

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LB-102 reduced the binding of a dopamine receptor PET ligand in the brain by two-fold compared to amisulpride. More faint luminescence represents greater dopamine receptor occupancy. %ID/g represents the percent injected dose per gram.

LB-102 Clinical Data

Completed Phase 1 Trial of LB-102 in Healthy Volunteers

We conducted a Phase 1, randomized, placebo-controlled, double-blinded clinical trial in the United States to evaluate the safety, tolerability, and pharmacokinetics of oral administration of LB-102 in 64 healthy volunteers after submitting an IND in October 2019 and receiving approval to proceed in December 2019. In the single ascending dose, or SAD, portion of this trial, cohorts of six volunteers received doses ranging from 10 mg up to 200 mg. In the multiple ascending dose, or MAD, portion of this trial, cohorts of six volunteers received doses of 50 mg to 100 mg twice-daily for one week. In total, 48 volunteers were dosed with LB-102. The following chart demonstrates the design of this Phase 1 trial.

 

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Design of the Phase 1 trial of LB-102 in healthy volunteers. BID = twice a day.

In September 2020, we announced the clinical results of this Phase 1 trial. The half-life of LB-102 was slightly greater than 12 hours, and maximum drug levels were observed approximately three hours after administration. We observed the plasma exposure of 50 mg of LB-102 to be 1,648 ng/h/mL. In a previous third-party study of amisulpride, plasma exposure was reported at 667 ng/h/mL. The chart below shows the pharmacokinetic profile of LB-102 in healthy volunteers from the SAD portion of this trial.

 

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Pharmacokinetics of LB-102 in healthy volunteers.

Analyses of the MAD portion of the trial demonstrated that peak-trough concentrations of LB-102 plateaued before dosing on Day 4. LB-102 accumulated moderately after multiple doses but less than what has been reported for amisulpride. Exposure to LB-102 increased in a dose-proportional manner.

In this Phase 1 trial, LB-102 was generally well-tolerated. All treatment emergent adverse effects, or TEAEs, were either mild or moderate. TEAEs included events typically associated with dopamine antagonists. At doses higher than those studied in our Phase 2 trial and which we plan to evaluate in our planned Phase 3 trial, moderate dystonia and QT prolongation, which is a measure of delayed repolarization of the Q and the T waves in electrocardiogram were observed. Consistent with other antipsychotic drugs that act as dopamine antagonists, use of LB-102 resulted in elevated serum prolactin levels. Subjects with moderate dystonia were treated with either Benadryl or Cogentin.

 

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The table below summarizes the safety results of this clinical trial.

 

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TEAEs observed in the Phase 1 trial of LB-102 in healthy adults. BID = twice a day.

At 50 mg, 75 mg, and 100 mg, the doses being evaluated in our Phase 2 trial, we observed no adverse events associated with QT prolongation, sedation, weight gain or EPS in our Phase 1 trial. Prolactin elevation, a common laboratory finding of most antipsychotic drugs that act as dopamine antagonists that is believed to be the result of inhibition of dopamine receptors in the pituitary, was observed at all doses.

QT prolongation refers to the lengthening of the QT interval in an electrocardiogram, during which interval, the heart recovers from one heartbeat and is preparing for the next heartbeat. The QT interval is a vulnerable phase in the electric cycle of the heart, and prolongation of this interval may lead to serious side effects. Amisulpride has been associated with QT prolongation. Although the mechanism linking amisulpride to this adverse event is not known, amisulpride is a weak inhibitor of human ether-a-go-go-related gene (hERG) potassium channels, and it has been shown that QT prolongation is dependent on amisulpride systemic exposure. At therapeutic doses of amisulpride up to 1,200 mg/day, literature reports of cardiac toxicity due to QT prolongation are extremely rare.

Completed Phase 1b PET Imaging Trial

We conducted a Phase 1b dopamine receptor occupancy trial of LB-102 in the United States using PET imaging to assess dopamine receptor occupancy in the brains of healthy volunteers. In this trial, the ability of LB-102 to bind to dopamine receptors was measured directly by displacement of the dopamine receptor PET ligand 11C-raclopride. This trial enrolled four cohorts of healthy volunteers dosing from 50 mg to 100 mg per day. The first three cohorts in this trial received a single dose of LB-102; in the fourth cohort, volunteers were dosed once-daily for four days. Of the four healthy volunteers in the fourth cohort, two received one daily dose of 50 mg, and two received one daily dose of 100 mg, each over four days.

 

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Design of the Phase 1b imaging trial of LB-102.

We announced data from our Phase 1b trial in December 2021. We observed that single doses of LB-102 led to a linear, dose-dependent dopamine receptor occupancy that achieved maximal levels at approximately eight hours post-dose and persisted for at least 24 hours, as shown in the figure below. Based on results from our 50 mg single-dose cohort, we measured dopamine receptor occupancy at 48 hours for the 75 mg single-dose cohort. These results and the previously observed plasma half-life of approximately 12 hours supported our decision to develop LB-102 for once-daily dosing.

 

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For cohorts one, two, and three, single doses of LB-102 led to dose-dependent dopamine receptor occupancy.

We evaluated dopamine receptor occupancy under steady-state conditions in our fourth dose cohort. We observed that the receptor occupancy following the Day 4 dose was relatively consistent over 24 hours in all four volunteers. Under steady-state conditions, at the 50 mg dose of LB-102, the average receptor occupancy was approximately 70%, and at the 100 mg dose, it was approximately 80%. Previous reports analyzing receptor occupancy of multiple antipsychotic drugs have found that occupancies of 60% to 80% correlate with maximum efficacy and tolerability in the treatment of schizophrenia. Receptor occupancy above 80% can be associated with an increased risk of EPS.

 

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The following chart depicts the dopamine receptor occupancy in the fourth cohort of our Phase 1b trial.

 

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Dopamine receptor occupancy following repeat dosing of LB-102. S1 and S2 indicate Subject #1 and Subject #2, respectively.

Dopamine receptor occupancy persisted over 24 hours after the final dose of LB-102 was administered under steady-state conditions and yielded a consistent engagement of dopamine receptors not always observed in other antipsychotic drugs.

Completed Phase 2 Trial of LB-102 in Acute Schizophrenia Patients

Clinical Trial Design

We conducted a four-week in-patient, double-blind, randomized, placebo-controlled Phase 2 trial of LB-102 for acute schizophrenia patients with total PANSS scores between 80 and 120, who have shown good response to previous antipsychotic drugs other than clozapine in the prior 12 months. The Phase 2 trial enrolled 359 participants at 25 clinical trial sites in the United States, who were randomized 3:3:1:3 across four cohorts, three doses of LB-102 and placebo (n=108). Prior to initiating dosing, patients underwent a seven-day wash-out period, a length of time that an enrolled patient may not receive any treatment before they begin the trial. Because we were able to achieve 70% receptor occupancy under steady-state conditions with a once-daily dose of 50 mg of LB-102, we chose to advance this as the lowest dose in our Phase 2 trial (n=107 participants) while exploring the potential of higher doses at 75 mg (n=108 participants) and 100 mg (n=36 participants). Based on previous results, we believed that there was a potential for the 100 mg dose to result in receptor occupancy above 80%. As a result, we chose to limit the number of participants enrolled at this dose level while maintaining enough patients to provide insight into the therapeutic potential of this dose. Participants in each cohort received once-daily doses for four weeks.

The primary endpoint of this trial was to evaluate the efficacy of the 50 mg and 75 mg doses of LB-102 compared to the placebo, as measured by change from baseline in PANSS total score at four weeks. The secondary endpoints included change from baseline in the Clinical Global Impression-Severity, or CGI-S (which measures the severity of schizophrenia) as measured by clinicians, and change from baseline on the PANSS subscale and Marder factor scores at four weeks. The 100 mg dose cohort was exploratory and was intended to characterize safety at the higher dose. However, we analyzed the 100 mg cohort with the same statistical rigor, including sensitivity analyses, applied to the 50 and 75 mg cohorts. We also evaluated the safety and pharmacodynamics of LB-102.

 

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The following chart demonstrates the design of this Phase 2 trial.

 

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Design of the Phase 2 trial of LB-102 in schizophrenia.

The topline results from the trial were announced in January 2025. Based on the design of this clinical trial, the results discussed below, and recent positive feedback from FDA as part of our end-of-Phase 2 interaction, we believe this Phase 2 trial may serve as one of two adequate well-controlled clinical trials of LB-102 required for approval. However, there is no guarantee that will be the case. In addition to our planned 6-week Phase 3 trial, which we shared with the FDA as part of our end-of-Phase 2 interaction, we anticipate the FDA will require 1,500 patient exposures to support an approval in schizophrenia. We expect to accrue these patient exposures through the registrational trial as well as an open-label trial that we expect to conduct concurrently with the Phase 3 trial.

Demographics and Patient Characteristics

Of the 359 participants enrolled in this Phase 2 trial, 81% (n=290) were male and the average age was 39.1 years. Participants were diagnosed with schizophrenia a minimum of two years prior to enrollment in the trial with an average time since diagnosis of 15.8 years. The baseline PANSS scores were balanced across all four cohorts with mean measurements of 93.8, 93.9, 93.6 and 93.9 for the placebo, 50 mg, 75 mg and 100 mg cohorts, respectively. Acute schizophrenia is measured as 80 to 120 on the PANSS scale. If a patient drops below 80, they are no longer considered to be in the acute phase of the disease. There were several psychiatric and neurological disorders diagnosed in greater than 5% of the participant population prior to the trial including insomnia (74.1%), anxiety (58.8%), depression (32.9%), agitation (30.1%), and headache (40.1%).

We also used the CGI-S total score to measure the severity of schizophrenia in participants at baseline and weekly for the four weeks of the trial. Using the CGI-S, the investigator rated the participants’ severity of illness, including behavior, symptoms, and function, over the past week on a scale of one to seven, with seven being the most severe. All participants were categorized at least as moderately ill, or a 4 on the CGI-S scale, with the majority of participants (range of 61.1% to 70.4% across the four cohorts) categorized as being markedly ill, or a 5 on the CGI-S scale, at baseline.

 

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LOGO

CGI-S Scores at baseline.

Efficacy Results

Primary Endpoint

The clinical trial achieved the primary endpoint of change from baseline in PANSS total score at four weeks. The least squares mean change from baseline at Week 4 was a 14.3-point decrease and 14.0-point decrease in PANSS score for the 50 mg and 75 mg cohorts, respectively. The exploratory 100 mg cohort showed a 16.1-point decrease in PANSS total score at Week 4. The placebo cohort had a 9.3-point decrease in PANSS total score. We included a number of measures in this Phase 2 trial in order to reduce the risk of an elevated placebo rate including consistent, frequent, and close engagement with clinical sites, the use of a third-party vendor to help identify and exclude professional patients from the trial, and a centralized review of PANSS ratings to ensure consistency and quality control throughout the trial. When adjusted for placebo-response, the 50 mg cohort achieved a five-point decrease (p=0.0009) and the 75 mg cohort achieved a 4.7-point decrease (p=0.0022) in PANSS total score. Despite the highest dose cohort being exploratory and not sized to detect a statistically significant difference, the 100 mg cohort demonstrated a 6.8-point decrease (nominal p=0.0017) in PANSS total score when adjusted for placebo, which did achieve statistical significance.

 

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LOGO

Least square (LS) mean change from baseline in PANSS total score.

The decrease in PANSS total score was observed as early as the first measurement on Day 8 with improvement seen through Week 4 across all three dose cohorts.

 

LOGO

Change in PANSS total score from baseline over time.

At Week 4, the 50 mg, 75 mg, and 100 mg groups showed effect sizes of 0.61, 0.41, and 0.83, respectively, as highlighted in the table below. Effect size is calculated by taking the difference in average observed PANSS change among completers between two groups (an active treatment arm and placebo) and dividing it by a single measure of variability that combines both groups’ spreads—also called the observed pooled standard deviation. The observed pooled standard deviation averages how much individual patients’ score changes scatter around their group’s mean. Clinicians value effect size because it conveys not just how large the average PANSS improvement is, but also how consistently patients respond. Even if two treatments reduce PANSS by the same amount on average, the one with less scatter (i.e., a lower observed pooled standard deviation) will have a higher effect size—and gives a clinician more confidence that a higher proportion of patients will see that same benefit.

 

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Dose of LB-102

   Effect Size versus Placebo  

50 mg

     0.61  

75 mg

     0.41  

100 mg

     0.83  

Effect Size versus Placebo in our Phase 2 trial.

Secondary Endpoints

Within this trial, responders were defined as those who had a 20% or greater reduction in PANSS score at Week 4 (floor-adjusted). The three dose cohorts achieved a responder rate of 31.9% (p=0.0587), 32.1% (p=0.0160), and 43.5% (p=0.0214) for the 50 mg, 75 mg, and 100 mg dose cohorts, respectively, compared to a responder rate of 18.3% for the placebo cohort.

We also assessed response to treatment with LB-102 using PANSS subscales for positive and negative symptoms, respectively. Looking specifically at positive symptom response, we observed a 4.8-point decrease (p=0.0051), 4.9-point decrease (p=0.0039), and 5.3-point decrease (p=0.0120) in the PANSS subscale for the 50 mg, 75 mg, and 100 mg dose cohorts, respectively, compared to a 3.1-point decrease in the placebo cohort. When looking at the negative symptom PANSS subscale, we observed a 2.2-point decrease (p=0.0116), 1.7-point decrease (p=0.1633), and 1.8-point decrease (p=0.2632) in the 50 mg, 75 mg, and 100 mg dose cohorts, respectively, compared to a 1.1-point decrease in the placebo cohort.

 

LOGO

LS Mean change in PANSS score from baseline to Week 4 in positive subscale.

 

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LOGO

LS Mean change in PANSS score from baseline to Week 4 in negative subscale.

We also conducted an exploratory post-hoc analysis of our Phase 2 data on the treatment effect in patients with negative symptoms at baseline (i.e., those patients with a PANSS Negative Subscore greater than or equal to 24). In patients with negative symptoms at baseline, the LS Mean change in negative symptom scores at Week 4 was -1.6 (placebo), -3.4 (50 mg, Δ -1.7, p=0.0045 versus placebo; effect size=0.67), -2.6 (75 mg, Δ -1.00, p=0.1501, effect size=0.34), and -3.3 (100 mg, Δ -1.70, p=0.0658, effect size=0.60). Across all analyses, the effect on negative symptoms was seen at the first measurement at week 1 and continued through Week 4.

Using the CGI-S scale, participants in all three dose cohorts demonstrated an improvement in total scores from baseline to Week 4. We observed a 0.72-point decrease (p=0.0008), 0.67-point decrease (0.0048), and 0.84-point decrease (0.0026) in the 50 mg, 75 mg, and 100 mg dose cohorts compared to a 0.39-point decrease in the placebo cohort. With these changes, the majority of participants shifted from markedly ill (CGI-S of 5) at baseline to moderately ill (CGI-S of 4, range of 45.8% to 65.2% of participants across all three dose cohorts) or mildly ill (CGI-S of 3, range of 17.4% to 25.3% of participants across all three dose cohorts). A small number of participants (0% to 2.2% across all three dose cohorts) achieved a CGI-S score of 2, which is considered borderline mentally ill.

 

LOGO

LS mean change in CGI-S total score from baseline to Week 4.

 

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LOGO

Shift in CGI-S Score from baseline (shadowed colors) to Week 4 (solid colors).

We also used the PANSS Marder factor, a way to analyze the PANSS data to identify responses in different dimensions of schizophrenia, including positive symptoms, disorganized thought, uncontrolled hostility/excitement, negative symptoms and anxiety/depression. PANSS Marder is a way to group the 30 individual items of the PANSS into five broader categories or dimensions. This factor structure is widely used in clinical trials and research to assess and analyze symptoms of schizophrenia. Statistically significant reductions were seen from baseline to Week 4 for all three dose cohorts for positive symptoms, disorganized thought and uncontrolled hostility/excitement. Numerical reductions, which did not reach statistical significance, were observed from baseline to Week 4 for all three dose cohorts for negative symptoms and anxiety/depression. These findings are depicted below:

 

LOGO LOGO LOGO LOGO LOGO

Change in PANSS Scores from baseline to Week 4 for each of the five Marder factors; * P<0.05, ** P<0.01 versus placebo.

Safety and Tolerability Results

In the Phase 2 trial, LB-102 was generally well tolerated. Safety was assessed through TEAEs, and EPS was assessed through TEAEs as well as the Simpson-Angus Scale, or SAS, the Barnes Akathisia Rating Scale, or BARS, and the Abnormal Involuntary Movement Scale, or AIMS. The majority of TEAEs were mostly transient and mild to moderate in severity. TEAEs were defined as any adverse event that began on or after the first dose of trial medication, or any pre-existing condition that reappeared during the treatment period and up to 14 days following the last dose. TEAEs were reported in 56% (placebo), 69% (50 mg), 57% (75 mg), and 75% (100 mg)

 

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of participants. The most commonly reported TEAEs were psychiatric neurological conditions that many participants were experiencing at the time of enrollment. Weight increase was the only TEAE to occur in at least 5% of the total population and at a rate at least twice that observed with placebo (LB-102 50 mg at 12.1%; LB-102 75 mg at 7.4%; LB-102 100 mg at 8.3%; placebo at 3.7%). This TEAE includes any weight increase without a threshold. Over the course of the trial, we observed approximately 1.6 kg placebo-adjusted weight gain. Despite the weight gain observed in the four-week trial, no clinically meaningful signal in metabolic parameters such as cholesterol, LDL, HDL, triglycerides or fasting glucose were observed. The discontinuation rate reached 18% during the treatment period (four weeks) and 27% when taking into account up to 14 days following the last dose. The most common comorbid medical conditions at baseline were insomnia (74.1%), anxiety (58.8%), headache (40.1%), depression (32.9%), and agitation (30.1%). Comorbid conditions at study entry enriched the reporting of TEAEs in our trial. Because TEAEs were defined as any adverse event that began on or after the first dose of trial medication, or any pre-existing condition that reappeared during the treatment period and up to 14 days following the last dose, the rates of certain AEs, such as insomnia, appear elevated in both placebo and LB-102 patients. Change from baseline to Week 4 in SAS, AIMS, and BARS demonstrated no difference between treatment arms and placebo. The following table summarizes the adverse events from the trial:

 

Adverse Events    50 mg
(N=107)
   75 mg
(N=108)
   100 mg
(N=36)
   Placebo (N=108)

Insomnia

   27 (25.2%)    23 (21.3%)    14 (38.9%)    24 (22.2%)

Headache

   12 (11.2%)    9 (8.3%)    2 (5.6%)    10 (9.3%)

Anxiety

   10 (9.3%)    9 (8.3%)    4 (11.1%)    9 (8.3%)

Agitation

   11 (10.3%)    6 (5.6%)    4 (11.1%)    10 (9.3%)

Weight increase

   13 (12.1%)    8 (7.4%)    3 (8.3%)    4 (3.7%)

Hyperprolactinemia

   11 (10.3%)    8 (7.4%)    6 (16.7%)    0

Blood creatine phosphokinase increased

   4 (3.7%)    1 (0.9%)    2 (5.6%)    3 (2.8%)

Alanine aminotransferase increased

   3 (2.8%)    1 (0.9%)    2 (5.6%)    1 (0.9%)

Somnolence

   1 (0.9%)    4 (3.7%)    2 (5.6%)    0

Constipation

   4 (3.7%)    1 (0.9%)    2 (5.6%)    0

TEAEs reported in 5% or more of patients in any cohort.

Ten participants reported TEAEs leading to withdrawal, including two in each of the placebo and 50 mg cohorts as well as three in each of the 75 mg and 100 mg cohorts. There were five reported serious adverse events, or SAEs, overall with two SAEs in the placebo cohort (psychotic disorder and death), one SAE in the 50 mg cohort (suicidal ideation – deemed possibly related to treatment), one SAE in the 75 mg cohort (dystonia – deemed possibly related to treatment) and one SAE in the 100 mg cohort (psychotic disorder – deemed not related to treatment). The incidence of TEAEs was similar across groups, with most events being mild or moderate.

 

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Because of the frequency of certain adverse events associated with schizophrenia medications, we identified adverse events of special interest, including EPS, sedation, adverse events associated with a prolactin increase, and QT interval corrected for heart rate, or QTcF, prolongation. These adverse events are depicted in the tables below.

 

EPS

Number of subjects (% of treatment group)

Preferred Term

   50 mg
(N=107)
   75 mg
(N=108)
   100 mg
(N=36)
   Placebo
(N=108)

Dystonia

   0    3 (2.8%)    1 (2.8%)    1 (0.9%)

Akathisia

   1 (0.9%)    2 (1.8%)    0    1 (0.9%)

Extrapyramidal disorder

   0    1 (0.9%)    1 (2.8%)    2 (1.9%)

Total EPS

   1 (1.0%)    6 (5.6%)    2 (5.6%)    4 (3.7%)

Related to prolactin increase

Number of subjects (% of treatment group)

Preferred Term

   50 mg
(N=107)
   75 mg
(N=108)
   100 mg
(N=36)
   Placebo
(N=108)

Galactorrhea

   2 (1.9%)    1 (0.9%)    0    0

Breast enlargement

   0    0    1 (2.8%)    0

Erectile dysfunction

   0    0    1 (2.8%)    0

Total related to Prolactin

   2 (1.9%)    1 (0.9%)    2 (5.6%)    0

Sedation

 

Number of subjects (% of treatment group)

Preferred Term

   50 mg
(N=107)
   75 mg
(N=108)
   100 mg
(N=36)
   Placebo
(N=108)

Sedation

   0    1 (0.9%)    0    0

QTcF Prolongation

 

QTcF from Baseline at Day 28 (ms)

     50 mg
(N=107)
   75 mg
(N=108)
   100 mg
(N=36)
   Placebo
(N=108)

Baseline

   393.4    394.7    390    393.4

Day 28

   4.9    4.3    5.4    1.7

Stopping criteria not met at any dose

 

 

Exploratory Endpoints

We also included a measure of cognition as an exploratory endpoint in our Phase 2 trial. This analysis utilized the CogState Computerized Schizophrenia Battery of Tests, a well validated measure of cognitive ability in subjects with schizophrenia. Patients had one practice session during the screening visit and completed the actual test on the first day of treatment (Day 1), the baseline assessment, and again on the last day of treatment (Day 28), the final assessment. The CogState battery utilized in our Phase 2 trial consisted of five tests designed to evaluate psychomotor function, memory, attention, working memory, and executive function. Test completion rate, one measure of quality control, was greater than or equal to 99% for each test across baseline and Day 28 visits. The test performance pass rate, another metric of quality control where data for a complete test is compared to expected rates of performance, was generally high for each test, with rates ranging from 93.6% to 99.4%. As part of our analysis of this data and consistent with other published literature utilizing the same CogState battery of tests, we conducted a post-hoc analysis in which we computed a global composite effect size, or overall improvement in cognition, versus placebo after excluding certain outliers that did not meet the test performance pass quality control metric. After excluding these outliers, the analysis was completed in all patients and did not enrich for patients with higher levels of cognitive impairment at baseline. After 4 weeks of treatment with LB-102, a robust, dose-dependent, and significant treatment effect size was identified in the completer population for all doses of LB-102 compared with placebo. Results of this analysis are highlighted in the table below.

 

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Dose

   Effect Size versus Placebo    p-value    n

50 mg

   0.26    0.0476    84

75 mg

   0.41    0.0027    74

100 mg

   0.66    0.0018    20

We believe that the magnitude of cognitive improvement and dose-dependent effect observed in this trial supports the further evaluation of the potential cognitive impacts of LB-102 in schizophrenia including in patients who have been stabilized with respect to positive symptoms of the disease. We also expect to study cognition in other diseases where cognitive impairment is well recognized to be a domain of the disease, including bipolar depression. We are also encouraged by the improvements observed in cognition in this trial and intend to further investigate the effects of LB-102 on cognition in both schizophrenia and bipolar depression. Improvements in cognition, if replicated in our subsequent clinical trials, have the potential to further support the differentiation of LB-102.

Planned Phase 3 Trial of LB-102 in Acute Schizophrenia and Additional NDA-Enabling Studies

We are planning to initiate a six-week Phase 3 trial of LB-102 in participants with acute schizophrenia in the first quarter of 2026, which, if positive, may be sufficient to support a regulatory approval application along with our Phase 2 trial and other planned NDA-enabling studies. The Phase 3 trial is anticipated to be a three-arm, inpatient, double-blinded, placebo-controlled, oral once-daily dose of LB-102 in patients with acute schizophrenia, with a six-week treatment duration. We plan to study the effects of 50 mg LB-102 or 100 mg LB-102 versus placebo in this trial, and patients will be randomized in a 1:1:1 ratio across the three arms of the trial. The sample size will be approximately 400 patients, and we plan to conduct this trial entirely in the United States at approximately 25 sites, a similar number of sites as were utilized in our Phase 2 acute schizophrenia trial. We expect there to be significant overlap between the sites utilized in our Phase 2 trial and those we plan to utilize in the Phase 3 trial. The primary endpoint of the trial is anticipated to be change from baseline in PANSS at Day 42. To mitigate the risk of an elevated placebo response in this trial, we expect to employ the same strategies which proved effective in our Phase 2 acute schizophrenia trial including consistent, frequent, and close engagement with clinical sites, the use of two third-party vendors (including the one used in our Phase 2 trial) to help identify and exclude professional patients from the trial, and a centralized review of PANSS ratings to ensure consistency and quality control throughout the trial. Secondary endpoints will include CGI-S, PANSS positive and negative subscales, Marder factor scores, the Personal and Social Performance Scale, or PSP, and cognition as well as safety and tolerability. We believe that the 6-week duration of this Phase 3 trial has the potential to further improve PANSS reductions observed following treatment with LB-102 given that in our Phase 2 trial, the PANSS score in the LB-102 treated arms declined at a faster rate than placebo through the 28-day duration of our Phase 2 trial. We expect to report topline data from the trial in the second half of 2027. Concurrently with the Phase 3 trial we expect to run an outpatient, open label trial to accrue the requisite safety population required to support NDA submission as well as other clinical and non-clinical studies typically required by FDA at the time of approval. To support approval, the safety population must include at least 1,500 cumulative patient exposures to LB-102, including at least 100 patients with greater than or equal to one year of exposure and 300 patients with greater than or equal to six months of exposure. As a result, we expect to enroll approximately 900 patients in our planned open label safety trial. If our Phase 3 trial is positive, we plan to hold a pre-NDA meeting with the FDA in the first quarter of 2028 to seek agreement from FDA on the suitability of our data to support an NDA submission for the treatment of schizophrenia with potential for submission of such NDA thereafter.

Bipolar Depression

Overview and Disease Background

People living with bipolar depression experience extreme shifts in mood, energy, and behavior, alternating between manic and depressive states. There are two types of bipolar disorder, distinguished as bipolar 1 and 2,

 

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which are characterized by chronically occurring episodes of mania or hypomania alternating with depression. To be diagnosed with bipolar 1 disorder, a person must experience a manic episode defined as a distinct period of persistently elevated or irritable mood with increased activity or energy lasting for at least seven days or requiring hospitalization. The manic episode may be preceded or followed by a hypomanic or major depressive episode. A bipolar 2 disorder diagnosis is based on experiencing hypomanic episode and major depressive episode without a manic episode. Manic episodes are markedly more severe than hypomanic episodes.

People experiencing a manic episode may have a highly inflated sense of self-worth or self-esteem, talk quickly and rapidly shift from one idea to the next, have trouble concentrating, be easily distracted, have a decreased need for sleep, engage in reckless or risk-taking behavior and have a fixed or mistaken grandiose or persecutory belief. During a depressive episode, a person may experience poor concentration, feelings of excessive guilt or low self-worth, hopelessness about the future, thoughts of dying or suicide, disrupted sleep, changes in appetite or weight and feeling very tired or low in energy. For those living with bipolar disorder, an estimated 82.9% have serious impairment due to the disease, the highest percent of serious impairment among all mood disorders, indicating there is significant need for new and better treatment options.

Limitations of Current Treatments for Bipolar Depression

Worldwide, it is estimated that 40 million people live with bipolar disorder. In the United States, an estimated 2.8%, or approximately seven million people, experience bipolar disorder in a given year. Stigma and discrimination against people with bipolar disorder are widespread, which can undermine access to treatment. Although with proper treatment, recovery is possible. Mood stabilizers and antipsychotic drugs which are the mainstay for treatment of bipolar disorder, have been shown to help manage periods of acute mania as well as depression. Based on third-party market research conducted for us, an important advantage of certain antipsychotic drugs in the treatment of bipolar depression is the ability to control depressive symptoms while preventing the emergence of mania. Antidepressants, such as selective serotonin reuptake inhibitors, can be effective in controlling depressive symptoms but also carry a risk of triggering manic events and therefore are typically reserved for later lines of therapy. This market research, together with an advisory board that we held, also highlight unmet needs in the treatment of bipolar depression. These unmet needs include fewer adverse events, better efficacy, including improvements in cognition and anhedonia, improved compliance to treatment, and a desire for therapies with novel mechanisms of action.

Our Solution: LB-102 for the Treatment of Bipolar Depression

In addition to our clinical development program in schizophrenia, we plan to leverage our expertise in neuropsychiatry and the unique mechanism of action of LB-102 for further development in bipolar depression. If successful in bipolar depression, we may also develop LB-102 in MDD. In the future, we may also develop LB-102 for other psychiatric disorders, including schizophrenia with predominantly negative symptoms, psychosis and agitation in Alzheimer’s disease, manic episodes of bipolar disorder, as well as CIAS. We plan to initiate a registrational-quality randomized Phase 2 trial in this indication in the first quarter of 2026, with topline data expected in the first quarter of 2028. Our initial Phase 2 trial will explore the utility of LB-102 in controlling the depressive symptoms of the disease. We may also develop LB-102 as a potential treatment for the manic episodes of bipolar disorder in the future.

We believe LB-102’s strong antagonism of the D2, D3, and 5HT7 receptors makes it well suited for treating bipolar depression, providing potential to control psychosis and mania through its effects on D2 and potential for antidepressive and pro-cognitive effects through its antagonism of 5HT7 and D3. Our Phase 2 trial of LB-102 in acute schizophrenia demonstrated strong antipsychotic activity and suggests opportunities for potential differentiation in bipolar depression given the observed tolerability profile (low rates of EPS, sedation, and gastrointestinal side effects) and positive impact on cognition. Amisulpride is approved for the treatment of dysthymia, a form of depression, in certain countries outside of the United States and has been shown to be as effective as certain approved agents for MDD and dysthymia. We believe that results in dysthymia and MDD

 

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provide strong scientific and clinical rationale for development of LB-102 in the treatment of depressive episodes associated with bipolar disorder or bipolar depression because episodes of major depression, whether unipolar (as in MDD) or bipolar (as in bipolar depression), are typically characterized by a similar imbalance in the neurotransmitters serotonin, noradrenaline, and dopamine, regardless of the underlying pathophysiology of the disease.

Additionally, among the four antipsychotics currently approved for schizophrenia and MDD or treatment resistant depression that were also studied in late-stage bipolar depression trials (quetiapine, cariprazine, aripiprazole, and olanzapine), three out of four, or 75%, generated positive data for the treatment of bipolar depression. There is also widespread use of amisulpride in bipolar disorder with approximately 3.4% of at least two million monthly prescriptions in Europe written for this indication. A non-racemic form of amisulpride showed strong antidepressant activity in two independent third-party, placebo-controlled bipolar depression trials with an approximately 17 to 18-point reduction in MADRS from baseline observed in each trial. The non-racemic form of amisulpride has been shown to be substantially similar to amisulpride in preclinical models. Our planned Phase 2 trial for bipolar depression will utilize a fixed-flexible dose of LB-102. This trial design allows us to evaluate two doses of LB-102 in the trial, thereby increasing the chances for a patient to derive clinical benefit from treatment with LB-102, while retaining the advantages of a two-arm trial, which is known to mitigate the risk of a high placebo rate. Additionally, flexible dose trials typically have better signal detection than fixed dose trials for depression, as flexible dose trials lower the magnitude of symptom reduction with placebo. We believe LB-102 has the potential to provide improved tolerability and clinical activity in bipolar depression compared to currently available treatments worldwide, which are associated with troubling adverse events and insufficient efficacy for certain symptoms, including cognitive impairment associated with the disease.

Planned Phase 2 Trial of LB-102 in Bipolar Depression

We are planning to initiate a Phase 2 trial of LB-102 in participants with depressive episodes associated with bipolar 1 disorder or bipolar depression in the first quarter of 2026, which, if positive, could potentially support a regulatory pathway along with an additional Phase 3 trial for the treatment of bipolar depression as a monotherapy. We plan to report topline data for this trial in the first quarter of 2028 and, subject to positive results from that trial, meet with the FDA to discuss trial results at an end-of-Phase 2 meeting thereafter. The Phase 2 trial is designed to be an outpatient, two-arm, double-blinded, placebo-controlled, oral, once-daily fixed-flexible dose of LB-102 in patients with depressive episodes associated with bipolar 1 disorder, with six-week treatment duration. We plan to enroll 359 patients and conduct this trial entirely in the United States. Patients will be randomized in a 1:1 ratio to LB-102 or placebo. Across most atypical antipsychotics, bipolar depression doses are usually approximately 50% lower than schizophrenia doses to keep D2 receptor occupancy at a level that lowers the potential for EPS yet high enough for antidepressant benefit. This is the dosing model that was used by Vraylar and Latuda, both of which are approved for schizophrenia and bipolar depression. In contrast, Caplyta, another drug approved for use in both schizophrenia and bipolar depression, utilized the same dose in both indications, in part because of its low rates of EPS. In selecting doses for our Phase 2 trial, we are blending these two paradigms. We plan to initiate all patients on half the lowest dose used in our acute schizophrenia trial (25 mg). Importantly, we believe that results of our Phase 2 acute schizophrenia trial, which demonstrated <1% EPS and no sedation even at 50 mg, provide us an opportunity to explore that dose in bipolar depression similar to Caplyta, which used a single dose across both indications. All patients randomized to receive LB-102 will begin treatment at 25 mg for the first three weeks of the trial. At the end of Week 3, if a patient has not improved based on a protocol guided set of specific items in the Clinical Global Impression-Bipolar Illness, or CGI-BP, scale and the patient is tolerating the drug, the dose of LB-102 will be increased in this patient to 50 mg for the remaining three weeks of the trial, subject to an allowance for up to one dose reduction for safety reasons. This trial design allows us to evaluate two doses of LB-102 in the trial, thereby increasing the chances for a patient to derive clinical benefit from treatment with LB-102, while retaining the advantages of a two-arm trial, which is known to mitigate the risk of a high placebo rate. The primary endpoint is expected to be MADRS-10 and will compare all LB-102 treated patients regardless of the dose received versus placebo. Secondary endpoints are

 

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expected to include MADRS-6, CGI-BP-S, cognition, anhedonia, as well as safety and tolerability. We have designed this trial to highlight what we believe will be differentiating attributes of LB-102 in bipolar depression. Specifically, we are targeting competitive MADRS-10 versus other approved agents, improved tolerability as evidenced by lower rates of sedation and gastrointestinal side effects compared with other approved agents, a rate of EPS consistent with or lower than what we observed in our schizophrenia Phase 2 trial, and the potential to demonstrate improvements in anhedonia and cognition versus placebo, which we believe could address important unmet needs in this disease. Following a successful Phase 2 trial, we believe that a single additional Phase 3 trial could support an approval for LB-102 as a monotherapy to treat bipolar depression. We expect an additional Phase 3 trial to be required to support approval as an adjunctive therapy for bipolar depression. Based on historical precedent, we expect to be able to utilize the safety dataset that we generate from our open label acute schizophrenia trial to support a potential approval for LB-102 in bipolar depression as the doses utilized in our bipolar depression trial will be equivalent to or lower than those utilized in our acute schizophrenia trials.

Flexible dose trials typically have better signal detection than fixed dose trials for depression. A third-party study from 2003 examined if the dosing schedule (either a fixed dose or a flexible dose), in an antidepressant clinical trial affects the frequency with which antidepressants show statistical superiority over placebo. In flexible dose trials, 59.6% (34/57) of the antidepressant treatment arms were statistically significant compared to placebo. In contrast, in the fixed dose trials, only 31.4% (11/35) of the antidepressant treatment arms were statistically significant compared to placebo. These data suggest a significantly lower magnitude of symptom reduction with placebo in flexible dose trials compared to fixed dose trials. To further reduce the potential for an elevated placebo rate, we expect to employ many of the same strategies which proved effective in our Phase 2 acute schizophrenia trial including consistent, frequent, and close engagement with clinical sites, the use of two third-party vendors (including the one used in our Phase 2 trial) to help identify and exclude professional patients from the trial, and a centralized review of MADRS ratings to ensure consistency and quality control throughout the trial. We also expect to utilize remote structured assessments to enhance enrollment precision in our clinical trial, which has been shown to reduce placebo response rates.

Future Development Opportunities of LB-102

Potential Additional Indications for LB-102

In addition to schizophrenia and bipolar depression, we are exploring the possibility of testing LB-102 in other neuropsychiatric disorders, such as major depressive disorder, psychosis and agitation in Alzheimer’s disease, predominantly negative symptoms of schizophrenia, and CIAS.

Based on existing third-party data investigating amisulpride and a non-racemic form of the drug as a treatment for several types of depression and the approval of amisulpride in multiple countries outside of the United States for the treatment of dysthymia, a form of depression, we are exploring the potential to study LB-102 in major depressive disorder. It is estimated that there are approximately 20 million people suffering from MDD in the United States.

We are also assessing LB-102 as a potential treatment for psychosis and agitation in Alzheimer’s disease. A third-party clinical trial published in 2018 in The Lancet studying the efficacy of amisulpride in treating elderly patients with very late-onset schizophrenia-like psychosis showed that over 12 weeks, there was a statistically significant 7.7-point improvement in the BPRS (Brief Psychiatric Rating Scale, a prior iteration of the PANSS) for amisulpride as compared to placebo. Importantly, amisulpride was well-tolerated in this vulnerable elderly population, where the average age in this trial was 81. Another third-party clinical trial, published in 2017, explored dose levels of off-label use of amisulpride in treating older people with Alzheimer’s disease-related psychosis. The clinical trial showed a reduction in symptoms was associated with amisulpride concentration and D2/D3 occupancy. To further investigate the potential of LB-102 in Alzheimer’s disease, we will need to conduct a Phase 1 trial to evaluate the safety of LB-102 in a healthy elderly population (aged 65 and older). It is estimated that approximately 40% of the approximately seven million Americans with Alzheimer’s disease experience psychosis or agitation.

 

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While our current schizophrenia clinical program is designed to investigate LB-102 as a treatment for people experiencing the acute phase, or positive symptoms, of schizophrenia, we believe LB-102 also has potential to address predominantly negative symptoms based on the results from our Phase 2 trial and clinical experience to date with amisulpride, an indication with significantly fewer treatment options. Amisulpride demonstrated a statistically significant benefit versus placebo in three independent third-party placebo-controlled trials in patients with predominantly negative symptoms with treatment durations ranging from six weeks to six months. We are also encouraged by the magnitude of the cognitive benefit we have observed to date in our schizophrenia trials and are also assessing the potential to study LB-102 as a treatment for cognitive impairment of schizophrenia, an indication for which there are no approved therapies. In both negative symptoms of schizophrenia and CIAS, we will need to study LB-102 in patients who have been stabilized with respect to the positive symptoms of their disease.

Potential New Formulations of LB-102

We are also developing an LAI formulation of LB-102, which may improve treatment compliance, a common issue in patients with schizophrenia and bipolar disorder. LB-102’s consistent dopamine receptor engagement over 24 hours and the lower administered dose may allow LB-102 to be administered as an LAI. We believe an effective LAI form of LB-102 has the potential to benefit patients worldwide, as relatively few approved agents are available as long-acting formulations. The American Psychiatric Association recommends injectable formulations in circumstances where doing so will improve adherence, decrease mortality, reduce hospitalization risk, and decrease treatment discontinuation rates.

We believe LAI formulations can have additional benefits in treating symptoms of schizophrenia, such as consistent drug exposure, which is potentially beneficial compared to orally dosed antipsychotic drugs, as it relieves the requirement for patients or their caregivers to rely on often self-enforced daily oral dosing to maintain efficacy. The latest guidance from the American Psychiatric Association calls for the use of LAI with patients who have a history of poor adherence. Using LAI antipsychotic drugs to treat schizophrenia patients may decrease mortality risk, reduce hospitalization risk, and decrease rates of treatment discontinuation. We believe such a formulation of LB-102 would potentially benefit patients both in the United States and globally. We have commenced LAI formulation development and expect to continue these efforts in 2026. We believe that the success of the 50 mg dose in our Phase 2 acute schizophrenia trial affords the opportunity to develop an LAI.

 

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Market Opportunity

Schizophrenia is one of the top 15 leading causes of disability in the world and affects approximately 3 million Americans, or approximately 1% of the U.S. population. The United States market for branded antipsychotic drugs in 2024 was approximately $12 billion, where despite the widespread use of generic drugs, several branded antipsychotic drugs each generate sales in excess of $1 billion per year. The chart below depict the United States market share of branded antipsychotic drugs in the United States for 2024 in terms of revenue.

 

LOGO

United States market for branded antipsychotic drugs – 2024.

Among the schizophrenia drugs with greater than $1 billion in sales, all have approvals in additional indications beyond schizophrenia, such as mood disorders. In addition, these drugs generally received their initial approval in schizophrenia prior to their approvals in mood disorders. It is well recognized that in the United States, antipsychotic drugs have higher prices than antidepressants, such as the selective serotonin reuptake inhibitors. Vraylar, Abilify, Rexulti, and Caplyta are approved in the United States for the treatment of schizophrenia in adults. Beyond schizophrenia, Vraylar, Abilify, and Caplyta are approved for the treatment of bipolar depression.

 

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The high incidence of schizophrenia, inadequate clinical response, and side effects from current therapeutics lead to a discontinuation rate of 74% within 18 months of treatment and present a clear market opportunity for more effective schizophrenia drugs that are well-tolerated. Switching treatment is also common in bipolar depression. For example, market research that we conducted suggests that approximately 61% of bipolar depression patients have switched therapies at least once.

 

LOGO

Several factors, including new diagnoses, inadequate responses, and high discontinuation rates contribute to a significant market opportunity for effective schizophrenia drugs.

Additionally, data from 2023 show that despite limited marketing efforts, there were at least two million annual prescriptions for amisulpride in the European Union. We believe that amisulpride’s continued use as an agent for the treatment of schizophrenia outside of the United States over the past 25 years supports the significant commercial potential of LB-102, if approved.

License and Other Agreements

Royalty Agreements

In July 2016, we entered into several Royalty Participation Agreements, or the Original Royalty Agreements, with certain of our existing investors, co-founders, former and current directors, and former and current executive officers, including Zachary Prensky, Andrew Vaino, Ph.D., and Marc Panoff, for royalties payable, in the aggregate, of up to 5.0% of future commercial worldwide sales of LB-102. In this transaction, we received $0.2 million in cash in exchange for the certificate holders receiving convertible notes with a face value of $0.2 million, shares of our common stock and the future royalties provided for in the Original Royalty Agreements. The future royalty payments provided for in the Original Royalty Agreements had an expiration date of December 31, 2037. The royalties were transferable upon surrender of the royalty certificate accompanied by written and notarized instructions of the transfer, provided that the certificate holder could not transfer to any individual or entity (i) to which it was unlawful for us to make such payments or (ii) that owned, controlled or possessed voting rights in the aggregate of more than 10% of our common stock. We had the option to purchase all issued and outstanding royalty certificates under the Original Royalty Agreements by way of a tender offer to all such holders, which would become binding at such time as the holders of two-thirds of all outstanding royalty interests agreed in writing to accept such tender offer.

In August 2023, contemporaneously with the closing of the Series C financing, we entered into several Amended and Restated Royalty Agreements to remove the expiration date and modify royalties payable to certificate holders in the aggregate amount of up to 2.75% of net sales of LB-102 through December 31, 2035 and increasing to up to 3.25% of net sales in 2036 and thereafter. Future sales are defined in these agreements as

 

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the gross payments received on total commercial sales of LB-102, whether by us or by any licensee of LB-102. None of the proceeds from the Series C financing were allocated to the certificate holders as the investors in the Series C financing are not parties to the Original Royalty Agreements or the Amended and Restated Royalty Agreements. Each certificate holder has the same rights and obligations as the other holders except with respect to its individual royalty amount that may come due from us if we generate any revenue from future sales of LB-102. The certificate holders may not transfer rights under the applicable Amended and Restated Royalty Agreement to any individual, entity, corporation, partnership or any other such organization without our written consent, which shall not be unreasonably withheld. We may purchase all issued and outstanding royalty certificates under the Amended and Restated Royalty Agreements by way of a tender offer to all such holders, which will become binding at such time as the holders of two-thirds of all outstanding royalty interests thereunder agree in writing to accept such tender offer.

Intellectual Property

Overview

We strive to protect and enhance the proprietary technology, inventions and improvements that are commercially important to our business, including by seeking, maintaining, enforcing and defending patent rights. Our policy is to seek to protect our proprietary position by, among other methods, filing patent applications in the United States and in jurisdictions outside of the United States related to our proprietary technology, inventions, improvements, and product candidate that are important to the development and implementation of our business. We also rely, in part, on trade secrets and know-how relating to our proprietary technology and product candidate, continuing innovation, and in-licensing opportunities to develop, strengthen and maintain our proprietary position in the field of precision psychiatry and neuropsychiatric drug development; however, trade secrets are difficult to protect and provide us with only limited protection. Our commercial success will depend in part on our ability to obtain and maintain patent and other proprietary protection for our technology, inventions and improvements, to preserve the confidentiality of our trade secrets, and defend and enforce our proprietary rights, including any patents that we own or may obtain in the future. Intellectual property rights may not address all potential threats to our competitive advantage.

As of July 21, 2025, we owned approximately 49 patents and pending patent applications in the United States and foreign jurisdictions, including seven issued U.S. patents and 11 issued foreign patents. The issued patents, or patents that may be issued from the pending patent applications, are expected to expire between 2037 and 2046, without taking into account potentially available patent term adjustments or extensions in the United States and other countries, and assuming payment of all appropriate maintenance, renewal, and annuity fees. We expect the patent term adjustment or extension to be up to five years. Forty-one of the patents and pending patent applications relate directly to LB-102. Additionally, we own two U.S. patents that are directed to open-ring derivative compounds of LB-102. The two U.S. patents claim open-ring derivative compounds of LB-102 as compositions of matter and methods of using these derivative compounds in the treatment of schizophrenia and other mental illnesses. In addition, there are two patent applications pending in Hong Kong and one patent application pending in China, the European patent office, and Taiwan, respectively, that are directed to uses of the R-enantiomer of LB-102. These patent applications cover methods of using the R-enantiomer of LB-102 in treating schizophrenia and other mental illnesses, such as depression, bipolar disorder, Tourette’s syndrome, schizoaffective disorder, Parkinson’s psychosis, Alzheimer’s psychosis, oppositional defiant disorder, personality disorder, childhood schizophrenia, dysthymia, treatment resistant schizophrenia, chronic fatigue syndrome, and predominantly negative symptoms of schizophrenia.

Product Candidate Patent Portfolio

LB-102

As of July 21, 2025, we owned approximately 43 patents and pending patent applications in the United States and foreign jurisdictions relating to LB-102, including five issued U.S. patents and 11 issued foreign patents, seven pending U.S. patent applications, 19 pending foreign applications, and one pending patent cooperation treaty, or PCT, application.

 

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We own all of the following patents and pending patent applications directed to LB-102, which are summarized below:

 

Indication(s)

  

Subject Matter

  

Projected

Expiration

Date*

  

Issued or Pending Patent Applications/
Jurisdiction

Schizophrenia and other mental illnesses    Composition of Matter and method of treatment    2037    Respectively, one patent issued in each of the following: Australia, EPO, Indonesia, Japan, Republic of Korea, Malaysia, and Singapore, two patents issued in China and Hong Kong, and five patents issued in the United States; one patent application pending in each of the following: Australia, Brazil, Malaysia, New Zealand, Singapore, and the United States
   Method of Treatment    2042    Respectively, one patent application pending in each of the following: Australia, Brazil, Canada, China, EPO, Japan, Republic of Korea, Malaysia, New Zealand, Singapore, and the United States; and two patent applications pending in Hong Kong
   Method of Treatment (Poor Cognition)    2044    One PCT application pending; and one application pending in Taiwan.
   Method of Treatment    2046    Five provisional applications pending in the United States.
 
*

Projected expiration dates are based on issued patents or patents that may be issued from pending patent applications, and do not take into account possible patent term adjustments, extensions, or terminal disclaimers and assumes payment of all appropriate maintenance, renewal, and annuity fees.

With respect to LB-102, our U.S. and foreign patents and pending patent applications cover claims directed to composition of matter, and method of treating schizophrenia and other mental illnesses such as depression, bipolar disorder, Tourette’s syndrome, schizoaffective disorder, Parkinson’s psychosis, Alzheimer’s psychosis, oppositional defiant disorder, personality disorder, childhood schizophrenia, dysthymia, resistant schizophrenia, and chronic fatigue syndrome. The issued patents covering the composition of matter of LB-102 and method of treating schizophrenia are expected to expire in 2037, and any patents that may be issued from the pending patent applications are expected to expire between 2037 and 2046, in each case, without taking into account any possible patent term adjustment or extensions or terminal disclaimers and assuming payment of all appropriate maintenance, renewal, and annuity fees. Our foreign patents and pending patent applications are filed in foreign jurisdictions including Australia, Brazil, Canada, China, Europe, Hong Kong, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, Singapore, and Taiwan.

Intellectual Property Protection

We continue to assess the extent to which we may seek additional patent protection related to our product candidate. The term of individual patents depends upon the date of filing of the patent application, date of patent issuance and the legal term of the patents in the countries in which they are obtained. In the United States, the patent term is 20 years from the earliest date of filing of the first non-provisional application to which priority is claimed. Outside of the United States, for patent applications first filed in the United States, the duration of patents varies in accordance with applicable local law, but typically is also 20 years from the earliest non-provisional filing date. In the United States, the patent term may be lengthened by a patent term adjustment,

 

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which compensates a patentee for administrative delays by the USPTO in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over a patent with an earlier expiration date. Moreover, in the context of approved products, there may be additional exclusivity for the patents covering such approved products. In the United States, the term of a patent that covers an FDA-approved drug may also be eligible for a patent term extension of up to five years under the Hatch-Waxman Act, which is designed to compensate for the period of the patent term lost during the FDA regulatory review process. The length of the patent term extension is calculated based on the length of time it takes for regulatory review. There are specific limitations to a patent term extension under the Hatch-Waxman Act. The extension cannot exceed the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent applicable to an approved drug may be extended and only those patents with claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. A patent term extension provided for under the Hatch-Waxman Act is available only for the first approved use of the drug, and thus, no extension is available if a product is approved for a subsequent use. Moreover, a patent can only be extended once, and thus, if a single patent is applicable to multiple products, it can only be extended based on one product. Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug.

We intend to pursue, in the normal course of business and when possible, additional patent protection for future compositions including solid state forms, methods of use, processes, composition, method of use, process, dosing, and formulations of our product candidate(s) we develop and commercialize. We may also pursue patent protection with respect to manufacturing and other technologies. In order to expand market exclusivity, we intend to strategically obtain or license additional intellectual property related to a current or contemplated product candidate.

In some instances, we submit patent applications to the USPTO as provisional patent applications. Corresponding non-provisional patent applications must be filed within 12 months of the provisional application filing date. Claims of the corresponding non-provisional application may be entitled to the benefit of the earlier provisional application filing date(s), and the patent term of the finally issued patent is calculated from the later non-provisional application filing date. Provisional applications for patents were designed to provide a lower-cost first patent filing in the United States. This system allows us to obtain an early priority date, add material disclosure to the patent application(s) during the 12-month period, obtain a later start to the patent term and to delay prosecution costs.

The PCT system allows a single application to be filed within 12 months of the original priority date of the patent application, and to designate all of the PCT member states in which national or regional patent applications can later be pursued based on the international patent application filed under the PCT. The PCT searching authority performs a patentability search and issues a non-binding patentability opinion which can be used to evaluate the chances of success for the national or regional applications prior to having to incur the filing fees and prosecution costs. Although a PCT application does not result in the issuance of a patent, it allows the applicant to seek protection in any of the member states through national/regional-phase applications. At the end of the period of two and a half years from the first priority date of the patent application, separate patent applications can be pursued in any of the PCT member states either by direct national filing or, in some cases by filing through a regional patent organization, such as the European Patent Office. The PCT system delays expenses, allows a limited evaluation of the chances of success for national/regional patent applications and enables substantial savings when applications are abandoned within the first two and a half years of filing. We intend to file U.S. non-provisional applications and PCT applications that claim the benefit of the priority date of our earlier filed provisional applications, when applicable.

For all patent applications, we determine claiming strategy on a case-by-case basis. Advice of counsel, country-specific patent laws, our business model and commercial needs are always considered. We may file patent applications containing claims for protection of all useful applications of our proprietary product candidate, as well as all new uses we discover for our existing product candidate, assuming these are strategically valuable. We continuously reassess the number and type of patent applications in our portfolio, as well as the pending and issued patent claims, to help ensure that maximum coverage and value are obtained for our

 

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processes, and compositions, given existing patent office rules and regulations. In addition, claims may be modified during patent prosecution, to the extent allowed, to meet our intellectual property and business needs.

There can be no assurance that we will be able to obtain, maintain, enforce, and defend all patents and other intellectual property rights necessary to conduct our business. The patents we currently own, possibly in-license in the future, or patents that issue from our owned patent applications, if any, may be challenged by third parties, may not effectively prevent third parties from commercializing competitive technologies or may not otherwise provide us with a competitive advantage. For more information regarding the risks related to our intellectual property, see the section titled “Risk Factors—Risks Related to Intellectual Property, Collaboration and Related Agreements.”

Sales, Marketing, and Commercialization

We do not currently have a commercial organization for the marketing, sales, and distribution of prescription pharmaceutical products. We intend to build our global commercialization capabilities internally over time, such that we are able to commercialize any product candidate for which we may obtain regulatory approval. We expect to manage future sales, marketing, and distribution through internal resources and third-party relationships. In addition, we will opportunistically explore commercialization partnerships, particularly with entities that have strong capabilities in geographies outside of the United States. As our current and future product candidates progress through clinical development and regulatory review, our commercial plans may change. Clinical data, the size of the development programs, the size of our target markets, the size of the requisite commercial infrastructure, the competitive landscape, and manufacturing needs may all influence our future commercialization strategies.

Manufacturing

We do not own or operate, and currently have no plans to establish, any manufacturing facilities. We have engaged, and expect to continue to rely on, well-established third-party CDMOs to produce and supply our product candidates for use in our preclinical studies and clinical trials. Because we are responsible for ensuring all aspects of our product candidates’ compliance and quality but rely on third-party contract manufacturers and analytical testing laboratories, we must employ personnel with extensive technical, manufacturing, analytical, and quality experience to oversee our contract manufacturing and testing activities, and to compile manufacturing and quality information for our regulatory submissions. We believe our current manufacturers have the scale, systems, and experience to supply our currently planned clinical trials.

Additionally, we intend to rely on third-party CDMOs for later-stage development and commercial manufacturing, if our product candidates receive marketing approval. As our lead product candidates advance through clinical development, we expect to enter into longer-term commercial supply agreements to fulfill and secure our production needs. Key starting material is manufactured by a limited number of CDMOs. The final drug substance in manufactured at a single CDMO. In the event it is necessary or advisable to acquire supplies from an alternative supplier, we might not be able to obtain them on commercially reasonable terms, if at all. It could also require significant time and expense to redesign our manufacturing processes to work with another company. If we need to change manufacturers during the clinical or development stage for product candidates or after commercialization for our product candidates, if approved, the FDA and corresponding foreign regulatory agencies must approve these new manufacturers in advance, which will involve testing and additional inspections to ensure compliance with FDA regulations and standards and may require significant lead times and delay.

To adequately meet our projected commercial manufacturing needs, our CDMOs will need to scale-up production, or we will need to secure additional suppliers. Processes for producing drug substances and drug product for commercial supply must be developed, with the goal of achieving reliable, reproducible, and cost-effective production. We believe the drug substance and drug product processes for our current product candidates can be appropriately scaled.

 

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Competition

The biopharmaceutical industry is characterized by rapid innovation and intense competition. While we believe that our lead product candidate, LB-102, offers a potentially attractive alternative to generic and branded therapeutics treating neuropsychiatric diseases, should it be approved for marketing, today we face competition from multiple biopharmaceutical and biotechnology companies that are similarly working to develop therapeutics targeting schizophrenia, as well as from academic institutions, governmental agencies, and public and private research institutions. Many of our potential competitors, either alone or with collaboration partners, have significantly greater financial resources than we do, as well as equal or greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of products, and the commercialization of those products. Accordingly, our potential competitors may be more successful than we are in achieving regulatory approvals and commercializing their neuropsychiatric products. We anticipate that we will face intense and increasing competition from existing, approved drugs, if LB-102 becomes a commercial product, as well as new drugs entering the market in the future and emerging technologies that become available.

We believe the key competitive factors affecting the success of our product candidate, LB-102, that we are developing to address schizophrenia and bipolar depression, if approved, are likely to be efficacy, safety, frequency of dosing, convenience, price, the level of generic competition, and the availability of reimbursement from government and other third-party payors.

Patients with schizophrenia have historically been treated with a variety of antipsychotic drugs and, accordingly, we believe LB-102, if approved, would compete with several currently approved therapeutics, including: clozapine (marketed by HLS Therapeutics, Inc.); quetiapine (marketed by AstraZeneca plc); aripiprazole (marketed by Otsuka Pharmaceutical Co. Ltd.); risperidone (marketed by Janssen Pharmaceuticals, Inc.); olanzapine (marketed by Eli Lilly & Company Ltd.); haloperidol (marketed by Janssen Pharmaceuticals, Inc.); Latuda (marketed by Sumitomo Pharma America, Inc.); Invega (marketed by Janssen Pharmaceuticals, Inc.); Rexulti (marketed by Otsuka Pharmaceutical Co. Ltd and H. Lundbeck A/S); Vraylar (marketed by AbbVie Inc.); Caplyta (marketed by Janssen Pharmaceuticals, Inc.); iloperidone (marketed by Vanda Pharmaceuticals Inc.); Uzedy (marketed by Teva Pharmaceutical Industries Limited); Lybalvi (marketed by Alkermes, Inc.); and Cobenfy (marketed by Bristol-Myers Squibb Company, Inc.). We are also aware of several companies developing compounds for the treatment of schizophrenia, including Alto Neuroscience Inc., Minerva Neurosciences, Inc., MapLight Therapeutics, Inc., Reviva Pharmaceuticals Holdings, Inc., and Acadia Pharmaceuticals Inc., as well as other earlier stage competitors.

In bipolar depression, we believe LB-102, if approved, would compete with several currently approved therapeutics, including: Vraylar (marketed by AbbVie Inc.); Caplyta (marketed by Janssen Pharmaceuticals, Inc.); olanzapine-fluoxetine combination (Symbyax, marketed by marketed by Eli Lilly & Company Ltd.); quetiapine (marketed by AstraZeneca plc); Latuda (marketed by Sumitomo Pharma America, Inc.); and seroquel. We are also aware of several companies developing compounds for the treatment of bipolar depression, including Alto Neuroscience Inc., NRx Pharmaceuticals, Inc., and Xenon Pharmaceuticals Inc., as well as other earlier stage competitors.

Government Regulation

Government authorities in the United States, at the federal, state and, local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, marketing, and export and import of human drug products. We, along with any third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory authorities of the countries in which we wish to conduct studies or seek approval of our product candidates. The process of obtaining regulatory approvals and ensuring compliance with applicable federal, state, local, and foreign statutes, regulations and requirements both during development and post-approval requires the expenditure of substantial time and financial resources.

 

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U.S. Drug Development Process

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act of 1938, or the FDCA, and its implementing regulations. A new drug must be approved by the FDA through the NDA process before it may be legally marketed in the United States. Failure to comply with the applicable U.S. requirements at any time during the product development or approval process, or after approval, may subject an applicant to administrative or judicial sanctions brought by the FDA and the Department of Justice, or DOJ, or other governmental entities. The process required by the FDA before a drug may be marketed in the United States generally involves the following:

 

  •  

completion of preclinical laboratory tests, animal studies and formulation studies in accordance with FDA’s GLP regulations and other applicable requirements;

 

  •  

submission to the FDA of an IND, which must become effective before human clinical trials may begin;

 

  •  

approval by an IRB or ethics committee before each clinical trial may be initiated;

 

  •  

performance of adequate and well-controlled human clinical trials in accordance with GCPs to evaluate the safety and efficacy of the proposed drug for its intended use;

 

  •  

preparation of and submission to the FDA of an NDA;

 

  •  

a determination by the FDA within 60 days of its receipt of an NDA to file the application for review;

 

  •  

satisfactory completion of an FDA advisory committee review, if applicable;

 

  •  

satisfactory completion of FDA inspections of the manufacturing facility or facilities at which the drug is produced to assess readiness for commercial manufacturing and conformance to the manufacturing-related elements of the application, to conduct a data integrity audit, and to assess compliance with current cGMP regulations to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity, and a potential inspection of selected clinical investigation sites to assess compliance with GCPs; and

 

  •  

FDA review and approval of the NDA.

Preclinical Studies and IND Application

Once a product candidate is identified for development, it enters the preclinical development stage. The preclinical developmental stage generally involves laboratory evaluations of chemistry, formulation, and stability, as well as studies to evaluate the product candidate’s toxicity, in an effort to support subsequent clinical testing. Such toxicity studies generally involve the use of animals, although an NDA applicant may fulfill nonclinical testing requirements by completing various in vitro assays (e.g., cell-based assays, organ chips, or microphysiological systems), in silico studies (i.e., computer modeling), other human or non-human biology-based tests (e.g., bioprinting), or in vivo animal tests.

Prior to beginning the first clinical trial with a product candidate in the United States, the product’s developer, also referred to as the IND sponsor, must submit the results of preclinical testing, together with manufacturing information and analytical data, to the FDA as part of an IND. An IND is a request for authorization from the FDA to administer an investigational drug product to humans, and must become effective before human clinical trials may begin. In addition to including the results of these nonclinical studies, the IND will also include a general investigational plan and a study protocol, detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated, if the trial protocol includes an efficacy evaluation. The IND may also include any available human data or literature to support the use of the product candidate. Additional nonclinical testing may continue even after the IND is submitted.

 

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The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the IND on clinical hold. In such case, the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial. Clinical holds also may be imposed by the FDA at any time after initiation of clinical trials due to safety concerns about ongoing or proposed clinical trials or non-compliance with specific FDA requirements, and the trials may not begin or continue until the FDA notifies the sponsor that the hold has been lifted. A clinical hold may affect one or more specific studies or all studies conducted under an active IND.

Human Clinical Trials in Support of an NDA

All clinical trials must be conducted under the supervision of one or more qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCPs, which include, among other things, the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials must be conducted under protocols detailing, among other things, the objectives of the trial, dosing procedures, research subject selection and exclusion criteria, and the safety and effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND, and a separate submission to the existing IND must be made for each successive clinical trial conducted during product development and for any subsequent material amendments to a protocol. While the IND is active, progress reports summarizing the results of the clinical trials and nonclinical studies performed since the last progress report, among other information, must be submitted at least annually to the FDA. Sponsors also must submit written IND safety reports to the FDA and investigators in a timely matter for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the same or similar drugs, findings from animal or in vitro testing suggesting a significant risk to humans, and any clinically important increased incidence of a serious suspected adverse reaction compared to that listed in the protocol or investigator brochure.

Furthermore, an IRB must review and approve the protocol before a clinical trial commences and must also approve the information regarding the trial and the consent form that must be signed by each research subject or the research subject’s legal representative, monitor the study until completed, and otherwise comply with IRB regulations. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. In addition, some clinical trials also include oversight by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. Depending on its charter, this group may determine whether a trial may move forward at designated check points based on access to certain data from the trial. There are also requirements governing the reporting of ongoing clinical studies and clinical trial results to public registries, including clinicaltrials.gov.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

 

  •  

Phase 1: The product candidate is initially introduced into healthy human subjects or patients and tested for safety, dosage tolerance, absorption, metabolism, excretion, distribution and elimination, and, if possible, to gain an early indication of its effectiveness.

 

  •  

Phase 2: The product candidate is administered to a limited patient population with a specified disease or condition to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product candidate for specific targeted diseases, and to determine dosage tolerance and optimal dosage.

 

  •  

Phase 3: The product candidate is administered to an expanded patient population to further evaluate dosage, to provide substantial evidence of efficacy and to further test for safety, generally at multiple geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk-benefit ratio of the product candidate and provide an adequate basis for product labeling.

 

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In some cases, the FDA may require, or sponsors may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product. These post-marketing clinical trials, sometimes referred to as Phase 4 studies, may be used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA.

A pivotal trial is a clinical trial that adequately meets regulatory agency requirements for the evaluation of a product candidate’s efficacy and safety such that it can be used to justify the approval of the product. Generally, pivotal trials are also Phase 3 trials but they may be Phase 2 trials if the trial design provides a reliable assessment of clinical benefit, particularly in situations where there is an unmet medical need. Congress recently amended the FDCA to require sponsors of a Phase 3 trial, or other “pivotal study” of a new drug to support marketing authorization, to design and submit a diversity action plan for such clinical trial. The action plan must include the sponsor’s diversity goals for enrollment, as well as a rationale for the goals and a description of how the sponsor will meet them. Sponsors must submit a diversity action plan to the FDA by the time the sponsor submits the relevant clinical trial protocol to the agency for review. The FDA may grant a waiver for some or all of the requirements for a diversity action plan. If the FDA objects to a sponsor’s diversity action plan or otherwise requires significant changes to be made, it could delay initiation of the relevant clinical trial.

During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points. These points may be prior to submission of an IND, at the end of Phase 2, and before an NDA is submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach alignment on the next phase of development.

Concurrent with clinical trials, companies usually complete additional nonclinical studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product and, among other things, the manufacturer must develop methods for testing the identity, strength, quality, and purity of the finished drug product. In addition, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product does not undergo unacceptable deterioration over its shelf life.

Disclosure of Clinical Trial Information

Sponsors of clinical trials of certain FDA-regulated products, including prescription drugs, are required to register and disclose certain clinical trial information on a public registry maintained by the U.S. National Institutes of Health, or NIH. In particular, information related to the product, patient population, phase of investigation, study sites and investigators and other aspects of the clinical trial is made public as part of the registration of the clinical trial. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs. Although sponsors are also obligated to disclose the results of their clinical trials after completion, disclosure of the results can be delayed in some cases for up to two years after the date of completion of the trial. Failure to timely register a covered clinical study or to submit study results as provided for in the law can give rise to civil monetary penalties and also prevent the non-compliant party from receiving future grant funds from the federal government.

U.S. Review and Approval Process

Assuming successful completion of the required clinical testing, the results of nonclinical studies and clinical trials, along with detailed descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product. The submission of an NDA is subject to the payment of a substantial user fee, unless a waiver or exemption applies. An annual program fee is also assessed on sponsors of approved prescription drug products. FDA adjusts these user fees on an annual basis.

 

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The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the NDA must be resubmitted with the additional information. The resubmitted application also is subject to review before the FDA accepts it for filing. Once filed, the FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether it is being manufactured in accordance with cGMP requirements to assure and preserve the product’s identity, strength, quality, and purity. Under the Prescription Drug User Fee Act, or PDUFA, policies that are currently in effect, the FDA has a goal of ten months from the filing date to complete its initial review of a standard application for a drug that is a new molecular entity, and six months from the filing date for an NDA that has been granted priority review. The FDA does not always meet its PDUFA goal dates, and the review process is often significantly extended by FDA requests for additional information or clarification and the sponsor’s process to respond to such inquiries.

The FDA likely will re-analyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process. The FDA also may require the development of a risk evaluation and mitigation strategy, or REMS, if it determines that a REMS is necessary to ensure that the benefits of the drug outweigh its risks and to assure the safe use of the product. The FDA determines the requirement for a REMS, as well as the specific REMS provisions, on a case-by-case basis. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS. The FDA will not approve the NDA without an approved REMS, if required. A REMS can include medication guides, physician communication plans, and/or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools.

The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making product approval and risk mitigation decisions.

Before approving an NDA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA may inspect one or more clinical trial sites to assure that the clinical trials were conducted in compliance with GCP regulations and to assure the integrity of the clinical data submitted to the FDA. To ensure cGMP and GCP compliance by its employees and third-party contractors, an applicant must incur significant expenditure of time, money and effort in the areas of training, record keeping, production and quality control.

After the FDA completes its evaluation of the NDA and any inspections or advisory committee consultations, the agency will issue either an approval letter or a Complete Response Letter, or CRL, to the NDA applicant. An approval letter authorizes commercial marketing of the drug for specific indications for use. A CRL indicates that the review cycle of the application is complete, and the application will not be approved in its present form. A CRL usually describes the specific deficiencies in the NDA identified by the FDA. Such deficiencies may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials or other significant and time-consuming requirements related to nonclinical studies or manufacturing. If a CRL is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies that the FDA has identified in the letter, or withdraw the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the agency will issue an approval letter to the applicant. The FDA has committed to reviewing such resubmissions in response to an issued CRL in either two or six months depending on the type of information included. Even if such additional data and information are submitted, however, the FDA may ultimately decide that the NDA does not satisfy the regulatory criteria for approval.

 

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If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited, which could restrict the commercial value of the product. In addition, the FDA may require a sponsor to conduct Phase 4 testing, which involves clinical trials designed to further assess a drug’s safety and effectiveness after NDA approval, and may require testing and surveillance programs to monitor the safety of approved products which have been commercialized. The FDA may also place other conditions on approval including the requirement for a risk evaluation and mitigation strategy, or REMS, to assure the safe use of the drug. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of products.

In addition, the Pediatric Research Equity Act, or PREA, requires a sponsor to conduct pediatric clinical trials for most drugs; specifically, in relation to applications for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs and supplements thereto must contain a pediatric assessment unless the sponsor has received a deferral or waiver. Sponsors must also submit Pediatric Study Plans, or PSPs, to the agency for review within sixty days of an end-of-Phase 2 meeting or, if there is no such meeting, as early as practicable before the initiation of the Phase 3 or Phase 2/3 clinical trial. The initial PSP must include an outline of the pediatric trial or trials that the sponsor plans to conduct, including trial objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric trials along with supporting information. The FDA and the sponsor must reach an agreement on the PSP. A sponsor can submit amendments to an agreed upon initial PSP at any time if changes to the pediatric plan need to be considered based on data collected from nonclinical studies, early phase clinical trials or other clinical development programs.

The required assessment must evaluate the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective, unless a waiver or deferral has been granted. The FDA may defer, on its own initiative or upon the sponsor’s request, submission of the pediatric assessments for some or all pediatric subpopulations until a specified date after approval. A deferral may be granted for several reasons, including a finding that the drug is ready for approval for use in adults before pediatric clinical trials are complete or that additional safety or effectiveness data needs to be collected before the pediatric clinical trials begin. The FDA must send a PREA non-compliance letter to any sponsor that fails to submit the required assessment, fails to keep a deferral current or fails to submit a request for approval of a pediatric formulation. The agency publicly posts such PREA non-compliance letters and sponsor’s response.

Fast Track, Breakthrough Therapy, and Priority Review Designations

The FDA offers a number of programs intended to expedite the development or review of a marketing application for an investigational drug. For example, the Fast Track designation program is intended to expedite or facilitate the process for developing and reviewing product candidates that are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast Track designation applies to the combination of the product candidate and the specific indication for which it is being studied. The sponsor of a Fast Track product candidate has opportunities for more frequent interactions with the applicable FDA review team during development and, once an NDA is submitted, the application may be eligible for priority review. An NDA for a Fast Track product candidate may also be eligible for rolling review, where the FDA may consider for review sections of the NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA.

A product candidate intended to treat a serious or life-threatening disease or condition may also be eligible for Breakthrough Therapy designation to expedite its development and review. A product candidate can receive Breakthrough Therapy designation if preliminary clinical evidence indicates that the product candidate, alone or

 

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in combination with one or more other drugs, may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the Fast Track program features, as well as more intensive FDA interaction and guidance beginning as early as Phase 1 and an organizational commitment to expedite the development and review of the product candidate, including involvement of senior managers.

In addition, an NDA may be eligible for priority review if the product candidate is designed to treat a serious condition, and if approved, would provide a significant improvement in safety or efficacy compared to available therapies for such disease or condition. The FDA will attempt to direct additional resources to the evaluation of a NDA designated for priority review in an effort to facilitate the review. For new-molecular-entity NDAs, priority review designation means the FDA’s goal is to take action on the marketing application within six months of the 60-day filing date, as compared to ten months for review of new-molecular-entity NDAs under its current PDUFA review goals.

Fast Track designation, Breakthrough Therapy designation, and priority review do not change the standards for approval, but they may expedite the development or approval process. Even if a product candidate qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.

Accelerated Approval Pathway

Additionally, product candidates studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions and that provide meaningful therapeutic benefit over existing treatments may be eligible for accelerated approval. Such products may be approved on the basis of adequate and well-controlled clinical trials establishing that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on an intermediate clinical endpoint that can be measured earlier than irreversible morbidity or mortality, or IMM, that is reasonably likely to predict an effect on IMM or other clinical benefits, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA will generally require the sponsor of a drug receiving accelerated approval to perform adequate and well-controlled confirmatory clinical studies to verify and describe the drug’s clinical benefit, and may require that such confirmatory trials be underway prior to granting accelerated approval. Sponsors are also required to send updates to the FDA every 6 months on the status of such studies, including progress toward enrollment targets, and the FDA must promptly post this information publicly.

NDA sponsors must conduct such post-approval confirmatory studies in a diligent manner, and as a result a product candidate approved on this basis is subject to rigorous post-marketing compliance requirements.

Products receiving accelerated approval may be subject to expedited withdrawal procedures if the sponsor fails to conduct the required confirmatory studies in a timely manner or if such studies fail to verify the predicted clinical benefit. In addition, all promotional materials for product candidates being considered and approved under the accelerated approval pathway are subject to prior review by the FDA, which could adversely impact the timing of the commercial launch of the product. Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.

Post-Approval Requirements

Following approval of a new drug, the manufacturer and the approved product are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to monitoring and record-keeping, reporting of adverse experiences with the product, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications, certain manufacturing changes and additional labeling claims, are subject to further FDA review and approval. Certain modifications may require the NDA sponsor to develop additional data or conduct additional nonclinical studies and clinical trials.

 

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There also are continuing, annual program fees for any marketed products. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies to assess compliance with cGMP requirements and other laws. The cGMP regulations include requirements relating to organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports and returned or salvaged products. In addition, changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP requirements and impose reporting requirements on the NDA applicant and any third-party manufacturers involved in producing the approved drug product. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMPs and other aspects of quality control and quality assurance. The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of requirements for post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS. Other potential consequences include, among other things:

 

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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

 

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mandated modification of promotional materials or labeling and the issuance of corrective information;

 

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the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product;

 

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fines, warning letters, or untitled letters;

 

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clinical holds on ongoing or planned clinical studies;

 

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refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product approvals;

 

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product seizure or detention, or refusal to permit the import or export of products;

 

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consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs; or

 

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injunctions or the imposition of civil or criminal penalties.

The FDA closely regulates the marketing, labeling, advertising and promotion of prescription drug products following approval. A company can make only those claims relating to safety and efficacy that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, e.g., unapproved uses or unapproved patient populations. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Although physicians may prescribe, in their independent professional medical judgment, legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA, manufacturers may not market or promote such uses. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. Manufacturers may also share truthful and not misleading information about their products that is otherwise consistent with a product’s FDA-approved labeling, which helps to support well-informed clinical decision-making by physicians and other health care professionals.

 

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In addition, national distribution of pharmaceutical products is subject to the Drug Supply Chain Security Act.

Marketing and Data Exclusivity

Orange Book Listing

In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent with claims covering the applicant’s product or method of using the product. Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of an ANDA. An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown to be bioequivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of, nonclinical or clinical tests to prove the safety or effectiveness of their drug product. Drugs approved in this way are commonly referred to as generic equivalents to the listed drug and can often be substituted by pharmacists under prescriptions written for the original listed drug.

The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book. Specifically, the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product. The ANDA applicant may also elect to submit a Section VIII statement certifying that its proposed ANDA labeling does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent. If the applicant does not challenge the listed patents, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired.

A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification. If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been received by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the ANDA applicant.

An applicant submitting an NDA under Section 505(b)(2) of the FD&C Act, also called a 505(b)(2) NDA, which permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by, or for, the applicant and for which the applicant has not obtained a right of reference, is required to certify to the FDA regarding any patents listed in the Orange Book for the approved product it references to the same extent that an ANDA applicant would.

Exclusivity

Regulatory exclusivity provisions under the FDCA can delay the submission or the approval of certain marketing applications that seek to reference an FDA-approved product. The FDCA provides a five-year period of non-patent data exclusivity within the United States to the first applicant to obtain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an ANDA, or file a 505(b)(2) NDA, for

 

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another version of such drug where the applicant does not own or have a legal right of reference to such data required for approval. However, an application may be submitted after four years if it contains a Paragraph IV certification.

The FDCA alternatively provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA, or supplement to an existing NDA, if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example new indications, dosages or strengths of an existing drug. This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs referencing the approved application for drugs containing the active agent for the original indication or condition of use. Five-year and three-year exclusivity will not delay the submission or approval of a full NDA that does not reference the approved application. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Pediatric exclusivity is another type of marketing exclusivity available in the United States. If granted, pediatric exclusivity provides for the attachment of an additional six months of marketing exclusivity to the term of any existing regulatory exclusivity or listed patents. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application. A product candidate may be eligible for this six-month period of exclusivity if the NDA sponsor conducts clinical trials in children and submits information requested in writing by the FDA, referred to as a Written Request, relating to the use of the product’s active moiety in children. The issuance of a Written Request does not require the sponsor to undertake the described clinical trials. In addition, the clinical trial data do not need to show the product to be effective in the pediatric population studied; rather, the additional protection is granted if the pediatric clinical trial is deemed to have fairly responded to the FDA’s Written Request. Although the FDA may issue a Written Request for studies on either approved or unapproved indications, it may only do so where it determines that information relating to that use of a product candidate in a pediatric population, or part of the pediatric population, may produce health benefits in that population.

Other U.S. Healthcare Laws and Compliance Requirements

In the United States, our current and future operations are subject to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to, CMS, other divisions of HHS (e.g., the Office of Inspector General, the Office for Civil Rights), the U.S. DOJ and individual U.S. Attorney offices within the DOJ, the Federal Trade Commission, or FTC, and state and local governments. For example, our business practices, including our clinical research program and any future sales, marketing and scientific/educational grant programs may be required to comply with the anti-fraud and abuse laws the false claims laws, transparency requirements, and similar state laws, each as amended, as applicable.

The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything of value. In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Rather, if “one purpose” of the remuneration is to induce referrals, the federal Anti-Kickback Statute is violated. The federal Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the

 

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requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Our future practices may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor.

The civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to, among others, a federal healthcare program that the person knows or should know is for a medical or other item or service that was not provided as claimed or is false or fraudulent.

The federal false claims laws, including the FCA, impose significant penalties and can be enforced by private citizens through civil qui tam actions, prohibit, any person or entity from, among other things, knowingly presenting, or causing to be presented, a false or fraudulent claim for payment to, or approval by, the federal government, including federal healthcare programs such as Medicare and Medicaid, or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government. A claim includes “any request or demand” for money or property presented to the U.S. government. For instance, historically, pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of the product for unapproved, off-label, and thus generally non-reimbursable, uses. In addition, a claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA.

HIPAA created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit program, including private third-party payors, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

In addition, HIPAA, as amended by HITECH, imposes certain requirements on covered entities, which include certain healthcare providers, health plans and healthcare clearinghouses, and their business associates and covered subcontractors that receive or obtain protected health information in connection with providing a service on behalf of a covered entity relating to the privacy, security and transmission of individually identifiable health information.

Additionally, the federal Physician Payments Sunshine Act, or the Sunshine Act, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) report information annually to CMS related to certain payments or other transfers of value made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician practitioners (such as physician assistants and nurse practitioners), and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to report accurately could result in penalties. In addition, many states also govern the reporting of payments or other transfers of value, many which differ from each other in significant ways, are often not pre-empted, and may have a more prohibitive effect than the Sunshine Act, thus further complicating compliance efforts.

Also, many states have similar, and typically more prohibitive, fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply

 

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regardless of the payor. In order to distribute pharmaceutical products commercially in the future, should FDA approval be granted to any of our product candidates, we must comply with state laws that require the registration of manufacturers and wholesale distributors of drug products in a state, including, in certain states, manufacturers and distributors who ship products into the state even if such manufacturers or distributors have no place of business within the state. Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing, and to prohibit certain other sales and marketing practices.

Ensuring business arrangements with third parties comply with applicable healthcare laws and regulations is a costly endeavor. If our operations are found to be in violation of any of the federal and state healthcare laws described above or any other current or future governmental regulations that apply to us, we may be subject to significant penalties, including without limitation, civil, criminal and/or administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions, private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter into government contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Coverage, Pricing, and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which we may obtain regulatory approval. In the United States and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend, in part, on the extent to which third-party payors provide coverage, and establish adequate reimbursement levels for such products. In the United States, third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations.

The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list, or also known as a formulary, which might not include all of the FDA-approved products for a particular indication. Third-party payors are increasingly challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical products, therapies and services, in addition to questioning their safety and efficacy. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs required to obtain the FDA approvals. Our product candidates may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. In addition, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. Further, obtaining reimbursement for our product may be particularly difficult because of the higher prices often associated with branded drugs and drugs administered under the supervision of physicians. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

Under currently applicable U.S. law, certain products not usually self-administered (including injectable drugs) may be eligible for coverage under Medicare through Medicare Part B. Medicare Part B is part of original Medicare, the federal health care program that provides health care benefits to the aged and disabled, and covers outpatient services and supplies, including certain biopharmaceutical products, that are medically necessary to

 

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treat a beneficiary’s health condition. As a condition of receiving Medicare Part B reimbursement for a manufacturer’s eligible drugs, the manufacturer is required to participate in other government healthcare programs, including the Medicaid Drug Rebate Program and the 340B Drug Pricing Program. The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with HHS as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid patients. Under the 340B Drug Pricing Program, the manufacturer must extend discounts to entities that participate in the program.

Different pricing and reimbursement schemes exist in other countries. In the EU, governments influence the price of pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers. Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost-effectiveness of a particular product candidate to currently available therapies. Other EU member states allow companies to fix their own prices for medicines, but monitor and control company profits. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.

The marketability of any product candidates for which we receive regulatory approval for commercial sale in any country or region may suffer if the government and third-party payors fail to provide adequate coverage and reimbursement. The downward pressure on the rise in healthcare costs in general and pharmaceutical products in particular has become intense. As a result, in the European Union, increasingly high barriers are being erected to the entry of new products. In the United States, the emphasis on managed care, the increasing influence of health maintenance organizations, and additional legislative changes has increased and we expect will continue to increase the pressure on product pricing. In addition, coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

Healthcare Reform in the U.S. and Potential Changes to Healthcare Laws

In the United States, there have been, and continue to be, legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect the profitable sale of product candidates that obtain marketing approval. The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay marketing approval of our product candidate. Moreover, among policy makers and payors in the United States, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. The pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product for which we obtain marketing approval.

The ACA includes measures that have significantly changed the way healthcare is financed by both governmental and private insurers. There have been judicial, executive and congressional challenges and amendments to certain aspects of the ACA. For example, the IRA, among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount

 

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program. It is possible that the ACA will be subject to judicial or Congressional challenges in the future. It is unclear how any such challenges and the healthcare reform measures of the second Trump administration will impact the ACA and our business.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. For example, on July 4, 2025, the annual reconciliation bill, OBBBA, was signed into law which is expected to reduce Medicaid spending and enrollment by implementing work requirements for some beneficiaries, capping state-directed payments, reducing federal funding, and limiting provider taxes used to fund the program. OBBBA also narrows access to ACA marketplace exchange enrollment and declines to extend the ACA enhanced advanced premium tax credits, set to expire in 2025, which, among other provisions in the law, are anticipated to reduce the number of Americans with health insurance. The Budget Control Act of 2011, among other things, created the Joint Select Committee on Deficit Reduction to recommend Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit reduction, which triggered the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of, on average, 2% per fiscal year until 2032 unless Congress takes additional action. Additionally, the American Rescue Plan Act of 2021 eliminated the statutory Medicaid drug rebate cap, previously set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, effective January 1, 2024.

Recently, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been several recent U.S. presidential executive orders, congressional inquiries and legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for drugs. For example, at the federal level, the IRA, among other things, (1) directs HHS to negotiate the price of certain high-expenditure, single-source drugs covered under the Medicare Drug Price Negotiation Program, and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. These provisions took effect progressively starting in fiscal year 2023. On August 15, 2024, HHS announced the agreed-upon prices of the first ten drugs that were subject to price negotiations, although the Medicare Drug Price Negotiation Program is currently subject to legal challenges. On January 17, 2025, HHS selected fifteen additional drugs covered under Part D for price negotiation in 2025. Each year thereafter more Part B and Part D products will become subject to the Medicare Drug Price Negotiation Program. On February 14, 2023, HHS released a report outlining three new models for testing by the Center for Medicare and Medicaid Innovation which will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care. It is unclear whether the models will be utilized in any health reform measures in the future.

Further, in 2023, an initiative to control the price of prescription drugs through the use of march-in rights under the Bayh-Dole Act was announced. Also in 2023, the National Institute of Standards and Technology published for comment a Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights, which for the first time includes the price of a product as one factor an agency can use when deciding to exercise march-in rights. While march-in rights have not previously been exercised, it is uncertain if that will continue under the new framework.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. For example, in January 2024, the FDA approved Florida’s SIP proposal to import certain drugs from Canada for specific state healthcare programs. It is unclear how this program will be implemented, including which drugs will be chosen, and whether it will be subject to legal challenges in the United States or Canada. Other states have also submitted SIP proposals that are pending review by the FDA. Any such approved importation plans, when implemented, may result in lower drug prices for products covered by those programs.

 

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We are unable to predict the future course of federal or state healthcare legislation in the United States directed at broadening the availability of healthcare and containing or lowering the cost of healthcare, particularly in light of the recent U.S. Presidential and Congressional elections. The current Trump administration is pursuing policies to reduce regulations and expenditures across government including at HHS, the FDA, the CMS, and related agencies. These actions, presently directed by executive orders or memoranda from the Office of Management and Budget, may propose policy changes that create additional uncertainty for our business. These actions and proposals include, for example, include (1) directives to reduce agency workforce and cut programs; (2) rescinding a Biden administration executive order tasking the Center for Medicare and Medicaid Innovation to consider new payment and healthcare models to limit drug spending; (3) eliminating the Biden administration’s executive order that directed HHS to establishing establish an AI task force and developing develop a strategic plan; (4) directing HHS and other agencies to lower prescription drug costs through a variety of initiatives, including by improving upon the Medicare Drug Price Negotiation Program and establishing Most-Favored-Nation pricing for pharmaceutical products; (5) imposing tariffs of imported pharmaceutical products; and (6) directing certain federal agencies to enforce existing law regarding hospital and price plan price transparency and by standardizing prices across hospitals and health plans. Additionally, in its June 2024 decision in Loper Bright Enterprises v. Raimondo, or Loper Bright, the U.S. Supreme Court overturned the longstanding Chevron doctrine, under which courts were required to give deference to regulatory agencies’ reasonable interpretations of ambiguous federal statutes. The Loper Bright decision could result in additional legal challenges to current regulations and guidance issued by federal agencies applicable to our operations, including those issued by the FDA. Congress may introduce and ultimately pass health care related legislation that could, among other legislation, impact the drug approval process and make changes to modify the Medicare Drug Price Negotiation Program created under the IRA, and expand the orphan drug exclusion in the IRA.

We expect that the healthcare reform measures that have been adopted and may be adopted in the future may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product and could seriously harm our future revenues. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products, if approved.

Foreign Government Regulation

To market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of other countries governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of our products.

Whether or not we obtain FDA approval of a product candidate, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. Approval by one regulatory authority does not ensure approval by regulatory authorities in other jurisdictions. The approval process varies from country to country, can involve additional testing beyond that required by FDA, and may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing, promotion, and reimbursement vary greatly from country to country. Failure to comply with applicable foreign regulatory requirements, may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Clinical Trials in the EU

Similarly to the United States, the various phases of non-clinical and clinical research in the European Union, or EU are subject to significant regulatory controls.

 

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Non-clinical studies are performed to demonstrate the health or environmental safety of new chemical or biological substances. Non-clinical studies must be conducted in compliance with the principles of good laboratory practice, GLP, as set forth in Directive 2004/10/EC. These GLP standards reflect the Organization for Economic Co-operation and Development requirements.

Clinical trials of medicinal products in the EU must be conducted in accordance with the Clinical Trials Regulation (EU) No 536/2014, and national regulations and the International Conference on Harmonization, guidelines on GCPs, as well as the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

EU Review and Approval process

In the EU, medicinal products can only be commercialized after a related marketing authorization, or MA, has been granted. To obtain an MA for a product in the EU, an applicant must submit a Marketing Authorization Application, or MAA, either under a centralized procedure administered by the European Medicines Agency, or EMA, or one of the procedures administered by the competent authorities of EU Member States (decentralized procedure, national procedure or mutual recognition procedure). An MA may be granted only to an applicant established in the EU.

The centralized procedure provides for the grant of a single MA by the European Commission that is valid throughout the EEA (which is comprised of the 27 EU Member States plus Norway, Iceland and Liechtenstein). Pursuant to Regulation (EC) No 726/2004, the centralized procedure is compulsory for specific products, including for (i) medicinal products derived from biotechnological processes, (ii) products designated as orphan medicinal products, (iii) advanced therapy medicinal products, or ATMPs, and (iv) products with a new active substance indicated for the treatment of HIV/AIDS, cancer, neurodegenerative diseases, diabetes, auto-immune and other immune dysfunctions and viral diseases. For products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is in the interest of patients, authorization through the centralized procedure is optional on related approval. Under the centralized procedure, the EMA’s Committee for Medicinal Products for Human Use, or CHMP, conducts the initial assessment of a product. The CHMP is also responsible for several post-authorization and maintenance activities, such as the assessment of modifications or extensions to an existing MA. The maximum timeframe for the evaluation of an MAA under the centralized procedure is 210 days, excluding clock stops when additional information or written or oral explanation is to be provided by the applicant in response to questions of the CHMP.

The decentralized MA procedure requires a separate application to, and leads to separate approval by, the competent authorities of each EU Member State in which the product is to be marketed. This application is identical to the application that would be submitted to the EMA for authorization through the centralized procedure. The reference EU Member State prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. The resulting assessment report is submitted to the concerned EU Member States who, within 90 days of receipt, must decide whether to approve the assessment report and related materials. If a concerned EU Member State cannot approve the assessment report and related materials due to concerns relating to a potential serious risk to public health, disputed elements may be referred to the Heads of Medicines Agencies’ Coordination Group for Mutual Recognition and Decentralised Procedures—Human, or CMDh, for review. The subsequent decision of the European Commission is binding on all EU Member States.

The mutual recognition procedure allows companies that have a medicinal product already authorized in one EU Member State to apply for this authorization to be recognized by the competent authorities in other EU Member States. Like the decentralized procedure, the mutual recognition procedure is based on the acceptance by the competent authorities of the EU Member States of the MA of a medicinal product by the competent authorities of other EU Member States. The holder of a national MA may submit an application to the competent authority of an EU Member State requesting that this authority recognize the MA delivered by the competent authority of another EU Member State.

 

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An MA has, in principle, an initial validity of five years. The MA may be renewed after five years on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the EU Member State in which the original MA was granted. To support the application, the MA holder must provide the EMA or the competent authority with a consolidated version of the Common Technical Document providing up-to-date data concerning the quality, safety and efficacy of the product, including all variations introduced since the MA was granted, at least nine months before the MA ceases to be valid. The European Commission or the competent authorities of the EU Member States may decide on justified grounds relating to pharmacovigilance, to proceed with one further five year renewal period for the MA. Once subsequently definitively renewed, the MA shall be valid for an unlimited period. Any authorization which is not followed by the actual placing of the medicinal product on the EU market (for a centralized MA) or on the market of the authorizing EU Member State within three years after authorization ceases to be valid (the so-called sunset clause).

Accelerated and Abbreviated Pathways in the EU

Innovative products that target an unmet medical need and are expected to be of major public health interest may be eligible for a number of expedited development and review programs, such as the Priority Medicines, or PRIME, scheme, which provides incentives similar to the breakthrough therapy designation in the U.S. PRIME is a voluntary scheme aimed at enhancing the EMA’s support for the development of medicinal products that target unmet medical needs. Eligible products must target conditions for which there is an unmet medical need (there is no satisfactory method of diagnosis, prevention or treatment in the EU or, if there is, the new medicinal product will bring a major therapeutic advantage) and they must demonstrate the potential to address the unmet medical need by introducing new methods of therapy or improving existing ones. Benefits accrue to sponsors of product candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development program elements, and potentially accelerated MAA assessment once a dossier has been submitted. Accelerated assessment may be granted by the CHMP in exceptional cases, when a medicinal product targeting an unmet medical need is expected to be of major interest from the point of view of public health and, in particular, from the viewpoint of therapeutic innovation. If the CHMP accepts a request for accelerated assessment, the time limit of 210 days will be reduced to 150 days (excluding clock stops). The CHMP can, however, revert to the standard time limit for the centralized procedure if it considers that it is no longer appropriate to conduct an accelerated assessment.

In the EU, a “conditional” MA may be granted in cases where all the required safety and efficacy data are not yet available. The European Commission may grant a conditional MA for a medicinal product if it is demonstrated that all of the following criteria are met: (i) the benefit-risk balance of the medicinal product is positive; (ii) it is likely that the applicant will be able to provide comprehensive data post-authorization; (iii) the medicinal product fulfils an unmet medical need; and (iv) the benefit of the immediate availability to patients of the medicinal product is greater than the risk inherent in the fact that additional data are still required. The conditional MA is subject to conditions to be fulfilled for generating the missing data or ensuring increased safety measures. It is valid for one year and must be renewed annually until all related conditions have been fulfilled. Once any pending studies are provided, the conditional MA can be converted into a traditional MA. However, if the conditions are not fulfilled within the timeframe set by the EMA and approved by the European Commission, the MA will cease to be renewed.

An MA may also be granted “under exceptional circumstances” where the applicant can show that it is unable to provide comprehensive data on efficacy and safety under normal conditions of use even after the product has been authorized and subject to specific procedures being introduced. These circumstances may arise in particular when the intended indications are very rare and, in the state of scientific knowledge at that time, it is not possible to provide comprehensive information, or when generating data may be contrary to generally accepted ethical principles. Like a conditional MA, an MA granted in exceptional circumstances is reserved to medicinal products intended to be authorized for treatment of rare diseases or unmet medical needs for which the applicant does not hold a complete data set that is required for the grant of a standard MA. However, unlike the conditional MA, an applicant for authorization in exceptional circumstances is not subsequently required to

 

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provide the missing data. Although the MA “under exceptional circumstances” is granted definitively, the risk-benefit balance of the medicinal product is reviewed annually, and the MA will be withdrawn if the risk-benefit ratio is no longer favorable.

Pediatric Development

In the EU, Regulation (EC) No 1901/2006 provides that all MAAs for new medicinal products have to include the results of trials conducted in the pediatric population, in compliance with a pediatric investigation plan, or PIP, agreed with the EMA’s Pediatric Committee, or PDCO. The PIP sets out the timing and measures proposed to generate data to support a pediatric indication of the medicinal product for which MA is being sought. The PDCO can grant a deferral of the obligation to implement some or all of the measures provided in the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in adults. Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these data are not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing treatments for pediatric patients. Once the MA is obtained in all EU Member States and study results are included in the product information, even when negative, the product is eligible for a six-month extension to the Supplementary Protection Certificate, or SPC, if any is in effect at the time of authorization or, in the case of orphan medicinal products, a two-year extension of orphan market exclusivity.

Data and Market Exclusivity in the EU

The EU provides opportunities for data and market exclusivity related to MAs. Upon receiving an MA, innovative medicinal products are generally entitled to receive eight years of data exclusivity and 10 years of market exclusivity. Data exclusivity, if granted, prevents regulatory authorities in the EU from referencing the innovator’s data to assess a generic application or biosimilar application for eight years from the date of authorization of the innovative product, after which a generic or biosimilar MAA can be submitted, and the innovator’s data may be referenced. The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the EU until 10 years have elapsed from the initial MA of the reference product in the EU. The overall ten-year period may, occasionally, be extended for a further year to a maximum of 11 years if, during the first eight years of those ten years, the MA holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. However, there is no guarantee that a product will be considered by the EU’s regulatory authorities to be a new chemical/biological entity, and products may not qualify for data exclusivity.

In April 2023, the European Commission issued a proposal to revise and replace the existing general pharmaceutical legislation, which was supported in large part by the European Parliament in April 2024. Additional procedural steps remain in the European legislative process and the proposed legislation is not expected to be adopted until at least 2026. If adopted and implemented as currently proposed, these legislative revisions will significantly change several aspects of drug development and approval in the EU.

Post-authorization Requirements in the EU

Where an MA is granted in relation to a medicinal product in the EU, the holder of the MA is required to comply with a range of regulatory requirements applicable to the manufacturing, marketing, promotion and sale of medicinal products. Similar to the United States, both MA holders and manufacturers of medicinal products are subject to comprehensive regulatory oversight by the EMA, the European Commission and/or the competent regulatory authorities of the individual EU Member States. The holder of an MA must establish and maintain a pharmacovigilance system and appoint an individual qualified person for pharmacovigilance who is responsible for oversight of that system. Key obligations include expedited reporting of suspected serious adverse reactions and submission of periodic safety update reports, or PSURs.

 

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All new MAAs must include a risk management plan, or RMP, describing the risk management system that the company will put in place and documenting measures to prevent or minimize the risks associated with the product. The regulatory authorities may also impose specific obligations as a condition of the MA. Such risk- minimization measures or post-authorization obligations may include additional safety monitoring, more frequent submission of PSURs, or the conduct of additional clinical trials or post-authorization safety studies.

In the EU, the advertising and promotion of medicinal products are subject to both EU and EU Member States’ laws governing promotion of medicinal products, interactions with physicians and other healthcare professionals, misleading and comparative advertising and unfair commercial practices. General requirements for advertising and promotion of medicinal products, such as direct-to-consumer advertising of prescription medicinal products are established in EU law. However, the details are governed by regulations in individual EU Member States and can differ from one country to another. Interactions between pharmaceutical companies and health care professionals are also governed by strict laws, such as national anti-bribery laws of European countries, national sunshine rules, regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct.

Pricing, Coverage and Reimbursement in the EU

In the EU, pricing and reimbursement schemes vary widely from country to country. For example, some countries provide that products may be marketed only after an agreement on reimbursement price has been reached. Such pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a product. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. In addition, the EU provides options for its Member States to restrict the range of products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. EU Member States may approve a specific price for a product, may adopt a system of direct or indirect controls on the profitability of the company placing the product on the market. Other EU Member States allow companies to fix their own prices for products but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. In addition, some EU Member States may require the completion of additional studies that compare the cost-effectiveness of a particular medicinal product candidate to currently available therapies. This Health Technology Assessment, or HTA, process is the procedure according to which the assessment of the public health impact, therapeutic impact and the economic and societal impact of use of a given medicinal product in the national healthcare systems of the individual country is conducted. The outcome of HTA regarding specific medicinal products will often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual EU Member States.

The Foreign Corrupt Practices Act

The FCPA prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. United States authorities that enforce the FCPA, including the DOJ, deem most health care professionals and other employees of foreign hospitals, clinics, research facilities and medical schools in countries with public health care or public education systems to be “foreign officials” under the FCPA. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Additional Regulation

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Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use, handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these laws may affect our future operations.

Data Privacy and Security

Numerous state, federal, and foreign laws, regulations and standards govern the collection, use, access to, confidentiality, and security of health-related and other personal information, including clinical trial data, and could apply now or in the future to our operations or the operations of our partners. In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws, and consumer protection laws and regulations, govern the collection, use, disclosure, and protection of health-related and other personal information. Further, to the extent we collect personal data from individuals outside of the United States, through clinical trials or otherwise, we could be subject to foreign laws, such as the GDPR, which govern the privacy and security of personal data, including health-related data. Our use of machine learning may also be subject to evolving laws and regulations, controlling for data bias and anti-discrimination. Privacy and security laws, regulations and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing.

Employees and Human Capital Resources

As of July 15, 2025, we had 16 total employees. Of our 16 employees, two hold Ph.D. and/or M.D. degrees and eight were engaged in research and development. None of our employees is subject to a collective bargaining agreement. We consider our relationship with our employees to be good.

We recognize that our continued ability to attract, retain, and motivate exceptional employees is vital to ensuring our long-term competitive advantage. Our employees are critical to our long-term success and are essential to helping us meet our goals. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing, and integrating our existing and additional employees. The principal purposes of our equity incentive plans are to attract, retain, and motivate selected employees, consultants, and directors through the granting of stock-based compensation awards and cash-based performance bonus awards.

Properties and Facilities

Our principal office is located at One Pennsylvania Plaza, Suite 1025, New York, NY 10119, where we lease approximately 8,900 square feet of office space under a lease that will expire in 2032. We believe that our existing facility is adequate to meet our current needs, and that suitable additional alternative spaces will be available in the future on commercially reasonable terms.

Legal Proceedings

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We do not have any pending litigation that, separately or in the aggregate, would, in the opinion of management, have a material adverse effect on our results of operations, financial condition, or cash flows.

 

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MANAGEMENT

The following table sets forth information about our executive officers, directors, and certain key employees as of June 30, 2025.

 

Name

   Age     

Position(s)

Executive Officers

     

Heather Turner

     52      Chief Executive Officer

Gad Soffer

     48      Chief Business Officer

Anna Eramo, M.D.

     51      Chief Medical Officer

Marc Panoff

     55      Senior Vice President, Finance

Richard Silva

     58      Senior Vice President, Technical Operations

Non-Employee Directors

     

Scott Garland

     56      Chairman of the Board of Directors

Rajul Jain, M.D.

     50      Director

Rebecca Luse

     40      Director

Ran Nussbaum

     52      Director

Zachary Prensky

     52      Director

Robert R. Ruffolo, Jr., Ph.D., D.Sc., D.Eng., F.C.P.P.

     75      Director

Chen Yu, M.D.

     51      Director
 
(1)

Member of the audit committee.

(2)

Member of the compensation committee.

(3)

Member of the nominating and corporate governance committee.

Executive Officers

Heather Turner has served as our Chief Executive Officer and director since November 2024. Prior to joining us, Ms. Turner was President and Chief Executive Officer of Carmot Therapeutics Inc. (acquired by Roche) from January 2023 to June 2024 and Chief Operating Officer from September 2022 to December 2022. Prior to Carmot, Ms. Turner served as Chief General Counsel and Secretary at Lyell Immunopharma, Inc. from April 2019 to May 2022. Prior to Lyell, Ms. Turner served as Executive Vice President, General Counsel and Secretary of Sangamo Therapeutics, Inc., a publicly traded gene therapy and gene editing company, from February 2018 to March 2019, and served as Executive Vice President, General Counsel and Head of Portfolio Strategy at Atara Biotherapeutics, Inc., a publicly-traded allogeneic cell therapy company, from July 2015 to February 2018. Prior to that, Ms. Turner served as General Counsel and Secretary at Orexigen Therapeutics, Inc. a publicly-traded company focused on metabolic diseases, from June 2007 to June 2015. Ms. Turner started her career at Cooley LLP as a corporate securities associate. Ms. Turner received her J.D. from UCLA School of Law and her B.A. in Environmental Studies from the University of California, Santa Barbara. Ms. Turner has served as the chair of the board of directors of Avalyn Pharma Inc., a clinical-stage biotech company, since November 2024 and as a member of the board of directors of Terns Pharmaceuticals, Inc., a publicly traded clinical-stage biopharmaceutical company, since November 2024. Our board of directors believes that Ms. Turner’s extensive experience as an executive and director of companies in the biopharmaceutical industry provides her with the qualifications to serve on our board of directors.

Gad Soffer has served as our Chief Business Officer since February 2025. Mr. Soffer has also served as a consultant and director of General Metabolics LLC since 2023. From 2021 to 2023, Mr. Soffer created and managed a family investment vehicle that focused on investing in the biotechnology and pharmaceutical sectors. Prior to that, Mr. Soffer served as Chief Executive Officer of Consonance-HFW Acquisition Corp. from November 2020 to June 2021. Prior to that, Mr. Soffer served as Chief Operating Officer at Rheos Medicines, Inc. from October 2018 to June 2020. Prior to that, he served as Executive Vice President and Chief Strategy Officer at Atara Biotherapeutics, Inc. from October 2016 to September 2018 and served as Chief Operating Officer from March 2013 through October 2016. From August 2008 to March 2013, he held various roles in

 

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Business Development and served as Global Project Leader for Abraxane at Celgene Corporation. From June 2000 to June 2001 and from April 2004 to April 2006, Mr. Soffer was a healthcare consultant with Easton Associates LLC. He received an A.B. from Harvard University, an M.S. from Columbia University and an M.B.A. from Harvard Business School.

Anna Eramo, M.D. has served as our Chief Medical Officer since September 2020. Prior to joining us, Dr. Eramo served various roles with increased responsibilities at Lundbeck A/S from 2017 to 2020, where she led U.S. clinical and medical affairs with primary responsibilities extending across its entire U.S. neurology and psychiatric portfolio of products, including brexpiprazole, vortioxetine, and Abilify Maintena. Dr. Eramo holds both an academic degree in Medicine and a specialty degree in Psychiatry and Psychotherapy from the University Medical School of Naples, Italy.

Marc Panoff has served as our Senior Vice President, Finance since June 2024 and previously served as our Chief Financial Officer from March 2016 to May 2024. Immediately prior to joining us, Mr. Panoff served as an independent consultant to several companies. From 2013 to 2015, Mr. Panoff served as Chief Financial Officer at Retrophin, Inc. From 2006 to 2012, Mr. Panoff served as Chief Financial Officer, Treasurer and Secretary of Neurologix, Inc. From 2004 to 2006, Mr. Panoff served as Chief Financial Officer of Nephros, Inc., a publicly traded medical device developer. Mr. Panoff has served on the board of directors of Little Bear Pharmaceuticals, Inc. since February 2025. Mr. Panoff received his Bachelor of Science degree in Business Administration from Washington University in St. Louis and his master’s degree in Business Administration from Arizona State University. He is also a Certified Public Accountant in New York State (inactive).

Richard Silva, Ph.D. has served as our Senior Vice President of Technical Operations since February 2025. Prior to joining us, Dr. Silva was Senior Vice President of Pharmaceutical Sciences at Carmot Therapeutics Inc. (acquired by Roche) from April 2023 to July 2024. Prior to that, Dr. Silva served as Vice President Technical Operations, Development and Manufacturing at Epizyme, Inc. (acquired by Ipsen) from March 2020 to April 2023. Prior to Epizyme, Dr. Silva was Senior Director at Kaleido Biosciences from March 2019 to February 2020, and prior to that he served as Senior Director of Chemical Process Development at ImmunoGen, Inc. from July 2015 to March 2019. Dr. Silva holds a Ph.D. in Synthetic Organic Chemistry from Dartmouth College and a B.S. in Chemistry from the University of Massachusetts.

Non-Employee Directors

Scott Garland has served as Chairman of our board of directors since February 2024. Since September 2023, Mr. Garland has been a partner at Vida Ventures. Mr. Garland was the Chief Executive Officer of PACT Pharma, Inc., an immuno-oncology company focused on developing neoantigen targeted T-cell therapies for solid tumors from 2021 to 2023. Prior to PACT Pharma, Inc., Mr. Garland served as President and Chief Executive Officer of Portola Pharmaceuticals, Inc. from 2018 to 2020, where he led the company through the commercial launch of Andexxa and acquisition by Alexion Pharmaceuticals, Inc. Before joining Portola Pharmaceuticals, Inc., Mr. Garland was at Relypsa Inc. from 2014 to 2018, where he served as Chief Commercial Officer, and then as President of the U.S. organization after Relypsa Inc.’s acquisition by Vifor Pharma AG. Prior to Relypsa Inc., Mr. Garland was Chief Commercial Officer at Exelixis, Inc. from 2011 to 2014. Mr. Garland has held numerous other commercial leadership roles at Genentech, Inc., Amgen Inc., Merck & Co., Inc., including leading the commercial franchises for two multi-billion-dollar therapies—Avastin and Rituxan. He also serves as a board member for ALX Oncology Inc., a biopharmaceutical company, since November 2022, and Day One Biopharmaceuticals, Inc., a biopharmaceutical company, since August 2021, and Olema Pharmaceuticals, Inc., a biopharmaceutical company, since October 2023. Mr. Garland served on the Board of Directors for Karyopharm Therapeutics Inc., a biotechnology company, from 2014 to 2020 and on the Board of Directors of Calithera Biosciences, Inc. from 2020 to 2023. Mr. Garland received a Bachelor of Science degree from California Polytechnic State University-San Luis Obispo and a master’s degree in Business Administration from the Fuqua School of Business at Duke University. Our board of directors believes that Mr. Garland’s extensive leadership experience in the healthcare industry and his service as a public company director qualify him to serve on our board of directors.

 

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Rajul Jain, M.D. has served as a member of our board of directors since September 2023. Since May 2019, Dr. Jain has been a partner at Vida Ventures, where he currently is a Managing Director. Dr. Jain previously served as Vice President at Kite Pharma, Inc. Previously, Mr. Jain was at Amgen, Inc. where his last role was Global Development Lead. There he oversaw the development of small molecules and biologics in the oncology and bone health therapeutic areas and was instrumental in advancing the R&D pipeline including regulatory approvals of Xgeva and Prolia. Mr. Jain also serves as a board member of Capstan Therapeutics, Inc., InduPro, Inc., Locanabio, Inc., A2 Biotherapeutics, Inc., Quanta Therapeutics, Inc., and Third Arc Bio, Inc. Mr. Jain completed his B.A. in Chemistry and Biochemistry at Rice University, and M.D. and Internal Medicine internship and residency at UT Southwestern Medical School, where he was a Howard Hughes Fellow. He completed his post-doctoral training in biophysics at Rockefeller University, and fellowship training at M.D. Anderson Cancer Center, where he was chief fellow. Our board of directors believes that Mr. Jain’s financial expertise and investment experience in the life sciences industry provides him with the qualifications to serve on our board of directors.

Rebecca Luse has served as a member of our board of directors since August 2023. Since January 2021, Ms. Luse has served as Principal of Deep Track Capital. Ms. Luse previously served as Principal of New Leaf Venture Partners. Previously, she worked on the sell side at both Jefferies and Piper Jaffray, covering biotechnology and specialty pharmaceuticals companies. Ms. Luse started her career as an investment banking analyst in the health care group of Bank of America and as a venture capital associate at Bay City Capital. Rebecca earned a Bachelor of Science in Biochemistry and Mathematics from Indiana University. Our board of directors believes Ms. Luse’s financial expertise and investment experience in the life sciences industry provides her with the qualifications to serve on our board of directors.

Ran Nussbaum has served as a member of our board of directors since August 2023. Since 2004, Mr. Nussbaum has served as a Managing Partner and the Co-Founder of Pontifax. He also serves as a board member on many of Pontifax’s portfolio companies. He currently serves as a director of Keros Therapeutics, Inc. since April 2016, Lutris Pharma Ltd since May 2016, Kamari Pharma Ltd since April 2021, Indapta Therapeutics Inc. since April 2022, and Graviton Bioscience Corp since December 2022. Mr. Nussbaum previously served as a director of Urogen Pharma Ltd., ArQule, Inc. (acquired by Merck & Co., Inc.), BioBlast Pharma Ltd., Eloxx Pharmaceuticals Ltd., Prevail Therapeutics Inc., VBI Vaccines Inc. and Kite Pharma, Inc. until its acquisition by Gilead Sciences, Inc. Our board of directors believes Mr. Nussbaum’s financial expertise and experience serving on the boards of directors of other public companies qualify him to serve on our board of directors.

Zachary Prensky is our Co-Founder, has served as a member of our board of directors since September 2015 and served as our Chief Executive Officer from September 2015 to November 2024. Prior to joining us, Mr. Prensky managed both Little Bear Investments and The Kybartai Trust, a family office with a heavy focus on investing in the biotechnology and pharmaceutical sectors, from 1998 to 2015. Since February 2025, Mr. Prensky has served as the Chief Executive Officer and member of the board of directors of Little Bear Pharmaceuticals, Inc. Mr. Prensky attended Yeshiva University. Our board of directors believes that Mr. Prensky’s experience as our Co-Founder and former Chief Executive Officer, as well as his expertise in the field of neuroscience, qualify him to serve on our board of directors.

Robert R. Ruffolo, Jr., Ph.D., D.Sc., D.Eng., F.C.P.P. has served as a member of our board of directors since July 2019. He served as the President of Research and Development and as the Corporate Senior Vice President of Wyeth Pharmaceuticals, Inc. from 2002 through 2008. In these roles, he managed an R&D organization of 9,000 scientists with an annual budget in excess of $3 billion. From 2000 to 2002 he served as an Executive Vice President at Wyeth Pharmaceuticals, Inc., where he was responsible for Pharmaceutical Research and Development. Prior to joining Wyeth Pharmaceuticals, Inc., Dr. Ruffolo spent 17 years at SmithKline Beecham Pharmaceuticals plc (now GlaxoSmithKline plc) where he was Senior Vice President and Director of Biological Sciences, Worldwide from 1984 to 2000. Before joining SmithKline Beecham Pharmaceuticals plc, Dr. Ruffolo spent six years at Eli Lilly and Company from 1978 to 1984 where he was Chairman of the Cardiovascular Research Committee. Dr. Ruffolo currently serves on the boards of directors of Elicio Therapeutics, Inc. and

 

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several private companies. He received his B.S. in Pharmacy from The Ohio State University and his Ph.D. in Pharmacology from The Ohio State University. Our board of directors believes that Dr. Ruffolo’s extensive leadership experience in the healthcare industry and his service as a public company director qualify him to serve on our board of directors.

Chen Yu, M.D. has served as a member of our board of directors since December 2023. Dr. Yu is the founder and Managing Partner at TCG Crossover Fund. Prior to founding TCG Crossover Fund, Dr. Yu spent 16 years as a Managing Partner at Vivo Capital, a life-sciences focused investment fund. Dr. Yu has extensive operating experience with leadership roles at both private and public companies, including stints as the Chief Operating Officer of Sagent Pharmaceuticals, Inc. from 2012 to 2013, and Chief Business Officer of China Kanghui Holdings, from 2010 to 2012. Dr. Yu previously served on the boards of Structure Therapeutics Inc. from 2021 to 2023, Tarsus Pharmaceuticals, Inc. in 2020, Sagent Pharmaceuticals, Inc. from 2008 to 2013, Nanjing King-friend Biochemical Pharmaceutical Co., Ltd. from 2011 to 2019, and over a dozen private companies. Dr. Yu also serves on the California Leadership Council for The Nature Conservancy and was previously a member of the Stanford Medical School Alumni Board of Governors. Dr. Yu received his M.D. and M.B.A. from Stanford University and graduated magna cum laude with a B.A. in Biology from Harvard University. Our board of directors believes that Dr. Yu’s financial expertise and experience serving on the boards of directors of other companies qualify him to serve on our board of directors.

Board Composition

Our business and affairs are organized under the direction of our board of directors, which currently consists of eight members. All of our directors currently serve on the board of directors pursuant to the provisions of the voting agreement between us and several of our stockholders. The voting agreement will terminate upon the completion of this offering, after which there will be no further contractual obligations regarding the election or designation of our directors. Our current directors will continue to serve as directors until their resignation, removal or successor is duly elected.

In accordance with the terms of our amended and restated certificate of incorporation that will become effective immediately prior to the closing of this offering, we will divide our board of directors into three classes, Class I, Class II, and Class III, with members of each class serving a staggered three-year term. In connection with this offering, our board of directors will be divided into the following three classes:

 

  •  

Class I, which will consist of    and    , whose terms will expire at our annual meeting of stockholders to be held in 2026;

 

  •  

Class II, which will consist of    and    , whose terms will expire at our annual meeting of stockholders to be held in 2027; and

 

  •  

Class III, which will consist of    and    , whose terms will expire at our annual meeting of stockholders to be held in 2028.

At each annual meeting of stockholders to be held after the initial classification, the successors to directors whose terms then expire will serve until the third annual meeting following their election and until their successors are duly elected and qualified. Our amended and restated bylaws that will become effective immediately prior to the closing of this offering will provide that the authorized number of directors may be changed only by resolution of a majority of our board of directors. Any additional directorships resulting from an increase in the number of directors or from the filling of any current vacancies will be distributed between the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our board of directors may have the effect of delaying or preventing changes in our control or management.

Director Independence

Our board of directors has undertaken a review of the independence of our directors and considered whether any director has a relationship that, in the opinion of the board of directors, would interfere with the exercise of

 

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independent judgment in carrying out the responsibilities of a member of our board. Based upon information requested from and provided by each director concerning such director’s background, employment, and affiliations, including family relationships, our board of directors has determined that all of our directors, except for Ms. Turner and Mr. Prensky, representing six of our eight directors, are “independent directors” as defined under the listing standards of Nasdaq. In making these determinations, our board of directors considered the current and prior relationships that each director has with our company and all other facts and circumstances that our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director and the transactions described in the section titled “Certain Relationships and Related Party Transactions.” Our board of directors has determined that Ms. Turner, by virtue of her role as our Chief Executive Officer, and Mr. Prensky, by virtue of his role as our former Chief Executive Officer, are not independent directors under the current rules and regulations of the SEC and the listing standards of Nasdaq.

There are no family relationships among any of our directors or executive officers.

Role of the Board in Risk Oversight

One of the key functions of our board of directors is informed oversight of our risk management process. Our board of directors does not have a standing risk management committee, but rather administers this oversight function directly through the board of directors as a whole. Additionally, in connection with this offering, our board of directors will establish various standing committees of the board of directors that will address risks inherent in their respective areas of oversight, as described below. In particular, our audit committee will monitor our major financial, accounting, legal, compliance, investment, tax, cybersecurity, and data privacy risks, and the steps our management has taken to identify and control these exposures, including by reviewing and setting guidelines, internal controls, and policies that govern the process by which risk assessment and management is undertaken. In addition, our compensation committee will oversee the management of risks relating to our employment policies and executive compensation plans and arrangements, and our nominating and corporate governance committee will oversee the management of our corporate governance practices.

While our board of directors oversees our risk management, management is responsible for day-to-day risk management processes. Our board of directors expects management to consider risk and risk management in each business decision, to proactively develop and monitor risk management strategies and processes for day-to-day activities, and to effectively implement risk management strategies adopted by our board of directors, as a whole and at the committee level. We believe this division of responsibilities is the most effective approach for addressing the risks we face.

Board Committees

In connection with this offering, our board of directors will establish an audit committee, a compensation committee, and a nominating and corporate governance committee. Our board of directors may from time to time establish other committees.

Audit Committee

Upon the completion of this offering, our audit committee will consist of     ,      , and     , with      serving as the chair of the audit committee. Our board of directors has determined that each of these individuals satisfies the requirements for independence under the current rules and regulations of the SEC and the listing standards of Nasdaq. Each member of our audit committee can read and understand fundamental financial statements in accordance with Nasdaq audit committee requirements. In addition, our board of directors has determined that qualifies as an “audit committee financial expert” within the meaning of SEC regulations. In arriving at these determinations, the board has examined each audit committee member’s scope of experience and the nature of their prior and/or current employment.

 

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The primary responsibilities of the audit committee will include, among other things:

 

  •  

helping our board of directors oversee our corporate accounting and financial reporting processes;

 

  •  

managing the selection, engagement, qualifications, independence, and performance of a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;

 

  •  

discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end operating results;

 

  •  

developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;

 

  •  

reviewing related person transactions;

 

  •  

overseeing cybersecurity matters and policies;

 

  •  

obtaining and reviewing a report by the independent registered public accounting firm that describes its internal quality control procedures, any material issues with such procedures, and any steps taken to deal with such issues when required by applicable law; and

 

  •  

approving, or, as permitted, pre-approving, audit and permissible non-audit services to be performed by the independent registered public accounting firm.

The audit committee will operate under a written charter, to be effective immediately prior to the closing of this offering, which satisfies the applicable rules and regulations of the SEC and the listing standards of Nasdaq.

Compensation Committee

Upon completion of this offering, our compensation committee will consist of      ,      , and     , with      serving as chair of the compensation committee. Our board of directors has determined that each of the members of our compensation committee is independent under the listing standards of Nasdaq and qualifies as a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act.

The primary responsibilities of the compensation committee will include, among other things:

 

  •  

reviewing and approving (or, as applicable, recommending to our board of directors) the compensation of our Chief Executive Officer and other executive officers;

 

  •  

reviewing and approving the compensation paid to our non-employee directors;

 

  •  

administering our equity incentive plans and other benefit programs;

 

  •  

reviewing and approving, or making recommendations to our board of directors with respect to, incentive compensation and equity plans;

 

  •  

reviewing, adopting, amending, and terminating the terms of any employment agreements, severance arrangements, bonus plans, deferred compensation plans, change-of-control protections, and any other compensatory arrangements for our executive officers;

 

  •  

reviewing, evaluating, and recommending to our board of directors succession plans for our executive officers; and

 

  •  

reviewing and establishing general policies relating to compensation and benefits of our employees, including our overall compensation philosophy.

The compensation committee will operate under a written charter, to be effective immediately prior to the closing of this offering, which satisfies the applicable rules and regulations of the SEC and the listing standards of Nasdaq.

 

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Nominating and Corporate Governance Committee

Upon completion of this offering, our nominating and corporate governance committee will consist of           and     , with      serving as chair of the nominating and corporate governance committee. Our board of directors has determined that each of these individuals is “independent” as defined under the applicable listing standards of Nasdaq and SEC rules and regulations.

The primary responsibilities of the nominating and corporate governance committee will include, among other things:

 

  •  

identifying, reviewing, and evaluating candidates, including the nomination of incumbent directors for reelection and nominees recommended by our stockholders, to serve on our board of directors;

 

  •  

considering and making recommendations to our board of directors regarding the composition and chairmanship of the committees of our board of directors;

 

  •  

instituting plans or programs for the continuing education of our board of directors and orientation of new directors;

 

  •  

developing and making recommendations to our board of directors regarding corporate governance guidelines and matters; and

 

  •  

overseeing periodic evaluations of the board of directors’ performance, including committees of the board of directors.

The nominating and corporate governance committee will operate under a written charter, to be effective immediately prior to the closing of this offering, which satisfies the applicable rules and regulations of the SEC and the listing standards of Nasdaq.

Code of Business Conduct and Ethics

Prior to the closing of this offering, we intend to adopt a written code of business conduct and ethics, or the Code of Conduct, that applies to our directors, officers, and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or person performing similar functions. Following this offering, a copy of the Code of Conduct will be available on the Corporate Governance section of our website, https://lbpharma.us/. We intend to disclose on our website any future amendments of our Code of Conduct or waivers that exempt any of the principal executive officer, principal financial officer, principal accounting officer or controller, persons performing similar functions or our directors from provisions in the Code of Conduct. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus. We have included our website in this prospectus solely as an inactive textual reference.

Compensation Committee Interlocks and Insider Participation

None of our current or former executive officers serve as a member of the compensation committee. None of our officers serve, or have served during the last completed fiscal year, on the board of directors or compensation committee, or other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of our board of directors or our compensation committee.

Non-Employee Director Compensation

Historically, we have not had a formal compensation policy with respect to service on our board of directors. In 2024, only our non-employee directors, Mr. Garland and Dr. Ruffolo, Jr., received cash fees and option awards in respect of their board service, as shown in the table below. We did not provide compensation for 2024 to our investor designee directors. We have reimbursed and will continue to reimburse all of our non-employee directors for their reasonable out-of-pocket expenses incurred in attending board of directors and committee meetings.

 

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Director Compensation Table

The following table sets forth information regarding the compensation of our non-employee directors earned for service on our board of directors during the year ended December 31, 2024.

 

Name

   Fees
Earned or
Paid in Cash
($)
     Option Awards
($)(1)
     All Other
Compensation
($)(2)
     Total
($)
 

Scott Garland(3)

     55,000        801,000        —         856,000  

Rajul Jain, M.D.

     —         —         —         —   

Rebecca Luse

     —         —         —         —   

Ran Nussbaum

     —         —         —         —   

Robert R. Ruffolo, Jr., Ph.D., D.Sc., D.Eng., F.C.P.P. (4)

     30,000        387,000        42,000        459,000  

Chen Yu, M.D.

     —         —         —         —   
 
(1)

Amounts reported in this column represent the aggregate grant date fair value of the stock option awards granted to Mr. Garland and Dr. Ruffolo, Jr. during 2024 as determined in accordance with FASB ASC Topic 718. Assumptions used in the calculations of these amounts are included in Note 10 to our audited financial statements included in this registration statement. The amounts do not reflect the actual economic value that may be realized by Mr. Garland or Dr. Ruffolo, Jr.

(2)

Includes consulting fees of $3,500 per month paid to Dr. Ruffolo, Jr. for clinical consulting services provided to us.

(3)

The aggregate number of shares issuable upon exercise of option awards outstanding at December 31, 2024 for Mr. Garland was 600,000, none of which were vested. 25% of each of the option awards vests upon the first anniversary of the grant date, and the remainder vests and becomes exercisable in thirty-six (36) substantially equal monthly installments thereafter.

(4)

The aggregate number of shares issuable upon exercise of option awards outstanding at December 31, 2024 for Dr. Ruffolo, Jr. was 370,000, 70,000 of which were fully vested. 25% of the option awards vests upon the first anniversary of the grant date, and the remainder vests and becomes exercisable in thirty-six (36) substantially equal monthly installments thereafter.

Ms. Turner, our current Chief Executive Officer, and Mr. Prensky, our former Chief Executive Officer, each of whom is also a director, did not receive any additional compensation for their respective service as directors in 2024. Ms. Turner and Mr. Prensky’s compensation as named executive officers in 2024 is set forth below under “Executive Compensation—Summary Compensation Table.”

Non-Employee Director Compensation Policy

We intend to adopt a formal non-employee director compensation policy in connection with this offering and on terms to be determined by our board of directors. Under the non-employee director policy, our non-employee directors will be eligible to receive compensation for service on our board of directors and committees of our board of directors.

 

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EXECUTIVE COMPENSATION

Our named executive officers for the year ended December 31, 2024, consisting of the two individuals who served as our principal executive officer during the fiscal year ended December 31, 2024 and the next two most highly compensated executive officers who were serving in such capacity as of December 31, 2024, were:

 

  •  

Heather Turner, our Chief Executive Officer and a member of our board of directors;

 

  •  

Zachary Prensky, our former Chief Executive Officer and a member of our board of directors;

 

  •  

Roger Sawhney, our former Chief Financial Officer; and

 

  •  

Anna Eramo, M.D., our Chief Medical Officer.

Summary Compensation Table

The following table sets forth information regarding all of the compensation awarded to or earned by or paid to our named executive officers during the fiscal year ended December 31, 2024.

 

Name and Principal Position

  Year     Salary
($)
    Bonus
($)(1)
    Option
Awards
($)(2)
    All Other
Compensation
($)
    Total ($)  

Heather Turner(3)

    2024       68,750       —        4,709,607       14,333 (4)      4,792,690  

Chief Executive Officer and Director

           

Zachary Prensky(5)

    2024       443,000       —        2,055,000       1,063,546 (6)      3,561,546  

Former Chief Executive Officer and Director

           

Roger Sawhney(7)

    2024       187,917       108,397       1,301,500       6,833 (8)      1,604,647  

Former Chief Financial Officer

           

Anna Eramo, M.D.

    2024       375,000       262,500       239,750       13,800 (8)      891,050  

Chief Medical Officer

           
 
(1)

Amounts reported in this column represent 2024 discretionary annual bonuses and, for Dr. Eramo only, an additional $75,000 discretionary bonus paid in 2024.

(2)

Amounts reported in this column represent the aggregate grant date fair value of the stock options granted to our named executive officers during 2024 under the 2023 Plan, as calculated in accordance with FASB ASC Topic 718. Assumptions used in the calculations of these amounts are included in Note 10 to our audited financial statements included in this registration statement. The amounts do not reflect the actual economic value that may be realized by the named executive officer.

(3)

Commenced employment as our Chief Executive Officer in November 2024.

(4)

Amount shown represents a housing stipend.

(5)

Resigned as our Chief Executive Officer in connection with Ms. Turner’s appointment as Chief Executive Officer.

(6)

Amount shown includes $13,800 in Company-paid 401(k) matching contributions and certain benefits in connection with Mr. Prensky’s employment termination pursuant to the Prensky Separation Agreement (as defined below), which include the following: (i) eighteen (18) months of base salary ($750,000), (ii) an amount with respect to his 2024 annual bonus ($250,000), and (iii) eighteen (18) months of the Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, premiums ($49,746).

(7)

Commenced employment as our Chief Financial Officer in June 2024 and was subsequently terminated in May 2025.

(8)

Amount shown represents Company-paid 401(k) matching contributions.

 

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Narrative to the Summary Compensation Table

Annual Base Salary

Our named executive officers receive a base salary to compensate them for services rendered to us. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role, and responsibilities. The base salary of our named executive officers is generally determined and approved by our board of directors in connection with the commencement of employment of the named executive officer and may be adjusted from time to time thereafter as the board of directors determines appropriate. The 2024 annual base salaries for our named executive officers were as follows: (1) $550,000 for Ms. Turner, (2) $500,000 for Mr. Prensky, (3) $410,000 for Mr. Sawhney, and (4) $375,000 for Dr. Eramo.

Bonus Compensation

In addition to base salaries, each of our named executive officers is eligible to receive a discretionary annual bonus of up to a percentage of the executive’s gross base salary based on individual performance, Company performance or as otherwise determined appropriate, as determined by our board of directors. For the year ended December 31, 2024, cash bonus targets were 50% for Ms. Turner, 40% for Mr. Prensky, 40% for Mr. Sawhney, and 40% for Dr. Eramo. The amount of any discretionary annual bonus is determined after the end of the year for which the bonus relates. The amounts paid to the named executive officers for the 2024 discretionary annual bonus (other than Ms. Turner and Mr. Prensky) were as follows: (1) $108,397 for Mr. Sawhney, and (2) $187,500 for Dr. Eramo. Mr. Prensky received a $250,000 annual bonus payment pursuant to the terms of the Prensky Separation Agreement, as described below under “—Potential Payments Upon Termination or Change in Control.”

In addition to the annual bonus, in May 2024, our board of directors (following the recommendation of our compensation committee) awarded Dr. Eramo a discretionary bonus equal to $75,000.

Equity-Based Incentive Awards

Our equity-based incentive awards are designed to align our named executive officers’ interests with those of our stockholders and to retain and incentivize our named executive officers over the long term. Our board of directors is responsible for approving equity grants. Vesting of equity awards is generally tied to continuous service with us and serves as an additional retention measure. Our named executive officers generally are awarded an initial new-hire grant upon commencement of employment. Additional grants may occur periodically in order to specifically incentivize our named executive officers with respect to achieving certain corporate goals or to reward our named executive officers for exceptional performance.

Prior to this offering, we have granted all equity awards pursuant to our 2017 Plan, 2018 Plan, and our 2023 Plan. Following this offering, we will grant equity incentive awards under the terms of our 2025 Plan. The terms of our equity plans are described below under “—Equity Benefit Plans.” All options are granted with a per share exercise price equal to no less than the fair market value of a share of our common stock on the date of the grant of such award. Generally, our option awards vest over a four-year period subject to the holder’s continuous service to us, as further described under “—Outstanding Equity Awards as of December 31, 2024” below.

In June 2024, our board of directors granted Mr. Prensky, Mr. Sawhney, and Dr. Eramo options to purchase 1,500,000, 950,000, and 175,000 shares of our common stock, respectively. In addition, in November 2024, our board of directors granted Ms. Turner an option to purchase 4,900,000 shares of our common stock. The terms of these awards are described under “—Outstanding Equity Awards as of December 31, 2024” below.

 

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Outstanding Equity Awards as of December 31, 2024

The following table sets forth certain information regarding equity awards granted to our named executive officers that remained outstanding as of December 31, 2024.

 

            Option Awards(1)      Stock Awards(1)  

Name

   Grant Date      Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
     Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
    Option
Exercise
Price
($)
     Option
Expiration
Date
     Number
of Shares
or Units
of Stock
that
Have
Not
Vested
(#)
     Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested
($)(2)
 

Heather Turner

     11/18/2024        —         4,900,000 (2)      1.50        11/17/2034        —         —   

Zachary Prensky(3)

     11/21/2018        110,000        —        2.30        11/20/2028        —         —   
     02/19/2020        25,000        —        2.50        02/18/2030        —         —   
     08/25/2020        35,000        —        2.50        08/24/2030        —         —   
     08/29/2023        166,666        333,334  (2)      1.50        08/28/2033        —         —   
     06/28/2024        —         1,500,000 (2)      1.50        06/27/2034        —         —   

Roger Sawhney(4)

     06/28/2024        —         950,000 (2)      1.50        06/27/2034        —         —   

Anna Eramo, M.D.

     08/29/2023        250,000        500,000  (2)      1.50        08/28/2033        —         —   
     06/28/2024        —         175,000 (2)      1.50        06/27/2034        —         —   
 
(1)

The equity awards listed in the table above were granted under the 2023 Plan, the 2018 Plan, and the 2017 Plan.

(2)

25% of the option vests upon the first anniversary of the grant date, and the remainder vests and becomes exercisable in thirty-six (36) substantially equal monthly installments thereafter.

(3)

Resigned as our Chief Executive Officer in connection with Ms. Turner’s appointment as Chief Executive Officer. In connection with such resignation, Mr. Prensky’s outstanding option awards were treated as described below under “—Potential Payments Upon Termination or Change in Control—Zachary Prensky.”

(4)

Was terminated from the Chief Financial Officer role in May 2025. In connection with such termination, Mr. Sawhney’s outstanding option award was treated as described below under “—Potential Payments Upon Termination or Change in Control—Roger Sawhney.”

Employment Arrangements

We are party to employment agreements with each of our named executive officers. The employment agreements set forth the named executive officer’s base salary, eligibility for employee benefits, and severance benefits upon a qualifying termination of employment or change in control of our Company and, other than Ms. Turner, generally provide for an initial term commencing on the effective date of the applicable agreement and ending on the one-year anniversary of the effective date. After the initial one-year term, the employment agreement will automatically renew for successive one-year terms. Either we or the executive may elect not to renew the employment agreement after the initial one-year term by providing the other party written notice of non-renewal not less than ninety (90) days prior to the expiration of the then-existing employment period. Each of our named executive officers has executed our standard confidential information, inventions assignment, and arbitration agreement. The key terms of the employment agreements with our named executive officers, including potential payments upon termination or change in control, are described below.

Heather Turner

In November 2024, we entered into an executive employment agreement with Heather Turner, our Chief Executive Officer and a member of our board of directors, who commenced employment on November 18, 2024, or the Turner Employment Agreement. The Turner Employment Agreement provides for an annual base salary of

 

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$550,000 per year. Pursuant to the Turner Employment Agreement, Ms. Turner is eligible to receive an annual performance cash bonus with a target bonus opportunity equal to 50% of her base salary, as adjusted from time to time, based on the achievement of corporate and individual objectives and milestones established by our board of directors. Additionally, pursuant to the Turner Employment Agreement, Ms. Turner received an option to purchase 4,900,000 shares of our common stock, at an exercise price of $1.50 per share. 25% of the option vests and becomes exercisable upon the first anniversary of the date Ms. Turner commenced employment with us, and the remainder vests and becomes exercisable in thirty-six (36) substantially equal monthly installments thereafter, subject to Ms. Turner continuing to have a service relationship (as defined in the 2023 Plan) with us through each such date. Ms. Turner is also entitled to certain severance benefits, the terms of which are described below under “—Potential Payments Upon Termination or Change in Control.”

Zachary Prensky

In August 2023, we entered into an executive employment agreement with Zachary Prensky, our former Chief Executive Officer and a member of our board of directors, which was amended in June 2024, or the Prensky Employment Agreement. The Prensky Employment Agreement provided for an annual base salary of $500,000 per year, as adjusted from time to time. Pursuant to the Prensky Employment Agreement, Mr. Prensky was eligible to receive an annual performance cash bonus with a target bonus opportunity equal to 40% of his base salary, as adjusted from time to time, based on the achievement of corporate and individual objectives and milestones established by our board of directors. Additionally, the Prensky Employment Agreement provided for the grant of an option to purchase (i) 500,000 shares of our common stock, at an exercise price of $1.50 per share, whereby 25% of the option vests and becomes exercisable upon the first anniversary of the effective date of the Prensky Employment Agreement, and the remainder vests and becomes exercisable in thirty-six (36) substantially equal monthly installments thereafter and (ii) 1,500,000 shares of our common stock, at an exercise price of $1.50 per share, whereby 25% of the option vests and becomes exercisable upon the first anniversary of the effective date of the amendment to the Prensky Employment Agreement, and the remainder vests and becomes exercisable in thirty-six (36) substantially equal monthly installments thereafter, in each case, subject to Mr. Prensky continuing to have a service relationship (as defined in the 2023 Plan) with us through each such date. Mr. Prensky was also entitled to certain severance benefits, pursuant to the Prensky Employment Agreement. In November 2024, we entered into a separation agreement with Mr. Prensky, the terms of which are described below under “—Potential Payments Upon Termination or Change in Control.”

Roger Sawhney

In June 2024, we entered into an executive employment agreement with Roger Sawhney, our former Chief Financial Officer, who commenced employment on June 21, 2024, or the Sawhney Employment Agreement. The Sawhney Employment Agreement provided for an annual base salary of $410,000 per year. Pursuant to the Sawhney Employment Agreement, Mr. Sawhney was eligible to receive an annual performance cash bonus with a target bonus opportunity equal to 40% of his base salary, as adjusted from time to time, based on the achievement of corporate and individual objectives and milestones established by our board of directors. Additionally, the Turner Employment Agreement provided for the grant of an option to purchase 950,000 shares of our common stock, at an exercise price of $1.50 per share, whereby 25% of the option vests and becomes exercisable upon the first anniversary of the effective date of the Sawhney Employment Agreement, and the remainder vests and becomes exercisable in thirty-six (36) substantially equal monthly installments thereafter, subject to Mr. Sawhney’s continuing to have a service relationship (as defined in the 2023 Plan) with us through each such date. Mr. Sawhney was also entitled to certain severance benefits, the terms of which are described below under “—Potential Payments Upon Termination or Change in Control.” In May 2025, we entered into a separation agreement with Mr. Sawhney, the terms of which are described below under “—Potential Payments Upon Termination or Change in Control.”

 

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Anna Eramo, M.D.

In August 2023, we entered into an executive employment agreement with Anna Eramo, M.D., our Chief Medical Officer, or the Eramo Employment Agreement. The Eramo Employment Agreement provides for an annual base salary of $325,000 per year, as adjusted from time to time. Dr. Eramo’s current annual base salary for 2025 is $393,750 per year. Pursuant to the Eramo Employment Agreement, Dr. Eramo is eligible to receive an annual performance cash bonus with a target bonus opportunity equal to 40% of her base salary, as adjusted from time to time, based on the achievement of corporate and individual objectives and milestones established by our board of directors. Additionally, the Eramo Employment Agreement provided for the grant of an option to purchase 750,000 shares of our common stock, at an exercise price of $1.50 per share. 25% of the option vested and became exercisable upon the first anniversary of the effective date of the Eramo Employment Agreement, and the remainder vests and becomes exercisable in thirty-six (36) substantially equal monthly installments thereafter, subject to Dr. Eramo continuing to have a service relationship with us through each such date. Dr. Eramo is also entitled to certain severance benefits, the terms of which are described below under “—Potential Payments Upon Termination or Change in Control.”

Potential Payments Upon Termination or Change in Control

Regardless of the manner in which a named executive officer’s service terminates, each of our named executive officers is entitled to receive amounts earned during his or her term of service, including unpaid salary and unused vacation. In the event of certain termination scenarios, each named executive officer will be entitled to receive the additional benefits summarized below pursuant to his or her employment agreement, subject to the timely execution and non-revocation of a separation agreement and general release of claims (among other preconditions).

Heather Turner

If we terminate Ms. Turner’s employment without cause or she resigns for good reason (each of “cause” and “good reason” as defined in the Turner Employment Agreement) during a time period other than the three (3) months prior to or twelve (12) months following a change in control (as defined in the Turner Employment Agreement), Ms. Turner will be entitled to receive the following benefits pursuant to the Turner Employment Agreement: (i) a severance payment equal to twelve (12) months of her then-current annual base salary, and (ii) if Ms. Turner is eligible for and elects group health plan continuation coverage under COBRA, we will reimburse Ms. Turner for the monthly COBRA premium paid by her for herself and her spouse/dependents until the earliest of (A) twelve (12) months following the termination date; (B) the expiration of Ms. Turner’s eligibility for the continuation coverage under COBRA; or (C) the date when Ms. Turner becomes eligible for substantially equivalent health insurance coverage in connection with new employment.

If, in the alternative, we terminate Ms. Turner’s employment without cause or she resigns for good reason during the three (3) months prior to or twelve (12) months following a change in control, Ms. Turner will be entitled to receive the following benefits in lieu of the regular severance benefits described above: (i) a lump sum cash payment equal to eighteen (18) months of her then-current base salary, (ii) one-and-a-half (1.5) times the annual bonus for the year in which the termination occurs, (iii) accelerated vesting of any unvested equity that Ms. Turner holds, and (iv) if Ms. Turner is eligible for and elects group health plan continuation coverage under COBRA, we will reimburse Ms. Turner for the monthly COBRA premium paid by her for herself and her spouse/dependents until the earliest of (A) eighteen (18) months following the termination date; (B) the expiration of Ms. Turner’s eligibility for the continuation coverage under COBRA; or (C) the date when Ms. Turner becomes eligible for substantially equivalent health insurance coverage in connection with new employment.

Upon termination of Ms. Turner’s employment by reason of death or disability (as defined in the Turner Employment Agreement), Ms. Turner (or her estate) will be entitled to receive the following benefits pursuant to the Turner Employment Agreement: (i) a pro rata portion of the annual bonus for the fiscal year in which the

 

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termination occurs, to the extent earned based on actual performance, and (ii) if Ms. Turner is eligible for and elects group health plan continuation coverage under COBRA, we will reimburse Ms. Turner for the monthly COBRA premium paid by her (or in the event of her death, her surviving spouse and/or dependents) for herself and her spouse/dependents, until the earliest of: (A) the last day of the month that is twenty-six (26) weeks after the date of such termination; (B) in the event of her disability, the date she becomes eligible to receive healthcare coverage from a subsequent employer, or (C) the date she is no longer eligible to receive COBRA continuation coverage.

Zachary Prensky

In November 2024, we entered into a transition, consulting, and separation agreement with Mr. Prensky, or the Prensky Separation Agreement, pursuant to which he ceased serving as Chief Executive Officer and served as Advisor to our Chief Executive Officer through December 31, 2024, his employment termination date. Pursuant to the Prensky Separation Agreement, Mr. Prensky is receiving the following benefits: (i) eighteen (18) months of base salary, (ii) an amount equal to his 2024 target bonus, and (iii) up to eighteen (18) months of COBRA premiums. The Prensky Separation Agreement also states that Mr. Prensky will provide consulting services following his termination of employment and while actively serving as a consultant, will receive continued vesting of his outstanding and unvested options for the duration of the consulting period (as defined in the Prensky Separation Agreement).

Roger Sawhney

If we had terminated Mr. Sawhney’s employment without cause or if he had resigned for good reason (each of “cause” and “good reason” as defined in the Sawhney Employment Agreement) during a time period other than the three (3) months prior to or twelve (12) months following a change in control (as defined in the Sawhney Employment Agreement), Mr. Sawhney would have been entitled to receive the following benefits pursuant to the Sawhney Employment Agreement: (i) a severance payment equal to nine (9) months of his then-current annual base salary, and (ii) if Mr. Sawhney had been eligible for and elected group health plan continuation coverage under COBRA, we would have reimbursed Mr. Sawhney for the monthly COBRA premium paid by him for himself and his spouse/dependents until the earliest of (A) nine (9) months following the termination date; (B) the expiration of Mr. Sawhney’s eligibility for the continuation coverage under COBRA; or (C) the date when Mr. Sawhney became eligible for substantially equivalent health insurance coverage in connection with new employment.

If, in the alternative, we had terminated Mr. Sawhney’s employment without cause or he resigned for good reason during the three (3) months prior to or twelve (12) months following a change in control, Mr. Sawhney would have been entitled to receive the following benefits in lieu of the regular severance benefits described above: (i) a lump sum cash payment equal to one year of his then-current base salary, (ii) one-and-a-half (1.5) times the annual bonus for the year in which the termination had occurred, (iii) accelerated vesting of any unvested equity that Mr. Sawhney had then held, and (iv) if Mr. Sawhney had been eligible for and elected group health plan continuation coverage under COBRA, we would have reimbursed Mr. Sawhney for the monthly COBRA premium paid by him for himself and his spouse/dependents until the earliest of (A) twelve (12) months following the termination date; (B) the expiration of Mr. Sawhney’s eligibility for the continuation coverage under COBRA; or (C) the date when Mr. Sawhney became eligible for substantially equivalent health insurance coverage in connection with new employment.

Upon termination of Mr. Sawhney’s employment by reason of death or disability (as defined in the Sawhney Employment Agreement), Mr. Sawhney (or his estate) would have been entitled to receive the following benefits pursuant to the Sawhney Employment Agreement: (i) a pro rata portion of the annual bonus for the fiscal year in which the termination occurred, to the extent earned based on actual performance, and (ii) if Mr. Sawhney had been eligible for and elected group health plan continuation coverage under COBRA, we would have reimbursed Mr. Sawhney for the monthly COBRA premium paid by him (or in the event of his death, his surviving spouse

 

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and/or dependents) for himself and his spouse/dependents, until the earliest of: (A) the last day of the month that is twenty-six (26) weeks after the date of such termination; (B) in the event of his disability, the date he became eligible to receive healthcare coverage from a subsequent employer, or (C) the date he was no longer eligible to receive COBRA continuation coverage.

In May 2025, we entered into a separation agreement with Mr. Sawhney, or the Sawhney Separation Agreement, pursuant to which his employment with us terminated effective May 7, 2025. Pursuant to the Sawhney Separation Agreement, Mr. Sawhney is receiving the following benefits: (i) the equivalent of nine (9) months of base salary, (ii) up to nine (9) months of COBRA premiums, (iii) acceleration of his then-outstanding and unvested stock option under the 2023 Plan, such that 25% of the shares subject to the option will be treated as vested and exercisable as of May 7, 2025, and (iv) retention of our company-issued laptop computer provided to him during his employment.

Anna Eramo, M.D.

If we terminate Dr. Eramo’s employment without cause or she resigns for good reason (each of “cause” and “good reason” as defined in the Eramo Employment Agreement), then Dr. Eramo will be entitled to receive the following benefits pursuant to the Eramo Employment Agreement: (i) a severance payment equal to eighteen (18) months of her then-current base salary, (ii) a pro rata portion of the annual bonus for the fiscal year in which the termination occurs, to the extent earned based on actual performance, and (iii) if Dr. Eramo is eligible for and elects group health plan continuation coverage under COBRA, we will reimburse Dr. Eramo for eighteen (18) months of the monthly COBRA premium paid by her for herself and her spouse/dependents, and (iv) an additional six (6) monthly installments of the option to purchase 750,000 shares of our common stock that Dr. Eramo received in August 2023 will automatically vest.

If, in the alternative, we terminate Dr. Eramo’s employment in the event of a change in control (as defined in the Eramo Employment Agreement), Dr. Eramo will be entitled to receive the following benefits in lieu of the regular severance benefits set forth above: (i) a lump sum cash payment equal to one year of her then-current base salary, (ii) one-and-a-half (1.5) times the annual bonus for the year in which the termination occurs, to the extent earned based on actual performance, (iii) if Dr. Eramo is eligible for and elects group health plan continuation coverage under COBRA, we will reimburse Dr. Eramo for twelve (12) months of the monthly COBRA premium paid by her for herself and her spouse/dependents, and (iv) 100% of the option to purchase 750,000 shares of our common stock that Dr. Eramo received in August 2023 will automatically vest.

Pursuant to the terms of the Eramo Employment Agreement, if Dr. Eramo’s employment agreement is terminated in the event of our non-renewal of the Eramo Employment Agreement, then Dr. Eramo will be entitled to a severance payment equal to nine (9) months of her then-current annual base salary, and an additional nine (9) monthly installments of the option to purchase 750,000 shares of our common stock that Dr. Eramo received in August 2023 will automatically vest.

Upon termination of Dr. Eramo’s employment by reason of death or disability (as defined in the Eramo Employment Agreement), Dr. Eramo (or her estate) will be entitled to receive the following benefits pursuant to the Eramo Employment Agreement: (i) a pro rata portion of the annual bonus for the fiscal year in which the termination occurs, to the extent earned based on actual performance, (ii) if Dr. Eramo is eligible for and elects group health plan continuation coverage under COBRA, we will reimburse Dr. Eramo for the monthly COBRA premium paid by her (or in the event of her death, her surviving spouse and/or dependents) for herself and her spouse/dependents, until the earliest of: (A) the last day of the month that is twenty-six (26) weeks after the date of such termination, (B) in the event of Dr. Eramo’s disability, the date Dr. Eramo becomes eligible to receive healthcare coverage from a subsequent employer, or (C) the date Dr. Eramo is no longer eligible to receive COBRA continuation coverage, and (iii) a minimum of 25% of the option to purchase 750,000 shares of our common stock that Dr. Eramo received in August 2023 will automatically vest.

 

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Other Compensation and Benefits

Each of our named executive officers is eligible to participate in our employee benefit plans, including our medical, dental, vision, life, and long-term disability plans, in each case on the same basis as all of our other employees. We pay at least a portion of the premiums for medical, dental, vision, and life insurance for all of our employees, including our named executive officers. We generally do not provide perquisites or personal benefits to our named executive officers, except in limited circumstances. In addition, we provide the opportunity to participate in a 401(k) plan to our employees, including each of our named executive officers, as discussed in the section below entitled “—401(k) Plan.”

401(k) Plan

Our named executive officers are eligible to participate in a defined contribution retirement plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax-advantaged basis. Eligible employees may defer eligible compensation on a pre-tax or after-tax (Roth) basis, up to the statutorily prescribed annual limits on contributions under the Code. Individual contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan (except for Roth contributions) and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan. We may elect, at our discretion, to make matching employee contributions.

Equity Benefit Plans

The principal features of our equity plans are summarized below. These summaries are qualified in their entirety by reference to the actual text of the plans, which are filed as exhibits to the registration statement of which this prospectus is a part.

2025 Equity Incentive Plan

Our board of directors adopted our 2025 Plan in 2025 and our stockholders approved our 2025 Plan in 2025. Our 2025 Plan is a successor to and continuation of our 2023 Plan (referred to in the 2025 Plan as LB Pharmaceuticals Inc 2023 Stock Incentive Plan) and became effective on the execution of the underwriting agreement related to this offering. Once our 2025 Plan became effective, no further grants will be made under our 2023 Plan.

Types of Awards. Our 2025 Plan provides for the grant of incentive stock options, or ISOs, to employees, including employees of any parent or subsidiary, and for the grant of non-statutory stock options, or NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards, and other forms of stock awards to employees, directors, and consultants, including employees and consultants of our affiliates.

Authorized Shares. Initially, the maximum number of shares of our common stock that may be issued under our 2025 Plan after it becomes effective will be    shares. In addition, the number of shares of our common stock reserved for issuance under our 2025 Plan will automatically increase on January 1 of each calendar year, starting on January 1, 2026 (assuming the 2025 Plan becomes effective in 2025) through January 1, 2035, in an amount equal to 5% of the total number of shares of our capital stock on a fully diluted basis on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by our board of directors. The maximum number of shares of our common stock that may be issued on the exercise of incentive stock options under our 2025 Plan is    .

Shares subject to stock awards granted under our 2025 Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, do not reduce the number of shares available for issuance

 

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under our 2025 Plan. Additionally, shares become available for future grant under our 2025 Plan if they were issued under stock awards under our 2025 Plan if we repurchase them or they are forfeited. This includes shares used to pay the exercise price of a stock award or to satisfy the tax withholding obligations related to a stock award.

Plan Administration. Our board of directors, or a duly authorized committee of our board of directors, will administer our 2025 Plan. Our board of directors may also delegate to one or more persons or bodies the authority to do one or more of the following (i) designate recipients (other than officers) of specified stock awards provided that no person or body may be delegated authority to grant a stock award to themself; (ii) determine the number of shares subject to such stock award; and (iii) determine the terms of such stock awards. Under our 2025 Plan, our board of directors has the authority to determine and amend the terms of awards and underlying agreements, including:

 

  •  

recipients;

 

  •  

the exercise, purchase or strike price of stock awards, if any;

 

  •  

the number of shares subject to each stock award;

 

  •  

the vesting schedule applicable to the awards, together with any vesting acceleration; and

 

  •  

the form of consideration, if any, payable on exercise or settlement of the award.

Under the 2025 Plan, the board of directors also generally has the authority to effect, with the consent of any adversely affected participant:

 

  •  

the reduction of the exercise, purchase, or strike price of any outstanding award;

 

  •  

the cancellation of any outstanding award and the grant in substitution therefore of other awards, cash, or other consideration; or

 

  •  

any other action that is treated as a repricing under generally accepted accounting principles.

Stock Options. ISOs and NSOs are granted under stock option agreements adopted by the plan administrator. The plan administrator determines the exercise price for stock options, within the terms and conditions of the 2025 Plan, provided that the exercise price of a stock option generally cannot be less than 100% of the fair market value of our common stock on the date of grant. Options granted under the 2025 Plan vest at the rate specified in the stock option agreement as determined by the plan administrator.

Tax Limitations on ISOs. The aggregate fair market value, determined at the time of grant, of our common stock with respect to ISOs that are exercisable for the first time by an option holder during any calendar year under all of our stock plans may not exceed $100,000. Options or portions thereof that exceed such limit will generally be treated as NSOs. No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any of our affiliates unless (i) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant; and (ii) the option is not exercisable after the expiration of five years from the date of grant.

Restricted Stock Unit Awards. Restricted stock units are granted under restricted stock unit award agreements adopted by the plan administrator. Restricted stock units may be granted in consideration for any form of legal consideration that may be acceptable to our board of directors and permissible under applicable law. A restricted stock unit may be settled by cash, delivery of stock, a combination of cash and stock as deemed appropriate by the plan administrator, or in any other form of consideration set forth in the restricted stock unit agreement. Additionally, dividend equivalents may be credited in respect of shares covered by a restricted stock unit. Except as otherwise provided in the applicable award agreement, restricted stock units that have not vested will be forfeited once the participant’s continuous service ends for any reason.

 

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Restricted Stock Awards. Restricted stock awards are granted under restricted stock award agreements adopted by the plan administrator. A restricted stock award may be awarded in consideration for cash, check, bank draft or money order, past services to us, or any other form of legal consideration that may be acceptable to our board of directors and permissible under applicable law. The plan administrator determines the terms and conditions of restricted stock awards, including vesting and forfeiture terms. If a participant’s service relationship with us ends for any reason, we may receive any or all of the shares of our common stock held by the participant that have not vested as of the date the participant terminates service with us through a forfeiture condition or a repurchase right.

Stock Appreciation Rights. Stock appreciation rights are granted under stock appreciation grant agreements adopted by the plan administrator. The plan administrator determines the purchase price or strike price for a stock appreciation right, which generally cannot be less than 100% of the fair market value of our common stock on the date of grant. A stock appreciation right granted under the 2025 Plan vests at the rate specified in the stock appreciation right agreement as determined by the plan administrator.

Performance Awards. The 2025 Plan permits the grant of performance-based stock and cash awards. The plan administrator may structure awards so that the shares of our stock, cash, or other property will be issued or paid only following the achievement of certain pre-established performance goals during a designated performance period. The performance criteria that will be used to establish such performance goals may be based on any measure of performance selected by the plan administrator. The performance goals may be based on a Company-wide basis, with respect to one or more business units, divisions, affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise (i) in the award agreement at the time the award is granted or (ii) in such other document setting forth the performance goals at the time the goals are established, we will appropriately make adjustments in the method of calculating the attainment of performance goals as follows: (1) to exclude restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects of items that are “unusual” in nature or occur “infrequently” as determined under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by us achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (8) to exclude the effect of any change in the outstanding shares of our common stock by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends; (9) to exclude the effects of stock based compensation and the award of bonuses under our bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; (11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles; and (12) to exclude the effects of the timing of acceptance for review and/or approval of submissions to the FDA, EMA or other comparable regulatory authority. In addition, we retain the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of the goals. The performance goals may differ from participant to participant and from award to award.

Other Stock Awards. The plan administrator may grant other awards based in whole or in part by reference to our common stock. The plan administrator will set the number of shares under the stock award and all other terms and conditions of such awards.

Non-Employee Director Compensation Limit. The aggregate value of all compensation granted or paid to any non-employee director with respect to any fiscal year following the year in which the underwriting agreement for this offering is executed, including stock awards granted and cash fees paid by us to such non-employee director, will not exceed $750,000 in total value (or in the case of the chair of the board, $1,000,000 in total value), or in the event such non-employee director is first appointed or elected to the board of

 

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directors during such fiscal year, $1,000,000 in total value (in each case, calculating the value of any such stock awards based on the grant date fair value of such stock awards for financial reporting purposes).

Changes to Capital Structure. In the event there is a specified type of change in our capital structure, such as a stock split, reverse stock split, or recapitalization, appropriate adjustments will be made to (i) the class and maximum number of shares reserved for issuance under the 2025 Plan, (ii) the class and maximum number of shares by which the share reserve may increase automatically each year, (iii) the class and maximum number of shares that may be issued on the exercise of incentive stock options, and (iv) the class and number of shares and exercise price, strike price, or purchase price, if applicable, of all outstanding stock awards.

Corporate Transactions. The following applies to stock awards under the 2025 Plan in the event of a corporate transaction, unless otherwise provided in a participant’s stock award agreement or other written agreement with us or one of our affiliates or unless otherwise expressly provided by the plan administrator at the time of grant.

In the event of a corporate transaction (as defined in the 2025 Plan), any stock awards outstanding under the 2025 Plan may be assumed, continued or substituted for by any surviving or acquiring corporation (or its parent company), and any reacquisition or repurchase rights held by us with respect to the stock award may be assigned to the successor (or its parent company). If the surviving or acquiring corporation (or its parent company) does not assume, continue or substitute for such stock awards, then with respect to any such stock awards that are held by participants whose continuous service has not terminated prior to the effective time of the transaction, or current participants, the vesting (and exercisability, if applicable) of such stock awards will be accelerated in full to a date prior to the effective time of the transaction (contingent upon the effectiveness of the transaction), and such stock awards will terminate if not exercised (if applicable) at or prior to the effective time of the transaction, and any reacquisition or repurchase rights held by us with respect to such stock awards will lapse (contingent upon the effectiveness of the transaction). With respect to performance awards with multiple vesting levels depending on performance level, unless otherwise provided by an award agreement or by the administrator, the award will accelerate at 100% of target. If the surviving or acquiring corporation (or its parent company) does not assume, continue or substitute for such stock awards, then with respect to any such stock awards that are held by persons other than current participants, such awards will terminate if not exercised (if applicable) prior to the effective time of the transaction, except that any reacquisition or repurchase rights held by us with respect to such stock awards will not terminate and may continue to be exercised notwithstanding the transaction. The plan administrator is not obligated to treat all stock awards or portions of stock awards in the same manner and is not obligated to take the same actions with respect to all participants.

In the event a stock award will terminate if not exercised prior to the effective time of a transaction, the plan administrator may provide, in its sole discretion, that the holder of such stock award may not exercise such stock award but instead will receive a payment equal in value to the excess (if any) of (i) the value of the property the participant would have received upon the exercise of the stock award over (ii) any exercise price payable by such holder in connection with such exercise.

Under our 2025 Plan, a corporate transaction is defined to include: (i) a sale of all or substantially all of our assets; (ii) the sale or disposition of more than 50% of our outstanding securities; (iii) the consummation of a merger or consolidation where we do not survive the transaction; and (iv) the consummation of a merger or consolidation where we do survive the transaction but the shares of our common stock outstanding before such transaction are converted or exchanged into other property by virtue of the transaction, unless otherwise provided in an award agreement or other written agreement between us and the award holder. Under the 2025 Plan, a change in control is defined to include (1) the acquisition by any person or company of more than 50% of the combined voting power of our then outstanding stock; (2) a merger, consolidation or similar transaction in which our stockholders immediately before the transaction do not own, directly or indirectly, more than 50% of the combined voting power of the surviving entity (or the parent of the surviving entity); (3) the approval by the stockholders or the board of directors of a plan of our complete dissolution or liquidation, or the occurrence of

 

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our complete dissolution or liquidation, except for a liquidation into a parent corporation; (4) a sale, lease, exclusive license or other disposition of all or substantially all of our assets other than to an entity more than 50% of the combined voting power of which is owned by our stockholders; and (5) an unapproved change in the majority of the board of directors.

Change in Control. In the event of a change in control, as defined under our 2025 Plan, awards granted under our 2025 Plan will not receive automatic acceleration of vesting and exercisability, although this treatment may be provided for in an award agreement.

Clawback. All awards granted under the 2025 Plan will be subject to recoupment in accordance with any clawback policy that we are required to adopt pursuant to the listing standards of any national securities exchange or association on which our securities are listed or as is otherwise required by the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, our board of directors may impose such other clawback, recovery or recoupment provisions in a stock award agreement as our board of directors determines necessary or appropriate.

Transferability. A participant may not transfer stock awards under our 2025 Plan other than by will, the laws of descent and distribution, or as otherwise provided under our 2025 Plan.

Plan Amendment or Termination. Our board of directors has the authority to amend, suspend, or terminate our 2025 Plan, provided that such action does not materially impair the existing rights of any participant without such participant’s written consent. Certain material amendments also require the approval of our stockholders. No incentive stock options may be granted after the tenth anniversary of the date our board of directors adopted our 2025 Plan. No stock awards may be granted under our 2025 Plan while it is suspended or after it is terminated.

2023 Stock Incentive Plan

Our board of directors adopted, and our stockholders approved, the 2023 Plan in August 2023. The 2023 Plan was amended in December 2024. The 2023 Plan terminated on the date the 2025 Plan became effective, and thereafter no further stock awards will be granted under the 2023 Plan. However, any outstanding stock awards granted under the 2023 Plan will remain outstanding, subject to the terms of our 2023 Plan and award agreements, until such outstanding options are exercised or until any stock awards terminate or expire by their terms.

Types of Awards. The 2023 Plan allows for the grant of ISOs to our employees, including employees of any parent or subsidiary, and for the grant of nonstatutory stock options and restricted stock awards to our employees, officers, directors, and consultants, including employees and consultants of our affiliates.

Authorized Shares. Subject to certain capitalization adjustments, the aggregate number of shares of our common stock that could be issued pursuant to stock awards under the 2023 Plan could not exceed 12,955,197 shares. The maximum number of shares of our common stock that could be issued pursuant to the exercise of ISOs under our 2023 Plan was 12,955,197 shares. The shares we have issued under the 2023 Plan have been authorized but unissued shares or shares we reacquired. The shares of common stock underlying any awards that are (i) expired or unexercisable without being exercised in full, (ii) surrendered pursuant to an option exchange program (as defined in the 2023 Plan), (iii) forfeited to or repurchased by us due to a failure to vest, or (iv) that are withheld upon exercise of an award or settlement of an award to cover the tax withholding, could again become available for issuance under the 2023 Plan, or collectively, 2023 Lapsed Awards.

Plan Administration. The 2023 Plan is administered by our board of directors or a committee appointed by it, or the 2023 Plan Administrator. The 2023 Plan Administrator has full power to, among other things, (i) determine the fair market value of our common stock, (ii) select the individuals to whom awards may be

 

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granted, (iii) determine the number of shares covered by awards, (iv) approve forms of award agreements for use under the 2023 Plan, (v) determine the specific terms and conditions of each award, (vi) amend the terms and conditions of any award, (vii) to determine whether and under what circumstances an option may be settled in cash instead of common stock, (viii) institute and determine the terms of an option exchange program under which (A) outstanding awards are exchanged for other awards or cash, (B) outstanding awards are transferred to a third party institution, or (C) the exercise price of outstanding awards is reduced or increased, (ix) approve addenda or to grant awards to, or to modify the terms of, any outstanding award agreement or any agreement related to any award, optioned stock, or restricted stock held by participants who are foreign nationals or employed outside of the United States to accommodate differences in local law, tax policy or custom, and (x) construe and interpret the terms of the 2023 Plan and awards.

Stock Options. The exercise price per share of all stock options generally must equal at least 100% of the fair market value per share of our common stock on the date of grant. The term of a stock option may not exceed ten years. An ISO granted to a participant who owns more than 10% of the total combined voting power of all classes of our stock on the date of grant, or any subsidiary corporations, may not have a term in excess of five years and must have an exercise price of at least 110% of the fair market value per share of our common stock on the date of grant. The 2023 Plan Administrator will determine the methods of payment of the exercise price of an option, which may include cash, check, promissory note, other shares, consideration received under a cashless exercise program, net exercise, other consideration and methods of payment, or any combination thereof acceptable to the 2023 Plan Administrator. After a participant’s termination of service, the participant generally may exercise his or her stock options, to the extent vested as of such date of termination, during a period of three (3) months after termination of service. If a termination of service is due to death or disability, the option generally will remain exercisable, to the extent vested as of such date of termination, for a period of twelve (12) months following the date of such termination of service. However, in no event may an option be exercised later than the expiration of its term.

Restricted Stock. Restricted stock awards are grants of shares of our common stock that are subject to various restrictions, including restrictions on transferability, and forfeitures provisions. Shares of restricted stock will vest, and the restrictions on such shares will lapse, in accordance with terms and conditions established by the 2023 Plan Administrator.

Changes to Capital Structure. In the event of certain changes in our capitalization, the 2023 Plan Administrator will adjust the number and class of shares of stock that may be delivered under the 2023 Plan and/or the number, class, and price of shares of common stock covered by each outstanding award.

Corporate Transactions. The 2023 Plan provides that in the event of a corporate transaction (as defined in the 2023 Plan), each outstanding award will be treated as the 2023 Plan Administrator determines without participant’s consent. Such determination may provide for one or more of the following including, without limitation, that (i) awards will be continued by us if we are the surviving entity, (ii) awards will be assumed, or substantially equivalent awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices, (iii) the participant’s awards will terminate upon or immediately prior to the consummation of such corporate transaction for no consideration, or (iv) the termination of an award in exchange for a payment in an amount equal to the excess of (1) the fair market value of the shares of our common stock subject to such awards as of the closing date of such corporate transaction over or (2) the exercise price or purchase price paid or to be paid for the shares subject to the awards. The 2023 Plan Administrator will not be obligated to treat similarly all awards, all awards a participant holds, all awards of the same type, or all portions of awards.

Transferability. The 2023 Plan generally does not allow for the transfer or assignment of awards other than by will or by the laws of descent and distribution, or, at the discretion of the 2023 Plan Administrator by gift to an immediate family member or to trusts for the benefit of family members.

 

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Plan Amendment or Termination. Our board of directors may amend, alter, suspend, or terminate the 2023 Plan at any time and for any reason, provided that stockholder approval is obtained where such approval is required by applicable law.

2018 Stock Incentive Plan

Our board of directors adopted, and our stockholders approved, the 2018 Plan in August 2018. The 2018 Plan terminated on the date the 2023 Plan became effective, and thereafter no further stock awards were granted under the 2018 Plan. However, any outstanding stock awards granted under the 2018 Plan will remain outstanding, subject to the terms of our 2018 Plan and award agreements, until such outstanding options are exercised or until any stock awards terminate or expire by their terms.

Types of Awards. The 2018 Plan allows for the grant of ISOs to our employees, including employees of any parent or subsidiary, and for the grant of nonstatutory stock options and restricted stock awards to our employees, officers, directors, and consultants, including employees and consultants of our affiliates.

Authorized Shares. Subject to certain capitalization adjustments, the aggregate number of shares of our common stock that could be issued pursuant to stock awards under the 2018 Plan could not exceed 1,096,783 shares. The maximum number of shares of our common stock that could be issued pursuant to the exercise of ISOs under our 2018 Plan was 1,096,783 shares plus any 2018 Lapsed Awards (as defined below). The shares we have issued under the 2018 Plan have been authorized but unissued shares or shares we reacquired. The shares of common stock underlying any awards that are (i) expired or unexercisable without being exercised in full, (ii) surrendered pursuant to an option exchange program (as defined in the 2018 Plan), (iii) forfeited to or repurchased by us due to a failure to vest, or (iv) that are withheld upon exercise of an award or settlement of an award to cover the tax withholding, could again become available for issuance under the 2018 Plan, or collectively, 2018 Lapsed Awards.

Plan Administration. The 2018 Plan is administered by our board of directors or a committee appointed by it, or the 2018 Plan Administrator. The 2018 Plan Administrator has full power to, among other things, (i) determine the fair market value of our common stock, (ii) select the individuals to whom awards may be granted, (iii) determine the number of shares covered by awards, (iv) approve forms of award agreements for use under the 2018 Plan, (v) determine the specific terms and conditions of each award, (vi) amend the terms and conditions of any award, (vii) to determine whether and under what circumstances an option may be settled in cash instead of common stock, (viii) institute and determine the terms of an option exchange program under which (A) outstanding awards are exchanged for other awards or cash, (B) outstanding awards are transferred to a third party institution, or (C) the exercise price of outstanding awards is reduced or increased, (ix) approve addenda or to grant awards to, or to modify the terms of, any outstanding award agreement or any agreement related to any award, optioned stock, or restricted stock held by participants who are foreign nationals or employed outside of the United States to accommodate differences in local law, tax policy or custom, and (x) construe and interpret the terms of the 2018 Plan and awards.

Stock Options. The exercise price per share of all stock options generally must equal at least 100% of the fair market value per share of our common stock on the date of grant. The term of a stock option may not exceed ten years. An ISO granted to a participant who owns more than 10% of the total combined voting power of all classes of our stock on the date of grant, or any subsidiary corporations, may not have a term in excess of five years and must have an exercise price of at least 110% of the fair market value per share of our common stock on the date of grant. The 2018 Plan Administrator will determine the methods of payment of the exercise price of an option, which may include cash, check, promissory note, other shares, consideration received under a cashless exercise program, net exercise, other consideration and methods of payment, or any combination thereof acceptable to the 2018 Plan Administrator. After a participant’s termination of service, the participant generally may exercise his or her stock options, to the extent vested as of such date of termination, during a period of three (3) months after termination of service. If a termination of service is due to death or disability, the option

 

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generally will remain exercisable, to the extent vested as of such date of termination, for a period of twelve (12) months following the date of such termination of service. However, in no event may an option be exercised later than the expiration of its term.

Restricted Stock. Restricted stock awards are grants of shares of our common stock that are subject to various restrictions, including restrictions on transferability, and forfeitures provisions. Shares of restricted stock will vest, and the restrictions on such shares will lapse, in accordance with terms and conditions established by the 2018 Plan Administrator.

Changes to Capital Structure. In the event of certain changes in our capitalization, the 2018 Plan Administrator will adjust the number and class of shares of stock that may be delivered under the 2018 Plan and/or the number, class, and price of shares of common stock covered by each outstanding award.

Corporate Transactions. The 2018 Plan provides that in the event of a corporate transaction (as defined in the 2018 Plan), each outstanding award will be treated as the 2018 Plan Administrator determines without participant’s consent. Such determination may provide for one or more of the following including, without limitation, that (i) awards will be continued by us if we are the surviving entity, (ii) awards will be assumed, or substantially equivalent awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices, (iii) the participant’s awards will terminate upon or immediately prior to the consummation of such corporate transaction for no consideration, or (iv) the termination of an award in exchange for a payment in an amount equal to the excess of (1) the fair market value of the shares of our common stock subject to such awards as of the closing date of such corporate transaction over or (2) the exercise price or purchase price paid or to be paid for the shares subject to the awards. The 2018 Plan Administrator will not be obligated to treat similarly all awards, all awards a participant holds, all awards of the same type, or all portions of awards.

Transferability. The 2018 Plan generally does not allow for the transfer or assignment of awards other than by will or by the laws of descent and distribution, or, at the discretion of the 2018 Plan Administrator by gift to an immediate family member or to trusts for the benefit of family members.

Plan Amendment or Termination. Our board of directors may amend, alter, suspend, or terminate the 2018 Plan at any time and for any reason, provided that stockholder approval is obtained where such approval is required by applicable law.

2017 Stock Incentive Plan

Our board of directors adopted, and our stockholders approved, the 2017 Plan in January 2017. The 2017 Plan was most recently amended in August 2018. The 2017 Plan terminated on the date the 2018 Plan became effective, and thereafter no further stock awards were granted under the 2017 Plan. However, any outstanding stock awards granted under the 2017 Plan will remain outstanding, subject to the terms of our 2017 Plan and award agreements, until such outstanding options are exercised or until any stock awards terminate or expire by their terms.

Types of Awards. The 2017 Plan allows for the grant of ISOs to our employees, including employees of any parent or subsidiary, and for the grant of nonstatutory stock options and restricted stock awards to our employees, officers, directors and consultants, including employees and consultants of our affiliates.

Authorized Shares. Subject to certain capitalization adjustments, the aggregate number of shares of our common stock that could be issued pursuant to stock awards under the 2017 Plan could not exceed 750,000 shares. The maximum number of shares of our common stock that could be issued pursuant to the exercise of ISOs under our 2017 Plan was 750,000 shares plus any 2017 Lapsed Awards (as defined below). The shares we have issued under the 2017 Plan have been authorized but unissued shares or shares we reacquired. The shares of

 

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common stock underlying any awards that are (i) expired or unexercisable without being exercised in full, (ii) surrendered pursuant to an option exchange program (as defined in the 2017 Plan), (iii) forfeited to or repurchased by us due to a failure to vest, or (iv) that are withheld upon exercise of an award or settlement of an award to cover the tax withholding, could again become available for issuance under the 2017 Plan, or collectively, 2017 Lapsed Awards.

Plan Administration. The 2017 Plan is administered by our board of directors or a committee appointed by it, or the 2017 Plan Administrator. The 2017 Plan Administrator has full power to, among other things, (i) determine the fair market value of our common stock, (ii) select the individuals to whom awards may be granted, (iii) determine the number of shares covered by awards, (iv) approve forms of award agreements for use under the 2017 Plan, (v) determine the specific terms and conditions of each award, (vi) amend the terms and conditions of any award, (vii) to determine whether and under what circumstances an option may be settled in cash instead of common stock, (viii) institute and determine the terms of an option exchange program under which (A) outstanding awards are exchanged for other awards or cash, (B) outstanding awards are transferred to a third party institution, or (C) the exercise price of outstanding awards is reduced or increased, (ix) approve addenda or to grant awards to, or to modify the terms of, any outstanding award agreement or any agreement related to any award, optioned stock, or restricted stock held by participants who are foreign nationals or employed outside of the United States to accommodate differences in local law, tax policy or custom, and (x) construe and interpret the terms of the 2017 Plan and awards.

Stock Options. The exercise price per share of all stock options generally must equal at least 100% of the fair market value per share of our common stock on the date of grant. The term of a stock option may not exceed ten years. An ISO granted to a participant who owns more than 10% of the total combined voting power of all classes of our stock on the date of grant, or any subsidiary corporations, may not have a term in excess of five years and must have an exercise price of at least 110% of the fair market value per share of our common stock on the date of grant. The 2017 Plan Administrator will determine the methods of payment of the exercise price of an option, which may include cash, check, promissory note, other shares, consideration received under a cashless exercise program, net exercise, other consideration and methods of payment, or any combination thereof acceptable to the 2017 Plan Administrator. After a participant’s termination of service, the participant generally may exercise his or her stock options, to the extent vested as of such date of termination, during a period of three (3) months after termination of service. If a termination of service is due to death or disability, the option generally will remain exercisable, to the extent vested as of such date of termination, for a period of twelve (12) months following the date of such termination of service. However, in no event may an option be exercised later than the expiration of its term.

Restricted Stock. Restricted stock awards are grants of shares of our common stock that are subject to various restrictions, including restrictions on transferability, and forfeitures provisions. Shares of restricted stock will vest, and the restrictions on such shares will lapse, in accordance with terms and conditions established by the 2017 Plan Administrator.

Changes to Capital Structure. In the event of certain changes in our capitalization, the 2017 Plan Administrator will adjust the number and class of shares of stock that may be delivered under the 2017 Plan and/or the number, class, and price of shares of common stock covered by each outstanding award.

Corporate Transactions. The 2017 Plan provides that in the event of a corporate transaction (as defined in the 2017 Plan), each outstanding award will be treated as the 2017 Plan Administrator determines without participant’s consent. Such determination may provide for one or more of the following including, without limitation, that (i) awards will be continued by us if we are the surviving entity, (ii) awards will be assumed, or substantially equivalent awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices, (iii) the participant’s awards will terminate upon or immediately prior to the consummation of such corporate transaction for no consideration, or (iv) the termination of an award in exchange for a payment in an amount equal to the excess of

 

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(1) the fair market value of the shares of our common stock subject to such awards as of the closing date of such corporate transaction over or (2) the exercise price or purchase price paid or to be paid for the shares subject to the awards. The 2017 Plan Administrator will not be obligated to treat similarly all awards, all awards a participant holds, all awards of the same type, or all portions of awards.

Transferability. The 2017 Plan generally does not allow for the transfer or assignment of awards other than by will or by the laws of descent and distribution, or, at the discretion of the 2017 Plan Administrator by gift to an immediate family member or to trusts for the benefit of family members.

Plan Amendment or Termination. Our board of directors may amend, alter, suspend, or terminate the 2017 Plan at any time and for any reason, provided that stockholder approval is obtained where such approval is required by applicable law.

2025 Employee Stock Purchase Plan

Our board of directors adopted, and our stockholders approved, our ESPP in    2025. The ESPP became effective upon the execution of the underwriting agreement for this offering. The purpose of the ESPP is to secure and retain the services of new employees, to retain the services of existing employees, and to provide incentives for such individuals to exert maximum efforts toward our success and that of our affiliates. Our ESPP will include two components. One component will be designed to allow eligible U.S. employees to purchase our ordinary shares in a manner that may qualify for favorable tax treatment under Section 423 of the Code. The other component will permit the grant of purchase rights that do not qualify for such favorable tax treatment in order to allow deviations necessary to permit participation by eligible employees who are foreign nationals or employed outside of the U.S. while complying with applicable foreign laws.

Share Reserve. Following this offering, the ESPP authorizes the issuance of     shares of our common stock under purchase rights granted to our employees or to employees of any of our designated affiliates. The number of shares of our common stock reserved for issuance will automatically increase on January 1 of each calendar year, beginning on January 1, 2026 (assuming the ESPP becomes effective in 2025) through January 1, 2035, by the lesser of (i) 1% of the total number of shares of our capital stock on a fully diluted basis on the last day of the calendar month before the date of the automatic increase, and (ii)     shares; provided that before the date of any such increase, our board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii). As of the date hereof, no shares of our common stock have been purchased under the ESPP.

Administration. Our board of directors, or a duly authorized committee thereof, will administer our ESPP. Our board of directors may delegate concurrent authority to administer the ESPP to our compensation and management development committee under the terms of the compensation and management development committee’s charter. The ESPP is implemented through a series of offerings under which eligible employees are granted purchase rights to purchase shares of our common stock on specified dates during such offerings. Under the ESPP, we may specify offerings with durations of not more than 27 months and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of our common stock will be purchased for employees participating in the offering. An offering under the ESPP may be terminated under certain circumstances.

Payroll Deductions. Generally, all regular employees, including executive officers, employed by us or by any of our designated affiliates, may participate in the ESPP and may contribute, normally through payroll deductions, up to 15% of their earnings (as defined in the ESPP) for the purchase of our common stock under the ESPP. Unless otherwise determined by our board of directors, common stock will be purchased for the accounts of employees participating in the ESPP at a price per share that is at least the lesser of (i) 85% of the fair market value of a share of our common stock on the first date of an offering; or (ii) 85% of the fair market value of a share of our common stock on the date of purchase.

 

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Limitations. Employees may have to satisfy one or more of the following service requirements before participating in the ESPP, as determined by our board of directors, including: (i) customary employment with us or one of our affiliates for more than 20 hours per week and more than five months per calendar year or (ii) continuous employment with us or one of our affiliates for a minimum period of time (not to exceed two years). No employee may purchase shares under the ESPP at a rate in excess of $25,000 worth of our common stock based on the fair market value per share of our common stock at the beginning of an offering for each year such a purchase right is outstanding. Finally, no employee will be eligible for the grant of any purchase rights under the ESPP if immediately after such rights are granted, such employee has voting power over 5% or more of our outstanding capital stock measured by vote or value under Section 424(d) of the Code.

Changes to Capital Structure. In the event that there occurs a change in our capital structure through such actions as a stock split, merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, liquidating dividend, combination of shares, exchange of shares, change in corporate structure, or similar transaction, the board of directors will make appropriate adjustments to: (i) the number of shares reserved under the ESPP; (ii) the maximum number of shares by which the share reserve may increase automatically each year; (iii) the number of shares and purchase price of all outstanding purchase rights; and (iv) the number of shares that are subject to purchase limits under ongoing offerings.

Corporate Transactions. In the event of certain significant corporate transactions (as defined in the ESPP), including: (i) a sale of all or substantially all of our assets; (ii) the sale or disposition of more than 50% of our outstanding securities; (iii) the consummation of a merger or consolidation where we do not survive the transaction; and (iv) the consummation of a merger or consolidation where we do survive the transaction but the shares of our common stock outstanding immediately before such transaction are converted or exchanged into other property by virtue of the transaction, any then-outstanding rights to purchase our stock under the ESPP may be assumed, continued or substituted for by any surviving or acquiring entity (or its parent company). If the surviving or acquiring entity (or its parent company) elects not to assume, continue, or substitute for such purchase rights, then the participants’ accumulated payroll contributions will be used to purchase shares of our common stock within ten business days before such corporate transaction, and such purchase rights will terminate immediately.

ESPP Amendment or Termination. Our board of directors has the authority to amend or terminate our ESPP, provided that except in certain circumstances such amendment or termination may not materially impair any outstanding purchase rights without the holder’s consent. We will obtain stockholder approval of any amendment to our ESPP as required by applicable law or listing requirements.

Limitation of Liability and Indemnification

Our amended and restated certificate of incorporation that will become effective immediately prior to the closing of this offering limits the liability of our current and former directors and officers for monetary damages to the fullest extent permitted by Delaware law. Delaware law provides that directors and officers of a corporation will not be personally liable for monetary damages for any breach of fiduciary duties as directors or officers, except liability for:

 

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any breach of the director’s or officer’s duty of loyalty to the corporation or its stockholders;

 

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any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

 

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as a director, unlawful payments of dividends or unlawful stock repurchases or redemptions;

 

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as an officer, derivative claims brought on behalf of the corporation by a stockholder; or

 

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any transaction from which the director or officer derived an improper personal benefit.

 

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This limitation of liability does not apply to liabilities arising under federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or recission.

Our amended and restated certificate of incorporation will authorize us to indemnify our directors, officers, employees, and other agents to the fullest extent permitted by Delaware law. Our amended and restated bylaws will provide that we are required to indemnify our directors and officers to the fullest extent permitted by Delaware law and may indemnify our other employees and agents. Our amended and restated bylaws will also provide that, on satisfaction of certain conditions, we will advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee, or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of Delaware law. We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers, and other employees as determined by the board of directors. With certain exceptions, these agreements provide for indemnification for related expenses including attorneys’ fees, judgments, fines, and settlement amounts incurred by any of these individuals in any action or proceeding.

We believe that these amended and restated certificate of incorporation and amended and restated bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain customary directors’ and officers’ liability insurance.

The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for directors, executive officers, or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

At present, there is no pending litigation or proceeding involving any of our directors, executive officers or employees for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.

Rule 10b5-1 Sales Plans

Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or executive officer when entering into the plan, without further direction from them. The director or executive officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a Rule 10b5-1 plan at any time. Our directors and executive officers also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material nonpublic information, or MNPI subject to compliance with the terms of our insider trading policy and any applicable 10b5-1 guidelines. 

Policies and Practices Related to the Grant of Certain Equity Awards

From time to time, we grant stock options to our employees, including the named executive officers, and to our non-employee directors. Historically, we have granted new-hire option awards on or soon after a new-hire’s employment start date and refresh, promotion or retention option grants when and as determined by our board of

 

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directors. We do not maintain any written policies on the timing of awards of stock options or similar instruments with option-like features. Following the effective date of the registration statement of which this prospectus forms a part, we expect that (i) the board of directors will consider whether there is any MNPI about us when determining the timing of stock option grants and will not seek to time the award of stock options in relation to our public disclosure of MNPI and (ii) we will not time the public release of MNPI for the purpose of affecting the value of executive compensation.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Other than compensation arrangements for our directors and executive officers, which are described elsewhere in this prospectus, below we describe transactions since January 1, 2022 to which we were or will be a participant, in which:

 

  •  

the amount involved in the transaction exceeded or will exceed the lesser of (i) $120,000 and (ii) 1% of the average of our total assets as of the end of the last two completed fiscal years; and

 

  •  

any of our then directors, executive officers, or holders of more than 5% of our capital stock, or any member of the immediate family of, or person sharing the household with, any of these individuals or entities, which we collectively refer to as our related parties, had or will have a direct or indirect material interest.

Convertible Preferred Stock Financings

Series C Preferred Stock Financing

From August 2023 to January 2024, we issued and sold an aggregate of 50 million shares of our Series C preferred stock at a purchase price of $1.50 per share for aggregate gross proceeds of $75.0 million. In addition, in August 2023, we issued an aggregate of 23,820,346 shares of our Series C preferred stock in exchange of the principal amount of all outstanding convertible notes at a conversion price of $1.50 per share. However, prospective investors should not rely on the investment decisions of our existing investors, as these investors may have different risk tolerances and have received their shares in prior offerings at prices lower than the price offered to the public in this offering.

The table below sets forth the number of shares of our Series C preferred stock purchased by our related parties. See the section titled “Principal Stockholders” for additional information.

 

Name Of Stockholder

   Shares of
Series C
Convertible
Preferred
Stock (#)
     Total
Purchase
Price ($)
 

Deep Track Biotechnology Master Fund, Ltd.(1)

     16,666,667        25,000,000  

Entities affiliated with Vida Ventures(2)

     13,333,333        19,999,999  

Entities affiliated with Pontifax(3)

     10,000,000        15,000,000  

Entities affiliated with TCG Crossover Fund(4)

     10,000,000        15,000,000  
 
(1)

Rebecca Luse, a member of our board of directors, is a Principal of Deep Track Capital.

(2)

Rajul Jain, M.D., a member of our board of directors, is a Managing Director of Vida Ventures.

(3)

Ran Nussbaum, a member of our board of directors, is a Managing Partner and the Co-Founder of Pontifax.

(4)

Chen Yu, M.D., a member of our board of directors, is a Founder and Managing Partner of TCG Crossover Fund.

Royalty Agreements

In July 2016, we entered into several Original Royalty Agreements with certain of our existing investors, co-founders, former and current directors, and former and current executive officers, including Zachary Prensky, Andrew Vaino, Ph.D., and Marc Panoff, for royalties payable, in the aggregate, of up to 5.0% of future commercial worldwide sales of LB-102. In this transaction, we received $0.2 million in cash in exchange for the certificate holders receiving convertible notes with a face value of $0.2 million, shares of our common stock and the future royalties provided for in the Original Royalty Agreements. The future royalty payments provided for in the Original Royalty Agreements had an expiration date of December 31, 2037. The royalties were transferable upon surrender of the royalty certificate accompanied by written and notarized instructions of the transfer,

 

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provided that the certificate holder could not transfer to any individual or entity (i) to which it was unlawful for us to make such payments or (ii) that owned, controlled or possessed voting rights in the aggregate of more than 10% of our common stock. We had the option to purchase all issued and outstanding royalty certificates under the Original Royalty Agreements by way of a tender offer to all such holders, which would become binding at such time as the holders of two-thirds of all outstanding royalty interests agreed in writing to accept such tender offer.

In August 2023, contemporaneously with the closing of the Series C financing, we entered into several Amended and Restated Royalty Agreements to remove the expiration date and modify royalties payable to certificate holders in the aggregate amount of up to 2.75% of net sales of LB-102 through December 31, 2035 and increasing to up to 3.25% of net sales in 2036 and thereafter. Future sales are defined in these agreements as the gross payments received on total commercial sales of LB-102, whether by us or by any licensee of LB-102. None of the proceeds from the Series C financing were allocated to the certificate holders as the investors in the Series C financing are not parties to the Original Royalty Agreements or the Amended and Restated Royalty Agreements. Each certificate holder has the same rights and obligations as the other holders except with respect to its individual royalty amount that may come due from us if we generate any revenue from future sales of LB-102. The certificate holders may not transfer rights under the applicable Amended and Restated Royalty Agreement to any individual, entity, corporation, partnership or any other such organization without our written consent, which shall not be unreasonably withheld. We may purchase all issued and outstanding royalty certificates under the Amended and Restated Royalty Agreements by way of a tender offer to all such holders, which will become binding at such time as the holders of two-thirds of all outstanding royalty interests thereunder agree in writing to accept such tender offer.

Investor Agreements

In connection with our preferred stock financings, we entered into investors’ rights, right of first refusal and co-sale, and voting agreements, which contain, among other things, registration rights, information rights, voting rights, and rights of first refusal, with certain holders of our capital stock, including entities affiliated with Deep Track Capital, Vida Ventures, Pontifax and TCG Crossover Fund. These agreements will terminate upon the closing of this offering, except for the registration rights granted under our investors’ rights agreement, as more fully described in the section titled “Description of Capital Stock—Registration Rights.” See also the section titled “Principal Stockholders” for additional information regarding beneficial ownership of our capital stock.

Equity Grants

We have granted stock options and restricted stock awards to our executive officers and certain members of our board of directors. For more information regarding the options granted to our executive officers and directors, see the sections titled “Management—Non-Employee Director Compensation” and “Executive Compensation.”

Indemnification Agreements

Our amended and restated certificate of incorporation that will be in effect immediately prior to the closing of this offering will contain provisions limiting the liability of directors and officers, and our amended and restated bylaws that will be in effect immediately prior to the closing of this offering will provide that we will indemnify each of our directors and officers to the fullest extent permitted under Delaware law. Our amended and restated certificate of incorporation and amended and restated bylaws that will be in effect immediately prior to the closing of this offering will also provide our board of directors with discretion to indemnify our employees when determined appropriate by the board.

In addition, we expect to enter into indemnification agreements with each of our directors and executive officers prior to the closing of this offering. For more information regarding these agreements, see the section titled “Executive Compensation—Limitation of Liability and Indemnification.”

 

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Policies and Procedures for Transactions with Related Persons

Prior to this offering, we have not had a formal policy regarding approval of transactions with related parties. In connection with this offering, we intend to adopt a written related-person transactions policy that sets forth our policies and procedures regarding the identification, review, consideration, and approval or ratification of “related-person transactions,” which policy became effective immediately upon the execution of the underwriting agreement for this offering. For purposes of our policy only, a “related-person transaction” will be a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we and any “related person” are, were or will be participants involving an amount that exceeds $120,000 or, if less, 1% of the average of our total assets for the last two competed fiscal years. Transactions involving compensation for services provided to us as an employee or director will not be covered by this policy. A related person will be any executive officer, director, nominee to become a director or a beneficial owner of more than 5% of any class of our voting securities, including any of their immediate family members and affiliates, including entities owned or controlled by such persons.

Under the policy, where a transaction has been identified as a related-person transaction, including any transaction that was not a related person transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to consummation, our management must present information regarding the proposed related person transaction to our audit committee (or, where review by our audit committee would be inappropriate, to another independent body of our board of directors) for review, consideration, and approval or ratification. The presentation must include a description of, among other things, all of the parties thereto, the material facts, the interests, direct and indirect, of the related persons, the benefits to us of the transaction, and whether the transaction is on terms that are comparable to the terms available to or from, as the case may be, an unrelated third party or to or from employees generally. Under the policy, we will collect information that we deem reasonably necessary from each director, executive officer, and, to the extent feasible, significant stockholder to enable us to identify any existing or potential related-person transactions and to effectuate the terms of the policy. In addition, under our Code of Conduct that we intend to adopt prior to the closing of this offering, our employees and directors will have an affirmative responsibility to disclose any transaction or relationship that reasonably could be expected to give rise to a conflict of interest.

In considering related person transactions, our audit committee, or other independent body of our board of directors, will take into account the relevant available facts and circumstances including:

 

  •  

the risks, costs, and benefits to us;

 

  •  

the impact on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated;

 

  •  

the terms of the transaction;

 

  •  

the availability of other sources for comparable services or products; and

 

  •  

the terms available to or from, as the case may be, unrelated third parties or to or from employees generally.

The policy will require that, in determining whether to approve, ratify or reject a related person transaction, our audit committee, or other independent body of our board of directors, must consider, in light of known circumstances, whether the transaction is in, or is not inconsistent with, our best interests and those of our stockholders, as our audit committee, or other independent body of our board of directors, determines in the good faith exercise of its discretion.

All of the transactions described in this section were entered into prior to the adoption of this policy. Although we have not had a written policy for the review and approval of transactions with related persons, our board of directors has historically reviewed and approved any transaction where a director or officer had a financial interest, including the transactions described above. Prior to approving such a transaction, the material

 

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facts as to a director’s or officer’s relationship or interest in the agreement or transaction were disclosed to our board of directors. Our board of directors took this information into account when evaluating the transaction and in determining whether such transaction was fair to us and in the best interest of all our stockholders.

 

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PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership of our capital stock as of June 30, 2025 by:

 

  •  

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;

 

  •  

each of our directors;

 

  •  

each of our named executive officers; and

 

  •  

all of our current executive officers and directors as a group.

The percentage ownership information shown in the table prior to this offering is based on 85,094,050 shares of common stock outstanding as of June 30, 2025, after giving effect to the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into 78,072,306 shares of common stock upon the closing of this offering.

The percentage ownership information shown in the table after this offering is based on      shares of common stock outstanding, assuming the sale of      shares of common stock by us in this offering and no exercise by the underwriters of their option to purchase additional shares.

We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options or warrants that are either immediately exercisable or exercisable within 60 days of June 30, 2025. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, we believe based on information provided to us, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.

 

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Except as otherwise noted below, the address for each person or entity listed in the table is c/o LB Pharmaceuticals Inc, One Pennsylvania Plaza, Suite 1025, New York, NY 10119.

 

     Number of
Shares
Beneficially
Owned
     Percentage of Shares
Beneficially Owned
 

Name and Address of Beneficial Owner

   Before
Offering
    After
Offering
 

Greater Than 5% Stockholders:

       

Deep Track Biotechnology Master Fund, Ltd.(1)

     16,666,667        19.6 %   

Entities affiliated with Vida Ventures(2)

     13,373,333        15.7 %   

Entities affiliated with Pontifax(3)

     10,000,000        11.8 %   

TCG Crossover Fund II, L.P.(4)

     10,000,000        11.8 %   

Named Executive Officers and Directors:

       

Heather Turner

     —            *   

Zachary Prensky(5)

     2,840,354        3.3 %   

Roger Sawhney, M.D.(6)

     237,500           *   

Anna Eramo, M.D.(7)

     526,038           *   

Scott Garland(8)

     208,331           *   

Rajul Jain, M.D.(2)

     13,373,333        15.7 %   

Rebecca Luse

     —            *   

Ran Nussbaum(3)

     10,000,000        11.8 %   

Robert R. Ruffolo, Jr., Ph.D., D.Sc. (h), D.Eng. (h), F.C.P.P.(9).

     242,249           *   

Chen Yu, M.D.(4)

     10,000,000        11.8 %   

All current executive officers and directors as a group (12 persons)(10)

     37,904,414        43.5 %   
 
*

Represents beneficial ownership of less than 1%.

(1)

Consists of 16,666,667 shares of common stock issuable upon conversion of shares of our redeemable convertible preferred stock held by Deep Track Biotechnology Master Fund, Ltd., or the Master Fund. Deep Track Capital, LP, or the Investment Manager, serves as the investment manager to the Master Fund and may be deemed to beneficially own such shares. Deep Track Capital GP, LLC, or the General Partner, is the General Partner of the Investment Manager. David Kroin is the Chief Investment Officer of the Investment Manager and managing member of the General Partner and may be deemed to beneficially own such shares. The business address of the Master Fund, the Investment Manager, the General Partner and Mr. Kroin is 200 Greenwich Avenue, 3rd Floor, Greenwich, CT 06830.

(2)

Consists of (i) 40,000 shares of common stock held by Vida Ventures Management Co, LLC, (ii) 30,667 shares of common stock issuable upon conversion of shares of our redeemable convertible preferred stock held by Vida Ventures III-A, L.P. and (iii) 13,302,666 shares of common stock issuable upon conversion of shares of our redeemable convertible preferred stock held by Vida Ventures III, L.P. Vida Ventures III-A, L.P. and Vida Ventures III, L.P. are collectively referred to as the “Vida Funds.” Vida Ventures GP III, L.L.C., or Vida GP, is the general partner of each of the Vida Funds. Vida Ventures Management Co., LLC is the management company of the Vida Funds. Dr. Jain, a member of our board of directors, is a managing member of Vida GP. Each of Vida GP and Dr. Jain may be deemed to have voting and dispositive power with respect to the shares owned by the Vida Funds. Each of Vida GP and Dr. Jain disclaims beneficial ownership of such shares, except to the extent of their respective pecuniary interests therein. The address for each of these entities and individuals is 10100 Santa Monica Blvd, 15th Floor, Los Angeles, CA 90067.

(3)

Consists of (i) 6,362,625 shares of common stock issuable upon conversion of shares of our redeemable convertible preferred stock held by Pontifax (Israel) VI Limited Partnership, or Pontifax Israel, and (ii) 3,637,375 shares of common stock issuable upon conversion of shares of our redeemable convertible preferred stock held by Pontifax (Cayman) VI Limited Partnership, or Pontifax Cayman. Pontifax Israel and Pontifax Cayman are collectively referred to as the Pontifax Entities. Pontifax VI G.P. L.P., or Pontifax VI G.P., is the general partner of each of the Pontifax Entities and Pontifax Management IV G.P. (2015) Ltd.,

 

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  or Pontifax Management, is the general partner of Pontifax VI G.P. Messrs. Tomer Kariv and Ran Nussbaum, are the Managing Partners of Pontifax Management and, as a result, may be deemed to share voting and investment power with respect to the shares held by each of the Pontifax Entities. The address of each of the Pontifax Entities is c/o The Pontifax Group, 14 Shenkar Street, Herzelia, Israel.
(4)

Consists of 10,000,000 shares of common stock issuable upon conversion of shares of our redeemable convertible preferred stock held by TCG Crossover Fund II, L.P. TCG Crossover GP II, LLC is the general partner of TCG Crossover Fund II, L.P. and may be deemed to have voting, investment, and dispositive power with respect to these securities. Chen Yu is the sole managing member of TCG Crossover GP II, LLC and may be deemed to share voting, investment and dispositive power with respect to these securities. Dr. Yu disclaims beneficial ownership over the shares held by TCG Crossover Fund II, L.P., except to the extent of his pecuniary interest therein. The business address for TCG Crossover GP II LLC, TCG Crossover Fund II, L.P. and Dr. Yu is 245 Lytton Ave., Suite 350, Palo Alto, CA 94301.

(5)

Consists of (i) 1,962,234 shares of common stock beneficially held by Mr. Prensky, (ii) 13,748 shares of common stock issuable upon conversion of shares of our redeemable convertible preferred stock beneficially held by Mr. Prensky, (iii) warrants to purchase up to 6,874 shares of common stock beneficially held by Mr. Prensky, and (iv) 857,498 shares of common stock issuable upon the exercise of options held by Mr. Prensky that are exercisable within 60 days of June 30, 2025.

(6)

Consists of shares of common stock issuable upon the exercise of options held by Mr. Sawhney that are exercisable within 60 days of June 30, 2025.

(7)

Consists of (i) 100,000 shares of common stock and (ii) 426,038 shares of common stock issuable upon the exercise of options held by Dr. Eramo that are exercisable within 60 days of June 30, 2025.

(8)

Consists of shares of common stock issuable upon the exercise of options held by Mr. Garland that are exercisable within 60 days of June 30, 2025.

(9)

Consists of (i) 66,000 shares of common stock and (ii) 176,249 shares of common stock issuable upon the exercise of options held by Dr. Ruffolo that are exercisable within 60 days of June 30, 2025.

(10)

Consists of (i) 2,454,012 shares of common stock beneficially owned by our current executive officers and directors and (ii) 33,347,081 shares of common stock issuable up on conversion of shares of our redeemable convertible preferred stock, (iii) warrants to purchase up to 6,874 shares of common stock, and (iv) 2,096,447 shares of common stock issuable upon common stock issuable upon the exercise of options held by our current executive officers and directors within 60 days of June 30, 2025.

 

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DESCRIPTION OF CAPITAL STOCK

The following description of our capital stock and certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws, as each will become effective immediately prior to the closing of this offering, are summaries and are qualified by reference to the amended and restated certificate of incorporation and the amended and restated bylaws, which are filed as exhibits to the registration statement of which this prospectus is part.

General

Upon the closing of this offering, our authorized capital stock will consist of    shares of common stock, par value $0.0001 per share, and    shares of preferred stock, par value $0.0001 per share. All of our authorized preferred stock upon the completion of this offering will be undesignated.

As of June 30, 2025, after giving effect to the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into an aggregate of 78,072,306 shares of our common stock upon the closing of this offering, there would have been 85,094,050 shares of common stock issued and outstanding, held of record by 368 stockholders.

Common Stock

Voting

Each holder of common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Our stockholders do not have cumulative voting rights in the election of directors. Accordingly, holders of a majority of the voting shares are able to elect all of the directors.

Dividends

Subject to preferences that may be applicable to any then-outstanding preferred stock, the holders of common stock are entitled to receive ratably dividends, if any, as may be declared from time to time by our board of directors out of legally available funds.

Liquidation

In the event of our liquidation, dissolution or winding-up, holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities, subject to the satisfaction of any liquidation preference granted to the holders of any outstanding shares of preferred stock.

Rights, Preferences, and Privileges

Holders of our common stock have no preemptive, conversion, or subscription rights, and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences, and privileges of the holders of our 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.

Fully Paid and Nonassessable

All of our outstanding shares of common stock are, and the shares of common stock to be issued in this offering will be, fully paid and nonassessable.

 

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Preferred Stock

As of June 30, 2025, there were 78,072,306 shares of redeemable convertible preferred stock outstanding, held of record by 298 stockholders. Upon the closing of this offering, all of the outstanding shares of redeemable convertible preferred stock will automatically convert into    shares of our common stock.

Under our amended and restated certificate of incorporation that will become effective immediately prior to the closing of this offering, our board of directors will have the authority, without further action by the stockholders, to issue up to    shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations, or restrictions thereon and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.

Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in our control that may otherwise benefit holders of our common stock and may adversely affect the market price of the common stock and the voting and other rights of the holders of common stock. We have no current plans to issue any shares of preferred stock.

Options

As of June 30, 2025, 12,992,582 shares of common stock were issuable upon the exercise of outstanding stock options, at a weighted-average exercise price of $1.56 per share. For additional information regarding terms of our equity incentive plans, see the section titled “Executive Compensation—Equity Benefit Plans.”

Warrants

Class A Warrants

In November 2018 and March 2019, we issued warrants to certain investors to purchase an aggregate of 913,873 shares of our common stock at an exercise price per share of $2.30, subject to adjustment as set forth in the warrant, or the Class A Warrants. In August 2023, in conjunction with the Series C financing, we modified the outstanding Class A Warrants and reduced the exercise price to $0.01. As of June 30, 2025, Class A Warrants to purchase up to 695,961 shares of our common stock remained unexercised. The Class A Warrants include a cashless exercise feature allowing the holder to receive shares underlying the applicable Class A Warrant in an amount reduced by the aggregate amount of the exercise price that would have been payable upon exercise of the applicable Class A Warrant for such shares. Each Class A Warrant is exercisable until the 10th anniversary from its issuance date. The Class A Warrants include anti-dilution protection provisions, subject to certain exceptions, relating to subsequent sales of shares of our common stock at an issuance price per share that is less than the then-effective exercise price of the Class A Warrants. The warrant holder is not a stockholder and has none of the rights of a stockholder until the warrant is exercised and the shares of common stock are issued upon exercise.

Class B Warrants

In November 2018 and March 2019, we issued warrants to certain investors to purchase an aggregate of 913,873 shares of our common stock at an exercise price per share of $2.30, subject to adjustment as set forth in the warrant, or the Class B Warrants. In August 2023, in conjunction with the Series C financing, we modified the outstanding Class B Warrants and reduced the exercise price to $0.01. As of June 30, 2025, Class B Warrants to purchase up to 882,948 shares of our common stock remained unexercised. The Class B Warrants include a

 

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cashless exercise feature allowing the holder to receive shares underlying the applicable Class B Warrant in an amount reduced by the aggregate amount of the exercise price that would have been payable upon exercise of the applicable Class B Warrant for such shares. Each Class B Warrant became exercisable in May 2022 and will remain exercisable until the 10th anniversary from its issuance date. The Class B Warrants include anti-dilution protection provisions, subject to certain exceptions, relating to subsequent sales of shares of our common stock at an issuance price per share that is less than the then-effective exercise price of the Class B Warrants. The warrant holder is not a stockholder and has none of the rights of a stockholder until the warrant is exercised and the shares of common stock are issued upon exercise.

Series B-1 Warrants

In May 2022, we issued warrants to certain investors to purchase 103,915 shares of our common stock at an exercise price per share of $3.75, subject to adjustment as set forth in the warrant, or the Series B-1 Warrants. In August 2023, in conjunction with the Series C financing, we modified the outstanding Series B-1 Warrants, reducing the exercise price to $0.01. As of June 30, 2025, Series B-1 Warrants to purchase up to 71,761 shares of our common stock remained unexercised. Series B-1 Warrants include a cashless exercise feature allowing the holder to receive shares underlying the applicable Series B-1 Warrant in an amount reduced by the aggregate amount of the exercise price that would have been payable upon exercise of the applicable Series B-1 Warrant for such shares. Each Series B-1 Warrant is exercisable until its expiration in May 2027. The Series B-1 Warrants include anti-dilution protection provisions, subject to certain exceptions, relating to subsequent sales of shares of our common stock at an issuance price per share that is less than the then-effective exercise price of the Series B-1 Warrants. The warrant holder is not a stockholder and has none of the rights of a stockholder until the warrant is exercised and the shares of common stock are issued upon exercise.

Maxim Warrants

In August 2023, we issued warrants to Maxim Group LLC to purchase 1,528,632 shares of our common stock at an exercise price per share of $0.01, subject to adjustment as set forth in the warrant, or the Maxim Warrants, which are currently held by Maxim Partners LLC. As of June 30, 2025, the Maxim Warrants remained unexercised. The Maxim Warrants include a cashless exercise feature allowing the holder to receive shares underlying the Maxim Warrant in an amount reduced by the aggregate amount of the exercise price that would have been payable upon exercise of the Maxim Warrant for such shares. Each Maxim Warrant is exercisable until its expiration in August 2033. The Maxim Warrants include anti-dilution protection provisions, subject to certain exceptions, relating to subsequent sales of shares of our common stock at an issuance price per share that is less than the then-effective exercise price of the Maxim Warrants. The warrant holder has certain demand and piggyback registration rights.

New Series B Warrants

In August 2023, we issued warrants to certain investors to purchase 100,373 shares of our common stock at an exercise price per share of $1.50, subject to adjustment as set forth in the warrant, or the New Series B Warrants. As of June 30, 2025, New Series B Warrants to purchase up to 98,456 shares of our common stock remained unexercised. The New Series B Warrants include a cashless exercise feature allowing the holder to receive shares underlying the applicable New Series B Warrant in an amount reduced by the aggregate amount of the exercise price that would have been payable upon exercise of the applicable New Series B Warrant for such shares. Each New Series B Warrant is exercisable until its expiration in August 2028. The New Series B Warrants include anti-dilution protection provisions, subject to certain exceptions, relating to subsequent sales of shares of our common stock at an issuance price per share that is less than the then-effective exercise price of the New Series B Warrants. The warrant holder is not a stockholder and has none of the rights of a stockholder until the warrant is exercised and the shares of common stock are issued upon exercise.

 

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Investors’ Rights Agreement

In August 2023, in connection with the issuance and sale of our Series C preferred stock, we entered into an Investors’ Rights Agreement, or the IRA. The IRA grants certain rights to the holders of our outstanding redeemable convertible preferred stock, including certain registration rights with respect to the registrable securities held by them. The holders of these registrable securities possess registration rights pursuant to the terms of the IRA and are described in additional detail below. As of the completion of this offering, after giving effect to the conversion of all outstanding shares of our redeemable convertible preferred stock into     shares of our common stock in connection with the completion of the offering, there would have been an aggregate of    shares of common stock that are entitled to these demand, piggyback and Form S-3 registration rights pursuant to the IRA. We will pay the registration expenses, other than the underwriting discounts and selling commissions, of the shares registered pursuant to the demand, piggyback and Form S-3 registrations described below.

Generally, in an underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions, to limit the number of shares the holders may include. The demand, piggyback and Form S-3 registration rights described below will expire no later than three years after the completion of this offering, upon the closing of a deemed liquidation event, or with respect to any particular holder, at such time that such holder can sell its shares under Rule 144 of the Securities Act during any three-month period.

Registration Rights

Upon the closing of this offering, certain holders of shares of our common stock, including certain of those shares of our common stock that will be issued upon the conversion of our redeemable convertible preferred stock and exercise of our outstanding warrants, as applicable, upon the closing of this offering, will be entitled to certain rights with respect to registration of such shares under the Securities Act pursuant to the terms of an investors’ rights agreement by and among us and certain of our stockholders. These shares are collectively herein referred to as registrable securities.

The investors’ rights agreement provides the holders of registrable securities with demand, piggyback and S-3 registration rights as described more fully below. As of June 30, 2025, holders of an aggregate of 78,072,306 registrable securities were entitled to these demand, piggyback and S-3 registration rights. Under the terms of the investor’s rights agreement, holders of registrable securities will have equivalent registration rights with respect to any additional shares of our common stock acquired by these holders.

Generally, in an underwritten offering, the managing underwriter, if any, has the right, subject to specified conditions, to limit the number of shares the holders may include. The demand, piggyback, and Form S-3 registration rights described below will expire (i) upon the closing of a deemed liquidation event, as such term is defined in our amended and restated certificate of incorporation as currently in effect, (ii) with respect to any particular holder, at such time following this offering that such holder can sell its shares without limitation under Rule 144 of the Securities Act during any three-month period or (iii) the third anniversary of this offering.

Demand Registration Rights

At any time beginning 180 days after the effective date of the registration statement of which this prospectus is a part, the holders of the registrable securities will be entitled to certain demand registration rights. Subject to the terms of the lock-up agreements described under “Underwriting”, the holders of at least 60% of the registrable securities then outstanding may make a written request that we register all or a portion of their shares, subject to certain specified exceptions. Such request for registration must cover registrable securities then outstanding having an aggregate offering price in excess of $15.0 million after deducting certain selling expenses. We are not obligated to take any action in response to such request (i) during the period that is estimated to be 60 days before and 180 days after the effective date of a Company-initiated registration, (ii) if we have already effected one registration pursuant to such requests for registration on Form S-1, or (iii) if the initiating holders propose to register securities that may be immediately registered on Form S-3.

 

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Additionally, if we determine that it would be materially detrimental to us and our stockholders for such registration statement to either become effective or remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving us, (ii) require making a premature disclosure of material information that we have a bona fide business purpose for preserving as confidential, or (iii) render us unable to comply with requirements under the Securities Act or Exchange Act to effect such a demand registration, then we have the right to defer such registration, not more than once in any 12-month period, for an aggregate of up to 120 days.

Piggyback Registration Rights

If we propose to register any of our securities under the Securities Act in another offering, either for our own account or for the account of other security holders, the holders of registrable securities will be entitled to notice of the registration and will be entitled to include their shares of common stock in the registration, subject to certain conditions and limitations, including the right of the underwriters to limit the number of shares included in such registration under specified circumstances.

Form S-3 Registration Rights

At any time when we are eligible to use a Form S-3 registration statement, the holders of the registrable securities then outstanding will be entitled to certain Form S-3 registration rights. Any holder of these shares can make a request that we register for offer and sale their shares on Form S-3 if we are qualified to file a registration statement on Form S-3, subject to certain specified exceptions. Such request for registration on Form S-3 must cover registrable securities then outstanding having an aggregate offering price in excess of $3.0 million after deducting certain selling expenses. We are not obligated to take any action in response to such request (i) during the period that is estimated to be 30 days before and 90 days after the effective date of a Company-initiated registration, or (ii) if we have already effected two registrations pursuant to such requests for registration within the preceding 12-month period.

Additionally, if we determine that it would be materially detrimental to us and our stockholders for such registration statement to either become effective or remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving us, (ii) require making a premature disclosure of material information that we have a bona fide business purpose for preserving as confidential, or (iii) render us unable to comply with requirements under the Securities Act or Exchange Act to effect such a demand registration, then we have the right to defer such registration, not more than once in any 12-month period, for an aggregate of up to 120 days.

Expenses of Registration Rights

We are required to pay all expenses, including reasonable fees and expenses, not to exceed $30,000 per registration, of one counsel to represent the selling stockholders, relating to any demand, piggyback or Form S-3 registration, other than underwriting discounts and commissions, stock transfer taxes, and any additional fees of counsel for the selling stockholders, subject to specified conditions and limitations. We are not required to pay registration expenses if a demand registration request is withdrawn at the request of a majority of holders of registrable securities to be registered, unless holders of a majority of the registrable securities agree to forfeit their right to one demand registration.

The investors’ rights agreement contains customary cross-indemnification provisions, pursuant to which we are obligated to indemnify the selling stockholders in the event of material misstatements or omissions in the applicable registration statement attributable to us, and the selling stockholders are obligated to indemnify us for material misstatements or omissions in the registration statement attributable to them, subject to certain limitations.

 

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Anti-Takeover Effects of Provisions of Our Amended and Restated Certificate of Incorporation, Our Amended and Restated Bylaws, and Delaware Law

Section 203 of the Delaware General Corporation 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 following the time that such stockholder became an interested stockholder, unless:

 

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prior to such time the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

 

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upon consummation of the transaction which 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 for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned (1) by persons who are directors and also officers and (2) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

 

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at or subsequent to such time, 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:

 

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any merger or consolidation involving the corporation or any direct or indirect majority-owned subsidiary of the corporation and the interested stockholder;

 

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any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder (in one transaction or a series of transactions);

 

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subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation or by any direct or indirect majority-owned subsidiary of the corporation of any stock of the corporation or of such subsidiary to the interested stockholder;

 

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any transaction involving the corporation or any direct or indirect majority-owned subsidiary of the corporation that has the effect, directly or indirectly, of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or

 

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any receipt by the interested stockholder of the benefit, directly or indirectly, of any loans, advances, guarantees, pledges, or other financial benefits by or through the corporation.

In general, Section 203 defines an “interested stockholder” as any entity or person who, together with the person’s affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation.

Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws

Provisions of our amended and restated certificate of incorporation and amended and restated bylaws that will become effective immediately prior to the closing of this offering may delay or discourage transactions involving an actual or potential change in our 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

 

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our common stock. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws:

 

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permit our board of directors to issue, without further action by the stockholders, up to      shares of preferred stock, with any rights, preferences and privileges as they may designate (including the right to approve an acquisition or other change in our control) that may be senior to our common stock;

 

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provide that the authorized number of directors may be changed only by resolution of our board of directors;

 

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provide that, subject to the rights of any series of preferred stock to elect directors, directors may only be removed for cause, which removal may be effected, subject to any limitation imposed by law, by the holders of at least 66 2/3% of the voting power of all of our then-outstanding shares of the common stock entitled to vote generally at an election of directors;

 

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provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

 

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divide our board of directors into three classes with each class serving three-year staggard terms;

 

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require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent or electronic transmission;

 

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provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide advance notice in writing in a timely manner and also specify requirements as to the form and content of a stockholder’s notice;

 

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do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose); and

 

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provide that special meetings of our stockholders may be called only by the chair of the board, our Chief Executive Officer or by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors.

Choice of Forum

Our amended and restated certificate of incorporation and our amended and restated bylaws that will become effective immediately prior to the closing of this offering will provide that the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf; (ii) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders; (iii) any action or proceeding asserting a claim against us or any of our current or former directors, officers or other employees, arising out of or pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; (iv) any action or proceeding to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws (including any right, obligation, or remedy thereunder); (v) any action or proceeding as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware; and (vi) any action asserting a claim against us or any of our directors, officers or other employees governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.

 

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The provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. Additionally, investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation will also provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, including all causes of action asserted against any defendant named in such complaint. For the avoidance of doubt, this provision is intended to benefit and may be enforced by us, our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering.

While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

Limitation on Liability and Indemnification Matters

See the section titled “Executive Compensation—Limitation of Liability and Indemnification.”

Listing

We have applied to list our common stock on the Nasdaq Global Market under the symbol “LBRX.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Equiniti Trust Company, LLC. The transfer agent and registrar’s address is P.O. Box 64945, Saint Paul, MN 55164-0945.

 

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock. Future sales of substantial amounts of common stock in the public market could adversely affect prevailing market prices. Furthermore, since only a limited number of shares will be available for sale shortly after this offering because of contractual and legal restrictions on resale described below, sales of substantial amounts of common stock in the public market after the restrictions lapse could adversely affect the prevailing market price for our common stock as well as our ability to raise equity capital in the future.

Based on the number of shares of common stock outstanding as of June 30, 2025, upon the completion of this offering, an aggregate of      shares of common stock will be outstanding, assuming the automatic conversion of all of our outstanding shares of redeemable convertible preferred stock into an aggregate of      shares of common stock. Of these shares, all of the shares of common stock sold in this offering will be freely tradable in the public market without restriction or further registration under the Securities Act, unless these shares are held by “affiliates,” as that term is defined in Rule 144 under the Securities Act.

The remaining shares of common stock outstanding after this offering will be “restricted securities,” as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if they are registered under the Securities Act or if they qualify for an exemption from registration, including the exemptions provided by under Rules 144 or 701 under the Securities Act, which rules are summarized below.

As a result of the lock-up agreements described below and subject to the provisions of Rules 144 or 701, these restricted securities will be available for sale in the public market as follows:

 

Approximate Number of Shares

  

First Date Available for Sale into the Public Market

Shares

   181 days after the date of this prospectus, upon expiration of the lock-up agreements referred to below, subject in some cases to applicable volume, manner of sale, and other limitations under Rule 144 and Rule 701.

Rule 144

In general, non-affiliate persons who have beneficially owned restricted shares of our common stock for at least six months, and any affiliate of the company who owns either restricted or unrestricted shares of our common stock, are entitled to sell their securities without registration with the SEC under an exemption from registration provided by Rule 144 under the Securities Act.

Non-Affiliates

Any person who is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale may sell an unlimited number of restricted securities under Rule 144 if:

 

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the restricted securities have been held for at least six months, including the holding period of any prior owner other than one of our affiliates (subject to certain exceptions);

 

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we have been subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale; and

 

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we are current in our Exchange Act reporting at the time of sale.

Any person who is not deemed to have been an affiliate of ours at the time of, or at any time during the three months preceding, a sale and has held the restricted securities for at least one year, including the holding period of any prior owner other than one of our affiliates, will be entitled to sell an unlimited number of restricted securities without regard to the length of time we have been subject to Exchange Act periodic reporting or whether we are current in our Exchange Act reporting. Non-affiliate resales are not subject to the manner of sale, volume limitation, or notice filing provisions of Rule 144.

 

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Affiliates

Persons seeking to sell restricted securities who are our affiliates at the time of, or any time during the three months preceding, a sale, would be subject to the restrictions described above. They are also subject to additional restrictions, by which such person would be required to comply with the manner of sale and notice provisions of Rule 144 and would be entitled to sell within any three-month period only that number of securities that does not exceed the greater of either of the following:

 

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1% of the number of shares of our common stock then outstanding, which will equal approximately      shares immediately after the completion of this offering; or

 

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the average weekly trading volume of our common stock on the stock exchange on which our shares are listed during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

Additionally, persons who are our affiliates at the time of, or any time during the three months preceding, a sale may sell unrestricted securities under the requirements of Rule 144 described above, without regard to the six-month holding period of Rule 144, which does not apply to sales of unrestricted securities.

Rule 701

Rule 701 under the Securities Act, as in effect on the date of this prospectus, permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144, including the holding period requirement. Most of our employees, executive officers or directors who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701, but all holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling their shares. However, substantially all Rule 701 shares are subject to lock-up agreements as described below and in the section titled “Underwriting” and will become eligible for sale upon the expiration of the restrictions set forth in those agreements.

Form S-8 Registration Statements

We intend to file with the SEC a registration statement on Form S-8 under the Securities Act covering the shares of common stock reserved for issuance under the 2017 Plan, the 2018 Plan, the 2023 Plan, the 2025 Plan and the ESPP. The registration statement on Form S-8 is expected to be filed and become effective as soon as practicable after the completion of this offering. Accordingly, shares registered under the registration statement on Form S-8 will be available for sale in the open market following its effective date, subject to Rule 144 volume limitations and the lock-up agreements described below, if applicable.

Lock-Up Agreements and Market-Standoff Agreements

We, our directors, our executive officers, and the holders of substantially all of our common stock or securities convertible into, exercisable for, or exchangeable for our common stock have entered into lock-up agreements and/or agreements containing market stand-off provisions imposing restrictions on our ability and the ability of such security holders to offer, sell, or transfer such securities for a period of 180 days following the date of this prospectus. The lock-up agreements pertaining to this offering provide that for a period of 180 days after the date of this prospectus, except with the prior written consent of Leerink Partners LLC, Piper Sandler & Co., and Stifel, Nicolaus & Company, Incorporated and subject to specified exceptions, we and they will not 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 for the sale of, or otherwise dispose of or transfer, any shares of common stock or any securities convertible into or exercisable or exchangeable for shares of common stock, or enter into any swap or other arrangement that transfers to another, in whole or in part, directly or indirectly, any of the economic consequences of ownership of the common stock.

 

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Our investors’ rights agreement and our standard form option agreement contain market stand-off provisions imposing restrictions on the ability of such security holders to offer, sell or transfer our equity securities for a period of 180 days following the date of this prospectus.

Registration Rights

Upon the closing of this offering, certain holders of our common stock will have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves. After registration pursuant to these rights, these shares will become freely tradable without restriction under the Securities Act. See the section titled “Description of Capital Stock—Registration Rights” for additional information regarding these registration rights.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following is a summary of the material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the ownership and disposition of our common stock issued pursuant to this offering. This discussion is not a complete analysis of all potential U.S. federal income tax consequences relating thereto, does not address any tax consequences arising under any state, local or non-U.S. tax laws, any estate, gift or other U.S. federal tax laws other than income tax laws, and does not address the potential application of the Medicare contribution tax on net investment income, any alternative minimum tax, or the special tax accounting rules under Section 451(b) of the Internal Revenue Code of 1986, as amended, or the Code. This discussion is based on the Code and applicable Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the Internal Revenue Service, or the IRS, all as in effect as of the date hereof. These authorities are subject to differing interpretations and may change, possibly retroactively, resulting in U.S. federal income tax consequences different from those discussed below. We have not requested nor do we intend to request a ruling from the IRS, or an opinion of counsel, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS or a court will agree with such statements and conclusions.

This discussion is limited to non-U.S. holders that purchase our common stock pursuant to this offering and that hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all of the U.S. federal income tax consequences that may be relevant to a particular holder in light of such holder’s circumstances. This discussion also does not consider any specific facts or circumstances that may be relevant to holders subject to special rules under the U.S. federal income tax laws, including, without limitation:

 

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certain former citizens or long-term residents of the United States;

 

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partnerships, S corporations, or other pass-through entities or arrangements (and investors therein);

 

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“specified foreign corporations” (including “controlled foreign corporations”) or “passive foreign investment companies;”

 

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persons who have elected to mark securities to market;

 

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corporations that accumulate earnings to avoid U.S. federal income tax;

 

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banks, financial institutions, investment funds, insurance companies, or brokers or dealers in securities;

 

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tax-exempt organizations, governmental organizations, or tax-qualified retirement plans;

 

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“qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds;

 

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real estate investment trusts or regulated investment companies;

 

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persons who hold common stock that constitutes “qualified small business stock” under Section 1202 of the Code, or “Section 1244 stock” under Section 1244 of the Code;

 

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persons who acquired our common stock in a transaction subject to the gain rollover provisions of the Code (including Section 1045 of the Code);

 

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persons that own, or have owned, actually or constructively, more than 5% of our common stock at any time (other than as expressly provided below);

 

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persons that acquired our common stock pursuant to the exercise of warrants or conversion rights under convertible instruments;

 

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persons whose functional currency is not the U.S. dollar;

 

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persons who acquire our common stock through the exercise options or otherwise as compensation for services; and

 

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  •  

persons holding our common stock as part of a hedging or conversion transaction, straddle, synthetic security, constructive sale, or other risk reduction strategy or integrated investment.

If a partnership (or an entity or arrangement that is treated as a partnership for U.S. federal income tax purposes) holds our common stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Partnerships holding our common stock and the partners in such partnerships are urged to consult their tax advisors about the particular U.S. federal income tax consequences to them of holding and disposing of our common stock.

THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING AND DISPOSING OF OUR COMMON STOCK, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL OR NON-U.S. TAX LAWS AND ANY U.S. FEDERAL NON-INCOME TAX LAWS, OR UNDER ANY APPLICABLE INCOME TAX TREATY.

Definition of Non-U.S. Holder

For purposes of this discussion, a non-U.S. holder is any beneficial owner of our common stock that is neither a “U.S. holder” nor a partnership (including any entity or arrangement treated as a partnership or that is disregarded from its owner) for U.S. federal income tax purposes. A U.S. holder is any beneficial owner of our common stock that, for U.S. federal income tax purposes, is or is treated as any of the following:

 

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an individual who is a citizen or resident of the United States;

 

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a corporation (or any entity treated 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;

 

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an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

 

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a trust (i) whose administration is subject to the primary supervision of a U.S. court, and which has one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) that have the authority to control all substantial decisions of the trust, or (ii) that has a valid election in effect under applicable Treasury Regulations to be treated as a United States person.

Distributions on Our Common Stock

As discussed under the “Dividend Policy” section of this prospectus, we have never declared or paid any cash dividends on our common stock, and we do not intend to pay cash dividends on our common stock for the foreseeable future. However, if we make cash or other property distributions on our common stock (other than certain pro rata distributions of our stock), such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Any portion of a distribution that exceeds our current and accumulated earnings and profits will constitute a return of capital and will first be applied against and reduce the non-U.S. holder’s tax basis in our common stock, but not below zero. Any amount distributed in excess of tax basis will be treated as gain realized on the sale or other disposition of our common stock and will be treated as described in the section titled “Gain on Sale or Other Taxable Disposition of Our Common Stock” below.

Subject to the discussions below regarding effectively connected income, backup withholding and Sections 1471 through 1474 of the Code, the Treasury Regulations thereunder, and other official guidance (commonly referred to as “FATCA”), dividends paid to a non-U.S. holder of our common stock generally will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty). To receive the benefit of a reduced treaty rate, a non-U.S. holder must

 

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furnish us or our paying agent with a valid IRS Form W-8BEN or IRS Form W-8BEN-E (or applicable successor form) and satisfy applicable certification and other requirements. This certification must be provided to us or our paying agent before the payment of dividends and must be updated periodically. If the non-U.S. holder holds our common stock through a financial institution or other agent acting on the non-U.S. holder’s behalf, the non-U.S. holder will be required to provide appropriate documentation to the applicable withholding agent, which then will be required to provide certification to us or our paying agent, either directly or through other intermediaries.

Non-U.S. holders that do not provide the required certification on a timely basis, but that qualify for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.

If a non-U.S. holder holds our common stock in connection with the conduct of a trade or business in the United States, and dividends paid on our common stock are effectively connected with such non-U.S. holder’s U.S. trade or business (and are attributable to such non-U.S. holder’s permanent establishment in the United States if required by an applicable tax treaty), the non-U.S. holder generally will be exempt from U.S. federal withholding tax. To claim the exemption, the non-U.S. holder must generally furnish a valid IRS Form W-8ECI (or applicable successor form) to the applicable withholding agent.

However, any such effectively connected dividends paid on our common stock generally will be subject to U.S. federal income tax on a net income basis at the regular U.S. federal income tax rates in the same manner as if the non-U.S. holder were a resident of the United States. A non-U.S. holder that is a non-U.S. corporation also may be subject to an additional branch profits tax equal to 30% (or such lower rate specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items. Non-U.S. holders should consult their tax advisors regarding any applicable income tax treaties that may provide for different rules.

Gain on Sale or Other Taxable Disposition of Our Common Stock

Subject to the discussion below regarding backup withholding, a non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized on the sale or other taxable disposition of our common stock, 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 required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the non-U.S. holder in the United States;

 

  •  

the non-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year of the sale or other taxable disposition (as calculated pursuant to Section 7701(b) of the Code), and certain other requirements are met; or

 

  •  

our common stock constitutes a “United States real property interest” by reason of our status as a United States real property holding corporation, or USRPHC, for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the sale or other taxable disposition or the non-U.S. holder’s holding period for our common stock.

Determining whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of our worldwide real property interests and our other assets used or held for use in a trade or business. We believe that we are not currently, and (although there can be no assurance in this regard) do not anticipate becoming, a USRPHC for U.S. federal income tax purposes. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a non-U.S. holder of our common stock will not be subject to U.S. federal income tax so long as (a) the non-U.S. holder owned, directly, indirectly, and constructively, no more than 5% of our common stock at all times within the shorter of (i) the five-year

 

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period preceding the disposition or (ii) the holder’s holding period and (b) our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market. There can be no assurance that our common stock will qualify as regularly traded on an established securities market. Prospective investors are encouraged to consult their own tax advisors regarding the possible consequences to them if we are, or were to become, a USRPHC.

Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular U.S. federal income tax rates in the same manner as if the non-U.S. holder were a resident of the United States. A non-U.S. holder that is a foreign corporation also may be subject to an additional branch profits tax equal to 30% (or such lower rate specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items.

A non-U.S. holder described in the second bullet point above will be subject to U.S. federal income tax at a flat 30% rate on gain realized upon the sale or other taxable disposition of our common stock which may be offset by certain U.S.-source capital losses (even though the individual is not considered a resident of the United States), provided that the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses. Non-U.S. holders should consult their tax advisors regarding any applicable income tax treaties that may provide for different rules.

Information Reporting and Backup Withholding

Annual reports are required to be filed with the IRS and provided to each non-U.S. holder indicating the amount of distributions on our common stock paid to such non-U.S. holder and the amount of any tax withheld with respect to those distributions. These information reporting requirements apply even if no withholding was required (because the distributions were effectively connected with the non-U.S. holder’s conduct of a U.S. trade or business, or withholding was reduced or eliminated by an applicable income tax treaty) and regardless of whether such distributions constitute dividends. This information also may be made available under a specific treaty or agreement with the tax authorities in the country in which the non-U.S. holder resides or is established. Backup withholding, currently at a 24% rate, generally will not apply to payments to a non-U.S. holder of distributions on or the gross proceeds of a disposition of our common stock provided that the non-U.S. holder furnishes the required certification for its non-U.S. status, such as by providing a valid IRS Form W-8BEN, IRS Form W-8BEN-E or IRS Form W-8ECI, or certain other requirements are met. Backup withholding may apply if the payor has actual knowledge, or reason to know, that the non-U.S. holder is a United States person that is not an exempt recipient.

Backup withholding is not an additional tax. If any amount is withheld under the backup withholding rules, non-U.S. holders are urged to consult their U.S. tax advisors regarding the possibility of and procedure for obtaining a refund or a credit against the non-U.S. holder’s U.S. federal income tax liability, if any.

Withholding on Foreign Entities

FATCA imposes a U.S. federal withholding tax of 30% on certain payments made to a “foreign financial institution” (as specially defined under these rules) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities certain information regarding certain U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or an exemption applies. FATCA also generally imposes a U.S. federal withholding tax of 30% on certain payments made to a non-financial foreign entity unless such entity provides the withholding agent a certification identifying certain direct and indirect U.S. owners of the entity, or an exemption applies. An intergovernmental agreement between the United States and an applicable non-U.S. country may modify these requirements. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes. FATCA currently applies to dividends paid on our common stock. The U.S. Treasury released proposed Treasury Regulations

 

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which, if finalized in their present form, would eliminate the U.S. federal withholding tax of 30% applicable to the gross proceeds of a sale or other disposition of our common stock. In its preamble to such proposed Treasury Regulations, the U.S. Treasury stated that taxpayers may generally rely on the proposed Treasury Regulations until final Treasury Regulations are issued.

Prospective investors are urged to consult with their tax advisors regarding the potential implications of FATCA on their investment in our common stock.

EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PURCHASING, HOLDING, AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY RECENT AND PROPOSED CHANGE IN APPLICABLE LAW, AS WELL AS TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL, NON-U.S. OR U.S. FEDERAL NON-INCOME TAX LAWS.

 

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UNDERWRITING

Leerink Partners LLC, Piper Sandler & Co. and Stifel, Nicolaus & Company, Incorporated are acting as representatives of each of the underwriters named below and as joint bookrunning managers for this offering. Subject to the terms and conditions set forth in the underwriting agreement among us and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the number of shares of common stock set forth opposite its name below.

 

Underwriter

   Number of
Shares
 

Leerink Partners LLC

  

Piper Sandler & Co.

  

Stifel, Nicolaus & Company, Incorporated

           
  

 

 

 

Total

           
  

 

 

 

Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and not jointly, to purchase all of the shares sold under the underwriting agreement if any of the shares are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and subject to other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers’ certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

Discounts and Commissions

The representatives have advised us that the underwriters propose initially to offer the shares to the public at the initial public offering price set forth on the cover page of this prospectus and to dealers at that price less a concession not in excess of $     per share. After the initial offering of the shares, the public offering price, concession or any other term of this offering may be changed by the representatives.

The following table shows the initial public offering price, underwriting discounts and commissions and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option.

 

            Total  
     Per
Share
     Without Option      With Option  

Initial public offering price

   $            $           $       

Underwriting discounts and commissions

   $        $        $    

Proceeds, before expenses, to us

   $        $        $    

We estimate expenses payable by us in connection with this offering, other than the underwriting discounts and commissions referred to above, will be approximately $  . We also have agreed to reimburse the underwriters for up to $35,000 for their FINRA counsel fee. In accordance with FINRA Rule 5110, this reimbursed fee is deemed underwriting compensation for this offering.

 

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Over-Allotment Option

We have granted an option to the underwriters, exercisable for 30 days after the date of this prospectus, to purchase up to      additional shares at the initial public offering price, less underwriting discounts and commissions. If the underwriters exercise this option, each underwriter will be obligated, subject to the conditions contained in the underwriting agreement, to purchase a number of additional shares proportionate to that underwriter’s initial amount reflected in the above table.

No Sales of Similar Securities

We, our executive officers and directors and substantially all of our other existing security holders have agreed not to sell or transfer any common stock or securities convertible into or exchangeable or exercisable for common stock, for 180 days after the date of this prospectus without first obtaining the written consent of Leerink Partners LLC, Piper Sandler & Co., and Stifel, Nicolaus & Company, Incorporated on behalf of the underwriters. Specifically, we and these other persons have agreed, with certain limited exceptions, not to directly or indirectly:

 

  •  

offer, pledge, sell or contract to sell any common stock;

 

  •  

sell any option or contract to purchase any common stock;

 

  •  

purchase any option or contract to sell any common stock;

 

  •  

grant any option, right or warrant for the sale of any common stock;

 

  •  

otherwise dispose of or transfer any common stock;

 

  •  

request or demand that we file a registration statement related to the common stock; or

 

  •  

enter into any swap or other agreement or any transaction that transfers, in whole or in part, the economic consequence of ownership of any common stock, whether any such swap, agreement or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.

The lock-up provisions apply to common stock and to securities convertible into or exchangeable or exercisable for common stock. They also apply to common stock owned now or acquired later by the person executing the lock-up agreement or for which the person executing the lock-up agreement later acquires the power of disposition.

Nasdaq Global Market Listing

We have applied to list our common stock on the Nasdaq Global Market, subject to notice of issuance, under the symbol “LBRX.”

Determination of Offering Price

Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations between us and the representatives. In addition to prevailing market conditions, the factors to be considered in determining the initial public offering price are:

 

  •  

the valuation multiples of publicly traded companies that the representatives believe to be comparable to us;

 

  •  

our financial information;

 

  •  

the history of, and the prospects for, our company and the industry in which we compete;

 

  •  

an assessment of our management, its past and present operations, and the prospects for, and timing of, our future revenues;

 

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  •  

the present state of our development; and

 

  •  

the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.

An active trading market for the shares may not develop. It is also possible that after this offering, our common stock will not trade in the public market at or above the initial public offering price.

The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.

Price Stabilization, Short Positions and Penalty Bids

Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing our common stock. However, the representatives may engage in transactions that stabilize the price of the common stock, such as bids or purchases to peg, fix or maintain that price.

In connection with this offering, the underwriters may purchase and sell our common stock in the open market. These transactions may include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in this offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ over-allotment option described above. The underwriters may close out any covered short position by either exercising their over-allotment option or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option granted to them under the underwriting agreement described above. “Naked” short sales are sales in excess of such over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our common stock in the open market after pricing that could adversely affect investors who purchase in this offering. Stabilizing transactions consist of various bids for or purchases of shares of common stock made by the underwriters in the open market prior to the closing of this offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. The underwriters may conduct these transactions on the Nasdaq Global Market, in the over-the-counter market or otherwise.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.

Electronic Distribution

In connection with this offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as e-mail.

 

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Other Relationships

The underwriters and certain of their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Some of the underwriters and certain of their affiliates may in the future engage in investment banking and other commercial dealings in the ordinary course of business with us and our affiliates, for which they may in the future receive customary fees, commissions and expenses.

In addition, in the ordinary course of their business activities, the underwriters and their 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. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Selling Restrictions

Notice to Prospective Investors in the European Economic Area

In relation to each Member State of the European Economic Area, or each, a Relevant State, no shares have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the EU Prospectus Regulation, except that shares may be offered to the public in that Relevant State at any time under the following exemptions under the EU Prospectus Regulation:

 

  A.

to any legal entity which is a qualified investor as defined under Article 2 of the EU Prospectus Regulation;

 

  B.

to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the EU Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or

 

  C.

in any other circumstances falling within Article 1(4) of the EU Prospectus Regulation,

provided that no such offer of shares shall require us or any of the representatives to publish a prospectus pursuant to Article 3 of the EU Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the EU Prospectus Regulation and each person who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with each of the underwriters and the Company that it is a “qualified investor” within the meaning of Article 2(e) of the EU Prospectus Regulation. In the case of any shares being offered to a financial intermediary as that term is used in the EU Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a Relevant State to qualified investors as so defined or in circumstances in which the prior consent of the underwriters have been obtained to each such proposed offer or resale.

In the case of any shares being offered to a financial intermediary as that term is used in Article 5(1) of the EU Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may

 

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give rise to an offer to the public other than their offer or resale in an EEA State to qualified investors, in circumstances in which the prior consent of the representatives has been obtained to each such proposed offer or resale.

For the purposes of this provision, the expression an “offer to the public” in relation to any shares in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, and the expression “EU Prospectus Regulation” means Regulation (EU) 2017/1129.

Notice to Prospective Investors in the United Kingdom

No shares have been offered or will be offered pursuant to the offering to the public in the United Kingdom prior to the publication of a prospectus in relation to the shares which has been approved by the Financial Conduct Authority, except that the shares may be offered to the public in the United Kingdom at any time:

 

  A.

to any legal entity which is a qualified investor as defined under Article 2 of the UK Prospectus Regulation;

 

  B.

to fewer than 150 natural or legal persons (other than qualified investors as defined under Article 2 of the UK Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or

 

  C.

in any other circumstances falling within Section 86 of the Financial Services and Markets Act 2000, or the FMSA,

provided that no such offer of the shares shall require us or any representative to publish a prospectus pursuant to Section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the UK Prospectus Regulation. For the purposes of this provision, the expression an “offer to the public” in relation to the shares in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares and the expression “UK Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.

In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the UK Prospectus Regulation) (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the Order) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as relevant persons) or otherwise in circumstances which have not resulted and will not result in an offer to the public of the shares in the United Kingdom within the meaning of the FSMA.

Any person in the United Kingdom that is not a relevant person should not act or rely on the information included in this document or use it as basis for taking any action. In the United Kingdom, any investment or investment activity that this document relates to may be made or taken exclusively by relevant persons.

Notice to Prospective Investors in Canada

The shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal 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 the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

 

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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 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.

Notice to Prospective Investors in Australia

This prospectus:

 

  A.

does not constitute a disclosure document or a prospectus under Chapter 6D.2 of the Corporations Act 2001 (Cth), or the Corporations Act;

 

  B.

has not been, and will not be, lodged with the Australian Securities and Investments Commission, or ASIC, as a disclosure document for the purposes of the Corporations Act and does not purport to include the information required of a disclosure document for the purposes of the Corporations Act; and

 

  C.

may only be provided in Australia to select investors who are able to demonstrate that they fall within one or more of the categories of investors, available under section 708 of the Corporations Act, or Exempt Investors.

The shares of common stock may not be directly or indirectly offered for subscription or purchased or sold, and no invitations to subscribe for or buy the shares of common stock may be issued, and no draft or definitive offering memorandum, advertisement or other offering material relating to any shares of common stock may be distributed in Australia, except where disclosure to investors is not required under Chapter 6D of the Corporations Act or is otherwise in compliance with all applicable Australian laws and regulations. By submitting an application for the shares of common stock, you represent and warrant to us that you are an Exempt Investor.

As any offer of shares of common stock under this document will be made without disclosure in Australia under Chapter 6D.2 of the Corporations Act, the offer of those securities for resale in Australia within 12 months may, under section 707 of the Corporations Act, require disclosure to investors under Chapter 6D.2 if none of the exemptions in section 708 applies to that resale. By applying for the shares of common stock you undertake to us that you will not, for a period of 12 months from the date of issue of the shares of common stock, offer, transfer, assign or otherwise alienate those shares of common stock to investors in Australia except in circumstances where disclosure to investors is not required under Chapter 6D.2 of the Corporations Act or where a compliant disclosure document is prepared and lodged with ASIC.

Notice to Prospective Investors in Hong Kong

The shares of common stock have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong), or the SFO, of Hong Kong and any rules made thereunder; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong), or the CO, or which do not constitute an offer to the public within the meaning of the CO. No advertisement, invitation or document relating to the common stock has been or may be issued or has been or may be in the possession of any person for the

 

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purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares of common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made thereunder.

Notice to Prospective Investors in Japan

The shares of common stock have not been and will not be registered pursuant to Article 4, Paragraph 1 of the Financial Instruments and Exchange Act. Accordingly, none of the common stock nor any interest therein may be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any “resident” of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to or for the benefit of a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other applicable laws, regulations and ministerial guidelines of Japan in effect at the relevant time.

Notice to Prospective Investors in Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of common stock may not be circulated or distributed, nor may the common stock be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time, or SFA) pursuant to Section 274 of the SFA; (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares of common stock are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

 

  A.

a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

 

  B.

a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,

securities or securities-based derivatives contract (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the common stock pursuant to an offer made under Section 275 of the SFA except:

 

  A.

to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

 

  B.

where no consideration is or will be given for the transfer;

 

  C.

as specified in Section 276(7) of the SFA; or

 

  D.

as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities based Derivatives Contracts) Regulations 2018.

 

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Singapore SFA Product Classification — Solely for the purposes of its obligations pursuant to sections 309B(1)(a) and 309B(1)(c) of the SFA, the company has determined, and hereby notifies all relevant persons (as defined in Section 309A of the SFA) that the shares of common stock are “prescribed capital markets products” (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

Notice to Prospective Investors in Switzerland

The shares of common stock may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document does not constitute a prospectus within the meaning of, and has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares of common stock or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, the company, the shares of common stock have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares of common stock will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of shares of common stock has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares of common stock.

Notice to Prospective Investors in Israel

This document does not constitute a prospectus under the Israeli Securities Law, 5728-1968, or the Israeli Securities Law, and has not been filed with or approved by the Israel Securities Authority. In Israel, this prospectus is being distributed only to, and is directed only at, and any offer of the shares is directed only at, (i) a limited number of persons in accordance with the Israeli Securities Law and (ii) investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, underwriters, venture capital funds, entities with equity in excess of NIS 50 million and “qualified individuals,” each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case, purchasing for their own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in the Addendum). Qualified investors are required to submit written confirmation that they fall within the scope of the Addendum, are aware of the meaning of same and agree to it.

 

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LEGAL MATTERS

The validity of the shares of common stock being offered by this prospectus will be passed upon for us by Cooley LLP, New York, New York. The underwriters are being represented by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston, Massachusetts.

EXPERTS

The financial statements of LB Pharmaceuticals Inc as of December 31, 2024 and 2023 and for each of the two years in the period ended December 31, 2024, included in this prospectus and in the Registration Statement, have been so included in reliance on the report of BDO USA, P.C., an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting. The report on the financial statements contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the shares of common stock being offered by this prospectus. This prospectus does not contain all of the information in the registration statement and its exhibits. For further information with respect to us and the common stock offered by this prospectus, we refer you to the registration statement and its exhibits. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.

Upon the completion of this offering, we will be subject to the information reporting requirements of the Exchange Act and we will file reports, proxy statements, and other information with the SEC. These reports, proxy statements, and other information will be available at www.sec.gov. We also maintain a website at https://lbpharma.us/, 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 incorporated by reference in, and is not part of, this prospectus.

 

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Table of Contents

INDEX TO FINANCIAL STATEMENTS

 

Financial Statements

  

Report of Independent Registered Public Accounting Firm

     F-2  

Balance Sheets as of December 31, 2024 and 2023

     F-3  

Statements of Operations for the Years Ended December 31, 2024 and 2023

     F-4  

Statements of Comprehensive Loss for the Years Ended December  31, 2024 and 2023

     F-5  

Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit for the Years Ended December 31, 2024 and 2023

     F-6  

Statements of Cash Flows for the Years Ended December 31, 2024 and 2023

     F-7  

Notes to Financial Statements

     F-8  

 

Unaudited Condensed Financial Statements

  

Condensed Balance Sheets as of June 30, 2025 and December 31, 2024

     F-38  

Condensed Statements of Operations for the Six Months Ended June 30, 2025 and 2024

     F-39  

Condensed Statements of Comprehensive Loss for the Six Months Ended June 30, 2025 and 2024

     F-40  

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit for the Six Months Ended June 30, 2025 and 2024

     F-41  

Condensed Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024

     F-42  

Notes to Condensed Financial Statements

     F-43  

 

F-1


Table of Contents

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

LB Pharmaceuticals Inc

New York, New York

Opinion on the Financial Statements

We have audited the accompanying balance sheets of LB Pharmaceuticals Inc (the “Company”) as of December 31, 2024 and 2023, the related statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not generated revenues, has suffered recurring losses from operations, has a net capital deficiency, and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ BDO USA, P.C.

We have served as the Company’s auditor since 2016.

New York, New York

June 27, 2025

 

F-2


Table of Contents

LB Pharmaceuticals Inc

Balance Sheets

(in thousands, except share and per share data)

 

 

     As of December 31,  
     2024     2023  

Assets

    

Current assets

    

Cash and cash equivalents

   $ 22,978     $ 14,979  

Marketable securities

     5,021       28,312  

Prepaid expenses and other assets

   $ 880     $ 2,343  
  

 

 

   

 

 

 

Total current assets

     28,879       45,634  

Operating lease right-of-use assets

     2,298       —   

Property and equipment, net

     1,859       23  

Restricted cash

     498       —   
  

 

 

   

 

 

 

Total assets

   $ 33,534     $ 45,657  
  

 

 

   

 

 

 

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit

    

Current liabilities

    

Accounts payable

     2,320       1,389  

Accrued expenses

     5,302       1,217  

Operating lease liability, current

     487       —   
  

 

 

   

 

 

 

Total current liabilities

     8,109       2,606  

Derivative liability—warrants

     2,504       1,557  

Operating lease liability, noncurrent

     3,216       —   
  

 

 

   

 

 

 

Total liabilities

     13,829       4,163  
  

 

 

   

 

 

 

Commitments and contingencies (Note 13)

    

Redeemable convertible preferred stock

    

Series Seed preferred stock, $0.0001 par value, 295,467 shares authorized, 295,467 shares issued and outstanding as of December 31, 2024 and 2023. Liquidation preference of $443 as of December 31, 2024 and 2023.

     435       435  

Series A preferred stock, $0.0001 par value, 3,655,374 shares authorized, 3,655,374 shares outstanding as of December 31, 2024 and 2023. Liquidation preference of $8,407 as of December 31, 2024 and 2023.

     6,179       6,179  

Series B preferred stock, $0.0001 par value, 301,119 shares authorized, 301,119 shares issued and outstanding as of December 31, 2024 and 2023. Liquidation preference of $903 as of December 31, 2024 and 2023.

     580       580  

Series C preferred stock, $0.0001 par value, 75,000,000 shares authorized, 73,820,346 and 47,153,680 shares issued and outstanding as of December 31, 2024 and 2023, respectively. Liquidation preference of $110,731 and $70,731 as of December 31, 2024 and 2023, respectively.

     107,065       68,773  

Stockholders’ deficit

    

Common stock, $0.0001 par value, 105,000,000 shares authorized, 7,021,744 and 6,960,889 shares issued and outstanding as of December 31, 2024 and 2023, respectively.

     1       1  

Additional paid-in capital

     9,657       6,473  

Accumulated deficit

     (104,323 )      (41,221 ) 

Accumulated other comprehensive income

     111       274  
  

 

 

   

 

 

 

Total stockholders’ deficit

   $ (94,554 )    $ (34,473 ) 
  

 

 

   

 

 

 

Total liabilities, redeemable convertible preferred stock and stockholders’ deficit

   $ 33,534     $ 45,657  
  

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

LB Pharmaceuticals Inc

Statements of Operations

(in thousands, except share and per share data)

 

 

     Year Ended December 31,  
     2024      2023  

Operating expenses

     

Research and development

   $ 51,171      $ 7,845  

General and administrative

     13,659        3,531  
  

 

 

    

 

 

 

Total operating loss

     (64,830 )       (11,376 ) 

Non-operating income (expense)

     

Interest income

     1,721        811  

Interest expense

     —         (4,825 ) 

Loss on extinguishment of debt

     —         (7,435 ) 

Realized gain on sale of marketable securities, net

     955        328  

(Loss) gain on change in fair value of derivative instruments

     (947 )       16,257  

Other expense

     —         (34 ) 
  

 

 

    

 

 

 

Total non-operating income

     1,729        5,102  
  

 

 

    

 

 

 

Loss before income tax

     (63,101 )       (6,274 ) 
  

 

 

    

 

 

 

Income tax provision

     1        1  
  

 

 

    

 

 

 

Net loss

   $ (63,102 )     $ (6,275 ) 
  

 

 

    

 

 

 

Net loss per share, basic and diluted

   $ (6.20 )     $ (0.78 ) 

Weighted average shares outstanding used in calculating net loss per share, basic and diluted

     10,175,580        8,011,802  

 

See accompanying notes to financial statements.

 

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Table of Contents

LB Pharmaceuticals Inc

Statements of Comprehensive Loss

(in thousands)

 

 

     Year Ended December 31,  
     2024      2023  

Net loss

   $ (63,102 )     $ (6,275 ) 

Unrealized (loss) gain on marketable securities, net

     (163 )       274  
  

 

 

    

 

 

 

Comprehensive loss

   $ (63,265 )     $ (6,001 ) 
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

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LB Pharmaceuticals Inc

Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit

(in thousands, except share data)

 

 

    Redeemable Convertible Preferred Stock                                      
    Series Seed     Series A     Series B     Series C     Common Stock                          
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Additional
Paid-in
Capital
    Accumulated
Deficit
    Accumulated
Other
Comprehensive
Income
    Total
Stockholders’
Deficit
 

Balance, December 31, 2022

    295,467     $ 435       3,655,374     $ 6,179       301,119     $ 580       —      $ —        6,898,390     $ 1     $ 6,133     $ (34,946 )    $ —      $ (28,812 ) 

Stock-based compensation expense

    —        —        —        —        —        —        —        —        —        —        295       —        —        295  

Shares issued upon exercise of warrants

    —        —        —        —        —        —        —        —        50,999       —        1       —        —        1  

Unrealized gain on marketable securities

    —        —        —        —        —        —        —        —        —        —        —        —        274       274  

Issuance of redeemable convertible Series C preferred stock, net of issuance costs

    —        —        —        —        —        —        23,333,334       33,042       —        —        —        —        —        —   

Issuance of redeemable convertible Series C preferred stock upon conversion of notes

    —        —        —        —        —        —        23,820,346       35,731       —        —        —        —        —        —   

Issuance of warrants to placement agent for convertible note financing

    —        —        —        —        —        —        —        —        —        —        44       —        —        44  

Issuance of restricted common stock to employees

    —        —        —        —        —        —        —        —        11,500       —        —        —        —        —   

Net loss

    —        —        —        —        —        —        —        —        —        —        —        (6,275 )      —        (6,275 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2023

    295,467     $ 435       3,655,374     $ 6,179       301,119     $ 580       47,153,680     $ 68,773       6,960,889     $ 1     $ 6,473     $ (41,221 )    $ 274     $ (34,473 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Stock-based compensation expense

    —        —        —        —        —        —        —        —        —        —        3,090       —        —       
3,090
 

Unrealized loss on marketable securities

    —        —        —        —        —        —        —        —        —        —        —        —        (163 )      (163 ) 

Issuance of redeemable convertible Series C preferred stock, net of issuance costs

    —        —        —        —        —        —        26,666,666       38,292       —        —        —        —        —        —   

Shares issued upon exercise of warrants

    —        —        —        —        —        —        —        —        7,105       —        3       —        —        3  

Shares issued upon exercise of options

    —        —        —        —        —        —        —        —        13,750       —        20       —        —        20  

Issuance of common stock for services

    —        —        —        —        —        —        —        —        40,000       —        71       —        —        71  

Net loss

    —        —        —        —        —        —        —        —        —        —        —        (63,102 )      —        (63,102 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2024

    295,467     $ 435       3,655,374     $ 6,179       301,119     $ 580       73,820,346     $ 107,065       7,021,744     $ 1     $ 9,657     $ (104,323 )    $ 111     $ (94,554 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

LB Pharmaceuticals Inc

Statements of Cash Flows

(in thousands)

 

 

     Year Ended December 31,  
     2024      2023  

Operating activities

     

Net loss

   $ (63,102 )     $ (6,275 ) 

Adjustments to reconcile net loss to net cash used in operating activities:

     

Stock-based compensation expense

     3,090        295  

Shares issued for services rendered

     71        —   

Other expense

     —         34  

Amortization of deferred financing fees

     —         3,883  

Write-off of deferred offering costs

     3,219        —   

Depreciation

     91        4  

Non-cash lease expense

     308        —   

Realized gain on marketable securities, net

     (955 )       (328 ) 

Loss on extinguishment of debt

     —         7,435  

(Accretion) amortization of (discounts) premiums on investments, net

     (34 )       428  

Loss (gain) on change in fair value of derivative instruments

     947        (16,257 ) 

Changes in operating assets and liabilities:

     

Prepaid expenses and other current assets

     (1,757 )       (2,257 ) 

Operating lease liability

     (60 )       —   

Accrued interest on marketable securities

     114        (154 ) 

Accounts payable and accrued expenses

     5,016        1,098  
  

 

 

    

 

 

 

Net cash used in operating activities

     (53,052 )       (12,094 ) 

Investing activities

     

Purchases of property and equipment

     (769 )       (25 ) 

Purchase of marketable securities

     (29,746 )       (33,985 ) 

Proceeds from the sale of marketable securities

     23,649        —   

Maturities of marketable securities

     30,100        6,000  
  

 

 

    

 

 

 

Net cash provided by (used in) investing activities

     23,234        (28,010 ) 
  

 

 

    

 

 

 

Financing activities

     

Proceeds from issuance of convertible notes

     —         725  

Proceeds from exercise of warrants and options

     23        1  

Proceeds from issuance of redeemable convertible Series C preferred stock

     40,000        35,000  

Payment of issuance costs of redeemable convertible Series C preferred stock

     (1,708 )       (1,958 ) 

Payment of debt issuance costs

     —         (89 ) 
  

 

 

    

 

 

 

Net cash provided by financing activities

     38,315        33,679  
  

 

 

    

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

     8,497        (6,425 ) 

Cash, cash equivalents and restricted cash, beginning of year

     14,979        21,404  
  

 

 

    

 

 

 

Cash, cash equivalents and restricted cash, end of year

   $ 23,476      $ 14,979  
  

 

 

    

 

 

 

Supplemental Disclosures of Cash Flow Information

     

Interest paid

   $ —       $ 1,981  

Income tax paid

   $ 1      $ 1  

Supplemental Disclosures of Non-cash Investing and Financing Information

     

Conversion of 2020 and 2022 Notes to redeemable convertible Series C preferred stock

   $ —       $ 35,731  

Warrants issued to placement agent

   $ —       $ 44  

Warrants issued to redeemable convertible Series B preferred stockholders

   $ —       $ 33  

Right of use assets in exchange for operating lease liabilities

   $ 2,405      $ —   

Acquisition of leasehold improvements

   $ 1,158      $ —   

 

See accompanying notes to financial statements.

 

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Table of Contents

LB Pharmaceuticals Inc

Notes to Financial Statements

 

1. Business Overview

LB Pharmaceuticals Inc (the “Company” or “LB”) was incorporated under the laws of the State of Delaware in September 2015 and is headquartered in New York, New York.

The Company is a clinical-stage biopharmaceutical company developing therapies for the treatment of schizophrenia, bipolar depression, and other neuropsychiatric diseases. The Company is building a pipeline that leverages the broad therapeutic potential of its lead product candidate, LB-102, which the Company believes has the potential to be the first benzamide antipsychotic drug approved for neuropsychiatric disorders in the United States. LB-102 is a Phase 3-ready oral, small molecule for the treatment of acute schizophrenia (defined as a sudden and severe episode of psychotic symptoms, characterized by hallucinations, delusions, and other positive symptoms).

Since the Company’s inception, it has focused substantially all of its efforts and financial resources on organizing and staffing the Company, raising capital, building its intellectual property portfolio, undertaking preclinical studies and clinical trials and providing general and administrative support for these activities. The Company has not generated any product revenue related to its primary business purpose to date and is subject to a number of risks similar to those of other early stage companies, including dependence on key individuals, regulatory approval of product candidates, uncertainty of market acceptance of products, if approved, competition from substitute products and larger companies, compliance with government regulations, protection of proprietary technology, dependence on third parties, product liability and the need to obtain adequate additional financing to fund the development of its product candidates.

Going Concern

The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has not generated revenues and relies on the issuance of debt and equity instruments to generate working capital. The Company experienced negative operating cash flows of $53.1 million and net loss of $63.1 million for the year ended December 31, 2024 and had an accumulated deficit of $104.3 million as of December 31, 2024. The Company expects to incur substantial expenses for the foreseeable future relating to research and development of LB-102 and to continue to generate operating losses. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The future viability of the Company is dependent on its ability to raise additional capital to fund its operations. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, which could adversely affect its business prospects, or the Company may be unable to continue operations. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

 

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Table of Contents

LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to the current period’s presentation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the accrual of research and development costs and the valuation of common stock, derivative warrant and stock-based compensation. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates.

Concentration of Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents and marketable securities.

Segment Information

The Company operates as a single reportable segment in the development of novel therapies for the treatment of neuropsychiatric diseases, including schizophrenia. The Company has not generated revenues since inception. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer (“CEO”). The CODM reviews the Company’s performance on an aggregate basis, thus the segment’s loss is the Company’s net loss, as reported on accompanying statements of operations, and the segment’s assets are the Company’s total assets, as reported on the accompanying balance sheets. Significant expenses provided to the CODM include research and development and general and administrative expenses, as reported on the accompanying statements of operations.

The CODM uses the information primarily to evaluate the Company’s performance and allocate resources. This includes reviewing key financial metrics such as budget versus actual expenditures and assessing overall cash flow and liquidity to ensure the continuity of operations. This approach allows the CODM to monitor the Company’s performance and make strategic adjustments as needed to support its operational and financial goals.

The Company’s operations and all long-lived assets are located in the United States.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company’s cash and cash equivalents primarily consist of balances held at one financial institution and in money market funds. Cash balances may, at times, exceed the Federal Deposit Insurance Corporation (“FDIC”) amounts. Management periodically assesses the financial condition of the banking institution and believes that any potential credit loss is minimal. As of December 31, 2024 and 2023, the Company’s cash balance exceeded the FDIC insured limit of $250,000.

Restricted Cash

Restricted cash primarily consists of certificates of deposit that are held as collateral against the letter of credit that the Company is required to maintain for its operating lease agreement.

 

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Table of Contents

LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

Marketable Securities

The Company accounts for marketable securities held as “available-for-sale” in accordance with Accounting Standards Codification (“ASC”) 320, Investments-Debt Securities. The Company classifies these investments as current assets and carries them at fair value. Unrealized gains and losses are recorded as a separate component of stockholders’ deficit as accumulated other comprehensive income. Realized gains or losses on marketable security transactions are reported in the statements of operations. Marketable securities are maintained at one financial institution and are governed by the Company’s investment policy, as approved by the Company’s board of directors.

The Company evaluates its marketable securities with unrealized loss positions for impairment by assessing if they are related to deterioration in credit risk and whether the entire amortized cost basis of the security will be recovered, the intent to sell, and whether it is more likely than not that the Company will be required to sell the securities before the recovery of their cost basis. Credit-related impairment losses, not to exceed the amount that fair value is less than the amortized cost basis, are recognized through an allowance for credit losses with changes in the allowance for credit losses recorded in the statements of operations.

No impairment losses related to marketable securities have been recognized during the years ended December 31, 2024 and 2023. Any unrealized losses on available-for-sale debt securities that are attributed to credit risk are recorded to earnings through an allowance for credit losses. Unrealized losses on available-for-sale debt securities were not material as of December 31, 2024 and 2023, and no allowance for credit losses was recorded.

Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Depreciation and amortization expense is recognized using the straight-line method over the following estimated useful lives:

 

Asset Category

   Estimated Useful Life

Leasehold improvements

   Lease term

Computer equipment

   3 years

Office furniture

   5 years

Leases

According to ASC 842 Leases, the Company determines if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether it has the right to control the use of the identified asset over the term of the arrangement.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. The interest rate implicit in lease contracts is typically not readily determinable. To the extent that the Company is unable to utilize an interest rate implicit in the lease, the collateralized incremental borrowing rate is used based on the information available at the lease commencement date, in determining the present value of lease payments. ROU assets are based on the measurement of the lease liability and includes any lease payments made prior to or on lease commencement and initial direct costs incurred and excludes lease incentives, as applicable.

The Company has elected not to recognize leases with an original term of one year or less on the balance sheet.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

The Company has elected to account for lease and non-lease components together as a single lease component for all underlying assets.

Deferred Offering Costs

The Company capitalizes certain legal, professional and accounting and other third-party fees that are directly associated with in-process equity financings as deferred financing costs until such financings are consummated. After consummation of an equity financing, these costs are recorded in stockholders’ equity as a reduction of additional paid-in capital generated as a result of the financings. Should the planned equity financing no longer be considered probable of being consummated, the deferred offering costs are expensed immediately as a charge to general and administrative expenses.

As of September 30, 2024, the Company recorded the write off of deferred offering costs in the amount of $3.2 million in general and administrative expenses in the accompanying statements of operations.

Debt Issuance Costs and Debt Discounts

Capitalized debt issuance costs related to the Company’s convertible notes payable are included as a direct deduction from the related debt liability. See Note 11 Notes for additional information.

The debt discount recorded in connection with the recognition of the derivative liability for the embedded conversion feature is included as a direct deduction from the related debt liability.

These costs are amortized into interest expense over the term of the notes.

Fair Value Measurements

The Company applies the fair value method under ASC 820 Fair Value Measurements and Disclosure to all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 – Observable inputs, such as quoted prices for identical assets and liabilities in active markets.

Level 2 – Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Unobservable inputs supported by little or no market data and requires management to develop its own assumptions based on best estimates of what market participants would use in pricing an asset or liability at the reporting date.

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest-level input that is significant to the fair value measurement in its entirety. To the extent that the valuation

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

is based on models or inputs that are less observable or unobservable in the market, the determination of fair value may require significant judgment and involve uncertainty. Changes in fair value measurements could have a significant impact on the results of operations in any given period.

The carrying amounts of cash equivalents, marketable securities, accounts payable and accrued expenses approximate the related fair values due to the short-term maturities of these instruments. The Company’s derivative liabilities are carried at fair value based on the fair value hierarchy. The Company invests its excess cash in financial instruments, which are readily convertible into cash, such as money market funds, fixed-income securities, and U.S. government securities. Cash equivalents, where applicable, are classified as Level 1 or Level 2, as defined by the fair value hierarchy.

Stock-Based Compensation

The Company uses equity-based compensation programs to provide long-term performance incentives for its employees, directors and consultants. These incentives consist primarily of stock options, restricted stock grants and penny warrants.

The Company measures all stock options and other stock-based awards to employees, directors and non-employees based on the fair value on the date of the grant and recognizes compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. The Company records the expense for these awards using the straight-line method over the service period. The Company recognizes adjustments to stock-based compensation expense for forfeitures as they occur. The Company classifies stock-based compensation expenses in its statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified.

The fair value of each stock option and other stock-based awards are estimated on the date of grant using the Black-Scholes option-pricing model. Inputs used in the Black-Scholes option-pricing model are summarized as follows:

Expected Term: The expected term is calculated using the simplified method. The simplified method calculates the expected term as the average of the vesting and contractual terms of the award. The Company elected to use the simplified method because of its limited history of stock option exercise activity.

Expected Volatility: The Company used the historical stock price volatility of a peer group of publicly-traded companies to calculate the expected volatility.

Risk-Free Interest Rate: The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

Expected Dividend Yield: The Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Accordingly, estimated dividend yield is zero.

The fair value for each restricted common stock award and penny warrants are estimated on the date of grant based on the most recent calculation of fair value of the Company’s common stock.

Common Stock Warrants and Warrant Liability

The Company accounts for common stock warrants issued as freestanding instruments in accordance with applicable accounting guidance as either liabilities or as equity instruments depending on the specific terms of

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

the warrant agreement. The Company classifies warrant liabilities on the balance sheet as long-term liabilities, which are revalued at each balance sheet date subsequent to the initial issuance. Changes in the fair value of the warrant liabilities are recorded in change in fair value of derivative instruments in the statements of operations. The Company values the aggregate equity value and allocates the value to the appropriate classes of equity through the use of the Black-Scholes option pricing model. The value of the warrants is derived through this equity allocation. Certain assumptions used in the model include expected volatility, dividend yield and risk-free interest rate. See Note 3 Fair Value Measurements for a description of these assumptions.

Redeemable Convertible Preferred Stock

The Company records all shares of redeemable convertible preferred stock at their respective fair values on the dates of issuance, net of issuance costs. The redeemable convertible preferred stock is recorded outside of permanent equity because upon the occurrence of certain deemed liquidation events, the majority of the holders can opt to redeem the shares at the liquidation preference and these events, including a merger, acquisition or sale of substantially all of the assets, are considered not solely within the Company’s control. The Company has not adjusted the carrying values of the redeemable convertible preferred stock to its redemption value because it is not considered redeemable as of December 31, 2024 and 2023.

Research and Development

Research and development costs include expenditures in connection with clinical trials, employee cash and stock-based compensation, regulatory and scientific consulting fees, contract research for preclinical studies, drug formulation, supply and handling and data collection. Advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

The value of goods and services received from the contract research organization (“CRO”) and other third parties are accrued each reporting period based on estimates of the level of services performed and progress in the period when invoices have not been received from such organizations. When evaluating the adequacy of the accrued liabilities, the progress of the studies or clinical trials are analyzed, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Accruals are adjusted as actual costs become known or as additional information becomes available.

General and Administrative

General and administrative costs include expenditures that are not directly related to research and development. General and administrative costs include costs for support and administrative functions including salaries and benefits, stock-based compensation and other personnel-related costs. Additional costs include non-personnel costs such as legal and professional fees, rent, audit fees and insurance costs.

Patents

The Company expenses external costs, such as filing fees and associated attorney fees, incurred to obtain issued patents and patent applications pending. The Company also expenses costs associated with maintaining and defending patents subsequent to their issuance in the period incurred.

Income Taxes

Income taxes have been determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

of assets and liabilities are recovered or paid. Deferred taxes result from differences between the financial statement and tax bases of LB’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The assessment of whether a valuation allowance is required often requires significant judgment.

Net Loss Per Share

The Company follows the two-class method when computing net loss per share, as the Company has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net loss attributable to common stockholders is computed by adjusting loss attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities, including outstanding stock options. Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock options.

The Company’s outstanding redeemable convertible preferred stock contractually entitle the holders of such shares to participate in distributions but does not require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Comprehensive Loss

Comprehensive loss includes net loss, as well as other changes in stockholders’ deficit that result from transactions and economic events other than those with stockholders. For the years ended December 31, 2024 and 2023, the Company’s only element of other comprehensive loss was unrealized gain/loss on marketable securities.

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which is intended to provide enhanced segment disclosures. The guidance requires disclosures about significant segment expenses and other segment items and identifying the CODM and how they use the reported segment profitability measures to assess segment performance and allocate resources. These enhanced disclosures are required for all public entities on an interim and annual basis, even if they have only a single reportable segment. The guidance is effective for years beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024. Early adoption is permitted. The Company adopted the guidance for the year ended December 31, 2024. The adoption required the Company to provide additional disclosures (Segment Information above), but otherwise it does not materially impact the accompanying financial statements.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures that requires public entities to annually disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The guidance is effective for fiscal years beginning after December 15, 2024 and early adoption is permitted. The Company is evaluating the guidance to determine if adoption will have a material impact on the financial statements or disclosures.

In November 2024, the FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, that requires public companies to provide more detailed disclosures to provide greater transparency about the components of specific expense categories. The guidance is effective for years beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the guidance to determine if adoption will have a material impact on the financial statements or disclosures.

3. Fair Value Measurements

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy (in thousands):

 

     As of December 31, 2024  
     Fair Value Measurement Using  
     Level 1      Level 2      Level 3      Total  

Assets

           

Cash Equivalents

           

Money market funds

   $ 19,926      $ —       $
— 
 
   $
19,926
 
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash equivalents

     19,926        —         —         19,926  

Marketable Securities

           

Government securities

     —         5,021        —         5,021  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total marketable securities

     —         5,021        —         5,021  
  

 

 

    

 

 

    

 

 

    

 

 

 

Restricted Cash

           

Certificate of deposit

     —         498        —         498  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 19,926      $ 5,519      $ —       $ 25,445  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Derivative liability - warrants

     —         —         2,504        2,504  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —       $ —       $ 2,504      $ 2,504  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

     As of December 31, 2023  
     Fair Value Measurement Using  
     Level 1      Level 2      Level 3      Total  

Assets

           

Cash Equivalents

           

Money market funds

   $ 7,231      $ —       $ —       $ 7,231  

US Treasury bills

     —         3,218        —         3,218  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash equivalents

     7,231        3,218        —         10,449  

Marketable Securities

           

US Treasury bills

     —         958        —         958  

Government securities

     —         24,899        —         24,899  

Corporate debt securities

     —         2,455        —         2,455  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total marketable securities

     —         28,312        —         28,312  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 7,231      $ 31,530      $ —       $ 38,761  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Derivative liability - warrants

     —         —         1,557        1,557  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $
— 
 
   $
— 
 
   $
1,557
 
   $ 1,557  
  

 

 

    

 

 

    

 

 

    

 

 

 

Marketable Securities

The Company accounts for marketable securities held as “available-for-sale” in accordance with ASC 320, Investments-Debt Securities. The Company classifies these investments as current assets and carries them at fair value.

The fair values of the Company’s corporate debt securities are based on prices obtained from independent pricing sources. The fair value of other marketable securities classified within Level 2 is based upon observable inputs that may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications.

Certificate of Deposit

The Company’s certificates of deposit are Level 2 instruments. The fair value of such instruments is estimated based on valuations obtained from third-party pricing services that utilize industry standard valuation models, including both income-based and market-based approaches, for which all significant inputs are observable either directly or indirectly. These inputs include interest rate curves, foreign exchange rates, and credit ratings.

Note Conversion Feature

In August and September 2020, the Company entered into Convertible Promissory Note Purchase Agreements (“2020 Notes”) with a group of lenders who loaned the Company a total of $10.0 million. In October 2022, November 2022, December 2022, and January 2023, the Company entered into Convertible Promissory Note Purchase Agreements (“2022 Notes”) with a group of lenders who loaned the Company a total of $25.7 million.

The 2020 Notes and 2022 Notes include conversion features which met the definition of a derivative liability. The conversion features were bifurcated from the host contract and a liability and corresponding discount were recorded on the date of issuance. The liability is remeasured at fair value at the end of each reporting period, with any changes recorded in the accompanying statements of operations.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

The 2020 Notes and 2022 Notes would automatically convert into the class of the stock issued in the Company’s next qualified financing at a conversion price equal to 80% of the per-share price of such securities issued. If the per-share price of the next qualified financing was below $2.35, the outstanding principal of the 2020 Notes and 2022 Notes would convert at the per-share price paid for such securities issued (see Note 11 Notes). In May 2023, the Company received a signed commitment for a qualified financing at $1.50 per share, thus the Company determined that the conversion feature had no value as of June 30, 2023. The 2020 Notes and 2022 Notes were converted to Series C preferred stock on August 29, 2023. See Note 11 Notes for additional information related to the 2020 Notes and the 2022 Notes and the note conversion features.

For the year ended December 31, 2023, the change in the fair value of the Level 3 note conversion feature liability resulted in the recording of a gain on change in fair value of derivative instruments of $16.6 million in the accompanying statements of operations.

The following are the assumptions used in the Black-Scholes valuation model in order to determine the fair value of the note conversion feature derivative liabilities for the embedded conversion feature related to 2022 Notes issued during the year ended December 31, 2023:

 

     January 26, 2023  

Term – financing event (in years)

     0.33  

Term – exit event (in years)

     1.33  

Volatility

     65.90 % 

Risk-free rate

     4.53 % 

Debt maturity date

     11/30/2024  

Discount rate

     31.50 % 

Warrants

In 2018 and 2019, the Company issued warrants to investors in connection with its private placement of Series A convertible preferred stock “A and B Warrants” (as defined in Note 8 Redeemable Convertible Preferred Stock and Equity). Pursuant to the terms of the A and B Warrants, the Company could be required to adjust the exercise price upon an adjustment of the price or exercise price of the Company’s existing stock or stock options.

In May 2022, the Company issued the Series B-1 Warrants (as defined below) to investors in connection with the Series B convertible preferred stock financing (the “Series B Offering”).

In August 2023, the Company issued the New Series B Warrants (as defined below) to the investors in the Series B Offering as an inducement to consent to the Series C preferred stock financing (the “Series C Offering”).

The Company issued warrants to investors in connection with equity financings. The warrants are required to be measured at fair value and reported as a liability in the accompanying balance sheets. The warrants are valued at each reporting date using the Black-Scholes model with any changes in fair value recorded in the accompanying statements of operations. The valuation of the warrants is considered Level 3 in the fair value hierarchy as the assumptions in the valuation that are both significant to the fair value measurement and unobservable. See Note 8 Redeemable Convertible Preferred Stock and Equity for additional information.

For the years ended December 31, 2024 and 2023, the Company recorded a loss on the change in the fair value of the Level 3 warrant liability of $0.9 million and $0.3 million, respectively, in the accompanying statements of operations.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

The following are the assumptions used in the Black-Scholes valuation model in order to determine the fair value of the derivative liabilities for the warrant liabilities for the years ended December 31, 2024 and 2023:

 

     August 28,
2023
    December 31,
2023
    December 31,
2024
 

Term – financing event (in years)

     0.50       —        —   

Term – exit event (in years)

     1.09       0.75       0.58 - 2.00  

Volatility

     67.0 %      57.5 %      49.0% - 70.0 % 

Exercise price

   $ 0.01 - $3.75     $ 0.01 - $1.50     $ 0.01 - $1.50  

Risk-free rate

     5.33 %      5.03 %      4.23% - 4.25 % 

 

If the significant unobservable inputs of volatility and discount rate were to change, this may result in a significantly higher or lower fair value measurement at the reporting dates. The change in the derivative liabilities for the years ended December 31, 2024 and 2023 was (in thousands):

 

     Note
Conversion
Feature
     Warrants      Total  

Balance, December 31, 2022

   $ 16,226      $ 1,228      $ 17,454  

Conversion feature for 2022 Notes (Jan. 2023 issuance)

     327        —         327  

Issuance of New Series B warrants

     —         33        33  

(Gain) loss due to change in fair value

     (16,553 )       296        (16,257 ) 
  

 

 

    

 

 

    

 

 

 

Balance, December 31, 2023

   $ —       $ 1,557      $ 1,557  

Loss due to change in fair value

     —         947        947  
  

 

 

    

 

 

    

 

 

 

Balance, December 31, 2024

   $ —       $ 2,504      $ 2,504  
  

 

 

    

 

 

    

 

 

 

During the years ended December 31, 2024 and 2023, there were no transfers of instruments between Level 1, 2 and 3 in the fair value hierarchy.

There are uncertainties on the fair value measurement of the instruments classified under Level 3 due to the use of unobservable inputs and interrelationships between these unobservable inputs, which could result in higher or lower fair value measurements.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

4. Cash Equivalents, Marketable Securities and Restricted Cash

The Company invests in certain U.S. government money market funds and treasury bills classified as cash equivalents and invests in certificate of deposits that are classified as restricted cash. The marketable securities consist of treasury bills, government securities and high investment grade corporate debt securities as follows (in thousands):

 

     As of December 31, 2024  
     Amortized
Cost
     Unrealized
Gains
     Unrealized
Losses
     Aggregate
Fair Value
 

Cash Equivalents

           

Money market funds

   $
19,926
 
   $
— 
 
   $
— 
 
   $
19,926
 
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash equivalents

     19,926        —         —         19,926  
  

 

 

    

 

 

    

 

 

    

 

 

 

Marketable Securities

           

Government securities

     4,910        111        —         5,021  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total marketable securities

   $ 4,910      $ 111      $ —       $ 5,021  

Restricted Cash

           

Certificate of deposit

     498        —         —         498  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash equivalents, marketable securities and restricted cash

   $
25,334
 
   $ 111      $ —       $ 25,445  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     As of December 31, 2023  
     Amortized
Cost
     Unrealized
Gains
     Unrealized
Losses
     Aggregate
Fair Value
 

Cash Equivalents

           

Money market funds

   $ 7,231      $ —       $ —       $ 7,231  

US Treasury bills

     3,169        49        —         3,218  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash equivalents

     10,400        49        —         10,449  

Marketable Securities

           

US Treasury bills

     956        2        —         958  

Government securities

     24,698        201        —         24,899  

Corporate debt securities

     2,433        22        —         2,455  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total marketable securities

     28,087        225        —         28,312  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash equivalents and marketable

   $ 38,487      $ 274      $ —       $ 38,761  
  

 

 

    

 

 

    

 

 

    

 

 

 

The contractual maturities of the Company’s marketable securities are summarized as follows (in thousands):

 

     As of December 31, 2024  
     Amortized
Cost
     Unrealized
Gains
     Unrealized
Losses
     Aggregate
Fair Value
 

Within one year

   $ 4,910      $ 111      $ —       $ 5,021  

After one year to five years

     —         —         —         —   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total marketable securities

   $ 4,910      $ 111      $ —       $ 5,021  
  

 

 

    

 

 

    

 

 

    

 

 

 

As of December 31, 2024 and 2023, there were no available-for-sale securities that have been in a continuous unrealized loss position for more than 12 months.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

A reconciliation of the cash, cash equivalents and restricted cash reported in the balance sheets that sum to the total of the amounts shown in the statements of cash flows is as follows (in thousands):

 

     As of December 31,  
     2024      2023  

Cash and cash equivalents

   $ 22,978      $ 14,979  

Restricted cash

     498        —   
  

 

 

    

 

 

 

Total cash, cash equivalents and restricted cash

   $ 23,476      $ 14,979  
  

 

 

    

 

 

 

5. Property and Equipment, Net

Property and equipment, net consisted of the following as of December 31, 2024 and 2023 (in thousands):

 

     December 31,
2024
     December 31,
2023
 

Leasehold improvements

   $ 1,491      $ —   

Computer equipment

     95        31  

Office furniture

     374        3  
  

 

 

    

 

 

 

Property and equipment

     1,960        34  

Less: Accumulated Depreciation

     (101 )       (11 ) 
  

 

 

    

 

 

 

Total property and equipment, net

   $ 1,859      $ 23  
  

 

 

    

 

 

 

Depreciation and amortization expense totaled $0.1 million and less than $0.1 million for the years ended December 31, 2024 and 2023, respectively, and is recorded in general and administrative expense in the accompanying statements of operations.

6. Prepaid Expenses and Other Current Assets and Accrued Expenses

Prepaid expenses consisted of the following as of December 31, 2024 and 2023 (in thousands):

 

     December 31,
2024
     December 31,
2023
 

Prepaid research and development

   $ 691      $ 2,246  

Deferred offering costs

     —         5  

Prepaid insurance

     57        71  

Other prepaid expenses and other current assets

     132        21  
  

 

 

    

 

 

 

Total prepaid expenses and other current assets

   $ 880      $ 2,343  
  

 

 

    

 

 

 

As of September 30, 2024, the Company recorded the write off of deferred offering costs in the amount of $3.2 million in general and administrative expenses in the accompanying statements of operations.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

Accrued expenses consisted of the following as of December 31, 2024 and 2023 (in thousands):

 

     December 31,
2024
     December 31,
2023
 

Accrued CRO costs

   $ 1,443      $ 326  

Accrued research and development costs

     488        50  

Accrued compensation costs

     1,441        798  

Accrued professional and consulting costs

     902        2  

Accrued termination benefits

     800        —   

Other accrued costs

     228        41  
  

 

 

    

 

 

 

Total accrued expenses

   $ 5,302      $ 1,217  
  

 

 

    

 

 

 

On November 26, 2024, the Company’s then-current chief executive officer (the “Former CEO”) entered into a transition, consulting, and separation agreement (“Separation Agreement”), pursuant to which the Former CEO resigned from his role as CEO and agreed to continue employment as advisor to the CEO through December 31, 2024. Under the Separation Agreement, the Former CEO is entitled to termination benefits until June 30, 2026, in the form of continuation of base salary in the same amount in effect as of December 31, 2024; the payment of monthly premiums for healthcare coverage; and provided that the Former CEO continues to provide consulting services to the Company as a consultant, the continued vesting of outstanding stock option awards in accordance with the applicable equity plans and stock option agreements. During the year ended December 31, 2024, the Company recorded $0.8 million of termination benefits in general and administrative expense in the accompanying statements of operations. See Note 10 Stock-Based Compensation for additional information on the continued vesting of outstanding stock options.

7. Leases

In May 2024, the Company entered into a new lease agreement for office space in New York, New York. The Company received $1.2 million of leasehold improvement incentives associated with the new lease agreement. The term of this lease commenced on June 21, 2024, which is the date the Company obtained control over the leased premises. The lease term continues through March 2032. The Company’s real estate lease agreement includes variable payments that are passed through by the landlord, such as insurance, taxes, and common area maintenance, and payments based on the usage of the asset. Pass-through charges and payments due to changes in usage of the asset are included within variable rent expense. Operating leases are recognized over the lease term and included in general and administrative expenses in the accompanying statements of operations. Variable lease expenses are recognized in general and administrative expenses in the accompanying statements of operations as incurred.

The Company’s lease agreement does not contain material residual value guarantees, restrictions, or covenants. The Company has no other operating leases recognized on the accompanying balance sheets.

The components of lease expense were as follows for the years ended December 31, 2024 and 2023 (in thousands):

 

     December 31,
2024
     December 31,
2023
 

Operating lease expense

   $ 308      $ —   

Short-term lease expense

     119        72  
  

 

 

    

 

 

 

Total lease expense

   $ 427      $ 72  
  

 

 

    

 

 

 

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

Short-term lease expense includes expenses related to the Company’s 2018 operating lease agreement for office space in New York, New York. The lease agreement was month-to-month and could be terminated by either party with three months’ written notice. The Company terminated the lease effective September 30, 2024. The Company made the policy election to exclude short-term leases from recognition and measurement under ASC 842.

The Company made an advance payment of $0.06 million for the first month of rent on the lease liabilities during the year ended December 31, 2024.

Supplemental balance sheet information related to operating leases as of December 31, 2024 and 2023 was as follows (in thousands):

 

     December 31,
2024
    December 31,
2023
 

Operating lease right-of-use assets

   $ 2,298     $ —   

Operating lease liability, current

     487       —   

Operating lease liability, noncurrent

     3,216       —   
  

 

 

   

 

 

 

Total operating lease liability

   $ 3,703     $ —   
  

 

 

   

 

 

 

Weighted average remaining lease term (in years)

     7.3       —   

Weighted average discount rate

     9.6 %      —  % 

As of December 31, 2024, future minimum commitments under operating leases were as follows:

 

     As of December 31, 2024  

Year ended December 31, 2025

   $ 487  

Year ended December 31, 2026

     730  

Year ended December 31, 2027

     730  

Year ended December 31, 2028

     764  

Year ended December 31, 2029

     775  

Thereafter

     1,743  
  

 

 

 

Total future lease payments

   $ 5,229  

Less: imputed interest

     (1,526 ) 
  

 

 

 

Present value of lease payments

   $ 3,703  
  

 

 

 

8. Redeemable Convertible Preferred Stock and Equity

The Company’s Fourth Amended and Restated Certificate of Incorporation (“Fourth Amended Certificate”) designates and authorizes the Company to issue 184.3 million shares, consisting of: (i) 105.0 million shares of common stock, par value $0.0001 per share; and (ii) 79.3 million shares of preferred stock, par value $0.0001 per share.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

Redeemable Convertible Preferred Stock

Redeemable convertible preferred stock (“Preferred Stock”) as of December 31, 2024 and 2023 consisted of the following (in thousands, except per share data):

 

     As of December 31, 2024  
     Issuance
Start Date
     Shares
Authorized
     Shares
Issued and
Outstanding
     Issuance
Price Per
Share
     Net
Carrying
Value
     Liquidation
Preference
 

Series Seed

     11/21/2017        295        295      $ 1.50      $ 435      $ 443  

Series A

     11/21/2018        3,655        3,655      $ 2.30        6,179        8,407  

Series B

     5/3/2022        301        301      $ 3.00        580        903  

Series C

     8/29/2023        75,000        73,820      $ 1.50        107,065        110,731  
     

 

 

    

 

 

       

 

 

    

 

 

 
        79,251        78,071         $ 114,259      $ 120,484  
     

 

 

    

 

 

       

 

 

    

 

 

 

 

     As of December 31, 2023  
     Issuance
Start Date
     Shares
Authorized
     Shares
Issued and
Outstanding
     Issuance
Price Per
Share
     Net
Carrying
Value
     Liquidation
Preference
 

Series Seed

     11/21/2017        295        295      $ 1.50      $ 435      $ 443  

Series A

     11/21/2018        3,655        3,655      $ 2.30        6,179        8,407  

Series B

     5/3/2022        301        301      $ 3.00        580        903  

Series C

     8/29/2023        75,000        47,154      $ 1.50        68,773        70,731  
     

 

 

    

 

 

       

 

 

    

 

 

 
        79,251        51,405         $ 75,967      $ 80,484  
     

 

 

    

 

 

       

 

 

    

 

 

 

In August 2023, the Company closed the Series C Offering with four new investor groups (“Series C New Investors”) to invest $75.0 million of which $35.0 million was payable upon the first closing in August 2023 and $40.0 million payable upon the enrollment of the first patient into the Phase 2 trial of LB-102. The second closing occurred in January 2024. The Company issued 23.3 million and 26.7 million shares of Series C preferred stock at the first and second closings, respectively. In conjunction with the Series C Offering, the strike price of warrants held by Series A and Series B preferred stockholders was reduced to $0.01 per share and the Series B preferred stockholders received 100,373 newly issued warrants at a strike price of $1.50 (“New Series B Warrants”), allowing the Series B preferred stockholders to purchase common stock in an amount equal to one-third of their current Series B preferred stock. See Warrants section below for additional information. The Company incurred issuance costs of $2.0 million associated with the Series C preferred stock and New Series B Warrants.

Upon the closing of the Series C Offering, the 2020 Notes and 2022 Notes automatically converted to 23.8 million shares of Series C preferred stock at a price of $1.50 per share. See Note 11 Notes for additional information.

As of December 31, 2024, the holders of the Preferred Stock have the following rights and preferences:

Voting: The holders of the Preferred Stock shall have full voting rights and powers and shall vote together with all other classes and series of stock of the Company. Each holder of Preferred Stock shall be entitled to the number of votes equal to the number of shares of common stock into which the preferred stock could be converted on the record date.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

Upon the closing of the Series C Offering, the Company’s Board of Directors shall consist of no more than seven members, including: one director shall be designated by each of the Series C New Investors; one director shall be designated by the existing stockholders of the Company, one director shall be the CEO of the Company and one independent director to be mutually agreed upon.

Series A and Series B Protective Provisions: At any time when shares of Series A or Series B preferred stock are outstanding, the Company will not, without the consent of a majority of the outstanding shares of Series A and Series B preferred stock (voting together as a single class): (i) take any action that requires the separate approval of the Series A or Series B preferred stockholders; (ii) amend the Fourth Amended Certificate to adversely affect the rights of the Series A or Series B stockholders differently from the Preferred Stock; or (iii) increase or decrease the authorized number of Series A or Series B preferred stock.

Series C Protective Provisions: Additionally, at any time that at least 50% of Series C preferred stock is outstanding, the Company will not without the consent of at least 60% of the Series C preferred stockholders (“Requisite Series C Holders”): (i) liquidate, dissolve or wind up the Company; (ii) amend, alter, repeal or waive any provisions of the Fourth Amended Certificate of Incorporation provided that any such amendment or waiver that is adverse to any series of Preferred Stock shall require the consent of the affected series (voting separately as a class); (iii) adversely change the rights, preferences or privileges of the Series C preferred stock; (iv) create any new class or series of equity interest having rights, preferences or privileges senior to or in parity with the Series C preferred stock; (v) increase or decrease the authorized number of shares of Preferred or Common Stock; (vi) purchase or redeem any Common or Preferred Stock, other than Common Stock granted by Board approved equity compensation arrangements; (vii) pay or declare any dividends or other distributions on Common or Preferred Stock; (viii) incur any indebtedness in excess of $1 million (other than ordinary trade indebtedness); (ix) increase or decrease the number of Directors on the Board; or (x) enter into any related party transactions other than changes in the compensation of the Company’s executive officers.

Dividends: The holders of Preferred Stock will not be entitled to dividends with respect to such shares, provided however that if the Board of Directors declares any dividends, holders of Preferred Stock will first receive at least an amount equal to the sum of (i) any declared but unpaid dividends on the applicable series of Preferred Stock plus (ii) a pro rata share of any dividends to be paid on other classes and series of the Company’s stock.

Liquidation Preference: In the event of any liquidation, dissolution or winding-up of the Company, the liquidation preference is as follows:

First: Series C preferred stockholders would be entitled to receive the greater of: (i) $1.50 per share (adjusted for any stock dividends, combinations or splits or similar transactions with respect to such shares), or (ii) the amount that would be received if the shares of Series C preferred stock were converted to common stock (“Series C Preference Amount”). Upon payment in full of the Series C Preference Amount, the holders of Series C preferred stock, shall not receive any additional payments from the Company. In the event the funds or assets are insufficient to pay in full the Series C Preference Amount, as described above, then all funds or assets available for shall be paid to the holders of Series C Stock pro rata based on the full Series C Preference Amount to which they are entitled.

Second: Series B preferred stockholders would be entitled to receive the greater of: (i) $3.00 per share (adjusted for any stock dividends, combinations or splits or similar transactions with respect to such shares), or (ii) the amount that would be received if the Series B Preferred were converted to Common Stock (“Series B Preference Amount”). In the event the funds or assets are insufficient to pay in full the Series B Preference Amount, as described above, then all funds or assets available for shall be paid to the holders of Series B Stock pro rata based on the full Series C Preference Amount to which they are entitled.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

Third: Series A preferred stockholders will be entitled to receive the greater of: (i) $2.30 per share (adjusted for any stock dividends, combinations or splits or similar transactions with respect to such shares), or (ii) the amount that would be received if the Series A Preferred were converted to Common Stock (“Series A Preference Amount”). In the event the funds or assets are insufficient to pay in full the Series A Preference Amount, as described above, then all funds or assets available for shall be paid to the holders of Series A Stock pro rata based on the full Series A Preference Amount to which they are entitled.

Fourth: Series Seed preferred stockholders will be entitled to receive the greater of: (i) $1.50 per share (adjusted for any stock dividends, combinations or splits or similar transactions with respect to such shares), or (ii) the amount that would be received if the Series Seed Preferred were converted to Common Stock (“Series Seed Preference Amount”). In the event the funds or assets are insufficient to pay in full the Series Seed Preference Amount, as described above, then all funds or assets available for shall be paid to the holders of Series Seed Stock pro rata based on the full Series Seed Preference Amount to which they are entitled.

After payment of the liquidation preference to the holders of Preferred Stock, the remaining assets of the Company shall be distributed ratably to the holders of common stock on a fully converted basis.

The Preferred Stock may be redeemed upon a Deemed Liquidation Event as defined in the Company’s Fourth Amended Certificate of Incorporation. The Preferred Stock will be redeemed as detailed above and may be redeemed at the greater of (i) the original issue price per share, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of such class or series of Preferred Stock been converted into common stock prior to the Deemed Liquidation Event. As of December 31, 2024, the shares of Preferred Stock were not redeemable and the likelihood of an occurrence of a Deemed Liquidation Event was not deemed to be probable.

Conversion: Each share of Preferred Stock is convertible at the option of the holder at any time after issuance into the number of fully paid and non-assessable shares of common stock as determined by dividing the original issue price of each series of Preferred Stock by the conversion price of each series in effect at time of the conversion. The initial conversion price is the respective original issue price, subject to adjustment in accordance with the anti-dilution provisions of the stock.

Each share of Preferred Stock will automatically be converted into one share of common stock at the then effective conversion rate in the event of either: (i) the closing of a public offering at a price of at least $3.00 per share (as adjusted for stock dividends, splits or similar transactions) resulting in gross proceeds to the Company of at least $75.0 million; or (ii) an event approved by the Requisite Series C Holders.

As of December 31, 2024 and 2023, none of the outstanding shares of Preferred Stock had been converted into common stock.

Reissuance: Shares of any Preferred Stock that are redeemed or converted will be retired or canceled and may not be reissued by the Company.

Common Stock

All issued shares of common stock are entitled to vote on a one share/one vote basis.

During 2024, the Company entered into an agreement for financial advisory services. As compensation for the services, the Company issued 40,000 shares of common stock. The Company recorded stock-based compensation expense of $0.1 million included in general and administrative expense on the accompanying statement of operations. The fair value of the issued shares was determined based on the fair value of the Company’s common stock as of the date of the agreement.

 

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Table of Contents

LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

Warrants

In 2018, in connection with the Company’s Series A Offering in 2018 (the “Series A Offering”), the Company issued warrants to purchase 1.8 million shares of the Company’s common stock at an exercise price of $2.30 per share. The warrants expire ten years after issuance. The warrants were issued in two tranches of which 0.9 million were fully exercisable at issuance (“Class A Warrants”) and the remaining 0.9 million were exercisable as of May 21, 2022 (“Class B Warrants”). The Class A Warrants and Class B Warrants are collectively referred to as the “A and B Warrants”.

In May 2022, in connection with the Series B Offering, the Company issued the Series B-1 Warrants to purchase 80,000 shares of the Company’s common stock that were immediately exercisable at an exercise price of $3.75 per share. The warrants expire five years after issuance.

The Series B Offering included a Rights Offer Phase (“Rights Offer”) in which the Company offered participants in the Series A Offering to invest in the Series B Offering. During the Rights Offer, for each Class A Warrant holder that invested in the Series B Offering, the Class A Warrant holder received the right to convert its Class A Warrants into the number of shares of common stock issuable upon exercise of the Class A Warrants, at no cost and for an exercise price of zero ($0.00) per share. On May 3, 2022, the Company settled the warrant liability and converted 0.2 million Class A Warrants to common stock. The difference in fair value based on the change in the exercise price of the warrants of less than $0.01 million was recorded to gain (loss) on change in fair value of derivative instruments in the accompanying statement of operations.

Pursuant to the anti-dilution terms contained in the Class A Warrants, any Class A Warrant holder who chose not to participate in the Rights Offer received a reduction in the exercise price of the Class A Warrants from $2.30 per share to $2.27 per share, calculated based on the amount of common stock issued upon conversion of the Class A Warrants in the Rights Offer.

The Class B Warrants issued as part of the Series A Offering remain outstanding and were not impacted by the Class A Warrant conversions.

In August 2023, as part of the Series C Offering, the Company modified the outstanding Class A Warrants, Class B Warrants and Class B-1 Warrants reducing the exercise price to $0.01. The Company recorded a gain on the change in fair value of $0.8 million to gain (loss) on change in fair value of derivative instruments in the accompanying statement of operations for the year ended December 31, 2023.

Additionally, the Company issued 0.1 million new warrants to the Series B preferred stockholders at a strike price of $1.50 per share (“New Series B Warrants”), allowing the Series B preferred stockholders to purchase common stock in an amount equal to 33.33% of their current Series B Preferred holdings. The New Series B Warrants were immediately exercisable and expire five years after issuance. The New Series B Warrants were issued as an incentive for the Series B stockholders to consent to the Series C Offering. The issuance of the New Series B Warrants was considered an inducement offer under ASC 470, Debt and the Company recorded financing costs based on the grant date fair value of the New Series B Warrants to other expense in the accompanying statement of operations for the year ended December 31, 2023.

 

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Table of Contents

LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

Warrants outstanding as of December 31, 2024 and 2023 are as follows:

 

     As of December 31,  
     2024      2023  

Class A Warrants

     695,961        695,961  

Class B Warrants

     882,948        886,698  

Series B-1 Warrants

     71,761        73,199  

New Series B Warrants

     98,456         100,373  

Placement agent warrants

     1,528,632        1,528,632  
  

 

 

    

 

 

 

Total warrants outstanding

     3,277,758        3,284,863  
  

 

 

    

 

 

 

See Note 3 Fair Value Measurements for warrant activity for the years ended December 31, 2024 and 2023.

9. Net Loss per Share

The following table sets forth the computation of basic and diluted net loss per share of common stock for the years ended December 31, 2024 and 2023 (in thousands, except share and per share data):

 

     Year ended December 31,  
     2024      2023  

Net loss

   $ (63,102 )     $ (6,275 ) 

Weighted average common shares used in computing net loss per share, basic and diluted (1)

     10,175,580        8,011,802  

Net loss per share, basic and diluted

   $ (6.20 )     $ (0.78 ) 

 

(1) 

Included within weighted average common shares outstanding for the years ended December 31, 2024 and 2023 are 3,181,839 and 2,102,412, respectively, common shares issuable upon the exercise of penny warrants. Per ASC 260, Earnings Per Share, the warrants are exercisable at any time for nominal consideration, and as such, the shares are considered outstanding for the purpose of calculating basic and diluted net loss per share attributable to common stockholders.

The Company’s potentially dilutive securities, which consist of stock options and convertible preferred stock, have been excluded from the computation of diluted net loss per share because including them would have had an anti-dilutive impact. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

The following common stock equivalents, presented based on amounts outstanding at each period end, have been excluded from the calculation of diluted net loss per share because including them would have an antidilutive effect (in thousands):

 

     December 31,
2024
     December 31,
2023
 

Redeemable convertible preferred stock

     78,071        51,405  
Restricted stock - unvested      190        193  

Common stock warrants

     98        100  

Stock options

     12,749        3,582  
  

 

 

    

 

 

 

Total Common Stock Equivalents

     91,108        55,280  
  

 

 

    

 

 

 

 

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Table of Contents

LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

10. Stock-Based Compensation

The Company uses equity-based compensation programs to provide long-term performance incentives for its employees, directors and consultants. These incentives consist primarily of stock options and restricted stock grants.

In 2017, the Company’s Board of Directors approved the LB Pharmaceuticals Inc 2017 Stock Incentive Plan (“2017 Plan”). The 2017 Plan authorized the issuance of stock options or restricted stock up to 0.8 million shares of the Company’s common stock. In August 2018, the Company amended the 2017 Plan, reducing the maximum aggregate number of shares that may be issued under the 2017 Plan to 0.6 million. No additional awards will be granted under the 2017 Plan. As of both December 31, 2024 and 2023, there were 0.3 million shares outstanding under the 2017 Plan.

In 2018, the Company’s Board of Directors approved the LB Pharmaceuticals Inc 2018 Stock Incentive Plan (“2018 Plan”). The 2018 Plan authorized the issuance of stock options or restricted stock up to 1.1 million shares of the Company’s common stock. No additional awards will be granted under the 2018 Plan. As of both December 31, 2024 and 2023, there were 0.8 million shares outstanding under the 2018 Plan.

In August 2023, the Company’s Board of Directors approved the LB Pharmaceuticals Inc 2023 Stock Incentive Plan, as amended (“2023 Plan”). The 2023 Plan authorized the issuance of stock options or restricted stock up to 8.1 million shares of the Company’s common stock. In December 2024, the Company amended the 2023 Plan increasing the maximum aggregate number of shares that may be issued under the 2023 Plan to approximately 13.0 million. The 2023 Plan expires in August 2033. As of December 31, 2024 and 2023, there were 11.7 million and 2.5 million shares outstanding, respectively. As of December 31, 2024, there are 1.3 million shares available for future issuance under the 2023 Plan.

Stock Options

Stock options vest based on one of the following schedules: (i) 25% on the first anniversary of grant date with the remaining 75% to vest in 36 equal monthly installments thereafter through the fourth anniversary of the grant date; (ii) 100% vesting in 36 equal monthly installments through the third anniversary of the grant date; or (iii) 100% vesting in 12 equal monthly installments through the first anniversary of the grant date for certain nonemployee grants. All stock options expire ten years from the grant date. The assumptions used to determine the fair value of stock options granted to employees and non-employees for the years ended December 31, 2024 and 2023 were as follows:

 

     December 31,
2024
    December 31,
2023
 

Expected life of options (in years)

     6.25 - 10.00       6.25  

Risk-free interest rate

     4.20% - 4.56 %      3.87% - 4.23 % 

Expected volatility

     82.1% - 86.4 %      85.5% - 85.7 % 

Dividends

     —        —   

Fair value of common stock

   $ 1.12 - $1.78     $ 0.76 - $1.00  

 

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Table of Contents

LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

A summary of the Company’s stock option activity and related information is as follows:

 

     Options
Outstanding
(in thousands)
     Weighted
Average
Exercise
Price Per
Share
     Weighted
Average
Remaining
Contractual
Term
(Years)
     Aggregate
Intrinsic
Value
 

Balance at December 31, 2022

     1,069      $ 2.22        6.05        —   

Granted

     2,513      $ 1.50           —   
  

 

 

          

Balance at December 31, 2023

     3,582      $ 1.71        8.19        —   

Granted

     9,517      $ 1.50           —   

Forfeited

     (333 )     $ 1.50           —   

Expired

     (3 )     $ 1.50           —   

Exercised

    
(14
) 
   $ 1.50           —   
  

 

 

          

Balance at December 31, 2024

     12,749      $ 1.56        9.01        —   
  

 

 

          

Options vested and expected to vest as of December 31, 2024

     12,749      $ 1.56        9.01     

Options exercisable as of December 31, 2024

     2,019      $ 1.88        6.27     

The weighted average grant date fair value of the stock options granted during the year ended December 31, 2024 was $1.12. The weighted average grant date fair value of the stock options granted during the year ended December 31, 2023 was $0.51.

Stock-based compensation related to stock options is recorded in the accompanying statements of operations as follows (in thousands):

 

     Year ended
December 31,
 
     2024      2023  

Research and development

   $ 396      $ 39  

General and administrative

     2,691        25  
  

 

 

    

 

 

 

Total stock-based compensation expense

   $ 3,087      $ 64  
  

 

 

    

 

 

 

As of December 31, 2024, the Company’s Former CEO entered into a Separation Agreement with the Company including continued consulting services (see Note 6 Prepaid Expenses and Accrued Expenses). Pursuant to the original terms of the stock option awards, the outstanding stock options continue to vest as long as services are provided to the Company under the Separation Agreement as a non-employee consultant. In accordance with ASC 718, there was a modification of the Former CEO’s options related to a reduction in the level of required service. The consulting services outlined in the Separation Agreement are not substantive. As a result, the Company determined the fair market value of all awards expected to vest over the duration of the Separation Agreement as of the modification date using the Black-Scholes option-pricing model. The total amount of $1.7 million was recognized immediately.

As of December 31, 2024, there was $8.0 million unrecognized stock-based compensation expense which is expected to be recognized over a weighted average period of 3.66 years. No stock options were exercised, expired or forfeited during the year ended December 31, 2023.

There were no realized tax benefits for the years ended December 31, 2024 and 2023.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

Restricted Stock

During the year ended December 31, 2023, the Company granted 11,500 shares of restricted stock to employees at a price of $1.50 per share and vest ratably over 36 months. No restricted stock was granted during the year ended December 31, 2024.

Restricted stock vests over the period of time for which services are expected to be rendered, which ranged from immediate vesting, up to 36 months, or vests on the six-month anniversary of the consummation of the Company’s first underwritten public offering (“IPO”) under the Securities Act of 1933, as amended.

A summary of the Company’s restricted stock activity is as follows:

 

     Shares
(in thousands)
     Weighted
Average
Grant Date 
Fair Value
 

Unvested Balance at December 31, 2022

     465      $ 0.46  

Granted

     12      $ 0.83  

Vested

     (283 )     $ 0.51  
  

 

 

    

Unvested Balance at December 31, 2023

     194      $ 0.41  

Granted

     —       $ —   

Vested

     (4 )     $ 0.83  
  

 

 

    

Unvested balance as of December 31, 2024

     190      $ 0.40  
  

 

 

    

During the year ended December 31, 2023, the Company agreed with its Chief Medical Officer to accelerate the vesting of 0.1 million shares of restricted stock. The Company recorded $0.1 million of stock-based compensation expense within research and development in the accompanying statement of operations for the year ended December 31, 2023.

As part of the Series C Offering, the Company modified certain restricted stock awards that were previously awarded to employees and non-employees to accelerate the vesting from six months after the consummation of an IPO to immediate vesting. An aggregate amount of 0.2 million restricted stock vested upon the closing of the Series C Offering in August 2023. The Company recorded $0.1 million and less than $0.01 million of stock-based compensation with general and administrative and research and development, respectively in the accompanying statement of operations for the year ended December 31, 2023.

The total fair value of restricted stock that vested during the years ended December 31, 2024 and 2023 was $0.2 million and less than $0.1 million, respectively.

Stock-based compensation related to restricted stock is recorded in the accompanying statements of operations as follows (in thousands):

 

     Year ended
December 31,
 
     2024      2023  

Research and development

   $ 2      $ 99  

General and administrative

     1        132  
  

 

 

    

 

 

 

Total stock-based compensation expense

   $ 3      $ 231  
  

 

 

    

 

 

 

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

As of December 31, 2024, the Company had unrecognized compensation expense related to such shares of $0.2 million.

Warrants

In 2020, in connection with services provided for the issuance of the 2020 Notes, the Company issued to a placement agent, warrants to purchase the Company’s common stock at an exercise price of $0.01 per share. The number of shares underlying the warrants was based upon 10% of the value of the 2020 Notes divided by the conversion price of the 2020 Notes upon conversion in the next round of financing or $2.50 upon maturity. As the conversion price could be based on any class of shares, and the warrants are for common stock the Company determined that the warrants should be equity-classified as there was no obligation for the Company to raise an additional round of equity financing and no other criteria for liability classification under ASC 718, Stock Compensation, were met. The warrants expire ten years after issuance.

The aggregate grant date fair value of the placement agent warrants issued in conjunction with the 2020 Notes was $0.6 million. The stock-based compensation cost related to the warrants was treated as a debt issuance cost for the 2020 Notes (see Note 11 Notes).

In May 2022, in connection with the Series B Offering, the Company issued to the placement agent, warrants to purchase 0.03 million shares of the Company’s common stock that were immediately exercisable at an exercise price of $0.01 per share. The warrants expire ten years after issuance.

From October 2022 to January 2023, in connection with services provided for the issuance of the 2022 Notes, the Company issued to a placement agent, warrants to purchase the Company’s common stock at an exercise price of $0.01 per share. The number of shares underlying the warrants was based upon 10% of the value of the 2022 Notes divided by the conversion price of the 2022 Notes upon conversion in the next round of financing or $2.50 upon maturity. As the conversion price could be based on any class of shares, and the warrants are for common stock the Company determined that the warrants should be equity-classified as there was no obligation for the Company to raise an additional round of equity financing and no other criteria for liability classification under ASC 718, Stock Compensation, were met. The warrants expire ten years after issuance.

The aggregate grant date fair value of the placement agent warrants issued in conjunction with the 2022 Notes was $1.5 million. The stock-based compensation cost related to the warrants was treated as a debt issuance cost for the 2022 Notes (see Note 11 Notes).

In August 2023, the Company executed a final agreement with the placement agent replacing all prior agreements. As part of this agreement, the Company issued warrants to purchase 1.5 million of the Company’s common stock exercisable six months after the grant date at an exercise price of $0.01 per share. Also, the 0.3 million warrants issued as part of the Series B Stock Offering (as described above) were amended and reissued and are exercisable six months after the grant date at an exercise price of $0.01 per share. The warrants expire ten years after issuance.

As the fair value of the replacement warrants was less than the grant date fair value of the original warrants, no incremental compensation costs were recorded.

11. Notes

On August 29, 2023, the Company entered into the Series C Offering (as described in Note 6 Redeemable Convertible Preferred Stock and Equity). The principal of all 2022 Notes and 2020 Notes outstanding at the time

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

of the closing, in the aggregate amount of $35.7 million, was converted into 23.8 million shares of Series C preferred stock at a price of $1.50 per share. The Company recorded a loss on extinguishment of debt in the amount of $7.4 million in the accompanying statements of operations. The Company elected to pay the accrued interest on the 2020 Notes and 2022 Notes in cash in the total amount of approximately $2.0 million.

2022 Convertible Notes

The Company entered into the 2022 Notes with several investors who loaned the Company a total of approximately $25.7 million as detailed below (in thousands):

 

Issue Date

   Principal            Original
Maturity
Date
 

October 21, 2022

   $ 6,925          10/21/2023  

November 10, 2022

     9,649          11/10/2023  

December 28, 2022

     8,431          11/30/2024  

January 26, 2023

     725          11/30/2024  
  

 

 

      

Total 2022 Notes

   $ 25,730       
  

 

 

      

The interest rate was 4% per annum. All payments of interest and principal were due and payable on the maturity date, unless converted earlier. The principal due under the 2022 Notes would automatically convert into the class of the stock issued in the Company’s next qualified financing of at least $20.0 million at a conversion price equal to 80% of the per-share price of such securities issued. If the per-share price of the next qualified financing was below $2.35, the outstanding principal of the 2022 Notes would have converted at the per-share price paid for such securities issued. The accrued interest would either be converted into the stock issued in the qualified financing or paid to the 2022 Note investors in cash at the Company’s discretion.

In the event the Company consummated a sale of the Company prior to the conversion or repayment in full of the 2022 Notes, at the closing of such sale of the Company, in lieu of the principal and interest that would otherwise be payable on the maturity date, the Company would allow each holder of the 2022 Notes to convert the principal and interest into common stock at a price per share of $2.50 up until the fifth day prior to the sale of the Company. In the event a holder made no such election within the five-day deadline, the Company would pay such holder of the unconverted 2022 Notes an aggregate amount equal to 1.5 times the aggregate amount of principal and interest then outstanding.

At inception, the Company concluded that the 2022 Notes contained a conversion option at a significant discount that was deemed to be an embedded derivative, which was required to be bifurcated and accounted for separately from the debt host. The derivative was bifurcated from the host contract and a liability and corresponding discount was recorded on the date of issuances in the total amount of $0.3 million and $7.1 million for the years ended December 31, 2023 and 2022, respectively. The liability is remeasured at fair value at the end of each reporting period, with any changes recorded in the accompanying statements of operations. For the year ended December 31, 2023, debt issuance costs associated with the 2022 Notes totaled $0.1 million.

On December 16, 2022, the Company amended and restated the 2022 Notes to extend the maturity date to November 30, 2024 for all noteholders. In accordance with ASC 470-50, Debt Modification and Extinguishments, the Company considered this extension of maturity date as a modification. The Company amortizes the remaining debt issuance costs and conversion feature over the remaining life of the modified debt.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

The Company recognized the following changes in the debt related to the 2022 Notes during the year ended December 31, 2023 (in thousands):

 

     2022
Notes
     Debt
Discount
     2022
Notes, Net
 

Balance December 31, 2022

   $ 25,005      $ (10,309 )     $ 14,696  

Issuance of 2022 Notes

     725        —         725  

Conversion features for 2022 Notes

     —         (327 )       (327 ) 

Issuance costs

     —         (133 )       (133 ) 

Amortization

     —         3,694        3,694  

Conversion to Series C preferred stock

     (25,730 )       7,075        (18,655 ) 
  

 

 

    

 

 

    

 

 

 

Balance December 31, 2023

   $ —       $ —       $ —   
  

 

 

    

 

 

    

 

 

 

2020 Convertible Notes

In 2020, the Company entered into the 2020 Notes with several investors who loaned the Company a total of $10.0 million. The original maturity date for each 2020 Note was three years after issuance. The interest rate was 4% per annum. All payments of interest and principal were due and payable on the maturity date (August and September 2023), unless converted earlier. The principal due under the 2020 Notes would automatically convert into the class of the Company’s stock issued in the Company’s next qualified financing of at least $10.0 million at a conversion price equal to 80% of the per-share of such securities issued. If the per-share price of the next qualified financing was below $2.35, the outstanding principal of the 2020 Notes would have converted at the per-share price paid for such securities issued. The accrued interest would either be converted into the stock issued in the qualified financing or paid to the 2020 Note investors in cash at the Company’s discretion.

In the event the Company consummated a sale of the Company prior to the conversion or repayment in full of the 2020 Notes, at the closing of such sale of the Company, in lieu of the principal and interest that would have otherwise been payable on the maturity date, the Company would have allowed each holder of the 2020 Notes to convert the principal and interest into common stock at a price per share of $2.50 up until the fifth day prior to the sale of the Company. In the event a holder made no such election within the five-day deadline, the Company would have paid such holder of the unconverted 2020 Notes an aggregate amount equal to 1.5 times the aggregate amount of principal and interest then outstanding.

At inception, the Company concluded that the 2020 Notes contained a conversion option at a significant discount that was deemed to be an embedded derivative, which was required to be bifurcated and accounted for separately from the debt host. The derivative was bifurcated from the host contract and a liability and corresponding discount was recorded on the date of issuances in the total amount of $0.7 million. The liability is remeasured at fair value at the end of each reporting period, with any changes recorded in the accompanying statements of operations. Debt issuance costs associated with the 2020 Notes totaled $1.9 million.

On December 16, 2022, the Company amended and restated the 2020 Notes to cause the maturity date and the conversion terms of such notes to those terms contained in the 2022 Notes (as amended and restated). The maturity date of the 2020 Notes was extended to November 30, 2024. In accordance with ASC 470-50, Debt Modification and Extinguishments, the Company considered this extension of maturity date as a modification. The Company amortized the remaining debt issuance costs and conversion feature over the remaining life of the modified debt.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

The Company recognized the following changes in the debt related to the 2020 Notes during the year ended December 31, 2023 (in thousands):

 

     2020
Notes
     Debt
Discount
     2020
Notes,
Net
 

Balance December 31, 2022

   $ 10,000      $ (548 )     $ 9,452  

Amortization

     —         189        189  

Conversion to Series C preferred stock

     (10,000 )       359        (9,641 ) 
  

 

 

    

 

 

    

 

 

 

Balance December 31, 2023

   $ —       $ —       $ —   
  

 

 

    

 

 

    

 

 

 

12. Income Taxes

The provision from income taxes for the years ended December 31, 2024 and 2023 is as follows (in thousands):

 

     Year ended
December 31,
 
Current:    2024      2023  

Federal

   $ —       $ —   

State

     1        1  
  

 

 

    

 

 

 

Total current tax expense

     1        1  
  

 

 

    

 

 

 

Deferred:

     

Federal

     —         —   

State

     —         —   
  

 

 

    

 

 

 

Total deferred tax expense

     —         —   
  

 

 

    

 

 

 

Income tax provision

   $ 1      $ 1  
  

 

 

    

 

 

 

A reconciliation of the effective tax rates of the Company and the U.S. federal statutory tax rate is as follows:

 

     Year ended
December 31,
 
     2024     2023  

Statutory tax rate

     21.0 %      21.0 % 

Changes in income taxes resulting from:

    

State taxes (net of federal tax benefits)

     (5.1 )%      12.1 % 

Increase in valuation allowance

     (17.9 )%      (65.4 )% 

Non-deductible interest and other expenses

     (1.1 )%      (18.3 )% 

Return to provision adjustments

     (0.2 )%      —  % 

Loss on extinguishment of debt

     —  %      (39.2 ) 

Derivative fair value measurement

     —  %      85.8 %

Tax credits

     3.3 %      4.0  
  

 

 

   

 

 

 

Effective income tax rate

     0.0 %      0.0 % 
  

 

 

   

 

 

 

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

The unrecognized temporary differences of the Company that give rise to significant portions of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023, are as follows (in thousands):

 

Deferred tax assets:    December 31,
2024
     December 31,
2023
 

Net operating losses

   $ 8,121      $ 8,109  

Capitalized research and development

     11,454        2,603  

Accruals

     436        404  

Stock-based compensation

     413        236  

Tax credits

     2,696        828  

Leases

     815        —   

Other

     —         21  
  

 

 

    

 

 

 

Gross deferred tax assets

     23,935        12,201  

Valuation allowance

     (23,390 )       (12,104 ) 
  

 

 

    

 

 

 

Total deferred tax assets

     545        97  

Deferred tax liabilities:

     

Depreciable asset basis differences

     (15 )       (6 ) 

Unrealized gain - other comprehensive income

     (24 )       (91 ) 
Operating lease right-of-use assets      (506 )       —   
  

 

 

    

 

 

 

Total deferred tax liabilities

     (545 )       (97 ) 
  

 

 

    

 

 

 

Net deferred tax assets

   $ —       $ —   
  

 

 

    

 

 

 

The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its net deferred tax assets. The Company primarily considered such factors as its history of operating losses, the nature of the Company’s deferred tax assets, and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. As of December 31, 2024 and 2023, the Company does not believe that it is more likely than not that the deferred tax assets will be realized; accordingly, a full valuation allowance has been established and no deferred tax asset is shown in the Company’s balance sheets. During the years ended December 31, 2024 and 2023, the valuation allowance increased by $11.3 million and $4.0 million, respectively, which primarily relates to the current year operating loss and capitalized research and development expenses.

The Company believes that income tax filing positions will be sustained upon examination and does not anticipate any adjustments that would result in a material adverse effect on the Company’s financial position, results of operations or cash flows. Accordingly, the Company has not recorded any reserves, or related accruals or uncertain income tax positions as of December 31, 2024 and 2023.

The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. The Company has no accruals for interest and penalties as of December 31, 2024 and 2023.

The Internal Revenue Code of 1986 contains certain provisions that can limit a taxpayer’s ability to utilize net operating loss (“NOL”) and tax credit carryforwards in any given year resulting from cumulative changes in ownership interests in excess of 50 percent over a three-year period (“ownership change”). In the event of such a deemed ownership change, Internal Revenue Code Section 382 (”Section 382”) imposes an annual limitation on pre-ownership change tax attributes. As of December 31, 2024, the Company has not performed a formal Section 382 study, however the Company has reviewed its temporary deductible differences in conjunction with its temporary taxable differences as a measure against its definite lived net operating losses and anticipates any impact would be immaterial.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

As of December 31, 2024, the Company has federal NOL carryforwards of approximately $37.2 million, of which $1.5 million is subject to the 20-year carryforward period and begins to expire in 2036. The remaining federal NOL carryforward of $35.7 million has an indefinite carryforward period.

The Company has available state NOL carryforwards of approximately $41.9 million and $49.1 million as of December 31, 2024 and 2023, respectively. The state NOLs are expected to begin to expire in 2036, although not all states conform to the federal NOL carryforward period and occasionally limit the use of NOLs for a period of time.

As of December 31, 2024 and 2023, the Company had federal research and development credits of approximately $2.7 million and $0.8 million, respectively. The research and development credits, if not utilized, will begin to expire in 2036.

The Company is subject to taxation and files income tax returns in the U.S. Federal and state jurisdictions. The statute of limitations for assessment by the Internal Revenue Service and state tax authorities remains open from the tax years December 31, 2021 through December 31, 2024. There are currently no federal or state income tax audits in progress. The tax authorities generally have the ability to review income tax returns for periods where the statute of limitations has previously expired and can subsequently adjust the NOL carryforward or tax credit amounts.

13. Commitments and Contingencies

The Company has contracted with various consultants and third parties to assist in pre-clinical research and development and clinical trials work for the Company’s leading drug compounds. The contracts are terminable at any time but obligate the Company to reimburse the providers for any time or costs incurred through the date of termination.

Funding Commitments

In September 2023, the Company entered into a work order with a third-party CRO to provide services with respect to the Company’s Phase 2 trial of LB-102. Minimum advances will be kept by the CRO throughout the duration of the clinical trial. As of December 31, 2024 and 2023, the Company recorded approximately $0.4 million and $2.2 million, respectively, in advances to the CRO, recorded in prepaid expenses in the accompanying balance sheets.

The Company enters into contracts in the normal course of business with contract development and manufacturing organizations (“CDMOs”) and other third parties for preclinical research studies and testing and manufacturing services, which are generally cancelable upon prior written notice. Payments due upon cancellation may consist of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation, and may also include termination penalties. As of December 31, 2024 and 2023, the Company had no outstanding liabilities related to such items.

Contingencies

In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business. The Company records accruals for such loss contingencies when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company, in accordance with this guidance, does not recognize gain contingencies until realized. The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities as of December 31, 2024.

 

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LB Pharmaceuticals Inc

Notes to Financial Statements

 

 

14. Related-Party Transactions

In 2020, the Company entered into an oral agreement with Rivopharm S.A. (“Rivopharm”), to develop an oral dose formulation of LB-102 for use in future human clinical trials. Piero Poli, a former board member of the Company, is the Principal of Rivopharm. The agreement calls for a subsidiary of Rivopharm, Developharma S.A. (“Developharma”), to complete this work for a cost to be paid in common stock of the Company totaling 428,571 shares.

Developharma initiated the development work in 2021 and was approximately 50% complete as of December 31, 2022. The Company recorded research and development expense of $0.2 million for 50% of the fair value of the stock to be paid. In 2023, Developharma completed the project. As a result of the completion, the Company issued 428,571 shares of common stock to Rivopharm and recorded additional research and development expense of $0.2 million.

In August 2023, contemporaneously with the closing of the Series C Offering, the Company entered into several amended and restated royalty participation agreements (the “Amended and Restated Royalty Agreements”) with certain of its investors, co-founders, former directors, and executive officers, none of whom are Series C New Investors. No consideration was received as part of the Amended and Restated Royalty Agreements. Pursuant to the Amended and Restated Royalty Agreements, the Company is obligated to pay royalties to all of the holders in an aggregate amount up to 2.75% on net sales arising from LB-102 worldwide through December 31, 2035. Thereafter, the Company is obligated to pay royalties to such holders in an aggregate amount up to 3.25% in perpetuity. Future sales are defined in these agreements as the gross payments received on total commercial sales of LB-102, whether by the Company or by any licensee of LB-102. As of December 31, 2024, certain officers of the Company and their affiliates held 1.27% of the future royalties.

Prior to the closing of the Series C Offering, three of the Company’s Board of Directors were replaced and the Company agreed to pay them a total of $0.2 million as part of their departure.

15. Subsequent Events

The Company evaluated subsequent events through June 27, 2025, the date these financial statements were available to be issued, and has not identified any events requiring disclosure.

 

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LB Pharmaceuticals Inc

Condensed Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

 

 

    As of  
    June 30,
2025
    December 31,
2024
 

Assets

   

Current assets

   

Cash and cash equivalents

  $ 14,225     $ 22,978  

Marketable securities

    —        5,021  

Prepaid expenses and other current assets

    556       880  
 

 

 

   

 

 

 

Total current assets

    14,781       28,879  

Operating lease right-of-use assets, net

    2,243       2,298  

Property and equipment, net

    1,716       1,859  

Restricted cash

    508       498  
 

 

 

   

 

 

 

Total assets

  $ 19,248     $ 33,534  
 

 

 

   

 

 

 

Liabilities, redeemable convertible preferred stock and stockholders’ deficit

   

Current liabilities

   

Accounts payable

  $ 635     $ 2,320  

Accrued expenses

    2,541       5,302  

Operating lease liability, current

    730       487  
 

 

 

   

 

 

 

Total current liabilities

    3,906       8,109  

Derivative liability—warrants

    1,925       2,504  

Operating lease liability, noncurrent

    3,031       3,216  
 

 

 

   

 

 

 

Total liabilities

    8,862       13,829  
 

 

 

   

 

 

 

Commitments and contingencies (Note 12)

   

Redeemable convertible preferred stock

   

Series Seed preferred stock, $0.0001 par value, 295,467 shares authorized, 295,467 shares issued and outstanding as of June 30, 2025 and December 31, 2024. Liquidation preference of $443 as of June 30, 2025 and December 31, 2024.

    435       435  

Series A preferred stock, $0.0001 par value, 3,655,374 shares authorized, 3,655,374 outstanding as of June 30, 2025 and December 31, 2024. Liquidation preference of $8,407 as of June 30, 2025 and December 31, 2024.

    6,179       6,179  

Series B preferred stock, $0.0001 par value, 301,119 shares authorized, 301,119 shares issued and outstanding as of June 30, 2025 and December 31, 2024. Liquidation preference of $903 as of June 30, 2025 and December 31, 2024.

    580       580  

Series C preferred stock, $0.0001 par value, 75,000,000 shares authorized, 73,820,346 shares issued and outstanding as of June 30, 2025 and December 31, 2024. Liquidation preference of $110,731 as of June 30, 2025 and December 31, 2024.

    107,065       107,065  

Stockholders’ deficit

   

Common stock, $0.0001 par value, 105,000,000 shares authorized, 7,021,744 and 7,021,744 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively

    1       1  

Additional paid-in capital

    10,626       9,657  

Accumulated deficit

    (114,500 )      (104,323 ) 

Accumulated other comprehensive income

    —        111  
 

 

 

   

 

 

 

Total stockholders’ deficit

    (103,873 )      (94,554 ) 
 

 

 

   

 

 

 

Total liabilities, redeemable convertible preferred stock and stockholders’ deficit

  $ 19,248     $ 33,534  
 

 

 

   

 

 

 

See accompanying notes to the unaudited condensed financial statements.

 

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LB Pharmaceuticals Inc

Condensed Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

 

 

     Six Months Ended June 30,  
     2025     2024  

Operating expenses

    

Research and development

   $ 5,842     $ 40,131  

General and administrative

     5,446       3,077  
  

 

 

   

 

 

 

Total operating loss

     (11,288 )      (43,208 ) 

Non-operating income (expense)

    

Interest income

     413       1,039  

Realized gain on sale of marketable securities, net

     119       90  

Gain (loss) on change in fair value of derivative instruments

     579       (1,771 ) 
  

 

 

   

 

 

 

Total non-operating income (loss)

     1,111       (642 ) 
  

 

 

   

 

 

 

Loss before income tax

     (10,177 )      (43,850 ) 

Income tax provision

     —        —   
  

 

 

   

 

 

 

Net loss

   $ (10,177 )    $ (43,850 ) 
  

 

 

   

 

 

 

Net loss per share, basic and diluted

   $ (1.02 )    $ (4.40 ) 

Weighted average shares outstanding used in calculating net loss per share, basic and diluted

     10,023,891       9,972,771  

See accompanying notes to the unaudited condensed financial statements.

 

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LB Pharmaceuticals Inc

Condensed Statements of Comprehensive Loss

(in thousands)

(Unaudited)

 

 

     Six Months Ended June 30,  
       2025         2024    

Net loss

   $ (10,177 )    $ (43,850 ) 

Unrealized (loss) gain on marketable securities, net

     (111 )      465  
  

 

 

   

 

 

 

Comprehensive loss

   $ (10,288 )    $ (43,385 ) 
  

 

 

   

 

 

 

See accompanying notes to the unaudited condensed financial statements.

 

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Table of Contents

LB Pharmaceuticals Inc

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit

(in thousands, except share data)

(Unaudited)

 

 

    Redeemable Convertible Preferred Stock                                      
    Series Seed     Series A     Series B     Series C     Common Stock                          
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     Additional
Paid-in
Capital
    Accumulated
Deficit
    Accumulated
Other
Comprehensive
Income
    Total
Stockholders’
Deficit
 

Balance, December 31, 2023

    295,467     $ 435       3,655,374     $ 6,179       301,119     $ 580       47,153,680     $ 68,773       6,960,889     $ 1     $ 6,473     $ (41,221 )    $ 274     $ (34,473 ) 

Share-based compensation expense

    —        —        —        —        —        —        —        —        —        —        341       —        —        341  

Issuance of redeemable convertible Series C preferred stock, net of issuance costs

    —        —        —        —        —        —        26,666,666       38,292       —        —        —        —        —        —   

Unrealized gain on marketable securities

    —        —        —        —        —        —        —        —        —        —        —        —        465       465  

Shares issued upon exercise of warrants

    —        —        —        —        —        —        —        —        7,105       —        3       —        —      $ 3  

Issuance of common stock for services

    —        —        —        —        —        —        —        —        40,000       —        71       —        —      $ 71  

Net loss

    —        —        —        —        —        —        —        —        —        —        —      $ (43,850 )      —      $ (43,850 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2024

    295,467     $ 435       3,655,374     $ 6,179       301,119     $ 580       73,820,346     $ 107,065       7,007,994     $ 1     $ 6,888     $ (85,071 )    $ 739     $ (77,443 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2024

    295,467     $ 435       3,655,374     $ 6,179       301,119     $ 580       73,820,346     $ 107,065       7,021,744     $ 1     $ 9,657     $ (104,323 )    $ 111     $ (94,554 ) 

Share-based compensation expense

    —        —        —        —        —        —        —        —        —        —        969       —        —        969  

Unrealized loss on marketable securities

    —        —        —        —        —        —        —        —        —        —        —        —        (111 )      (111 ) 

Net loss

    —        —        —        —        —        —        —        —        —        —        —        (10,177 )      —        (10,177 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2025

    295,467     $ 435       3,655,374     $ 6,179       301,119     $ 580       73,820,346     $ 107,065       7,021,744     $ 1     $ 10,626     $ (114,500 )    $ —      $ (103,873 ) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the unaudited condensed financial statements.

 

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LB Pharmaceuticals Inc

Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

     Six Months Ended June 30,  
       2025         2024    

Operating Activities

    

Net loss

   $ (10,177 )    $ (43,850 ) 

Adjustments to reconcile net loss to net cash used in operating activities:

    

Stock-based compensation expense

     969       341  

Shares issued for services rendered

     —        71  

Depreciation

     155       6  

Noncash lease expense

     55       44  

Realized gain on sale of marketable securities, net

     (119 )      (90 ) 

(Accretion) amortization of (discounts) premium on investments, net

     (12 )      194  

(Gain) loss on change in fair value of derivative instruments

     (579 )      1,771  

Changes in operating assets and liabilities:

    

Prepaid expenses and other current assets

     324       (1,865 ) 

Operating lease liability

     58       (61 ) 

Accrued interest on marketable securities

     40       (133 ) 

Accounts payable and accrued expenses

     (4,446 )      18,222  
  

 

 

   

 

 

 

Net cash used in operating activities

     (13,732 )      (25,350 ) 
  

 

 

   

 

 

 

Investing Activities

    

Purchases of property and equipment

     (12 )      (88 ) 

Purchase of marketable securities

     —        (29,746 ) 

Proceeds from the sale of marketable securities

     2,501       —   

Maturities of marketable securities

     2,500       10,656  
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     4,989       (19,178 ) 
  

 

 

   

 

 

 

Financing Activities

    

Proceeds from issuance of redeemable convertible Series C preferred stock

     —        40,000  

Payment of issuance costs

     —        (1,708 ) 

Proceeds from exercise of warrants and options

     —        3  
  

 

 

   

 

 

 

Net cash provided by financing activities

     —        38,295  
  

 

 

   

 

 

 

Net decrease in cash, cash equivalents and restricted cash

     (8,743 )      (6,233 ) 

Cash, cash equivalents and restricted cash, beginning of period

     23,476       14,979  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash, end of period

   $ 14,733     $ 8,746  
  

 

 

   

 

 

 

Supplemental Disclosures of Noncash Investing and Financing Information

    

Right-of-use assets obtained in exchange for operating lease liabilities

   $ —      $ 2,405  

Leasehold improvements paid by lessor

   $ —      $ 1,158  

See accompanying notes to the unaudited condensed financial statements.

 

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Table of Contents

LB Pharmaceuticals Inc

Notes to Condensed Financial Statements

(Unaudited)

 

1. Business Overview

LB Pharmaceuticals Inc (the “Company” or “LB”) was incorporated under the laws of the State of Delaware in September 2015 and is headquartered in New York, New York.

The Company is a clinical-stage biopharmaceutical company developing therapies for the treatment of schizophrenia, bipolar depression, and other neuropsychiatric diseases. The Company is building a pipeline that leverages the broad therapeutic potential of its lead product candidate, LB-102, which the Company believes has the potential to be the first benzamide antipsychotic drug approved for neuropsychiatric disorders in the United States. LB-102 is a Phase 3-ready oral, small molecule for the treatment of acute schizophrenia (defined as a sudden and severe episode of psychotic symptoms, characterized by hallucinations, delusions, and other positive symptoms).

Since the Company’s inception, it has focused substantially all of its efforts and financial resources on organizing and staffing the Company, raising capital, building its intellectual property portfolio, undertaking preclinical studies and clinical trials and providing general and administrative support for these activities. The Company has not generated any product revenue related to its primary business purpose to date and is subject to a number of risks similar to those of other early stage companies, including dependence on key individuals, regulatory approval of product candidates, uncertainty of market acceptance of products, if approved, competition from substitute products and larger companies, compliance with government regulations, protection of proprietary technology, dependence on third parties, product liability and the need to obtain adequate additional financing to fund the development of its product candidates.

Going Concern

The Company’s condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has not generated revenues and relies on the issuance of debt and equity instruments to generate working capital. The Company experienced negative operating cash flows of $13.7 million and net loss of $10.2 million for the six months ended June 30, 2025, and had an accumulated deficit of $114.5 million as of June 30, 2025. The Company expects to incur substantial expenses for the foreseeable future relating to research and development of LB-102 and to continue to generate operating losses. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The future viability of the Company is dependent on its ability to raise additional capital to fund its operations. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, which could adversely affect its business prospects, or the Company may be unable to continue operations. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

 

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Table of Contents

LB Pharmaceuticals Inc

Notes to Condensed Financial Statements

(Unaudited)

 

 

The accompanying balance sheet as of June 30, 2025 and the statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’ deficit and cash flows for the six months ended June 30, 2025 and 2024 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2025 and the results of its operations and cash flows for the six months ended June 30, 2025 and 2024. Certain information and footnote disclosures typically included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited interim financial statements should be read in conjunction with the Company’s financial statements as of and for the year ended December 31, 2024. The results for the six months ended June 30, 2025 are not necessarily indicative of results to be expected for the year ending December 31, 2025, any other interim periods, or any future year or period.

The significant accounting policies and estimates used in preparation of the financial statements are described in the Company’s audited financial statements as of and for the year ended December 31, 2024, and the notes thereto. During the six months ended June 30, 2025, there were no material changes to the Company’s significant accounting policies.

Segment Information

The Company operates as a single reportable segment in the development of novel therapies for the treatment of neuropsychiatric diseases, including schizophrenia. The Company has not generated revenues since inception. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer (“CEO”). The CODM reviews the Company’s performance on an aggregate basis, thus the segment’s loss is the Company’s net loss, as reported on accompanying condensed statements of operations, and the segment’s assets are the Company’s total assets, as reported on the accompanying condensed balance sheets. Significant expenses provided to the CODM include research and development and general and administrative expenses, as reported on the accompanying condensed statements of operations.

The CODM uses the information primarily to evaluate the Company’s performance and allocate resources. This includes reviewing key financial metrics such as budget versus actual expenditures and assessing overall cash flow and liquidity to ensure the continuity of operations. This approach allows the CODM to monitor the Company’s performance and make strategic adjustments as needed to support its operational and financial goals.

The Company’s operations and all long-lived assets are located in the United States.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures that requires public entities to annually disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The guidance is effective for fiscal years beginning after December 15, 2024 and early adoption is permitted. The Company is evaluating the guidance to determine if adoption will have a material impact on the financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, that requires public companies to provide more detailed disclosures to provide greater transparency about the components of specific expense categories. The guidance is effective for years beginning after

 

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Table of Contents

LB Pharmaceuticals Inc

Notes to Condensed Financial Statements

(Unaudited)

 

 

December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the guidance to determine if adoption will have a material impact on the financial statement disclosures.

3. Fair Value Measurements

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy (in thousands):

 

     As of June 30, 2025  
     Fair Value Measurement Using  
     Level 1      Level 2      Level 3      Total  

Assets

           

Cash Equivalents

           

Money market funds

   $ 13,569      $ —       $ —       $ 13,569  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash equivalents

     13,569        —         —         13,569  

Restricted Cash

           

Certificate of deposit

     —         508        —         508  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total restricted cash

     —         508        —         508  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 13,569      $ 508      $ —       $ 14,077  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Derivative liability - warrants

     —         —         1,925        1,925  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —       $ —       $ 1,925      $ 1,925  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     As of December 31, 2024  
     Fair Value Measurement Using  
     Level 1      Level 2      Level 3      Total  

Assets

           

Cash Equivalents

           

Money market funds

   $ 19,926      $ —       $ —       $ 19,926  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash equivalents

     19,926        —         —         19,926  

Marketable Securities

           

Government securities

     —         5,021        —         5,021  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total marketable securities

     —         5,021        —         5,021  

Restricted Cash

           

Certificate of deposit

     —         498        —         498  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total restricted cash

     —         498        —         498  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 19,926      $ 5,519      $ —       $ 25,445  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Derivative liability - warrants

     —         —         2,504        2,504  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ —       $ —       $ 2,504      $ 2,504  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

LB Pharmaceuticals Inc

Notes to Condensed Financial Statements

(Unaudited)

 

 

Marketable Securities

The Company accounts for marketable securities held as “available-for-sale” in accordance with ASC 320, Investments-Debt Securities. The Company classifies these investments as current assets and carries them at fair value.

The fair value of the Company’s marketable securities classified within Level 2 is based upon observable inputs that may include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications.

Certificate of Deposit

The Company’s certificates of deposit are Level 2 instruments. The fair value of such instruments is estimated based on valuations obtained from third-party pricing services that utilize industry standard valuation models, including both income-based and market-based approaches, for which all significant inputs are observable either directly or indirectly. These inputs include interest rate curves, foreign exchange rates, and credit ratings.

Warrants

The Company previously issued warrants to investors in connection with equity financings. The warrants are required to be measured at fair value and reported as a liability in the accompanying unaudited condensed balance sheets. The warrants are valued at each reporting date using the Black-Scholes model with any changes in fair value recorded in the accompanying unaudited condensed statements of operations. The valuation of the warrants is considered under Level 3 of the fair value hierarchy due to the need to use assumptions in the valuation that are both significant to the fair value measurement and unobservable. See Note 8 Redeemable Convertible Preferred Stock and Equity for additional information.

For the six months ended June 30, 2025 and 2024, the change in the fair value of the Level 3 warrant liability resulted in the recording of a gain (loss) on change in fair value of derivative instruments of $0.6 million and $(1.8) million, respectively, in the accompanying unaudited condensed statements of operations.

The following are the assumptions used in the Black-Scholes valuation model in order to determine the fair value of the derivative liabilities for the warrant liabilities as of June 30, 2025 and December 31, 2024:

 

     June 30, 2025      December 31, 2024  

Term – financing event (in years)

     —         —   

Term – exit event (in years)

     0.25 - 2.25        0.58 - 2.00  

Volatility

     50.0% - 68.0%        49.0% - 70.0%  

Exercise price

   $ 0.01 - $1.50      $ 0.01 - $1.50  

Risk-free rate

     3.71% - 4.41%        4.23% - 4.25%  

Changes in one or more significant unobservable inputs used in the valuation may result in a significantly higher or lower fair value measurement at the reporting dates. The change in the derivative liabilities for the six months ended June 30, 2025 was (in thousands):

 

     Warrants  

Balance, December 31, 2024

   $ 2,504  

Gain due to change in fair value

     (579 ) 
  

 

 

 

Balance, June 30, 2025

   $ 1,925  
  

 

 

 

 

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Table of Contents

LB Pharmaceuticals Inc

Notes to Condensed Financial Statements

(Unaudited)

 

 

During the six months ended June 30, 2025 and 2024, there were no transfers of instruments between Level 1, 2 and 3 in the fair value hierarchy.

There are uncertainties on the fair value measurement of the instruments classified under Level 3 due to the use of unobservable inputs and interrelationships between these unobservable inputs, which could result in higher or lower fair value measurements.

4. Cash Equivalents, Marketable Securities and Restricted Cash

The Company invests in certain U.S. government money market funds and treasury bills classified as cash equivalents and invests in certificates of deposit that are classified as restricted cash. The marketable securities consist of government securities as follows (in thousands):

 

     As of June 30, 2025  
     Amortized
Cost
     Unrealized
Gains
     Unrealized
Losses
     Aggregate
Fair Value
 

Cash Equivalents

           

Money market funds

   $ 13,569      $ —       $ —       $ 13,569  

Restricted Cash

           

Certificate of deposit

     508        —         —         508  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash equivalents and restricted cash

   $ 14,077      $ —       $ —       $ 14,077  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     As of December 31, 2024  
     Amortized
Cost
     Unrealized
Gains
     Unrealized
Losses
     Aggregate
Fair Value
 

Cash Equivalents

           

Money market funds

   $ 19,926      $ —       $ —       $ 19,926  

Marketable Securities

           

Government securities

     4,910        111        —         5,021  

Restricted Cash

           

Certificate of deposit

     498        —         —         498  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash equivalents, marketable securities and restricted cash

   $ 25,334      $ 111      $ —       $ 25,445  
  

 

 

    

 

 

    

 

 

    

 

 

 

As of June 30, 2025 and December 31, 2024, there were no marketable securities that have been in a continuous unrealized loss position for more than 12 months.

A reconciliation of the cash, cash equivalents and restricted cash reported in the balance sheets that sum to the total of the amounts shown in the statements of cash flows is as follows (in thousands):

 

     As of
June 30, 2025
     As of
December 31, 2024
 

Cash and cash equivalents

   $ 14,225      $ 22,978  

Restricted cash

     508        498  
  

 

 

    

 

 

 

Total cash, cash equivalents and restricted cash

   $ 14,733      $ 23,476  
  

 

 

    

 

 

 

 

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Table of Contents

LB Pharmaceuticals Inc

Notes to Condensed Financial Statements

(Unaudited)

 

 

5. Property and Equipment, Net

Property and equipment, net consisted of the following as of June 30, 2025 and December 31, 2024 (in thousands):

 

     June 30,
2025
     December 31,
2024
 

Leasehold improvements

   $ 1,491      $ 1,491  

Computer equipment

     101        95  

Office furniture

     380        374  
  

 

 

    

 

 

 

Property and equipment

     1,972        1,960  

Less: Accumulated depreciation

     (256 )       (101 ) 
  

 

 

    

 

 

 

Total property and equipment, net

   $ 1,716      $ 1,859  
  

 

 

    

 

 

 

6. Accrued Expenses

Accrued expenses consisted of the following as of June 30, 2025 and December 31, 2024 (in thousands):

 

     June 30,
2025
     December 31,
2024
 

Accrued CRO costs

   $ 29      $ 1,443  

Accrued research and development costs

     227        488  

Accrued compensation costs

     735        1,441  

Accrued professional and consulting costs

     249        902  

Accrued termination benefits

     1,249        800  

Other accrued costs

     52        228  
  

 

 

    

 

 

 

Total accrued expenses

   $ 2,541      $ 5,302  
  

 

 

    

 

 

 

7. Leases

In May 2024, the Company entered into a new lease agreement for office space in New York, New York totaling approximately 8,900 square feet. The Company received $1.2 million of leasehold improvement incentives associated with the new lease agreement. The term of this lease commenced on June 21, 2024, which is the date the Company obtained control over the leased premises. The lease term continues through March 2032. The Company’s real estate lease agreement includes variable payments that are passed through by the landlord, such as insurance, taxes, and common area maintenance, and payments based on the usage of the asset. Pass-through charges and payments due to changes in usage of the asset are included within variable lease expense. Operating leases are recognized over the lease term and included in general and administrative expenses in the accompanying unaudited condensed statements of operations. Variable lease expenses are recognized in general and administrative expenses in the accompanying unaudited condensed statements of operations as incurred.

The Company’s lease agreement does not contain material residual value guarantees, restrictions, or covenants. The Company has no other operating leases recognized on the accompanying unaudited condensed balance sheets.

 

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Table of Contents

LB Pharmaceuticals Inc

Notes to Condensed Financial Statements

(Unaudited)

 

 

The components of lease expense were as follows for the six months ended June 30, 2025 and 2024 (in thousands):

 

     Six Months Ended
June 30,
 
      2025        2024   

Operating lease expense

   $ 268      $ 44  

Short-term lease expense

     —         71  

Variable lease expense

     15        —   
  

 

 

    

 

 

 

Total lease expense

   $ 283      $ 115  
  

 

 

    

 

 

 

Short-term lease expense includes expenses related to the Company’s 2018 operating lease agreement for office space in New York City. The lease agreement was month-to-month and could be terminated by either party with three months’ written notice. The Company terminated the lease effective September 30, 2024. The Company made the policy election to exclude short-term leases from recognition and measurement under ASC 842.

Supplemental balance sheet information related to operating leases as of June 30, 2025 and December 31, 2024 was as follows (in thousands):

 

     June 30,
2025
    December 31,
2024
 

Weighted average remaining lease term (in years)

     6.8       7.3  

Weighted average discount rate

     9.6 %      9.6 % 

Other information related to leases for the six months ended June 30, 2025 and 2024 was as follows:

 

     Six Months Ended
June 30,
 
      2025        2024   

Cash paid for amounts included in the measurement of lease liabilities

   $ 155      $ 61  

As of June 30, 2025, future minimum commitments under operating leases were as follows (in thousands):

 

Year Ending December 31,

   As of June 30, 2025  

2025 (remaining period)

   $ 365  

2026

     730  

2027

     730  

2028

     764  

2029

     775  

Thereafter

     1,744  
  

 

 

 

Total future lease payments

   $ 5,108  

Less: imputed interest

     (1,347 ) 
  

 

 

 

Present value of lease payments

   $ 3,761  
  

 

 

 

 

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LB Pharmaceuticals Inc

Notes to Condensed Financial Statements

(Unaudited)

 

 

8. Redeemable Convertible Preferred Stock and Equity

The Company’s Fourth Amended and Restated Certificate of Incorporation designates and authorizes the Company to issue up to 184.3 million shares, consisting of: (i) 105.0 million shares of common stock, par value $0.0001 per share; and (ii) 79.3 million shares of preferred stock, par value $0.0001 per share.

Redeemable Convertible Preferred Stock

Redeemable convertible preferred stock (“Preferred Stock”) as of June 30, 2025 and December 31, 2024 consisted of the following (in thousands, except per share data):

 

     As of June 30, 2025  
     Issuance
Start Date
     Shares
Authorized
     Shares
Issued and
Outstanding
     Issuance
Price
Per Share
     Net
Carrying
Value
     Liquidation
Preference
 

Series Seed

     11/21/2017        295        295      $ 1.50      $ 435      $ 443  

Series A

     11/21/2018        3,655        3,655      $ 2.30        6,179        8,407  

Series B

     5/3/2022        301        301      $ 3.00        580        903  

Series C

     8/29/2023        75,000        73,820      $ 1.50        107,065        110,731  
     

 

 

    

 

 

       

 

 

    

 

 

 
        79,251        78,071         $ 114,259      $ 120,484  
     

 

 

    

 

 

       

 

 

    

 

 

 

 

     As of December 31, 2024  
     Issuance
Start Date
     Shares
Authorized
     Shares
Issued and
Outstanding
     Issuance
Price
Per Share
     Net
Carrying
Value
     Liquidation
Preference
 

Series Seed

     11/21/2017        295        295      $ 1.50      $ 435      $ 443  

Series A

     11/21/2018        3,655        3,655      $ 2.30        6,179        8,407  

Series B

     5/3/2022        301        301      $ 3.00        580        903  

Series C

     8/29/2023        75,000        73,820      $ 1.50        107,065        110,731  
     

 

 

    

 

 

       

 

 

    

 

 

 
        79,251        78,071         $ 114,259      $ 120,484  
     

 

 

    

 

 

       

 

 

    

 

 

 

In August 2023, the Company closed on the Series C preferred stock financing (the “Series C Offering”) with four new investor groups (“Series C New Investors”) to invest $75.0 million of which $35.0 million was payable upon the first closing in August 2023 (“First Tranche”) in exchange for approximately 23.3 million shares of Series C preferred stock and $40.0 million payable upon the enrollment of the first patient into the Phase 2 clinical trial of LB-102 (“Second Tranche”). The Second Tranche closed in January 2024 and the Company issued approximately 26.7 million shares of Series C preferred stock at $1.50 per share for total gross proceeds of $40.0 million. The Company incurred issuance costs of $2.0 million and $1.7 million associated with the closings of the First Tranche and Second Tranche, respectively.

Upon the closing of the Series C Offering, $35.7 million principal of the 2020 Notes and 2022 Notes automatically converted to 23.8 million shares of Series C preferred stock at a price of $1.50 per share.

As of June 30, 2025 and December 31, 2024, none of the outstanding shares of Preferred Stock had been converted into common stock.

Reissuance: Shares of any Preferred Stock that are redeemed or converted will be retired or canceled and may not be reissued by the Company.

 

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LB Pharmaceuticals Inc

Notes to Condensed Financial Statements

(Unaudited)

 

 

Common Stock

All issued shares of common stock are entitled to vote on a one share/one vote basis.

Warrants

See Note 3 Fair Value Measurements for warrant activity for the six months ended June 30, 2025 and 2024.

9. Net Loss per Share

The following table sets forth the computation of basic and diluted net loss per share of common stock for the six months ended June 30, 2025 and 2024 (in thousands, except share and per share data):

 

     Six Months Ended June 30,  
     2025      2024  

Net loss

   $ (10,177 )     $ (43,850 ) 

Weighted average shares outstanding used in calculating net loss per share, basic and diluted (1)

     10,023,891        9,972,771  
  

 

 

    

 

 

 

Net loss per share, basic and diluted

   $ (1.02 )     $ (4.40 ) 
  

 

 

    

 

 

 

 

(1)

Included within weighted average shares of common stock outstanding for the six months ended June 30, 2025 and 2024 are 3,179,302 and 3,184,404 shares of common stock issuable upon the exercise of penny warrants, respectively. Per ASC 260, Earnings Per Share, the warrants are exercisable at any time for nominal consideration, and as such, the shares are considered outstanding for the purpose of calculating basic and diluted net loss per share attributable to common stockholders.

The Company’s potentially dilutive securities, which consist primarily of stock options and convertible preferred stock, have been excluded from the computation of diluted net loss per share because including them would have had an anti-dilutive impact. Therefore, the weighted average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

The following potentially dilutive shares, presented based on amounts outstanding at each period end, have been excluded from the calculation of diluted net loss per share (in thousands):

 

     June 30,
2025
     June 30,
2024
 

Redeemable convertible preferred stock

     78,071        78,071  

Restricted stock - unvested

     187        191  

Common stock warrants

     98        98  

Stock options

     12,992        7,604  
  

 

 

    

 

 

 

Total potentially dilutive shares

     91,348        85,964  
  

 

 

    

 

 

 

10. Stock-Based Compensation

The Company uses equity-based compensation programs to provide long-term performance incentives for its employees, directors and consultants. These incentives consist primarily of stock options and restricted stock grants.

 

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LB Pharmaceuticals Inc

Notes to Condensed Financial Statements

(Unaudited)

 

 

In January 2017, the Company’s Board of Directors approved the LB Pharmaceuticals Inc 2017 Stock Incentive Plan (“2017 Plan”). In October 2018, the Company’s Board of Directors approved the LB Pharmaceuticals Inc 2018 Stock Incentive Plan (“2018 Plan”). No additional shares will be issued under the 2017 and 2018 Plans. As of both June 30, 2025 and December 31, 2024, there were 0.3 million and 0.8 million shares outstanding under the 2017 Plan and the 2018 Plan, respectively.

In August 2023, the Company’s Board of Directors approved the LB Pharmaceuticals Inc 2023 Stock Incentive Plan (“2023 Plan”). The 2023 Plan authorized the issuance of stock options or restricted stock up to 8.1 million shares of the Company’s common stock. In December 2024, the Company amended the 2023 Plan increasing the maximum aggregate number of shares that may be issued under the 2023 Plan to 13.0 million. The 2023 Plan expires in August 2033. As of June 30, 2025 and December 31, 2024, there were 11.9 million and 11.7 million shares outstanding under the 2023 Plan, respectively. As of June 30, 2025, 1.0 million shares were available for future issuance under the 2023 Plan.

Stock Options

The stock options granted in the six months ended June 30, 2025 (awarded on February 11, 2025) and 2024 vest based on one of the following schedules: (i) 25% on the first anniversary of grant date with the remaining 75% to vest in 36 equal monthly installments thereafter through the fourth anniversary of the grant date; (ii) 100% vesting in 36 equal monthly installments through the third anniversary of the grant date; or (iii) 100% vesting in 12 equal monthly installments through the first anniversary of the grant date for certain nonemployee grants. All stock options expire ten years from the grant date. The assumptions used to determine the fair value of stock options granted were as follows:

 

     February 11,
2025
    June 30,
2024
 

Expected life of options (in years)

     6.25       6.25 - 10.0  

Risk-free interest rate

     4.42 %      4.20% - 4.36 % 

Expected volatility

     86.7 %      85.1% - 86.3 % 

Dividends

     —        —   

Fair value of common stock

   $ 1.26     $ 1.50 - $1.78  

A summary of the Company’s stock option activity and related information is as follows (in thousands, except per share data):

 

     Options
Outstanding
     Weighted
Average
Exercise
Price
Per Share
     Weighted
Average
Remaining
Contractual
Term
(Years)
     Aggregate
Intrinsic
Value
 

Balance at December 31, 2024

     12,749      $ 1.56        9.01      $ —   

Granted

     1,000        1.50           —   

Forfeited

     (757 )       1.50           —   
  

 

 

          

Balance at June 30, 2025

     12,992        1.56        8.57        —   
  

 

 

          

Options vested and expected to vest as of June 30, 2025

     12,992        1.56        8.57     

Options exercisable as of June 30, 2025

     3,415        1.73        6.99     

 

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LB Pharmaceuticals Inc

Notes to Condensed Financial Statements

(Unaudited)

 

 

The weighted average grant date fair value of the stock options granted during the six months ended June 30, 2025 was $0.93. The Company granted 4.1 million stock options during the six months ended June 30, 2024 at a weighted average grant date fair value of $1.37.

During the six months ended June 30, 2025 and 2024, the Company recognized stock-based compensation expense related to stock options as follows (in thousands):

 

     Six Months Ended
June 30,
 
      2025        2024   

Research and development

   $ 243      $ 154  

General and administrative

     724        185  
  

 

 

    

 

 

 

Total stock-based compensation

   $ 967      $ 339  
  

 

 

    

 

 

 

As of June 30, 2025, there was $6.5 million unrecognized stock-based compensation expense which is expected to be recognized over a weighted average period of 3.40 years. No stock options were exercised or expired during the six months ended June 30, 2025 and 2024. There was less than 0.1 million stock options forfeited during the six months ended June 30, 2024.

In connection with a reduction in force (“RIF”) initiated in May 2025, the Company modified stock option awards granted to the Chief Financial Officer (“Former CFO”) and Chief Scientific Officer (“Former CSO”). These modifications involve the acceleration of service-based vesting conditions and were accounted for as Type III modifications (improbable-to-probable vesting) in accordance with ASC 718. During the six months ended June 30, 2025, the Company recognized a reduction of $0.2 million in stock-based compensation expense included in general and administrative expense and an increase of less than $0.1 million included in research and development expense on the unaudited condensed statement of operations as a result of the RIF.

The fair value of the modified stock options was remeasured as of May 6, 2025 using the Black-Scholes option pricing model, incorporating the following assumptions:

 

     May 6, 2025  

Expected life of options (in years)

     0.25 - 0.56  

Risk-free interest rate

     4.42%  

Expected volatility

     86.7%  

Dividends

     —   

Fair value of common stock

   $ 0.79  

There were no realized tax benefits for the six months ended June 30, 2025 or 2024.

Restricted Stock

The Company did not grant any restricted stock during the six months ended June 30, 2025 or 2024.

Restricted stock vests over the period of time for which services are expected to be rendered, which ranged from immediate vesting, up to 36 months, or vests on the six-month anniversary of the consummation of the Company’s first underwritten public offering (“IPO”) under the Securities Act of 1933, as amended.

 

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LB Pharmaceuticals Inc

Notes to Condensed Financial Statements

(Unaudited)

 

 

During the six months ended June 30, 2025 and 2024, the Company recognized stock-based compensation related to shares of restricted stock as follows (in thousands):

 

     Six Months Ended
June 30,
 
     2025      2024  

Research and development

   $ 1      $ 1  

General and administrative

     1        1  
  

 

 

    

 

 

 

Total stock-based compensation

   $ 2      $ 2  
  

 

 

    

 

 

 

As of June 30, 2025, the Company had unrecognized compensation expense related to such shares of $0.2 million.

11. Restructuring

On May 6, 2025, the Company commenced a RIF. This initiative affected several employees, including the Former CFO and the Former CSO. The RIF was designed to streamline operations while ensuring continuity during the transition period.

In connection with the RIF, the Company entered into separation agreements with impacted employees that entitle the impacted employees to termination benefits, with benefit terms expiring at various dates through May 30, 2026. These benefits included the continuation of base salary, then in effect, and the payment of monthly premiums for Company-sponsored healthcare coverage. The Former CFO and Former CSO also received accelerated vesting on outstanding stock option awards. See Note 10 Stock-Based Compensation for additional information on the stock option modifications.

The Company expects to incur total restructuring charges of approximately $0.7 million, primarily related to termination benefits, partially offset by a reduction in stock-based compensation expenses.

During the six months ending June 30, 2025, the Company recognized $0.2 million in general and administrative expense and $0.5 million in research and development expense in the unaudited condensed statement of operations related to termination benefits under the various separation agreements. The modification of the Former CFO’s and Former CSO’s stock options resulted in a reduction of $0.2 million in stock-based compensation expense included in general and administrative expense and an increase of less than $0.1 million included in research and development expense in the unaudited condensed statement of operations during the six months ended June 30, 2025.

All restructuring costs associated with the RIF were recognized in the second quarter of 2025, when the plan was communicated to affected employees and obligations were incurred. The remaining severance payments, which were accrued as of June 30, 2025, are expected to be paid through May 2026.

On November 26, 2024, the Company’s chief executive officer (the “Former CEO”) entered into a separation and consulting agreement (“Separation Agreement”), pursuant to which the Former CEO resigned from his role as CEO. Under the Separation Agreement, the Former CEO is entitled to termination benefits until June 30, 2026, in the form of continuation of base salary in the same amount in effect as of December 31, 2024 and the payment of monthly premiums for healthcare coverage. As of December 31, 2024, the Company recorded $0.8 million of accrued termination benefits in the balance sheet.

 

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LB Pharmaceuticals Inc

Notes to Condensed Financial Statements

(Unaudited)

 

 

The following table provides a reconciliation of the beginning and ending liability balances for the six months ended June 30, 2025:

 

Balance, December 31, 2024

   $ 800  

Termination benefits expense

     896  

Cash payments

     (447 ) 
  

 

 

 

Balance, June 30, 2025

   $ 1,249  
  

 

 

 

12. Commitments and Contingencies

The Company has contracted with various consultants and third parties to assist in pre-clinical research and development and clinical trials work for the Company’s leading drug compounds. The contracts are terminable at any time but obligate the Company to reimburse the providers for any time or costs incurred through the date of termination.

Funding Commitments

In September 2023, the Company entered into a work order with a third-party contract research organization (“CRO”) to provide services with respect to the Company’s Phase 2 clinical trial of LB-102. Minimum advances will be kept by the CRO throughout the duration of the clinical trial. As of June 30, 2025, the Company recorded approximately $0.1 million in advances to the CRO, recorded in prepaid expenses and other current assets in the accompanying unaudited condensed balance sheet.

The Company enters into contracts in the normal course of business with contract development and manufacturing organizations and other third parties for preclinical research studies and testing and manufacturing services, which are generally cancelable upon prior written notice. Payments due upon cancellation may consist of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancellation, and may also include termination penalties. As of June 30, 2025, the Company had no outstanding liabilities related to such items.

Contingencies

In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business. The Company records accruals for such loss contingencies when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company, in accordance with this guidance, does not recognize gain contingencies until realized. The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities as of June 30, 2025.

13. Related-Party Transactions

In August 2023, contemporaneously with the closing of the Series C Offering, the Company entered into several amended and restated royalty participation agreements (the “Amended and Restated Royalty Agreements”) with certain of its investors, co-founders, former and current directors, and former and current executive officers, none of whom are Series C New Investors. No consideration was received as part of the Amended and Restated Royalty Agreements. Pursuant to the Amended and Restated Royalty Agreements, the Company is obligated to pay royalties to all of the holders in an aggregate amount up to 2.75% on net sales arising from LB-102 worldwide through December 31, 2035. Thereafter, the Company is obligated to pay royalties to such holders in

 

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LB Pharmaceuticals Inc

Notes to Condensed Financial Statements

(Unaudited)

 

 

an aggregate amount up to 3.25% in perpetuity. Future sales are defined in these agreements as the gross payments received on total commercial sales of LB-102, whether by the Company or by any licensee of LB-102. As of June 30, 2025, certain former and current officers of the Company and their affiliates held 1.13% of the future royalties.

14. Subsequent Events

The Company evaluated subsequent events through August 22, 2025, the date these financial statements were available to be issued and has not identified any events requiring disclosure.

 

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    Shares

 

 

LOGO

Common Stock 

Leerink Partners

Piper Sandler

Stifel

Through and including     , 2025 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

 
 


Table of Contents

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table indicates the expenses to be incurred in connection with the offering described in this registration statement, other than the underwriting discounts and commissions, all of which will be paid by us. All amounts are estimated except the U.S. Securities and Exchange Commission, or SEC, registration fee, the Financial Industry Regulatory Authority, Inc., or FINRA, filing fee, and the Nasdaq listing fee.

 

     Amount  

SEC registration fee

   $ 15,310  

FINRA filing fee

     15,500  

Nasdaq listing fee

     *  

Printing and engraving expenses

     *  

Legal fees and expenses

     *  

Accounting fees and expenses

     *  

Transfer agent and registrar fees and expenses

     *  

Miscellaneous fees and expenses

     *  
  

 

 

 

Total

   $     *  
  

 

 

 
 
*

To be provided by amendment.

Item 14. Indemnification of Directors and Officers.

Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities Act of 1933, as amended, or the Securities Act. Our amended and restated certificate of incorporation that will become effective immediately prior to the closing of this offering permits indemnification of our directors, officers, employees and other agents to the maximum extent permitted by the Delaware General Corporation Law, and our amended and restated bylaws that will be in effect upon the completion of this offering provide that we will indemnify our directors and executive officers and permit us to indemnify our other officers, employees, and other agents, in each case to the maximum extent permitted by the Delaware General Corporation Law.

We have entered into indemnification agreements with our directors and executive officers, whereby we have agreed to indemnify our directors and executive officers to the fullest extent permitted by law, including indemnification against expenses and liabilities incurred in legal proceedings to which the director or executive officer was, or is threatened to be made, a party by reason of the fact that such director or executive officer is or was a director, executive officer, employee or agent of LB Pharmaceuticals Inc, provided that such director or executive officer acted in good faith and in a manner that the director or executive officer reasonably believed to be in, or not opposed to, the best interest of LB Pharmaceuticals Inc. At present, there is no pending litigation or proceeding involving a director or executive officer of LB Pharmaceuticals Inc regarding which indemnification is sought, nor is the registrant aware of any threatened litigation that may result in claims for indemnification.

We maintain insurance policies that indemnify our directors and officers against various liabilities arising under the Securities Act and the Securities Exchange Act of 1934, as amended, that might be incurred by any director or officer in his capacity as such.

The underwriters are obligated, under certain circumstances, under the underwriting agreement to be filed as Exhibit 1.1 hereto, to indemnify us and our officers and directors against liabilities under the Securities Act.

 

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Table of Contents

Item 15.  Recent Sales of Unregistered Securities.

Set forth below is information regarding all unregistered securities issued and options granted by us since January 1, 2022 through the date of this registration statement:

Issuance of Common Stock

In 2022, we issued 428,571 shares of our common stock to Rivopharm S.A., or Rivopharm, in lieu of cash payment for work performed by a subsidiary of Rivopharm, pursuant to an oral agreement between us and an affiliate of Rivopharm. For additional information, see “Certain Relationships and Related Party Transactions—Issuance of Common Stock.”

Issuances Pursuant to our Equity Plans

From January 1, 2022 through the date of this registration statement, we have granted options under our 2023 Stock Incentive Plan to purchase up to an aggregate of 11,849,488 shares (net of expirations, forfeitures and cancellations) of common stock, at a weighted-average price of $1.50 per share, in each case, to our employees, directors and consultants. From January 1, 2022 through the date of this registration statement, no options have been granted under our 2017 Stock Incentive Plan or 2018 Stock Incentive Plan, and no shares of common stock have been issued upon the exercise of options.

Issuances of Warrants

In May 2022, we issued the Series B-1 Warrants to certain accredited investors to purchase 75,283 shares of our common stock at an exercise price per share of $3.75.

In August 2023, we issued the Maxim Warrants to Maxim Group LLC to purchase 1,528,632 shares of our common stock at an exercise price per share of $0.01.

In August 2023, we issued the New Series B Warrants to certain accredited investors to purchase 100,373 shares of our common stock at an exercise price per share of $1.50.

Issuances of Preferred Stock

In May 2022, we issued 301,119 shares of our Series B preferred stock to certain individual and institutional accredited investors at a purchase price of $3.00 per share, for aggregate consideration of approximately $0.9 million, or the Series B Offering. Maxim Group LLC acted as placement agent for the Series B Offering and received a commission of up to 10.0% of the gross proceeds from the Series B Offering and certain warrants which were ultimately replaced with the Maxim Warrants.

From August 2023 to January 2024, we issued 50,000,000 shares of our Series C preferred stock to 234 individual and institutional accredited investors at a purchase price of $1.50 per share, for aggregate consideration of approximately $75.0 million. In addition, in August 2023, we issued an aggregate of 23,820,346 shares of our Series C preferred stock in exchange of the principal amount of all outstanding convertible notes at a conversion price of $1.50 per share.

Issuance of Convertible Notes

In October 2022, November 2022, and December 2022 through January 2023, we conducted a convertible promissory notes offering in multiple closings pursuant to which we issued an aggregate principal amount of $25.7 million of unsecured convertible promissory notes to certain accredited investors, or the Notes Offering, bearing interest at 4.0% with a maturity on the earlier of (a) the first anniversary date of such note or (b) the sale

 

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Table of Contents

of the Company. Maxim Group LLC acted as placement agent for the Notes Offering and received a commission of up to 10.0% of the gross proceeds from the Notes Offering and certain warrants which were ultimately replaced with the Maxim Warrants. In addition, all of the convertible notes outstanding at the time were automatically converted into shares of our Series C preferred stock upon the closing of our Series C Financing.

None of the foregoing transactions, other than the Series B Offering and the Notes Offering, involved any underwriters, underwriting discounts or commissions, or any public offering. Unless otherwise specified above, we believe these transactions were exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act (and Regulation D or Regulation S promulgated thereunder) or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or under benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed on the share certificates issued in these transactions. All recipients had adequate access, through their relationships with us, to information about us. The sales of these securities were made without any general solicitation or advertising.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits.

The exhibits listed below are filed as part of this registration statement.

 

Exhibit

No.

  

Description

 1.1    Form of Underwriting Agreement
 3.1    Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect
 3.2    Form of Amended and Restated Certificate of Incorporation of the Registrant, to be effective immediately prior to the closing of this offering
 3.3    Amended and Restated Bylaws of the Registrant, as currently in effect
 3.4    Form of Amended and Restated Bylaws of the Registrant, to be effective immediately prior to the closing of this offering
 4.1*    Form of Common Stock Certificate
 4.2†    Investors’ Rights Agreement, by and among the Registrant and certain of its stockholders, dated as of August 29, 2023
 4.3†    Form of Class A Warrants
 4.4†    Form of Class B Warrants
 4.5†    Form of Maxim Warrants
 4.6†    Form of New Series B Warrants
 4.7†    Form of Series B-1 Warrants
 5.1*    Opinion of Cooley LLP
10.1+    2017 Equity Incentive Plan
10.2+    Form of Option Grant Notice and Agreement, Exercise Notice, and Restricted Award Notice under the 2017 Equity Incentive Plan

 

II-3


Table of Contents

Exhibit

No.

  

Description

10.3+    2018 Equity Incentive Plan
10.4+    Form of Option Grant Notice and Agreement, Exercise Notice, and Restricted Award Notice under the 2018 Equity Incentive Plan
10.5+    2023 Equity Incentive Plan
10.6+    Amendment No. 1 to 2023 Equity Incentive Plan
10.7+    Form of Option Grant Notice and Agreement, Exercise Notice, and Restricted Award Notice under the 2023 Equity Incentive Plan
10.8+*    2025 Equity Incentive Plan
10.9+*    Form of Option Grant Notice and Agreement, and Exercise Notice under the 2025 Equity Incentive Plan
10.10+*    Form of RSU Award Grant Notice and Agreement under the 2025 Equity Incentive Plan
10.11+*    2025 Employee Stock Purchase Plan
10.12+    Form of Indemnification Agreement between the Registrant and each of its directors and executive officers
10.13+    Executive Employment Agreement, dated November 1, 2024, between Heather Turner and the Registrant
10.14+    Executive Employment Agreement, dated February 3, 2025, between Gad Soffer and the Registrant
10.15+    Executive Employment Agreement, dated August 25, 2023, between Anna Eramo and the Registrant
10.16+    Executive Employment Agreement, dated August 25, 2023, between Marc Panoff and the Registrant
10.17+    Amendment No 1. to Executive Employment Agreement, dated June 28, 2024, between Marc Panoff and the Registrant
10.18+    Executive Employment Agreement, dated February 3, 2025, between Richard Silva and the Registrant
10.19+    Executive Employment Agreement, dated August 25, 2023, between Zachary Prensky and the Registrant
10.20+    Amendment No 1. to Executive Employment Agreement, dated June 28, 2024, between Zachary Prensky and the Registrant
10.21+    Transition, Consulting, and Separation agreement, dated November 26, 2024, between Zachary Prensky and the Registrant
10.22+    Executive Employment Agreement, dated June 12, 2024, between Roger Sawhney and the Registrant
10.23+    Separation Agreement, dated May 6, 2025, between Roger Sawhney and the Registrant
10.24+*    Non-Employee Director Compensation Policy
10.25    Form of Amended and Restated Royalty Participation Agreement by and between the Registrant and certain holders
10.26†    Lease Agreement, dated May 20, 2024, between the Registrant and One Penn Plaza LLC
21.1    List of Subsidiaries
23.1    Consent of BDO USA, P.C., Independent Registered Public Accounting Firm

 

II-4


Table of Contents

Exhibit

No.

  

Description

23.2*    Consent of Cooley LLP (included in Exhibit 5.1)
24.1    Power of Attorney (see signature page)
107    Filing Fee Table
 
*

To be filed by amendment.

**

Previously filed.

+

Indicates management contract or compensatory plan.

†

Certain schedules and exhibits to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.

(b) Financial statement schedules.

No financial statement schedules are provided because the information called for is not required or is shown either in the financial statements or the notes thereto.

Item 17. Undertakings.

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 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.

The undersigned Registrant hereby undertakes that:

(a) For purposes of determining any liability under the Securities Act, 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.

(b) For the purpose of determining any liability under the Securities Act, 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.

 

II-5


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on August 22, 2025.

 

LB PHARMACEUTICALS INC

By:

 

/s/ Heather Turner

 

Heather Turner

Chief Executive Officer

 

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Table of Contents

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Heather Turner and Marc Panoff and each of them, as his or her true and lawful attorney-in-fact and agents, each with the full power of substitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments), and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-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 and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

    

Title

 

Date

/s/ Heather Turner

Heather Turner

    

Chief Executive Officer and Director

(Principal Executive Officer)

  August 22, 2025

/s/ Marc Panoff

Marc Panoff

    

Senior Vice President, Finance

(Principal Financial and Accounting Officer)

  August 22, 2025

/s/ Scott Garland

Scott Garland

    

Chairman of the Board of Directors

  August 22, 2025

/s/ Rajul Jain, M.D.

Rajul Jain, M.D.

    

Director

  August 22, 2025

/s/ Rebecca Luse

Rebecca Luse

    

Director

  August 22, 2025

/s/ Ran Nussbaum

Ran Nussbaum

    

Director

  August 22, 2025

/s/ Zachary Prensky

Zachary Prensky

    

Director

  August 22, 2025

/s/ Robert R. Ruffolo, Jr., Ph.D., D.Sc. (h),

D.Eng. (h), F.C.P.P.

Robert R. Ruffolo, Jr., Ph.D., D.Sc. (h),

D.Eng. (h), F.C.P.P.

    

Director

  August 22, 2025

/s/ Chen Yu, M.D.

Chen Yu, M.D.

    

Director

  August 22, 2025

 

II-7

Exhibit 1.1

LB Pharmaceuticals Inc

(a Delaware corporation)

[•] Shares of Common Stock

UNDERWRITING AGREEMENT

[•], 2025

Leerink Partners LLC

Piper Sandler & Co.

Stifel, Nicolaus & Company, Incorporated

as Representatives of the several Underwriters

c/o  Leerink Partners LLC

53 State Street, 40th Floor

Boston, MA 02109

c/o  Piper Sandler & Co.

350 North 5th Street, Suite 1000

Minneapolis, MN 55401

c/o  Stifel, Nicolaus & Company, Incorporated

787 7th Avenue, 11th Floor

New York, NY 10019

Ladies and Gentlemen:

LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), confirms its agreement with Leerink Partners LLC (“Leerink Partners”), Piper Sandler & Co. (“Piper Sandler”), and Stifel, Nicolaus & Company, Incorporated (“Stifel”), and each of the other Underwriters named in Schedule A hereto (collectively, the “Underwriters,” which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for which Leerink Partners, Piper Sandler, and Stifel are acting as representatives (in such capacity, the “Representatives”), with respect to (i) the sale by the Company and the purchase by the Underwriters, acting severally and not jointly, of the respective numbers of shares of common stock, par value $0.0001 per share, of the Company (“Common Stock”) set forth in Schedule A hereto and (ii) the grant by the Company to the Underwriters, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of [•] additional shares of Common Stock. The aforesaid [•] shares of Common Stock (the “Initial Securities”) to be purchased by the Underwriters and all or any part of the [•] shares of Common Stock subject to the option described in Section 2(b) hereof (the “Option Securities”) are herein called, collectively, the “Securities.”

The Company understands that the Underwriters propose to make a public offering of the Securities as soon as the Representatives deem advisable after this Underwriting Agreement (this “Agreement”) has been executed and delivered.


The Company has prepared and filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-1 (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 “1933 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 1933 Act (the “1933 Act Regulations”) and Rule 424(b) (“Rule 424(b)”) of the 1933 Act Regulations. The information included in such prospectus that was omitted from such registration statement at the time such registration statement 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 1933 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 final prospectus, in the form first furnished to the Underwriters for use in connection with the offering 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”).

As used in this Agreement:

“Applicable Time” means [__:00 [P./A.]M.], New York City time, on [•], 2025 or such other time as agreed by the Company and the Representatives.

“General Disclosure Package” means any Issuer General Use Free Writing Prospectuses issued at or prior to the Applicable Time, the most recent preliminary prospectus that is distributed to investors prior to the Applicable Time and the information included on Schedule B-1 hereto, all considered together.

“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the 1933 Act Regulations (“Rule 433”), including without limitation any “free writing prospectus” (as defined in Rule 405 of the 1933 Act Regulations (“Rule 405”)) relating to the Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show for an offering that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Securities or of the offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).

“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a “bona fide electronic road show,” as defined in Rule 433 (a “Bona Fide Electronic Road Show”)), as evidenced by its being specified in Schedule B-2 hereto.

“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.

 

2


“Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the 1933 Act.

“Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the 1933 Act.

SECTION 1. Representations and Warranties.

(a) Representations and Warranties by the Company. The Company represents and warrants to each Underwriter as of the date hereof, the Applicable Time, the Closing Time (as defined below) and any Date of Delivery (as defined below), and agrees with each Underwriter, as follows:

(i) Registration Statement and Prospectuses. Each of the Registration Statement and any amendment thereto has become effective under the 1933 Act. No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued by the Commission under the 1933 Act, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued by the Commission and no proceedings for any of those purposes have been instituted by the Commission 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.

Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. Each preliminary prospectus, the Prospectus and any amendment or supplement thereto, at the time each was filed with the Commission, complied in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. Each preliminary prospectus delivered to the Underwriters for use in connection with the offering and the Prospectus was or 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.

The Registration Statement, any preliminary prospectus and the Prospectus, and the filing of the Registration Statement, any preliminary prospectus and the Prospectus with the Commission have been duly authorized by and on behalf of the Company, and the Registration Statement has been duly executed pursuant to such authorization.

(ii) Accurate Disclosure. Neither the Registration Statement nor any amendment thereto, at its effective time, at the Closing Time or at any Date of Delivery, contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. As of the Applicable Time, none of (A) the General Disclosure Package, (B) any individual Issuer Limited Use Free Writing Prospectus, when considered together with the General Disclosure Package, nor (C) any individual Written Testing-the-Waters Communication, when considered together with the General 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. Neither the Prospectus nor any amendment or supplement thereto (including any prospectus wrapper), as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b), at the Closing Time or at any Date of Delivery, 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.

 

3


The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement (or any amendment thereto), the General Disclosure Package or the Prospectus (or any amendment or supplement thereto, including any prospectus wrapper) made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives expressly for use therein. For purposes of this Agreement, the only information so furnished shall be the information in [•] in each case contained in the Prospectus (collectively, the “Underwriter Information”).

(iii) Issuer Free Writing Prospectuses. No Issuer Free Writing Prospectus conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, and any preliminary or other prospectus deemed to be a part thereof that has not been superseded or modified. The Company has made available a Bona Fide Electronic Road Show in compliance with Rule 433(d)(8)(ii) such that no filing of any “road show” (as defined in Rule 433(h)) is required in connection with the offering of the Securities. Any Issuer Free Writing Prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the 1933 Act and the 1933 Act Regulations. Each Issuer Free Writing Prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) under the 1933 Act or that was prepared by or behalf of or used or referred to by the Company complies or will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. Except for the Issuer Free Writing Prospectuses, if any, identified in Schedule B-2 hereto, and electronic road shows, if any, each furnished to the Representatives before first use, the Company has not prepared, used or referred to, and will not, without the prior consent of the Representatives, prepare, use or refer to, any issuer free writing prospectus.

(iv) Testing-the-Waters Materials. The Company (A) has not engaged in any Testing-the-Waters Communication other than Testing-the-Waters Communications with the consent of the Representatives with entities that are qualified institutional buyers within the meaning of Rule 144A under the 1933 Act or institutions that are accredited investors within the meaning of Rule 501 under the 1933 Act and (B) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have 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 B-3 hereto.

(v) Company Not Ineligible Issuer. At the time of filing the Registration Statement and any post-effective 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 1933 Act Regulations) of the Securities and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.

(vi) Emerging Growth Company Status. From the time of the initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any individual or entity authorized to act on its behalf in any Testing-the-Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the 1933 Act (an “Emerging Growth Company”).

 

4


(vii) Independent Accountants. The accountants who certified the financial statements and supporting schedules included in the Registration Statement, the General Disclosure Package and the Prospectus are independent public accountants as required by the 1933 Act, the 1933 Act Regulations and the Public Company Accounting Oversight Board (United States).

(viii) Financial Statements; Non-GAAP Financial Measures. The financial statements included in the Registration Statement, the General Disclosure Package and the Prospectus, together with the related schedules and notes, comply as to form in all material respects with Regulation S-X under the 1933 Act and present fairly, in all material respects, the financial position of the Company at the dates indicated and the statement of operations, stockholders’ equity and cash flows of the Company for the periods specified; said financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved. The supporting schedules, if any, present fairly, in all material respects, in accordance with GAAP the information required to be stated therein, except in the case of unaudited interim financial statements, which are subject to normal year-end audit adjustments and exclude certain footnotes as permitted by applicable rules of the Commission. The selected financial data and the summary financial information included in the Registration Statement, the General Disclosure Package and the Prospectus present fairly, in all material respects, the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included therein. Except as included therein, no historical or pro forma financial statements or supporting schedules are required to be included in the Registration Statement, the General Disclosure Package or the Prospectus under the 1933 Act or the 1933 Act Regulations. All disclosures contained in the Registration Statement, the General Disclosure Package or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply with Regulation G of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and Item 10 of Regulation S-K, to the extent applicable.

(ix) Sarbanes-Oxley Act of 2002. The Company has taken all necessary actions to ensure that, upon the effectiveness of the Registration Statement, it will be in compliance with all provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder (collectively, the “Sarbanes-Oxley Act”) which the Company is required to comply with as of the effectiveness of the Registration Statement, and is actively taking steps to ensure that it will be in compliance with other provisions of the Sarbanes-Oxley Act that will become applicable to the Company at all times after the effectiveness of the Registration Statement (taking into account all exemptions and phase-in periods provided under the Jumpstart Our Business Startups Act and otherwise under applicable law).

(x) No Material Adverse Change in Business. Except as otherwise stated therein, since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company, whether or not arising in the ordinary course of business (a “Material Adverse Effect”), (B) there have been no transactions entered into by the Company, other than those in the ordinary course of business, which are material with respect to the Company, (C) there have been no material liabilities or obligations, direct or contingent, entered into by the Company and (D) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock.

 

5


(xi) Good Standing of the Company. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the General Disclosure Package and the Prospectus and to enter into and perform its obligations under this Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to be so qualified or to be in good standing would not result in a Material Adverse Effect.

(xii) Subsidiaries. The Company does not own an interest in any corporation, partnership, limited liability company, joint venture, trust or other business entity.

(xiii) Capitalization. The authorized, issued and outstanding shares of capital stock of the Company are as set forth in the Registration Statement, the General Disclosure Package and the Prospectus in the column entitled “Actual” under the caption “Capitalization” (except for subsequent issuances, if any, (A) pursuant to this Agreement, (B) pursuant to reservations, agreements or employee benefit plans referred to in the Registration Statement, the General Disclosure Package and the Prospectus or (C) pursuant to the conversion of convertible securities or exercise of options referred to in the Registration Statement, the General Disclosure Package and the Prospectus). The outstanding shares of capital stock of the Company have been duly authorized and are validly issued, fully paid and non-assessable. None of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights of any securityholder of the Company.

(xiv) Authorization of Agreement. This Agreement has been duly authorized, executed and delivered by the Company.

(xv) Authorization and Description of Securities. The Securities 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 fully paid and non-assessable; and the issuance of the Securities is not subject to the preemptive or other similar rights of any securityholder of the Company. The Common Stock conforms, in all material respects, to all statements relating thereto contained in the Registration Statement, the General Disclosure Package and the Prospectus and such description conforms to the rights set forth in the instruments defining the same. No holder of Securities will be subject to personal liability by reason of being such a holder.

(xvi) Registration Rights. There are no persons with registration rights or other similar rights to have any securities registered for sale pursuant to the Registration Statement or otherwise registered for sale or sold by the Company under the 1933 Act pursuant to this Agreement, other than those rights that have been disclosed in the Registration Statement, the General Disclosure Package and the Prospectus and have been waived.

(xvii) Absence of Violations, Defaults and Conflicts. Neither the Company is (A) in violation of its charter, by-laws or similar organizational document, (B) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company is a party or by which either of them may be bound or to which any of the properties or assets of the Company is subject (collectively, “Agreements and

 

6


Instruments”), except for such defaults that would not, singly or in the aggregate, result in a Material Adverse Effect, or (C) in violation of any law, statute, rule, regulation, judgment, order, writ or decree of any arbitrator, court, governmental body, regulatory body, administrative agency or other authority, body or agency having jurisdiction over the Company or any of their respective properties, assets or operations (each, a “Governmental Entity”), except for such violations that would not, singly or in the aggregate, result in a Material Adverse Effect. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein and in the Registration Statement, the General Disclosure Package and the Prospectus (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described therein under the caption “Use of Proceeds”) and compliance by the Company with its obligations hereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any properties or assets of the Company pursuant to, the Agreements and Instruments (except for such conflicts, breaches, defaults or Repayment Events or liens, charges or encumbrances that would not, singly or in the aggregate, result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter, by-laws or similar organizational document of the Company or any law, statute, rule, regulation, judgment, order, writ or decree of any Governmental Entity. As used herein, a “Repayment Event” means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company.

(xviii) Listing. The Securities have been approved for listing on the Nasdaq Global Market, subject to notice of issuance.

(xix) Absence of Labor Dispute. No labor dispute with the employees of the Company exists or, to the knowledge of the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers, customers or contractors, which, in either case, would result in a Material Adverse Effect.

(xx) Absence of Proceedings. Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, there is no action, suit, proceeding, inquiry or investigation before or brought by any Governmental Entity (including, without limitation, any action, suit proceeding, inquiry or investigation before or brought by the U.S. Food and Drug Administration (the “FDA”) or the European Medicines Agency (the “EMA”)) now pending or, to the knowledge of the Company, threatened, against or affecting the Company, which would reasonably be expected to result in a Material Adverse Effect, or which would reasonably be expected to materially and adversely affect their respective properties or assets or the consummation of the transactions contemplated in this Agreement or the performance by the Company of its obligations hereunder; and the aggregate of all pending legal or governmental proceedings to which the Company is a party or of which any of their respective properties or assets is the subject which are not described in the Registration Statement, the General Disclosure Package and the Prospectus, including ordinary routine litigation incidental to the business, would not reasonably be expected to result in a Material Adverse Effect.

(xxi) Accuracy of Exhibits. There are no contracts or documents which are required to be described in the Registration Statement, the General Disclosure Package or the Prospectus or to be filed as exhibits to the Registration Statement which have not been so described and filed as required.

 

7


(xxii) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any Governmental Entity is necessary or required for the performance by the Company of its obligations hereunder, in connection with the offering, issuance or sale of the Securities hereunder or the consummation of the transactions contemplated by this Agreement, except such as have been already obtained or as may be required under the 1933 Act, the 1933 Act Regulations, the rules of the Nasdaq Stock Market LLC, state securities laws or the rules of Financial Industry Regulatory Authority, Inc. (“FINRA”).

(xxiii) Possession of Licenses and Permits. The Company possesses such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate Governmental Entities necessary to conduct the business now operated by them (including, without limitation, all such permits, licenses, approvals, consents and other authorizations required by the FDA, the EMA, or any other federal, state, local or foreign agencies or bodies engaged in the regulation of clinical or preclinical studies, pharmaceuticals, biologics, biohazardous substances or activities related to the business now operated by the Company), except where the failure so to possess would not, singly or in the aggregate, result in a Material Adverse Effect. The Company is in compliance with the terms and conditions of all Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, result in a Material Adverse Effect. The Company has fulfilled and performed all of its material obligations with respect to the Governmental Licenses and, to the knowledge of the Company, no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the Company as a holder of any permit, except where the failure to so fulfill or perform, or the occurrence of such event, would not, singly or in the aggregate, result in a Material Adverse Effect. All of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not, singly or in the aggregate, result in a Material Adverse Effect. The Company has not received any written notice of proceedings relating to the revocation or modification of any Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect.

(xxiv) Title to Property. The Company has good and marketable title to all real property owned by it and good title to all other properties owned by it, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (A) are described in the Registration Statement, the General Disclosure Package and the Prospectus or (B) do not, singly or in the aggregate, materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company; and all of the leases and subleases material to the business of the Company, considered as one enterprise, and under which the Company holds properties described in the Registration Statement, the General Disclosure Package or the Prospectus, are in full force and effect, and the Company has not received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company to the continued possession of the leased or subleased premises under any such lease or sublease.

 

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(xxv) Title to Intellectual Property. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, the Company owns the patents, patent applications, licenses, inventions, copyrights, know how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property necessary for, or used in the conduct, or the proposed conduct, of the business of the Company in the manner described in the Registration Statement, the General Disclosure Package and the Prospectus (collectively, the “Intellectual Property”); the patents, trademarks, and copyrights, if any, included within the Intellectual Property are valid, enforceable, and subsisting; other than as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, (A) the Company is not obligated to pay a material royalty, grant a license to, or provide other material consideration to any third party in connection with the Intellectual Property, (B) the Company has not received any notice of any claim of infringement, misappropriation or conflict with any asserted rights of others with respect to any of the Company’s drug candidates, services, processes or Intellectual Property, (C) to the knowledge of the Company, neither the sale nor use of any of the discoveries, inventions, drug candidates, services or processes of the Company referred to in the Registration Statement, the General Disclosure Package or the Prospectus do or will, to the knowledge of the Company, infringe, misappropriate or violate any right or valid patent claim of any third party, (D) none of the technology employed by the Company has been obtained or is being used by the Company in material violation of any contractual obligation binding on the Company or, to the Company’s knowledge, upon any of its officers, directors or employees or otherwise in material violation of the rights of any persons, (E)to the knowledge of the Company, no third party has any ownership right in or to any Intellectual Property that is owned by the Company, other than any co-owner of any patent constituting Intellectual Property who is listed on the records of the U.S. Patent and Trademark Office (the “USPTO”) and any co-owner of any patent application constituting Intellectual Property who is named in such patent application, (F) there is no material infringement by third parties of any Intellectual Property, (G) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the Company’s rights in or to any Intellectual Property, and (H) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any Intellectual Property. The Company is in compliance with the terms of each agreement pursuant to which Intellectual Property has been licensed to the Company, and all such agreements are in full force and effect.

(xxvi) Patents and Patent Applications. All patents and patent applications owned by the Company have, to the knowledge of the Company, been duly and properly filed and maintained; to the knowledge of the Company, the parties prosecuting such patent applications have complied with their duty of candor and disclosure to the USPTO in connection with such applications; and the Company is not aware of any facts required to be disclosed to the USPTO that were not disclosed to the USPTO and which would preclude the grant of a patent in connection with any such application or would reasonably be expected to form the basis of a finding of invalidity with respect to any patents that have issued with respect to such applications. To the Company’s knowledge, all patents and patent applications owned by the Company and filed with the USPTO or any foreign or international patent authority (the “Company Patent Rights”) have been duly and properly filed; the Company believes it has complied with its duty of candor and disclosure to the USPTO for the Company Patent Rights.

(xxvii) FDA Compliance. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, the Company: (A) is and at all times has been in material compliance with all statutes, rules or regulations of the FDA and other comparable Governmental Entities applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing, labeling, promotion, sale, offer for sale, storage, import, export or disposal of any product under development, manufactured or distributed by the Company

 

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(“Applicable Laws”); (B) has not received any FDA Form 483, notice of adverse finding, warning letter, untitled letter or other written correspondence or written notice from the FDA or any Governmental Authority alleging or asserting material noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, exemptions, authorizations, permits and supplements or amendments thereto required by any such Applicable Laws (“Authorizations”); (C) possesses all material Authorizations and such Authorizations are valid and in full force and effect and the Company is not in material violation of any term of any such Authorizations; (D) has not received written notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from the FDA or any Governmental Authority or third party alleging that any product operation or activity is in material violation of any Applicable Laws or Authorizations and has no knowledge that the FDA or any Governmental Authority or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; (E) has not received written notice that the FDA or any Governmental Authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any material Authorizations and has no knowledge that the FDA or any Governmental Authority is considering such action; and (F) has filed, obtained, maintained or submitted all material reports, documents, forms, 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 materially complete and correct on the date filed (or were corrected or supplemented by a subsequent submission).

(xxviii) Compliance with Health Care Laws. For the past six (6) years, the Company has operated and currently is in compliance with all applicable health care laws, rules and regulations (except where such failure to operate or non-compliance would not, singly or in the aggregate, result in a Material Adverse Effect), including, without limitation, (i) the Federal, Food, Drug and Cosmetic Act (21 U.S.C. §§ 301 et seq.); (ii) all applicable federal, state, local and all applicable foreign healthcare related fraud and abuse laws, including, without limitation, the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)), the U.S. Physician Payments Sunshine Act (42 U.S.C. § 1320a-7h), the civil False Claims Act (31 U.S.C. §§ 3729 et seq.), the criminal False Claims Law (42 U.S.C. § 1320a-7b(a)), all criminal laws relating to healthcare fraud and abuse, including but not limited to 18 U.S.C. Sections 286 and 287, the healthcare fraud criminal provisions under the U.S. Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) (42 U.S.C. Section 1320d et seq.), the exclusions law (42 U.S.C. § 1320a-7), and the civil monetary penalties law (42 U.S.C. § 1320a-7a); (iii) HIPAA, as amended by the Health Information Technology for Economic Clinical Health Act (42 U.S.C. Section 17921 et seq.); (iv) the regulations promulgated pursuant to such laws; and (v) any other similar local, state, federal, or foreign health care laws (collectively, the “Health Care Laws”). Neither the Company, nor to the Company’s knowledge, any of its officers, directors, employees or agents have engaged in activities which are, as applicable, cause for false claims liability, civil penalties, or mandatory or permissive exclusion from Medicare, Medicaid, or any other state or federal healthcare program. The Company has not received written notice or other correspondence of any claim, action, suit, audit, survey, proceeding, hearing, enforcement, investigation, arbitration or other action (“Action”) from any court or arbitrator or governmental or regulatory authority or third party alleging that any product operation or activity is in violation of any Health Care Laws, and, to the Company’s knowledge, no such claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action is threatened. The Company is not a party to and does not have any ongoing reporting obligations pursuant to any corporate integrity agreement, deferred prosecution agreement, monitoring agreement, consent decree, settlement order, plan of correction or similar agreement imposed by any governmental or regulatory authority. Additionally, neither the Company, nor to the Company’s knowledge, any of its employees, officers or directors, has been excluded, suspended or debarred from participation in any U.S. state or federal health care program or human clinical research or, to the knowledge of the Company, is subject to a governmental inquiry, investigation, proceeding, or other similar action that could reasonably be expected to result in debarment, suspension, or exclusion.

 

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(xxix) Environmental Laws. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus or would not, singly or in the aggregate, result in a Material Adverse Effect, (A) the Company is not in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products, asbestos-containing materials or mold (collectively, “Hazardous Materials”) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, “Environmental Laws”), (B) the Company has all permits, authorizations and approvals required under any applicable Environmental Laws and is in compliance with their requirements, (C) there are no pending or, to the knowledge of the Company, threatened, administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company and (D) there are no events or circumstances that would reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or Governmental Entity, against or affecting the Company relating to Hazardous Materials or any Environmental Laws.

(xxx) Accounting Controls. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, the Company maintains effective internal control over financial reporting (as defined under Rule 13-a15 and 15d-15 under the rules and regulations of the Commission under the 1934 Act (the “1934 Act Regulations”)) and a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) 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 described in the Registration Statement, the General Disclosure Package and the Prospectus, since the end of the Company’s most recent audited fiscal year, there has been (1) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (2) no change in the Company’s internal control over financial reporting that has materially adversely affected, or is reasonably likely to materially adversely affect, the Company’s internal control over financial reporting.

(xxxi) Tests and Preclinical and Clinical Trials. The studies, tests and preclinical and clinical trials conducted by or, to the Company’s knowledge, on behalf of the Company were and, if still ongoing, are being conducted in all material respects in accordance with experimental protocols, procedures and controls pursuant to accepted professional scientific standards and all Authorizations and Applicable Laws, including, without limitation, the Federal Food, Drug and Cosmetic Act and the rules and regulations promulgated thereunder (collectively, “FFDCA”); the descriptions of the results of such studies, tests and trials contained in the Registration Statement, the General Disclosure Package and the Prospectus are, to the Company’s knowledge, accurate and complete in all material respects and fairly present the data derived from such studies, tests and trials; except to the extent disclosed in the Registration Statement, the General Disclosure Package

 

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and the Prospectus, the Company is not aware of any studies, tests or trials, the results of which the Company believes reasonably call into question the study, test, or trial results described or referred to in the Registration Statement, the General Disclosure Package and the Prospectus when viewed in the context in which such results are described and the clinical state of development; and, except to the extent disclosed in the Registration Statement, the General Disclosure Package or the Prospectus, the Company has not received any notices or correspondence from the FDA or any Governmental Entity requiring the termination or suspension of any studies, tests or preclinical or clinical trials conducted by or on behalf of the Company, other than ordinary course communications with respect to modifications in connection with the design and implementation of such trials, copies of which communications have been made available to you.

(xxxii) Payment of Taxes. All U.S. federal income tax returns of the Company required by law to be filed have been filed and all taxes shown by such returns or otherwise assessed against the Company, which are due and payable by the Company, have been paid, except assessments against which appeals have been or will be promptly taken and as to which adequate reserves have been provided in conformity with GAAP or where the failure to do so could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. The Company has filed all other tax returns that are required to have been filed by it pursuant to applicable foreign, state, local or other law except insofar as the failure to file such returns would not result in a Material Adverse Effect. The charges, accruals and reserves on the books of the Company in respect of any income tax liability for any years not finally determined are, in conformity with GAAP, adequate to meet any assessments or re-assessments for additional income tax for any years not finally determined, except to the extent of any inadequacy that would not result in a Material Adverse Effect.

(xxxiii) Insurance. The Company carries or is entitled to the benefits of insurance, with financially sound and reputable insurers, in such amounts and covering such risks as is generally maintained by companies of established repute engaged in the same or similar business, and all such insurance is in full force and effect. The Company has no reason to believe that it will not be able (A) to renew its existing insurance coverage as and when such policies expire or (B) 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. The Company has not been denied any insurance coverage which it has sought or for which it has applied.

(xxxiv) Investment Company Act. The Company is not required, and upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the Registration Statement, the General Disclosure Package and the Prospectus will not be required, to register as an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”).

(xxxv) Absence of Manipulation. Neither the Company nor any affiliate of the Company has taken, nor will the Company or any affiliate take, directly or indirectly, any action which is designed, or would be expected, to cause or result in, or which constitutes, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities or to result in a violation of Regulation M under the 1934 Act.

(xxxvi) Foreign Corrupt Practices Act. None of the Company, or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or other person acting on behalf of the Company is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and

 

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regulations thereunder (the “FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company has and, to the knowledge of the Company, its affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.

(xxxvii) Money Laundering Laws. The operations of the Company are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

(xxxviii) OFAC. None of the Company, or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or representative of the Company is an individual or entity (“Person”) currently the subject or target of any sanctions administered or enforced by the United States Government, including, without limitation, the U.S. Department of the Treasury’s Office of Foreign Assets Control, the United Nations Security Council, the European Union, His Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”), nor is the Company located, organized or resident in a country or territory that is the subject or target of comprehensive Sanctions (currently, the Crimea region, the non-government controlled areas of the Zaporizhzhia and Kherson Regions of Ukraine (or any other Covered Region of Ukraine identified pursuant to Executive Order 14065), the so-called Donetsk People’s Republic, the so-called Luhansk People’s Republic, Cuba, Iran, North Korea, and Syria) (each, a “Sanctioned Jurisdiction”); and the Company will not directly or indirectly use the proceeds of the sale of the Securities, or lend, contribute or otherwise make available such proceeds to joint venture partners or other Person, to fund any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions prohibiting such funding or in any other manner that will result in a violation by any Person (including any Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions; the Company is not engaged in, or has, at any time in the past five years, engaged in, any dealings or transactions with or involving any Person that was or is, as applicable, at the time of such dealing or transaction, the subject or target of Sanctions prohibiting such dealing or transaction or with any Sanctioned Jurisdiction; the Company has instituted, and maintains, policies and procedures reasonably designed to promote and achieve continued compliance with Sanction.

(xxxix) Lending Relationship. Except as disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, the Company (i) does not have any material lending or other relationship with any banking or lending affiliate of any Underwriter and (ii) does not intend to use any of the proceeds from the sale of the Securities to repay any outstanding debt owed to any affiliate of any Underwriter.

(xl) Statistical and Market-Related Data. Any statistical and market-related data included in the Registration Statement, the General Disclosure Package or the Prospectus are based on or derived from sources that the Company believes, after reasonable inquiry, to be reliable and accurate and, to the extent required, the Company has obtained the written consent to the use of such data from such sources.

 

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(xli) Maintenance of Rating. The Company has no debt securities or preferred stock that is rated by any “nationally recognized statistical rating organization” (as that term is defined by the Commission for purposes of Rule 436(g)(2) under the 1933 Act).

(xlii) Privacy and Data Protection. For the past three (3) years, the Company has operated its business in a manner compliant in all material respects with all United States federal, state, local and non-United States privacy, data security and data protection laws and regulations applicable to the Company’s collection, use, transfer, protection, disposal, disclosure, handling and storage of “personal data” as defined under applicable laws (“Personal Data”). For the past three (3) years: (i) the Company has been and is in compliance in all material respects with internal policies and procedures designed to protect the integrity and security of the Personal Data collected, handled or stored by or on behalf of the Company in connection with its business. The Company has taken commercially reasonable steps designed to Personal Data, protected health information (as defined under HIPAA), and other material confidential information of the Company and any third parties in its possession (“Sensitive Company Data”). The material tangible or digital information technology systems (including computers, screens, servers, workstations, routers, hubs, switches, networks, data communications lines, technical data and hardware), software and telecommunications systems owned or licensed by the Company and used or held for use by the Company (the “Company IT Assets”) are reasonably adequate and operational for, in accordance with their documentation and functional specifications, the business of the Company as now operated To the Company’s knowledge, the Company has not suffered any security breaches, compromises or incidents with respect to any Company IT Asset or Sensitive Company Data, except where such breaches, compromises or incidents would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect. Except as would not reasonably be expected to, singly or in the aggregate, result in a Material Adverse Effect, to the Company’s knowledge, the Company has not been required by applicable law to notify any individual of any information security breach, compromise or incident involving Sensitive Company Data.

(xliii) No Broker Fees. Except as disclosed in the General Disclosure Package, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim against the Company or any Underwriter for a brokerage commission, finder’s fee or other like payment in connection with the offering of the Securities contemplated hereby.

(b) Officer’s Certificates. Any certificate signed by any officer of the Company delivered to the Representatives or to counsel for the Underwriters shall be deemed a representation and warranty by the Company to each Underwriter as to the matters covered thereby.

SECTION 2. Sale and Delivery to Underwriters; Closing.

(a) Initial Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Underwriter, severally and not jointly, and each Underwriter, severally and not jointly, agrees to purchase from the Company, at the price per share set forth in Schedule A, that number of Initial Securities set forth in Schedule A opposite the name of such Underwriter, plus any additional number of Initial Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof, subject, in each case, to such adjustments among the Underwriters as the Representatives in their sole discretion shall make to eliminate any sales or purchases of fractional shares.

 

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(b) Option Securities. In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the Underwriters, severally and not jointly, to purchase up to an additional [•] shares of Common Stock, at the price per share set forth in Schedule A, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities. The option hereby granted may be exercised for 30 days after the date hereof and may be exercised in whole or in part at any time from time to time upon notice by the Representatives to the Company setting forth the number of Option Securities as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Securities. Any such time and date of delivery (a “Date of Delivery”) shall be determined by the Representatives, but any Date of Delivery after the Closing Time shall not be later than seven full business days nor earlier than one full business day after the exercise of said option, nor in any event prior to the Closing Time. If the option is exercised as to all or any portion of the Option Securities, each of the Underwriters, acting severally and not jointly, will purchase that proportion of the total number of Option Securities then being purchased which the number of Initial Securities set forth in Schedule A opposite the name of such Underwriter bears to the total number of Initial Securities, subject, in each case, to such adjustments as the Representatives in their sole discretion shall make to eliminate any sales or purchases of fractional shares.

(c) Payment. Payment of the purchase price for, and delivery of certificates or security entitlements for, the Initial Securities shall be made at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., or at such other place as shall be agreed upon by the Representatives and the Company, at 10:00 A.M. (New York City time) on the first (second, if the pricing occurs after 4:00 P.M. (New York City time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten business days after such date as shall be agreed upon by the Representatives and the Company (such time and date of payment and delivery being herein called “Closing Time”). Delivery of the Initial Securities at the Closing Time shall be made through the facilities of The Depository Trust Company unless the Representatives shall otherwise instruct.

In addition, in the event that any or all of the Option Securities are purchased by the Underwriters, payment of the purchase price for, and delivery of certificates or security entitlements for, such Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Representatives and the Company, on each Date of Delivery as specified in the notice from the Representatives to the Company. Delivery of the Option Securities on each such Date of Delivery shall be made through the facilities of The Depository Trust Company unless the Representatives shall otherwise instruct.

Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company, against delivery to the Representatives for the respective accounts of the Underwriters of certificates or security entitlements for the Securities to be purchased by them. It is understood that each Underwriter has authorized the Representatives, for their accounts, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial Securities and the Option Securities, if any, which it has agreed to purchase. Each of Leerink Partners, Piper Sandler, and Stifel, individually and not as Representatives of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial Securities or the Option Securities, if any, to be purchased by any Underwriter whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder.

 

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SECTION 3. Covenants of the Company. The Company covenants with each Underwriter as follows:

(a) Compliance with Securities Regulations and Commission Requests. The Company, subject to Section 3(b), will comply with the requirements of Rule 430A, and will notify the Representatives as soon as practicable, 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 threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the 1933 Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the 1933 Act in connection with the offering of the Securities. The Company will effect all filings required under Rule 424(b), in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and will 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 will make every reasonable effort 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.

(b) Continued Compliance with Securities Laws. The Company will comply with the 1933 Act and the 1933 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 General 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 1933 Act Regulations (“Rule 172”), would be) required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for 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 General Disclosure Package or the Prospectus in order that the General 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 General Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly (A) give the Representatives notice of such event, (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the General Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representatives with copies of any such amendment or supplement and (C) 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 Representatives or counsel for the Underwriters shall object. 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 Representatives notice of any filings made pursuant to the 1934 Act or the 1934 Act Regulations within 48 hours prior to the Applicable Time; the Company will give the Representatives notice of its intention to make any such filing from the Applicable Time to the Closing Time and will furnish the Representatives with copies of any such documents 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 Representatives or counsel for the Underwriters shall reasonably object.

 

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(c) Delivery of Registration Statements. The Company has furnished or will deliver to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith) and signed copies of all consents and certificates of experts, and will also deliver to the Representatives, 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.

(d) Delivery of Prospectuses. The Company has delivered 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 1933 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 1933 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.

(e) Blue Sky Qualifications. The Company will use its best efforts, in cooperation with the Underwriters, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representatives 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.

(f) Rule 158. The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders as soon as practicable an earning statement for the purposes of, and to provide to the Underwriters the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act.

(g) Use of Proceeds. The Company will use the net proceeds received by it from the sale of the Securities in all material respects in the manner specified in the Registration Statement, the General Disclosure Package and the Prospectus under the heading “Use of Proceeds.”

(h) Listing. The Company will use its best efforts to effect and maintain the listing of the Common Stock (including the Securities) on the Nasdaq Global Market.

(i) Restriction on Sale of Securities. During a period of 180 days from the date of the Prospectus, the Company will not, without the prior written consent of Leerink Partners, Piper Sandler, and Stifel, (i) directly or indirectly, 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 or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file or confidentially submit any registration statement under the 1933 Act with respect to any of the foregoing, (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common

 

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Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise or (iii) publicly announce an intention to effect any such swap, agreement or other transaction described in clauses (i) and (ii). The foregoing sentence shall not apply to (A) the Securities to be sold hereunder; (B) any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the conversion of a convertible security outstanding on the date hereof and referred to in the Registration Statement, the General Disclosure Package and the Prospectus; (C) any shares of Common Stock issued or options to purchase Common Stock granted pursuant to existing employee benefit plans of the Company referred to in the Registration Statement, the General Disclosure Package and the Prospectus; (D) any shares of Common Stock issued pursuant to any existing non-employee director stock plan or dividend reinvestment plan referred to in the Registration Statement, the General Disclosure Package and the Prospectus; (E) the filing by the Company of any registration statement on Form S-8 or a successor form thereto; or (F) the issuance by the Company of shares of Common Stock or any securities convertible into or exercisable or exchangeable for, Common Stock, or the entrance into an agreement to issue Common Stock or any securities convertible into, or exercisable or exchangeable for, Common Stock, in connection with any merger, joint venture, strategic alliances, commercial or other collaborative transaction or the acquisition or license of the business, property, technology or other assets of another individual or entity or the assumption of an employee benefit plan in connection with a merger or acquisition; provided, that the aggregate number of shares of Common Stock or any securities convertible into, or exercisable or exchangeable for, Common Stock that the Company may issue or agree to issue pursuant to this clause (F) shall not exceed 5% of the total outstanding share capital of the Company immediately following the issuance of the shares of Common Stock; and provided further, that the recipients of such securities provide to the Representatives a signed lock-up letter substantially in the form of the lock-up letter described in Section 5(i) hereof.

(j) Lock-Up Release or Waiver. If Leerink Partners, Piper Sandler, and Stifel, in their sole discretion, agree to release or waive the restrictions set forth in a lock-up agreement described in Section 5(i) hereof for an officer or director of the Company and provide the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit B hereto through a major news service at least two business days before the effective date of the release or waiver.

(k) 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 1933 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and 1934 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 1933 Act.

(l) Issuer Free Writing Prospectuses. The Company agrees that, unless it obtains the prior written consent of the Representatives, it will not make any offer relating to the Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433; provided that the Representatives will be deemed to have consented to the Issuer Free Writing Prospectuses listed on Schedule B-2 hereto and any “road show that is a written communication” within the meaning of Rule 433(d)(8)(i) that has been reviewed by the Representatives. The Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to, or deemed consented to, by the Representatives as an “issuer free writing prospectus,” as defined in Rule 433, and that it has complied and will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development

 

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as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement which has not been superseded or modified, any preliminary prospectus or the Prospectus or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.

(m) Testing-the-Waters Materials. 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 will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.

(n) Emerging Growth Company Status. The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Securities within the meaning of the 1933 Act and (ii) completion of the 180-day restricted period referred to in Section 3(i).

SECTION 4. Payment of Expenses.

(a) Expenses. The Company will pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of copies of each preliminary prospectus, each Issuer Free Writing Prospectus and the Prospectus and any amendments or supplements thereto and any costs associated with electronic delivery of any of the foregoing by the Underwriters to investors, (iii) the preparation, issuance and delivery of the certificates or security entitlements for the Securities to the Underwriters, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Securities to the Underwriters (but not the sale of such Securities by the Underwriters), (iv) the fees and disbursements of the Company’s counsel, accountants and other advisors, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(e) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of a “Blue Sky Survey” and any supplement thereto, (vi) the fees and expenses of any transfer agent or registrar for the Securities, (vii) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the Securities, including without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and 50% of the cost of aircraft and other transportation chartered in connection with the road show; provided, however, that (A) the Underwriters shall pay their direct costs and expenses associated with the road show and (B) the Underwriters shall pay 50% of the cost of aircraft and other transportation chartered in connection with the road show, (viii) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters (such fees, together with any fees incurred pursuant to this clause (v) not to exceed $35,000) in connection with, the review by FINRA of the terms of the sale of the Securities, (ix) the fees and expenses incurred in connection with the listing of the Securities on the Nasdaq Global Market, and (x) the costs and expenses (including, without limitation, any damages or other amounts payable in connection with legal or contractual liability) associated with the reforming of any contracts for sale of the Securities made by the Underwriters caused by a breach of the representation contained in the third sentence of Section 1(a)(ii). It is understood, however, that except as provided in this Section and Section 6 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Shares by them and any advertising expenses connected with any offers they may make.

 

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(b) Termination of Agreement. If this Agreement is terminated by the Representatives in accordance with the provisions of Section 5, Section 9(a)(i), Section 9(a)(iii) or Section 10 hereof, the Company shall reimburse the Underwriters for all of their reasonably documented out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters; provided however, that if this Agreement is terminated by the Representatives pursuant to Section 10, the Company shall have no obligation to reimburse the out of pocket expenses of any Underwriters that have failed to purchase the Securities that they have agreed to purchase hereunder.

SECTION 5. Conditions of Underwriters’ Obligations. The obligations of the several Underwriters hereunder are subject to the accuracy of the representations and warranties of the Company contained herein or in certificates of any officer of the Company delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions:

(a) Effectiveness of Registration Statement; Rule 430A Information. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and, at the Closing Time, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the 1933 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; and the Company has complied with each request (if any) from the Commission for additional information to the reasonable satisfaction of counsel to the Underwriters. A 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.

(b) Opinion of Counsel for Company. At the Closing Time, the Representatives shall have received the opinion and the negative assurance letter, each dated the Closing Time, of Cooley LLP, counsel for the Company, together with the opinion of Perkins Coie LLP, special counsel for the Company with respect to intellectual property matters, each in form and substance satisfactory to counsel for the Underwriters, together with signed or reproduced copies of each such letter for each of the other Underwriters as counsel to the Underwriters may reasonably request.

(c) Opinion of Counsel for Underwriters. At the Closing Time, the Representatives shall have received the opinion, and negative assurance letter, each dated the Closing Time, of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel for the Underwriters, together with signed or reproduced copies of such letters for each of the other Underwriters in form and substance satisfactory to the Representatives. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York, the General Corporation Law of the State of Delaware and the federal securities laws of the United States, upon the opinions of counsel satisfactory to the Representatives. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers and other representatives of the Company and certificates of public officials.

 

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(d) Officers’ Certificate. At the Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, any Material Adverse Effect, and the Representatives shall have received a certificate of the principal executive officer of the Company and of the principal financial officer of the Company, dated the Closing Time, to the effect that (i) there has been no such Material Adverse Effect, (ii) the representations and warranties of the Company in this Agreement are true and correct with the same force and effect as though expressly made at and as of the Closing Time, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement under the 1933 Act has been issued, 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 their knowledge, contemplated.

(e) Accountant’s Comfort Letter. At the time of the execution of this Agreement, the Representatives shall have received from BDO USA, P.C. a letter, dated such date, in form and substance satisfactory to the Representatives, together with signed or reproduced copies of such letter for each of the other Underwriters containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the General Disclosure Package and the Prospectus.

(f) Bring-down Comfort Letter. At the Closing Time, the Representatives shall have received from BDO USA, P.C. a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time.

(g) Approval of Listing. At the Closing Time, the Securities shall have been approved for listing on the Nasdaq Global Market, subject only to official notice of issuance.

(h) No Objection. FINRA has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements relating to the offering of the Securities.

(i) Lock-up Agreements. At the date of this Agreement, the Representatives shall have received an agreement substantially in the form of Exhibit A hereto signed by all of the Company’s directors, officers and securityholders.

(j) Conditions to Purchase of Option Securities. In the event that the Underwriters exercise their option provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of the Company contained herein and the statements in any certificates furnished by the Company hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Representatives shall have received:

(i) Officers’ Certificate. A certificate, dated such Date of Delivery, of the principal executive officer of the Company and of the principal financial officer of the Company confirming that the certificate delivered at the Closing Time pursuant to Section 5(d) hereof remains true and correct as of such Date of Delivery.

(ii) Opinion of Counsel for Company. If requested by the Representatives, the opinion, and negative assurance letter, of Cooley LLP, counsel for the Company, together with the opinion of Perkins Coie LLP, special counsel for the Company with respect to intellectual property matters, each in form and substance satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinions and negative assurance letter required by Section 5(b) hereof.

 

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(iii) Opinion of Counsel for Underwriters. If requested by the Representatives, the opinion, and negative assurance letter, of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion and negative assurance letter required by Section 5(c) hereof.

(iv) Bring-down Comfort Letter. If requested by the Representatives, a letter from BDO USA, P.C., in form and substance satisfactory to the Representatives and dated such Date of Delivery, substantially in the same form and substance as the letter furnished to the Representatives pursuant to subsection (f) of this Section, except that the “specified date” in the letter furnished pursuant to this paragraph shall be a date not more than three business days prior to such Date of Delivery.

(k) Additional Documents. At the Closing Time and at each Date of Delivery (if any), counsel for the Underwriters shall have been furnished with such other documents and opinions as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or 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 reasonably satisfactory in form and substance to the Representatives and counsel for the Underwriters.

(l) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several Underwriters to purchase the relevant Option Securities, may be terminated by the Representatives by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 4, 6, 7, 8, 15, 16 and 17 shall survive any such termination and remain in full force and effect.

SECTION 6. Indemnification.

(a) Indemnification of Underwriters. The Company agrees to indemnify and hold harmless each Underwriter, its affiliates (as such term is defined in Rule 501(b) under the 1933 Act (each, an “Affiliate”)), its selling agents and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

(i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included (A) in any preliminary prospectus, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto), or (B) in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Securities (“Marketing Materials”), including any roadshow or investor presentations made to investors by the Company (whether in person or electronically), or

 

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the omission or alleged omission in any preliminary prospectus, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication, the General Disclosure Package, the Prospectus (or any amendment or supplement thereto) or in any Marketing Materials of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Company;

(iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by the Representatives), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in the Registration Statement (or any amendment thereto), including the Rule 430A Information, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Underwriter Information.

(b) Indemnification of Company, Directors and Officers. Each Underwriter severally agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Underwriter Information.

(c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by the Representatives, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for the reasonable fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise

 

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or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

(d) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

SECTION 7. Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) 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 of the Underwriters, on the other hand, in connection with the statements or omissions, which resulted in such losses, liabilities, claims, damages or expenses, 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 hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company, on the one hand, and the total underwriting discount received by the Underwriters, on the other hand, in each case as set forth on the cover of the Prospectus, bear to the aggregate initial public offering price of the Securities as set forth on the cover of the Prospectus.

The relative fault of the Company, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or 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.

The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 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 which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.

 

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Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions received by such Underwriter in connection with the Securities underwritten by it and distributed to the public.

No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and each Underwriter’s Affiliates and selling agents shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Underwriters’ respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial Securities set forth opposite their respective names in Schedule A hereto and not joint.

SECTION 8. Representations, Warranties and Agreements to Survive. All representations, warranties and agreements 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 investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any person controlling any Underwriter, its officers or directors or any person controlling the Company and (ii) delivery of and payment for the Securities.

SECTION 9. Termination of Agreement.

(a) Termination. The Representatives may terminate this Agreement, by notice to the Company, at any time at or prior to the Closing Time (i) if there has been, in the judgment of the Representatives, since the time of execution of this Agreement or since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in U.S. or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representatives, impracticable or inadvisable to proceed with the completion of the offering or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the Nasdaq Global Market, or (iv) if trading generally on the NYSE MKT or the New York Stock Exchange or in the Nasdaq Global Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by order of the Commission, FINRA or any other governmental authority, or (v) a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States or with respect to Clearstream or Euroclear systems in Europe, or (vi) if a banking moratorium has been declared by either Federal or New York authorities.

(b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 4, 6, 7, 8, 15, 16 and 17 shall survive such termination and remain in full force and effect.

 

25


SECTION 10. Default by One or More of the Underwriters. If one or more of the Underwriters shall fail at the Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the “Defaulted Securities”), the Representatives shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representatives shall not have completed such arrangements within such 24-hour period, then:

(i) if the number of Defaulted Securities does not exceed 10% of the number of Securities to be purchased on such date, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or

(ii) if the number of Defaulted Securities exceeds 10% of the number of Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the Underwriters to purchase, and the Company to sell, the Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of any non-defaulting Underwriter.

No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of its default.

In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the Underwriters to purchase and the Company to sell the relevant Option Securities, as the case may be, either the (i) Representatives or (ii) the Company shall have the right to postpone Closing Time or the relevant Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration Statement, the General Disclosure Package or the Prospectus or in any other documents or arrangements. As used herein, the term “Underwriter” includes any person substituted for an Underwriter under this Section 10.

SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to Leerink Partners at 1301 Avenue of the Americas, 5th Floor, New York, New York 10019, attention of Stuart R. Nayman, to Piper Sandler at 350 North 5th Street, Suite 1000, Minneapolis, Minnesota 55401, and to Stifel at 787 Seventh Avenue, 11th Floor, New York, New York 10019, with a copy to Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center, Boston, Massachusetts 02111, attention of William C. Hicks, John T. Rudy and Alok A. Choksi. Notices to the Company shall be directed to One Pennsylvania Avenue, Suite #1025, New York, New York 10119, attention of Heather Turner, Chief Executive Officer, with a copy to Cooley LLP, 55 Hudson Yards, New York, New York 10001, attention of Divakar Gupta and Brandon Fenn.

SECTION 12. No Advisory or Fiduciary Relationship. The Company acknowledges and agrees that (a) the purchase and sale of the Securities pursuant to this Agreement, including the determination of the initial public offering price of the Securities and any related discounts and commissions, is an arm’s-length commercial transaction between the Company, on the one hand, and the several Underwriters, on the other hand, (b) in connection with the offering of the Securities and the process leading thereto, each

 

26


Underwriter is and has been acting solely as a principal and is not the agent or fiduciary of the Company or its stockholders, creditors, employees or any other party, (c) no Underwriter has assumed or will assume an advisory or fiduciary responsibility in favor of the Company with respect to the offering of the Securities or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company or on other matters) and no Underwriter has any obligation to the Company with respect to the offering of the Securities except the obligations expressly set forth in this Agreement, (d) the Underwriters and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and (e) the Underwriters have not provided any legal, accounting, regulatory or tax advice with respect to the offering of the Securities and the Company has consulted its own respective legal, accounting, regulatory and tax advisors to the extent it deemed appropriate.

SECTION 13. Recognition of the U.S. Special Resolution Regimes. In the event that any Underwriter that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.

In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.

For purposes of this Agreement, (A) “BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k); (B) “Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b); (C) “Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable; and (D) “U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.

SECTION 14. Parties. This Agreement shall each inure to the benefit of and be binding upon the Underwriters and the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters and the Company and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Underwriters and the Company and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase.

SECTION 15. Waiver of Trial by Jury. 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.

 

27


SECTION 16. GOVERNING LAW. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW YORK WITHOUT REGARD TO ITS CHOICE OF LAW PROVISIONS.

SECTION 17. Consent to Jurisdiction; Waiver of Immunity. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby shall be instituted in (i) the federal courts of the United States of America located in the City and County of New York, Borough of Manhattan or (ii) the courts of the State of New York located in the City and County of New York, Borough of Manhattan (collectively, the “Specified Courts”), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court, as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party’s address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum.

SECTION 18. TIME. TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

SECTION 19. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.

SECTION 20. Counterparts. This Agreement may be executed in any number of counterparts (which may include counterparts delivered by any standard form of telecommunication), each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same agreement. 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.

SECTION 21. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.

SECTION 22. Entire Agreement. This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company and the Underwriters, or any of them, with respect to the subject matter hereof.

[SIGNATURE PAGES FOLLOW]

 

28


If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Underwriters and the Company in accordance with its terms.

 

Very truly yours,

LB PHARMACEUTICALS INC

By:    
 

Name:

 

Title:

 

CONFIRMED AND ACCEPTED
 As of the date first above written:
LEERINK PARTNERS LLC
By:    
  Name:
  Title:
PIPER SANDLER & CO.
By:    
  Name:
  Title:
STIFEL, NICOLAUS & COMPANY, INCORPORATED
By:    
  Name:

Title:

For themselves and as Representatives of the other Underwriters named in Schedule A hereto.

 

[SIGNATURE PAGE TO UNDERWRITING AGREEMENT]


SCHEDULE A

The initial public offering price per share for the Securities shall be $[•].

The purchase price per share for the Securities to be paid by the several Underwriters shall be $[•], being an amount equal to the initial public offering price set forth above less $[•] per share, subject to adjustment in accordance with Section 2(b) for dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities.

 

Name of Underwriter    Number of
Initial Securities
 

Leerink Partners LLC

  

Piper Sandler & Co.

  

Stifel, Nicolaus & Company, Incorporated

  
  
  

 

 

 

Total

  
  
  

 

 

 


SCHEDULE B-1

Pricing Terms

1. The Company is selling [•] shares of Common Stock.

2. The Company has granted an option to the Underwriters, severally and not jointly, to purchase up to an additional [•] shares of Common Stock.

3. The initial public offering price per share for the Securities shall be $[•].


SCHEDULE B-2

Free Writing Prospectuses

[None]


SCHEDULE B-3

List of Written Testing-the-Waters Communications

Testing-the-Waters Presentation dated July 2025


Exhibit A

FORM OF LOCK-UP AGREEMENT

__________, 2025

Leerink Partners LLC

Piper Sandler & Co.

Stifel, Nicolaus & Company, Incorporated

as Representatives of the several Underwriters

c/o   Leerink Partners LLC

53 State Street, 40th Floor

Boston, MA 02109

c/o   Piper Sandler & Co.

350 North 5th Street, Suite 1000

Minneapolis, MN 55401

c/o   Stifel, Nicolaus & Company, Incorporated

787 7th Avenue, 11th Floor

New York, NY 10019

 

  Re:

Proposed Public Offering by LB Pharmaceuticals Inc

Ladies and Gentlemen:

The undersigned, a securityholder, officer and/or director of LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), understands that Leerink Partners LLC (“Leerink Partners”), Piper Sandler & Co. (“Piper Sandler”), and Stifel, Nicolaus & Company, Incorporated (“Stifel”) propose to enter into an Underwriting Agreement (the “Underwriting Agreement”) with the Company providing for the public offering (the “Public Offering”) of shares (the “Securities”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”). Leerink Partners, Piper Sandler, and Stifel are collectively referred to herein as the “Representatives.” In recognition of the benefit that such an offering will confer upon the undersigned as a securityholder, an officer and/or a director of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with each underwriter to be named in the Underwriting Agreement (collectively, the “Underwriters”) that, during the period beginning on the date hereof and ending on the date that is 180 days from the date of the Underwriting Agreement (the “Lock-Up Period”), the undersigned will not, without the prior written consent of the Representatives, on behalf of the Underwriters, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any shares of Common Stock or any securities convertible into or exchangeable or exercisable for Common Stock, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the “Lock-Up Securities”), or exercise any right with respect to the registration of any of the Lock-Up Securities, or file or cause to be filed any registration statement in connection therewith, under the Securities Act of 1933, as amended (the “Securities Act”), or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Lock-Up Securities, whether any such swap or transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise. If the undersigned is an officer or director of the Company, the undersigned further agrees that the foregoing provisions shall be equally applicable to any issuer-directed Securities the undersigned may purchase in the Public Offering.


If the undersigned is an officer or director of the Company, (1) the Representatives, on behalf of the Underwriters, agree that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of Common Stock, the Representatives, on behalf of the Underwriters, will notify the Company of the impending release or waiver, and (2) the Company will agree in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver. Any release or waiver granted by the Representatives on behalf of the Underwriters hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if (i) the release or waiver is effected solely to permit a transfer not for consideration and (ii) the transferee has agreed in writing to be bound by the same terms described in this lock-up agreement to the extent and for the duration that such terms remain in effect at the time of the transfer.

Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer Lock-Up Securities without the prior written consent of the Representatives, provided, in each case, that (1) in the cases of clauses (i)-(v) below, the Representatives receive a signed lock-up agreement for the balance of the Lock-Up Period from each donee, trustee, distributee, or transferee, as the case may be, (2) in the case of transfers pursuant to clauses (i)-(iii) and (v)-(vi) below and in the case of transfers pursuant to clause (iv) below if the undersigned is not a corporation, partnership, limited liability company, trust or other business entity, any such transfer shall not involve a disposition for value, (3) in the case of transfers pursuant to clauses (ii)-(iv) below, such transfers are not required to be reported with the Securities and Exchange Commission (the “SEC”) on Form 4 in accordance with Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the undersigned does not otherwise voluntarily effect any public filing or report regarding such transfers (other than a filing on a Form 5 made after the expiration of the Lock-Up Period); and (4) in the case of transfers pursuant to clauses (i) and (v)-(vii) below, the undersigned does not voluntarily effect any public filing or report regarding such transfers (other than a filing on a Form 5 made after the expiration of the Lock-Up Period) and if any such filing or report shall be legally required during the Lock-Up Period, such filing or report shall clearly indicate in the footnotes thereto the circumstances of such transfer or distribution:

 

  (i)

as a bona fide gift or gifts;

 

  (ii)

to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned (for purposes of this lock-up agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin);

 

  (iii)

as a distribution or other transfer by a partnership to its partners or former partners or by a limited liability company to its members or retired members or by a corporation to its stockholders or former stockholders or to any wholly-owned subsidiary of such corporation;

 

  (iv)

to the undersigned’s affiliates or to any investment fund or other entity controlled or managed by the undersigned;

 

  (v)

pursuant to a qualified domestic relations order or in connection with a divorce settlement;

 

  (vi)

by will or intestate succession upon the death of the undersigned; or

 

-2-


  (vii)

to the Company in satisfaction of any tax withholding obligation.

Furthermore, no provision in this lock-up agreement shall be deemed to restrict or prohibit (1) the transfer of the undersigned’s Lock-Up Securities to the Company in connection with the termination of the undersigned’s services to the Company, provided that any filing under Section 16 of the Exchange Act, made in connection with such transfer shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described in this clause (1); (2) the exercise or exchange by the undersigned of any option or warrant to acquire any shares of Common Stock or options to purchase shares of Common Stock, in each case for cash or on a “cashless” or “net exercise” basis, pursuant to any warrant, stock option, stock bonus or other stock plan or arrangement; provided, however, that the underlying shares of Common Stock shall continue to be subject to the restrictions on transfer set forth in this lock-up agreement and that any filing under Section 16 of the Exchange Act made in connection with such exercise or exchange shall clearly indicate in the footnotes thereto that (a) the filing relates to the circumstances described in this clause (2) and (b) no shares were sold by the reporting person; (3) the transfer of Lock-Up Securities upon the completion of a bona fide third-party tender offer, merger, consolidation or other similar transaction that is approved by the Company’s board of directors and made to all holders of the Company’s securities involving a change of control of the Company; provided, however, that in the event that such tender offer, merger, consolidation or other such transaction is not completed, such securities held by the undersigned shall remain subject to the restrictions on transfer set forth in this lock-up agreement; (4) the conversion of outstanding preferred stock of the Company into shares of Common Stock, provided that any such shares received upon such conversion shall be subject to the restrictions on transfer set forth in this lock-up agreement; and (5) the transfer or disposition of shares of Common Stock purchased by the undersigned in the Public Offering or on the open market following the Public Offering; provided, that such transfer or disposition is not required to be reported with the SEC on Form 4 in accordance with Section 16 of the Exchange Act and the undersigned does not otherwise voluntarily effect any public filing or report regarding such transfer or disposition (other than a filing on a Form 5 made after the expiration of the Lock-Up Period).

Notwithstanding anything herein to the contrary, nothing herein shall prevent the undersigned from establishing a 10b5-1 trading plan that complies with Rule 10b5-1 under the Exchange Act (“10b5-1 Trading Plan”) or from amending an existing 10b5-1 Trading Plan so long as there are no sales of Lock-Up Securities under any such 10b5-1 Trading Plan during the Lock-Up Period; provided, however, that any public announcement or filing under the Exchange Act regarding the establishment or amendment of such 10b5-1 Trading Plan shall clearly disclose that no shares of Common Stock shall be disposed by such plan during the duration of the Lock-Up Period.

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 Lock-Up Securities except in compliance with the foregoing restrictions. This lock-up agreement shall automatically terminate, and the undersigned shall be released from the undersigned’s obligations hereunder, upon the earliest to occur, if any, of (i) prior to the execution of the Underwriting Agreement, the Company advises the Representatives 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 prior to the closing of the Public Offering (other than the provisions thereof which survive termination), or (iv) December 31, 2025 (provided that the Company may, by written notice to the undersigned prior to such date, extend such date for a period of up to an additional three (3) months), in the event that the Underwriting Agreement has not been executed by such date.

 

-3-


With respect to the Public Offering and during the Lock-Up Period, the undersigned waives any registration rights relating to the registration under the Securities Act of the offer and sale of any shares of Common Stock and/or any Lock-Up Securities owned either of record or beneficially by the undersigned, including any rights to receive notice of the Public Offering. The undersigned further agrees that, to the extent that the terms of this lock-up agreement conflict with or are in any way inconsistent with any prior investor rights agreement, registration rights agreement, market stand-off agreement or any other lock-up or similar agreement to which the undersigned and the Company may be a party, this lock-up agreement supersedes such prior agreement.

This lock-up agreement may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com or www.echosign.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.

This lock-up agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

[SIGNATURE PAGE FOLLOWS]

 

-4-


Very truly yours,

 

Name of Security Holder (Print exact name)
By:                        

Signature

If not signing in an individual capacity:

 

Name of Authorized Signatory (Print)

 

Title of Authorized Signatory (Print)
(indicate capacity of person signing if signing as custodian, trustee, or on behalf of an entity)

 

[SIGNATURE PAGE TO LOCK-UP AGREEMENT]


Exhibit B

FORM OF PRESS RELEASE

TO BE ISSUED PURSUANT TO SECTION 3(j)

LB Pharmaceuticals Inc

[Date]

LB Pharmaceuticals Inc (the “Company”) announced today that Leerink Partners LLC, Piper Sandler & Co. and Stifel, Nicolaus & Company, Incorporated, joint book-running managers in the Company’s recent public sale of [•] shares of common stock, are [waiving] [releasing] a lock-up restriction with respect to [•] shares of the Company’s common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on [DATE], and the shares may be sold on or after such date.

This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.

Exhibit 3.1

FOURTH AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

LB PHARMACEUTICALS INC

(Pursuant to Sections 242 and 245 of the

General Corporation Law of the State of Delaware)

LB Pharmaceuticals Inc, a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”),

DOES HEREBY CERTIFY:

1. That the name of this corporation is LB Pharmaceuticals Inc, and that this corporation was originally incorporated pursuant to the General Corporation Law on September 11, 2015.

2. That the Board of Directors duly adopted resolutions proposing to amend and restate the Third Amended and Restated Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:

RESOLVED, that the Third Amended and Restated Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:

FIRST: The name of this corporation is LB Pharmaceuticals Inc (the “Corporation”).

SECOND: The address of the registered office of the Corporation in the State of Delaware is One Commerce Center, 1201 Orange Street, Suite 600, in the City of Wilmington, County of New Castle, and zip code of 19801. The name of its registered agent at such address is Agents and Corporations, Inc.

THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 105,000,000 shares of Common Stock, $0.0001 par value per share (“Common Stock”) and (ii) 79,251,960 shares of Preferred Stock, $0.0001 par value per share, of which 295,467 shares are hereby designated “Series Seed Preferred”, 3,655,374 shares are hereby designated “Series A Preferred”, 301,119 shares are hereby designated “Series B Preferred”, and 75,000,000 are hereby designated “Series C Preferred” (the Series Seed Preferred, the Series A Preferred, the Series B Preferred, and the Series C Preferred, together, the “Preferred Stock”).

 

1


The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

A. COMMON STOCK

1. General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

2. Voting. The holders of the Common Stock are entitled to one (1) vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one (1) or more series of Preferred Stock that may be required by the terms of this Fourth Amended and Restated Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.

B. PREFERRED STOCK

Except as specifically set forth in this Part B, the Series Seed Preferred, Series A Preferred, Series B Preferred, and Series C Preferred shall each have the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. Unless otherwise indicated, references to “Sections” in this Part B of this Article Fourth refer to sections of Part B of this Article Fourth.

1. Dividends.

The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in this Fourth Amended and Restated Certificate of Incorporation) the holders of shares of Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of such Preferred Stock in an amount at least equal to the sum of (a) the aggregate amount of any dividends previously declared but unpaid on such Preferred Stock, as applicable, and (b) (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Preferred Stock, as applicable, as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of such series of Preferred Stock, as applicable, in each case calculated on the record date for determination of holders entitled to receive such dividend, or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Preferred Stock, as applicable, determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series

 

2


of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Original Issue Price (as defined below); provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one (1) class or series of capital stock of the Corporation, the dividend payable to the holders of Preferred Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest dividend. The “Original Issue Price” shall mean, with respect to the Series Seed Preferred, $1.50 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the applicable Series Seed Preferred; with respect to the Series A Preferred, $2.30 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the applicable Series A Preferred; with respect to the Series B Preferred, $3.00 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the applicable Series B Preferred; and with respect to the Series C Preferred, $1.50 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the applicable Series C Preferred.

2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.

2.1 Preferential Payments to Holders of Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, and in the event of a Deemed Liquidation Event (as defined below), the holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the consideration payable to stockholders in such Deemed Liquidation Event or out of the Available Proceeds (as defined below), as applicable, as follows:

2.1.1 First, before any payment shall be made to the holders of Series B Preferred, Series A Preferred, Series Seed Preferred or Common Stock by reason of their ownership thereof, the holders of shares of Series C Preferred then outstanding shall be entitled to be paid an amount per share equal to the greater of (i) the Original Issue Price for the Series C Preferred, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable to the holders of Series C Preferred had all shares of Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event; provided, that the aforementioned conversion described with respect to each of Series B Preferred, Series A Preferred, and Series Seed Preferred shall be assumed only if such conversion would cause the holders of such Series B Preferred, Series A Preferred, or Series Seed Preferred, as the case may be, to receive a greater per share liquidation payment than such holders would have received without such conversion (the amount payable to the holders of Series C Preferred pursuant to this sentence is hereinafter referred to as the “Series C Liquidation Amount”). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series C Preferred the full amount to which they shall be entitled under this Section 2.1.1, the holders of shares of Series C Preferred shall share ratably in any distribution of the assets of the Corporation available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

 

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2.1.2 Second, after the payment of all preferential amounts required to be paid pursuant to Section 2.1.1 and before any payment shall be made to the holders of Series A Preferred, Series Seed Preferred or Common Stock by reason of their ownership thereof, the holders of shares of Series B Preferred then outstanding shall be entitled to be paid an amount per share equal to the greater of (i) the Original Issue Price for the Series B Preferred, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable to the holders of Series B Preferred had all shares of Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event; provided, that the aforementioned conversion described with respect to each of Series C Preferred, Series A Preferred, and Series Seed Preferred shall be assumed only if such conversion would cause the holders of such Series C Preferred, Series A Preferred, or Series Seed Preferred, as the case may be, to receive a greater per share liquidation payment than such holders would have received without such conversion (the amount payable to the holders of Series B Preferred pursuant to this sentence is hereinafter referred to as the “Series B Liquidation Amount”). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event and after payment in full of the Series C Liquidation Amount, the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series B Preferred the full amount to which they shall be entitled under this Section 2.1.2, the holders of shares of Series B Preferred shall share ratably in any distribution of the assets of the Corporation available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

2.1.3 Third, after the payment of all preferential amounts required to be paid pursuant to Sections 2.1.1 and 2.1.2 and before any payment shall be made to the holders of Series Seed Preferred or Common Stock by reason of their ownership thereof, the holders of shares of Series A Preferred then outstanding shall be entitled to be paid an amount per share equal to the greater of (i) the Original Issue Price for the Series A Preferred, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable to the holders of Series A Preferred had all shares of Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event; provided, that the aforementioned conversion described with respect to each of Series C Preferred, Series B Preferred, and Series Seed Preferred shall be assumed only if such conversion would cause the holders of such Series C Preferred, Series B Preferred, or Series Seed Preferred, as the case may be, to receive a greater per share liquidation payment than such holders would have received without such conversion (the amount payable to the holders of Series A Preferred pursuant to this sentence is hereinafter (the amount payable to the holders of Series A Preferred pursuant to this sentence is hereinafter referred to as the “Series A Liquidation Amount”). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event and after payment in full of the Series C Liquidation Amount and Series B Liquidation Amount, the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred the full amount to which they shall be entitled under this Section 2.1.3, the holders of shares of Series A Preferred shall share ratably in any distribution of the assets of the Corporation available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

 

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2.1.4 Fourth, after the payment of all preferential amounts required to be paid pursuant to Sections 2.1.1, 2.1.2, and 2.1.3 and before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, the holders of shares of Series Seed Preferred then outstanding shall be entitled to be paid an amount per share equal to the greater of (i) the Original Issue Price for the Series Seed Preferred, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable to the holders of Series Seed Preferred had all shares of Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event; provided, that the aforementioned conversion described with respect to each of Series C Preferred, Series B Preferred, and Series A Preferred shall be assumed only if such conversion would cause the holders of such Series C Preferred, Series B Preferred, or Series A Preferred, as the case may be, to receive a greater per share liquidation payment than such holders would have received without such conversion (the amount payable to the holders of Series Seed Preferred pursuant to this sentence is hereinafter referred to as the “Series Seed Liquidation Amount”). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event and after payment in full of the Series C Liquidation Amount, Series B Liquidation Amount and Series A Liquidation Amount, the remaining assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series Seed Preferred the full amount to which they shall be entitled under this Section 2.1.4, the holders of shares of Series Seed Preferred shall share ratably in any distribution of the assets of the Corporation available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

2.2 Payments to Holders of Common Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after the payment in full of the Series C Liquidation Amount, Series B Liquidation Amount, Series A Liquidation Amount, and Series Seed Liquidation Amount required to be paid to the holders of shares of Series C Preferred, Series B Preferred, Series A Preferred, and Series Seed Preferred, respectively, the remaining assets of the Corporation available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, the consideration not payable to the holders of shares of Preferred Stock pursuant to Section 2.1 or the remaining Available Proceeds, as the case may be, shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares held by each such holder.

2.3 Deemed Liquidation Events.

2.3.1 Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless the holders of at least a majority of the outstanding shares of Series A Preferred, Series B Preferred, and Series C Preferred, voting together as a single class and on an as-converted to Common Stock basis (the “Requisite Holders”), elect otherwise by written notice sent to the Corporation at least fifteen (15) days prior to the effective date of any such event:

 

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(a) a merger or consolidation in which

 

  (i)

the Corporation is a constituent party or

 

  (ii)

a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,

except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or

(b) (1) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole (including, without limitation, the granting by the Corporation of an exclusive, irrevocable license to a third party of all or substantially all of the Corporation’s intellectual property), or (2) the sale or disposition (whether by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions) of one (1) or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.

2.3.2 Effecting a Deemed Liquidation Event.

(a) The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Section 2.3.1(a)(i) unless the agreement or plan of merger or consolidation for such transaction (the “Merger Agreement”) provides that the consideration payable to the stockholders of the Corporation in such Deemed Liquidation Event shall be allocated to the holders of capital stock of the Corporation in accordance with Sections 2.1 and 2.2.

(b) In the event of a Deemed Liquidation Event referred to in Section 2.3.1(a)(ii) or 2.3.1(b), if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within ninety (90) days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice to each holder of Preferred Stock no later than the ninetieth (90th) day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause (ii) to require the redemption of such shares of Preferred Stock, and (ii) if the Requisite Holders so request in a written instrument delivered to the Corporation not later than one hundred twenty

 

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(120) days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors of the Corporation), together with any other assets of the Corporation available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the “Available Proceeds”), on the one hundred fiftieth (150th) day after such Deemed Liquidation Event, to redeem all outstanding shares of Preferred Stock by paying an amount per share equal to the Series C Liquidation Amount with respect to shares of Series C Preferred, an amount per share equal to the Series B Liquidation Amount with respect to shares of Series B Preferred, an amount per share equal to the Series A Liquidation Amount with respect to shares of Series A Preferred, and an amount per share equal to the Series Seed Liquidation Amount with respect to shares of Series Seed Preferred, consistent with the terms of Section 2.1. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Series C Preferred, Series B Preferred, Series A Preferred, or Series Seed Preferred, respectively, the Corporation shall, subject to and in accordance with the order of priority of payments set forth in Section 2.1, redeem a pro rata portion of each holder’s shares of such series of Preferred Stock to the fullest extent of such Available Proceeds, based on the respective amounts which would otherwise be payable in respect of the shares to be redeemed if the Available Proceeds were the only proceeds available for such redemption, and shall redeem the remaining shares as soon as it may lawfully do so under Delaware law governing distributions to stockholders. Prior to the distribution or redemption provided for in this Section 2.3.2(b), the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event.

(c) Before the applicable date of any redemption described in Section 2.3.2(b), each holder of shares of Preferred Stock to be redeemed on such redemption date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4, shall, if a holder of shares in certificated form, surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated by the Corporation in a written notice to the holder, and thereupon the price to be paid in redemption of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Preferred Stock represented by a certificate are redeemed, a new certificate, instrument, or book entry representing the unredeemed shares of Preferred Stock shall promptly be issued to such holder.

2.3.3 Amount Deemed Paid or Distributed. The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities to be paid or distributed to such holders pursuant to such Deemed Liquidation Event. The value of such property, rights or securities shall be determined in good faith by the Board of Directors of the Corporation.

 

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2.3.4 Allocation of Escrow and Contingent Consideration. In the event of a Deemed Liquidation Event pursuant to Section 2.3.1(a)(i), if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the “Additional Consideration”), the Merger Agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Sections 2.1 and 2.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Sections 2.1 and 2.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Section 2.3.4, consideration placed into escrow or retained as a holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Initial Consideration.

3. Voting.

3.1 General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of this Fourth Amended and Restated Certificate of Incorporation, holders of Series Seed Preferred, Series A Preferred, Series B Preferred, and Series C Preferred shall vote together with the holders of Common Stock as a single class and on an as-converted to Common Stock basis.

3.2 Election of Directors. The holders of record of the shares of Series C Preferred, voting exclusively and as a separate class, shall be entitled to elect four (4) directors of the Corporation (each, a “Series C Director”), and the holders of record of the shares of Series B Preferred, Series A Preferred, Series Seed Preferred, and Common Stock (excluding shares of Common Stock issued or issuable upon conversion of the Series C Preferred) (the “Legacy Stock”), voting exclusively and together as a single class on an as-converted basis, shall be entitled to elect one (1) director of the Corporation (the “Preferred/Common Director”); provided, however, for administrative convenience, the initial Series C Directors and Legacy Preferred/Common Director may also be appointed by the Board of Directors in connection with the approval of the initial issuance of Series C Preferred without a separate action by the holders of the Series C Preferred or Legacy Stock, as applicable. Any director elected as provided in the preceding sentence may be removed without cause by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. If the holders of shares of Series C Preferred, or the holders of shares of Legacy Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors, voting exclusively and as a separate class, pursuant to the first sentence of this Section 3.2, then any directorship not so filled shall

 

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remain vacant until such time as the holders of the shares of Series C Preferred or Legacy Stock, as the case may be, elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect a person to fill such directorship, voting exclusively and as a separate class, pursuant to the first sentence of this Section 3.2. The holders of record of the shares of Common Stock and of any other class or series of voting stock (including the Preferred Stock), exclusively and voting together as a single class on an as-converted basis, shall be entitled to elect the balance of the total number of directors of the Corporation. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or classes or series entitled to elect such director shall constitute a quorum for the purpose of electing such director. Except as otherwise provided in this Section 3.2, a vacancy in any directorship filled by the holders of any class or classes or series shall be filled only by vote or written consent in lieu of a meeting of the holders of such class or classes or series or by any remaining director or directors elected by the holders of such class or classes or series pursuant to this Section 3.2. The rights of the holders of the Series C Preferred under the first sentence of this Section 3.2 shall terminate on the first date following the date the first share of Series C Preferred Stock was issued (the “Original Issue Date”) on which there are issued and outstanding less than twenty percent (20%) of the total number of shares of Series C Preferred originally issued pursuant to that certain Series C Preferred Stock Purchase Agreement, dated on or about the date the first share of Series C Preferred Stock was issued, by and among the Corporation and the other parties thereto, as such agreement may be amended from time to time (the “Series C Stock Purchase Agreement”) (subject to appropriate adjustment in the event of any stock dividend, stock split, combination, or other similar recapitalization with respect to the Series C Preferred).

3.3 Series A Preferred and Series B Preferred Protective Provisions. At any time when shares of Series A Preferred or Series B Preferred are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation, recapitalization, reclassification, or otherwise, do any of the following without (in addition to any other vote required by law or this Fourth Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the holders of at least a majority of the outstanding shares of Series A Preferred and Series B Preferred, given in writing or by vote at a meeting, consenting or voting (as the case may be) together as a single class on an as-converted basis, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:

3.3.1 take any action that by law or by this Fourth Amended and Restated Certificate of Incorporation requires the separate approval of the holders of the Series A Preferred or Series B Preferred;

3.3.2 amend this Fourth Amended and Restated Certificate of Incorporation or the Corporation’s Bylaws, in either case via an amendment that by its terms adversely and in a discriminatory manner affects the rights of the holders of Series A Preferred or Series B Preferred differently from the Preferred Stock generally; or

3.3.3 increase or decrease (other than by conversion) the authorized number of Series A Preferred or Series B Preferred.

 

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3.4 At any time when at least fifty percent (50%) of the total number of shares of Series C Preferred that previously were issued pursuant to the Series C Preferred Stock Purchase Agreement (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series C Preferred) are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation, recapitalization, reclassification, or otherwise, do any of the following without (in addition to any other vote required by law or this Fourth Amended and Restated Certificate of Incorporation) the written consent or affirmative vote of the holders of at least 60% of the outstanding shares of Series C Preferred (the “Requisite Series C Holders”), given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:

3.4.1 liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any merger or consolidation or any other Deemed Liquidation Event, or consent to any of the foregoing;

3.4.2 amend, alter, repeal, or waive any provision of this Fourth Amended and Restated Certificate of Incorporation or Bylaws of the Corporation, except for any amendment to effectuate a reduction in the authorized number of shares of Preferred Stock in accordance with the last sentence of Section 4.3.3, the last sentence of Section 5.2 or the last sentence of Section 5A.1;

3.4.3 adversely alter or change the rights, preferences or privileges of the Series C Preferred;

3.4.4 create, or authorize the creation of, or reclassify, any capital stock unless the same ranks junior to the Series C Preferred with respect to its rights, preferences and privileges;

3.4.5 increase or decrease (other than by conversion) the authorized number of shares of Preferred Stock or Common Stock, except for any reduction in the authorized number of shares of Series C Preferred in accordance with the last sentence of Section 5A.1;

3.4.6 purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and (ii) repurchases of stock issued pursuant to equity compensation arrangements approved by the Board of Directors of the Corporation;

3.4.7 create, or authorize the creation of, or issue, or authorize the issuance of any debt security or incur other indebtedness for borrowed money, including but not limited to obligations and contingent obligations under guarantees, or permit any subsidiary to take any such action with respect to any debt security or other indebtedness for borrowed money, if the aggregate indebtedness of the Corporation and its subsidiaries for borrowed money following such action would exceed $1,000,000, other than equipment leases or trade payables incurred in the ordinary course;

 

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3.4.8 increase or decrease the authorized number of directors constituting the Board of Directors; or

3.4.9 enter into any agreement, arrangement, or transaction with any officer or director of the Corporation or any “associate” (as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended) of any such person, other than (a) agreements, arrangements, or transactions to change the compensation of any executive officer of the Corporation and (b) option grants and stock awards approved by the Board of Directors of the Corporation.

4. Optional Conversion. The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

4.1 Right to Convert.

4.1.1 Conversion Ratio. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the applicable Original Issue Price for such share by the applicable Conversion Price (as defined below) in effect at the time of conversion. The conversion price for the applicable series of Preferred Stock shall be referred to as such series of Preferred Stock’s “Conversion Price,” which shall initially be equal to the applicable Original Issue Price for each series of Preferred Stock. Such initial Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

4.1.2 Termination of Conversion Rights. In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Preferred Stock; provided that the foregoing termination of Conversion Rights shall not affect the amount(s) otherwise paid or payable in accordance with Section 2.1 to holders of Preferred Stock pursuant to such liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event.

4.2 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay a cash adjustment in respect of such fractional shares in an amount equal to the same fraction of the fair market value of a share of Common Stock as determined in good faith by the Board of Directors at the Conversion Time (as defined below). Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock so converted at any one time by any holder thereof, and not upon each share of Preferred Stock so converted.

 

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4.3 Mechanics of Conversion.

4.3.1 Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall (a) provide written notice to the Corporation’s transfer agent at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent) that such holder elects to convert all or any number of such holder’s shares of Preferred Stock and, if applicable, any event on which such conversion is contingent and (b), if such holder’s shares are certificated, surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent). Such notice shall state such holder’s name and address or the names and addresses of the nominees in which such holder wishes the shares of Common Stock to be issued. If required by the Corporation, any certificates surrendered for conversion shall be endorsed (however, medallion guarantees shall not be required) or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such notice and, if applicable, certificates (or lost certificate affidavit and agreement) shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the specified shares shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time (i) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a certificate or certificates (if such shares are certificated; if not, reasonably satisfactory evidence of the issuance of such shares) for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and (if such shares are certificated) a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (ii) pay in cash such amount as provided in Section 4.2 in lieu of any faction of a share of Common Stock otherwise issuable upon such conversion, and (iii) pay all declared but unpaid dividends on the shares of Preferred Stock converted.

4.3.2 Reservation of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in commercially reasonable efforts to obtain the requisite stockholder approval of any necessary amendment to this Fourth Amended and Restated Certificate of Incorporation. Before taking any action which would cause an adjustment reducing the applicable Conversion Price of a series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of the applicable series of Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock at such applicable adjusted Conversion Price.

 

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4.3.3 Effect of Conversion. All shares of Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Section 4.2, and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of the applicable series of Preferred Stock accordingly.

4.3.4 No Further Adjustment. Upon any such conversion, no adjustment to the applicable Conversion Price shall be made for any declared but unpaid dividends on the applicable series of Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

4.3.5 Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

4.4 Adjustments to Series A Conversion Price, Series B Conversion Price, and Series C Conversion Price for Diluting Issues.

4.4.1 Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:

(a) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Section 4.4.3 below, deemed to be issued) by the Corporation after the Original Issue Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options (as defined below) and Convertible Securities (as defined below) (clauses (1) and (2), collectively, “Exempted Securities”):

 

  (i)

As to any series of Preferred Stock, shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on such series of Preferred Stock;

 

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  (ii)

shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Section 4.5, 4.6, 4.7 or 4.8;

 

  (iii)

shares of Common Stock or Options (including shares returned to the share reserve due to cancellation, termination, repurchases and the like and shares issuable upon the exercise of Options outstanding as of the Original Issue Date) issued to employees, officers, directors, agents, or contractors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Corporation;

 

  (iv)

shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security;

 

  (v)

shares of Common Stock, Options or Convertible Securities issued as acquisition consideration pursuant to the acquisition of another entity by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided that such issuances are approved by the Board of Directors of the Corporation;

 

  (vi)

shares of Common Stock issued or to be issued to an affiliate of Maxim Group LLC pursuant to the terms of that certain advisory agreement dated January 6, 2022, as the same may be amended;

 

  (vii)

shares of Common Stock, Options or Convertible Securities issued to holders of Series A Preferred, Series B Preferred, or Series C Preferred as part of any tender, exchange, or rights offer that occurs on or before the 60th day immediately following the Original Issue Date, provided that a majority of the then-outstanding shares of such class participates in such issuance; or

 

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  (viii)

shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Corporation.

(b) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

(c) “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

4.4.2 No Adjustment of Conversion Price. No adjustment in the Series A Conversion Price or Series B Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of at least a majority of the outstanding shares of Series A Preferred and Series B Preferred, considered together as a single class and on an as-converted to Common Stock basis, agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock. No adjustment in the Series C Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the Requisite Series C Holders agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.

4.4.3 Deemed Issue of Additional Shares of Common Stock.

(a) If the Corporation at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.

(b) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the applicable Conversion Price pursuant to the terms of Section 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares

 

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of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Series A Conversion Price, Series B Conversion Price, and Series C Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to the Series A Conversion Price, the Series B Conversion Price, or the Series C Conversion Price, respectively, as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (b) shall have the effect of (i) increasing the Series A Conversion Price to an amount which exceeds the lower of the Series A Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or the Series A Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date, (ii) increasing the Series B Conversion Price to an amount which exceeds the lower of the Series B Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or the Series B Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date, or (iii) increasing the Series C Conversion Price to an amount which exceeds the lower of the Series C Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or the Series C Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

(c) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Series A Conversion Price, the Series B Conversion Price, or the Series C Conversion Price pursuant to the terms of Section 4.4.4 (either because the consideration per share (determined pursuant to Section 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Series A Conversion Price, the Series B Conversion Price, or the Series C Conversion Price, as applicable, then in effect, or because such Option or Convertible Security was issued before the Original Issue Date), are revised after the Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Section 4.4.3(a) shall be deemed to have been issued effective upon such increase or decrease becoming effective).

 

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(d) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Series A Conversion Price, the Series B Conversion Price, or the Series C Conversion Price pursuant to the terms of Section 4.4.4, the Series A Conversion Price, the Series B Conversion Price, and the Series C Conversion Price, as applicable, shall be readjusted to such Series A Conversion Price, Series B Conversion Price, or Series C Conversion Price, as applicable, as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

(e) If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the applicable Conversion Price provided for in this Section 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Section 4.4.3). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Series A Conversion Price, Series B Conversion Price, and Series C Conversion Price that would result under the terms of this Section 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Series A Conversion Price, the Series B Conversion Price, or the Series C Conversion Price, as applicable, that such issuance or amendment took place at the time such calculation can first be made.

4.4.4 Adjustment of Series A Conversion Price, Series B Conversion, and Series C Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 4.4.3), without consideration or for a consideration per share less than the applicable Conversion Price in effect immediately prior to such issuance or deemed issuance, then each of the Series A Conversion Price, Series B Conversion Price, and Series C Conversion Price, as applicable, shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:

CP2 = CP1* (A + B) ÷ (A + C).

For purposes of the foregoing formula, the following definitions shall apply:

(a) “CP2” shall mean the Series A Conversion Price, the Series B Conversion Price, or the Series C Conversion Price, as applicable, in effect immediately after such issuance or deemed issuance of Additional Shares of Common Stock

 

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(b) “CP1” shall mean the Series A Conversion Price, the Series B Conversion Price, or the Series C Conversion Price, as applicable, in effect immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock;

(c) “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issuance or deemed issuance or upon conversion or exchange of Convertible Securities (including the Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);

(d) “B” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued or deemed issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and

(e) “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

4.4.5 Determination of Consideration. For purposes of this Section 4.4, the consideration received by the Corporation for the issuance or deemed issuance of any Additional Shares of Common Stock shall be computed as follows:

(a) Cash and Property. Such consideration shall:

 

  (i)

insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

 

  (ii)

insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation; and

 

  (iii)

in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation.

(b) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing:

 

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  (i)

The total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

 

  (ii)

the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

4.4.6 Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the applicable Conversion Price pursuant to the terms of Section 4.4.4, and such issuance dates occur within a period of no more than one hundred and twenty (120) days from the first such issuance to the final such issuance, then, upon the final such issuance, each of the Series A Conversion Price, the Series B Conversion Price, and the Series C Conversion Price, as applicable, shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

4.5 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding Common Stock, each of the Series Seed Conversion Price, the Series A Conversion Price, the Series B Conversion Price, and the Series C Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, each of the Series Seed Conversion Price, the Series A Conversion Price, the Series B Conversion Price, and the Series C Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this Section shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

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4.6 Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event each of the Series Seed Conversion Price, the Series A Conversion Price, the Series B Conversion Price, and the Series C Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Series Seed Conversion Price, the Series A Conversion Price, the Series B Conversion Price, or the Series C Conversion Price, as applicable, then in effect by a fraction:

(1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

(2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

Notwithstanding the foregoing, (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, each of the Series Seed Conversion Price, the Series A Conversion Price, the Series B Conversion Price, and the Series C Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter such Series Seed Conversion Price, Series A Conversion Price, Series B Conversion Price, or Series C Conversion Price, as applicable, shall be adjusted pursuant to this Section as of the time of actual payment of such dividends or distributions; and (b) that no such adjustment shall be made if the holders of Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.

4.7 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of Series Seed Preferred, Series A Preferred, Series B Preferred, and Series C Preferred shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of such Series Seed Preferred, Series A Preferred, Series B Preferred, and Series C Preferred had been converted into Common Stock on the date of such event.

 

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4.8 Adjustment for Merger or Reorganization, etc. Subject to the provisions of Section 2.3, if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Sections 4.4, 4.6 or 4.7), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one (1) share of Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Series Seed Conversion Price, the Series A Conversion Price, the Series B Conversion Price, and the Series C Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Preferred Stock. For the avoidance of doubt, nothing in this Section 4.8 shall be construed as preventing the holders of Preferred Stock from seeking any appraisal rights to which they are otherwise entitled under the General Corporation Law in connection with a merger triggering an adjustment hereunder, nor shall this Section 4.8 be deemed conclusive evidence of the fair value of the shares of the Preferred Stock in any such appraisal proceeding.

4.9 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the applicable Conversion Price pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than ten (10) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Preferred Stock (but in any event not later than ten (10) days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the applicable Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Preferred Stock. The Corporation agrees to maintain its stock transfer and registry books so as to reflect accurately the Conversion Price and the conversion rate with respect to shares of the Preferred Stock.

4.10 Notice of Record Date. In the event:

(a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

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(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least ten (10) days prior to the record date or effective date for the event specified in such notice.

5. Mandatory Conversion.

5.1 Trigger Events. Upon either (a) the closing of the sale of shares of Common Stock to the public at a price of at least $3.00 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock), in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $75,000,000 of gross proceeds to the Corporation (before deduction of underwriters’ commissions and expenses) and in connection with such offering the Common Stock is listed for trading on the Nasdaq Stock Market’s National Market, the New York Stock Exchange or another exchange or marketplace approved the Board of Directors; and (b) the date and time, or the occurrence of an event, specified by vote or written consent of the Requisite Series C Holders (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”), then (i) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective conversion rate as calculated pursuant to Section 4.1.1 and (ii) such shares may not be reissued by the Corporation.

5.2 Procedural Requirements. All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Preferred Stock in certificated form shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate

 

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has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, any certificates surrendered for conversion shall be endorsed (however, medallion guarantees shall not be required) or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Section 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender any certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Section 5.2. As soon as practicable after the Mandatory Conversion Time and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall (a) issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates (if such shares are certificated; if not, reasonably satisfactory evidence of the issuance of such shares) for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and (b) pay cash as provided in Section 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

5A. Special Series C Preferred Mandatory Conversion.

5A.1. Trigger Event. In the event that any “Purchaser” becomes a “Defaulting Purchaser” (as defined and provided in the Series C Preferred Stock Purchase Agreement), then, unless the terms of this Section 5A are waived with the written consent or affirmative vote of the Requisite Series C Holders and the Board of Directors, each share of Series C Preferred held by such holder or any transferee of such holder shall automatically, and without any further action on the part of such holder or transferee, be converted into one-fifth (1/5) of a share of Common Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series C Preferred or Common Stock), effective upon the earlier of the consummation of the Second Closing (as defined in the Series C Preferred Stock Purchase Agreement) by any holder of Series C Preferred or twenty business days following the satisfaction or waiver (as applicable) of all conditions to the Second Closing set forth in the Series C Stock Purchase Agreement. Such conversion is referred to as a “Special Mandatory Conversion.”

5A.2. Procedural Requirements. Upon a Special Mandatory Conversion, each holder of shares of Series C Preferred converted pursuant to Section 5A.1 shall be sent written notice of such Special Mandatory Conversion and the place designated for mandatory conversion of all such shares of Series C Preferred pursuant to this Section 5A. Upon receipt of such notice, each holder of such shares of Series C Preferred in certificated form shall surrender his, her or its

 

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certificate or certificates for all such shares (or, if such holder alleges that any such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Series C Preferred converted pursuant to Section 5A.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the time of the Special Mandatory Conversion (notwithstanding the failure of the holder or holders thereof to surrender any certificates for such shares at or prior to such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders therefor (or lost certificate affidavit and agreement), to receive the items provided for in the next sentence of this Section 5A.2. As soon as practicable after the Special Mandatory Conversion and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Series C Preferred so converted, the Corporation shall (a) issue and deliver to such holder, or to his, her or its nominees, an electronic or physical certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and (b) pay cash as provided in Section 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and any declared but unpaid dividends on the shares of Series C Preferred converted. Such converted Series C Preferred shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Series C Preferred accordingly.

6. Redeemed or Otherwise Acquired Shares. Any shares of Preferred Stock that are redeemed, converted or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption, conversion or acquisition.

7. Waiver. Except as otherwise set forth herein, (a) any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders of Preferred Stock by the affirmative written consent or vote of the holders of a majority of the shares of Preferred Stock then outstanding and (b) at any time more than one (1) series of Preferred Stock is issued and outstanding, any of the rights, powers, preferences and other terms of any series of Preferred Stock set forth herein may be waived on behalf of all holders of such series of Preferred Stock by the affirmative written consent or vote of (i) in the case of the Series C Preferred, the Requisite Series C Holders, or (ii) in the case of all other series of Preferred Stock, the holders of a majority of the shares of such series of Preferred Stock then outstanding.

8. Notices. Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

 

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FIFTH: Subject to any additional vote required by this Fourth Amended and Restated Certificate of Incorporation or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.

SIXTH: Subject to any additional vote required by this Fourth Amended and Restated Certificate of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation. Each director shall be entitled to one (1) vote on each matter presented to the Board of Directors.

SEVENTH: Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

EIGHTH: Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

NINTH: To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Ninth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended.

Any repeal or modification of the foregoing provisions of this Article Ninth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

TENTH: The following indemnification provisions shall apply to the persons enumerated below.

1. Right to Indemnification of Directors and Officers. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (an “Indemnified Person”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that such person, or a person for whom such person is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Indemnified Person in such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in Section 3 of this Article

 

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Tenth the Corporation shall be required to indemnify an Indemnified Person in connection with a Proceeding (or part thereof) commenced by such Indemnified Person only if the commencement of such Proceeding (or part thereof) by the Indemnified Person was authorized in advance by the Board of Directors.

2. Prepayment of Expenses of Directors and Officers. The Corporation shall pay the expenses (including attorneys’ fees) incurred by an Indemnified Person in defending any Proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Indemnified Person to repay all amounts advanced if it should be ultimately determined that the Indemnified Person is not entitled to be indemnified under this Article Tenth or otherwise.

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

4. Indemnification of Employees and Agents. The Corporation may indemnify and advance expenses to any person who was or is made or is threatened to be made or is otherwise involved in any Proceeding by reason of the fact that such person, or a person for whom such person is the legal representative, is or was an employee or agent of the Corporation or, while an employee or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such person in connection with such Proceeding. The ultimate determination of entitlement to indemnification of persons who are non-director or officer employees or agents shall be made in such manner as is determined by the Board of Directors in its sole discretion. Notwithstanding the foregoing sentence, the Corporation shall not be required to indemnify a person in connection with a Proceeding initiated by such person if the Proceeding was not authorized in advance by the Board of Directors.

5. Advancement of Expenses of Employees and Agents. The Corporation may pay the expenses (including attorneys’ fees) incurred by an employee or agent in defending any Proceeding in advance of its final disposition on such terms and conditions as may be determined by the Board of Directors.

6. Non-Exclusivity of Rights. The rights conferred on any person by this Article Tenth shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of this Amended and Restated Certificate of Incorporation, the Bylaws of the Corporation, or any agreement, or pursuant to any vote of stockholders or disinterested directors or otherwise.

 

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7. Other Indemnification. The Corporation’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer or employee of another Corporation, partnership, limited liability company, joint venture, trust, organization or other enterprise shall be reduced by any amount such person may collect as indemnification from such other Corporation, partnership, limited liability company, joint venture, trust, organization or other enterprise.

8. Insurance. The Board of Directors may, to the full extent permitted by applicable law as it presently exists, or may hereafter be amended from time to time, authorize an appropriate officer or officers to purchase and maintain at the Corporation’s expense insurance: (a) to indemnify the Corporation for any obligation which it incurs as a result of the indemnification of directors, officers and employees under the provisions of this Article Tenth; and (b) to indemnify or insure directors, officers and employees against liability in instances in which they may not otherwise be indemnified by the Corporation under the provisions of this Article Tenth.

9. Amendment or Repeal. Any repeal or modification of the foregoing provisions of this Article Tenth shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. The rights provided hereunder shall inure to the benefit of any Indemnified Person and such person’s heirs, executors and administrators.

ELEVENTH: The Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Preferred Stock or any partner, member, director, stockholder, employee, affiliate or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, the persons referred to in clauses (i) and (ii) are “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation.

TWELFTH: Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation, its directors, officers or employees arising pursuant to any provision of the Delaware General Corporation Law or the Corporation’s certificate of incorporation or bylaws or (iv) any action asserting a claim against the Corporation, its directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten (10) days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of

 

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Chancery does not have subject matter jurisdiction. If any provision or provisions of this Article Twelve shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article Twelve (including, without limitation, each portion of any sentence of this Article Twelve containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

* * *

3. That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.

4. That this Fourth Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this Corporation’s Third Amended and Restated Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, this Fourth Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 28th day of August, 2023.

 

By:  

/s/ Zachary Prensky

  Zachary Prensky, Chief Executive Officer

Exhibit 3.2

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

LB PHARMACEUTICALS INC

 

 

LB Pharmaceuticals Inc, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “DGCL”), does hereby certify that:

ONE: The name of this corporation is LB Pharmaceuticals Inc. The date of filing of the original certificate of incorporation of this corporation with the Secretary of State of the State of Delaware was September 11, 2015.

TWO: This certificate of incorporation was duly adopted in accordance with the provisions of Sections 242 and 245 of the DGCL and has been duly approved by the written consent of the stockholders of this corporation in accordance with Section 228 of the DGCL.

THREE: Pursuant to Sections 242 and 245 of the DGCL, the certificate of incorporation of this corporation, as heretofore amended, is hereby amended, integrated and restated to read in its entirety as follows:

SECTION 1.

The name of this corporation is LB Pharmaceuticals Inc (the “Corporation”).

SECTION 2.

The address of the registered office of the Corporation in the State of Delaware is One Commerce Center, 1201 Orange Street, Suite 600, City of Wilmington, County of New Castle, Zip Code 19801, and the name of the registered agent of the Corporation in the State of Delaware at such address is Agents and Corporations, Inc.

SECTION 3.

The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware (the “DGCL”).

SECTION 4.

Section 4.1 The Corporation is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares that the Corporation is authorized to issue is 510,000,000 shares, consisting of 500,000,000 shares of Common Stock, par value $0.0001 per share, and 10,000,000 shares of Preferred Stock, par value $0.0001 per share.

 

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Section 4.2 The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (the “Board”) is hereby expressly authorized to provide for the issue of all or any of the unissued and undesignated shares of the Preferred Stock, in one or more series, and to fix the number of shares of such series and to determine for each such series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be set forth in a certificate of designation adopted by the Board and filed in accordance with the DGCL.

Section 4.3 The number of authorized shares of Preferred Stock and Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding plus, if applicable, the number of shares of such class or series reserved for issuance) by the affirmative vote of the holders of a majority of the voting power of all of the outstanding shares of stock of the Corporation entitled to vote thereon, without a separate vote of the holders of the Preferred Stock or the Common Stock, respectively, unless a vote of any such holders is required pursuant to the terms of any certificate of designation filed with respect to any series of Preferred Stock.

Section 4.4 Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided, however, that, except as otherwise required by applicable law, holders of Common Stock shall not be entitled to vote on any amendment to this certificate of incorporation (as amended from time to time, the “Certificate of Incorporation”) (including any certificate of designation filed with respect to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series of Preferred Stock are entitled, either separately or together as a class with the holders of one or more other affected series of Preferred Stock, to vote thereon pursuant to applicable law or the Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock).

SECTION 5.

For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation, of its directors and stockholders, or any class thereof, as the case may be, it is further provided that:

Section 5.1 MANAGEMENT OF THE BUSINESS.

Except as otherwise provided by the DGCL or the Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board. Subject to any rights of the holders of shares of any one or more series of Preferred Stock then outstanding to elect additional directors under specified circumstances, the number of directors that shall constitute the Board shall be fixed exclusively by the Board.

Section 5.2 BOARD OF DIRECTORS

Subject to the rights of the holders of any one or more series of Preferred Stock to elect additional directors under specified circumstances, the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. Each class shall consist, as nearly as practicable, of a number of directors equal to one third of the number of members of the Board authorized as provided in Section 5.1. The Board is authorized to assign members of the Board already in office to such classes at the time the classification becomes effective. At the first annual meeting of stockholders following the filing of the Certificate of Incorporation (the “Filing Date”), the initial term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of

 

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stockholders following the Filing Date, the initial term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the Filing Date, the initial term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

Notwithstanding the foregoing provisions of this section, each director shall serve until such director’s successor is duly elected and qualified or until such director’s earlier death, resignation or removal. No decrease in the number of directors constituting the Board shall remove or shorten the term of any incumbent director.

Section 5.3 REMOVAL OF DIRECTORS

Subject to the rights of the holders of any one or more series of Preferred Stock to remove directors elected by such series of Preferred Stock, any individual director or the entire Board may be removed from office at any time, but only for cause, and only by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all the then-outstanding shares of the capital stock of the Corporation entitled to vote generally at an election of directors, voting together as a single class.

Section 5.4 VACANCIES.

Subject to any limitations imposed by applicable law and subject to the rights of the holders of any one or more series of Preferred Stock to elect additional directors or fill vacancies in respect of such directors, any vacancies on the Board resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board, or by a sole remaining director, and not by the stockholders. Any director elected to fill a newly created directorship or vacancy in accordance with the preceding sentence shall hold office until the next annual meeting of stockholders held to elect the class of directors to which such director is elected and until such director’s successor shall have been elected and qualified or such director’s earlier death, resignation or removal.

Section 5.5 PREFERRED STOCKHOLDERS ELECTION RIGHTS.

Whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a series or separately as a class with one or more such other series, to elect directors at an annual or special meeting of stockholders, the election, term of office, removal and other features of such directorships shall be governed by the terms of the Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock) applicable thereto. The number of directors that may be elected by the holders of any such series of Preferred Stock shall be in addition to the number fixed pursuant to Section 5.1 hereof, and the total number of directors constituting the whole Board shall be automatically adjusted accordingly. Except as otherwise provided by the Board in the resolution or resolutions establishing such series, whenever the holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such additional directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors, shall forthwith terminate (in which case each such director thereupon shall cease to be qualified as, and shall cease to be, a director) and the total authorized number of directors of the Corporation shall automatically be reduced accordingly.

 

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Section 5.6 BYLAW AMENDMENTS.

The Board is expressly authorized and empowered to adopt, amend or repeal any provisions of the bylaws of the Corporation (as amended from time to time, the “Bylaws”) without the assent or vote of the stockholders in any manner not inconsistent with the laws of the State of Delaware or the Certificate of Incorporation. The stockholders shall also have power to adopt, amend or repeal the Bylaws; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by the Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class.

Section 5.7 STOCKHOLDER ACTIONS.

a. The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.

b. Subject to any rights of the holders of shares of any one or more series of Preferred Stock then outstanding, any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of the stockholders and may not be effected by consent in lieu of a meeting.

c. Subject to any rights of the holders of shares of any series of Preferred Stock then outstanding, special meetings of stockholders of the Corporation may be called only by the Chairperson of the Board, the Chief Executive Officer, the President or the Board, but a special meeting may not be called by any other person or persons and any power of stockholders to call a special meeting of stockholders is specifically denied. Only such business shall be considered at a special meeting of stockholders as shall have been stated in the notice for such meeting.

d. An annual meeting of stockholders for the purpose of election of directors and for such other business as may properly come before the meeting, shall be held on such date, time and place, if any, as may be determined from time to time by the Board.

SECTION 6.

No director or officer of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL, as the same exists or may hereafter be amended. Any amendment, modification or repeal of the foregoing sentence shall not adversely affect any right or protection of a director or officer of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal. Solely for purposes of this Section 6, “officer” shall have the meaning provided in Section 102(b)(7) of the DGCL.

SECTION 7.

Section 7.1 Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware and any appellate court therefrom shall be the sole and exclusive forum for: (A) any derivative claim or cause of action brought on behalf of the Corporation; (B) any claim or cause of action that is based upon a violation of a duty owed by any current or former director, officer, other employee or stockholder of the Corporation, to the Corporation or the Corporation’s stockholders; (C) any claim or cause of action against the Corporation or any current or former director, officer or other

 

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employee of the Corporation, arising out of or pursuant to any provision of the DGCL, the Certificate of Incorporation or the Bylaws; (D) any claim or cause of action seeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws (including any right, obligation, or remedy thereunder); (E) any claim or cause of action as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; and (F) any claim or cause of action against the Corporation or any current or former director, officer or other employee of the Corporation, governed by the internal-affairs doctrine or otherwise related to the Corporation’s internal affairs, in all cases to the fullest extent permitted by applicable law and subject to the court having personal jurisdiction over the indispensable parties named as defendants; provided, however, that if the designation of such court as the sole and exclusive forum for a claim or action referred to in foregoing clauses (A) through (F) of this Section would violate applicable law, then the United States District Court for the District of Delaware shall be the sole and exclusive forum for such claim or cause of action.

Section 7.2 Unless the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by applicable law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, including all causes of action asserted against any defendant named in such complaint. For the avoidance of doubt, this provision is intended to benefit and may be enforced by the Corporation, its officers and directors, the underwriters for any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying the offering.

SECTION 8.

Section 8.1 Any person or entity holding, owning, or otherwise acquiring any interest in any security of the Corporation shall be deemed to have notice of and consented to the provisions of the Certificate of Incorporation.

Section 8.2 The Corporation reserves the right to amend, alter, change or repeal, at any time and from time to time, any provision contained in the Certificate of Incorporation, in the manner now or hereafter prescribed by statute, except as provided in Section 8.3, and all rights, preferences and privileges of whatsoever nature conferred upon the stockholders, directors or any other persons whomsoever by and pursuant to the Certificate of Incorporation are granted subject to this reservation.

Section 8.3 Notwithstanding any other provisions of the Certificate of Incorporation or any provision of applicable law that might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of capital stock of the Corporation required by applicable law or by the Certificate of Incorporation or any certificate of designation filed with respect to a series of Preferred Stock, the affirmative vote of the holders of at least at least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required to alter, amend or repeal (whether by merger, consolidation, conversion or otherwise), or adopt any provision inconsistent with, Sections 5, 6, 7 and this Section 8.

SECTION 9.

Section 9.1 If any provision or provisions of the Certificate of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of the Certificate of Incorporation (including, without limitation, each portion of any paragraph of the Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not, to the fullest extent permitted by applicable law, in any way be affected or impaired thereby.

 

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The Corporation has caused this certificate of incorporation to be signed by a duly authorized officer of the Corporation on [MONTH][DAY], 2025.

 

LB Pharmaceuticals Inc
By:    
  Heather Turner
  Chief Executive Officer

 

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Exhibit 3.3

THIRD AMENDED AND RESTATED BYLAWS

OF

LB PHARMACEUTICALS INC

ARTICLE I

CORPORATE OFFICES

1.1 Offices. In addition to the corporation’s registered office set forth in the certificate of incorporation, the Board of Directors may at any time establish other offices at any place or places where the corporation is qualified to do business.

ARTICLE II

MEETINGS OF STOCKHOLDERS

2.1 Place Of Meetings. Meetings of stockholders shall be held at any place, within or outside the state of Delaware, designated by the Board of Directors. In the absence of any such designation, stockholders’ meetings shall be held at the registered office of the corporation.

2.2 Annual Meeting. The annual meeting of stockholders shall be held on such date, time and place, either within or without the state of Delaware, as may be designated by resolution of the Board of Directors each year. At the meeting, directors shall be elected and any other proper business may be transacted.

2.3 Special Meeting. Special meetings of stockholders for any purpose or purposes shall be called pursuant to a resolution approved by the Board of Directors and may not be called by any other person or persons. The only business which may be conducted at a special meeting shall be the matter or matters set forth in the notice of such meeting.

2.4 Notice Of Stockholders’ Meetings. All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place (if any), date and hour of the meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called.

2.5 Manner Of Giving Notice; Affidavit Of Notice. Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders may be given by electronic mail or other electronic transmission, in the manner provided in Section 232 of the Delaware General Corporation Law. An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.


2.6 Quorum. The holders of a majority of the shares of stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (a) the chairman of the meeting or (b) holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, shall have power to adjourn the meeting to another place (if any), date or time.

2.7 Adjourned Meeting; Notice. When a meeting is adjourned to another place (if any), date or time, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place (if any), thereof and the means of remote communications (if any) by which stockholders and proxyholders may be deemed to be present and vote at such adjourned meeting, are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the place (if any), date and time of the adjourned meeting and the means of remote communications (if any) by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

2.8 Organization; Conduct of Business

(a) Such person as the Board of Directors may have designated or, in the absence of such a person, the chief executive officer or, in his or her absence, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the secretary of the corporation, the secretary of the meeting shall be such person as the chairman of the meeting appoints.

(b) The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including the manner of voting and the conduct of business. The date and time of opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting.

2.9 Voting

(a) The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.12 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements).

(b) Except as may be otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. Except as otherwise required by the certificate of incorporation, all elections shall be determined by a plurality of the votes cast, and except as otherwise required by law or the certificate of incorporation, all other matters shall be determined by a majority of the votes cast affirmatively or negatively.

2.10 Waiver Of Notice. Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, or waiver by electronic mail or other electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice, or any waiver of notice by electronic transmission, unless so required by the certificate of incorporation or these bylaws.

 

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2.11 Stockholder Action By Written Consent Without A Meeting

(a) Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is (i) signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and (ii) delivered to the corporation in accordance with Section 228(a) of the Delaware General Corporation Law.

(b) Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the date the earliest dated consent is delivered to the corporation, a written consent or consents signed by a sufficient number of holders to take action are delivered to the corporation in the manner prescribed in this Section. A telegram, cablegram, electronic mail or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or by a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for purposes of this Section to the extent permitted by law. Any such consent shall be delivered in accordance with Section 228(d)(1) of the Delaware General Corporation Law.

(c) Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.

(d) Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing (including by electronic mail or other electronic transmission as permitted by law). If the action which is consented to is such as would have required the filing of a certificate under any section of the General Corporation Law of Delaware if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware.

2.12 Record Date For Stockholder Notice; Voting; Giving Consents

(a) In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action.

(b) If the Board of Directors does not so fix a record date:

(i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

 

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(ii) The record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent (including consent by electronic mail or other electronic transmission as permitted by law) is delivered to the corporation.

(iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

(c) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, if such adjournment is for 30 days or less; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

2.13 Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by an instrument in writing or by an electronic transmission permitted by law filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder’s name is placed on the proxy (whether by manual signature, typewriting, facsimile, electronic or telegraphic transmission or otherwise) by the stockholder or the stockholder’s attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the General Corporation Law of Delaware.

ARTICLE III

DIRECTORS

3.1 Powers. Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors.

3.2 Number Of Directors. Upon the adoption of these bylaws, the number of directors constituting the entire Board of Directors shall be seven (7). Thereafter, this number may be changed by a resolution of the Board of Directors or of the stockholders, subject to Section 3.4 of these bylaws and except as otherwise required by the certificate of incorporation. No reduction of the authorized number of directors shall have the effect of removing any director before such director’s term of office expires.

3.3 Election, Qualification And Term Of Office Of Directors. Except as provided in Section 3.4 of these bylaws, and unless otherwise provided in the certificate of incorporation, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Unless otherwise specified in the certificate of incorporation, elections of directors need not be by written ballot.

 

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3.4 Resignation And Vacancies

(a) Any director may resign at any time upon written notice to the attention of the Secretary of the corporation. Notwithstanding the provisions of Section 223(a)(1) and 223(a)(2) of the Delaware General Corporation Law, but subject to any contrary provision of the certificate of incorporation, any vacancy, including newly created directorships resulting from any increase in the authorized number of directors or amendment of the certificate of incorporation, and vacancies created by removal or resignation of a director, may be filled by a majority of the directors then in office (including any directors that have tendered a resignation effective at a future date), though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced; provided, however, that where such vacancy occurs among the directors elected by the holders of a class or series of stock, the holders of shares of such class or series may override the Board of Directors’ action to fill such vacancy by (i) voting for their own designee to fill such vacancy at a meeting of the Corporation’s stockholders or (ii) written consent, if the consenting stockholders hold a sufficient number of shares to elect their designee at a meeting of the stockholders.

(b) If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware.

(c) If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable.

3.5 Place Of Meetings; Meetings By Telephone

(a) The Board of Directors of the corporation may hold meetings, both regular and special, either within or outside the state of Delaware.

(b) Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

3.6 Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the board.

 

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3.7 Special Meetings; Notice

(a) Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the chairman of the board, the chief executive officer, the secretary or any two directors.

(b) Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail, facsimile or electronic transmission (including e-mail), charges prepaid, addressed to each director at that director’s address, facsimile number or e-mail address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least 4 days before the time of the holding of the meeting. If the notice is delivered personally or by facsimile, electronic transmission or telephone, it shall be delivered at least 24 hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director whom the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting. The notice need not specify the place of the meeting, if the meeting is to be held at the principal executive office of the corporation. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting.

3.8 Quorum

(a) At all meetings of the Board of Directors, a majority of the total number of duly elected directors then in office shall constitute a quorum for the transaction of business, except as may be otherwise specifically provided by statute, by the certificate of incorporation or by that certain Voting Agreement by and among the corporation and certain stockholders dated August 29, 2023, as may be amended from time to time (the “Voting Agreement”). The act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute, by the certificate of incorporation or by the Voting Agreement. If a quorum is not present at any meeting of the Board of Directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

(b) A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

3.9 Waiver Of Notice. Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, or waiver by electronic mail or other electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws.

 

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3.10 Board Action By Written Consent Without A Meeting

(a) Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

(b) Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.

3.11 Fees And Compensation Of Directors. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have the authority to fix the compensation of directors. No such compensation shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.

3.12 Approval Of Loans To Officers; Contracts with Affiliates.

(a) The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

(b) Subject to obtaining any approval required by the certificate of incorporation and by Section 144 of the General Corporate Law of Delaware, the corporation may enter into contracts and agreements for property or services in the ordinary course of business with any director, any stockholder, or any Affiliate or other Person related to or Affiliated with a director or stockholder, provided that such contracts and agreements are on terms and conditions which are no less favorable to the corporation than could be obtained by the corporation in the same type of transaction with an independent third party.

(c) “Affiliate” means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by, or under common control with such Person, (ii) any Person owning or controlling fifty percent (50%) or more of the outstanding voting securities of such Person, (iii) any officer, director, general partner, manager or trustee of such Person, and (iv) any Family Member of any Person described in clause (i), (ii) or (iii) above. For purposes of this definition, “controlling,” “controlled by,” or “under common control with” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. “Equity Securities” has the meaning ascribed to such term in Rule 405 promulgated under the Securities Act of 1933, as amended, and in any event includes any capital stock, any limited partnership interest, any limited liability company interest and any other interest or security having the attendant right to vote for directors or managers or similar representatives, including any options or warrants to purchase the foregoing and other securities convertible, exchangeable or exercisable for the foregoing. “Family Member”, when used to indicate a relationship with any Person, means (x) the spouse, sibling, parent or lineal descendent of such Person, by birth or adoption, and (y) all trustees and beneficiaries of any such Person that is a trust, and all successors of such trust and its trustees and beneficiaries. As used in this Section 3.12, “Person” means an individual or any partnership, corporation, estate, trust, limited liability company or other legal entity.

 

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3.13 Removal Of Directors

(a) Unless otherwise restricted by statute, by the certificate of incorporation, by any contract to which the corporation is party (including the Voting Agreement) or by these bylaws, any director or the entire Board of Directors may be removed, with or without cause, by, and only by, the affirmative vote of the holders of the shares of the class or series of stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders, and any vacancy thereby created may be filled by the holders of that class or series of stock represented at the meeting or pursuant to written consent.

(b) No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

(c) Notwithstanding anything in the certificate of incorporation or these bylaws to the contrary, any amendment or repeal of any provision of this Section 3.13 shall require the affirmative vote of at least a majority of the voting power of all then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class and on an as converted to common stock basis.

ARTICLE IV

COMMITTEES

4.1 Committees Of Directors. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, or in these bylaws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the General Corporate Law of Delaware to be submitted to stockholders for approval or (ii) adopting, amending or repealing any Bylaw of the corporation.

4.2 Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

4.3 Meetings And Action Of Committees. Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting) of these bylaws, with such changes in the context of such provisions as are necessary to substitute the committee and its members for the Board of Directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the Board of Directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the Board of Directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board of Directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

 

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ARTICLE V

OFFICERS

5.1 Officers. The officers of the corporation shall include, if and when designated by the Board of Directors, a chairman, chief executive officer, chief operating officer, chief science officer, chief financial officer, secretary, and one or more vice presidents, all of whom shall be elected at the annual organizational meeting of the Board of Directors or appointed in accordance with the provisions of Section 5.3 of these bylaws. The Board of Directors may also appoint one or more Assistant Secretaries, Assistant Treasurers, and such other officers and agents with such powers and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors.

5.2 Removal And Resignation Of Officers

(a) Subject to the rights (if any) of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board of Directors at any regular or special meeting of the board or, except in the case of an officer chosen by the Board of Directors, by any officer upon whom the power of removal is conferred by the Board of Directors.

(b) Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights (if any) of the corporation under any contract to which the officer is a party.

5.3 Vacancies In Offices. Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors.

5.4 Chairman. The chairman, if one is designated, shall serve as the chairman of the Board of Directors, and as such shall preside at all meetings of the Board of Directors and of the stockholders. He shall also perform all and only such duties as from time to time may be assigned to or requested of him by the Board of Directors. In the event no chief executive officer is serving in office, the chairman shall perform all duties of the chief executive officer.

5.5 Chief Executive Officer. The chief executive officer, if one is designated, shall be primarily responsible for the implementation of the policies of the Board of Directors, subject to the authority of the Board of Directors. In the absence of a chairman, the chief executive officer shall preside at meetings of the Board of Directors and stockholders. The chief executive officer may sign and execute in the name of the corporation stock certificates, deeds, mortgages, bonds, contracts or other instruments except in cases where the signing and the execution thereof shall be expressly and exclusively delegated by the Board of Directors or by these bylaws to some other officer or agent of the corporation or shall be required by law or otherwise to be signed or executed by some other officer or agent.

5.6 Chief Scientific Officer. The chief scientific officer, if one is designated, shall be involved in the overall business strategy of the corporation, and shall be primarily responsible for the overall scientific, technological, and research operations of the corporation.

 

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5.7 Chief Medical Officer. The chief medical officer, if one is designated, shall be involved in the overall business strategy of the corporation, and shall be primarily responsible for the overall medical direction and related medical research of the corporation.

5.8 Chief Financial Officer. The chief financial officer, if one is designated, shall have charge of and be responsible for all funds, securities, receipts and disbursements of the corporation, and shall deposit all monies and securities of the corporation in such banks and depositories as shall be designated by the Board of Directors. He shall be responsible (a) for maintaining adequate financial accounts and records in accordance with generally accepted accounting practices; (b) for the preparation of appropriate operating budgets and financial statements; (c) for the preparation and filing of all tax returns required by law; (d) for financial and accounting matters; and (e) for the performance of all duties incident to the office of chief financial officer and such other duties as from time to time may be assigned to him by the Board of Directors. The chief financial officer may sign and execute in the name of the corporation stock certificates, deeds, mortgages, bonds, contracts or other instruments, except in cases where the signing and the execution thereof shall be expressly and exclusively delegated by the Board of Directors or by these bylaws to some other officer or agent of the corporation or shall be required by law or otherwise to be signed or executed.

5.9 Secretary. The secretary, if one is designated, shall act as secretary of all meetings of the Board of Directors and all meetings of the stockholders. When requested, he shall also act as secretary of the meetings of the committees of the Board of Directors. He shall keep and preserve the minutes of all such meetings in permanent books. He shall see that all notices required to be given by the corporation are duly given and served; shall have custody of all deeds, leases, contracts and other important corporation documents; shall have charge of the books, records and papers of the corporation relating to its organization and management as a corporation; shall see that all reports, statements and other documents required by law (except tax returns) are properly filed; and shall in general perform such other duties as from time to time may be assigned to him by the Board of Directors.

5.10 Vice Presidents. Each vice president, if designated, shall have such title and powers and duties as may from time to time be assigned to him by the Board of Directors. Any vice president may sign and execute in the name of the corporation contracts (but not deeds, mortgages, bonds, or other instruments) authorized by the Board of Directors, except where the signing and execution of such documents shall be expressly and exclusively delegated by the Board of Directors to some other officer or agent of the corporation or shall be required by law or otherwise to be signed or executed by some other officer or agent.

5.11 Representation Of Shares Of Other Corporations. The chairman of the board, the chief executive officer, any vice president, the secretary or assistant secretary of this corporation, or any other person authorized by the Board of Directors or the chief executive officer or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by the person having such authority.

5.12 Authority And Duties Of Officers. In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the Board of Directors or the stockholders.

 

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ARTICLE VI

GENERAL MATTERS

6.1 Checks. From time to time, the Board of Directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.

6.2 Execution Of Corporate Contracts And Instruments. The Board of Directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

6.3 Stock Certificates and Notices; Uncertificated Stock; Partly Paid Shares

(a) The shares of the corporation may be certificated or uncertificated, as provided under Delaware law, and shall be entered in the books of the corporation and recorded as they are issued. Any or all of the signatures on any certificate may be a facsimile or electronic signature. In case any officer, transfer agent or registrar who has signed or whose facsimile or electronic signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

(b) Within a reasonable time after the issuance or transfer of uncertificated stock and upon the request of a stockholder, the corporation shall send to the record owner thereof a written notice that shall set forth the name of the corporation, that the corporation is organized under the laws of Delaware, the name of the stockholder, the number and class (and the designation of the series, if any) of the shares, and any restrictions on the transfer or registration of such shares of stock imposed by the corporation’s certificate of incorporation, these bylaws, any agreement among stockholders or any agreement between stockholders and the corporation.

(c) The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate (if any) issued to represent any such partly paid shares, or upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

6.4 Special Designation On Certificates and Notices of Issuance. If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock or the notice of issuance to the record owner of uncertificated stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the

 

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certificate that the corporation shall issue to represent such class or series of stock or the notice of issuance to the record owner of uncertificated stock, or the purchase agreement for such stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

6.5 Lost Certificates. Except as provided in this Section 6.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or notice of uncertificated stock in the place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or the owner’s legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

6.6 Construction; Definitions. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

6.7 Dividends

(a) The directors of the corporation, subject to any restrictions contained in (i) the General Corporation Law of Delaware or (ii) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the corporation’s capital stock.

(b) The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies.

6.8 Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors and may be changed by the Board of Directors.

6.9 Stockholders of Record. The corporation shall be entitled to recognize the exclusive right of a person recorded on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person recorded on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

6.10 Facsimile or Electronic Signature. In addition to the provisions for use of facsimile or electronic signatures elsewhere specifically authorized in these bylaws, facsimile or electronic signatures of any stockholder, director or officer of the corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.

 

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ARTICLE VII

TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL

7.1 Applicability of Article VII.

(a) No Application to Series C Preferred Stock. Notwithstanding anything to the contrary set forth in these bylaws, the provisions of this Article VII (other than this Section 7.1) shall have no application to any holder of Series C Preferred Stock, or any common stock issued upon conversion of Series C Preferred Stock, with respect to such shares held by it.

(b) Parties to Right of First Refusal and Co-Sale Agreement. Notwithstanding anything to the contrary set forth in these bylaws, the provisions of Section 7.2, Section 7.3, Section 7.4, and Section 7.5(a) shall have no application to any stockholder identified as a “Key Holder” in that certain Right of First Refusal and Co-Sale Agreement dated August 29, 2023 by and among the corporation and certain of its stockholders (as amended from time to time) and who complies (or whose compliance is validly waived) with the restrictions on Transfer set forth in that agreement.

7.2 Transfer Restrictions.

7.2.1 Except to the extent permitted pursuant to Section 7.3, no stockholder shall, directly or indirectly, sell, convey, transfer, syndicate, assign, mortgage, pledge, hypothecate or otherwise encumber or dispose of in any way, including pursuant to equitable or other distribution after divorce or separation or by operation of law or otherwise (each, a “Transfer”) all or any portion of their shares of stock of the corporation, rights to receive dividends or other similar or dissimilar rights or interest other than in accordance with the terms and conditions of this Article VII. Any such attempted Transfer not permitted hereunder shall be null and void ab initio and the corporation shall not register or effect such Transfer and the stockholder making the purported Transfer shall indemnify and hold the corporation and the other stockholders harmless from and against any federal, state or local income taxes, or transfer taxes arising as a result of, or caused directly or indirectly by, such purported Transfer.

7.2.2 The restrictions on Transfer set forth in this Section 7.2 shall not apply with respect to, and shall terminate and be of no further force and effect upon the consummation of an Initial Public Offering.

7.3 Permitted Transfers. The requirements of Sections 7.2 through 7.9 of this Article VII (other than Section 7.4, which shall apply to every Transfer of shares of stock of the corporation, other than a Transfer to the corporation or a Transfer of Series C Preferred Stock or any shares of common stock issued upon conversion of Series C Preferred Stock) shall not apply to the following Transfers (each of which shall be deemed to constitute a “Permitted Transfer”), each transferee of a Permitted Transfer being referred to herein as a “Permitted Transferee”:

(a) any Transfer, directly or indirectly, by any stockholder who is an individual of all or any portion of his shares of stock, (i) outright or in trust to or for the benefit of (A) a Family Member (as defined above) of such individual stockholder and/or such individual stockholder, or (B) any personal representative, estate or executor under any will of such individual stockholder or pursuant to the laws of intestate succession, so long as the final recipient from any personal representative, estate or executor under any will or pursuant to the laws of intestate succession or pursuant to any other Transfer pursuant to this paragraph (a) is a Family Member of such original holder, (ii) with the written consent of holders of a majority of the then outstanding shares of preferred stock of the corporation and holders of a majority of the then outstanding shares of common stock of the corporation, voting as separate classes, outright or in trust to or for the benefit of a civic, educational or charitable organization, or (iii) to an individual or entity which is wholly owned and controlled by such individual.

 

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(b) any Transfer, directly or indirectly, by a stockholder that is a non-natural person of all or any portion of its shares of stock of the corporation (i) to the direct or indirect holder of any ownership interest in such stockholder, (ii) outright or in trust to or for the benefit of such holder of any ownership interest in such stockholder, (iii) outright or in trust to or for the benefit of a Family Member of any such direct or indirect holder or an entity all of the beneficial interests of which are held by such Family Members, or (iv) to an individual or entity to hold such shares of stock of the corporation as the stockholder’s nominee.

(c) any Transfer, directly or indirectly, by a stockholder to an Affiliate of such stockholder, or by a holder of shares of preferred stock of the corporation to another holder of shares of preferred stock of the corporation.

(d) Any Transfer of less than ten percent (10%) of the shares of stock held by a stockholder who is an individual.

(e) Any Transfer to the corporation.

7.4 Right of First Refusal.

(a) Subject to the provisions of this Article VII (including without limitation Section 7.4(h) below), if a stockholder desires to Transfer, directly or indirectly, any of such stockholder’s shares of stock of the corporation (the “Transferring Stockholder”), the Transferring Stockholder shall deliver to the corporation prompt written notice (hereinafter referred to as a “Notice of Intention to Transfer”) of the intention to Transfer and the terms and conditions of the proposed Transfer, which notice shall state (i) the number, class, and series of shares of stock proposed to be Transferred (the “Offered Shares”), (ii) the purchase price therefor, including a description of any non-cash consideration sufficiently detailed to permit valuation thereof, (iii) the identity of the proposed transferee, and (iv) any other material terms and conditions of the proposed Transfer, including the proposed Transfer date (which date may not be less than ten (10) calendar days after the date of delivery of the Notice of Intention to Transfer). The Notice of Intention to Transfer shall be accompanied by a written offer (hereinafter referred to as the “Inside Offer”), irrevocable for ten (10) calendar days from its receipt, to sell to the corporation, for a price in cash determined in accordance with Section 7.4(e), the quantity of Offered Shares specified in clause (b) of this Section 7.4 on the same terms and conditions as set forth in the Notice of Intention to Transfer.

(b) The corporation shall have ten (10) calendar days from the date on which it receives the Notice of Intention to Transfer to determine whether to accept the Inside Offer to purchase all or a portion of the Offered Shares by delivering written notice to the Transferring Stockholder (the “Corporation Notice”) of its intent to accept such Inside Offer and the number of Offered Shares that the corporation intends to purchase. The right of first refusal granted to the corporation hereunder shall terminate if unexercised within ten (10) calendar days after receipt of the Notice of Intention to Transfer.

(c) Notwithstanding the foregoing, if the corporation does not elect to accept the Inside Offer, or if the total number of Offered Shares that the corporation has agreed to purchase pursuant to this Section 7.4 is less than the total number of Offered Shares, then the corporation shall be deemed to have forfeited any right to purchase such Offered Shares, and the Transferring Stockholder may, subject to Section 7.5, Transfer all, but not less than all, of the Offered Shares to the bona fide third-party transferee identified in the Notice of Intention to Transfer on the same terms and conditions set forth in the Notice of Intention to Transfer, during the sixty (60) calendar day period immediately following the expiration of the Inside Offer. Any Offered Shares not purchased pursuant to the Inside Offer or by such third-party transferee within the time periods specified herein shall again become subject to all of the terms and conditions of this Article VII and may not thereafter be Transferred except in accordance with this Article VII.

 

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(d) The purchase price applicable to the corporation for the Offered Shares shall be an amount in cash equal to one hundred percent (100%) of the cash purchase price and one hundred percent (100%) of the fair market value of any non-cash consideration set forth in the Notice of Intention to Transfer. Notwithstanding anything to the contrary in this Section 7.4, the time periods applicable to the election by the corporation to purchase the Offered Shares set forth in this Section 7.4 shall not be deemed to commence until a determination of fair market value of any non-cash consideration set forth in the Notice of Intention to Transfer has been made by the Board of Directors in good faith.

(e) If the corporation has the right to purchase Offered Shares pursuant to the terms of this Article VII, the corporation will purchase such Offered Shares on substantially the same terms and with the same method of payment as is specified in the Notice of Intention to Transfer; provided, however, that if the method of payment set forth in the Notice of Intention to Transfer consists of property other than cash, then the corporation shall pay the purchase price in a sum of cash as determined in accordance with Section 7.4(d).

(f) At the closing of the purchase, the corporation shall make payment as described in Section 7.4(e) by wire transfer in immediately available funds and the Transferring Stockholder shall tender to the corporation an assignment of all of the Transferring Stockholder’s right, title and interest in and to the Offered Shares, free and clear of all liens and encumbrances, together with a mutual release in a form reasonably acceptable to the Board of Directors duly executed by such Transferring Stockholder.

(g) The rights of first refusal granted pursuant to this Section 7.4 shall be deemed to be extended to all Permitted Transferees to whom shares of stock have been Transferred. The right of first refusal granted pursuant to this Section 7.4 shall not apply with respect to Transfers to Permitted Transferees or pursuant to the exercise of “Tag-Along” or “Drag-Along” rights exercised pursuant to the certificate of incorporation, and shall not apply with respect to, and shall terminate and be of no further force and effect upon the earlier to occur of (i) a “Sale Transaction” (as used herein, such term shall have the meaning provided in the corporation’s certificate of incorporation), and (ii) the consummation of an underwritten offering of securities pursuant to the Securities Act of 1933 (an “Initial Public Offering”).

7.5 Miscellaneous Transfer Restrictions. Notwithstanding any other provisions of this Article VII (but excluding for this purpose Section 7.1), no Transfer of any shares of stock of the corporation (including pursuant to a Permitted Transfer) may be made unless:

(a) the Transferor gives the corporation notice thereof at least ten (10) calendar days prior to such Transfer, together with a certificate of the Transferor containing a statement that such Transfer is permitted under this Article VII, together with such information as is reasonably necessary for the corporation to confirm such statement;

(b) such Transfer would not result in a violation of applicable law, including the Securities Act of 1933, as amended, and any state securities or “Blue Sky” laws applicable to the corporation or the shares of stock to be Transferred;

(c) such Transfer would not cause the corporation to lose its exemption from the registration requirements of the Investment Company Act of 1940, as amended;

 

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(d) such Transfer is not to a proposed transferee that is a competitor of the corporation;

(e) such Transfer would not result in the corporation being required to register under Section 12(g) of the Securities Exchange Act of 1934, as amended;

(f) such Transfer would not, based upon the advice of counsel, cause the corporation to violate any law or regulation or have the effect of prohibiting or impairing any material business practice of the corporation, any acquisition of property (tangible or intangible) by the corporation, the conduct of business by the corporation, or otherwise limiting the freedom of the corporation to engage in any line of business or to compete or do business with any person;

(g) the proposed transferee shall have executed any stockholders, voting or other agreement to which the Transferor and the transferred stock were subject; and

(h) if requested by the Board of Directors, the Transferring stockholder shall have provided an opinion of counsel satisfactory to the Board of Directors as to the matters set forth in clauses (a) through (f) of this Section 7.5;

provided that, the requirements of this Section 7.5 shall have no application to (i) a Sale Transaction, or (ii) the consummation of an Initial Public Offering.

7.6 Transfer Of Stock. Upon receipt by the corporation or the transfer agent of the corporation of proper transfer instructions from the record holder of uncertificated shares or upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate or, in the case of uncertificated securities and upon request, a notice of issuance of shares, to the person entitled thereto, cancel the old certificate (if any) and record the transaction in its books.

7.7 Stock Transfer Agreements. The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware.

7.8 Legends. The certificates representing shares of stock of the corporation shall bear on their face a legend substantially in the following form so long as the provisions of this Article VII remains in effect:

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT THE TERMS AND CONDITIONS OF THE BYLAWS OF THE CORPORATION, INCLUDING RESTRICTIONS ON TRANSFER, AND RIGHTS OF FIRST REFUSAL (TO THE EXTENT APPLICABLE), AS PROVIDED IN THE BYLAWS OF THE CORPORATION.”

7.9 Amendment or Repeal of Article VII. Notwithstanding anything in the certificate of incorporation or these bylaws to the contrary, any amendment or repeal of any provision of this Article VII shall require the affirmative vote of at least a majority of the voting power of the then- outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class and on an as converted to common stock basis.

 

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ARTICLE VIII

AMENDMENTS

Subject to the provisions of the certificate of incorporation and Section 3.13(c) and Section 7.9 of these bylaws, the Board of Directors is expressly empowered to adopt, amend or repeal bylaws of the corporation. Subject to Section 3.13(c) and Section 7.9 of these bylaws, the stockholders shall also have power to adopt, amend or repeal the bylaws of the corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the certificate of incorporation, such action by stockholders shall require the affirmative vote of at least a majority of the voting power of all then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class and on an as converted to common stock basis.

 

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Exhibit 3.4

AMENDED AND RESTATED BYLAWS

OF

LB PHARMACEUTICALS INC

 

 

(A DELAWARE CORPORATION)

SECTION 1.

OFFICES

Section 1.1 Registered Office. The registered office of LB Pharmaceuticals Inc (the “Corporation”) in the State of Delaware and the name of the Corporation’s registered agent at such address shall be as set forth in the certificate of incorporation of the Corporation (as the same may be amended and/or restated from time to time, the “Certificate of Incorporation”).

Section 1.2 Other Offices. The Corporation may at any time establish other offices both within and without the State of Delaware.

SECTION 2.

CORPORATE SEAL

Section 2.1 Corporate Seal. The Board of Directors of the Corporation (the “Board”) may adopt a corporate seal. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

SECTION 3.

STOCKHOLDERS’ MEETINGS

Section 3.1 Place of Meetings. Meetings of the stockholders of the Corporation may be held at such place, if any, either within or without the State of Delaware, as may be determined from time to time by the Board. The Board may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the General Corporation Law of the State of Delaware (“DGCL”) and Section 3.9 below.

Section 3.2 Annual Meetings.

(a) The annual meeting of the stockholders of the Corporation, for the purpose of election of directors and for such other business as may properly come before it, shall be held on such date and time as may be determined from time to time by the Board. Any annual meeting of stockholders may be postponed, rescheduled or cancelled by the Board, or any director or officer of the Corporation to whom the Board delegates such authority, at any time before or after notice of such meeting has been given to stockholders. Nominations of persons for election to the Board and proposals of other business to be considered by the stockholders may be made at an annual meeting of stockholders: (i) pursuant to the Corporation’s notice of meeting of stockholders (or any supplement thereto); (ii) by or at the direction of the Board or a duly


authorized committee thereof; or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving the stockholder’s notice provided for in Section 3.2(b) of these bylaws (as may be amended and/or restated from time to time, the “Bylaws”) and who is a stockholder of record at the time of the annual meeting of stockholders, who is entitled to vote at the meeting and who complied with the procedures and requirements set forth in this Section 3.2. For the avoidance of doubt, clause (iii) above shall be the exclusive means for a stockholder to make nominations and submit other business before an annual meeting of stockholders.

(b) At an annual meeting of the stockholders, only such business shall be conducted as is a proper matter for stockholder action under the DGCL, the Certificate of Incorporation and the Bylaws, and only such nominations shall be made and such business shall be conducted as shall have been properly brought before the meeting in accordance with the procedures below.

 

  (1)

For nominations for the election to the Board to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 3.2(a), the stockholder must deliver written notice to the Secretary at the principal executive offices of the Corporation on a timely basis as set forth in Section 3.2(b)(3) and must update and supplement the information contained in such written notice on a timely basis as set forth in Section 3.2(c). In addition to all of the information required by Section 3.2(b)(4), such stockholder’s notice shall include as to each nominee such stockholder proposes to nominate at the meeting: (A) the name, age, business address and residence address of such nominee, (B) the principal occupation or employment of such nominee, (C) the class or series and number of shares of each class or series of capital stock of the Corporation that are owned of record and beneficially by such nominee and list of any pledge of or encumbrances on such shares, (D) the date or dates on which such shares were acquired and the investment intent of such acquisition, (E) the questionnaire, representation and agreement required by Section 3.2(e), completed and signed by such nominee, and (F) all other information concerning such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an election contest is not involved and whether or not proxies are being or will be solicited), or that is otherwise required to be disclosed or provided to the Corporation pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “1934 Act”) and the rules and regulations promulgated thereunder (including such person’s written consent to being named in a proxy statement, associated proxy card and other filings as a nominee and to serving as a director if elected); and (B) all of the information required by Section 3.2(b)(4). The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation and to determine the independence (as such term is used in any applicable stock exchange listing requirements or applicable law) of such proposed nominee or to determine the eligibility of such proposed nominee to serve on any committee or sub-committee of the Board under any applicable stock exchange listing requirements or applicable law, or that the Board determines, in its sole discretion, could be material to a reasonable stockholder’s understanding of the background, qualifications, experience, independence, or lack thereof, of such proposed nominee. The number of nominees a stockholder may nominate for election at an annual meeting on its own behalf (or in the case of a stockholder giving the notice on behalf of a beneficial owner, the number of nominees a stockholder may nominate for election at an annual meeting on behalf of such beneficial owner) shall not exceed the number of directors to be elected at such annual meeting. A stockholder may not designate any substitute or alternate nominees unless the stockholder provides timely notice of such substitute or alternate nominee(s) in accordance with this Section 3.2, in the case of an annual meeting, or Section 3.3, in the case of a special meeting (and such notice contains all of the information, representations, questionnaires and certifications with respect to such substitute or alternate nominee(s) that are required by the Bylaws with respect to nominees for director).


  (2)

For business other than nominations for the election to the Board to be properly brought before an annual meeting by a stockholder pursuant to clause (ii) of Section 3.2(a), the stockholder must deliver written notice to the Secretary at the principal executive offices of the Corporation on a timely basis as set forth in Section 3.2(b)(3), and must update and supplement the information contained in such written notice on a timely basis as set forth in Section 3.2(c). Such stockholder’s notice shall include: (A) as to each matter such stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws, the language of the proposed amendment), the reasons for conducting such business at the meeting, and any material interest (including any anticipated benefit of such business to any Proponent (as defined below) other than solely as a result of its ownership of the Corporation’s capital stock, that is material to any Proponent individually, or to the Proponents in the aggregate) in such business of any Proponent; and (B) all of the information required by Section 3.2(b)(4).

 

  (3)

To be timely, the written notice required by Section 3.2(b)(1) or 3.2(b)(2) must be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day, nor earlier than the 120th day, prior to the first anniversary of the immediately preceding year’s annual meeting (for purposes of notice required for action to be taken at the Corporation’s first annual meeting of stockholders after its initial public offering of common stock, the date of the immediately preceding year’s annual meeting shall be deemed to have occurred on June 1 in such immediately preceding calendar year); provided, however, that, subject to the last sentence of this Section 3.2(b)(3), in the event that the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 70 days after the anniversary of the preceding year’s annual meeting, or if no annual meeting was held (or deemed to have been held), notice by the stockholder to be timely must be so received not earlier than the 120th day prior to such annual meeting and not later than the later of the close of business on (i) the 90th day prior to such annual meeting or (ii) the tenth day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall an adjournment or postponement (or the public announcement thereof) of an annual meeting for which notice has been given, or for which a public announcement of the date of the meeting has been made by the Corporation, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

 

  (4)

The written notice required by Sections 3.2(b)(1) or 3.2(b)(2) shall also include, as of the date of the notice and as to the stockholder giving the notice, the beneficial owner, if any, on whose behalf the nomination or proposal is made and any affiliate who controls either of the foregoing stockholder or beneficial owner, directly or indirectly (each, a “Proponent” and collectively, the “Proponents”): (A) the name and address of each Proponent, including, if applicable, such name and address as they appear on the Corporation’s books and records; (B) the class, series and number of shares of each class or series of the capital stock of the Corporation that are, directly or indirectly, owned of record or beneficially (within the meaning of Rule 13d-3 under the 1934 Act) by each Proponent (provided, that for purposes of this Section 3.2(b)(4), such Proponent shall in all events be deemed to beneficially own all shares of any class or series of capital stock of the Corporation as to which such Proponent or any of its affiliates or associates has a right to acquire beneficial ownership whether immediately or at any time in the future); (C) a description of any agreement, arrangement or understanding (whether oral or in writing) with respect to such nomination or proposal (and/or the voting of shares of any class or series of capital stock of the Corporation, other than a revocable proxy given in response to a proxy solicitation made to 10 or more persons) between or among any Proponent and any of its affiliates or associates, and/or any other persons (including their names) including without limitation, any agreements, arrangements or understandings required to be disclosed pursuant to Item 5 or Item 6 of 1934 Act Schedule 13D, regardless of whether the requirement to file a Schedule 13D


  is applicable; (D) a representation that the stockholder is a holder of record of shares of the Corporation at the time of giving notice, will be entitled to vote at the meeting, and that such stockholder (or a qualified representative thereof) intends to appear at the meeting to nominate the person or persons specified in the notice (with respect to a notice under Section 3.2(b)(1)) or to propose the business that is specified in the notice (with respect to a notice under Section 3.2(b)(2)); (E) a representation whether any Proponent or any other participant (as defined in Item 4 of Schedule 14A under the 1934 Act) will engage in a solicitation with respect to such nomination or proposal and, if so, the name of each participant in such solicitation and the amount of the cost of solicitation that has been and will be borne, directly or indirectly, by each participant in such solicitation, and a representation as to whether the Proponents intend or are part of a group which intends (x) to deliver, or make available, a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s voting shares required to approve or adopt the proposal or elect the nominee, (y) to otherwise solicit proxies or votes from stockholders in support of such proposal or nomination and/or (z) to solicit proxies in support of any proposed nominee in accordance with Rule 14a-19 promulgated under the 1934 Act; (F) a description of all Derivative Transactions (as defined below) by each Proponent during the previous 12-month period, including the date of the transactions and the class, series and number of securities involved in, and the material economic or voting terms of, such Derivative Transactions; (G) a certification regarding whether each Proponent has complied with all applicable federal, state and other legal requirements in connection with such Proponent’s acquisition of shares of capital stock or other securities of the Corporation and/or such Proponent’s acts or omissions as a stockholder or beneficial owner of the Corporation; and (H) any other information relating to each Proponent required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14 of the 1934 Act and the rules and regulations promulgated thereunder.

(c) A stockholder providing the written notice required by Section 3.2(b)(1) or (2) shall update and supplement such notice in writing, if necessary, so that the information (other than the representations required by Section 3.2(b)(4)(E)) provided or required to be provided in such notice is true and correct in all material respects as of (i) the record date for the determination of stockholders entitled to notice of the meeting and (ii) the date that is five Business Days (as defined below) prior to the meeting and, in the event of any adjournment or postponement thereof, five Business Days prior to such adjourned or postponed meeting; provided, that no such update or supplement shall cure or affect the accuracy (or inaccuracy) of any representations made by any Proponent, any of its affiliates or associates, or a nominee or the validity (or invalidity) of any nomination or proposal that failed to comply with this Section 3.2 or is rendered invalid as a result of any inaccuracy therein. In the case of an update and supplement pursuant to clause (i) of this Section 3.2(c), such update and supplement must be received by the Secretary at the principal executive offices of the Corporation not later than five Business Days after the later of the record date for the determination of stockholders entitled to notice of the meeting or the public announcement of such record date. In the case of an update and supplement pursuant to clause (ii) of this Section 3.2(c), such update and supplement shall be received by the Secretary at the principal executive offices of the Corporation not later than two Business Days prior to the date for the meeting, and, in the event of any adjournment or postponement thereof, two Business Days prior to such adjourned or postponed meeting (or if there are fewer than two Business Days between the date for the meeting, or the date of the immediately preceding adjournment or postponement thereof, and the date for the adjourned or postponed meeting, not later than the day prior to such adjourned or postponed meeting).

(d) Notwithstanding anything in Section 3.2(b)(3) to the contrary, in the event that the number of directors to be elected to the Board at an annual meeting is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board at least 10 days before the last day a stockholder may deliver a notice of nomination in accordance with


Section 3.2(b)(3), a stockholder’s notice required by this Section 3.2 and that complies with the requirements in Section 3.2(b)(1), other than the timing requirements in Section 3.2(b)(3), shall also be considered timely, but only with respect to nominees for the new positions created by such increase, if it shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation.

(e) To be eligible to be a nominee for election or re-election as a director of the Corporation pursuant to a nomination under clause (iii) of Section 3.2(a) or clause (ii) of Section 3.3(c), each Proponent must deliver (in accordance with the time periods prescribed for delivery of notice under Sections 3.2(b)(3), 3.2(d) or 3.3(c), as applicable) to the Secretary at the principal executive offices of the Corporation a completed written questionnaire with respect to the background, qualifications, stock ownership and independence of such proposed nominee and the background of any other person or entity on whose behalf the nomination is being made (in the form provided by the Secretary within 10 days following a written request therefor by a stockholder of record) and a written representation and agreement (in the form provided by the Secretary within 10 days following written request therefor by a stockholder of record) that such person (i) is not and will not become a party to (A) any agreement, arrangement or understanding (whether oral or in writing) with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed in the questionnaire or (B) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law; (ii) is not and will not become a party to any agreement, arrangement or understanding (whether oral or in writing) with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director of the Corporation or a nominee that has not been disclosed in such questionnaire; (iii) would be in compliance, if elected as a director of the Corporation, and will comply with, all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation that are publicly disclosed or which were provided by the Secretary with the written representation and agreement required by this Section 3.2(e); and (iv) if elected as a director of the Corporation, intends to serve the entire term until the next meeting at which such candidate would face re-election.

(f) Notwithstanding anything to the contrary in the Bylaws, unless otherwise required by applicable law, in the event that any Proponent (i) provides notice pursuant to Rule 14a-19(b) promulgated under the 1934 Act with respect to one or more proposed nominees and (ii) subsequently fails to (x) comply with the requirements of Rule 14a-19 promulgated under the 1934 Act (or fails to timely provide reasonable evidence sufficient to satisfy the Corporation that such Proponent has met the requirements of Rule 14a-19(a)(3) promulgated under the 1934 Act in accordance with the next sentence) or (y) inform the Corporation that they no longer plan to solicit proxies in accordance with the requirements of Rule 14a-19 under the 1934 Act by delivering a written notice to the Secretary at the principal executive offices of the Corporation within two (2) Business Days after the occurrence of such change, then the nomination of each such proposed nominee shall be disregarded (and such nominee disqualified from standing for election or re-election), notwithstanding that the nominee is included (as applicable) as a nominee in the Corporation’s proxy statement, notice of meeting or other proxy materials for any stockholder meeting (or any supplement thereto) and notwithstanding that proxies or votes in respect of the election of such proposed nominees may have been received by the Corporation (which proxies and votes shall be disregarded). If any Proponent provides notice pursuant to Rule 14a-19(b) promulgated under the 1934 Act, such Proponent shall deliver to the Corporation, no later than five (5) Business Days prior to the applicable meeting, reasonable evidence sufficient to demonstrate that it has met the requirements of Rule 14a-19(a)(3) promulgated under the 1934 Act. Notwithstanding anything to the contrary set forth herein, and for the avoidance of doubt, the nomination of any person whose name is included (as applicable) as a nominee in the Corporation’s proxy


statement, notice of meeting or other proxy materials for any stockholder meeting (or any supplement thereto) as a result of any notice provided by any Proponent pursuant to Rule 14a-19(b) promulgated under the 1934 Act with respect to such proposed nominee and whose nomination is not made by or at the direction of the Board or any authorized committee thereof shall not be deemed (for purposes of clause (i) of Section 3.2(a) or otherwise) to have been made pursuant to the Corporation’s notice of meeting (or any supplement thereto) and any such nominee may only be nominated by a Proponent pursuant to clause (iii) of Section 3.2(a) and, in the case of a special meeting of stockholders, pursuant to and to the extent permitted under Section 3.3(c).

(g) A person shall not be eligible for election or re-election as a director, unless the person is nominated, in the case of an annual meeting, in accordance with clause (ii) or (iii) of Section 3.2(a) and in accordance with the procedures and requirements set forth in Section 3.2(b), Section 3.2(c), Section 3.2(d), Section 3.2(e) and Section 3.2(f), as applicable, or in the case of a special meeting, in accordance with Section 3.3(c) of the Bylaws and the procedures and requirements thereof. Only such business shall be conducted at any annual meeting of the stockholders of the Corporation as shall have been brought before the meeting in accordance with Section 3.2(a) and in accordance with the procedures set forth in Section 3.2(b), Section 3.2(c) and Section 3.2(f), as applicable. Except as otherwise required by applicable law, and subject to the supervision, direction and control of the Board of Directors, the chair of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures and requirements set forth in the Bylaws (including, without limitation, compliance with Rule 14a-19 promulgated under the 1934 Act) and, if any proposed nomination or business is not in compliance with the Bylaws, or the Proponent does not act in accordance with the representations required in this Section 3.2, to declare that such proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded (and such nominee disqualified from standing for election or re-election), or that such business shall not be transacted, notwithstanding that such proposal or nomination is set forth in (as applicable) the Corporation’s proxy statement, notice of meeting or other proxy materials and notwithstanding that proxies or votes in respect of such nomination or such business may have been solicited or received. Notwithstanding the foregoing provisions of this Section 3.2, unless otherwise required by applicable law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded (and such nominee disqualified from standing for election or re-election) and such proposed business shall not be transacted, notwithstanding that such nomination or proposed business is set forth in (as applicable) the Corporation’s proxy statement, notice of meeting or other proxy materials and notwithstanding that proxies or votes in respect of such vote may have been solicited or received by the Corporation. For purposes of this Section 3.2, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager, trustee or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders, and such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, shall be provided to the Secretary of the Corporation at least five Business Days prior to the meeting of stockholders.

(h) For purposes of Sections 3.2 and 3.3,

 

  (1)

“affiliates” and “associates” shall have the meanings set forth in Rule 405 under the Securities Act of 1933, as amended (the “1933 Act”);

 

  (2)

“Business Day” means any day other than Saturday, Sunday or a day on which banks are closed in New York City, New York;


  (3)

“close of business” means 6:00 p.m. local time at the principal executive offices of the Corporation on any calendar day, whether or not the day is a Business Day;

 

  (4)

“Derivative Transaction” means any agreement, arrangement, interest or understanding entered into by, or on behalf or for the benefit of, any Proponent or any of its affiliates or associates, whether record or beneficial: (A) the value of which is derived in whole or in part from the value of any class or series of shares or other securities of the Corporation; (B) that otherwise provides any direct or indirect opportunity to gain or share in any gain derived from a change in the value of securities of the Corporation; (C) the effect or intent of which is to mitigate loss, manage risk or benefit from changes in value or price with respect to any securities of the Corporation; or (D) that provides the right to vote (other than a revocable proxy given in response to a proxy solicitation made to 10 or more persons) or increase or decrease the voting power of, such Proponent, or any of its affiliates or associates, directly or indirectly, with respect to any securities of the Corporation, which agreement, arrangement, interest or understanding may include, without limitation, any option, warrant, debt position, note, bond, convertible security, swap, stock appreciation or similar right, short position, profit interest, hedge, right to dividends, voting agreement, performance-related fee or arrangement to borrow or lend shares (whether or not subject to payment, settlement, exercise or conversion in any such class or series), and any proportionate interest of such Proponent in the securities of the Corporation held by any general or limited partnership, or any limited liability company, of which such Proponent is, directly or indirectly, a general partner or managing member; and

 

  (5)

“public announcement” means disclosure in a press release reported by the Dow Jones News Service, Associated Press, Business Wire, GlobeNewswire or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act or by such other means reasonably designed to inform the public or security holders in general of such information, including, without limitation, posting on the Corporation’s investor relations website.

 

  (6)

a “qualified representative” of a stockholder shall mean (A) a duly authorized officer, manager, trustee or partner of such stockholder or (B) a person authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders, and such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, shall be provided to the Secretary of the Corporation at least five Business Days prior to the meeting of stockholders.

Section 3.3 Special Meetings.

(a) Special meetings of the stockholders of the Corporation may only be called in the manner provided in the Certificate of Incorporation. Any special meeting of stockholders previously scheduled by the Board may be postponed, rescheduled or cancelled by the Board, or any director or officer to whom the Board has delegated such authority, at any time before or after notice of such meeting has been given to stockholders.

(b) The Board shall determine the date, time and place, if any, of such special meeting. Upon determination of the date, time and place, if any, of the meeting, the Secretary shall cause a notice of meeting to be given to the stockholders entitled to vote, in accordance with the provisions of Section 3.4.


(c) Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected (i) by or at the direction of the Board or a duly authorized committee thereof or (ii) by any stockholder of the Corporation who is a stockholder of record at the time of giving notice provided for in this paragraph and who is a stockholder of record at the time of the special meeting, who is entitled to vote at the meeting and who complies with Sections 3.2(b)(1), 3.2(b)(4), 3.2(c), 3.2(e) and 3.2(f). The number of nominees a stockholder may nominate for election at a special meeting on its own behalf (or in the case of a stockholder giving the notice on behalf of a beneficial owner, the number of nominees a stockholder may nominate for election at a special meeting on behalf of such beneficial owner) shall not exceed the number of directors to be elected at such special meeting. In the event the Corporation calls a special meeting of stockholders for the purpose of submitting a proposal to stockholders for the election of one or more directors, any such stockholder of record entitled to vote in such election of directors may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if written notice setting forth the information required by Sections 3.2(b)(1) and 3.2(b)(4) shall be received by the Secretary at the principal executive offices of the Corporation not earlier than the close of business on 120th day prior to such special meeting and not later than the close of business on the later of (i) the 90th day prior to such meeting or (ii) the tenth day following the day on which the Corporation first makes a public announcement of the date of the special meeting at which directors are to be elected. The stockholder shall also update and supplement such information as required under Section 3.2(c). In no event shall an adjournment or a postponement (or the public announcement thereof) of a special meeting for which notice has been given, or for which a public announcement of the date of the meeting has been made by the Corporation, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

(d) A person shall not be eligible for election or re-election as a director at the special meeting unless the person is nominated either in accordance with clause (i) or clause (ii) of Section 3.3(c). Except as otherwise required by applicable law, and subject to the supervision, direction and control of the Board of Directors, the chair of the meeting shall have the power and duty to determine whether a nomination was made in accordance with the procedures and requirements set forth in the Bylaws and, if any proposed nomination is not in compliance with the Bylaws (including, without limitation, compliance with Rule 14a-19 under the 1934 Act), or if the Proponent does not act in accordance with the representations required in Section 3.2, to declare that such nomination shall not be presented for stockholder action at the meeting and shall be disregarded (and such nominee disqualified from standing for election or re-election), notwithstanding that such nomination is set forth in (as applicable) the Corporation’s proxy statement, notice of meeting or other proxy materials and notwithstanding that proxies or votes in respect of such nomination may have been solicited or received. Notwithstanding the foregoing provisions of this Section 3.3, unless otherwise required by applicable law, if the stockholder (or a qualified representative of the stockholder (meeting the requirements specified in Section 3.2(f)) does not appear at the special meeting of stockholders of the Corporation to present a nomination, such nomination shall be disregarded (and such nominee disqualified from standing for election or re-election), notwithstanding that the nomination is set forth (as applicable) in the Corporation’s proxy statement, notice of meeting or other proxy materials and notwithstanding that proxies or votes in respect of such nomination may have been solicited or received by the Corporation.

(e) Notwithstanding the foregoing provisions of Sections 3.2 and 3.3, a stockholder must also comply with all applicable requirements of the 1934 Act and the rules and regulations promulgated thereunder with respect to the matters set forth in Sections 3.2 and 3.3, and any failure to comply with such requirements shall be deemed a failure to comply with Sections 3.2 or 3.3, as applicable; provided, however, that, to the fullest extent not prohibited by applicable law, any references in the Bylaws to the 1934 Act or the rules and regulations promulgated thereunder are not intended to and shall not limit the requirements applicable to proposals and/or nominations to be considered pursuant to Sections 3.2(a)(iii) and 3.3(c). Nothing in the Bylaws shall be deemed to affect any rights of holders of any class or series of preferred stock to nominate and elect directors pursuant to and to the extent provided in any applicable provision of the Certificate of Incorporation.


Section 3.4 Notice of Meetings. Except as otherwise provided by applicable law, the Certificate of Incorporation or the Bylaws, notice of each meeting of stockholders shall be given not less than ten nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of such meeting. Such notice shall specify the date, time and place, if any, of the meeting, the record date for determining stockholders entitled to vote at the meeting, if such record date is different from the record date for determining stockholders entitled to notice of the meeting, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at any such meeting, and, in the case of special meetings, the purpose or purposes of the meeting. Notice shall be deemed given as provided in Section 232 of the DGCL.

Section 3.5 Quorum and Vote Required. At all meetings of stockholders, except where otherwise required by law or by the Certificate of Incorporation, or by the Bylaws, the presence, in person, by remote communication, if applicable, or by proxy, of the holders of a majority of the voting power of the outstanding shares of stock entitled to vote at the meeting shall constitute a quorum for the transaction of business. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

Unless a different or minimum vote is provided by law or by applicable stock exchange rules, or by the Certificate of Incorporation or the Bylaws, in which case such different or minimum vote shall be the applicable vote on the matter, in all matters other than the election of directors, the affirmative vote of a majority of the votes cast on such matter, voting affirmatively or negatively (excluding abstentions and broker non-votes) shall be the act of the stockholders. Except as otherwise required by law, the Certificate of Incorporation or the Bylaws, directors shall be elected by a plurality of the votes of the shares present in person, by remote communication, if applicable, or represented by proxy at the meeting and entitled to vote in the election of directors. Where a separate vote by a class or classes or series is required, except as required by law or by the Certificate of Incorporation or the Bylaws, the holders of a majority of the voting power of the outstanding shares of such class or classes or series, present in person, by remote communication, if applicable, or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter. Unless a different or minimum vote is provided by law or by the Certificate of Incorporation or the Bylaws or any applicable stock exchange rules, in which case such different or minimum vote shall be the applicable vote on the matter, the affirmative vote of the holders of a majority (or plurality, in the case of the election of directors) of the votes cast on such matter, voting affirmatively or negatively (excluding abstentions and broker non-votes) shall be the act of such class or classes or series.

Section 3.6 Adjournment and Notice of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chair of the meeting or by the stockholders by the affirmative vote of a majority of the votes cast, voting affirmatively or negatively (excluding abstentions and broker non-votes). When a meeting is adjourned to another time or place, if any, (including an adjournment taken to address a technical failure to convene or continue a meeting using remote communication) notice need not be given of the adjourned meeting if the time and place, if any, thereof and the means of remote communication, if any, by which stockholders and proxyholders may be deemed present in person and may vote at such meeting are announced at the meeting at which the adjournment is taken or are (i) displayed, during the time scheduled for the meeting, on the same electronic network used to enable stockholders and proxy holders to participate in the meeting by means of remote


communication or (ii) set forth in the notice of meeting given in accordance with Section 3.4. At the adjourned meeting, the Corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date so fixed for notice of such adjourned meeting.

Section 3.7 Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders or adjournment thereof, except as otherwise provided by applicable law, only persons in whose names shares stand on the stock records of the Corporation on the record date shall be entitled to vote at any meeting of stockholders. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy. No proxy shall be voted after three years from its date of creation unless the proxy provides for a longer period. Voting at meetings of stockholders need not be by written ballot. Any stockholder directly or indirectly soliciting proxies from other stockholders must use a proxy card color other than white, which shall be reserved for the exclusive use by the Board.

Section 3.8 List of Stockholders. The corporation shall prepare, no later than the tenth day before each meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder; provided, however, if the record date for determining the stockholders entitled to vote is less than ten days before the meeting date, the list shall reflect all of the stockholders entitled to vote as of the tenth day before the meeting date. Nothing in this Section 3.8 shall require the corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of ten days ending on the day before the meeting date: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation.

Section 3.9 Remote Communication; Delivery to the Corporation.

(a) If authorized by the Board in its sole discretion, and subject to such guidelines and procedures as the Board may adopt, stockholders and proxyholders not physically present at a stockholder meeting may, by means of remote communication:

 

  (1)

participate in a meeting of stockholders; and

 

  (2)

be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (i) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder, (ii) the Corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (iii) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Corporation.


(b) Whenever Section 3.2 or 3.3 requires one or more persons (including a record or beneficial owner of capital stock) to deliver a document or information to the Corporation or any officer, employee or agent thereof (including any notice, request, questionnaire, revocation, representation or other document or agreement), such document or information shall be in writing exclusively (and not in an electronic transmission) and shall be delivered exclusively by hand (including, without limitation, overnight courier service) or by certified or registered mail, return receipt requested and the Corporation shall not be required to accept delivery of any document not in such written form or so delivered.

Section 3.10 Organization.

(a) At every meeting of stockholders, a person designated by the Board shall act as chair of the meeting of stockholders. If no chair of the meeting of stockholders is so designated, then the Chair of the Board, or if no Chair has been appointed, is absent or refuses to act, the Chief Executive Officer, or if no Chief Executive Officer is then serving or the Chief Executive Officer is absent or refuses to act, the President, or, if the President is absent or refuses to act, a chair of the meeting chosen by the stockholders by the affirmative vote of a majority of the votes cast, voting affirmatively or negatively (excluding abstentions and broker non-votes), shall act as chair of the meeting of stockholders. A person designated by the Board shall act as secretary of the meeting. If no secretary of the meeting is designated, then the Secretary, or, in the Secretary’s absence, an Assistant Secretary or other officer or other person directed to do so by the chair of the meeting, shall act as secretary of the meeting.

(b) The Board shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board, if any, the chair of the meeting shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chair, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the Corporation and their duly authorized and constituted proxies and such other persons as the chair shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters that are to be voted on by ballot. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting. Unless and to the extent determined by the Board or the chair of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

(c) The Corporation may and shall, if required by applicable law, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the chair of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability. The inspectors shall: (1) ascertain the number of shares outstanding and the voting power of each; (2) determine the shares represented at a meeting and the validity of proxies and ballots; (3) count all votes and ballots; (4) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and (5) certify their determination of the number of shares represented at the meeting, and their


count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Sections 211(e) or 212(c)(2) of the DGCL, or any information provided pursuant to Sections 211(a)(2)b.(i) or (iii) of the DGCL, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification pursuant to Section 231(b)(5) of the DGCL shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.

SECTION 4.

DIRECTORS

Section 4.1 Number. The authorized number of directors of the Corporation shall be fixed in accordance with the Certificate of Incorporation.

Section 4.2 Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board, except as may be otherwise provided by the Certificate of Incorporation or the DGCL.

Section 4.3 Terms. The terms of directors shall be as set forth in the Certificate of Incorporation.

Section 4.4 Classes of Directors. The directors shall be divided into classes as and to the extent provided in the Certificate of Incorporation, except as otherwise required by applicable law.

Section 4.5 Vacancies; Newly Created Directorships. Vacancies and newly created directorships on the Board shall be filled as set forth in the Certificate of Incorporation, except as otherwise required by applicable law.

Section 4.6 Resignation. Any director may resign at any time by delivering such director’s notice in writing or by electronic transmission to the Board or the Secretary. Such resignation shall take effect at the time of delivery of the notice or at any later time specified therein. Acceptance of such resignation shall not be necessary to make it effective. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office for the unexpired portion of the term of the director whose place shall be vacated and until such director’s successor shall have been duly elected and qualified or until such director’s earlier death, resignation or removal.

Section 4.7 Removal. Directors shall be removed as set forth in the Certificate of Incorporation.


Section 4.8 Meetings.

(a) Regular Meetings. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board may be held at any time or date and at any place, if any, within or outside of the State of Delaware that has been designated by the Board and publicized among all directors, either orally or in writing, by telephone, including a voice-messaging system or other system designed to record and communicate messages, facsimile or by electronic mail or other electronic means. No further notice shall be required for regular meetings of the Board.

(b) Special Meetings. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board may be held at any time and place, if any, within or without the State of Delaware as designated and called by the Chair of the Board, the Chief Executive Officer, the President, or the Board pursuant to a resolution adopted by a majority of the directors then in office.

(c) Meetings by Electronic Communications Equipment. Any member of the Board, or of any committee thereof, may participate in a meeting by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

(d) Notice of Special Meetings. Notice of the time and place, if any, of all special meetings of the Board shall be given orally or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, or by electronic mail or other means of electronic transmission at least 24 hours before the date and time of the meeting. If notice is sent by U.S. mail, it shall be sent by first class mail, postage prepaid, at least three days before the date of the meeting. 30Neither the business to be transacted at, nor the purpose of, any special meeting of the Board need be specified in any such notice.

Section 4.9 Quorum and Voting.

(a) Except as otherwise required by the DGCL, the Certificate of Incorporation or the Bylaws, a quorum of the Board shall consist of a majority of the authorized number of directors fixed from time to time by the Board in accordance with the Certificate of Incorporation; provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn the meeting to another time, without notice other than by announcement at the meeting.

(b) At each meeting of the Board at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by applicable law, the Certificate of Incorporation or the Bylaws.

Section 4.10 Action without Meeting. Unless otherwise restricted by the Certificate of Incorporation or the Bylaws, any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission. After an action is taken, such consent or consents shall be filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Section 4.11 Fees and Compensation. Unless otherwise restricted by the Certificate of Incorporation or the Bylaws, the Board, or any duly authorized committee thereof, shall have the authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation in any capacity.


Section 4.12 Committees.

(a) Committees. The Board may, from time to time, appoint such committees as may be permitted by applicable law. Such committees appointed by the Board shall consist of one or more members of the Board and to the extent permitted by applicable law and provided in the resolution of the Board shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or repealing any Bylaw of the Corporation.

(b) Term. The Board, subject to any requirements of any outstanding series of preferred stock and the provisions of subsection (a) of this Section 4.12, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of such committee member’s death, such person’s resignation from the committee or on such date that the committee member, for any reason, is no longer a member of the Board. The Board may at any time for any reason remove any individual committee member and the Board may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.

(c) Meetings. Unless the Board shall otherwise provide, regular meetings of any committee appointed pursuant to this Section 4.12 shall be held at such times and places, if any, as are determined by the Board, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at such place, if any, that has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon notice to the members of such committee of the time and place, if any, of such special meeting given in the manner provided for the giving of notice to members of the Board of the time and place, if any, of special meetings of the Board. Unless otherwise provided by the Board in the resolutions authorizing the creation of the committee, the presence of at least a majority of the members of the committee then serving shall be necessary to constitute a quorum unless the committee shall consist of one or two members, in which event one member shall constitute a quorum; and all matters shall be determined by the affirmative vote of a majority of the members present at a meeting of the committee at which a quorum is present.

Section 4.13 Duties of Chair of the Board. The Board shall elect from its ranks a Chair of the Board. The Chair of the Board shall perform such other duties customarily associated with the office and shall also perform such other duties and have such other powers, as the Board shall designate from time to time. The Chair of the Board, when present, shall preside at all meetings of the Board in accordance with Section 4.14 of the Bylaws.

Section 4.14 Organization. At every meeting of the directors, the Chair of the Board shall act as chair of the meeting. If a Chair has not been appointed or is absent, the Chief Executive Officer (if a director), or, if a Chief Executive Officer is absent, the President (if a director), or, in the absence of any such person, the Lead Director (if one has been appointed by the Board), or, in the absence of any such person, a chair of the meeting chosen by a majority of the directors present, shall preside over the meeting. The Secretary, or in the Secretary’s absence, any Assistant Secretary or other officer, director or other person directed to do so by the person presiding over the meeting, shall act as secretary of the meeting.


SECTION 5.

OFFICERS

Section 5.1 Officers Designated. The officers of the Corporation shall include, if and when designated by the Board, the Chief Executive Officer, the President, the Secretary, the Chief Financial Officer and the Treasurer. The Board may also appoint one or more Assistant Secretaries and Assistant Treasurers and such other officers and agents with such powers and duties as it shall deem appropriate or necessary. The Board may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the Corporation at any one time unless specifically prohibited therefrom by applicable law, the Certificate of Incorporation or the Bylaws.

Section 5.2 Tenure and Duties of Officers.

(a) General. All officers shall hold office at the pleasure of the Board and until their successors shall have been duly elected and qualified, subject to such officer’s earlier death, resignation or removal. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board or by a committee thereof to which the Board has delegated such responsibility or, if so authorized by the Board, by the Chief Executive Officer or another officer of the Corporation. To the extent that a Chief Financial Officer has been appointed and no Treasurer has been appointed, all references in these Bylaws to the Treasurer shall be deemed references to the Chief Financial Officer.

(b) Duties of Chief Executive Officer. The Chief Executive Officer shall preside, if a director, at all meetings of the Board, unless a Chair of the Board has been appointed and is present and willing to act. The Chief Executive Officer shall be the chief executive officer of the Corporation and, subject to the supervision, direction and control of the Board, shall have the general powers and duties of supervision, direction, management and control of the business and officers of the Corporation as are customarily associated with the position of Chief Executive Officer. To the extent that a Chief Executive Officer has been appointed and no President has been appointed, all references in the Bylaws to the President shall be deemed references to the Chief Executive Officer. The Chief Executive Officer shall perform other duties customarily associated with the office and shall also perform such other duties and have such other powers, as the Board shall designate from time to time.

(c) Duties of President. The President shall preside, if a director, at all meetings of the Board, unless a Chair of the Board or Chief Executive Officer has been appointed and is present and willing to act. Unless another officer has been appointed Chief Executive Officer of the Corporation, the President shall be the chief executive officer of the Corporation and, subject to the supervision, direction and control of the Board, shall have the general powers and duties of supervision, direction, management and control of the business and officers of the Corporation as are customarily associated with the position of President. The President shall perform other duties customarily associated with the office and shall also perform such other duties and have such other powers, as the Board (or the Chief Executive Officer, if the Chief Executive Officer and President are not the same person and the Board has delegated the designation of the President’s duties to the Chief Executive Officer) shall designate from time to time.

(d) Duties of Secretary and Assistant Secretary. The Secretary shall attend all meetings of the stockholders and of the Board and shall record, or cause to be recorded, all acts, votes and proceedings thereof in the minute books of the Corporation. The Secretary shall give, or cause to be given, notice in conformity with the Bylaws of all meetings of the stockholders and of all meetings of the Board and any committee thereof requiring notice. The Secretary shall perform all other duties provided for in the Bylaws and other duties customarily associated with the office and shall also perform such other duties and have such other powers, as the Board or the Chief Executive Officer, or if no Chief Executive Officer is then


serving, the President shall designate from time to time. The Chief Executive Officer, or if no Chief Executive Officer is then serving, the President may direct any Assistant Secretary or other officer to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties customarily associated with the office and shall also perform such other duties and have such other powers as the Board or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President shall designate from time to time.

(e) Duties of the Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept the books of account of the Corporation in a thorough and proper manner and shall render statements of the financial affairs of the Corporation in such form and as often as required by the Board or the President. The Chief Financial Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board or the President shall designate from time to time. The Chief Executive Officer, or if no Chief Executive Officer is then serving, the President may direct the Treasurer, if any, or any Assistant Treasurer, or the Controller or any Assistant Controller to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each Controller and Assistant Controller shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board or the President shall designate from time to time.

(f) Duties of Treasurer and Assistant Treasurer. The Treasurer, subject to the order of the Board, shall have the custody of all funds and securities of the Corporation. The Treasurer shall perform other duties customarily associated with the office and shall also perform such other duties and have such other powers as the Board, the Chief Financial Officer, or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President shall designate from time to time. The Chief Financial Officer or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President may direct any Assistant Treasurer or other officer to assume and perform the duties of the Treasurer in the absence or disability of the Treasurer, and each Assistant Treasurer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board, the Chief Financial Officer, or the Chief Executive Officer, or if no Chief Executive Officer is then serving, the President shall designate from time to time.

Section 5.3 Delegation of Authority. The Board may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

Section 5.4 Resignations. Any officer may resign at any time by giving notice in writing or by electronic transmission to the Board, the Chair of the Board, the Chief Executive Officer, the President or the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the Corporation under any contract with the resigning officer.

Section 5.5 Removal. Any officer may be removed from office at any time, either with or without cause, by the Board, or by any duly authorized committee thereof or any officer upon whom such power of removal may have been conferred by the Board.


SECTION 6.

EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION

Section 6.1 Execution of Corporate Instruments. The Board may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute, sign or endorse on behalf of the Corporation any corporate instrument or document, or to sign on behalf of the Corporation the corporate name without limitation, or to enter into contracts on behalf of the Corporation, except where otherwise provided by applicable law or the Bylaws, and such execution or signature shall be binding upon the Corporation.

(a) All checks and drafts drawn on banks or other depositaries on funds to the credit of the Corporation or in special accounts of the Corporation shall be signed by such person or persons as the Board shall from time to time authorize so to do.

(b) Unless otherwise specifically determined by the Board or otherwise required by applicable law, the execution, signing or endorsement of any corporate instrument or document by or on behalf of the Corporation may be effected manually, by facsimile or (to the extent not prohibited by applicable law and subject to such policies and procedures as the Corporation may have in effect from time to time) by electronic signature.

(c) Unless authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

Section 6.2 Voting of Securities Owned by the Corporation. All stock and other securities of or interests in other corporations or entities owned or held by the Corporation for itself, or for other parties in any capacity, shall be voted, and all proxies and consents with respect thereto shall be executed, by the person or persons authorized so to do by resolution of the Board, or, in the absence of such authorization, by the Chair of the Board, the Chief Executive Officer, or the President.

SECTION 7.

SHARES OF STOCK

Section 7.1 Form and Execution of Certificates. The shares of the Corporation shall be represented by certificates, or shall be uncertificated if so provided by resolution or resolutions of the Board. Certificates for the shares of stock of the Corporation, if any, shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the Corporation represented by certificates shall be entitled to have a certificate signed by or in the name of the Corporation by any two authorized officers of the Corporation (including, without limitation, the Chair of the Board, the Chief Executive Officer, the President, the Treasurer, any Assistant Treasurer, the Secretary and any Assistant Secretary), certifying the number, and the class or series, of shares owned by such holder in the Corporation in certificated form. Any or all of the signatures on the certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue.

Section 7.2 Lost Certificates. The Corporation may issue a new certificate or certificates or uncertificated shares in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. The Corporation may require, as a condition


precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owner’s legal representative, to give the Corporation a bond (or other adequate security) sufficient to indemnify the Corporation against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen, or destroyed or the issuance of such new certificate(s) or uncertificated shares.

Section 7.3 Transfers.

(a) Transfers of record of shares of stock of the Corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and, in the case of stock represented by certificate, upon the surrender of a properly endorsed certificate or certificates for a like number of shares.

(b) The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes or series of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes or series owned by such stockholders in any manner not prohibited by the DGCL.

Section 7.4 Fixing Record Dates.

(a) In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, subject to applicable law, not be more than 60 nor less than ten days before the date of such meeting. If the Board so fixes a record date for determining the stockholders entitled to notice of any meeting of stockholders, such date shall also be the record date for determining the stockholders entitled to vote at such meeting, unless the Board determines, at the time it fixes the record date for determining the stockholders entitled to notice of such meeting, that a later date on or before the date of the meeting shall be the record date for determining the stockholders entitled to vote at such meeting. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determining the stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determining the stockholders entitled to vote in accordance with the provisions of this Section 7.4(a).

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

Section 7.5 Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.


Section 7.6 Additional Powers of the Board. In addition to, and without limiting, the powers set forth in the Bylaws, the Board shall have power and authority to make all such rules and regulations as it shall deem expedient concerning the issue, transfer, and registration of certificates for shares of stock of the Corporation, including the use of uncertificated shares of stock, subject to the provisions of the DGCL, other applicable law, the Certificate of Incorporation and the Bylaws. The Board may appoint and remove transfer agents and registrars of transfers, and may require all stock certificates to bear the signature of any such transfer agent and/or any such registrar of transfers.

SECTION 8.

OTHER SECURITIES OF THE CORPORATION

Section 8.1 Execution of Other Securities. All bonds, debentures and other corporate securities of the Corporation, other than stock certificates (covered in Section 7.1), may be signed by the Chair of the Board, the Chief Executive Officer, or the President, or such other person as may be authorized by the Board; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the Corporation or such other person as may be authorized by the Board, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the Corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the Corporation.

SECTION 9.

DIVIDENDS

Section 9.1 Declaration of Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation and applicable law, if any, may be declared by the Board. Dividends may be paid in cash, in property, or in shares of capital stock or other securities of the Corporation, subject to the provisions of the Certificate of Incorporation and applicable law.

Section 9.2 Dividend Reserve. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board from time to time, in its absolute discretion, determines proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose or purposes as the Board shall determine to be conducive to the interests of the Corporation, and the Board may modify or abolish any such reserve in the manner in which it was created.


SECTION 10.

FISCAL YEAR

Section 10.1 Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board and may be changed by the Board.

SECTION 11.

INDEMNIFICATION

Section 11.1 Indemnification of Directors, Officers, Employees and Other Agents.

(a) Directors and Officers. The Corporation shall indemnify to the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), any person who was or is made or is threatened to be made a party or is otherwise involved in a Proceeding, by reason of the fact that such person is or was a director or officer of the Corporation, or while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, whether the basis of such Proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving as a director or officer, against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, however, that the Corporation will not be required to indemnify or advance expenses to any director or officer in connection with any Proceeding (or part thereof) initiated by such person unless (i) the Proceeding (or part thereof) was authorized by the Board or (ii) the Proceeding (or part thereof) is initiated to enforce rights to indemnification or advancement of expenses as provided under subsection (d) of this Section 11.1 or is a compulsory counterclaim brought by such person.

Any reference to an officer of the Corporation in this Section 11.1 shall be deemed to refer exclusively to the Chief Executive Officer, President, Chief Financial Officer, Secretary, Treasurer and any other officer of the Corporation appointed by the Board pursuant to Section 5 of these Bylaws, and any reference to an officer of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be deemed to refer exclusively to an officer appointed by the board of directors or equivalent governing body of such other entity pursuant to the certificate of incorporation and bylaws or equivalent organizational documents of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. The fact that any person who is or was an employee of the Corporation or an employee of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, but not an officer thereof as described in the preceding sentence, has been given or has used the title of “Vice President” or any other title that could be construed to suggest or imply that such person is or may be such an officer of the Corporation or of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall not result in such person being constituted as, or being deemed to be, such an officer of the Corporation or of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise for purposes of this Section 11.1.

(b) Employees and Other Agents. The Corporation shall have power to indemnify and advance expenses to its employees and other agents to the fullest extent permitted by the DGCL.


(c) Expenses. The Corporation shall advance to any current or former director or officer of the Corporation, or to any person, who while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, prior to the final disposition of the Proceeding, promptly following request therefor, all expenses incurred by such person in defending (or participating as a witness in) any Proceeding referred to in Section 11.1(a), or in connection with a Proceeding brought to establish or enforce a right to indemnification or advancement of expenses under subsection (d) of this Section 11.1, provided, however, that any advancement of expenses incurred by a current or former director or officer in such director’s or officer’s capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) will be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it is ultimately determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified or entitled to advancement for such expenses under this Section 11.1 or otherwise.

(d) Enforcement. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and officers under this Section 11.1 will be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the Corporation and the director or officer. Any right to indemnification or advancement of expenses granted by this Section 11.1 to a current or former director or officer will be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advancement of expenses is denied, in whole or in part, (ii) no disposition of a claim for indemnification is made within 60 days of request therefor, or (iii) no disposition of a claim for an advance is made within 30 days of request therefor. The claimant in such enforcement action, if successful in whole or in part, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, will be entitled to be paid also the expense of prosecuting or defending the claim to the fullest extent permitted by the DGCL. In (i) any suit brought to enforce a right to indemnification hereunder (but not in a suit brought to enforce a right to an advancement of expenses) it shall be a defense that, and (ii) any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the DGCL. Neither the failure of the Corporation (including its Board, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because such person has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including its Board, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, will be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. In any suit brought by a current or former director or officer to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the director or officer is not entitled to be indemnified, or to such advancement of expenses, under this Section 11.1 or otherwise is on the Corporation.

(e) Non-Exclusivity of Rights. The rights conferred on any person by this Section 11.1 are not exclusive of any other right that such person may have or hereafter acquire under any applicable law, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding office. The Corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the DGCL.


(f) Survival of Rights. The rights conferred on any person by this Section 11.1 will continue as to a person who has ceased to be a director or officer and will inure to the benefit of the heirs, executors and administrators of such a person.

(g) Insurance. To the fullest extent permitted by the DGCL, the Corporation may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Section 11.1.

(h) Amendments. Any repeal or modification of this Section 11.1 is only prospective and does not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any Proceeding against any current or former director or officer of the Corporation.

(i) Saving Clause. If this Section 11 or any portion hereof is invalidated on any ground by any court of competent jurisdiction, then the Corporation will nevertheless indemnify and advance expenses to each director and officer to the full extent not prohibited by any applicable portion of this Section 11 that has not been invalidated, or by applicable law. If this Section 11 is invalid due to the application of the indemnification and advancement provisions of another jurisdiction, then the Corporation will indemnify and advance expenses to each director and officer to the full extent under applicable law.

(j) Certain Definitions. For the purposes of this Section 11, the following definitions apply:

 

  (1)

The term “Proceeding” is to be broadly construed and includes, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.

 

  (2)

The term “expenses” is to be broadly construed and includes, without limitation, court costs, attorneys’ fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.

 

  (3)

The term the “Corporation” includes, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger that, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, stands in the same position under the provisions of this Section 11 with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.

 

  (4)

References to “fines” include any excise taxes assessed on a person with respect to an employee benefit plan.

SECTION 12.

NOTICES

Section 12.1 Notices.

(a) Notice to Stockholders. Notice to stockholders of stockholder meetings shall be given as provided in Section 3.4. Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such stockholder, and except as otherwise required by applicable law, written notice to stockholders for purposes other than stockholder meetings may be sent by U.S. mail or courier service, facsimile or by electronic mail or other means of electronic transmission in accordance with Section 232 of the DGCL.


(b) Notice to Directors. Any notice required to be given to any director may be given by the method stated in subsection (a) or as otherwise provided in the Bylaws, with notice other than one that is delivered personally to be sent to such address or electronic mail address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known address or electronic mail address of such director.

(c) Affidavit of Mailing. An affidavit of notice, executed by a duly authorized and competent employee of the Corporation or its transfer agent appointed with respect to the class of stock affected, or other agent, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.

(d) Methods of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.

(e) Notice to Person with Whom Communication is Unlawful. Whenever notice is required to be given, under applicable law or any provision of the Certificate of Incorporation or Bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting that shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation is such as to require the filing of a certificate under any provision of the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

(f) Notice to Stockholders Sharing an Address. Except as otherwise prohibited under the DGCL, any notice given under the provisions of the DGCL, the Certificate of Incorporation or the Bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Such consent shall have been deemed to have been given if such stockholder fails to object in writing to the Corporation within 60 days of having been given notice by the Corporation of its intention to send the single notice. Any consent shall be revocable by the stockholder by written notice to the Corporation.

(g) Waiver. Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or the Bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or the Bylaws.


SECTION 13.

AMENDMENTS

Section 13.1 Amendments. Subject to the limitations set forth in Section 11.1(h) or the Certificate of Incorporation, the Board is expressly empowered to adopt, amend or repeal the Bylaws of the Corporation. The stockholders also shall have power to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by the Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock (as defined in the Certificate of Incorporation)), such action by stockholders shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class.

Exhibit 4.2

INVESTORS’ RIGHTS AGREEMENT

THIS INVESTORS’ RIGHTS AGREEMENT (this “Agreement”) is made as of August 29, 2023, by and among LB Pharmaceuticals Inc., a Delaware corporation (the “Company”), and each of the investors listed on Schedule A hereto, each of which is referred to in this Agreement as an “Investor”.

RECITALS

WHEREAS, certain of the Investors signatory hereto (the “Existing Investors”) hold shares of Series A Preferred Stock, shares of Series B Preferred Stock (each as defined below), and/or warrants to purchase shares of Common Stock (each, an “Existing Investor Warrant”), and possess certain registration rights, information rights, and/or inspection rights pursuant to Sections 5.10, 5.12, 5.13, and Exhibit A of a Subscription Agreement for such shares of Series A Preferred Stock and Existing Investor Warrant(s) (each, a “Series A Subscription Agreement”) or Sections 5.9, 5.11, 5.12, and Exhibit D of a Subscription Agreement for such shares of Series B Preferred Stock and Existing Investor Warrant(s) (each, a “Series B Subscription Agreement”), as applicable (such registration, information, and inspection rights, collectively, the “Prior Registration/Information Rights”); and

WHEREAS, the Existing Investors are holders of a majority of the total outstanding shares of Series A Preferred Stock that were purchased pursuant to the Series A Subscription Agreements and holders of a majority of the total outstanding shares of Series B Preferred Stock that were purchased pursuant to the Series B Subscription Agreements, and they desire to terminate the Prior Registration/Information Rights of all holders of shares of Series A Preferred Stock, shares of Series B Preferred Stock, and Existing Investor Warrants in accordance with Section 6.2 of the Series A Subscription Agreements and Section 6.2 of the Series B Subscription Agreements, and to accept the rights created pursuant to this Agreement in lieu of the Prior Registration/Information Rights; and

WHEREAS, certain of the Investors are parties to that certain Series C Preferred Stock Purchase Agreement of even date herewith by and among the Company and such Investors (the “Purchase Agreement”), under which certain of the Company’s and such Investors’ obligations are conditioned upon the execution and delivery of this Agreement by such Investors, the requisite Existing Investors, and the Company;

NOW, THEREFORE, the Existing Investors hereby agree that the Prior Registration/Information Rights of all holders of shares of Series A Preferred Stock, shares of Series B Preferred Stock, and Existing Investor Warrants are hereby terminated, and the parties to this Agreement further agree as follows:

1. Definitions. For purposes of this Agreement:

1.1 “Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including, without limitation, any general partner, managing member, officer, director or trustee of such Person, or any venture capital fund or other investment fund now or hereafter existing that is controlled by one (1) or more general partners, managing members or investment adviser of, or shares the same management company or investment adviser with, such Person.

 

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1.2 “Board of Directors” means the board of directors of the Company.

1.3 “Certificate of Incorporation” means the Company’s Fourth Amended and Restated Certificate of Incorporation, as amended and/or restated from time to time.

1.4 “Common Stock” means shares of the Company’s common stock, par value $0.0001 per share.

1.5 “Competitor” means a Person engaged, directly or indirectly (including through any partnership, limited liability company, corporation, joint venture or similar arrangement (whether now existing or formed hereafter)), in the development of a drug therapy to treat schizophrenia, but shall not include (i) any Major Investor described in clause (a) of that defined term or (ii) any financial investment firm or collective investment vehicle that, together with its Affiliates, holds less than twenty percent (20)% of the outstanding equity of any Competitor and does not, nor do any of its Affiliates, have a right to designate any members of the board of directors of any Competitor.

1.6 “Damages” means any loss, damage, claim or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, claim or liability (or any action in respect thereof) arises out of or is based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.

1.7 “Derivative Securities” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including options and warrants.

1.8 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

1.9 “Excluded Registration” means (i) a registration relating to the sale or grant of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, equity incentive or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

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1.10 “FOIA Party” means a Person that, in the reasonable determination of the Board of Directors, may be subject to, and thereby required to disclose non-public information furnished by or relating to the Company under, the Freedom of Information Act, 5 U.S.C. 552 (“FOIA”), any state public records access law, any state or other jurisdiction’s laws similar in intent or effect to FOIA, or any other similar statutory or regulatory requirement.

1.11 “Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

1.12 “Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits forward incorporation of substantial information by reference to other documents filed by the Company with the SEC.

1.13 “GAAP” means generally accepted accounting principles in the United States as in effect from time to time.

1.14 “Holder” means any holder of Registrable Securities who is a party to this Agreement.

1.15 “Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, life partner or similar statutorily-recognized domestic partner, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships of a natural person referred to herein.

1.16 “Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.

1.17 “IPO” means the Company’s first underwritten public offering of its Common Stock under the Securities Act.

1.18 “Major Investor” means (a) each of Deep Track Biotechnology Master Fund, Ltd. (“Deep Track Capital”), Vida Ventures III, L.P. and Vida Ventures III-A, L.P. (collectively, “Vida”), Pontifax (Israel) VI Limited Partnership, Pontifax (Cayman) VI Limited Partnership, and TCG Crossover Fund II, L.P., for so long as such Investor, individually or together with such Investor’s Affiliates, continues to hold at least forty percent (40%) of the shares of Series C Preferred Stock that it purchased pursuant to the Purchase Agreement (or the shares of Common Stock issuable upon conversion thereof), and (b) any other Investor that, individually or together with such Investor’s Affiliates, holds at least 725,000 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof); provided that no Defaulting Purchaser (as defined in the Purchase Agreement) shall be a Major Investor.

1.19 “New Securities” means, collectively, equity securities of the Company, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities.

 

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1.20 “Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

1.21 “Preferred Director” means any director of the Company that the holders of record of the Series C Preferred Stock are entitled to elect, exclusively and as a separate class, pursuant to the Certificate of Incorporation.

1.22 “Preferred Stock” means, collectively, shares of the Company’s Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock.

1.23 “Registrable Securities” means (i) the Common Stock issuable or issued upon conversion of the Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock; (ii) any Common Stock issued or issuable (directly or indirectly) upon exercise of any Existing Investor Warrant; (iii) any Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company, acquired by the Investors after the date hereof; and (iv) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced above; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Section 6.1, and excluding for purposes of Section 2 any shares for which registration rights have terminated pursuant to Section 2.13 of this Agreement; provided that notwithstanding anything herein to the contrary, “Registrable Securities” does not include any Common Stock issued upon conversion of the Series C Preferred Stock pursuant to the “Special Mandatory Conversion” provisions of the Certificate of Incorporation (the “Special Mandatory Conversion Shares”) or any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, any Special Mandatory Conversion Shares.

1.24 “Registrable Securities then outstanding” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.

1.25 “Restricted Securities” means the securities of the Company required to be notated with the legend set forth in Section 2.12(b) hereof.

1.26 “SEC” means the Securities and Exchange Commission.

1.27 “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

1.28 “SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.

1.29 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

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1.30 “Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Section 2.6.

1.31 “Series A Preferred Stock” means shares of the Company’s Series A Preferred Stock, par value $0.0001 per share.

1.32 “Series B Preferred Stock” means shares of the Company’s Series B Preferred Stock, par value $0.0001 per share.

1.33 “Series C Preferred Stock” means shares of the Company’s Series C Preferred Stock, par value $0.0001 per share.

2. Registration Rights. The Company covenants and agrees as follows:

2.1 Demand Registration.

(a) Form S-1 Demand. If at any time after one hundred eighty (180) days after the effective date of the registration statement for the IPO, the Company receives a request from Holders of sixty percent (60%) of the Registrable Securities then outstanding (but excluding for purposes of calculating such percentage all Common Stock issuable or issued upon conversion of the Series A Preferred Stock and Series B Preferred Stock) that the Company file a Form S-1 registration statement with respect to such portion of the Registrable Securities then outstanding having an anticipated aggregate offering price, net of Selling Expenses, that would equal or exceed $15,000,000, then the Company shall: (x) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (y) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1(c) and 2.3.

(b) Form S-3 Demand. If at any time when it is eligible to use a Form S-3 registration statement, the Company receives a request from Holders of Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $3,000,000, then the Company shall (i) within ten (10) days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Sections 2.1(c) and 2.3.

 

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(c) Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than one hundred twenty (120) days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period.

(d) The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a), (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (ii) after the Company has effected one (1) registration pursuant to Section 2.1(a); or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 2.1(b). The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(b), (i) during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or (ii) if the Company has effected two (2) registrations pursuant to Section 2.1(b) within the twelve (12) month period immediately preceding the date of such request. A registration shall not be counted as “effected” for purposes of this Section 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Section 2.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 2.1(d); provided, that if such withdrawal is during a period the Company has deferred taking action pursuant to Section 2.1(c), then the Initiating Holders may withdraw their request for registration and such registration will not be counted as “effected” for purposes of this Section 2.1(d).

2.2 Company Registration. If the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration or the IPO), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities that each such

 

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Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.6.

2.3 Underwriting Requirements.

(a) If, pursuant to Section 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.1, and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 2.4(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Section 2.3, if the managing underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares.

(b) In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions

 

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as shall mutually be agreed to by all such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares. Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the number of Registrable Securities included in the offering be reduced below thirty percent (30%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering. For purposes of the provision in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

(c) For purposes of Section 2.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 2.3(a), fewer than fifty percent (50%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

2.4 Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration;

(b) prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

(c) furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

 

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(d) use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

(f) use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

(g) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

(h) promptly make available for inspection by the selling Holders, any managing underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;

(i) notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and

(j) after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, its insider trading policy shall provide that the Company’s directors may implement a trading program under Rule 10b5-1 of the Exchange Act.

2.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.

 

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2.6 Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements, not to exceed $30,000 per registration, of one counsel for the selling Holders (“Selling Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Sections 2.1(a) or 2.1(b), as the case may be; provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Sections 2.1(a) or 2.1(b). All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 (other than fees and disbursements of counsel to any Holder, other than the Selling Holder Counsel, which shall be borne solely by the Holder engaging such counsel) shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

2.7 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

2.8 Indemnification. If any Registrable Securities are included in a registration statement under this Section 2:

(a) To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.

 

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(b) To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Section 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

(c) Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8, only to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.8.

(d) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either: (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.8, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is

 

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appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Section 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Section 2.8(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.

(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control; provided, however, that any matter expressly provided for or addressed by the foregoing provisions that is not expressly provided for or addressed by the underwriting agreement shall be controlled by the foregoing provisions.

(f) Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement or any provision(s) of this Agreement.

2.9 Reports Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:

(a) make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO;

(b) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

 

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(c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the registration statement filed by the Company for the IPO), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); and (ii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).

2.10 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder to include such securities in any registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the number of the Registrable Securities of the Holders that are included; provided that this limitation shall not apply to Registrable Securities acquired by any additional Investor that becomes a party to this Agreement in accordance with Section 6.9.

2.11 “Market Stand-off” Agreement. Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company of shares of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-1, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days): (i) lend; 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; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held immediately before the effective date of the registration statement for such offering or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 2.11 shall apply only to the IPO, shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement and shall be applicable to the Holders only if all officers and directors are subject to the same restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually owning more than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock). The underwriters in connection with such registration are intended third-party beneficiaries of this Section 2.11 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 2.11 or that are necessary to give further effect thereto. Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply pro rata to all Company stockholders that are subject to such agreements, based on the number of shares subject to such agreements.

 

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2.12 Restrictions on Transfer.

(a) The Preferred Stock, the Registrable Securities, and the Existing Investor Warrants shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Preferred Stock, the Registrable Securities, and the Existing Investor Warrants held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement. Notwithstanding the foregoing, the Company shall not require any transferee of shares pursuant to an effective registration statement or, following the IPO, SEC Rule 144, in each case, to be bound by the terms of this Agreement.

(b) Each certificate, instrument, or book entry representing (i) the Preferred Stock, (ii) the Registrable Securities, (iii) the Existing Investor Warrants, and (iv) any other securities issued in respect of the securities referenced in clauses (i), (ii), and (iii), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Section 2.12(c)) be notated with a legend substantially in the following form:

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Section 2.12.

(c) The holder of such Restricted Securities, by acceptance of ownership thereof, agrees to comply in all respects with the provisions of this Section 2. Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction or following the IPO, the transfer is made pursuant to SEC Rule 144, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer; provided that no such notice shall be required in connection if the intended sale, pledge or transfer complies with SEC Rule 144. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer

 

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in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a notice, legal opinion or “no action” letter (x) in any transaction in compliance with SEC Rule 144; or (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided that with respect to transfers under the foregoing clause (y), each transferee agrees in writing to be subject to the terms of this Section 2.12. Each certificate, instrument, or book entry representing the Restricted Securities transferred as above provided shall be notated with, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 2.12(b), except that such certificate instrument, or book entry shall not be notated with such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.

(d) Until the sooner of (x) 15 business days after the Second Closing (as defined in the Purchase Agreement) or (y) such date as the Company acknowledges to the “Required Purchasers” named in the Purchase Agreement that the Second Closing Condition will not be met, no Required Purchaser may transfer any shares of Series C Preferred Stock held by it unless the proposed transferee shall have agreed in writing (the form and provisions of which shall be reasonably satisfactory to the Company) that (i) it undertakes all obligations of the Required Purchaser under the Purchase Agreement and (ii) it agrees to abide by the consequences of failing to participate in the Second Closing if required under the Purchase Agreement, including all consequences of being deemed a Defaulting Purchaser (as defined in the Purchase Agreement).

2.13 Termination of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Sections 2.1 or 2.2 shall terminate upon the earliest to occur of:

(a) the closing of a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation;

(b) such time after consummation of the IPO as SEC Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder’s shares without limitation, during a three (3)-month period without registration;

(c) the third (3rd) anniversary of the IPO.

 

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3. Information and Observer Rights.

3.1 Delivery of Financial Statements. The Company shall deliver to each Major Investor, provided that the Board of Directors has not reasonably determined that such Major Investor is a Competitor of the Company:

(a) as soon as practicable, but in any event within one hundred eighty (180) days after the end of each fiscal year of the Company (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and (iii) a statement of stockholders’ equity as of the end of such year, all such financial statements audited and certified by independent public accountants of nationally or regionally recognized standing selected by the Company;

(b) as soon as practicable, but in any event within ninety (90) days after the end of each quarter of each fiscal year of the Company, unaudited statements of income and cash flows for such fiscal quarter, and an unaudited balance sheet, and a comparison between (x) the actual amounts as of and for such fiscal quarter and (y) the comparable amounts for the prior fiscal quarter and as included in the Budget (as defined in Section 3.1(c)) for such fiscal quarter, and a statement of stockholders’ equity as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments; and (ii) not contain all notes thereto that may be required in accordance with GAAP); and

(c) as soon as practicable, but in any event thirty (30) days before the end of each fiscal year, a budget and business plan for the next fiscal year, prepared on a monthly basis, including balance sheets, income statements, and statements of cash flow for such months and, promptly after prepared, any other budgets or revised budgets prepared by the Company (such budget and business plan that is approved by the Board of Directors is collectively referred to herein as the “Budget”).

If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.

Notwithstanding anything else in this Section 3.1 to the contrary, the Company may cease providing the information set forth in this Section 3.1 during the period starting with the date sixty (60) days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering; provided that the Company’s covenants under this Section 3.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.

3.2 Inspection. The Company shall permit each Major Investor (provided that the Board of Directors has not reasonably determined that such Major Investor is a Competitor of the Company), at such Major Investor’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably requested by the Major Investor; provided, however, that the Company shall not be obligated pursuant to this Section 3.2 to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

 

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3.3 Observer Rights.

(a) As long as Deep Track Capital owns not less than forty percent (40%) of the shares of the Series C Preferred Stock it has purchased under the Purchase Agreement, the Company shall invite a representative of Deep Track Capital to attend all meetings of the Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at substantially the same time and in substantially the same manner as provided to such directors; provided, however, that such representative shall agree to hold in confidence all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest, or if such Investor or its representative is a Competitor of the Company.

(b) As long as Vida owns not less than forty percent (40%) of the shares of the Series C Preferred Stock it has purchased under the Purchase Agreement, the Company shall invite a representative of Vida to attend all meetings of the Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors at substantially the same time and in substantially the same manner as provided to such directors; provided, however, that such representative shall agree to hold in confidence all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest, or if such Investor or its representative is a Competitor of the Company

3.4 Termination of Information and Observer Rights. The covenants set forth in Section 3.1, Section 3.2, and Section 3.3 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon the closing of a Deemed Liquidation Event; provided that such covenants shall terminate and be of no further force or effect with respect to any Investor that becomes a Defaulting Purchaser.

3.5 Confidentiality. Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor or make decisions with respect to its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 3.5 by such Investor), (b) is or has been independently developed or conceived by such Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to such

 

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Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent reasonably necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Section 3.5, provided that the Board of Directors has not reasonably determined that such prospective purchaser is a Competitor of the Company; (iii) to any Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (iv) as may otherwise be required by law, regulation, rule, court order or subpoena, provided that such Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.

4. Rights to Future Stock Issuances.

4.1 Right of First Offer. Subject to the terms and conditions of this Section 4.1 and applicable securities laws, if the Company proposes to offer or sell any New Securities, the Company shall first offer such New Securities to each Major Investor. A Major Investor shall be entitled to apportion the right of first offer hereby granted to it in such proportions as it deems appropriate, among (i) itself, and (ii) its Affiliates; provided that each such Affiliate or Investor Beneficial Owner (x) is not a Competitor or FOIA Party, unless such party’s purchase of New Securities is otherwise consented to by the Board of Directors, and (y) agrees to enter into this Agreement and the Voting Agreement of even date herewith among the Company, the Investors and the other parties named therein, as an “Investor” under each such agreement (provided that any Competitor or FOIA Party shall not be entitled to any rights as a Major Investor under Sections 3.1, 3.2 and 4.1 hereof).

(a) The Company shall give notice (the “Offer Notice”) to each Major Investor, stating (i) its bona fide intention to offer such New Securities, (ii) the number of such New Securities to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such New Securities.

(b) By notification to the Company within twenty (20) days after the Offer Notice is given, each Major Investor may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities which equals the proportion that the Common Stock then held by such Major Investor (including all shares of Common Stock then issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held by such Major Investor) bears to the total Common Stock of the Company then outstanding (assuming full conversion and/or exercise, as applicable, of all Preferred Stock and any other Derivative Securities then outstanding). At the expiration of such twenty (20) day period, the Company shall promptly notify each Major Investor that elects to purchase or acquire all the shares available to it (each, a “Fully Exercising Investor”) of any other Major Investor’s failure to do likewise. During the ten (10) day period commencing after the Company has given such notice, each Fully Exercising Investor may, by giving notice to the Company, elect to purchase or acquire, in addition to the number of shares specified above, up to that portion of the New Securities for which Major

 

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Investors were entitled to subscribe but that were not subscribed for by the Major Investors which is equal to the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of Preferred Stock and any other Derivative Securities then held, by such Fully Exercising Investor bears to the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held, by all Fully Exercising Investors who wish to purchase such unsubscribed shares. The closing of any sale pursuant to this Section 4.1(b) shall occur within the later of ninety (90) days of the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to Section 4.1(c).

(c) If all New Securities referred to in the Offer Notice are not elected to be purchased or acquired as provided in Section 4.1(b), the Company may, during the one hundred twenty (120) day period following the expiration of the periods provided in Section 4.1(b), offer and sell the remaining unsubscribed portion of such New Securities to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the New Securities within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to the Major Investors in accordance with this Section 4.1.

(d) The right of first offer in this Section 4.1 shall not be applicable to (i) Exempted Securities (as defined in the Certificate of Incorporation); (ii) shares of Common Stock issued in the IPO; and (iii) the issuance of shares of Series C Preferred Stock pursuant to Section 1.2(b) of the Purchase Agreement.

4.2 Termination. The covenants set forth in Section 4.1 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, or (ii) upon the closing of a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation; provided that such covenants shall terminate and be of no further force or effect with respect to any Investor that becomes a Defaulting Purchaser.

5. Additional Covenants.

5.1 Insurance. The Company shall obtain, within ninety (90) days of the date hereof, from a financially sound and reputable insurer Directors and Officers liability insurance in an amount and on terms and conditions satisfactory to the Board of Directors, and will use commercially reasonable efforts to cause such insurance policy to be maintained until such time as the Board of Directors determines that such insurance should be discontinued. Notwithstanding any other provision of this Section 5.1 to the contrary, for so long as a Preferred Director is serving on the Board of Directors, the Company shall not cease to maintain a Directors and Officers liability insurance policy in an amount of at least $3,000,000 unless approved by such Preferred Director and shall annually, within one hundred twenty (120) days after the end of each fiscal year of the Company, deliver to the Investors a certification that such a Directors and Officers liability insurance policy remains in effect.

 

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5.2 Employee Agreements. Unless otherwise approved by the Board of Directors, the Company will cause each Person now or hereafter employed by it or by any subsidiary (or engaged by the Company or any subsidiary as a consultant/independent contractor) with access to confidential information and/or trade secrets to enter into a nondisclosure, proprietary rights assignment and non-solicitation agreement. In addition, the Company shall not amend, modify, terminate, waive, or otherwise alter, in whole or in part, any of the above-referenced agreements or any restricted stock agreement between the Company and any employee, without the consent of the Board of Directors.

5.3 Employee Stock. Unless otherwise approved by the Board of Directors, all employees of the Company who purchase, receive options to purchase, or receive awards of shares of the Company’s capital stock after the date hereof shall be required to execute restricted stock or option agreements, as applicable, providing for a market stand-off provision substantially similar to that in Section 2.11. Without the prior approval by the Board of Directors, the Company shall not amend, modify, terminate, waive or otherwise alter, in whole or in part, any stock purchase, stock restriction or option agreement with any existing employee or service provider if such amendment would cause it to be inconsistent with this Section 5.3. In addition, unless otherwise approved by the Board of Directors, the Company shall retain (and not waive) a “right of first refusal” on employee transfers until the Company’s IPO and shall have the right to repurchase unvested shares at cost upon termination of employment of a holder of restricted stock.

5.4 Matters Requiring Preferred Director Approval. During such time or times as the holders of Series C Preferred Stock are entitled to elect a Preferred Director and such seat is filled, the Company hereby covenants and agrees with each of the Investors that it shall not, without approval of the Board of Directors, which approval must include the vote of at least two of the Preferred Directors:

(a) make, or permit any subsidiary to make, any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Company;

(b) make, or permit any subsidiary to make, any loan or advance to any Person, including, without limitation, any employee or director of the Company or any subsidiary, except advances and similar expenditures in the ordinary course of business or under the terms of an employee stock or option plan approved by the Board of Directors;

(c) guarantee, directly or indirectly, or permit any subsidiary to guarantee, directly or indirectly, any indebtedness except for trade accounts of the Company or any subsidiary arising in the ordinary course of business;

(d) make any investment inconsistent with any investment policy approved by the Board of Directors;

(e) incur any aggregate indebtedness in excess of $500,000 that is not already included in the Budget (as defined in Section 3.1(c)), other than trade credit incurred in the ordinary course of business;

 

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(f) hire, terminate, or change the compensation of the executive officers, including approving any option grants or stock awards to executive officers;

(g) change the principal business of the Company, enter new lines of business, or exit the current line of business;

(h) sell, assign, license, pledge, or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business; or

(i) enter into any corporate strategic relationship involving the payment, contribution, or assignment by the Company or to the Company of money or assets greater than $1,000,000.

5.5 Board Matters. The Company shall reimburse the nonemployee directors and the observers serving pursuant to Section 3.3 for all reasonable out-of-pocket expenses (including airfare) incurred (consistent with the Company’s expense reimbursement policy) in connection with acting on behalf of and with the approval of the Company, including attending meetings of the Board of Directors. Each Series C Director (as defined in the Certificate of Incorporation) shall be entitled in such person’s discretion to be a member of all committees of the Board of Directors.

5.6 Successor Indemnification. If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of the Company with respect to indemnification of members of the Board of Directors as in effect immediately before such transaction, whether such obligations are contained in the Company’s Bylaws, the Certificate of Incorporation, or elsewhere, as the case may be.

5.7 Indemnification Matters. The Company hereby acknowledges that one (1) or more of the Preferred Directors nominated to serve on the Board of Directors by one (1) or more Investors may have certain rights to indemnification, advancement of expenses and/or insurance provided by one (1) or more of the Investors and certain of their Affiliates (collectively, the “Investor Indemnitors”). The Company hereby agrees (a) that it is the indemnitor of first resort (i.e., its obligations to any such Preferred Director are primary and any obligation of the Investor Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Preferred Director are secondary), (b) that it shall be required to advance the full amount of expenses incurred by such Preferred Director and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement by or on behalf of any such Preferred Director to the extent legally permitted and as required by the Certificate of Incorporation or Bylaws of the Company (or any agreement between the Company and such Preferred Director), without regard to any rights such Preferred Director may have against the Investor Indemnitors, and, (c) that it irrevocably waives, relinquishes and releases the Investor Indemnitors from any and all claims against the Investor Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Investor Indemnitors on behalf of any such Preferred Director with respect to any claim for which such Preferred Director has sought indemnification from the Company shall affect the foregoing and the Investor Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Preferred Director against the Company. The Preferred Directors and the Investor Indemnitors are intended third-party beneficiaries of this Section 5.7 and shall have the right, power and authority to enforce the provisions of this Section 5.7 as though they were a party to this Agreement.

 

21


5.8 Right to Conduct Activities. The Company hereby agrees and acknowledges that each of Deep Track Capital, Vida, Pontifax (Israel) VI Limited Partnership, Pontifax (Cayman) VI Limited Partnership, and TCG Crossover Fund II, L.P. (each, a “Professional Investment Fund”) (together with its Affiliates) is a professional investment organization, and as such reviews the business plans and related proprietary information of many enterprises, some of which may compete directly or indirectly with the Company’s business (as currently conducted or as currently propose to be conducted). The Company hereby agrees that, to the extent permitted under applicable law, none of the Professional Investment Funds (or its Affiliates) shall be liable to the Company for any claim arising out of, or based upon, (i) the investment by such Professional Investment Fund (or its Affiliates) in any entity competitive with the Company, or (ii) actions taken by any partner, officer, employee or other representative of such Professional Investment Fund (or its Affiliates) to assist any such competitive company, whether or not such action was taken as a member of the board of directors of such competitive company or otherwise, and whether or not such action has a detrimental effect on the Company; provided, however, that the foregoing shall not relieve (x) any of the Investors from liability associated with the unauthorized disclosure of the Company’s confidential information obtained pursuant to this Agreement, or (y) any director or officer of the Company from any liability associated with his or her fiduciary duties to the Company.

5.9 Anti-Harassment Policy. The Company shall, within sixty (60) days following the Initial Closing (as defined in the Purchase Agreement), adopt and thereafter maintain in effect (i) a code of conduct governing appropriate workplace behavior and (ii) an anti-harassment and discrimination policy prohibiting discrimination and harassment at the Company. Such policy shall be reviewed and approved by the Board of Directors.

5.10 Cybersecurity. The Company shall, within one hundred eighty (180) days following the Initial Closing (as defined in the Purchase Agreement), use commercially reasonable efforts to (a) identify and restrict access (including through physical and/or technical controls) to the Company’s confidential business information and trade secrets and any information about identified or identifiable natural persons maintained by or on behalf of the Company (collectively, “Protected Data”) to those individuals who have a need to access it and (b) implement reasonable physical, technical and administrative safeguards designed to protect the confidentiality, integrity and availability of its technology and systems (including servers, laptops, desktops, cloud, containers, virtual environments and data centers) and all Protected Data. The Company shall evaluate on a periodic basis at least annually whether such safeguards should be updated to maintain a level of security appropriate to the risk posed to Company systems and Protected Data. The Company shall educate its employees about the proper use and storage of Protected Data, including periodic training as determined reasonably necessary by the Company or the Board of Directors.

 

22


5.11 Termination of Covenants. The covenants set forth in this Section 5, except for Sections 5.6 and 5.7, shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, or (ii) upon a Deemed Liquidation Event, as such term is defined in the Certificate of Incorporation, whichever event occurs first.

6. Miscellaneous.

6.1 Successors and Assigns. The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (i) is an Affiliate of a Holder; (ii) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one (1) or more of such Holder’s Immediate Family Members; or (iii) after such transfer, holds at least 200,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations, and other recapitalizations); provided, however, that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 2.11. For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate or stockholder of a Holder; (2) who is a Holder’s Immediate Family Member; or (3) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall, as a condition to the applicable transfer, establish a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

6.2 Governing Law. This Agreement shall be governed by the internal law of the State of Delaware, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Delaware.

6.3 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, 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.

6.4 Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

 

23


6.5 Notices.

(a) All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or (as to the Company) to the principal office of the Company and to the attention of the Chief Executive Officer, or in any case to such email address or address as subsequently modified by written notice given in accordance with this Section 6.5. If notice is given to the Company, a copy (which copy shall not constitute notice) shall also be sent to Williams Mullen, 200 South 10th Street, Suite 1600, Richmond, Virginia 23219, Attn: Andrew White, Email: awhite@williamsmullen.com, and if notice is given to Investors, a copy (which copy shall not constitute notice) shall also be given to Schulte Roth & Zabel LLP, 919 Third Avenue, New York, NY 10022, Attn: Michael Flynn, Email: michael.flynn@srz.com.

(b) Consent to Electronic Notice. Each Investor consents to the delivery of any stockholder notice pursuant to the Delaware General Corporation Law (the “DGCL”), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (or any successor thereto) at the electronic mail address set forth below such Investor’s name on the Schedules hereto, as updated from time to time by notice to the Company, or as on the books of the Company. To the extent that any notice given by means of electronic transmission is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected electronic mail address has been provided, and such attempted electronic notice shall be ineffective and deemed to not have been given. Each Investor agrees to promptly notify the Company of any change in such stockholder’s electronic mail address, and that failure to do so shall not affect the foregoing.

6.6 Amendments and Waivers. Any term of this Agreement may be amended, modified or terminated and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of at least sixty percent (60%) of the Registrable Securities then outstanding; provided that the Company may in its sole discretion waive compliance with Section 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Section 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing: (a) this Agreement may not be amended, modified or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, modification, termination, or waiver applies to all Investors in the same fashion (it being agreed that a waiver of the provisions of Section 4 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase

 

24


securities in such transaction); (b) Sections 3.1 and 3.2, Section 4 and any other section of this Agreement applicable to the Major Investors (including this clause (b) of this Section 6.6) may be amended, modified, terminated or waived with only the written consent of the Company and the holders of at least sixty percent (60%) of the Registrable Securities then outstanding and held by the Major Investors; (c) Section 3.3(a) and this clause (c) of this Section 6.6 may be amended, modified, terminated or waived with only the written consent of the Company and Deep Track Capital for so long as it owns not less than forty percent (40%) of the shares of the Series C Preferred Stock it has purchased under the Purchase Agreement; and (d) Section 3.3(b) and this clause (d) of this Section 6.6 may be amended, modified, terminated or waived with only the written consent of the Company and Vida for so long as it owns not less than forty percent (40%) of the shares of the Series C Preferred Stock it has purchased under the Purchase Agreement. Notwithstanding the foregoing, Schedule A hereto may be amended by the Company from time to time to add transferees of any Registrable Securities in compliance with the terms of this Agreement without the consent of the other parties; and Schedule A hereto may also be amended by the Company after the date of this Agreement without the consent of the other parties to add information regarding any additional Investor who becomes a party to this Agreement in accordance with Section 6.9. The Company shall give prompt notice of any amendment, modification or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, modification, termination, or waiver. Any amendment, modification, termination, or waiver effected in accordance with this Section 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one (1) or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

6.7 Severability. In case any one (1) or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

6.8 Aggregation of Stock; Apportionment. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated Persons may apportion such rights as among themselves in any manner they deem appropriate.

6.9 Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of Series C Preferred Stock after the date hereof, any purchaser of such shares of Series C Preferred Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed an “Investor” for all purposes hereunder. No action or consent by the Investors shall be required for such joinder to this Agreement by such additional Investor, so long as such additional Investor has agreed in writing to be bound by all of the obligations as an “Investor” hereunder.

 

25


6.10 Entire Agreement. This Agreement (including any Schedules hereto) together with the other Transaction Documents (as defined in the Purchase Agreement), constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled. Upon the effectiveness of this Agreement, the Prior Registration/Information Rights of all holders of shares of Series A Preferred Stock, shares of Series B Preferred Stock, and Existing Investor Warrants shall be deemed terminated and shall be of no further force or effect.

6.11 Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Delaware and to the jurisdiction of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of Delaware or the United States District Court for the District of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.

WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

6.12 Attorneys’ Fees. If any action at law or in equity (including, arbitration) is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

6.13 Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or non-defaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

[Signature Page Follows]

 

26


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

COMPANY:     LB Pharmaceuticals Inc
    By:  

/s/ Zachary Prensky

    Name:   Zachary Prensky
    Title:   President & CEO

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

INVESTOR:

 

DEEP TRACK BIOTECHNOLOGY MASTER FUND, LTD.
By:  

/s/ Nir Messafi

Name:   Nir Messafi
  (print)
Title:   Authorized Person

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

INVESTOR:

 

VIDA VENTURES III, L.P.
By: Vida Ventures GP III, L.L.C., its general partner
By:  

/s/ Rajul Jain

Name:   Rajul Jain
  (print)
Title:   Managing Director
VIDA VENTURES III-A, L.P.
By: Vida Ventures GP III, L.L.C., its general partner
By:  

/s/ Rajul Jain

Name:   Rajul Jain
  (print)
Title:   Managing Director

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

INVESTOR:

 

PONTIFAX (ISRAEL) VI LIMITED PARTNERSHIP
By:  

/s/ Tomar Kariv

Name:   Tomar Kariv
  (print)
Title:   CEO
PONTIFAX (CAYMAN) VI LIMITED PARTNERSHIP
By:  

/s/ Tomar Kariv

Name:   Tomar Kariv
  (print)
Title:   CEO

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

INVESTOR:

 

TCG CROSSOVER FUND II, L.P.
By: TCG Crossover GP II, LLC, its General Partner
By:  

/s/ Chen Yu

Name:   Chen Yu
  (print)
Title:   Managing Partner

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
      Alalia PTY LTD Trustees of the Alalia PTY
      LTD ATF McNamee Family Trust U/A/D
      8/17/05, AMD 8/23/16
     

 

      Name of Entity or Trust
      By:  

/s/ William Anthony McNamee

      Name:   William Anthony McNamee
      Title:   Director

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
      Bahr Family Limited Partnership
     

 

      Name of Entity or Trust
      By:  

/s/ Robert Bahr

      Name:   Robert Bahr
      Title:   Trustee of the General Partner

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Robert Bahr

         Print Name:  

Robert Bahr

    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
      Ballycurnane Holdings Limited
     

 

      Name of Entity or Trust
      By:  

/s/ Alan Duggan

      Name:   Alan Duggan
      Title:   Mr

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Gretchen Barlow Alexander & Alexander George

         Print Name:   Gretchen Barlow Alexander & Alexander George
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ vamsi Batthula

         Print Name:   vamsi Batthula
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Simon Berring

         Print Name:   Simon Berring
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Marek Biestek

         Print Name:   Marek Biestek
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Joseph R. Bishop III

         Print Name:   Joseph R. Bishop III
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
     

Friedhelm Blobel & Karin Blobel, Trustees of the Blobel Family 2003 Trust U/A/D 11/13/03

      Name of Entity or Trust
      By:  

/s/ Friedhelm Blobel

      Name:   Friedhelm Blobel
      Title:   Trustee

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ GIdeon Bollag

         Print Name:   GIdeon Bollag
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Charles Brinkley

         Print Name:   Charles Brinkley
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Elena Bruck

         Print Name:   Elena Bruck
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Alexis Campagna

         Print Name:   Alexis Campagna
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Eric Prescott Campbell

         Print Name:   Eric Prescott Campbell
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Orlando Campopiano

         Print Name:   Orlando Campopiano
    If an Entity or Trust:
     
      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Declan Cassidy

         Print Name:   Declan cassidy
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Philip Cibulsky

         Print Name:   Philip Cibulsky
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Shmuel Ciner

         Print Name:   Shmuel Ciner
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:    

If an Individual:

         Signature:  

/s/ Michael Cohn & Paula Cohn

      Print Name:   Michael Cohn & Paula Cohn
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

 

      Print Name:  

 

    If an Entity or Trust:
      Coleman Family Protection Trust
     

 

      Name of Entity or Trust
      By:  

/s/ Mark Coleman

      Name:   Mark Coleman
      Title:   MD

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

/s/ Anthony Daulerio

      Print Name:   Anthony Daulerio
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Gwendoline & Hesham Elnaggar

         Print Name:   Gwendoline & Hesham Elnaggar
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

/s/ Lawrence Fridkis

      Print Name:   Lawrence Fridkis
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ David Frydrych

         Print Name:   David Frydrych
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Robert Garff

         Print Name:   Robert Garff
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
     

Morris Garfinkle & Stephanie Garfinkle,

Trustees of the Garfinkle Revocable Trust

U/A/D 5/15/08

     

 

      Name of Entity or Trust
      By:  

/s/ Morris Garfinkle

      Name:   Morris Garfinkle
      Title:   Trustee

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Albert Gentile & Hiedi Gentile

         Print Name:   Albert Gentile & Hiedi Gentile
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
      Gillard Family Intervivos Trust UAD 06/16/93
      Stuart Gillard & Marilyn Gillard TTEES AMD
      11/06/17  
     

 

      Name of Entity or Trust
      By:  

/s/ Stuart Gillard

      Name:   Stuart Gillard
      Title:   trustee

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Daniel Gologorsky

         Print Name:   Daniel Gologorsky
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Steven & Helane Goodman

         Print Name:   Steven & Helane Goodman
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Richard A Graham

         Print Name:   Richard A Graham
    If an Entity or Trust:
     
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

/s/ Daniel Grellner

      Print Name:   Daniel Grellner
    If an Entity or Trust:
     
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

/s/ Greg Guarasci

      Print Name:   Greg Guarasci
    If an Entity or Trust:
     
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

 

      Print Name:  

 

    If an Entity or Trust:
      Gundyco ITF Orca Capital GMBH
     
 

Name of Entity or Trust

      By:  

/s/ Bettina Schroedl

      Name:   Bettina Schroedl
      Title:   Management Assistant

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

/s/ Nathan Halegua

      Print Name:   Nathan Halegua
    If an Entity or Trust:
     
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

/s/ Justin Hance

      Print Name:   Justin Hance
    If an Entity or Trust:
     
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

/s/ Philip DG Harden

      Print Name:   Philip DG Harden
    If an Entity or Trust:
     
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Don Hinkle

      Print Name:   Don Hinkle
    If an Entity or Trust:
        
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

      Print Name:  

 

    If an Entity or Trust:
         James R. & Amita Hollingshead as Trustees of the James R. and Amita Hollingshead Revocable Living Trust U/A/D 05/30/08
     
 

Name of Entity or Trust

      By:  

/s/ James R Hollingshead

      Name:   James R Hollingshead
      Title:   Trustee

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Joseph Jimenez Jr.

      Print Name:   Joseph Jimenez Jr.
    If an Entity or Trust:
        
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

      Print Name:  

 

    If an Entity or Trust:
         B. Kristine Johnson Trust U/A/D 08/13/08
      B. Kristine Johnson, TTEE
     
 

Name of Entity or Trust

      By:  

/s/ B. Kristine Johnson Trust

      Name:   B. Kristine Johnson Trust
      Title:   B. Kristine Johnson Trust U/A/D
        08/13/08

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

 

      Print Name:  

 

    If an Entity or Trust:
      William J. Kadi & Sandra M Kadi as Trustees of the Kadi Family Trust U/A/D 08/31/06
     
 

Name of Entity or Trust

      By:  

/s/ William Kadi

      Name:   William Kadi
      Title:   Trustee

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

      Print Name:  

 

    If an Entity or Trust:
      Kenmont Capital Private Equity Partners IV, L.P.
     
 

Name of Entity or Trust

         By:  

/s/ Donald Kendall Jr.

      Name:   Donald Kendall Jr.
      Title:   Managing Director

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

      Print Name:  

 

    If an Entity or Trust:
         Robert C. Kopple, Trustee of the E.L. II Properties Trust U/A/D 7/1/83, AMD. 8/1/07
     
 

Name of Entity or Trust

      By:  

/s/ Robert Kopple

      Name:   Robert Kopple
      Title:   Trustee

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ William Krywicki & Nancie

        Krywicki JT TEN
      Print Name:   William Krywicki & Nancie
        Krywicki JT TEN
    If an Entity or Trust:
        
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

/s/ Todd Candy

      Print Name:   Todd Candy
    If an Entity or Trust:
     
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Keith Lieberthal

         Print Name:   Keith Lieberthal
    If an Entity or Trust:
     

   

      Name of Entity or Trust
      By:  

    

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

    

         Print Name:  

 

    If an Entity or Trust:
      Lincoln Park Capital Fund, LLC
     

   

      Name of Entity or Trust
      By:  

/s/ Josh Scheinfeld

      Name:   Josh Scheinfeld
      Title:   President

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Adam Lipson

      Print Name:   Adam Lipson
    If an Entity or Trust:
       

   

      Name of Entity or Trust
         By:  

   

      Name:  

    

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

    

         Print Name:  

 

    If an Entity or Trust:
      Lucius Verus, LLC
     

   

      Name of Entity or Trust
      By:  

/s/ Lucius Verus, LLC

      Name:   Lucius Verus, LLC
      Title:   Member

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

    

         Print Name:  

 

    If an Entity or Trust:
      Michael L. Meyer, Trustee of the Michel L.
      Meyer Living Trust U/A/D 7/14/89, AMD 9/29/15
     

   

      Name of Entity or Trust
      By:  

/s/ Michael L. Meyer

      Name:   Michael L. Meyer
      Title:   Trustee

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Glenn Muir

         Print Name:   Glenn Muir
    If an Entity or Trust:
     

   

      Name of Entity or Trust
      By:  

   

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

/s/ Walter Mullen

      Print Name:   Walter Mullen
    If an Entity or Trust:
     

   

      Name of Entity or Trust
      By:  

   

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

   

         Print Name:  

   

    If an Entity or Trust:
      David S. Nagelberg 2003 REV TR UAD
      07/02/03 David S. Nagelberg TTEE
     

    

      Name of Entity or Trust
      By:  

/s/ David Nagelberg

      Name:   David Nagelberg
      Title:   Trustee

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

    

         Print Name:  

   

    If an Entity or Trust:
      Oxford Chase Advisors LLC
     

   

      Name of Entity or Trust
      By:  

/s/ Manoj Madhavan

      Name:   Manoj Madhavan
      Title:   Partner

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Nico Pianta

         Print Name:   Nico Pianta
    If an Entity or Trust:
     

   

      Name of Entity or Trust
      By:  

    

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Joshua Prensky

         Print Name:   Joshua Prensky
    If an Entity or Trust:
     

   

      Name of Entity or Trust
      By:  

   

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

/s/ Claude Prieur and Karen Prieur

      Print Name:   Claude Prieur and Karen Prieur
    If an Entity or Trust:
     

   

      Name of Entity or Trust
      By:  

   

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

/s/ Viswanathan Ramakrishnan

      Print Name:   Viswanathan Ramakrishnan
    If an Entity or Trust:
     

   

      Name of Entity or Trust
      By:  

   

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

/s/ Catherine Reinhard

      Print Name:   Catherine Reinhard
    If an Entity or Trust:
     

   

      Name of Entity or Trust
      By:  

   

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
      Richman Trust DTD 06/02/1983 UAD 06/02/83 Douglas Richman & Eva Richman TTEES
     

   

      Name of Entity or Trust
      By:  

/s/ Douglas Richman

      Name:   Douglas Richman
      Title:   Co-trustees

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
      M. Rivkind & M. Devilliers Rivkind, Trustees of the Rivkind-Devilliers Trust U/A/D 3/27/98
     

   

      Name of Entity or Trust
      By:  

/s/ Michael Rivkind

      Name:   Michael Rivkind
      Title:   Trustee

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
      Rivopharm SA
     

   

      Name of Entity or Trust
      By:  

/s/ Piero Poli

      Name:   Piero Poli
      Title:   President and CEO

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
      Robert S. Colman Trust UAD 03/13/85 Robert S. Colman TTEE AMD 07/15/13
     

   

      Name of Entity or Trust
      By:  

/s/ Robert Colman

      Name:   Robert Colman
      Title:   trustee

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Dyke Rogers

         Print Name:   Dyke Rogers
    If an Entity or Trust:
     

   

      Name of Entity or Trust
      By:  

/s/ Dyke Rogers

      Name:  
      Title:  

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Richard Schnabel

         Print Name:   Richard Schnabel
    If an Entity or Trust:
     

   

      Name of Entity or Trust
      By:  

  

      Name:  
      Title:  

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ David Schneider

         Print Name:   David Schneider
    If an Entity or Trust:
     

   

      Name of Entity or Trust
      By:  

    

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

/s/ Jonathan Sessler

      Print Name:   Jonathan Sessler
    If an Entity or Trust:
     
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Donald Sesterhenn

      Print Name:   Donald Sesterhenn
    If an Entity or Trust:
        
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
      Shepherd 98 LLC
     
 

Name of Entity or Trust

      By:  

/s/ Ron Eller

      Name:   Ron Eller
      Title:   Manager

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
         Signature:  

 

      Print Name:  

 

    If an Entity or Trust:
      Steel Road Capital Limited
     
 

Name of Entity or Trust

      By:  

/s/ Michael Kean

      Name:   Michael Kean
      Title:   Director

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Kyle Stults

         Print Name:   Kyle stults
    If an Entity or Trust:
     
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Edmund Sullivan

         Print Name:   Edmund Sullivan
    If an Entity or Trust:
     
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Irene Sullivan

         Print Name:   Irene Sullivan
    If an Entity or Trust:
     
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

      Print Name:  

 

    If an Entity or Trust:
         The Robert L. Bahr Revocable Trust UAD 03/14/85 Robert Bahr TTEE
     
 

Name of Entity or Trust

      By:  

/s/ Robert Bahr

      Name:   Robert Bahr
      Title:   Trustee

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

      Print Name:  

 

    If an Entity or Trust:
         The Robert L. Bahr Revocable Trust
     
 

Name of Entity or Trust

      By:  

/s/ Robert L. Bahr

      Name:   Robert L. Bahr
      Title:   Trustee

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

      Print Name:  

 

    If an Entity or Trust:
         Zachary Segal Trust
     
 

Name of Entity or Trust

      By:  

/s/ Zachary Segal

      Name:   Zachary Segal
      Title:   MD

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
      Three Fifteen Investments LLC
     
 

Name of Entity or Trust

      By:  

/s/ Marek Biestek

      Name:   Marek Biestek
      Title:   Director

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

      Print Name:  

 

    If an Entity or Trust:
         V2M Life Sciences LP
     
 

Name of Entity or Trust

      By:  

/s/ Misha Petkevich

      Name:   Misha Petkevich
      Title:   CIO

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Premnath Viswanath

      Print Name:   Premnath Viswanath
    If an Entity or Trust:
        
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Jeffrey Vogel

      Print Name:   Jeffrey Vogel
    If an Entity or Trust:
        
 

Name of Entity or Trust

      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Neil Wasserman

         Print Name:   Neil Wasserman
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
      Watercrest Partners LP
     

 

      Name of Entity or Trust
      By:  

/s/ Warren Harmel

      Name:   Warren Harmel
      Title:   Manager

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
     

R.M. Weiland & A.L. Weiland, Trustees of the

Robert M. & Anne L. Weiland Trust

U/A/D 10/22/97

     

 

      Name of Entity or Trust
      By:  

/s/ Robert Weiland

      Name:   Robert Weiland
      Title:   Trustee

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

 

         Print Name:  

 

    If an Entity or Trust:
     

Steven & Kaye Yost Family Trust U/A/D

2/7/92 AMD 6/4/97 Steven A. Yost and

Kaye L. Yost TTEES

     

 

      Name of Entity or Trust
      By:  

/s/ Steven A. Yost and Kay L. Yost

      Name:   Steven A. Yost and Kay L. Yost
      Title:   Trustee

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Gwendoline Elnaggar Hesham Elnaggar

         Print Name:   Gwendoline Elnaggar Hesham Elnaggar
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Gretchen Barlow Alexander

       

/s/ George Murnane

         Print Name:   Gretchen Barlow Alexander
        George Murnane
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Michael Cohn

       

/s/ Paula Cohn

         Print Name:   Michael Cohn Paula Cohn
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Signature:  

/s/ Albert Gentile

       

/s/ Hiedi Gentile

         Print Name:   Albert Gentile Hiedi Gentile
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Steven Goodman & Helane B. Goodman, JTTEN
      Signature:  

/s/ Steven Goodman Helane

        Goodman
         Print Name:   Steven Goodman Helane
        Goodman
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
      Richard A. Graham Hiba T. Graham JT
      Signature:  

/s/ Richard A. Graham

        /s/ Hiba T. Graham
         Print Name:   Richard A. Graham
        Hiba T. Graham
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
    Keith Lindsay Lieberthal & Julianna Marguilies, JTTEN
      Signature:  

/s/ Keith Lieberthal

       

/s/ Julianna Margulies

         Print Name:   Keith Lieberthal
        Julianna Margulies
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
    Claude James Prieur and Karen Ann Prieur, JTTEN
         Signature:  

/s/ Claude Prieur

        /s/ Karen Prieur
      Print Name:   Claude Prieur  Karen Prieur
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


IN WITNESS WHEREOF, the undersigned has executed this Investors’ Rights Agreement as of the date first written above.

 

INVESTOR:     If an Individual:
   

Shalom & Miriam Veffer

      Signature:  

/s/ Shalom Veffer

        /s/ Miriam Veffer
         Print Name:   Shalom Veffer  Miriam Veffer
    If an Entity or Trust:
     

 

      Name of Entity or Trust
      By:  

 

      Name:  

 

      Title:  

 

 

COUNTERPART SIGNATURE PAGE TO INVESTORS’ RIGHTS AGREEMENT—COMPANY


SCHEDULE A

INVESTORS1

Investors (Holders of Series C Preferred Stock - Lead Purchasers)

 

Investor Name

  

Attention

Deep Track Biotechnology Master Fund, Ltd.    Nir Messafi

Vida Ventures III, L.P.

c/o Vida Ventures Management Co. LLC

   Rajul Jain

Vida Ventures III-A, L.P.

c/o Vida Ventures Management Co. LLC

   Rajul Jain
Pontifax (Israel) VI Limited Partnership    Ran Nassbaum, Asaf Shinar
Pontifax (Cayman) VI Limited Partnership    Ran Nassbaum, Asaf Shinar

TCG CROSSOVER FUND II, L.P.

c/o TCG Crossover Management, LLC

   Craig Skaling

Investors (Holders of Series C Preferred Stock - Prior Noteholders

 

Investor Name

  

Attention

350 Investments PTY LTD    David Tiffney
3B Capital Partners, Inc    Brent Bickett
Aaron Ciner   
Al Brothers Family Trust UAD 12/12/14 Alfred Brothers TTEE    Alfred Brothers
Albert Gentile Hiedi Lyn Gentile JT TEN   
Alexander Koyfman   
Alok Agrawal Aruna Agrawal JT TEN   
Amended & Restated Trust Agreement Anne Romanoff Ilyinsky UAD 05/20/92 Anne Romanoff Ilyinsky TTEE   
Anand Krishnan   
Anand Shay Jailall   
Andrew Fisher   
Andrew Gi, LLC   
Anthony Daulerio   
Arnold T. Hagler Separate Property Trust UAD 09/17/97 Arnold T. Hagler TTEE   
B. Kristine Johnson Trust U/A/D 08/13/08 B. Kristine Johnson, TTEE   
Ballycurnane Holdings Limited    Alan Duggan
BES Investments LLC    James Bergin
Biotech Mountains BV    Alexander Vos
Brett Alan Venteicher & Rachel Ann Venteicher   
Brian S. Tyler Kristen M. Tyler JT TEN   
Bruce A. Burskey   
Bryce Boland   
 
1 

Each Investor’s address, phone number and email are on file with the Company’s records.


Campbell Family Trust UAD 03/04/99 Eric Prescott Campbell & Lisa W. Campbell TTEES    Eric Campbell
Charles Bancroft   
Charles Keefe   
Charles L. Dickson & Nancy A. Gillett 1995 Revocable Trust UAD 08/15/92 Charles L. Dickson & Nancy A. Gillett TTEES   
Chester A. Gougis & Shelly Ochab JT TEN   
Chitayat-Mahboubian Family Trust UAD 08/10/09 Jack Chitayat & Nikochehr Mahboubian TTEES   
Chris Z. Barra Lory L. Barra COMM PROP   
Christian Ray Storm   
Christopher Mecray   
Claude James Prieur and Karen Ann Prieur, JTTEN   
Clay Struve   
Corey Grossman   
Coventry Asset Management, LTD    Gen Fukunaga
Craig Geers   
Dana D. Keith   
Daniel Martin Birnbaum   
Daniel P. Petro   
Darrell Brookstein and Helen Brookstein, and their successors, Co-Trustees of the Brookstein Family Trust amended and restated by Declaration of Trust Dated May 31, 2007   
Dave Yawman Margaret Yawman JT TEN   
David G. Kennedy Trust UAD 08/06/93 D G Kennedy & J A Kennedy TTEES AMD 04/22/02   
David Schneider   
Donald Sesterhenn   
Dr. Steven and Jan Richards Revocable Trust UAD 06/30/11 Steven D. Richards & Alison Watson TTEES   
Edward John Generelli   
Enderson Guimaraes   
Eric J. Evans   
Esther Dyson   
F. Thomas Godart   
Gal Cohen Living Trust UAD 02/11/20 Gal Cohen TTEE   
Gary Elliston   
George I. Stoeckert   
George M. Mann 2005 Trust DTD 3/2/2005 UAD 03/02/05 George M. Mann TTEE AMD 09/01/16   
Gideon Bollag   
Gillard Family Intervivos Trust UAD 06/16/93 Stuart Gillard & Marilyn Gillard TTEES AMD 11/06/17   
Golden Investment CO LP    John Golden
Graham Burton   
Greenway Capital, LP   
Gregory H. Blaine   
Hani Zeini   
Harvey Lang   


Hoyt David Morgan   
Irrevocable Aloha Trust    Marianne Hellauer
ISYMAX Corp.    Murray Miller
J&J Investment Corporation    Joyson Karakunnel
J. Martin & D. Martin TTEE Martin 2012 Family Trust    James & Denise Martin
Jack Cavin Holland 1979 Revocable Trust UAD 02/14/79 Jack Cavin Holland TTEE AMD 12/19/13   
Jacobson Sorensen Investments LP    Michael Jacobson
James B. and Karen A. Glavin Family Trust UAD 10/30/98 James B. Glavin & Karen A. Glavin TTEES   
James F. Winschel Jr. Rosmery Torrico JT JTEN   
James J. Bender   
James J. Hisatomi   
James R. & Amita Hollingshead as Trustees of the James R. and Amita Hollingshead Revocable Living Trust U/A/D 05/30/08   
Jate Samathivathanachai   
Jeffrey K. Vogel   
Joan Plastiras Revocable Trust UAD 10/01/08 Joan Plastiras TTEE   
Joel L. Hochman Revocable Trust UAD 12/08/94 Joel Hochman TTEE   
Joel Yanowitz & Amy B. Metzenbaum 2003 REV Trust UAD 07/22/03 J Yanowitz & A B Metzenbaum TTEES AMD 07/01/20   
John A. Ballantyne Revocable Living Trust UAD 08/01/17 John Ballantyne TTEE   
John Chapman   
John Golden   
John V. Wagner   
Joseph Ingino   
Joshua Berkowitz 2009 GRAT UAD 01/01/09 Joshua Berkowitz TTE   
Joshua Gregg Berkowitz   
Justin Hance   
Kamar Capital LLC    Ade Akande
Kim A. Lopdrup & Lillian Cathryne Lopdrup   
Kimberly Promise Morgan   
Kurtis Krentz   
Lance Swiss SARL (newly transferred from Marcin Pirog)   
Lars E. Birgerson   
Lorie Mary Karnath   
LPKT 2007 LLC    Sebastian Berdichevsky
Lypul Limited    Linda Longworth
MAI 2 LLC    Brian Finn
MAI Family Holdings, LLC    Alex Moreno
Marc Cohen   
Marcin Pirog   
Mar-Crs Living Trust UAD 06/23/17 Michael Anthony Recny PH.D & Catherine Ruth Sullivan TTEES    Michael A. Recny
Mark Patterson   


Martin 2012 Family Trust UAD 12/17/12 James Martin & Denise Martin TTEES   
Matthew 5 LLC    Mark McCamish
McEwan-Lane Family Trust UAD 04/03/19 Paul McEwan & Adrienne Lane TTEES   
Micah Spruill   
Michael & Paula Cohn   
Michael Angelo Pulice   
Michael Cantacuzene, TTEE of the Michael Cantacuzene Revocable TR UAD 11/26/19   
Michael Chlopak Donna Chlopak JT TEN   
Michael D. Miller   
Michael E. Sherman   
Michael J. Burskey Susan H. Burskey JT TEN   
Michael L. Meyer, Trustee of the Michael L. Meyer Living Trust U/A/D 7/14/89, AMD 9/29/15   
Michael P. Bailey   
Michael Sieger Paula Sieger JT TEN   
Midwest Capital Group LLC    Tzvi Ciner
Monte D. Anglin and Janet S. Anglin JTWROS   
Nanue LTD    Eunan Maguire & Peter Maguire
Nedenia C Rumbough   
Noor A. Sheriff   
Northlea Partners LLP    John Abeles
Oliver Chatten   
Oliver Chrzan   
Ordinance Capital LP    Steven B. Green
OSI Holdings, LLC    Kevin McCarthy
Patrick T. Lee   
Paul D. Ehrman   
Paul Francis   
Paul Ingrassia and Lynn Ingrassia JT TEN   
Paul Wagner   
Paul Yang Jung Hwa Kim JT TEN   
PEAS Trust, dtd 12/27/2012    Steven Berger
Peter A. Morgan Revocable Trust   
Peter A. Pogany   
Peter D. Brundage   
Peter John Vincent   
Pin Capital LLC    Quan Zhang
Pulice Grandchild IRR Trust FBO William A. Pulice II UAD 02/14/97 William R. Pulice TTEE    Ron Pulice
Pulice Trust UAD 03/12/09 W R Pulice & S Warnock Pulice TTEES AMD 03/20/19    Ron Pulice
Ragheed Mitri   
Rand L. Rosenberg Separate Property Trust UAD 05/23/02 Rand L. Rosenberg TTEE   
Raymond Debbane   


Raymond L.M. Wong   
Reich Family Trust UAD 08/09/96 M.L. Reich and C.M. Reich TTEES    Martin Reich
Renee Herzing, as Trustee of the Henry Herzing Irrevocable Grantor Trust U/A/D 01/01/07   
Richard A. Graham Hiba T. Graham JT   
Richard Pilnik   
RKL Ohio Corp.   
Robert Essner   
Robert M. Newsome   
Robert Roche Associates, LLC   
Robert S. Colman Trust UAD 03/13/85 Robert S. Colman TTEE AMD 07/15/13   
Robert Semmens & Susan Semmens JT TEN   
Roch F. Doliveux   
Ronald Artinian   
Ronald Gottesman   
Ronald Peterson Judy Peterson JT TEN   
Samer Garas   
Samir Mammadov   
Santuccio Ricciardi   
Scott M. Handelman   
SEAS Trust, dtd 12/27/2012    Steven Berger
Shamus, LLC    David E. Smith
Shashank Upadhye Shilpa Upadhye JT TEN   
Shepherd 98 LLC    Ron Eller
Sherman Children Trust UAD 12/19/08 Brian Krisberg TTEE    Lori Sherman
Sherman Children’s Florida Trust    Lori Sherman
Shield Street Capital LLC    Joshua Gregg Berkowitz
Shiloh Produce, Inc    Stormy Adams
Shimer Living Trust 10/18/2005 Julie Ann Shimer & Jary W. Shimer TTEES    Julie Ann & Jary
Sierra Blanca LLC    Joseph Berding
SJM Revocable Trust UAD 10/20/19 Stephen Meringoff TTEE    Stephen Meringoff
Stanley M. Marks   
Stanley Waintraub Charnie Waintraub JT TEN   
Staunch Limited    James Healey
Stephen B. Connor   
Stephen Bender   
Stephen Cutler   
Stephen Kaufer   
Stephen M. Payne   
Stephen Mut   
Steven & Kaye Yost Family Trust U/A/D 2/7/92 AMD 6/4/97 Steven A. Yost and Kaye L. Yost TTEES   
Steven R. Sanislo   
Steven Stuart 2012 Family Trust UAD 12/21/12 Catherine C. Froman & Lizabeth Bronder TTEES   
Stewart A. Kohl 2nd Restatement of Declaration TR UAD 08/19/99 Stewart A. Kohl TTEE   


Strypemonde Foundation UAD 07/20/99 Paul Francis & Titia Hulst TTEES    Paul Francis
Teran Guerin Davis 2019 Irrevocable Trust UAD 12/26/19 Teran Guerin Davis TTEE   
Terrence Troy   
TGI Holdings, LLC    Michael Targoff
The Bahr Family Limited Partnership    Robert Bahr
The Hansen Family Trust UAD 10/17/14 Brian B. Hansen & Kara B. Hansen TTEES   
The Jacobson Sorensen Revocable Trust UAD 03/26/04 Michael Jacobson & Trine Sorensen TTEES    Michael Jacobson
The Kenneth M. Sutin MD Revocable Trust   
The MGFMZF 2020 Irrevocable Trust UAD 12/18/20 Mohsen Zaki Fahmi TTEE   
The Michael D. and Miriam Miller Family Trust UAD TRUST UAD 12/17/99 M D Miller & M G Miller TTEES AMD 11/01/18   
The Peter S. Fine & Rebecca Ailes-Fine Family Trust UAD 10/24/01 P S Fine & R Ailes-Fine TTEES   
The Robert L. Bahr Revocable Trust UAD 03/14/85 Robert Bahr TTEE   
The Shand Family Trust UAD 05/07/99 Robert Shand & Susan Shand TTEES AMD 09/25/14   
The Stanford Baratz Revocable Trust UAD 09/07/94 Stanford Baratz and Amy Baratz TTEES   
Thomas G. Mendell Dynasty Trust UAD 12/09/10 Andrea H. Mendell & Alice Mendell Starr TTEES   
Thomas M. Wascher   
Thomas Ross   
Timothy J. Pire   
Timothy Louis Casady   
Timothy P. Hanley & Monica Hanley JT TEN   
Truetzel Revocable Trust UAD 04/30/08 David W Truetzel & Stephanie Truetzel TTEES   
Trust U/W Bernice S. Postley FBO Thomas Mendell UAD 03/20/75 Andrea H Mendell TTEE   
Trust U/W Renee Weiss    Peter Weiss
Trust U/W/O Lenore O. FBO James Stern UAD 12/27/82 James Stern TTEE   
Tzvi Ciner   
V2M Life Sciences LP   
Varney J. Hintlian   
Vern Norviel and Anne Norviel JT TEN   
Vijay Singh Richa Mishra JT TEN   
Walter Mullen   
Wasabi Investors    Geoffrey Raker
Watercrest Partners LP    Warren Harmel
Wickfield Investment Company, LLC    Jeffrey Starman
William F. Grieco   
William Huff   
Wilson Wilson & Wilson    Minda Wilson
Zachary S. Handelman   
Zaykowski Partners, L.P.    Paul Zaykowski


Investors (Holders of Series A Preferred Stock and/or Series B Preferred Stock

 

Investor Name

  

Attention

Adam Lipson   
Alalia PTY LTD Trustees of the Alalia PTY LTD ATF McNamee Family Trust U/A/D 8/17/05, AMD 8/23/16    William & Brian McNamee
Albert Gentile Hiedi Lyn Gentile JT TEN   
Alexis Campagna   
Anthony Daulerio   
B. Kristine Johnson Trust U/A/D 08/13/08 B. Kristine Johnson, TTEE   
Bahr Family Limited Parternship   
Ballycurnane Holdings Limited    Alan Duggan
Catherine Reinhard   
Charles Brinkley   
Claude James Prieur and Karen Ann Prieur, JTTEN   
Coleman Family Protection Trust   
Daniel Gologorsky   
Daniel James Grellner   
David Frydrych   
David S. Nagelberg 2003 REV TR UAD 07/02/03 David S. Nagelberg TTEE   
David Schneider   
Declan John Cassidy   
Donald Hinkle   
Donald Sesterhenn   
Dyke Rogers   
Edmund Sullivan   
Elena Bruck   
Eric Prescott Campbell   
Friedhelm Blobel & Karin Blobel, Trustees of the Blobel Family 2003 Trust U/A/D 11/13/03   
Gideon Bollag   
Gillard Family Intervivos Trust UAD 06/16/93 Stuart Gillard & Marilyn Gillard TTEES AMD 11/06/17    Stuart & Marilyn Gillard
Glenn Muir   
Gregory Ross Guarasci   
Gretchen Barlow Alexander Alexander George Murnane JT TEN   
Gundyco ITF Orca Capital GMBH    Battina Schroedl & Thomas Koenig
Gwendoline Elnaggar & Hesham M. Elnaggar   
Irene Sullivan   
James A. Ntambi   
James R. & Amita Hollingshead as Trustees of the James R. and Amita Hollingshead Revocable Living Trust U/A/D 05/30/08   
Jeffrey K. Vogel   
Jonathan L. Sessler   
Joseph Jimenez Jr.   
Joseph R. Bishop III   
Joshua Prensky   
Justin Hance   


Keith Lindsay Lieberthal & Julianna Marguilies, JTTEN   
Kenmont Capital Private Equity Partners IV, L.P.    Donald Kendall Jr.
Kyle Stults   
Lawrence Fridkis   
Lincoln Park Capital Fund, LLC    Jonathan Cope & Josh Scheinfeld
Lucius Verus, LLC    Derek Hennecke
M. Rivkind & M. Devilliers Rivkind, Trustees of the Rivkind-Devilliers Trust U/A/D 3/27/98    Michael Rivkind
Marek Biestek   
Michael & Paula Cohn   
Michael L. Meyer, Trustee of the Michael L. Meyer Living Trust U/A/D 7/14/89, AMD 9/29/15   
Morris Garfinkle & Stephanie Garfinkle, Trustess of the Garfinkle Revocable Trust U/A/D 5/15/08   
Nathan Halegua   
Neil Wasserman   
Nico Pianta   
Orlando Campopiano   
Oxford Chase Advisors LLC    Manoj Madhavan
Philip Cibulsky   
Philip DG Harden   
Premnath Viswanath   
R.M. Weiland & A.L. Weiland, Trustees of the Robert M. & Anne L. Weiland Trust U/A/D 10/22/97   
Richard A. Graham Hiba T. Graham JT   
Richard Schnabel   
Richman Trust DTD 06/02/1983 UAD 06/02/83 Doulgas Richman & Eva Richman TTEES    Douglas Richman
Rivopharm SA    Piero Poli
Robert Bahr   
Robert C. Kopple, Trustee of the E.L. II Properties Trust U/A/D 7/1/83, AMD. 8/1/07   
Robert Garff   
Robert S. Colman Trust UAD 03/13/85 Robert S. Colman TTEE AMD 07/15/13    Bob Coleman
Shepherd 98 LLC    Ron Eller
Simon Berring   
Steel Road Capital Limited    Michael Kean
Steven & Kaye Yost Family Trust U/A/D 2/7/92 AMD 6/4/97 Steven A. Yost and Kaye L. Yost TTEES   
Steven Goodman & Helane B. Goodman, JTTEN   
The Robert L. Bahr Revocable Trust UAD 03/14/85 Robert Bahr TTEE   
Three Fifteen Investments LLC    Marek Biestek
V2M Life Sciences LP    Misha Petkevich
Vamsi Batthula   
Viswanathan Ramakrishnan   
Walter Mullen   
Watercrest Partners LP    Warren Harmel
William J. Kadi & Sandra M Kadi as Trustees of the Kadi Family Trust U/A/D 08/31/06   
William Krywicki and Nancie Krywicki, JTTEN   
Wolf Prensky   
Zachary Segal Trust   

Exhibit 4.3

WARRANT-A

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

THIS WARRANT (AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT) IS SUBJECT TO (i) AN AMENDED AND RESTATED STOCKHOLDERS AGREEMENT DATED AS OF DECEMBER 20, 2017, BY AND AMONG LB PHARMACEUTICALS INC (THE “COMPANY”) AND STOCKHOLDERS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, INCLUDING AS OF ______________, 2018 THE “STOCKHOLDERS AGREEMENT”), AND (ii) THE SECOND AMENDED AND RESTATED BYLAWS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “BYLAWS”). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS WARRANT MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS CONTAINED HEREIN. A COPY OF THE STOCKHOLDERS AGREEMENT AND BYLAWS SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST.

Warrant Certificate No.: A-XX

Original Issue Date:

FOR VALUE RECEIVED, LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), hereby certifies that _____________ (the “Holder”) is entitled to purchase from the Company ____________duly authorized, validly issued, fully paid and nonassessable shares of Common Stock at a purchase price per share of $2.30 (subject to adjustment as provided herein, the “Exercise Price”), all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain capitalized terms used herein are defined in Section 1 hereof.

1. Definitions. As used in this Warrant, the following terms have the respective meanings set forth below:

“Aggregate Exercise Price” means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3 hereof, multiplied by (b) the Exercise Price in effect as of the Exercise Date in accordance with the terms of this Warrant.

“Board” means the board of directors of the Company.

“Business Day” means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in New York, New York are authorized or obligated by law or executive order to close.

“Common Stock” means the common stock, par value $0.0001 per share, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the date hereof.

“Common Stock Deemed Outstanding” means, at any given time, the sum of (a) the number of shares of Common Stock actually outstanding at such time, plus (b) the number of shares of Common Stock issuable upon exercise of Options actually outstanding at such time, plus (c) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities actually outstanding at such time (treating as actually outstanding any Convertible Securities issuable upon exercise of Options actually outstanding at such time), in each case, regardless of whether the Options or Convertible Securities are actually exercisable at such time; provided, that Common Stock Deemed Outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries.

 

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“Company” has the meaning set forth in the preamble.

“Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

“Excluded Issuances” means any issuance or sale (or deemed issuance or sale in accordance with Section 4(d)) by the Company after the Original Issue Date of: (a) shares of Common Stock issued upon the exercise of this Warrant; (b) up to an aggregate of 1,154,550 shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations) issued directly or upon the exercise of Options to directors, officers, employees, or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company, in each case authorized by the Board and issued pursuant to the Company’s 2017 Stock Incentive Plan (including all such shares of Common Stock and Options outstanding prior to the Original Issue Date); or (c) shares of Common Stock issued upon the conversion or exercise of Options (other than Options covered by clause (b) above) or Convertible Securities issued prior to the Original Issue Date, provided that such securities are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price thereof.

“Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., eastern time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

“Exercise Agreement” has the meaning set forth in Section 3(a)(i).

“Exercise Period” has the meaning set forth in Section 2.

“Exercise Price” has the meaning set forth in the preamble.

“Fair Market Value” means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which “Fair Market Value” is being determined; provided, that if the Common Stock is listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association, the “Fair Market Value” of the Common Stock shall be the fair market value per share as determined jointly by the Board and the Holder.

“Holder” has the meaning set forth in the preamble.

“Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

“Original Issue Date” means November 21, 2018.

 

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“Nasdaq” means The NASDAQ Stock Market LLC.

“OTC Bulletin Board” means the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system.

“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

“Pink OTC Markets” means the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink.

“Warrant” means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

“Warrant Shares” means the shares of Common Stock or other capital stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.

2. Term of Warrant. Subject to the terms and conditions hereof, at any time or from time to time after the date hereof and prior to 5:00 p.m., eastern time, on the tenth (10th) anniversary of the date hereof or, if such day is not a Business Day, on the next preceding Business Day (the “Exercise Period”), the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder (subject to adjustment as provided herein).

3. Exercise of Warrant.

(a) Exercise Procedure. This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

(i) surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an “Exercise Agreement”), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and

(ii) payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b).

(b) Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as expressed in the Exercise Agreement, by the following methods:

(i) by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price;

(ii) by instructing the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price;

(iii) by surrendering to the Company (x) Warrant Shares previously acquired by the Holder with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price and/or (y) other securities of the Company having a value as of the Exercise Date equal to the Aggregate Exercise Price (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred stock shall be the liquidation value thereof plus accumulated and unpaid dividends and in the case of shares of Common Stock shall be the Fair Market Value thereof); or

(iv) any combination of the foregoing.

 

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In the event of any withholding of Warrant Shares or surrender of other equity securities pursuant to clause (ii), (iii) or (iv) above where the number of shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld or surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value per Warrant Share as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above.

(c) Delivery of Stock Certificates. Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(a) hereof), the Company shall, as promptly as practicable, and in any event within 30 days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 7 below, such other Person’s name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

(d) Fractional Shares. The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

(e) Delivery of New Warrant. Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 3(c) hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

(f) Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With respect to the exercise of this warrant, the Company hereby represents, covenants and agrees:

(i) This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

(ii) All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges.

(iii) The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

(iv) The Company shall use its best efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise.

 

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(v) The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

(g) Conditional Exercise. Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock, or otherwise), such exercise may at the election of the Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

(h) Reservation of Shares. During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this

Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

4. Adjustment to Exercise Price and Number of Warrant Shares. In order to prevent dilution of the purchase rights granted under this Warrant, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 4 (in each case, after taking into consideration any prior adjustments pursuant to this Section 4).

(a) Adjustment to Exercise Price Upon Issuance of Common Stock. Except as provided in Section 4(c) and except in the case of an event described in either Section 4(e) or Section 4(f), if the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or in accordance with Section 4(d) is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), then immediately upon such issuance or sale (or deemed issuance or sale), the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale) shall be reduced (and in no event increased) to an Exercise Price equal to the quotient obtained by dividing:

(i) the sum of (A) the product obtained by multiplying the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) by the Exercise Price then in effect plus (B) the aggregate consideration, if any, received by the Company upon such issuance or sale (or deemed issuance or sale); by

(ii) the sum of (A) the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) plus (B) the aggregate number of shares of Common Stock issued or sold (or deemed issued or sold) by the Company in such issuance or sale (or deemed issuance or sale).

 

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(b) Adjustment to Number of Warrant Shares Upon Adjustment to Exercise Price. Upon any and each adjustment of the Exercise Price as provided in Section 4(a), the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment shall be increased to a number of Warrant Shares equal to the quotient obtained by dividing:

(i) the product of (A) the Exercise Price in effect immediately prior to any such adjustment multiplied by (B) the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any such adjustment; by

(ii) the Exercise Price resulting from such adjustment.

(c) Exceptions To Adjustment Upon Issuance of Common Stock. Anything herein to the contrary notwithstanding, there shall be no adjustment to the Exercise Price or the number of Warrant Shares issuable upon exercise of this Warrant with respect to any Excluded Issuance.

(d) Effect of Certain Events on Adjustment to Exercise Price. For purposes of determining the adjusted Exercise Price under Section 4(a) hereof, the following shall be applicable:

(i) Issuance of Options. If the Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Options, whether or not such Options or the right to convert or exchange any Convertible Securities issuable upon the exercise of such Options are immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 4(d)(v) ) for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon the exercise of such Options is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued as of the date of granting or sale of such Options (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price under Section 4(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 4(a)) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of all such Options, plus (y) the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus (z), in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the issuance or sale of all such Convertible Securities and the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of all such Options or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of all such Options. Except as otherwise provided in Section 4(d)(iii), no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock or of Convertible Securities upon exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities issuable upon exercise of such Options.

(ii) Issuance of Convertible Securities. If the Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the right to convert or exchange any such Convertible Securities is immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 4(d)(v)) for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Convertible Securities, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of the total maximum amount of such Convertible Securities shall be deemed to have been issued as of the date of granting or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price pursuant to Section 4(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 4(a)) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of such Convertible Securities, plus (y) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. Except as otherwise provided in Section 4(d)(iii), (A) no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock upon conversion or exchange of such Convertible Securities and (B) no further adjustment of the Exercise Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Exercise Price have been made pursuant to the other provisions of this Section 4(d).

 

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(iii) Change in Terms of Options or Convertible Securities. Upon any change in any of (A) the total amount received or receivable by the Company as consideration for the granting or sale of any Options or Convertible Securities referred to in Section 4(d)(i) or Section 4(d)(ii) hereof, (B) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of any Options or upon the issuance, conversion or exchange of any Convertible Securities referred to in Section 4(d)(i) or Section 4(d)(ii) hereof, (C) the rate at which Convertible Securities referred to in Section 4(d)(i) or Section 4(d)(ii) hereof are convertible into or exchangeable for Common Stock, or (D) the maximum number of shares of Common Stock issuable in connection with any Options referred to in Section 4(d)(i) hereof or any Convertible Securities referred to in Section 4(d)(ii) hereof (in each case, other than in connection with an Excluded Issuance), then (whether or not the original issuance or sale of such Options or Convertible Securities resulted in an adjustment to the Exercise Price pursuant to this Section 4) the Exercise Price in effect at the time of such change shall be adjusted or readjusted, as applicable, to the Exercise Price which would have been in effect at such time pursuant to the provisions of this Section 4 had such Options or Convertible Securities still outstanding provided for such changed consideration, conversion rate or maximum number of shares, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment or readjustment the Exercise Price then in effect is reduced, and the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment or readjustment shall be correspondingly adjusted or readjusted pursuant to the provisions of Section 4(b).

(iv) Treatment of Expired or Terminated Options or Convertible Securities. Upon the expiration or termination of any unexercised Option (or portion thereof) or any unconverted or unexchanged Convertible Security (or portion thereof) for which any adjustment (either upon its original issuance or upon a revision of its terms) was made pursuant to this Section 4 (including without limitation upon the redemption or purchase for consideration of all or any portion of such Option or Convertible Security by the Company), the Exercise Price then in effect hereunder shall forthwith be changed pursuant to the provisions of this Section 4 to the Exercise Price which would have been in effect at the time of such expiration or termination had such unexercised Option (or portion thereof) or unconverted or unexchanged Convertible Security (or portion thereof), to the extent outstanding immediately prior to such expiration or termination, never been issued.

(v) Calculation of Consideration Received. If the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or is deemed to have issued or sold in accordance with Section 4(d), any shares of Common Stock, Options or Convertible Securities: (A) for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor; (B) for consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by the Company shall be the market price (as reflected on any securities exchange, quotation system or association or similar pricing system covering such security) for such securities as of the end of business on the date of receipt of such securities; (C) for no specifically allocated consideration in connection with an issuance or sale of other securities of the Company, together comprising one integrated transaction, the amount of the consideration therefor shall be deemed to be the fair value of such portion of the aggregate consideration received by the Company in such transaction as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued in such transaction; or (D) to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued to such owners. The net amount of any cash consideration and the fair value of any consideration other than cash or marketable securities shall be determined in good faith jointly by the Board and the Holder.

(vi) Record Date. For purposes of any adjustment to the Exercise Price or the number of Warrant Shares in accordance with this Section 4, in case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

 

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(vii) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof or the transfer of such shares among the Company and its wholly-owned subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section 4.

(viii) Other Dividends and Distributions. Subject to the provisions of this Section 4(d), if the Company shall, at any time or from time to time after the Original Issue Date, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of the Company (other than a dividend or distribution of shares of Common Stock, Options or Convertible Securities in respect of outstanding shares of Common Stock), cash or other property, then, and in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant, in addition to the number of Warrant Shares receivable thereupon, the kind and amount of securities of the Company, cash or other property which the Holder would have been entitled to receive had the Warrant been exercised in full into Warrant Shares on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the Exercise Date, retained such securities, cash or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section 4 with respect to the rights of the Holder; provided, that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as the Holder would have received if the Warrant had been exercised in full into Warrant Shares on the date of such event.

(e) Adjustment to Exercise Price and Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock. If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Company payable in shares of Common Stock or in Options or Convertible Securities, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 4(e) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.

(f) Adjustment to Exercise Price and Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger. In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company’s assets to another Person or (v) other similar transaction (other than any such transaction covered by Section 4(e)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without taking into account any limitations or restrictions on the exercisability of this Warrant); and, in such case, appropriate adjustment (in form and substance satisfactory to the Holder) shall be made with respect to the Holder’s rights under this Warrant to insure that the provisions of this Section 4 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant (including, in the case of any consolidation, merger, sale or similar transaction in which the successor or purchasing Person is other than the Company, an immediate adjustment in the Exercise Price to the value per share for the

 

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Common Stock reflected by the terms of such consolidation, merger, sale or similar transaction, and a corresponding immediate adjustment to the number of Warrant Shares acquirable upon exercise of this Warrant without regard to any limitations or restrictions on exercise, if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger, sale or similar transaction). The provisions of this Section 4(f) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. The Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant and satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other transaction contemplated by the provisions of this Section 4(f), the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 2 instead of giving effect to the provisions contained in this Section 4(f) with respect to this Warrant.

(g) Certain Events. If any event of the type contemplated by the provisions of this Section 4 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features) occurs, then the Board shall make an appropriate adjustment in the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 4; provided, that no such adjustment pursuant to this Section 4(g) shall increase the Exercise Price or decrease the number of Warrant Shares issuable as otherwise determined pursuant to this Section 4.

(h) Certificate as to Adjustment.

(i) As promptly as reasonably practicable following any adjustment of the Exercise Price, but in any event not later than 30 days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

(ii) As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than 30 days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.

(i) Notices. In the event:

(i) that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

(ii) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company’s assets to another Person; or

(iii) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

then, and in each such case, the Company shall send or cause to be sent to the Holder at least 30 days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the

 

9


books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.

5. Purchase Rights. In addition to any adjustments pursuant to Section 4 above, if at any time the Company grants, issues or sells any shares of Common Stock, Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock (the “Purchase Rights”), then the Holder shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder would have acquired if the Holder had held the number of Warrant Shares acquirable upon complete exercise of this Warrant 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 Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. Anything herein to the contrary notwithstanding, the Holder shall not be entitled to the Purchase Rights granted herein with respect to any Excluded Issuance.

6. Stockholders Agreement and Bylaws. All Warrant shares issuable upon exercise of this Warrant are and shall become subject to, and have the benefit of, the Stockholders Agreement and the Bylaws, and the Holder shall be required, for so long as the Holder holds any Warrant Shares, to become and remain a party to the Stockholders Agreement.

7. Transfer of Warrant. Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B, together with funds sufficient to pay any transfer taxes described in Section 3(f)(v) in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

8. Holder Not Deemed a Stockholder; Limitations on Liability. Except as otherwise specifically provided herein (including Section 4(d)(viii)), prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

9. Replacement on Loss; Division and Combination.

(a) Replacement of Warrant on Loss. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided, that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

 

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(b) Division and Combination of Warrant. Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment which may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of this Warrant or Warrants to the Company at its then principal executive offices, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the respective Holders or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment which may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

10. No Impairment. The Company shall not, by amendment of its Certificate of Incorporation or Bylaws, 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 to be observed or performed by it hereunder, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the Holder in order to protect the exercise rights of the Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant.

11. Compliance with the Securities Act.

(a) Agreement to Comply with the Securities Act; Legend. The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 11 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the “Securities Act”). This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.”

(b) Representations of the Holder. In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:

(i) The Holder is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.

(ii) The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

 

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(iii) The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

12. Warrant Register. The Company shall keep and properly maintain at its principal executive offices books for the registration of the Warrant and any transfers thereof. The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant.

13. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 13).

 

If to the Company:   

LB Pharmaceuticals Inc

575 Madison Avenue

10th Floor

New York, New York 10022

Attention: Board of Directors

If to the Holder:   

             

             

             

14. Cumulative Remedies. Except to the extent expressly provided in Section 8 to the contrary, the rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

15. Equitable Relief. Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.

16. Entire Agreement. This Warrant, together with the Stockholders Agreement and the Bylaws, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Warrant and the Stockholders Agreement and the Bylaws, the statements in the body of this Warrant shall control.

17. Successor and Assigns. This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

 

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18. No Third-Party Beneficiaries. This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

19. Headings. The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

20. Amendment and Modification; Waiver. Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

21. Severability. If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

22. Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.

23. Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of New York in each case located in New York, New York, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

24. Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

25. Counterparts. This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

26. No Strict Construction. This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original Issue Date.

 

LB PHARMACEUTICALS INC,

a Delaware corporation

By:  

 

Name:   Zachary Prensky
Title:   President

 

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Exhibit 4.4

WARRANT-B

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

THIS WARRANT (AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT) IS SUBJECT TO (i) AN AMENDED AND RESTATED STOCKHOLDERS AGREEMENT DATED AS OF DECEMBER 20, 2017, BY AND AMONG LB PHARMACEUTICALS INC (THE “COMPANY”) AND STOCKHOLDERS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, INCLUDING AS OF     , 2018 THE “STOCKHOLDERS AGREEMENT”), AND (ii) THE AMENDED AND RESTATED BYLAWS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “BYLAWS”). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS WARRANT MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS CONTAINED HEREIN. A COPY OF THE STOCKHOLDERS AGREEMENT AND BYLAWS SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST.

Warrant Certificate No.: B-XX

Original Issue Date:           

FOR VALUE RECEIVED, LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), hereby certifies that, if and only if no Liquidation Event (as defined below) has been consummated prior to       ,         (the “Holder”), shall be entitled to purchase from the Company          duly authorized, validly issued, fully paid and nonassessable shares of Common Stock at a purchase price per share of $2.30 (subject to adjustment as provided herein, the “Exercise Price”), all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain capitalized terms used herein are defined in Section 1 hereof.

1. Definitions. As used in this Warrant, the following terms have the respective meanings set forth below:

“Aggregate Exercise Price” means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3 hereof, multiplied by the Exercise Price in effect as of the Exercise Date in accordance with the terms of this Warrant.

“Board” means the board of directors of the Company.

“Business Day” means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in New York, New York are authorized or obligated by law or executive order to close.

 

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“Change of Control” means (a) a reorganization, consolidation or merger of the Company with or into any other corporation or corporations (other than a wholly-owned subsidiary of the Company); or (b) the sale, transfer, liquidation or other disposition of all or substantially all of the assets of the Company, including the granting by the Company of an exclusive, irrevocable license to a third party of all or substantially all of the Company’s intellectual property (in each case other than to a wholly-owned subsidiary of the Company); or (c) the closing of the transfer (whether by merger, consolidation or otherwise), in one transaction or a series of related transactions, to a person or group of affiliated persons (other than an underwriter of the Company’s securities), of the Company’s then outstanding securities; in each case which results in the Company’s stockholders immediately prior to such transaction or series of related transactions, holding less than fifty percent (50%) of the voting power of the entity surviving or continuing (including the corporation or the entity owning or licensing all or substantially all of the assets of the Company) following such transaction or series of related transactions; provided a Change of Control shall not apply to a merger effected solely for the purposes of changing the domicile of the Company.

“Common Stock” means the common stock, par value $0.0001 per share, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the date hereof.

“Common Stock Deemed Outstanding” means, at any given time, the sum of (a) the number of shares of Common Stock actually outstanding at such time, plus (b) the number of shares of Common Stock issuable upon exercise of Options actually outstanding at such time, plus (c) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities actually outstanding at such time (treating as actually outstanding any Convertible Securities issuable upon exercise of Options actually outstanding at such time), in each case, regardless of whether the Options or Convertible Securities are actually exercisable at such time; provided, that Common Stock Deemed Outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries.

“Company” has the meaning set forth in the preamble. “Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

“Excluded Issuances” means any issuance or sale (or deemed issuance or sale in accordance with Section 4(d)) by the Company after the Original Issue Date of: (a) shares of Common Stock issued upon the exercise of this Warrant; (b) up to an aggregate of 1,154,550 shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations) issued directly or upon the exercise of Options to directors, officers, employees, or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company, in each case authorized by the Board and issued pursuant to the Company’s 2017 Stock Incentive Plan (including all such shares of Common Stock and Options outstanding prior to the Original Issue Date); or (c) shares of Common Stock issued upon the conversion or exercise of Options (other than Options covered by clause (b) above) or Convertible Securities issued prior to the Original Issue Date, provided that such securities are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price thereof.

“Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., eastern time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

 

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“Exercise Agreement” has the meaning set forth in Section 3(a)(i).

“Exercise Period” has the meaning set forth in Section 2.

“Exercise Price” has the meaning set forth in the preamble.

“Fair Market Value” means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which “Fair Market Value” is being determined; provided, that if the Common Stock is listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association, the “Fair Market Value” of the Common Stock shall be the fair market value per share as determined jointly by the Board and the Holder.

“Holder” has the meaning set forth in the preamble.

“Liquidation Event” means (i) any sale, merger, consolidation, reorganization or other transaction which results in a Change of Control, or (ii) the sale of Company securities to the public in an offering pursuant to an effective registration statement under the Securities Act of 1933, as amended.

“Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

“Original Issue Date” means       .

“Nasdaq” means The NASDAQ Stock Market LLC.

“OTC Bulletin Board” means the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system.

“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

“Pink OTC Markets” means the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink.

“Warrant” means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

“Warrant Shares” means the shares of Common Stock or other capital stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.

 

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2. Term of Warrant. Subject to the terms and conditions hereof, at any time or from time to time after          and prior to 5:00 p.m., eastern time, on the tenth (10th) anniversary of the date hereof or, if such day is not a Business Day, on the next preceding Business Day (the “Exercise Period”), and provided that no Liquidation Event has been consummated prior to          , the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder (subject to adjustment as provided herein). If a Liquidation Event has been consummated at any time prior to          , this Warrant shall expire and shall have no further force or effect.

3. Exercise of Warrant.

(a) Exercise Procedure. Provided that no Liquidation Event has been consummated prior to           , this Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

(i) surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an “Exercise Agreement”), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and

(ii) payment to the Company of the Aggregate Exercise Price in accordance with Section 3.

(b) Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as expressed in the Exercise Agreement, by the following methods:

(i) by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price;

(ii) by instructing the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price;

(iii) by surrendering to the Company (x) Warrant Shares previously acquired by the Holder with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price and/or (y) other securities of the Company having a value as of the Exercise Date equal to the Aggregate Exercise Price (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred stock shall be the liquidation value thereof plus accumulated and unpaid dividends and in the case of shares of Common Stock shall be the Fair Market Value thereof); or

(iv) any combination of the foregoing.

(v) In the event of any withholding of Warrant Shares or surrender of other equity securities pursuant to clause (ii), (iii) or (iv) above where the number of shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld or surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value per Warrant Share as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above.

 

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(c) Delivery of Stock Certificates. Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(a) hereof), the Company shall, as promptly as practicable, and in any event within 30 days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 7 below, such other Person’s name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

(d) Fractional Shares. The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

(e) Delivery of New Warrant. Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 3 hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

(f) Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With respect to the exercise of this warrant, the Company hereby represents, covenants and agrees:

(i) This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

(ii) All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges.

(iii) The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

 

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(iv) The Company shall use its best efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise.

(v) The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

(g) Conditional Exercise. Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock, or otherwise), such exercise may at the election of the Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

(h) Reservation of Shares. During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

4. Adjustment to Exercise Price and Number of Warrant Shares. In order to prevent dilution of the purchase rights granted under this Warrant, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 4 (in each case, after taking into consideration any prior adjustments pursuant to this Section 4).

(a) Adjustment to Exercise Price Upon Issuance of Common Stock. Except as provided in Section 4(c) and except in the case of an event described in either Section 4(e) or Section 4(f), if the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or in accordance with Section 4(d) is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), then immediately upon such issuance or sale (or deemed issuance or sale), the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale) shall be reduced (and in no event increased) to an Exercise Price equal to the quotient obtained by dividing:

(i) the sum of (A) the product obtained by multiplying the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) by the Exercise Price then in effect plus (B) the aggregate consideration, if any, received by the Company upon such issuance or sale (or deemed issuance or sale); by

(ii) the sum of (A) the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) plus (B) the aggregate number of shares of Common Stock issued or sold (or deemed issued or sold) by the Company in such issuance or sale (or deemed issuance or sale).

 

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(b) Adjustment to Number of Warrant Shares Upon Adjustment to Exercise Price. Upon any and each adjustment of the Exercise Price as provided in Section 4(a), the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment shall be increased to a number of Warrant Shares equal to the quotient obtained by dividing:

(i) the product of (A) the Exercise Price in effect immediately prior to any such adjustment multiplied by (B) the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any such adjustment; by

(ii) the Exercise Price resulting from such adjustment.

(c) Exceptions To Adjustment Upon Issuance of Common Stock. Anything herein to the contrary notwithstanding, there shall be no adjustment to the Exercise Price or the number of Warrant Shares issuable upon exercise of this Warrant with respect to any Excluded Issuance.

(d) Effect of Certain Events on Adjustment to Exercise Price. For purposes of determining the adjusted Exercise Price under Section 4(a) hereof, the following shall be applicable:

(i) Issuance of Options. If the Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Options, whether or not such Options or the right to convert or exchange any Convertible Securities issuable upon the exercise of such Options are immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 4(d)(v)) for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon the exercise of such Options is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued as of the date of granting or sale of such Options (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price under Section 4(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 4(a)) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of all such Options, plus (y) the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus (z), in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the issuance or sale of all such Convertible Securities and the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of all such Options or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of all such Options. Except as otherwise provided in Section 4(d)(iii), no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock or of Convertible Securities upon exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities issuable upon exercise of such Options.

(ii) Issuance of Convertible Securities. If the Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the right to convert or exchange any such Convertible Securities is immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 4(d)(v)) for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Convertible Securities, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of the total maximum amount of such Convertible

 

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Securities shall be deemed to have been issued as of the date of granting or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price pursuant to Section 4(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 4(a)) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of such Convertible Securities, plus (y) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. Except as otherwise provided in Section 4(d)(iii), (A) no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock upon conversion or exchange of such Convertible Securities and (B) no further adjustment of the Exercise Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Exercise Price have been made pursuant to the other provisions of this Section 4(d).

(iii) Change in Terms of Options or Convertible Securities. Upon any change in any of (A) the total amount received or receivable by the Company as consideration for the granting or sale of any Options or Convertible Securities referred to in Section 4(d)(i) or Section 4(d)(ii) hereof, (B) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of any Options or upon the issuance, conversion or exchange of any Convertible Securities referred to in Section 4(d)(i) or Section 4(d)(ii) hereof, (C) the rate at which Convertible Securities referred to in Section 4(d)(i) or Section 4(d)(ii) hereof are convertible into or exchangeable for Common Stock, or (D) the maximum number of shares of Common Stock issuable in connection with any Options referred to in Section 4(d)(i) hereof or any Convertible Securities referred to in Section 4(d)(ii) hereof (in each case, other than in connection with an Excluded Issuance), then (whether or not the original issuance or sale of such Options or Convertible Securities resulted in an adjustment to the Exercise Price pursuant to this Section 4) the Exercise Price in effect at the time of such change shall be adjusted or readjusted, as applicable, to the Exercise Price which would have been in effect at such time pursuant to the provisions of this Section 4 had such Options or Convertible Securities still outstanding provided for such changed consideration, conversion rate or maximum number of shares, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment or readjustment the Exercise Price then in effect is reduced, and the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment or readjustment shall be correspondingly adjusted or readjusted pursuant to the provisions of Section 4(b).

(iv) Treatment of Expired or Terminated Options or Convertible Securities. Upon the expiration or termination of any unexercised Option (or portion thereof) or any unconverted or unexchanged Convertible Security (or portion thereof) for which any adjustment (either upon its original issuance or upon a revision of its terms) was made pursuant to this Section 4 (including without limitation upon the redemption or purchase for consideration of all or any portion of such Option or Convertible Security by the Company), the Exercise Price then in effect hereunder shall forthwith be changed pursuant to the provisions of this Section 4 to the Exercise Price which would have been in effect at the time of such expiration or termination had such unexercised Option (or portion thereof) or unconverted or unexchanged Convertible Security (or portion thereof), to the extent outstanding immediately prior to such expiration or termination, never been issued.

(v) Calculation of Consideration Received. If the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or is deemed to have issued or sold in accordance with Section 4(d), any shares of Common Stock, Options or Convertible Securities: (A) for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor; (B) for consideration other than cash, the amount of the consideration other than cash received by the

 

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Company shall be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by the Company shall be the market price (as reflected on any securities exchange, quotation system or association or similar pricing system covering such security) for such securities as of the end of business on the date of receipt of such securities; (C) for no specifically allocated consideration in connection with an issuance or sale of other securities of the Company, together comprising one integrated transaction, the amount of the consideration therefor shall be deemed to be the fair value of such portion of the aggregate consideration received by the Company in such transaction as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued in such transaction; or (D) to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued to such owners. The net amount of any cash consideration and the fair value of any consideration other than cash or marketable securities shall be determined in good faith jointly by the Board and the Holder.

(vi) Record Date. For purposes of any adjustment to the Exercise Price or the number of Warrant Shares in accordance with this Section 4, in case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

(vii) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof or the transfer of such shares among the Company and its wholly-owned subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section 4.

(viii) Other Dividends and Distributions. Subject to the provisions of this Section 4(d), if the Company shall, at any time or from time to time after the Original Issue Date, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of the Company (other than a dividend or distribution of shares of Common Stock, Options or Convertible Securities in respect of outstanding shares of Common Stock), cash or other property, then, and in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant, in addition to the number of Warrant Shares receivable thereupon, the kind and amount of securities of the Company, cash or other property which the Holder would have been entitled to receive had the Warrant been exercised in full into Warrant Shares on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the Exercise Date, retained such securities, cash or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section 4 with respect to the rights of the Holder; provided, that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as the Holder would have received if the Warrant had been exercised in full into Warrant Shares on the date of such event.

 

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(e) Adjustment to Exercise Price and Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock. If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Company payable in shares of Common Stock or in Options or Convertible Securities, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 4(c) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.

(f) Adjustment to Exercise Price and Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger. In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company’s assets to another Person or (v) other similar transaction (other than any such transaction covered by Section 4(e)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without taking into account any limitations or restrictions on the exercisability of this Warrant); and, in such case, appropriate adjustment (in form and substance satisfactory to the Holder) shall be made with respect to the Holder’s rights under this Warrant to insure that the provisions of this Section 4 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant (including, in the case of any consolidation, merger, sale or similar transaction in which the successor or purchasing Person is other than the Company, an immediate adjustment in the Exercise Price to the value per share for the Common Stock reflected by the terms of such consolidation, merger, sale or similar transaction, and a corresponding immediate adjustment to the number of Warrant Shares acquirable upon exercise of this Warrant without regard to any limitations or restrictions on exercise, if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger, sale or similar transaction). The provisions of this Section 4(f) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. The Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant and satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other transaction contemplated by the provisions of this Section 4(f), the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 2 instead of giving effect to the provisions contained in this Section 4(f) with respect to this Warrant.

 

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(g) Certain Events. If any event of the type contemplated by the provisions of this Section 4 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features) occurs, then the Board shall make an appropriate adjustment in the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 4; provided, that no such adjustment pursuant to this Section 4(g) shall increase the Exercise Price or decrease the number of Warrant Shares issuable as otherwise determined pursuant to this Section 4.

(h) Certificate as to Adjustment.

(i) As promptly as reasonably practicable following any adjustment of the Exercise Price, but in any event not later than 30 days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

(ii) As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than 30 days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.

(i) Notices. In the event:

(i) that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

(ii) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company’s assets to another Person; or

(iii) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

then, and in each such case, the Company shall send or cause to be sent to the Holder at least 30 days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.

 

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5. Purchase Rights. In addition to any adjustments pursuant to Section 4 above, if at any time the Company grants, issues or sells any shares of Common Stock, Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock (the “Purchase Rights”), then the Holder shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder would have acquired if the Holder had held the number of Warrant Shares acquirable upon complete exercise of this Warrant 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 Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. Anything herein to the contrary notwithstanding, the Holder shall not be entitled to the Purchase Rights granted herein with respect to any Excluded Issuance.

6. Stockholders Agreement and Bylaws. All Warrant shares issuable upon exercise of this Warrant are and shall become subject to, and have the benefit of, the Stockholders Agreement and the Bylaws, and the Holder shall be required, for so long as the Holder holds any Warrant Shares, to become and remain a party to the Stockholders Agreement.

7. Transfer of Warrant. Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B, together with funds sufficient to pay any transfer taxes described in Section 3(f)(v) in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

8. Holder Not Deemed a Stockholder; Limitations on Liability. Except as otherwise specifically provided herein (including Section 4(d)(viii)), prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

9. Replacement on Loss; Division and Combination.

(a) Replacement of Warrant on Loss. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided, that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

 

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(b) Division and Combination of Warrant. Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment which may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of this Warrant or Warrants to the Company at its then principal executive offices, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the respective Holders or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment which may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

10. No Impairment. The Company shall not, by amendment of its Certificate of Incorporation or Bylaws, 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 to be observed or performed by it hereunder, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the Holder in order to protect the exercise rights of the Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant.

11. Compliance with the Securities Act.

(a) Agreement to Comply with the Securities Act; Legend. The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 11 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the “Securities Act”). This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.”

(b) Representations of the Holder. In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:

(i) The Holder is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.

 

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(ii) The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

(iii) The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

12. Warrant Register. The Company shall keep and properly maintain at its principal executive offices books for the registration of the Warrant and any transfers thereof. The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant.

13. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 13).

 

If to the Company:

  

LB Pharmaceuticals Inc

  

575 Madison Avenue 10th Floor

  

New York, New York 10022

  

Attention: Board of Directors

If to the Holder:

  

 

  

 

  

 

  

 

14. Cumulative Remedies. Except to the extent expressly provided in Section 8 to the contrary, the rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

15. Equitable Relief. Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.

 

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16. Entire Agreement. This Warrant, together with the Stockholders Agreement and the Bylaws, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Warrant and the Stockholders Agreement and the Bylaws, the statements in the body of this Warrant shall control.

17. Successor and Assigns. This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

18. No Third-Party Beneficiaries. This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

19. Headings. The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

20. Amendment and Modification; Waiver. Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

21. Severability. If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

22. Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.

23. Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of New York in each case located in New York, New York, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

 

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24. Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

25. Counterparts. This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

26. No Strict Construction. This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original Issue Date.

 

LB PHARMACEUTICALS INC, a
Delaware corporation
By:  

 

Name: Zachary Prensky
Title: President

 

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Exhibit 4.5

AMENDED AND RESTATED WARRANT

THIS AMENDED AND RESTATED WARRANT (THIS “WARRANT”) AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE SECURITIES ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE COMPANY REQUESTS, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO (I) THE THIRD AMENDED AND RESTATED BYLAWS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “BYLAWS”), (II) A RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT ENTERED INTO OR TO BE ENTERED INTO BY AND AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “ROFR AGREEMENT”), AND (III) A VOTING AGREEMENT ENTERED INTO OR TO BE ENTERED INTO BY AND AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “VOTING AGREEMENT”). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS WARRANT MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS CONTAINED HEREIN. COPIES OF THE BYLAWS, THE ROFR AGREEMENT AND THE VOTING AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST.

Warrant Certificate No.: [CSWM-XXX]

Original Issue Date:

FOR VALUE RECEIVED, LB PHARMACEUTICALS INC, a Delaware corporation (the “Company”), hereby certifies that MAXIM PARTNERS, LLC, a Delaware limited liability company, or its assigns (the “Holder”), shall be entitled to purchase from the Company _____________ duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (as defined below) at a purchase price per share of $0.01 (subject to adjustment as provided herein, the “Exercise Price”), all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain capitalized terms used herein are defined in Section 1 hereof.


This Warrant amends and restates in their entirety (i) Warrant CSWM-001 and (ii) Warrant CSWM-002 (collectively, the “Original Warrants”), in order to confirm the previously unfixed share numbers indicated in the Original Warrants. The Original Warrants were issued by the Company to the Holder in connection with the Company’s sale of convertible promissory notes pursuant to a Confidential Private Placement Memorandum dated June 22, 2020 (as amended and supplemented). Each of the Original Warrants shall have been returned to the Company for cancellation and/or shall have been canceled by the Company in its Carta system, as applicable, prior to the issuance of this Warrant. Upon the issuance of this Warrant, the Original Warrants shall be terminated in all respects.

1. Definitions. As used in this Warrant, the following terms have the respective meanings set forth below:

“Aggregate Exercise Price” means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3 hereof, multiplied by (b) the Exercise Price in effect as of the Exercise Date in accordance with the terms of this Warrant.

“Board” means the board of directors of the Company.

“Business Day” means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in New York, New York are authorized or obligated by law or executive order to close.

“Common Stock” means the Common Stock, par value $0.0001 per share, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the date hereof.

“Common Stock Deemed Outstanding” means, at any given time, the sum of (a) the number of shares of Common Stock actually outstanding at such time, plus (b) the number of shares of Common Stock issuable upon exercise of Options actually outstanding at such time, plus (c) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities actually outstanding at such time (treating as actually outstanding any Convertible Securities issuable upon exercise of Options actually outstanding at such time), in each case, regardless of whether the Options or Convertible Securities are actually exercisable at such time; provided, that Common Stock Deemed Outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries.

“Company” has the meaning set forth in the preamble.

“Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

“Excluded Issuances” means any issuance or sale (or deemed issuance or sale in accordance with Section 5(d)) by the Company after the Original Issue Date of: (a) shares of Common Stock issued upon the exercise of this Warrant; (b) up to an aggregate of 9,743,114 shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations) issued directly or upon the exercise of Options to directors, officers, employees, or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company, in each case authorized by the Board and issued pursuant to the

 

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Company’s 2017 Stock Incentive Plan, 2018 Stock Incentive Plan and 2023 Stock Incentive Plan (including all such shares of Common Stock and Options outstanding prior to the Original Issue Date); (c) shares of Common Stock issued upon the conversion or exercise of Options (other than Options covered by clause (b) above) or Convertible Securities issued prior to the Original Issue Date, provided that such securities are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price thereof; (d) Exempted Securities, as defined in the Company’s Fourth Amended and Restated Certificate of Incorporation; or (e) shares of Common Stock or Convertible Securities issued in connection with any financing approved by at least four (4) directors of the Board.

“Exercise Agreement” has the meaning set forth in Section 3(a)(i).

“Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., eastern time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

“Exercise Period” has the meaning set forth in Section 2.

“Exercise Price” has the meaning set forth in the preamble.

“Fair Market Value” means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which “Fair Market Value” is being determined; provided, that if the Common Stock is listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association, the “Fair Market Value” of the Common Stock shall be the fair market value per share as determined jointly by the Board and the Holder.

“Holder” has the meaning set forth in the preamble.

“Nasdaq” means The NASDAQ Stock Market LLC.

“Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

 

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“Original Issue Date” means the date specified on the first page of this Warrant.

“OTC Bulletin Board” means the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system.

“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

“Pink OTC Markets” means the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink.

“Warrant” means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

“Warrant Shares” means the shares of Common Stock or other capital stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.

2. Term of Warrant. Subject to the terms and conditions hereof, at any time or from time to time on or after the date that is 6 months after the Original Issue Date and prior to 5:00 p.m., eastern time, on the tenth (10th) anniversary of the date hereof or, if such day is not a Business Day, on the next preceding Business Day (the “Exercise Period”), the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder (subject to adjustment as provided herein).

3. Exercise of Warrant.

(a) Exercise Procedure. This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

(i) surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an “Exercise Agreement”), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and

(ii) payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b).

(b) Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as expressed in the Exercise Agreement, by the following methods:

(i) by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price;

 

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(ii) by instructing the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price;

(iii) by surrendering to the Company (x) Warrant Shares previously acquired by the Holder with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price and/or (y) other securities of the Company having a value as of the Exercise Date equal to the Aggregate Exercise Price (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred stock shall be the liquidation value thereof plus accumulated and unpaid dividends and in the case of shares of Common Stock shall be the Fair Market Value thereof); or

(iv) any combination of the foregoing.

In the event of any withholding of Warrant Shares or surrender of other equity securities pursuant to clause (ii), (iii) or (iv) above where the number of shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld or surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value per Warrant Share as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above.

(c) Delivery of Stock Certificates. Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(b) hereof), the Company shall, as promptly as practicable, and in any event within 30 days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 8 below, such other Person’s name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

(d) Fractional Shares. The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

 

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(e) Delivery of New Warrant. Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 3(c) hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

(f) Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With respect to the exercise of this warrant, the Company hereby represents, covenants and agrees:

(i) This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

(ii) All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non- assessable, issued free and clear of all taxes, liens and charges.

(iii) The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

(iv) The Company shall use its best efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise.

(v) The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

(g) Conditional Exercise. Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock, or otherwise), such exercise may, at the election of the Holder, be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

 

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(h) Reservation of Shares. During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

4. Registration Rights. The Company hereby grants to the Holder(s) the registration rights associated with the Warrant Shares set forth on Exhibit B hereto, subject to the terms and conditions set forth therein.

5. Adjustment to Exercise Price and Number of Warrant Shares. In order to prevent dilution of the purchase rights granted under this Warrant, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 5 (in each case, after taking into consideration any prior adjustments pursuant to this Section 5).

(a) Adjustment to Exercise Price Upon Issuance of Common Stock. Except as provided in Section 5(c) and except in the case of an event described in either Section 5(e) or Section 5(f), if the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or in accordance with Section 5(d) is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), then immediately upon such issuance or sale (or deemed issuance or sale), the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale) shall be reduced (and in no event increased) to an Exercise Price equal to the quotient obtained by dividing:

(i) the sum of (A) the product obtained by multiplying the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) by the Exercise Price then in effect plus (B) the aggregate consideration, if any, received by the Company upon such issuance or sale (or deemed issuance or sale); by

(ii) the sum of (A) the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) plus (B) the aggregate number of shares of Common Stock issued or sold (or deemed issued or sold) by the Company in such issuance or sale (or deemed issuance or sale).

(b) Adjustment to Number of Warrant Shares Upon Adjustment to Exercise Price. Upon any and each adjustment of the Exercise Price as provided in Section 5(a), the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment shall be increased to a number of Warrant Shares equal to the quotient obtained by dividing:

(i) the product of (A) the Exercise Price in effect immediately prior to any such adjustment multiplied by (B) the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any such adjustment; by

 

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(ii) the Exercise Price resulting from such adjustment.

(c) Exceptions To Adjustment Upon Issuance of Common Stock. Anything herein to the contrary notwithstanding, there shall be no adjustment to the Exercise Price or the number of Warrant Shares issuable upon exercise of this Warrant with respect to any Excluded Issuance.

(d) Effect of Certain Events on Adjustment to Exercise Price. For purposes of determining the adjusted Exercise Price under Section 5(a) hereof, the following shall be applicable:

(e) Issuance of Options. If the Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Options, whether or not such Options or the right to convert or exchange any Convertible Securities issuable upon the exercise of such Options are immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 5(d)(v)) for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon the exercise of such Options is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued as of the date of granting or sale of such Options (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price under Section 5(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 5(a)) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of all such Options, plus (y) the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the issuance or sale of all such Convertible Securities and the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of all such Options or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of all such Options. Except as otherwise provided in Section 5(d)(iii), no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock or of Convertible Securities upon exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities issuable upon exercise of such Options.

(i) Issuance of Convertible Securities. If the Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the right to convert or exchange any such Convertible Securities is immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 5(d)(v)) for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Convertible Securities, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of the total maximum amount of such Convertible Securities shall be deemed to have been issued

 

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as of the date of granting or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price pursuant to Section 5(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 5(a)) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of such Convertible Securities, plus (y) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. Except as otherwise provided in Section 5(d)(iii), (A) no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock upon conversion or exchange of such Convertible Securities and (B) no further adjustment of the Exercise Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Exercise Price have been made pursuant to the other provisions of this Section 5(d).

(ii) Change in Terms of Options or Convertible Securities. Upon any change in any of (A) the total amount received or receivable by the Company as consideration for the granting or sale of any Options or Convertible Securities referred to in Section 5(d)(i) or Section 5(d)(ii) hereof, (B) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of any Options or upon the issuance, conversion or exchange of any Convertible Securities referred to in Section 5(d)(i) or Section 5(d)(ii) hereof, (C) the rate at which Convertible Securities referred to in Section 5(d)(i) or Section 5(d)(ii) hereof are convertible into or exchangeable for Common Stock, or (D) the maximum number of shares of Common Stock issuable in connection with any Options referred to in Section 5(d)(i) hereof or any Convertible Securities referred to in Section 5(d)(ii) hereof (in each case, other than in connection with an Excluded Issuance), then (whether or not the original issuance or sale of such Options or Convertible Securities resulted in an adjustment to the Exercise Price pursuant to this Section 5) the Exercise Price in effect at the time of such change shall be adjusted or readjusted, as applicable, to the Exercise Price which would have been in effect at such time pursuant to the provisions of this Section 5 had such Options or Convertible Securities still outstanding provided for such changed consideration, conversion rate or maximum number of shares, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment or readjustment the Exercise Price then in effect is reduced, and the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment or readjustment shall be correspondingly adjusted or readjusted pursuant to the provisions of Section 5(b).

(iii) Treatment of Expired or Terminated Options or Convertible Securities. Upon the expiration or termination of any unexercised Option (or portion thereof) or any unconverted or unexchanged Convertible Security (or portion thereof) for which any adjustment (either upon its original issuance or upon a revision of its terms) was made pursuant to this Section 5 (including without limitation upon the redemption or purchase for consideration of all or any portion of such Option or Convertible Security by the Company), the Exercise Price then in effect hereunder shall forthwith be changed pursuant to the provisions of this Section 5 to the Exercise Price which would have been in effect at the time of such expiration or termination had such unexercised Option (or portion thereof) or unconverted or unexchanged Convertible Security (or portion thereof), to the extent outstanding immediately prior to such expiration or termination, never been issued.

 

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(iv) Calculation of Consideration Received. If the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or is deemed to have issued or sold in accordance with Section 5(d), any shares of Common Stock, Options or Convertible Securities: (A) for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor; (B) for consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by the Company shall be the market price (as reflected on any securities exchange, quotation system or association or similar pricing system covering such security) for such securities as of the end of business on the date of receipt of such securities; (C) for no specifically allocated consideration in connection with an issuance or sale of other securities of the Company, together comprising one integrated transaction, the amount of the consideration therefor shall be deemed to be the fair value of such portion of the aggregate consideration received by the Company in such transaction as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued in such transaction; or (D) to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued to such owners. The net amount of any cash consideration and the fair value of any consideration other than cash or marketable securities shall be determined in good faith by the Board.

(v) Record Date. For purposes of any adjustment to the Exercise Price or the number of Warrant Shares in accordance with this Section 5, in case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

(vi) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof or the transfer of such shares among the Company and its wholly-owned subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section 5.

(vii) Other Dividends and Distributions. Subject to the provisions of this Section 5(d), if the Company shall, at any time or from time to time after the Original Issue Date, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of the Company (other than a dividend or distribution of shares of Common Stock, Options or Convertible Securities in respect of

 

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outstanding shares of Common Stock), cash or other property, then, and in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant, in addition to the number of Warrant Shares receivable thereupon, the kind and amount of securities of the Company, cash or other property which the Holder would have been entitled to receive had the Warrant been exercised in full into Warrant Shares on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the Exercise Date, retained such securities, cash or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section 5 with respect to the rights of the Holder; provided, that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as the Holder would have received if the Warrant had been exercised in full into Warrant Shares on the date of such event.

(f) Adjustment to Exercise Price and Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock. If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Company payable in shares of Common Stock or in Options or Convertible Securities or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 5(e) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.

(g) Adjustment to Exercise Price and Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger. In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company’s assets to another Person or (v) other similar transaction (other than any such transaction covered by Section 5(e)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without

 

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taking into account any limitations or restrictions on the exercisability of this Warrant); and, in such case, appropriate adjustment (in form and substance reasonably satisfactory to the Holder) shall be made with respect to the Holder’s rights under this Warrant to ensure that the provisions of this Section 5 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant (including, in the case of any consolidation, merger, sale or similar transaction in which the successor or purchasing Person is other than the Company, an immediate adjustment in the Exercise Price to the value per share for the Common Stock reflected by the terms of such consolidation, merger, sale or similar transaction, and a corresponding immediate adjustment to the number of Warrant Shares acquirable upon exercise of this Warrant without regard to any limitations or restrictions on exercise, if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger, sale or similar transaction). The provisions of this Section 5(f) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. The Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant and reasonably satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other transaction contemplated by the provisions of this Section 5(f), the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 2 instead of giving effect to the provisions contained in this Section 5(f) with respect to this Warrant.

(h) Certain Events. If any event of the type contemplated by the provisions of this Section 5 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features) occurs, then the Board shall make an appropriate adjustment in the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 5; provided, that no such adjustment pursuant to this Section 5(g) shall increase the Exercise Price or decrease the number of Warrant Shares issuable as otherwise determined pursuant to this Section 5.

(i) Certificate as to Adjustment.

(i) As promptly as reasonably practicable following any adjustment of the Exercise Price and/or the number of Warrant Shares issuable upon exercise of this Warrant, but in any event not later than 30 days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

(ii) As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than 30 days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.

 

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(j) Notices. In the event:

(i) that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security;

(ii) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company’s assets to another Person; or

(iii) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

then, and in each such case, the Company shall send or cause to be sent to the Holder at least 30 days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding- up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.

6. Purchase Rights. In addition to any adjustments pursuant to Section 5 above, if at any time the Company grants, issues or sells any shares of Common Stock, Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock (the “Purchase Rights”), then the Holder shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder would have acquired if the Holder had held the number of Warrant Shares acquirable upon complete exercise of this Warrant 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 Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. Anything herein to the contrary notwithstanding, the Holder shall not be entitled to the Purchase Rights granted herein with respect to any Excluded Issuance.

 

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7. Bylaws and Stockholders Agreements. All Warrant shares issuable upon exercise of this Warrant are and shall become subject to, and have the benefit of, the Bylaws, the ROFR Agreement and the Voting Agreement, and the Holder shall be required, for so long as the Holder holds any Warrant Shares, to be bound by the terms of the Bylaws and to be bound by and remain a party to the ROFR Agreement and the Voting Agreement.

8. Transfer of Warrant. Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed instrument of assignment, in form and substance reasonably satisfactory to the Company, together with funds sufficient to pay any transfer taxes described in Section 3(f)(v) in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

9. Holder Not Deemed a Stockholder; Limitations on Liability. Except as otherwise specifically provided herein (including Section 5(d)(viii)), prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

10. Replacement on Loss; Division and Combination.

(a) Replacement of Warrant on Loss. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company, at its own expense, shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided, that in the case of mutilation, no indemnity shall be required if this Warrant is surrendered to the Company for cancellation in an identifiable form.

(b) Division and Combination of Warrant. Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment which may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of such Warrant or Warrants to the Company at its then principal executive offices, together with a written notice

 

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specifying the names and denominations in which new Warrant or Warrants are to be issued, signed by the respective Holder or Holders or such its or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment which may be involved in such division or combination, the Company shall, at its own expense, execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

11. No Impairment. The Company shall not, by amendment of its then-current Certificate of Incorporation or Bylaws, 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 to be observed or performed by it hereunder, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the Holder in order to protect the exercise rights of the Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant.

12. Compliance with the Securities Act.

(a) Agreement to Comply with the Securities Act; Legend. The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 12 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the “Securities Act”). This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE SECURITIES ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF LB PHARMACEUTICALS INC (THE “COMPANY”) REQUESTS, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.”

 

15


(b) Representations of the Holder. In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:

(i) The Holder is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.

(ii) The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

(iii) The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

13. Warrant Register. The Company shall keep and properly maintain at its principal executive offices books and records for the registration of the Warrant and any transfers thereof, which may include records kept through electronic equity management platform (e.g., Carta). The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant.

14. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 14).

 

If to the Company:   

LB Pharmaceuticals Inc

575 Madison Avenue, 10th Floor

New York, New York 10022

Attention: Board of Directors

 

16


If to the Holder:   

Maxim Partners LLC

405 Lexington Avenue

New York, New York 10174

Attention: Patricia Serafin

15. Cumulative Remedies. Except to the extent expressly provided in this Warrant to the contrary, the rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

16. Equitable Relief. Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.

17. Entire Agreement. This Warrant, together with the Bylaws, the ROFR Agreement and the Voting Agreement, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter, including, without limitation, the Original Warrants.

18. Successor and Assigns. This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

19. No Third-Party Beneficiaries. This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

20. Headings. The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

21. Amendment and Modification; Waiver. Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

17


22. Severability. If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

23. Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.

24. Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of New York in each case located in New York, New York, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

25. Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

26. Counterparts. This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

27. No Strict Construction. This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

[SIGNATURE PAGE FOLLOWS]

 

18


IN WITNESS WHEREOF, the Company has duly executed this Warrant as of the Original Issue Date.

 

LB PHARMACEUTICALS INC,

a Delaware corporation

By:  

 

Name: Zachary Prensky
Title: President and Chief Executive Officer

 

Accepted and agreed to by the Holder.
MAXIM PARTNERS, LLC,
a New York limited liability company
By:  

 

Name : James Siegel
Title: General Counsel

 

[Signature Page to Warrant CSWM-006]


EXHIBIT A

EXERCISE AGREEMENT

 

To: LB Pharmaceuticals Inc    Dated:_________

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.    ), hereby elects to purchase (check applicable box):

 

  ☐

_________shares of Common Stock covered by such Warrant; or

 

  ☐

the maximum number of shares of Common Stock covered by such Warrant.

The undersigned hereby makes payment in full of the Aggregate Exercise Price as follows (check applicable box):

 

  ☐

payment of $_________ in cash or wire transfer of immediately available funds; or

 

  ☐

pursuant to cashless exercise, as set forth in Section 3(b)(ii) or (iii) of the attached Warrant; or

 

  ☐

by a combination of the aforementioned methods of payment, with $________ paid in cash or wire transfer of immediately available funds and the remainder of the Aggregate Exercise Price paid pursuant to cashless exercise.

If the Company certificates its shares of Common Stock, please issue a certificate or certificates representing said shares of Common Stock (net of any Warrant Shares withheld to cover the Aggregate Exercise Price) and, in any case, please update the Company’s books and records to reflect the issuance of said shares of Common Stock (net of any Warrant Shares withheld to cover the Aggregate Exercise Price) in such name or names as specified below:

 

Name:    
Address:    

Certain capitalized terms used herein shall have the meanings given to such terms in the attached Warrant.

IN WITNESS WHEREOF, the undersigned has caused this Exercise Agreement to be executed on the day and year first above written.

 

if an individual:

 

[Printed or Typed Name]
By:  

 

  (Signature)
if an entity:

 

[Printed or Typed Entity Name]
By:  

 

  (Signature)
Name:  

 

Title:  

 


Exhibit B

REGISTRATION RIGHTS

All of the Warrant Shares will be deemed “Registrable Securities” subject to the provisions of this Exhibit B. All capitalized terms used but not defined in this Exhibit B shall have the meanings ascribed to such terms in the Warrant to which this Exhibit B is attached.

As used in this Exhibit B, the following capitalized terms have the following meanings: “Effectiveness Date” means, with respect to the Demand Registration Statement required to be filed hereunder, the 90th calendar day following the receipt of the request of the Majority Holders to file such Demand Registration Statement (or, if the Demand Registration Statement is reviewed by the SEC, the 120th calendar day following such request).

“Registration Statement” means any Registration Statement on Form S-1 (or such other form then available to the Company) that is filed by the Company in connection with an IPO or filed with respect to any offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for shareholders of the Company for their account (or by the Company and by shareholders of the Company) other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan on Form S-8, (ii) for a dividend reinvestment plan or (iii) in connection with a merger or acquisition.

“SEC” means the United States Securities and Exchange Commission.

1. Registration Rights.

1.1. Demand Registration. At any time after the Company has a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or subject to the reporting requirements of Section 15(d) of the Exchange Act, the Holders of a majority of the Warrants and the Warrant Shares then outstanding (the “Majority Holders”) may request that the Company prepare and file with the SEC a registration statement covering the resale of all of the Registrable Securities for a resale offering to be made on a continuous basis (the “Demand Registration Statement”). Subject to the terms of this Exhibit B, upon receipt of such request, the Company shall prepare and file the Demand Registration Statement and the Company shall use its commercially best efforts to cause the Demand Registration Statement to be declared effective under the Securities Act of 1933, as amended (the “Securities Act”) as promptly as possible after the filing thereof, but in any event prior to the Effectiveness Date, and shall use its commercially best efforts to keep such Demand Registration Statement, with respect to each Holder, continuously effective under the Securities Act until the earlier to occur of (i) the date on which such Holder may sell all Registrable Securities then held without any restriction under Rule 144 promulgated under the Securities Act (“Rule 144”), or (ii) all Registrable Securities covered by such Demand Registration Statement have been sold by such Holder (the “Effectiveness Period”). For the purpose of clarity, the Holders shall collectively have only one (1) opportunity to request that the Company file a Demand Registration Statement.

 

B-1


1.2. Piggy-Back Rights.

1.2.1. If (A) the Company proposes to complete an initial public offering of its Common Stock (the “IPO”) or (B) at any time after the Company has a class of securities registered under Section 12 of the Exchange Act or subject to the reporting requirements of Section 15(d) of the Exchange Act, there is not an effective registration statement covering the resale of all of the Registrable Securities for a resale offering and the Company proposes to file any Registration Statement, then the Company shall (x) give written notice of such proposed IPO or filing to the holders of Registrable Securities appearing on the books and records of the Company as such a holder as soon as practicable but in no event less than ten (10) days before the anticipated IPO or filing date of the Registration Statement, which notice shall describe the IPO or the amount and type of securities to be included in such Registration Statement, the intended method(s) of distribution, and the name of the proposed managing underwriter or underwriters, if any, of the IPO or other offering, and (y) offer to the holders of Registrable Securities in such notice the opportunity to register the sale of such number of Registrable Securities as such holders may request in writing within five (5) days following receipt of such notice (a “Piggy-Back Registration”). The Company shall cause such Registrable Securities to be included in such registration and shall cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All holders of Registrable Securities proposing to distribute their securities through a Piggy-Back Registration that involves an underwriter or underwriters shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such Piggy-Back Registration.

1.2.2. Notwithstanding any other provision of this Section 1.2, if the Piggy-Back registration involves an underwriter or underwriters of a primary offering of the Company’s securities and such underwriter or underwriters advise the Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities in proportion (as nearly as practicable) to the number of Registrable Securities then owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders. If as a result of the application of the foregoing provisions, the Company eliminates or reduces the number of Registrable Securities that are included in the registration statement to an amount that is less than 25% of the Registrable Securities, then the Company shall use its best efforts to issue unrestricted shares of Common Stock upon any conversion and/or exercise of the Registrable Securities that occur after the subject Registration Statement is effective, and to cause the transfer agent to deliver the certificates by the later of: (i) six (6) months from the date the Registrable Securities were issued; (ii) the date of expiration of any lock-up related to the registration statement; and (iii) 30 days after the requirements are met to convert or exercise the Registrable Securities.

1.3. Withdrawal. Any holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the IPO or Registration Statement. The Company (whether on its own determination or as the result of a

 

B-2


withdrawal by persons making a demand pursuant to written contractual obligations) may withdraw a Registration Statement at any time prior to the effectiveness of such Registration Statement. Notwithstanding any such withdrawal, the Company shall pay all expenses incurred by the holders of Registrable Securities in connection with such Piggy-Back Registration as provided in Section 1.7 below.

1.4. Notwithstanding the registration obligations set forth in Sections 1.1 and 1.2 above, if the SEC informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415 promulgated under the Securities Act, be registered for resale as a secondary offering on a single Demand Registration Statement or Registration Statement, the Company agrees to inform each of the holders thereof and use its reasonable efforts to file amendments to the Demand Registration Statement or Registration Statement, as the case may be, as required by the SEC, covering the maximum number of Registrable Securities permitted to be registered by the SEC, on Form S-1 or such other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Sections 1.1 and 1.2 above.

1.5. The Company shall notify the holders of Registrable Securities at any time when a prospectus relating to such holder’s Registrable Securities is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such Demand Registration Statement or Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. At the request of such holder, the Company shall also prepare, file and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of the Registrable Securities, such prospectus shall 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 in light of the circumstances then existing. The holders of Registrable Securities shall not offer or sell any Registrable Securities covered by the Demand Registration Statement or Registration Statement after receipt of such notification until the receipt of such supplement or amendment.

1.6. The Company may request a holder of Registrable Securities to furnish the Company such information with respect to such holder and such holder’s proposed distribution of the Registrable Securities pursuant to the Demand Registration Statement or Registration Statement as the Company may from time to time reasonably request in writing or as shall be required by law or by the Commission in connection therewith, and such holders shall furnish the Company with such information.

1.7. All fees and expenses incident to the performance of or compliance with this Exhibit B by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to the Demand Registration Statement or Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the SEC, (B) with respect to filings required to be made with any trading market on which the Common

 

B-3


Stock is then listed for trading, (C) in compliance with applicable state securities or blue sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with blue sky qualifications or exemptions of the Registrable Securities) and (D) with respect to any filing that may be required to be made by any broker through which a holder of Registrable Securities intends to make sales of Registrable Securities with the Financial Industry Regulatory Authority, (ii) printing expenses, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel to the Holders of Registrable Securities, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other persons or entities retained by the Company in connection with the consummation of the transactions contemplated by this Exhibit B. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Exhibit B (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any holder of Registrable Securities.

1.8. The Company and its successors and assigns shall indemnify and hold harmless each Holder, each holder of Registrable Securities, the officers, directors, members, partners, agents and employees (and any other individuals or entities with a functionally equivalent role of a person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each individual or entity who controls each Holder or any such holder of Registrable Securities (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other individuals or entities with a functionally equivalent role of a person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling individual or entity (each, an “Indemnified Party”), to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in the Demand Registration Statement or a Registration Statement, any related prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any such prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Exhibit B, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based upon information regarding a Holder or information furnished by such holder of Registrable Securities to the Company in writing for use therein. The Company shall notify each Holder and each holder of Registrable Securities promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Exhibit B of which the Company is aware.

 

B-4


1.9. If the indemnification under Section 1.8 is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then the Company shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Company and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of the Company and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, the Company or the Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in Section 1.8 was available to such party in accordance with its terms. It is agreed that it would not be just and equitable if contribution pursuant to this Section 1.9 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding sentence. Notwithstanding the provisions of this Section 1.9, neither the Holder nor any holder of Registrable Securities shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such party from the sale of all of their Registrable Securities pursuant to such Demand Registration Statement or Registration Statement or related prospectus exceeds the amount of any damages that such party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

1.10. Lock-Up. The Holders each agree to enter into lock-up agreements with the Company pursuant to which such Holders will not transfer their respective securities (except as described in the lock-up agreements) for a period of up to 180 days following the consummation of an IPO; provided that the Holders shall only be required to enter into such lock-up agreements if the officers and directors of the Company, as well as any persons or entities owning more than 5% of the Company’s Common Stock on an as converted and as exercised basis, shall agree to a lock-up no less onerous than the Holders. Such lock-up agreement shall be in a form that is customary for an IPO and reasonably acceptable to the Company or underwriter in such offering. Nothing in this Section 1.10 shall impact the Holders’ ability to exercise their registration rights pursuant to Sections 1.1 and 1.2.

 

B-5


Exhibit C-2

Amended and Restated Warrant [CSWM-XXX]

 

10


AMENDED AND RESTATED WARRANT

THIS AMENDED AND RESTATED WARRANT (THIS “WARRANT”) AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE SECURITIES ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE COMPANY REQUESTS, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO (I) THE THIRD AMENDED AND RESTATED BYLAWS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “BYLAWS”), (II) A RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT ENTERED INTO OR TO BE ENTERED INTO BY AND AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “ROFR AGREEMENT”), AND (III) A VOTING AGREEMENT ENTERED INTO OR TO BE ENTERED INTO BY AND AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “VOTING AGREEMENT”). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS WARRANT MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS CONTAINED HEREIN. COPIES OF THE BYLAWS, THE ROFR AGREEMENT AND THE VOTING AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST.

Warrant Certificate No.: [CSWM-XXX]

Original Issue Date:

FOR VALUE RECEIVED, LB PHARMACEUTICALS INC, a Delaware corporation (the “Company”), hereby certifies that MAXIM PARTNERS, LLC, a Delaware limited liability company, or its assigns (the “Holder”), shall be entitled to purchase from the Company __________ duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (as defined below) at a purchase price per share of $0.01 (subject to adjustment as provided herein, the “Exercise Price”), all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain capitalized terms used herein are defined in Section 1 hereof.

 

1


This Warrant amends and restates in its entirety Warrant ________ (the “Original Warrant”). The Original Warrant was issued by the Company to the Holder in connection with the Rights Offer (as such term is defined in the Company’s Amended and Restated Confidential Private Placement Memorandum dated June 29, 2022). The Original Warrant shall have been returned to the Company for cancellation and/or shall have been canceled by the Company in its Carta system, as applicable, prior to the issuance of this Warrant. Upon the issuance of this Warrant, the Original Warrant shall be terminated in all respects.

28. Definitions. As used in this Warrant, the following terms have the respective meanings set forth below:

“Aggregate Exercise Price” means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3 hereof, multiplied by (b) the Exercise Price in effect as of the Exercise Date in accordance with the terms of this Warrant.

“Board” means the board of directors of the Company.

“Business Day” means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in New York, New York are authorized or obligated by law or executive order to close.

“Common Stock” means the Common Stock, par value $0.0001 per share, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the date hereof.

“Common Stock Deemed Outstanding” means, at any given time, the sum of (a) the number of shares of Common Stock actually outstanding at such time, plus (b) the number of shares of Common Stock issuable upon exercise of Options actually outstanding at such time, plus (c) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities actually outstanding at such time (treating as actually outstanding any Convertible Securities issuable upon exercise of Options actually outstanding at such time), in each case, regardless of whether the Options or Convertible Securities are actually exercisable at such time; provided, that Common Stock Deemed Outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries.

“Company” has the meaning set forth in the preamble.

“Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

“Excluded Issuances” means any issuance or sale (or deemed issuance or sale in accordance with Section 5(d)) by the Company after the Original Issue Date of: (a) shares of Common Stock issued upon the exercise of this Warrant; (b) up to an aggregate of 9,743,114 shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations) issued directly or upon the exercise of Options to directors, officers, employees, or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company, in each case authorized by the Board and issued pursuant to the Company’s 2017 Stock Incentive Plan, 2018 Stock Incentive Plan and the 2023 Stock Incentive Plan (including all such shares of Common Stock and Options outstanding prior to the Original

 

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Issue Date); (c) shares of Common Stock issued upon the conversion or exercise of Options (other than Options covered by clause (b) above) or Convertible Securities issued prior to the Original Issue Date, provided that such securities are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price thereof; (d) Exempted Securities, as defined in the Company’s Fourth Amended and Restated Certificate of Incorporation; or (e) shares of Common Stock or Convertible Securities issued in connection with any financing approved by at least four (4) directors of the Board.

“Exercise Agreement” has the meaning set forth in Section 3(a)(i).

“Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., eastern time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

“Exercise Period” has the meaning set forth in Section 2.

“Exercise Price” has the meaning set forth in the preamble.

“Fair Market Value” means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which “Fair Market Value” is being determined; provided, that if the Common Stock is listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association, the “Fair Market Value” of the Common Stock shall be the fair market value per share as determined jointly by the Board and the Holder.

“Holder” has the meaning set forth in the preamble.

“Nasdaq” means The NASDAQ Stock Market LLC.

“Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

“Original Issue Date” means the date specified on the first page of this Warrant.

 

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“OTC Bulletin Board” means the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system.

“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

“Pink OTC Markets” means the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink.

“Warrant” means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

“Warrant Shares” means the shares of Common Stock or other capital stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.

29. Term of Warrant. Subject to the terms and conditions hereof, at any time or from time to time on or after the date that is 6 months after the Original Issue Date and prior to 5:00 p.m., eastern time, on the tenth (10th) anniversary of the date hereof or, if such day is not a Business Day, on the next preceding Business Day (the “Exercise Period”), the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder (subject to adjustment as provided herein).

30. Exercise of Warrant.

(a) Exercise Procedure. This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

(i) surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an “Exercise Agreement”), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and

(ii) payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b).

(b) Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as expressed in the Exercise Agreement, by the following methods:

(i) by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price;

 

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(ii) by instructing the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price;

(iii) by surrendering to the Company (x) Warrant Shares previously acquired by the Holder with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price and/or (y) other securities of the Company having a value as of the Exercise Date equal to the Aggregate Exercise Price (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred stock shall be the liquidation value thereof plus accumulated and unpaid dividends and in the case of shares of Common Stock shall be the Fair Market Value thereof); or

(iv) any combination of the foregoing.

In the event of any withholding of Warrant Shares or surrender of other equity securities pursuant to clause (ii), (iii) or (iv) above where the number of shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld or surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value per Warrant Share as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above.

(c) Delivery of Stock Certificates. Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(b) hereof), the Company shall, as promptly as practicable, and in any event within 30 days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 8 below, such other Person’s name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

(d) Fractional Shares. The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

 

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(e) Delivery of New Warrant. Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 3(c) hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

(f) Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With respect to the exercise of this warrant, the Company hereby represents, covenants and agrees:

(i) This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

(ii) All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non- assessable, issued free and clear of all taxes, liens and charges.

(iii) The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

(iv) The Company shall use its best efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise.

(v) The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

(g) Conditional Exercise. Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock, or otherwise), such exercise may, at the election of the Holder, be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

 

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(h) Reservation of Shares. During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

31. Registration Rights. The Company hereby grants to the Holder(s) the registration rights associated with the Warrant Shares set forth on Exhibit B hereto, subject to the terms and conditions set forth therein.

32. Adjustment to Exercise Price and Number of Warrant Shares. In order to prevent dilution of the purchase rights granted under this Warrant, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 5 (in each case, after taking into consideration any prior adjustments pursuant to this Section 5).

(a) Adjustment to Exercise Price Upon Issuance of Common Stock. Except as provided in Section 5(c) and except in the case of an event described in either Section 5(e) or Section 5(f), if the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or in accordance with Section 5(d) is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), then immediately upon such issuance or sale (or deemed issuance or sale), the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale) shall be reduced (and in no event increased) to an Exercise Price equal to the quotient obtained by dividing:

(i) the sum of (A) the product obtained by multiplying the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) by the Exercise Price then in effect plus (B) the aggregate consideration, if any, received by the Company upon such issuance or sale (or deemed issuance or sale); by

(ii) the sum of (A) the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) plus (B) the aggregate number of shares of Common Stock issued or sold (or deemed issued or sold) by the Company in such issuance or sale (or deemed issuance or sale).

(b) Adjustment to Number of Warrant Shares Upon Adjustment to Exercise Price. Upon any and each adjustment of the Exercise Price as provided in Section 5(a), the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment shall be increased to a number of Warrant Shares equal to the quotient obtained by dividing:

(i) the product of (A) the Exercise Price in effect immediately prior to any such adjustment multiplied by (B) the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any such adjustment; by

 

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(ii) the Exercise Price resulting from such adjustment.

(c) Exceptions To Adjustment Upon Issuance of Common Stock. Anything herein to the contrary notwithstanding, there shall be no adjustment to the Exercise Price or the number of Warrant Shares issuable upon exercise of this Warrant with respect to any Excluded Issuance.

(d) Effect of Certain Events on Adjustment to Exercise Price. For purposes of determining the adjusted Exercise Price under Section 5(a) hereof, the following shall be applicable:

(e) Issuance of Options. If the Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Options, whether or not such Options or the right to convert or exchange any Convertible Securities issuable upon the exercise of such Options are immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 5(d)(v)) for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon the exercise of such Options is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued as of the date of granting or sale of such Options (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price under Section 5(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 5(a)) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of all such Options, plus (y) the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the issuance or sale of all such Convertible Securities and the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of all such Options or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of all such Options. Except as otherwise provided in Section 5(d)(iii), no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock or of Convertible Securities upon exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities issuable upon exercise of such Options.

(i) Issuance of Convertible Securities. If the Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the right to convert or exchange any such Convertible Securities is immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 5(d)(v)) for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Convertible Securities, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of the total maximum amount of such Convertible Securities shall be deemed to have been issued

 

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as of the date of granting or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price pursuant to Section 5(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 5(a)) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of such Convertible Securities, plus (y) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. Except as otherwise provided in Section 5(d)(iii), (A) no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock upon conversion or exchange of such Convertible Securities and (B) no further adjustment of the Exercise Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Exercise Price have been made pursuant to the other provisions of this Section 5(d).

(ii) Change in Terms of Options or Convertible Securities. Upon any change in any of (A) the total amount received or receivable by the Company as consideration for the granting or sale of any Options or Convertible Securities referred to in Section 5(d)(i) or Section 5(d)(ii) hereof, (B) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of any Options or upon the issuance, conversion or exchange of any Convertible Securities referred to in Section 5(d)(i) or Section 5(d)(ii) hereof, (C) the rate at which Convertible Securities referred to in Section 5(d)(i) or Section 5(d)(ii) hereof are convertible into or exchangeable for Common Stock, or (D) the maximum number of shares of Common Stock issuable in connection with any Options referred to in Section 5(d)(i) hereof or any Convertible Securities referred to in Section 5(d)(ii) hereof (in each case, other than in connection with an Excluded Issuance), then (whether or not the original issuance or sale of such Options or Convertible Securities resulted in an adjustment to the Exercise Price pursuant to this Section 5) the Exercise Price in effect at the time of such change shall be adjusted or readjusted, as applicable, to the Exercise Price which would have been in effect at such time pursuant to the provisions of this Section 5 had such Options or Convertible Securities still outstanding provided for such changed consideration, conversion rate or maximum number of shares, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment or readjustment the Exercise Price then in effect is reduced, and the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment or readjustment shall be correspondingly adjusted or readjusted pursuant to the provisions of Section 5(b).

(iii) Treatment of Expired or Terminated Options or Convertible Securities. Upon the expiration or termination of any unexercised Option (or portion thereof) or any unconverted or unexchanged Convertible Security (or portion thereof) for which any adjustment (either upon its original issuance or upon a revision of its terms) was made pursuant to this Section 5 (including without limitation upon the redemption or purchase for consideration of all or any portion of such Option or Convertible Security by the Company), the Exercise Price then in effect hereunder shall forthwith be changed pursuant to the provisions of this Section 5 to the Exercise Price which would have been in effect at the time of such expiration or termination had such unexercised Option (or portion thereof) or unconverted or unexchanged Convertible Security (or portion thereof), to the extent outstanding immediately prior to such expiration or termination, never been issued.

 

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(iv) Calculation of Consideration Received. If the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or is deemed to have issued or sold in accordance with Section 5(d), any shares of Common Stock, Options or Convertible Securities: (A) for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor; (B) for consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by the Company shall be the market price (as reflected on any securities exchange, quotation system or association or similar pricing system covering such security) for such securities as of the end of business on the date of receipt of such securities; (C) for no specifically allocated consideration in connection with an issuance or sale of other securities of the Company, together comprising one integrated transaction, the amount of the consideration therefor shall be deemed to be the fair value of such portion of the aggregate consideration received by the Company in such transaction as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued in such transaction; or (D) to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued to such owners. The net amount of any cash consideration and the fair value of any consideration other than cash or marketable securities shall be determined in good faith by the Board.

(v) Record Date. For purposes of any adjustment to the Exercise Price or the number of Warrant Shares in accordance with this Section 5, in case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

(vi) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof or the transfer of such shares among the Company and its wholly-owned subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section 5.

(vii) Other Dividends and Distributions. Subject to the provisions of this Section 5(d), if the Company shall, at any time or from time to time after the Original Issue Date, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of the Company (other than a dividend or distribution of shares of Common Stock, Options or Convertible Securities in respect of

 

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outstanding shares of Common Stock), cash or other property, then, and in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant, in addition to the number of Warrant Shares receivable thereupon, the kind and amount of securities of the Company, cash or other property which the Holder would have been entitled to receive had the Warrant been exercised in full into Warrant Shares on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the Exercise Date, retained such securities, cash or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section 5 with respect to the rights of the Holder; provided, that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as the Holder would have received if the Warrant had been exercised in full into Warrant Shares on the date of such event.

(f) Adjustment to Exercise Price and Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock. If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Company payable in shares of Common Stock or in Options or Convertible Securities or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 5(e) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.

(g) Adjustment to Exercise Price and Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger. In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company’s assets to another Person or (v) other similar transaction (other than any such transaction covered by Section 5(e)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without

 

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taking into account any limitations or restrictions on the exercisability of this Warrant); and, in such case, appropriate adjustment (in form and substance reasonably satisfactory to the Holder) shall be made with respect to the Holder’s rights under this Warrant to ensure that the provisions of this Section 5 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant (including, in the case of any consolidation, merger, sale or similar transaction in which the successor or purchasing Person is other than the Company, an immediate adjustment in the Exercise Price to the value per share for the Common Stock reflected by the terms of such consolidation, merger, sale or similar transaction, and a corresponding immediate adjustment to the number of Warrant Shares acquirable upon exercise of this Warrant without regard to any limitations or restrictions on exercise, if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger, sale or similar transaction). The provisions of this Section 5(f) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. The Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant and reasonably satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other transaction contemplated by the provisions of this Section 5(f), the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 2 instead of giving effect to the provisions contained in this Section 5(f) with respect to this Warrant.

(h) Certain Events. If any event of the type contemplated by the provisions of this Section 5 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features) occurs, then the Board shall make an appropriate adjustment in the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 5; provided, that no such adjustment pursuant to this Section 5(g) shall increase the Exercise Price or decrease the number of Warrant Shares issuable as otherwise determined pursuant to this Section 5.

(i) Certificate as to Adjustment.

(i) As promptly as reasonably practicable following any adjustment of the Exercise Price and/or the number of Warrant Shares issuable upon exercise of this Warrant, but in any event not later than 30 days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

(ii) As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than 30 days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.

 

12


(j) Notices. In the event:

(i) that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security;

(ii) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company’s assets to another Person; or

(iii) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

then, and in each such case, the Company shall send or cause to be sent to the Holder at least 30 days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding- up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.

33. Purchase Rights. In addition to any adjustments pursuant to Section 5 above, if at any time the Company grants, issues or sells any shares of Common Stock, Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock (the “Purchase Rights”), then the Holder shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder would have acquired if the Holder had held the number of Warrant Shares acquirable upon complete exercise of this Warrant 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 Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. Anything herein to the contrary notwithstanding, the Holder shall not be entitled to the Purchase Rights granted herein with respect to any Excluded Issuance.

 

13


34. Bylaws and Stockholders Agreements. All Warrant shares issuable upon exercise of this Warrant are and shall become subject to, and have the benefit of, the Bylaws, the ROFR Agreement and the Voting Agreement, and the Holder shall be required, for so long as the Holder holds any Warrant Shares, to be bound by the terms of the Bylaws and to be bound by and remain a party to the ROFR Agreement and the Voting Agreement.

35. Transfer of Warrant. Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed instrument of assignment, in form and substance reasonably satisfactory to the Company, together with funds sufficient to pay any transfer taxes described in Section 3(f)(v) in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in thedenominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

36. Holder Not Deemed a Stockholder; Limitations on Liability. Except as otherwise specifically provided herein (including Section 5(d)(viii)), prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

37. Replacement on Loss; Division and Combination.

(a) Replacement of Warrant on Loss. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company, at its own expense, shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided, that in the case of mutilation, no indemnity shall be required if this Warrant is surrendered to the Company for cancellation in an identifiable form.

(b) Division and Combination of Warrant. Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment which may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of such Warrant or Warrants to the Company at its then principal executive offices, together with a written notice

 

14


specifying the names and denominations in which new Warrant or Warrants are to be issued, signed by the respective Holder or Holders or such its or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment which may be involved in such division or combination, the Company shall, at its own expense, execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

38. No Impairment. The Company shall not, by amendment of its then-current Certificate of Incorporation or Bylaws, 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 to be observed or performed by it hereunder, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the Holder in order to protect the exercise rights of the Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant.

39. Compliance with the Securities Act.

(a) Agreement to Comply with the Securities Act; Legend. The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 12 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the “Securities Act”). This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE SECURITIES ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF LB PHARMACEUTICALS INC (THE “COMPANY”) REQUESTS, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.”

 

15


(b) Representations of the Holder. In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:

(i) The Holder is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.

(ii) The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

(iii) The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

40. Warrant Register. The Company shall keep and properly maintain at its principal executive offices books and records for the registration of the Warrant and any transfers thereof, which may include records kept through electronic equity management platform (e.g., Carta). The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant.

41. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 14).

 

16


If to the Company:   

LB Pharmaceuticals Inc

575 Madison Avenue, 10th Floor

New York, New York 10022

Attention: Board of Directors

  
If to the Holder:   

Maxim Partners LLC

405 Lexington Avenue

New York, New York 10174

Attention: Patricia Serafin

  

42. Cumulative Remedies. Except to the extent expressly provided in this Warrant to the contrary, the rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

43. Equitable Relief. Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.

44. Entire Agreement. This Warrant, together with the Bylaws, the ROFR Agreement and the Voting Agreement, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter, including, without limitation, the Original Warrant.

45. Successor and Assigns. This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

46. No Third-Party Beneficiaries. This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

47. Headings. The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

48. Amendment and Modification; Waiver. Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

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49. Severability. If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

50. Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.

51. Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of New York in each case located in New York, New York, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

52. Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

53. Counterparts. This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

54. No Strict Construction. This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has duly executed this Warrant as of the Original Issue Date.

 

LB PHARMACEUTICALS INC,
a Delaware corporation
By:    
Name:   Zachary Prensky
Title:   President and Chief Executive Officer

 

Accepted and agreed to by the Holder.
MAXIM PARTNERS, LLC,
a New York limited liability company
By:    
Name :   James Siegel
Title:   General Counsel

 

[Signature Page to Warrant CSWM-006]


EXHIBIT A

EXERCISE AGREEMENT

 

To: LB Pharmaceuticals Inc       Dated:       

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.    ), hereby elects to purchase (check applicable box):

 

  ☐

     shares of Common Stock covered by such Warrant; or

 

  ☐

the maximum number of shares of Common Stock covered by such Warrant.

The undersigned hereby makes payment in full of the Aggregate Exercise Price as follows (check applicable box):

 

  ☐

payment of $     in cash or wire transfer of immediately available funds; or

 

  ☐

pursuant to cashless exercise, as set forth in Section 3(b)(ii) or (iii) of the attached Warrant; or

 

  ☐

by a combination of the aforementioned methods of payment, with $     paid in cash or wire transfer of immediately available funds and the remainder of the Aggregate Exercise Price paid pursuant to cashless exercise.

If the Company certificates its shares of Common Stock, please issue a certificate or certificates representing said shares of Common Stock (net of any Warrant Shares withheld to cover the Aggregate Exercise Price) and, in any case, please update the Company’s books and records to reflect the issuance of said shares of Common Stock (net of any Warrant Shares withheld to cover the Aggregate Exercise Price) in such name or names as specified below:

 

Name:        
Address:        

Certain capitalized terms used herein shall have the meanings given to such terms in the attached Warrant.

IN WITNESS WHEREOF, the undersigned has caused this Exercise Agreement to be executed on the day and year first above written.

 

if an individual:

 

[Printed or Typed Name]
By:  

 

  (Signature)
if an entity:

 

[Printed or Typed Entity Name]
By:  

 

  (Signature)
Name:  

 

Title:  

 


Exhibit B

REGISTRATION RIGHTS

All of the Warrant Shares will be deemed “Registrable Securities” subject to the provisions of this Exhibit B. All capitalized terms used but not defined in this Exhibit B shall have the meanings ascribed to such terms in the Warrant to which this Exhibit B is attached.

As used in this Exhibit B, the following capitalized terms have the following meanings: “Effectiveness Date” means, with respect to the Demand Registration Statement required to be filed hereunder, the 90th calendar day following the receipt of the request of the Majority Holders to file such Demand Registration Statement (or, if the Demand Registration Statement is reviewed by the SEC, the 120th calendar day following such request).

“Registration Statement” means any Registration Statement on Form S-1 (or such other form then available to the Company) that is filed by the Company in connection with an IPO or filed with respect to any offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for shareholders of the Company for their account (or by the Company and by shareholders of the Company) other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan on Form S-8, (ii) for a dividend reinvestment plan or (iii) in connection with a merger or acquisition.

“SEC” means the United States Securities and Exchange Commission.

2. Registration Rights.

2.1. Demand Registration. At any time after the Company has a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or subject to the reporting requirements of Section 15(d) of the Exchange Act, the Holders of a majority of the Warrants and the Warrant Shares then outstanding (the “Majority Holders”) may request that the Company prepare and file with the SEC a registration statement covering the resale of all of the Registrable Securities for a resale offering to be made on a continuous basis (the “Demand Registration Statement”). Subject to the terms of this Exhibit B, upon receipt of such request, the Company shall prepare and file the Demand Registration Statement and the Company shall use its commercially best efforts to cause the Demand Registration Statement to be declared effective under the Securities Act of 1933, as amended (the “Securities Act”) as promptly as possible after the filing thereof, but in any event prior to the Effectiveness Date, and shall use its commercially best efforts to keep such Demand Registration Statement, with respect to each Holder, continuously effective under the Securities Act until the earlier to occur of (i) the date on which such Holder may sell all Registrable Securities then held without any restriction under Rule 144 promulgated under the Securities Act (“Rule 144”), or (ii) all Registrable Securities covered by such Demand Registration Statement have been sold by such Holder (the “Effectiveness Period”). For the purpose of clarity, the Holders shall collectively have only one (1) opportunity to request that the Company file a Demand Registration Statement.

 

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2.2. Piggy-Back Rights.

2.2.1. If (A) the Company proposes to complete an initial public offering of its Common Stock (the “IPO”) or (B) at any time after the Company has a class of securities registered under Section 12 of the Exchange Act or subject to the reporting requirements of Section 15(d) of the Exchange Act, there is not an effective registration statement covering the resale of all of the Registrable Securities for a resale offering and the Company proposes to file any Registration Statement, then the Company shall (x) give written notice of such proposed IPO or filing to the holders of Registrable Securities appearing on the books and records of the Company as such a holder as soon as practicable but in no event less than ten (10) days before the anticipated IPO or filing date of the Registration Statement, which notice shall describe the IPO or the amount and type of securities to be included in such Registration Statement, the intended method(s) of distribution, and the name of the proposed managing underwriter or underwriters, if any, of the IPO or other offering, and (y) offer to the holders of Registrable Securities in such notice the opportunity to register the sale of such number of Registrable Securities as such holders may request in writing within five (5) days following receipt of such notice (a “Piggy-Back Registration”). The Company shall cause such Registrable Securities to be included in such registration and shall cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All holders of Registrable Securities proposing to distribute their securities through a Piggy-Back Registration that involves an underwriter or underwriters shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such Piggy-Back Registration.

2.2.2. Notwithstanding any other provision of this Section 1.2, if the Piggy-Back registration involves an underwriter or underwriters of a primary offering of the Company’s securities and such underwriter or underwriters advise the Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities in proportion (as nearly as practicable) to the number of Registrable Securities then owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders. If as a result of the application of the foregoing provisions, the Company eliminates or reduces the number of Registrable Securities that are included in the registration statement to an amount that is less than 25% of the Registrable Securities, then the Company shall use its best efforts to issue unrestricted shares of Common Stock upon any conversion and/or exercise of the Registrable Securities that occur after the subject Registration Statement is effective, and to cause the transfer agent to deliver the certificates by the later of: (i) six (6) months from the date the Registrable Securities were issued; (ii) the date of expiration of any lock-up related to the registration statement; and (iii) 30 days after the requirements are met to convert or exercise the Registrable Securities.

2.3. Withdrawal. Any holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the IPO or Registration Statement. The Company (whether on its own determination or as the result of a

 

B-2


withdrawal by persons making a demand pursuant to written contractual obligations) may withdraw a Registration Statement at any time prior to the effectiveness of such Registration Statement. Notwithstanding any such withdrawal, the Company shall pay all expenses incurred by the holders of Registrable Securities in connection with such Piggy-Back Registration as provided in Section 1.7 below.

2.4. Notwithstanding the registration obligations set forth in Sections 1.1 and 1.2 above, if the SEC informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415 promulgated under the Securities Act, be registered for resale as a secondary offering on a single Demand Registration Statement or Registration Statement, the Company agrees to inform each of the holders thereof and use its reasonable efforts to file amendments to the Demand Registration Statement or Registration Statement, as the case may be, as required by the SEC, covering the maximum number of Registrable Securities permitted to be registered by the SEC, on Form S-1 or such other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Sections 1.1 and 1.2 above.

2.5. The Company shall notify the holders of Registrable Securities at any time when a prospectus relating to such holder’s Registrable Securities is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such Demand Registration Statement or Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. At the request of such holder, the Company shall also prepare, file and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of the Registrable Securities, such prospectus shall 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 in light of the circumstances then existing. The holders of Registrable Securities shall not offer or sell any Registrable Securities covered by the Demand Registration Statement or Registration Statement after receipt of such notification until the receipt of such supplement or amendment.

2.6. The Company may request a holder of Registrable Securities to furnish the Company such information with respect to such holder and such holder’s proposed distribution of the Registrable Securities pursuant to the Demand Registration Statement or Registration Statement as the Company may from time to time reasonably request in writing or as shall be required by law or by the Commission in connection therewith, and such holders shall furnish the Company with such information.

2.7. All fees and expenses incident to the performance of or compliance with this Exhibit B by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to the Demand Registration Statement or Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the SEC, (B) with respect to filings required to be made with any trading market on which the Common

 

B-3


Stock is then listed for trading, (C) in compliance with applicable state securities or blue sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with blue sky qualifications or exemptions of the Registrable Securities) and (D) with respect to any filing that may be required to be made by any broker through which a holder of Registrable Securities intends to make sales of Registrable Securities with the Financial Industry Regulatory Authority, (ii) printing expenses, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel to the Holders of Registrable Securities, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other persons or entities retained by the Company in connection with the consummation of the transactions contemplated by this Exhibit B. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Exhibit B (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any holder of Registrable Securities.

2.8. The Company and its successors and assigns shall indemnify and hold harmless each Holder, each holder of Registrable Securities, the officers, directors, members, partners, agents and employees (and any other individuals or entities with a functionally equivalent role of a person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each individual or entity who controls each Holder or any such holder of Registrable Securities (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other individuals or entities with a functionally equivalent role of a person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling individual or entity (each, an “Indemnified Party”), to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in the Demand Registration Statement or a Registration Statement, any related prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any such prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Exhibit B, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based upon information regarding a Holder or information furnished by such holder of Registrable Securities to the Company in writing for use therein. The Company shall notify each Holder and each holder of Registrable Securities promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Exhibit B of which the Company is aware.

 

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2.9. If the indemnification under Section 1.8 is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then the Company shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Company and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of the Company and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, the Company or the Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in Section 1.8 was available to such party in accordance with its terms. It is agreed that it would not be just and equitable if contribution pursuant to this Section 1.9 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding sentence. Notwithstanding the provisions of this Section 1.9, neither the Holder nor any holder of Registrable Securities shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such party from the sale of all of their Registrable Securities pursuant to such Demand Registration Statement or Registration Statement or related prospectus exceeds the amount of any damages that such party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

2.10. Lock-Up. The Holders each agree to enter into lock-up agreements with the Company pursuant to which such Holders will not transfer their respective securities (except as described in the lock-up agreements) for a period of up to 180 days following the consummation of an IPO; provided that the Holders shall only be required to enter into such lock-up agreements if the officers and directors of the Company, as well as any persons or entities owning more than 5% of the Company’s Common Stock on an as converted and as exercised basis, shall agree to a lock-up no less onerous than the Holders. Such lock-up agreement shall be in a form that is customary for an IPO and reasonably acceptable to the Company or underwriter in such offering. Nothing in this Section 1.10 shall impact the Holders’ ability to exercise their registration rights pursuant to Sections 1.1 and 1.2.

 

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Exhibit C-3

Warrant [CSWM-XXX]

 

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WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE SECURITIES ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE COMPANY REQUESTS, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO (I) THE THIRD AMENDED AND RESTATED BYLAWS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “BYLAWS”), (II) A RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT ENTERED INTO OR TO BE ENTERED INTO BY AND AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “ROFR AGREEMENT”), AND (III) A VOTING AGREEMENT ENTERED INTO OR TO BE ENTERED INTO BY AND AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “VOTING AGREEMENT”). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS WARRANT MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS CONTAINED HEREIN. COPIES OF THE BYLAWS, THE ROFR AGREEMENT AND THE VOTING AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST.

Warrant Certificate No.:

Original Issue Date:

FOR VALUE RECEIVED, LB PHARMACEUTICALS INC, a Delaware corporation (the “Company”), hereby certifies that MAXIM PARTNERS, LLC, a Delaware limited liability company, or its assigns (the “Holder”), shall be entitled to purchase from the Company __________duly authorized, validly issued, fully paid and nonassessable shares of Common Stock (as defined below) at a purchase price per share of $0.01 (subject to adjustment as provided herein, the “Exercise Price”), all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain capitalized terms used herein are defined in Section 1 hereof.

 

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55. Definitions. As used in this Warrant, the following terms have the respective meanings set forth below:

“Aggregate Exercise Price” means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3 hereof, multiplied by (b) the Exercise Price in effect as of the Exercise Date in accordance with the terms of this Warrant.

“Board” means the board of directors of the Company.

“Business Day” means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in New York, New York are authorized or obligated by law or executive order to close.

“Common Stock” means the Common Stock, par value $0.0001 per share, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the date hereof.

“Common Stock Deemed Outstanding” means, at any given time, the sum of (a) the number of shares of Common Stock actually outstanding at such time, plus (b) the number of shares of Common Stock issuable upon exercise of Options actually outstanding at such time, plus (c) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities actually outstanding at such time (treating as actually outstanding any Convertible Securities issuable upon exercise of Options actually outstanding at such time), in each case, regardless of whether the Options or Convertible Securities are actually exercisable at such time; provided, that Common Stock Deemed Outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries.

“Company” has the meaning set forth in the preamble.

“Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

“Excluded Issuances” means any issuance or sale (or deemed issuance or sale in accordance with Section 5(d)) by the Company after the Original Issue Date of: (a) shares of Common Stock issued upon the exercise of this Warrant; (b) up to an aggregate of 9,743,114 shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations) issued directly or upon the exercise of Options to directors, officers, employees, or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company, in each case authorized by the Board and issued pursuant to the Company’s 2017 Stock Incentive Plan, 2018 Stock Incentive Plan and the 2023 Stock Incentive Plan (including all such shares of Common Stock and Options outstanding prior to the Original Issue Date); (c) shares of Common Stock issued upon the conversion or exercise of Options (other than Options covered by clause (b) above) or Convertible Securities issued prior to the Original Issue Date, provided that such securities are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price thereof; (d) Exempted Securities, as defined in the Company’s Fourth Amended and Restated Certificate of Incorporation; or (e) shares of Common Stock or Convertible Securities issued in connection with any financing approved by at least four (4) directors of the Board.

 

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“Exercise Agreement” has the meaning set forth in Section 3(a)(i).

“Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., eastern time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

“Exercise Period” has the meaning set forth in Section 2.

“Exercise Price” has the meaning set forth in the preamble.

“Fair Market Value” means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which “Fair Market Value” is being determined; provided, that if the Common Stock is listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association, the “Fair Market Value” of the Common Stock shall be the fair market value per share as determined jointly by the Board and the Holder.

“Holder” has the meaning set forth in the preamble.

“Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

“Original Issue Date” means the date specified on the first page of this Warrant. “Nasdaq” means The NASDAQ Stock Market LLC.

“OTC Bulletin Board” means the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system.

“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

“Pink OTC Markets” means the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink.

 

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“Warrant” means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

“Warrant Shares” means the shares of Common Stock or other capital stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.

56. Term of Warrant. Subject to the terms and conditions hereof, at any time or from time to time on or after the date that is 6 months after the Original Issue Date and prior to 5:00 p.m., eastern time, on the tenth (10th) anniversary of the date hereof or, if such day is not a Business Day, on the next preceding Business Day (the “Exercise Period”), the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder (subject to adjustment as provided herein).

57. Exercise of Warrant.

(a) Exercise Procedure. This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

(i) surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an “Exercise Agreement”), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and

(ii) payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b).

(b) Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as expressed in the Exercise Agreement, by the following methods:

(i) by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price;

(ii) by instructing the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price;

(iii) by surrendering to the Company (x) Warrant Shares previously acquired by the Holder with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price and/or (y) other securities of the Company having a value as of the Exercise Date equal to the Aggregate Exercise Price (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred stock shall be the liquidation value thereof plus accumulated and unpaid dividends and in the case of shares of Common Stock shall be the Fair Market Value thereof); or

(iv) any combination of the foregoing.

 

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In the event of any withholding of Warrant Shares or surrender of other equity securities pursuant to clause (ii), (iii) or (iv) above where the number of shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld or surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value per Warrant Share as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above.

(c) Delivery of Stock Certificates. Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(b) hereof), the Company shall, as promptly as practicable, and in any event within 30 days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 8 below, such other Person’s name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

(d) Fractional Shares. The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

(e) Delivery of New Warrant. Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 3(c) hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

(f) Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With respect to the exercise of this warrant, the Company hereby represents, covenants and agrees:

(i) This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

 

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(ii) All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non- assessable, issued free and clear of all taxes, liens and charges.

(iii) The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

(iv) The Company shall use its best efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise.

(v) The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

(g) Conditional Exercise. Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock, or otherwise), such exercise may, at the election of the Holder, be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

(h) Reservation of Shares. During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

58. Registration Rights. The Company hereby grants to the Holder(s) the registration rights associated with the Warrant Shares set forth on Exhibit B hereto, subject to the terms and conditions set forth therein.

 

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59. Adjustment to Exercise Price and Number of Warrant Shares. In order to prevent dilution of the purchase rights granted under this Warrant, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 5 (in each case, after taking into consideration any prior adjustments pursuant to this Section 5).

(a) Adjustment to Exercise Price Upon Issuance of Common Stock. Except as provided in Section 5(c) and except in the case of an event described in either Section 5(e) or Section 5(f), if the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or in accordance with Section 5(d) is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), then immediately upon such issuance or sale (or deemed issuance or sale), the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale) shall be reduced (and in no event increased) to an Exercise Price equal to the quotient obtained by dividing:

(i) the sum of (A) the product obtained by multiplying the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) by the Exercise Price then in effect plus (B) the aggregate consideration, if any, received by the Company upon such issuance or sale (or deemed issuance or sale); by

(ii) the sum of (A) the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) plus (B) the aggregate number of shares of Common Stock issued or sold (or deemed issued or sold) by the Company in such issuance or sale (or deemed issuance or sale).

(b) Adjustment to Number of Warrant Shares Upon Adjustment to Exercise Price. Upon any and each adjustment of the Exercise Price as provided in Section 5(a), the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment shall be increased to a number of Warrant Shares equal to the quotient obtained by dividing:

(i) the product of (A) the Exercise Price in effect immediately prior to any such adjustment multiplied by (B) the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any such adjustment; by

(ii) the Exercise Price resulting from such adjustment.

(c) Exceptions To Adjustment Upon Issuance of Common Stock. Anything herein to the contrary notwithstanding, there shall be no adjustment to the Exercise Price or the number of Warrant Shares issuable upon exercise of this Warrant with respect to any Excluded Issuance.

 

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(d) Effect of Certain Events on Adjustment to Exercise Price. For purposes of determining the adjusted Exercise Price under Section 5(a) hereof, the following shall be applicable:

(e) Issuance of Options. If the Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Options, whether or not such Options or the right to convert or exchange any Convertible Securities issuable upon the exercise of such Options are immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 5(d)(v)) for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon the exercise of such Options is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued as of the date of granting or sale of such Options (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price under Section 5(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 5(a)) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of all such Options, plus (y) the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the issuance or sale of all such Convertible Securities and the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of all such Options or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of all such Options. Except as otherwise provided in Section 5(d)(iii), no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock or of Convertible Securities upon exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities issuable upon exercise of such Options.

(i) Issuance of Convertible Securities. If the Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the right to convert or exchange any such Convertible Securities is immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 5(d)(v)) for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Convertible Securities, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of the total maximum amount of such Convertible Securities shall be deemed to have been issued as of the date of granting or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price pursuant to Section 5(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 5(a)) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of such Convertible Securities, plus (y) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. Except as otherwise provided in Section 5(d)(iii), (A) no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock upon conversion or exchange of such Convertible Securities and (B) no further adjustment of the Exercise Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Exercise Price have been made pursuant to the other provisions of this Section 5(d).

 

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(ii) Change in Terms of Options or Convertible Securities. Upon any change in any of (A) the total amount received or receivable by the Company as consideration for the granting or sale of any Options or Convertible Securities referred to in Section 5(d)(i) or Section 5(d)(ii) hereof, (B) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of any Options or upon the issuance, conversion or exchange of any Convertible Securities referred to in Section 5(d)(i) or Section 5(d)(ii) hereof, (C) the rate at which Convertible Securities referred to in Section 5(d)(i) or Section 5(d)(ii) hereof are convertible into or exchangeable for Common Stock, or (D) the maximum number of shares of Common Stock issuable in connection with any Options referred to in Section 5(d)(i) hereof or any Convertible Securities referred to in Section 5(d)(ii) hereof (in each case, other than in connection with an Excluded Issuance), then (whether or not the original issuance or sale of such Options or Convertible Securities resulted in an adjustment to the Exercise Price pursuant to this Section 5) the Exercise Price in effect at the time of such change shall be adjusted or readjusted, as applicable, to the Exercise Price which would have been in effect at such time pursuant to the provisions of this Section 5 had such Options or Convertible Securities still outstanding provided for such changed consideration, conversion rate or maximum number of shares, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment or readjustment the Exercise Price then in effect is reduced, and the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment or readjustment shall be correspondingly adjusted or readjusted pursuant to the provisions of Section 5(b).

(iii) Treatment of Expired or Terminated Options or Convertible Securities. Upon the expiration or termination of any unexercised Option (or portion thereof) or any unconverted or unexchanged Convertible Security (or portion thereof) for which any adjustment (either upon its original issuance or upon a revision of its terms) was made pursuant to this Section 5 (including without limitation upon the redemption or purchase for consideration of all or any portion of such Option or Convertible Security by the Company), the Exercise Price then in effect hereunder shall forthwith be changed pursuant to the provisions of this Section 5 to the Exercise Price which would have been in effect at the time of such expiration or termination had such unexercised Option (or portion thereof) or unconverted or unexchanged Convertible Security (or portion thereof), to the extent outstanding immediately prior to such expiration or termination, never been issued.

(iv) Calculation of Consideration Received. If the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or is deemed to have issued or sold in accordance with Section 5(d), any shares of Common Stock, Options or Convertible Securities: (A) for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor; (B) for consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by the Company shall be the market price (as reflected on any securities exchange, quotation system or association or similar pricing system covering such security) for such securities as of the end of business on the date of receipt of such securities; (C) for no specifically

 

9


allocated consideration in connection with an issuance or sale of other securities of the Company, together comprising one integrated transaction, the amount of the consideration therefor shall be deemed to be the fair value of such portion of the aggregate consideration received by the Company in such transaction as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued in such transaction; or (D) to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued to such owners. The net amount of any cash consideration and the fair value of any consideration other than cash or marketable securities shall be determined in good faith by the Board.

(v) Record Date. For purposes of any adjustment to the Exercise Price or the number of Warrant Shares in accordance with this Section 5, in case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

(vi) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof or the transfer of such shares among the Company and its wholly-owned subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section 5.

(vii) Other Dividends and Distributions. Subject to the provisions of this Section 5(d), if the Company shall, at any time or from time to time after the Original Issue Date, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of the Company (other than a dividend or distribution of shares of Common Stock, Options or Convertible Securities in respect of outstanding shares of Common Stock), cash or other property, then, and in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant, in addition to the number of Warrant Shares receivable thereupon, the kind and amount of securities of the Company, cash or other property which the Holder would have been entitled to receive had the Warrant been exercised in full into Warrant Shares on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the Exercise Date, retained such securities, cash or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section 5 with respect to the rights of the Holder; provided, that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as the Holder would have received if the Warrant had been exercised in full into Warrant Shares on the date of such event.

 

10


(f) Adjustment to Exercise Price and Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock. If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Company payable in shares of Common Stock or in Options or Convertible Securities or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 5(e) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.

(g) Adjustment to Exercise Price and Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger. In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company’s assets to another Person or (v) other similar transaction (other than any such transaction covered by Section 5(e)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without taking into account any limitations or restrictions on the exercisability of this Warrant); and, in such case, appropriate adjustment (in form and substance reasonably satisfactory to the Holder) shall be made with respect to the Holder’s rights under this Warrant to ensure that the provisions of this Section 5 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant (including, in the case of any consolidation, merger, sale or similar transaction in which the successor or purchasing Person is other than the Company, an immediate adjustment in the Exercise Price to the value per share for the Common Stock reflected by the terms of such consolidation, merger, sale or similar transaction, and a corresponding immediate adjustment to the number of Warrant Shares acquirable upon exercise of this Warrant without regard to any limitations or restrictions on exercise, if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger, sale or similar transaction). The provisions of this Section 5(f) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. The Company shall not effect any such

 

11


reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant and reasonably satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other transaction contemplated by the provisions of this Section 5(f), the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 2 instead of giving effect to the provisions contained in this Section 5(f) with respect to this Warrant.

(h) Certain Events. If any event of the type contemplated by the provisions of this Section 5 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features) occurs, then the Board shall make an appropriate adjustment in the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 5; provided, that no such adjustment pursuant to this Section 5(g) shall increase the Exercise Price or decrease the number of Warrant Shares issuable as otherwise determined pursuant to this Section 5.

(i) Certificate as to Adjustment.

(i) As promptly as reasonably practicable following any adjustment of the Exercise Price and/or the number of Warrant Shares issuable upon exercise of this Warrant, but in any event not later than 30 days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

(ii) As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than 30 days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.

(j) Notices. In the event:

(i) that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security;

(ii) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company’s assets to another Person; or

 

12


(iii) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

then, and in each such case, the Company shall send or cause to be sent to the Holder at least 30 days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding- up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.

60. Purchase Rights. In addition to any adjustments pursuant to Section 5 above, if at any time the Company grants, issues or sells any shares of Common Stock, Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock (the “Purchase Rights”), then the Holder shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder would have acquired if the Holder had held the number of Warrant Shares acquirable upon complete exercise of this Warrant 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 Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. Anything herein to the contrary notwithstanding, the Holder shall not be entitled to the Purchase Rights granted herein with respect to any Excluded Issuance.

61. Bylaws and Stockholders Agreements. All Warrant shares issuable upon exercise of this Warrant are and shall become subject to, and have the benefit of, the Bylaws, the ROFR Agreement and the Voting Agreement, and the Holder shall be required, for so long as the Holder holds any Warrant Shares, to be bound by the terms of the Bylaws and to be bound by and remain a party to the ROFR Agreement and the Voting Agreement.

62. Transfer of Warrant. Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed instrument of assignment, in form and substance reasonably satisfactory to the Company, together with funds sufficient to pay any transfer taxes described in Section 3(f)(v) in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in thedenominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

 

13


63. Holder Not Deemed a Stockholder; Limitations on Liability. Except as otherwise specifically provided herein (including Section 5(d)(viii)), prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

64. Replacement on Loss; Division and Combination.

(a) Replacement of Warrant on Loss. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company, at its own expense, shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided, that in the case of mutilation, no indemnity shall be required if this Warrant is surrendered to the Company for cancellation in an identifiable form.

(b) Division and Combination of Warrant. Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment which may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of such Warrant or Warrants to the Company at its then principal executive offices, together with a written notice specifying the names and denominations in which new Warrant or Warrants are to be issued, signed by the respective Holder or Holders or such its or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment which may be involved in such division or combination, the Company shall, at its own expense, execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

65. No Impairment. The Company shall not, by amendment of its then-current Certificate of Incorporation or Bylaws, 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 to be observed or performed by it hereunder, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the Holder in order to protect the exercise rights of the Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant.

 

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66. Compliance with the Securities Act.

(a) Agreement to Comply with the Securities Act; Legend. The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 12 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the “Securities Act”). This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE SECURITIES ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF LB PHARMACEUTICALS INC (THE “COMPANY”) REQUESTS, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.”

(b) Representations of the Holder. In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:

(i) The Holder is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.

(ii) The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

 

15


(iii) The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

67. Warrant Register. The Company shall keep and properly maintain at its principal executive offices books and records for the registration of the Warrant and any transfers thereof, which may include records kept through electronic equity management platform (e.g., Carta). The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant.

68. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 14).

 

If to the Company:   

LB Pharmaceuticals Inc

575 Madison Avenue, 10th Floor

New York, New York 10022

Attention: Board of Directors

If to the Holder:   

Maxim Partners LLC

405 Lexington Avenue

New York, New York 10174

Attention: Patricia Serafin

69. Cumulative Remedies. Except to the extent expressly provided in this Warrant to the contrary, the rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

70. Equitable Relief. Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.

 

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71. Entire Agreement. This Warrant, together with the Bylaws, the ROFR Agreement and the Voting Agreement, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter.

72. Successor and Assigns. This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

73. No Third-Party Beneficiaries. This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

74. Headings. The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

75. Amendment and Modification; Waiver. Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

76. Severability. If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

77. Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.

78. Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of New York in each case located in New York, New York, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by

 

17


certified or registered mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

79. Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

80. Counterparts. This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

81. No Strict Construction. This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has duly executed this Warrant as of the Original Issue Date.

 

LB PHARMACEUTICALS INC,

a Delaware corporation

By:  

 

Name: Zachary Prensky
Title: President and Chief Executive Officer

 

Accepted and agreed to by the Holder.

MAXIM PARTNERS, LLC,

a New York limited liability company

By:  

 

Name : James Siegel
Title: General Counsel

 

[Signature Page to Warrant CSWM-006]


EXHIBIT A

EXERCISE AGREEMENT

 

To: LB Pharmaceuticals Inc    Dated:______________

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.________ ), hereby elects to purchase (check applicable box):

 

  ☐

_________shares of Common Stock covered by such Warrant; or

 

  ☐

the maximum number of shares of Common Stock covered by such Warrant.

The undersigned hereby makes payment in full of the Aggregate Exercise Price as follows (check applicable box):

 

  ☐

payment of $__________ in cash or wire transfer of immediately available funds; or

 

  ☐

pursuant to cashless exercise, as set forth in Section 3(b)(ii) or (iii) of the attached Warrant; or

 

  ☐

by a combination of the aforementioned methods of payment, with $___________ paid in cash or wire transfer of immediately available funds and the remainder of the Aggregate Exercise Price paid pursuant to cashless exercise.

If the Company certificates its shares of Common Stock, please issue a certificate or certificates representing said shares of Common Stock (net of any Warrant Shares withheld to cover the Aggregate Exercise Price) and, in any case, please update the Company’s books and records to reflect the issuance of said shares of Common Stock (net of any Warrant Shares withheld to cover the Aggregate Exercise Price) in such name or names as specified below:

 

Name:    
Address:  

 

Certain capitalized terms used herein shall have the meanings given to such terms in the attached Warrant.

IN WITNESS WHEREOF, the undersigned has caused this Exercise Agreement to be executed on the day and year first above written.

 

if an individual:

 

[Printed or Typed Name]
By:  

 

  (Signature)
if an entity:

 

[Printed or Typed Entity Name]
By:  

 

  (Signature)
Name:  

 

Title:  

 


Exhibit B

REGISTRATION RIGHTS

All of the Warrant Shares will be deemed “Registrable Securities” subject to the provisions of this Exhibit B. All capitalized terms used but not defined in this Exhibit B shall have the meanings ascribed to such terms in the Warrant to which this Exhibit B is attached.

As used in this Exhibit B, the following capitalized terms have the following meanings: “Effectiveness Date” means, with respect to the Demand Registration Statement required to be filed hereunder, the 90th calendar day following the receipt of the request of the Majority Holders to file such Demand Registration Statement (or, if the Demand Registration Statement is reviewed by the SEC, the 120th calendar day following such request).

“Registration Statement” means any Registration Statement on Form S-1 (or such other form then available to the Company) that is filed by the Company in connection with an IPO or filed with respect to any offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for shareholders of the Company for their account (or by the Company and by shareholders of the Company) other than a Registration Statement (i) filed in connection with any employee stock option or other benefit plan on Form S-8, (ii) for a dividend reinvestment plan or (iii) in connection with a merger or acquisition.

“SEC” means the United States Securities and Exchange Commission.

3. Registration Rights.

3.1. Demand Registration. At any time after the Company has a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or subject to the reporting requirements of Section 15(d) of the Exchange Act, the Holders of a majority of the Warrants and the Warrant Shares then outstanding (the “Majority Holders”) may request that the Company prepare and file with the SEC a registration statement covering the resale of all of the Registrable Securities for a resale offering to be made on a continuous basis (the “Demand Registration Statement”). Subject to the terms of this Exhibit B, upon receipt of such request, the Company shall prepare and file the Demand Registration Statement and the Company shall use its commercially best efforts to cause the Demand Registration Statement to be declared effective under the Securities Act of 1933, as amended (the “Securities Act”) as promptly as possible after the filing thereof, but in any event prior to the Effectiveness Date, and shall use its commercially best efforts to keep such Demand Registration Statement, with respect to each Holder, continuously effective under the Securities Act until the earlier to occur of (i) the date on which such Holder may sell all Registrable Securities then held without any restriction under Rule 144 promulgated under the Securities Act (“Rule 144”), or (ii) all Registrable Securities covered by such Demand Registration Statement have been sold by such Holder (the “Effectiveness Period”). For the purpose of clarity, the Holders shall collectively have only one (1) opportunity to request that the Company file a Demand Registration Statement.

 

B-1


3.2. Piggy-Back Rights.

3.2.1. If (A) the Company proposes to complete an initial public offering of its Common Stock (the “IPO”) or (B) at any time after the Company has a class of securities registered under Section 12 of the Exchange Act or subject to the reporting requirements of Section 15(d) of the Exchange Act, there is not an effective registration statement covering the resale of all of the Registrable Securities for a resale offering and the Company proposes to file any Registration Statement, then the Company shall (x) give written notice of such proposed IPO or filing to the holders of Registrable Securities appearing on the books and records of the Company as such a holder as soon as practicable but in no event less than ten (10) days before the anticipated IPO or filing date of the Registration Statement, which notice shall describe the IPO or the amount and type of securities to be included in such Registration Statement, the intended method(s) of distribution, and the name of the proposed managing underwriter or underwriters, if any, of the IPO or other offering, and (y) offer to the holders of Registrable Securities in such notice the opportunity to register the sale of such number of Registrable Securities as such holders may request in writing within five (5) days following receipt of such notice (a “Piggy-Back Registration”). The Company shall cause such Registrable Securities to be included in such registration and shall cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All holders of Registrable Securities proposing to distribute their securities through a Piggy-Back Registration that involves an underwriter or underwriters shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such Piggy-Back Registration.

3.2.2. Notwithstanding any other provision of this Section 1.2, if the Piggy-Back registration involves an underwriter or underwriters of a primary offering of the Company’s securities and such underwriter or underwriters advise the Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities in proportion (as nearly as practicable) to the number of Registrable Securities then owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders. If as a result of the application of the foregoing provisions, the Company eliminates or reduces the number of Registrable Securities that are included in the registration statement to an amount that is less than 25% of the Registrable Securities, then the Company shall use its best efforts to issue unrestricted shares of Common Stock upon any conversion and/or exercise of the Registrable Securities that occur after the subject Registration Statement is effective, and to cause the transfer agent to deliver the certificates by the later of: (i) six (6) months from the date the Registrable Securities were issued; (ii) the date of expiration of any lock-up related to the registration statement; and (iii) 30 days after the requirements are met to convert or exercise the Registrable Securities.

3.3. Withdrawal. Any holder of Registrable Securities may elect to withdraw such holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the IPO or Registration Statement. The Company (whether on its own determination or as the result of a

 

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withdrawal by persons making a demand pursuant to written contractual obligations) may withdraw a Registration Statement at any time prior to the effectiveness of such Registration Statement. Notwithstanding any such withdrawal, the Company shall pay all expenses incurred by the holders of Registrable Securities in connection with such Piggy-Back Registration as provided in Section 1.7 below.

3.4. Notwithstanding the registration obligations set forth in Sections 1.1 and 1.2 above, if the SEC informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415 promulgated under the Securities Act, be registered for resale as a secondary offering on a single Demand Registration Statement or Registration Statement, the Company agrees to inform each of the holders thereof and use its reasonable efforts to file amendments to the Demand Registration Statement or Registration Statement, as the case may be, as required by the SEC, covering the maximum number of Registrable Securities permitted to be registered by the SEC, on Form S-1 or such other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Sections 1.1 and 1.2 above.

3.5. The Company shall notify the holders of Registrable Securities at any time when a prospectus relating to such holder’s Registrable Securities is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such Demand Registration Statement or Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. At the request of such holder, the Company shall also prepare, file and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of the Registrable Securities, such prospectus shall 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 in light of the circumstances then existing. The holders of Registrable Securities shall not offer or sell any Registrable Securities covered by the Demand Registration Statement or Registration Statement after receipt of such notification until the receipt of such supplement or amendment.

3.6. The Company may request a holder of Registrable Securities to furnish the Company such information with respect to such holder and such holder’s proposed distribution of the Registrable Securities pursuant to the Demand Registration Statement or Registration Statement as the Company may from time to time reasonably request in writing or as shall be required by law or by the Commission in connection therewith, and such holders shall furnish the Company with such information.

3.7. All fees and expenses incident to the performance of or compliance with this Exhibit B by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to the Demand Registration Statement or Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the SEC, (B) with respect to filings required to be made with any trading market on which the Common

 

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Stock is then listed for trading, (C) in compliance with applicable state securities or blue sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with blue sky qualifications or exemptions of the Registrable Securities) and (D) with respect to any filing that may be required to be made by any broker through which a holder of Registrable Securities intends to make sales of Registrable Securities with the Financial Industry Regulatory Authority, (ii) printing expenses, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and the reasonable fees and disbursements of one counsel to the Holders of Registrable Securities, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other persons or entities retained by the Company in connection with the consummation of the transactions contemplated by this Exhibit B. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Exhibit B (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any holder of Registrable Securities.

3.8. The Company and its successors and assigns shall indemnify and hold harmless each Holder, each holder of Registrable Securities, the officers, directors, members, partners, agents and employees (and any other individuals or entities with a functionally equivalent role of a person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each individual or entity who controls each Holder or any such holder of Registrable Securities (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other individuals or entities with a functionally equivalent role of a person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling individual or entity (each, an “Indemnified Party”), to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in the Demand Registration Statement or a Registration Statement, any related prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any such prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Exhibit B, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based upon information regarding a Holder or information furnished by such holder of Registrable Securities to the Company in writing for use therein. The Company shall notify each Holder and each holder of Registrable Securities promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Exhibit B of which the Company is aware.

 

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3.9. If the indemnification under Section 1.8 is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then the Company shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Company and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of the Company and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, the Company or the Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in Section 1.8 was available to such party in accordance with its terms. It is agreed that it would not be just and equitable if contribution pursuant to this Section 1.9 were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding sentence. Notwithstanding the provisions of this Section 1.9, neither the Holder nor any holder of Registrable Securities shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such party from the sale of all of their Registrable Securities pursuant to such Demand Registration Statement or Registration Statement or related prospectus exceeds the amount of any damages that such party has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

3.10. Lock-Up. The Holders each agree to enter into lock-up agreements with the Company pursuant to which such Holders will not transfer their respective securities (except as described in the lock-up agreements) for a period of up to 180 days following the consummation of an IPO; provided that the Holders shall only be required to enter into such lock-up agreements if the officers and directors of the Company, as well as any persons or entities owning more than 5% of the Company’s Common Stock on an as converted and as exercised basis, shall agree to a lock-up no less onerous than the Holders. Such lock-up agreement shall be in a form that is customary for an IPO and reasonably acceptable to the Company or underwriter in such offering. Nothing in this Section 1.10 shall impact the Holders’ ability to exercise their registration rights pursuant to Sections 1.1 and 1.2.

 

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Exhibit 4.6

WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE SECURITIES ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE COMPANY REQUESTS, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

THIS WARRANT (AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT) IS SUBJECT TO (I) THE THIRD AMENDED AND RESTATED BYLAWS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “BYLAWS”), AND (II) A VOTING AGREEMENT ENTERED INTO BY AND AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “VOTING AGREEMENT”). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS WARRANT MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS CONTAINED HEREIN. COPIES OF THE BYLAWS AND THE VOTING AGREEMENT SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST.

Warrant Certificate No.: [CSWB2-xxx]

Original Issue Date: _______________

FOR VALUE RECEIVED, LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), hereby certifies that ______________ (the “Holder”), with an address located at [ADDRESS] is entitled to purchase from the Company ______________ duly authorized, validly issued, fully paid and nonassessable shares of Common Stock at a purchase price per share of $1.50 (subject to adjustment as provided herein, the “Exercise Price”), all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain capitalized terms used herein are defined in Section 1 hereof.

1. Definitions. As used in this Warrant, the following terms have the respective meanings set forth below:

“Aggregate Exercise Price” means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3 hereof, multiplied by (b) the Exercise Price in effect as of the Exercise Date in accordance with the terms of this Warrant.

“Board” means the board of directors of the Company.

“Business Day” means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in New York, New York are authorized or obligated by law or executive order to close.

“Common Stock” means the common stock, par value $0.0001 per share, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the date hereof.

“Common Stock Deemed Outstanding” means, at any given time, the sum of (a) the number of shares of Common Stock actually outstanding at such time, plus (b) the number of shares of Common Stock issuable upon exercise of Options actually outstanding at such time, plus (c) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities actually outstanding at such time (treating as actually outstanding any Convertible Securities issuable upon exercise of Options actually outstanding at such time), in each case, regardless of whether the Options or Convertible Securities are actually exercisable at such time; provided, that Common Stock Deemed Outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries.

 

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“Company” has the meaning set forth in the preamble.

“Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

“Excluded Issuances” means any issuance or sale (or deemed issuance or sale in accordance with Section 4(d)) by the Company after the Original Issue Date of: (a) shares of Common Stock issued upon the exercise of this Warrant; (b) up to an aggregate of 9,743,114 shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations) issued directly or upon the exercise of Options to directors, officers, employees, or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company, in each case authorized by the Board and issued pursuant to the Company’s 2017 Stock Incentive Plan, 2018 Stock Incentive Plan and 2023 Stock Incentive Plan (including all such shares of Common Stock and Options outstanding prior to the Original Issue Date); (c) shares of Common Stock issued upon the conversion or exercise of Options (other than Options covered by clause (b) above) or Convertible Securities issued prior to the Original Issue Date, provided that such securities are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price thereof; (d) Exempted Securities, as defined in the Company’s Fourth Amended and Restated Certificate of Incorporation; or (e) shares of Common Stock or Convertible Securities issued in connection with any financing approved by at least four (4) directors of the Board.

“Exercise Agreement” has the meaning set forth in Section 3(a)(i).

“Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., eastern time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

“Exercise Period” has the meaning set forth in Section 2.

“Exercise Price” has the meaning set forth in the preamble.

“Fair Market Value” means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which “Fair Market Value” is being determined; provided, that if the Common Stock is listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association, the “Fair Market Value” of the Common Stock shall be the fair market value per share as determined jointly by the Board and the Holder.

“Holder” has the meaning set forth in the preamble.

“Nasdaq” means The NASDAQ Stock Market LLC.

 

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“Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

“Original Issue Date” means the date specified on the first page of this Warrant .

“OTC Bulletin Board” means the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system.

“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

“Pink OTC Markets” means the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink.

“Warrant” means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

“Warrant Shares” means the shares of Common Stock or other capital stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.

2. Term of Warrant. Subject to the terms and conditions hereof, at any time or from time to time after the date hereof and prior to 5:00 p.m., eastern time, on the fifth (5th) anniversary of the date hereof or, if such day is not a Business Day, on the next preceding Business Day (the “Exercise Period”), the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder (subject to adjustment as provided herein).

3. Exercise of Warrant.

(a) Exercise Procedure. This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

(i) surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an “Exercise Agreement”), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and

(ii) payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b).

(b) Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as expressed in the Exercise Agreement, by the following methods:

(i) by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price;

(ii) by instructing the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price;

(iii) by surrendering to the Company (x) Warrant Shares previously acquired by the Holder with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price and/or (y) other securities of the Company having a value as of the Exercise Date equal to the Aggregate Exercise Price (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred stock shall be the liquidation value thereof plus accumulated and unpaid dividends and in the case of shares of Common Stock shall be the Fair Market Value thereof); or

 

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(iv) any combination of the foregoing.

In the event of any withholding of Warrant Shares or surrender of other equity securities pursuant to clause (ii), (iii) or (iv) above where the number of shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld or surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value per Warrant Share as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above.

(c) Delivery of Stock Certificates. Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(b) hereof), the Company shall, as promptly as practicable, and in any event within 30 days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 7 below, such other Person’s name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

(d) Fractional Shares. The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

(e) Delivery of New Warrant. Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 3(c) hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

(f) Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With respect to the exercise of this warrant, the Company hereby represents, covenants and agrees:

(i) This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

(ii) All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges.

(iii) The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

 

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(iv) The Company shall use its best efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise.

(v) The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

(g) Conditional Exercise. Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock, or otherwise), such exercise may at the election of the Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

(h) Reservation of Shares. During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

4. Adjustment to Exercise Price and Number of Warrant Shares. In order to prevent dilution of the purchase rights granted under this Warrant, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 4 (in each case, after taking into consideration any prior adjustments pursuant to this Section 4).

(a) Adjustment to Exercise Price Upon Issuance of Common Stock. Except as provided in Section 4(c) and except in the case of an event described in either Section 4(e) or Section 4(f), if the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or in accordance with Section 4(d) is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), then immediately upon such issuance or sale (or deemed issuance or sale), the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale) shall be reduced (and in no event increased) to an Exercise Price equal to the quotient obtained by dividing:

(i) the sum of (A) the product obtained by multiplying the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) by the Exercise Price then in effect plus (B) the aggregate consideration, if any, received by the Company upon such issuance or sale (or deemed issuance or sale); by

(ii) the sum of (A) the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) plus (B) the aggregate number of shares of Common Stock issued or sold (or deemed issued or sold) by the Company in such issuance or sale (or deemed issuance or sale).

(b) Adjustment to Number of Warrant Shares Upon Adjustment to Exercise Price. Upon any and each adjustment of the Exercise Price as provided in Section 4(a), the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment shall be increased to a number of Warrant Shares equal to the quotient obtained by dividing:

(i) the product of (A) the Exercise Price in effect immediately prior to any such adjustment multiplied by (B) the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any such adjustment; by

 

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(ii) the Exercise Price resulting from such adjustment.

(c) Exceptions To Adjustment Upon Issuance of Common Stock. Anything herein to the contrary notwithstanding, there shall be no adjustment to the Exercise Price or the number of Warrant Shares issuable upon exercise of this Warrant with respect to any Excluded Issuance.

(d) Effect of Certain Events on Adjustment to Exercise Price. For purposes of determining the adjusted Exercise Price under Section 4(a) hereof, the following shall be applicable:

(i) Issuance of Options. If the Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Options, whether or not such Options or the right to convert or exchange any Convertible Securities issuable upon the exercise of such Options are immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 4(d)(v) ) for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon the exercise of such Options is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued as of the date of granting or sale of such Options (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price under Section 4(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 4(a)) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of all such Options, plus (y) the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus (z), in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the issuance or sale of all such Convertible Securities and the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of all such Options or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of all such Options. Except as otherwise provided in Section 4(d)(iii), no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock or of Convertible Securities upon exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities issuable upon exercise of such Options.

(ii) Issuance of Convertible Securities. If the Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the right to convert or exchange any such Convertible Securities is immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 4(d)(v)) for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Convertible Securities, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of the total maximum amount of such Convertible Securities shall be deemed to have been issued as of the date of granting or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price pursuant to Section 4(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 4(a)) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of such Convertible Securities, plus (y) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. Except as otherwise provided in Section 4(d)(iii), (A) no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock upon conversion or exchange of such Convertible Securities and (B) no further adjustment of the Exercise Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Exercise Price have been made pursuant to the other provisions of this Section 4(d).

 

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(iii) Change in Terms of Options or Convertible Securities. Upon any change in any of (A) the total amount received or receivable by the Company as consideration for the granting or sale of any Options or Convertible Securities referred to in Section 4(d)(i) or Section 4(d)(ii) hereof, (B) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of any Options or upon the issuance, conversion or exchange of any Convertible Securities referred to in Section 4(d)(i) or Section 4(d)(ii) hereof, (C) the rate at which Convertible Securities referred to in Section 4(d)(i) or Section 4(d)(ii) hereof are convertible into or exchangeable for Common Stock, or (D) the maximum number of shares of Common Stock issuable in connection with any Options referred to in Section 4(d)(i) hereof or any Convertible Securities referred to in Section 4(d)(ii) hereof (in each case, other than in connection with an Excluded Issuance), then (whether or not the original issuance or sale of such Options or Convertible Securities resulted in an adjustment to the Exercise Price pursuant to this Section 4) the Exercise Price in effect at the time of such change shall be adjusted or readjusted, as applicable, to the Exercise Price which would have been in effect at such time pursuant to the provisions of this Section 4 had such Options or Convertible Securities still outstanding provided for such changed consideration, conversion rate or maximum number of shares, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment or readjustment the Exercise Price then in effect is reduced, and the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment or readjustment shall be correspondingly adjusted or readjusted pursuant to the provisions of Section 4(b).

(iv) Treatment of Expired or Terminated Options or Convertible Securities. Upon the expiration or termination of any unexercised Option (or portion thereof) or any unconverted or unexchanged Convertible Security (or portion thereof) for which any adjustment (either upon its original issuance or upon a revision of its terms) was made pursuant to this Section 4 (including without limitation upon the redemption or purchase for consideration of all or any portion of such Option or Convertible Security by the Company), the Exercise Price then in effect hereunder shall forthwith be changed pursuant to the provisions of this Section 4 to the Exercise Price which would have been in effect at the time of such expiration or termination had such unexercised Option (or portion thereof) or unconverted or unexchanged Convertible Security (or portion thereof), to the extent outstanding immediately prior to such expiration or termination, never been issued.

(v) Calculation of Consideration Received. If the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or is deemed to have issued or sold in accordance with Section 4(d), any shares of Common Stock, Options or Convertible Securities: (A) for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor; (B) for consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by the Company shall be the market price (as reflected on any securities exchange, quotation system or association or similar pricing system covering such security) for such securities as of the end of business on the date of receipt of such securities; (C) for no specifically allocated consideration in connection with an issuance or sale of other securities of the Company, together comprising one integrated transaction, the amount of the consideration therefor shall be deemed to be the fair value of such portion of the aggregate consideration received by the Company in such transaction as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued in such transaction; or (D) to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued to such owners. The net amount of any cash consideration and the fair value of any consideration other than cash or marketable securities shall be determined in good faith by the Board.

(vi) Record Date. For purposes of any adjustment to the Exercise Price or the number of Warrant Shares in accordance with this Section 4, in case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

 

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(vii) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof or the transfer of such shares among the Company and its wholly-owned subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section 4.

(viii) Other Dividends and Distributions. Subject to the provisions of this Section 4(d), if the Company shall, at any time or from time to time after the Original Issue Date, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of the Company (other than a dividend or distribution of shares of Common Stock, Options or Convertible Securities in respect of outstanding shares of Common Stock), cash or other property, then, and in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant, in addition to the number of Warrant Shares receivable thereupon, the kind and amount of securities of the Company, cash or other property which the Holder would have been entitled to receive had the Warrant been exercised in full into Warrant Shares on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the Exercise Date, retained such securities, cash or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section 4 with respect to the rights of the Holder; provided, that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as the Holder would have received if the Warrant had been exercised in full into Warrant Shares on the date of such event.

(e) Adjustment to Exercise Price and Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock. If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Company payable in shares of Common Stock or in Options or Convertible Securities, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 4(e) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.

(f) Adjustment to Exercise Price and Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger. In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company’s assets to another Person or (v) other similar transaction (other than any such transaction covered by Section 4(e)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without taking into account any limitations or restrictions on the exercisability of this Warrant); and, in such case, appropriate adjustment (in form and substance reasonably satisfactory to the Holder) shall be made with respect to the Holder’s rights under this Warrant to ensure that the provisions of this Section 4 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant (including, in the case of any consolidation, merger, sale or similar transaction in which the successor or purchasing Person is other than the Company, an immediate adjustment in the Exercise Price to the value per share

 

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for the Common Stock reflected by the terms of such consolidation, merger, sale or similar transaction, and a corresponding immediate adjustment to the number of Warrant Shares acquirable upon exercise of this Warrant without regard to any limitations or restrictions on exercise, if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger, sale or similar transaction). The provisions of this Section 4(f) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. The Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant and reasonably satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other transaction contemplated by the provisions of this Section 4(f), the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 2 instead of giving effect to the provisions contained in this Section 4(f) with respect to this Warrant.

(g) Certain Events. If any event of the type contemplated by the provisions of this Section 4 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features) occurs, then the Board shall make an appropriate adjustment in the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 4; provided, that no such adjustment pursuant to this Section 4(g) shall increase the Exercise Price or decrease the number of Warrant Shares issuable as otherwise determined pursuant to this Section 4.

(h) Certificate as to Adjustment.

(i) As promptly as reasonably practicable following any adjustment of the Exercise Price and/or the number of Warrant Shares issuable upon exercise of this Warrant, but in any event not later than 30 days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

(ii) As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than 30 days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.

(i) Notices. In the event:

(i) that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security;

(ii) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company’s assets to another Person; or

(iii) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company; then, and in each such case, the Company shall send or cause to be sent to the Holder at least 30 days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to

 

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exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.

5. Purchase Rights. In addition to any adjustments pursuant to Section 4 above, if at any time the Company grants, issues or sells any shares of Common Stock, Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock (the “Purchase Rights”), then the Holder shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder would have acquired if the Holder had held the number of Warrant Shares acquirable upon complete exercise of this Warrant 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 Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. Anything herein to the contrary notwithstanding, the Holder shall not be entitled to the Purchase Rights granted herein with respect to any Excluded Issuance.

6. Bylaws and Voting Agreement. All Warrant shares issuable upon exercise of this Warrant are and shall become subject to, and have the benefit of, the Bylaws and the Voting Agreement, and the Holder shall be required, for so long as the Holder holds any Warrant Shares, to be bound by the terms of the Bylaws and to be bound by and become (or remain) a party to the Voting Agreement.

7. Transfer of Warrant. Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B, together with funds sufficient to pay any transfer taxes described in Section 3(f)(v) in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

8. Holder Not Deemed a Stockholder; Limitations on Liability. Except as otherwise specifically provided herein (including Section 4(d)(viii)), prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

9. Replacement on Loss; Division and Combination.

(a) Replacement of Warrant on Loss. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided, that, in the case of mutilation, no indemnity shall be required if this Warrant is surrendered to the Company for cancellation in an identifiable form.

(b) Division and Combination of Warrant. Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment which may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of such Warrant or Warrants to the Company at its then principal executive offices, together with

 

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a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the respective Holders or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment which may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

10. No Impairment. The Company shall not, by amendment of its Certificate of Incorporation or Bylaws, 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 to be observed or performed by it hereunder, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the Holder in order to protect the exercise rights of the Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant.

11. Compliance with the Securities Act.

(a) Agreement to Comply with the Securities Act; Legend. The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 11 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the “Securities Act”). This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE SECURITIES ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE SECURITIES ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE COMPANY REQUESTS, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.”

(b) Representations of the Holder. In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:

(i) The Holder is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.

(ii) The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

(iii) The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

 

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12. Warrant Register. The Company shall keep and properly maintain at its principal executive offices books and records for the registration of the Warrant and any transfers thereof, which may include records kept through electronic equity management platform (e.g., Carta). The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant.

13. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 13).

 

If to the Company:

  

LB Pharmaceuticals Inc

575 Madison Avenue

10th Floor

New York, New York 10022

Attention: Board of Directors

  

If to the Holder:

   At the address specified on the first page
of this Warrant
  

14. Cumulative Remedies. Except to the extent expressly provided in this Warrant to the contrary, the rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

15. Equitable Relief. Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.

16. Entire Agreement. This Warrant, together with the Bylaws and the Voting Agreement, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter.

17. Successor and Assigns. This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

18. No Third-Party Beneficiaries. This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

 

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19. Headings. The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

20. Amendment and Modification; Waiver. Except as otherwise provided herein, this Warrant may be amended, modified or supplemented by (i) the written consent of the Company and the Holder, or (ii) the written consent of the Company and holders of then-outstanding warrants of the Company having the same Exercise Price as this Warrant, whose Warrants are exercisable for Warrant Shares greater than a majority of the total Warrant Shares exercisable with respect to all of such applicable group of warrants (such holders, a “Majority-in-Interest” and all of such applicable group of warrants, the “Applicable Warrants”), provided that such amendment, waiver, or modification treats all such holders in the same manner. No waiver by the Company, the Holder or a Majority-in-Interest of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving, provided that a waiver by a Majority-in-Interest shall be effective (i) against the Holder, and (ii) with respect to all Applicable Warrants and against the holders thereof. No waiver by any party or a Majority-in-Interest shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

21. Severability. If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

22. Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.

23. Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of New York in each case located in New York, New York, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

24. Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

25. Counterparts. This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

26. No Strict Construction. This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original Issue Date.

 

LB PHARMACEUTICALS INC,
a Delaware corporation
By:  

 

Name:   Zachary Prensky
Title:   Chief Executive Officer

 

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Exhibit A

Form of Exercise Agreement

 

To: LB Pharmaceuticals Inc    Dated:___________

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.    ), hereby elects to purchase (check applicable box):

 

  ☐

shares of Common Stock covered by such Warrant; or

 

  ☐

the maximum number of shares of Common Stock covered by such Warrant.

The undersigned hereby makes payment in full of the Aggregate Exercise Price as follows (check all that apply):

 

  ☐

payment of $__________ in cash or wire transfer of immediately available funds

 

  ☐

value of shares of the Company’s securities (subject to Board approval of Fair Market Value)

 

  ☐

value of Warrant Shares pursuant to net exercise (subject to Board approval of Fair Market Value)

If the Company certificates its shares of Common Stock, please issue a certificate or certificates representing said shares of Common Stock and, in any case, please update the Company’s books and records to reflect the issuance of said shares of Common Stock in such name or names as specified below:

 

Name:                                                                                      
Address:                                                                                  
                                                                                    

Certain capitalized terms used herein shall have the meanings given to such terms in the attached Warrant.

 

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IN WITNESS WHEREOF, the undersigned has caused this Exercise Agreement to be executed on the day and year first above written.

 

if an individual:

 

[Printed or Typed Name]
By:  

 

  (Signature)
if an entity:

 

[Printed or Typed Entity Name]
By:  

 

  (Signature)
Name:  

 

Title:  

 

 

16


Exhibit B

Form of Assignment

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [__________] all of or [__________] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to ________________________________________ whose address is___________________________________________________________

 

 

 

 

 

 

 

     Dated:   

 

  the Holder’s Signature:      

 

  the Holder’s Address:      

 

       

 

       

 

 

17

Exhibit 4.7

WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

THIS WARRANT (AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT) IS SUBJECT TO THE AMENDED AND RESTATED BYLAWS OF THE COMPANY (AS AMENDED FROM TIME TO TIME, THE “BYLAWS”). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS WARRANT MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS CONTAINED HEREIN. A COPY OF THE BYLAWS SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST.

Warrant Certificate No.: [Series B-1]

Original Issue Date:

FOR VALUE RECEIVED, LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), hereby certifies that ________________ (the “Holder”), with an address located at [ADDRESS] is entitled to purchase from the Company ________________ duly authorized, validly issued, fully paid and nonassessable shares of Common Stock at a purchase price per share of $3.75 (subject to adjustment as provided herein, the “Exercise Price”), all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain capitalized terms used herein are defined in Section 1 hereof.

1. Definitions. As used in this Warrant, the following terms have the respective meanings set forth below:

“Aggregate Exercise Price” means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3 hereof, multiplied by (b) the Exercise Price in effect as of the Exercise Date in accordance with the terms of this Warrant.

“Board” means the board of directors of the Company.

 

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“Business Day” means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in New York, New York are authorized or obligated by law or executive order to close.

“Common Stock” means the common stock, par value $0.0001 per share, of the Company, and any capital stock into which such Common Stock shall have been converted, exchanged or reclassified following the date hereof.

“Common Stock Deemed Outstanding” means, at any given time, the sum of (a) the number of shares of Common Stock actually outstanding at such time, plus (b) the number of shares of Common Stock issuable upon exercise of Options actually outstanding at such time, plus (c) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities actually outstanding at such time (treating as actually outstanding any Convertible Securities issuable upon exercise of Options actually outstanding at such time), in each case, regardless of whether the Options or Convertible Securities are actually exercisable at such time; provided, that Common Stock Deemed Outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries.

“Company” has the meaning set forth in the preamble.

“Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

“Excluded Issuances” means any issuance or sale (or deemed issuance or sale in accordance with Section 4(d)) by the Company after the Original Issue Date of: (a) shares of Common Stock issued upon the exercise of this Warrant; (b) up to an aggregate of 1,154,550 shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends and recapitalizations) issued directly or upon the exercise of Options to directors, officers, employees, or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company, in each case authorized by the Board and issued pursuant to the Company’s 2017 Stock Incentive Plan (including all such shares of Common Stock and Options outstanding prior to the Original Issue Date); (c) shares of Common Stock issued upon the conversion or exercise of Options (other than Options covered by clause (b) above) or Convertible Securities issued prior to the Original Issue Date, provided that such securities are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price thereof; (d) Exempted Securities, as defined in the Company’s Third Amended and Restated Certificate of Incorporation; or (e) shares of Common Stock or Convertible Securities issued in connection with any financing approved by at least four (4) directors of the Board.

“Exercise Date” means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., eastern time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

“Exercise Agreement” has the meaning set forth in Section 3(a)(i).

 

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“Exercise Period” has the meaning set forth in Section 2.

“Exercise Price” has the meaning set forth in the preamble.

“Fair Market Value” means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which “Fair Market Value” is being determined; provided, that if the Common Stock is listed on any domestic securities exchange, the term “Business Day” as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association, the “Fair Market Value” of the Common Stock shall be the fair market value per share as determined jointly by the Board and the Holder.

“Holder” has the meaning set forth in the preamble.

“Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

“Original Issue Date” means the date specified on the first page of this Warrant.

“Nasdaq” means The NASDAQ Stock Market LLC.

“OTC Bulletin Board” means the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system.

“Person” means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

“Pink OTC Markets” means the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink.

“Warrant” means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

 

3


“Warrant Shares” means the shares of Common Stock or other capital stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.

2. Term of Warrant. Subject to the terms and conditions hereof, at any time or from time to time after the date hereof and prior to 5:00 p.m., eastern time, on the fifth (5th) anniversary of the date hereof or, if such day is not a Business Day, on the next preceding Business Day (the “Exercise Period”), the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder (subject to adjustment as provided herein).

3. Exercise of Warrant.

(a) Exercise Procedure. This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

(i) surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an “Exercise Agreement”), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and

(ii) payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b).

(b) Payment of the Aggregate Exercise Price. Payment of the Aggregate Exercise Price shall be made, at the option of the Holder as expressed in the Exercise Agreement, by the following methods:

(i) by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price;

(ii) by instructing the Company to withhold a number of Warrant Shares then issuable upon exercise of this Warrant with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price;

(iii) by surrendering to the Company (x) Warrant Shares previously acquired by the Holder with an aggregate Fair Market Value as of the Exercise Date equal to such Aggregate Exercise Price and/or (y) other securities of the Company having a value as of the Exercise Date equal to the Aggregate Exercise Price (which value in the case of debt securities shall be the principal amount thereof plus accrued and unpaid interest, in the case of preferred stock shall be the liquidation value thereof plus accumulated and unpaid dividends and in the case of shares of Common Stock shall be the Fair Market Value thereof); or

 

4


(iv) any combination of the foregoing.

In the event of any withholding of Warrant Shares or surrender of other equity securities pursuant to clause (ii), (iii) or (iv) above where the number of shares whose value is equal to the Aggregate Exercise Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder (by delivery of a certified or official bank check or by wire transfer of immediately available funds) based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount equal to the product of (x) such incremental fraction of a share being so withheld or surrendered multiplied by (y) in the case of Common Stock, the Fair Market Value per Warrant Share as of the Exercise Date, and, in all other cases, the value thereof as of the Exercise Date determined in accordance with clause (iii)(y) above.

(c) Delivery of Stock Certificates. Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(a) hereof), the Company shall, as promptly as practicable, and in any event within 30 days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 7 below, such other Person’s name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

(d) Fractional Shares. The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

(e) Delivery of New Warrant. Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 3(c) hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

(f) Valid Issuance of Warrant and Warrant Shares; Payment of Taxes. With respect to the exercise of this warrant, the Company hereby represents, covenants and agrees:

(i) This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

 

5


(ii) All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non- assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges.

(iii) The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

(iv) The Company shall use its best efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise.

(v) The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided, that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

(g) Conditional Exercise. Notwithstanding any other provision hereof, if an exercise of any portion of this Warrant is to be made in connection with a public offering or a sale of the Company (pursuant to a merger, sale of stock, or otherwise), such exercise may at the election of the Holder be conditioned upon the consummation of such transaction, in which case such exercise shall not be deemed to be effective until immediately prior to the consummation of such transaction.

(h) Reservation of Shares. During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

4. Adjustment to Exercise Price and Number of Warrant Shares. In order to prevent dilution of the purchase rights granted under this Warrant, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 4 (in each case, after taking into consideration any prior adjustments pursuant to this Section 4).

 

6


(a) Adjustment to Exercise Price Upon Issuance of Common Stock. Except as provided in Section 4(c) and except in the case of an event described in either Section 4(e) or Section 4(f), if the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or in accordance with Section 4(d) is deemed to have issued or sold, any shares of Common Stock without consideration or for consideration per share less than the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale), then immediately upon such issuance or sale (or deemed issuance or sale), the Exercise Price in effect immediately prior to such issuance or sale (or deemed issuance or sale) shall be reduced (and in no event increased) to an Exercise Price equal to the quotient obtained by dividing:

(i) the sum of (A) the product obtained by multiplying the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) by the Exercise Price then in effect plus (B) the aggregate consideration, if any, received by the Company upon such issuance or sale (or deemed issuance or sale); by

(ii) the sum of (A) the Common Stock Deemed Outstanding immediately prior to such issuance or sale (or deemed issuance or sale) plus (B) the aggregate number of shares of Common Stock issued or sold (or deemed issued or sold) by the Company in such issuance or sale (or deemed issuance or sale).

(b) Adjustment to Number of Warrant Shares Upon Adjustment to Exercise Price. Upon any and each adjustment of the Exercise Price as provided in Section 4(a), the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment shall be increased to a number of Warrant Shares equal to the quotient obtained by dividing:

(i) the product of (A) the Exercise Price in effect immediately prior to any such adjustment multiplied by (B) the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any such adjustment; by

(ii) the Exercise Price resulting from such adjustment.

(c) Exceptions To Adjustment Upon Issuance of Common Stock. Anything herein to the contrary notwithstanding, there shall be no adjustment to the Exercise Price or the number of Warrant Shares issuable upon exercise of this Warrant with respect to any Excluded Issuance.

(d) Effect of Certain Events on Adjustment to Exercise Price. For purposes of determining the adjusted Exercise Price under Section 4(a) hereof, the following shall be applicable:

(i) Issuance of Options. If the Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Options, whether or not such Options or the right to convert or exchange any Convertible Securities issuable upon the exercise of such Options are immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 4(d)(v) ) for which

 

7


Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon the exercise of such Options is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued as of the date of granting or sale of such Options (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price under Section 4(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 4(a)) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of all such Options, plus (y) the minimum aggregate amount of additional consideration payable to the Company upon the exercise of all such Options, plus (z), in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable to the Company upon the issuance or sale of all such Convertible Securities and the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the exercise of all such Options or upon the conversion or exchange of all Convertible Securities issuable upon the exercise of all such Options. Except as otherwise provided in Section 4(d)(iii), no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock or of Convertible Securities upon exercise of such Options or upon the actual issuance of Common Stock upon conversion or exchange of Convertible Securities issuable upon exercise of such Options.

(ii) Issuance of Convertible Securities. If the Company shall, at any time or from time to time after the Original Issue Date, in any manner grant or sell (whether directly or by assumption in a merger or otherwise) any Convertible Securities, whether or not the right to convert or exchange any such Convertible Securities is immediately exercisable, and the price per share (determined as provided in this paragraph and in Section 4(d)(v)) for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities is less than the Exercise Price in effect immediately prior to the time of the granting or sale of such Convertible Securities, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of the total maximum amount of such Convertible Securities shall be deemed to have been issued as of the date of granting or sale of such Convertible Securities (and thereafter shall be deemed to be outstanding for purposes of adjusting the Exercise Price pursuant to Section 4(a)), at a price per share equal to the quotient obtained by dividing (A) the sum (which sum shall constitute the applicable consideration received for purposes of Section 4(a)) of (x) the total amount, if any, received or receivable by the Company as consideration for the granting or sale of such Convertible Securities, plus (y) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange of all such Convertible Securities, by (B) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. Except as otherwise provided in Section 4(d)(iii), (A) no further adjustment of the Exercise Price shall be made upon the actual issuance of Common Stock upon conversion or exchange of such Convertible Securities and (B) no further adjustment of the Exercise Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Exercise Price have been made pursuant to the other provisions of this Section 4(d).

 

8


(iii) Change in Terms of Options or Convertible Securities. Upon any change in any of (A) the total amount received or receivable by the Company as consideration for the granting or sale of any Options or Convertible Securities referred to in Section 4(d)(i) or Section 4(d)(ii) hereof, (B) the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of any Options or upon the issuance, conversion or exchange of any Convertible Securities referred to in Section 4(d)(i) or Section 4(d)(ii) hereof, (C) the rate at which Convertible Securities referred to in Section 4(d)(i) or Section 4(d)(ii) hereof are convertible into or exchangeable for Common Stock, or (D) the maximum number of shares of Common Stock issuable in connection with any Options referred to in Section 4(d)(i) hereof or any Convertible Securities referred to in Section 4(d)(ii) hereof (in each case, other than in connection with an Excluded Issuance), then (whether or not the original issuance or sale of such Options or Convertible Securities resulted in an adjustment to the Exercise Price pursuant to this Section 4) the Exercise Price in effect at the time of such change shall be adjusted or readjusted, as applicable, to the Exercise Price which would have been in effect at such time pursuant to the provisions of this Section 4 had such Options or Convertible Securities still outstanding provided for such changed consideration, conversion rate or maximum number of shares, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment or readjustment the Exercise Price then in effect is reduced, and the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to any such adjustment or readjustment shall be correspondingly adjusted or readjusted pursuant to the provisions of Section 4(b).

(iv) Treatment of Expired or Terminated Options or Convertible Securities. Upon the expiration or termination of any unexercised Option (or portion thereof) or any unconverted or unexchanged Convertible Security (or portion thereof) for which any adjustment (either upon its original issuance or upon a revision of its terms) was made pursuant to this Section 4 (including without limitation upon the redemption or purchase for consideration of all or any portion of such Option or Convertible Security by the Company), the Exercise Price then in effect hereunder shall forthwith be changed pursuant to the provisions of this Section 4 to the Exercise Price which would have been in effect at the time of such expiration or termination had such unexercised Option (or portion thereof) or unconverted or unexchanged Convertible Security (or portion thereof), to the extent outstanding immediately prior to such expiration or termination, never been issued.

(v) Calculation of Consideration Received. If the Company shall, at any time or from time to time after the Original Issue Date, issue or sell, or is deemed to have issued or sold in accordance with Section 4(d), any shares of Common Stock, Options or Convertible Securities: (A) for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor; (B) for consideration other than cash, the amount of the consideration other than cash received by the Company shall be the fair value of such consideration, except where such consideration consists of marketable securities, in which case the amount of consideration received by the Company shall be the market price (as reflected on any securities exchange, quotation system or association or similar pricing system covering such security) for such securities as of the end of business on the date of receipt of such securities; (C) for no specifically allocated consideration in connection with an issuance or sale of other securities of the Company, together comprising one integrated transaction, the amount of the consideration therefor shall be deemed to be the fair value of such portion of the aggregate consideration received by the Company

 

9


in such transaction as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued in such transaction; or (D) to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be, issued to such owners. The net amount of any cash consideration and the fair value of any consideration other than cash or marketable securities shall be determined in good faith jointly by the Board and the Holder.

(vi) Record Date. For purposes of any adjustment to the Exercise Price or the number of Warrant Shares in accordance with this Section 4, in case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

(vii) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof or the transfer of such shares among the Company and its wholly-owned subsidiaries) shall be considered an issue or sale of Common Stock for the purpose of this Section 4.

(viii) Other Dividends and Distributions. Subject to the provisions of this Section 4(d), if the Company shall, at any time or from time to time after the Original Issue Date, make or declare, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or any other distribution payable in securities of the Company (other than a dividend or distribution of shares of Common Stock, Options or Convertible Securities in respect of outstanding shares of Common Stock), cash or other property, then, and in each such event, provision shall be made so that the Holder shall receive upon exercise of the Warrant, in addition to the number of Warrant Shares receivable thereupon, the kind and amount of securities of the Company, cash or other property which the Holder would have been entitled to receive had the Warrant been exercised in full into Warrant Shares on the date of such event and had the Holder thereafter, during the period from the date of such event to and including the Exercise Date, retained such securities, cash or other property receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section 4 with respect to the rights of the Holder; provided, that no such provision shall be made if the Holder receives, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities, cash or other property in an amount equal to the amount of such securities, cash or other property as the Holder would have received if the Warrant had been exercised in full into Warrant Shares on the date of such event.

 

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(e) Adjustment to Exercise Price and Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock. If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Company payable in shares of Common Stock or in Options or Convertible Securities, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination shall be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 4(e) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.

(f) Adjustment to Exercise Price and Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger. In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company’s assets to another Person or (v) other similar transaction (other than any such transaction covered by Section 4(e)), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, each Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without taking into account any limitations or restrictions on the exercisability of this Warrant); and, in such case, appropriate adjustment (in form and substance satisfactory to the Holder) shall be made with respect to the Holder’s rights under this Warrant to insure that the provisions of this Section 4 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant (including, in the case of any consolidation, merger, sale or similar transaction in which the successor or purchasing Person is other than the Company, an immediate adjustment in the Exercise Price to the value per share for the Common Stock reflected by the terms of such consolidation, merger, sale or similar transaction, and a corresponding immediate adjustment to the number of Warrant Shares acquirable upon exercise of this Warrant without regard to any limitations or restrictions on exercise, if the value so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger, sale or similar transaction). The provisions of this Section 4(f) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. The Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification,

 

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consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant and satisfactory to the Holder, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other transaction contemplated by the provisions of this Section 4(f), the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 2 instead of giving effect to the provisions contained in this Section 4(f) with respect to this Warrant.

(g) Certain Events. If any event of the type contemplated by the provisions of this Section 4 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features) occurs, then the Board shall make an appropriate adjustment in the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 4; provided, that no such adjustment pursuant to this Section 4(g) shall increase the Exercise Price or decrease the number of Warrant Shares issuable as otherwise determined pursuant to this Section 4.

(h) Certificate as to Adjustment.

(i) As promptly as reasonably practicable following any adjustment of the Exercise Price, but in any event not later than 30 days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

(ii) As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than 30 days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the Exercise Price then in effect and the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.

(i) Notices. In the event:

(i) that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

(ii) of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale of all or substantially all of the Company’s assets to another Person; or

(iii) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

 

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then, and in each such case, the Company shall send or cause to be sent to the Holder at least 30 days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.

5. Purchase Rights. In addition to any adjustments pursuant to Section 4 above, if at any time the Company grants, issues or sells any shares of Common Stock, Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of Common Stock (the “Purchase Rights”), then the Holder shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder would have acquired if the Holder had held the number of Warrant Shares acquirable upon complete exercise of this Warrant 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 Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. Anything herein to the contrary notwithstanding, the Holder shall not be entitled to the Purchase Rights granted herein with respect to any Excluded Issuance.

6. Bylaws. All Warrant shares issuable upon exercise of this Warrant are and shall become subject to, and have the benefit of, the Bylaws.

7. Transfer of Warrant. Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B, together with funds sufficient to pay any transfer taxes described in Section 3(f)(v) in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

8. Holder Not Deemed a Stockholder; Limitations on Liability. Except as otherwise specifically provided herein (including Section 4(d)(viii)), prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the

 

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Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

9. Replacement on Loss; Division and Combination.

(a) Replacement of Warrant on Loss. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, mutilated or destroyed; provided, that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

(b) Division and Combination of Warrant. Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment which may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of this Warrant or Warrants to the Company at its then principal executive offices, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the respective Holders or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment which may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

10. No Impairment. The Company shall not, by amendment of its Certificate of Incorporation or Bylaws, 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 to be observed or performed by it hereunder, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the Holder in order to protect the exercise rights of the Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant.

 

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11. Compliance with the Securities Act.

(a) Agreement to Comply with the Securities Act; Legend. The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 11 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the “Securities Act”). This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.”

(b) Representations of the Holder. In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:

(i) The Holder is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.

(ii) The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

(iii) The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

 

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12. Warrant Register. The Company shall keep and properly maintain at its principal executive offices books for the registration of the Warrant and any transfers thereof. The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant.

13. Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 13).

 

If to the Company:    LB Pharmaceuticals Inc
575 Madison Avenue
10th Floor
New York, New York 10022
Attention: Board of Directors
If to the Holder:    At the address specified on the first page of this Warrant

14. Cumulative Remedies. Except to the extent expressly provided in Section 8 to the contrary, the rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

15. Equitable Relief. Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.

16. Entire Agreement. This Warrant, together with the Stockholders Agreement and the Bylaws, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Warrant and the Stockholders Agreement and the Bylaws, the statements in the body of this Warrant shall control.

 

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17. Successor and Assigns. This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

18. No Third-Party Beneficiaries. This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

19. Headings. The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

20. Amendment and Modification; Waiver. Except as otherwise provided herein, this Warrant may be amended, modified or supplemented by (i) the written consent of the Company and the Holder, or (ii) the written consent of the Company and holders of then-outstanding warrants of the Company having the same Exercise Price as this Warrant, whose Warrants are exercisable for Warrant Shares greater than a majority of the total Warrant Shares exercisable with respect to all of such applicable group of warrants (such holders, a “Majority-in-Interest” and all of such applicable group of warrants, the “Applicable Warrants”), provided that such amendment, waiver, or modification treats all such holders in the same manner. No waiver by the Company, the Holder or a Majority-in-Interest of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving, provided that a waiver by a Majority-in-Interest shall be effective (i) against the Holder, and (ii) with respect to all Applicable Warrants and against the holders thereof. No waiver by any party or a Majority-in-Interest shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

21. Severability. If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

22. Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.

23. Submission to Jurisdiction. Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of New York in each case located in New York, New York, and each party irrevocably submits to the exclusive jurisdiction of such courts

 

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in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party’s address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

24. Waiver of Jury Trial. Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

25. Counterparts. This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

26. No Strict Construction. This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original Issue Date.

 

LB PHARMACEUTICALS INC, a
Delaware corporation
By:  

     

Name:   Zachary Prensky
Title:   President

 

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Exhibit 10.1

LB PHARMACEUTICALS INC

2017 STOCK INCENTIVE PLAN

1. Purposes of the Plan. The purposes of this LB Pharmaceuticals Inc 2017 Stock Incentive Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants, and to promote the success of the Company’s business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant of an Option and subject to the applicable provisions of Section 422 of the Code and the regulations promulgated thereunder. Restricted Stock may also be granted under the Plan.

2. Definitions. As used herein, the following definitions shall apply:

(a) “Administrator” means the Board or a Committee, as determined pursuant to the terms of Section 4(a) of the Plan.

(b) “Affiliate” means (i) an entity other than a Subsidiary which, together with the Company, is under common control of a third person or entity and (ii) an entity other than a Subsidiary in which the Company and /or one or more Subsidiaries own a controlling interest.

(c) “Applicable Laws” means all applicable laws, rules, regulations and requirements, including, but not limited to, all applicable U.S. federal or state laws, any Stock Exchange rules or regulations, and the applicable laws, rules or regulations of any other country or jurisdiction where Options or Restricted Stock are granted under the Plan or Participants reside or provide services, as such laws, rules, and regulations shall be in effect from time to time.

(d) “Award” means any award of an Option or Restricted Stock under the Plan.

(e) “Board” means the Board of Directors of the Company.

(f) “California Participant” means a Participant whose Award is issued in reliance on Section 25102(o) of the California Corporations Code.

(g) “Cashless Exercise” means a program approved by the Administrator in which payment of the Option exercise price or tax withholding obligations or other required deductions may be satisfied, in whole or in part, with Shares subject to the Option, including by delivery of an irrevocable direction to a securities broker (on a form prescribed by the Company) to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of such amount.

(h) “Cause” for termination of a Participant’s Continuous Service Status will exist (unless another definition is provided in an applicable Option Agreement, Restricted Stock Purchase Agreement, employment agreement or other applicable written agreement, in which case such other definition shall be used for purposes of this Plan) if the Participant’s Continuous Service Status is terminated for any of the following reasons: (i) any material breach by Participant of any material written agreement between Participant and the Company and Participant’s failure to cure such breach within 30 days after receiving written notice thereof; (ii) any failure by Participant to comply with the Company’s material written policies or rules as they may be in effect from time to time; (iii) neglect or persistent unsatisfactory performance of Participant’s duties and Participant’s failure to cure such condition within 30 days after receiving written notice thereof; (iv) Participant’s repeated failure to follow reasonable and lawful instructions from the Board or Chief Executive Officer and Participant’s failure to cure such condition within 30 days after receiving written notice thereof; (v) Participant’s conviction of, or plea of guilty or nolo contendere to, any crime that results in, or is reasonably expected to result in, material harm to the business or reputation of the Company; (vi) Participant’s commission of or participation in an act of fraud against the Company; (vii) Participant’s intentional material damage to the Company’s business, property or reputation; or (viii) Participant’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom the Participant owes an obligation of nondisclosure as a result of his or her relationship with the Company. For purposes of clarity, a termination without

 

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“Cause” does not include any termination that occurs as a result of Participant’s death or disability. The determination as to whether a Participant’s Continuous Service Status has been terminated for Cause shall be made in good faith by the Company and shall be final and binding on the Participant. The foregoing definition does not in any way limit the Company’s ability to terminate a Participant’s employment or consulting relationship at any time, and the term “Company” will be interpreted to include any Subsidiary, Parent, Affiliate, or any successor thereto, if appropriate.

(i) “Change of Control” means (i) a sale of all or substantially all of the Company’s assets other than to an Excluded Entity (as defined below), (ii) a merger, consolidation or other capital reorganization or business combination transaction of the Company with or into another corporation, limited liability company or other entity other than an Excluded Entity, or (iii) the consummation of a transaction, or series of related transactions, in which any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of all of the Company’s then outstanding voting securities.

Notwithstanding the foregoing, a transaction shall not constitute a Change of Control if its purpose is to (A) change the jurisdiction of the Company’s incorporation, (B) create a holding company that will be owned in substantially the same proportions by the persons who hold the Company’s securities immediately before such transaction, or (C) obtain funding for the Company in a financing that is approved by the Company’s Board. An “Excluded Entity” means a corporation or other entity of which the holders of voting capital stock of the Company outstanding immediately prior to such transaction are the direct or indirect holders of voting securities representing at least a majority of the votes entitled to be cast by all of such corporation’s or other entity’s voting securities outstanding immediately after such transaction.

(j) “Code” means the Internal Revenue Code of 1986, as amended.

(k) “Committee” means one or more committees or subcommittees of the Board consisting of two (2) or more Directors (or such lesser or greater number of Directors as shall constitute the minimum number permitted by Applicable Laws to establish a committee or sub-committee of the Board) appointed by the Board to administer the Plan in accordance with Section 4 below.

(l) “Common Stock” means the Company’s common stock, par value $0.0001 per share, as adjusted pursuant to Section 10 below.

(m) “Company” means LB Pharmaceuticals Inc, a Delaware corporation.

(n) “Consultant” means any person or entity, including an advisor but not an Employee, that renders, or has rendered, services to the Company, or any Parent, Subsidiary or Affiliate and is compensated for such services, and any Director whether compensated for such services or not.

(o) “Continuous Service Status” means the absence of any interruption or termination of service as an Employee or Consultant. Continuous Service Status as an Employee or Consultant shall not be considered interrupted or terminated in the case of: (i) Company approved sick leave; (ii) military leave; (iii) any other bona fide leave of absence approved by the Company, provided that, if an Employee is holding an Incentive Stock Option and such leave exceeds 3 months then, for purposes of Incentive Stock Option status only, such Employee’s service as an Employee shall be deemed terminated on the 1st day following such 3-month period and the Incentive Stock Option shall thereafter automatically become a Nonstatutory Stock Option in accordance with Applicable Laws, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to a written Company policy. Also, Continuous Service Status as an Employee or Consultant shall not be considered interrupted or terminated in the case of a transfer between locations of the Company or between the Company, its Parents, Subsidiaries or Affiliates, or their respective successors, or a change in status from an Employee to a Consultant or from a Consultant to an Employee.

(p) “Director” means a member of the Board.

(q) “Disability” means “disability” within the meaning of Section 22(e)(3) of the Code.

 

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(r) “Employee” means any person employed by the Company, or any Parent, Subsidiary or Affiliate, with the status of employment determined pursuant to such factors as are deemed appropriate by the Company in its sole discretion, subject to any requirements of Applicable Laws, including the Code. The payment by the Company of a director’s fee shall not be sufficient to constitute “employment” of such director by the Company or any Parent, Subsidiary or Affiliate.

(s) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(t) “Fair Market Value” means, as of any date, the per share fair market value of the Common Stock, as determined by the Administrator in good faith on such basis as it deems appropriate and applied consistently with respect to Participants. Whenever possible, the determination of Fair Market Value shall be based upon the per share closing price for the Shares as reported in The Wall Street Journal for the applicable date.

(u) “Family Members” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships) of the Participant, any person sharing the Participant’s household (other than a tenant or employee), a trust in which these persons (or the Participant) have more than 50% of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than 50% of the voting interests.

(v) “Incentive Stock Option” means an Option intended to, and which does, in fact, qualify as an incentive stock option within the meaning of Section 422 of the Code.

(w) “Involuntary Termination” means (unless another definition is provided in the applicable Option Agreement, Restricted Stock Purchase Agreement, employment agreement or other applicable written agreement) the termination of a Participant’s Continuous Service Status other than for (i) death, (ii) Disability or (iii) for Cause by the Company or a Parent, Subsidiary, Affiliate or successor thereto, as appropriate.

(x) “Listed Security” means any security of the Company that is listed or approved for listing on a national securities exchange or designated or approved for designation as a national market system security on an interdealer quotation system by the Financial Industry Regulatory Authority (or any successor thereto).

(y) “Nonstatutory Stock Option” means an Option that is not intended to, or does not, in fact, qualify as an Incentive Stock Option.

(z) “Option” means a stock option granted pursuant to the Plan.

(aa) “Option Agreement” means a written document, the form(s) of which shall be approved from time to time by the Administrator, reflecting the terms of an Option granted under the Plan and includes any documents attached to or incorporated into such Option Agreement, including, but not limited to, a notice of stock option grant and a form of exercise notice.

(bb) “Option Exchange Program” means a program approved by the Administrator whereby outstanding Options (i) are exchanged for Options with a lower exercise price, Restricted Stock, cash or other property or (ii) are amended to decrease the exercise price as a result of a decline in the Fair Market Value.

(cc) “Optioned Stock” means Shares that are subject to an Option or that were issued pursuant to the exercise of an Option.

(dd) “Optionee” means an Employee or Consultant who receives an Option.

(ee) “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of grant of the Award, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.

 

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(ff) “Participant” means any holder of one or more Awards or Shares issued pursuant to an Award.

(gg) “Plan” means this 2016 Stock Incentive Plan.

(hh) “Restricted Stock” means Shares acquired pursuant to a right to purchase or receive Common Stock granted pursuant to Section 8 below.

(ii) “Restricted Stock Purchase Agreement” means a written document, the form(s) of which shall be approved from time to time by the Administrator, reflecting the terms of Restricted Stock granted under the Plan and includes any documents attached to such agreement.

(jj) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act, as amended from time to time, or any successor provision.

(kk) “Share” means a share of Common Stock, as adjusted in accordance with Section 10 below.

(ll) “Stock Exchange” means any stock exchange or consolidated stock price reporting system on which prices for the Common Stock are quoted at any given time.

(mm) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of grant of the Award, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

(nn) “Ten Percent Holder” means a person who owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary measured as of an Award’s date of grant.

3. Stock Subject to the Plan. Subject to the provisions of Section 10 below, the maximum aggregate number of Shares that may be issued under the Plan is 750,000 Shares, all of which Shares may be issued under the Plan pursuant to Incentive Stock Options. The Shares issued under the Plan may be authorized, but unissued, or reacquired Shares. If an Award should expire or become unexercisable for any reason without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unissued Shares that were subject thereto shall, unless the Plan shall have been terminated, continue to be available under the Plan for issuance pursuant to future Awards. In addition, any Shares which are retained by the Company upon exercise of an Award in order to satisfy the exercise or purchase price for such Award or any withholding taxes due with respect to such Award shall be treated as not issued and shall continue to be available under the Plan for issuance pursuant to future Awards. Shares issued under the Plan and later forfeited to the Company due to the failure to vest or repurchased by the Company at the original purchase price paid to the Company for the Shares (including, without limitation, upon forfeiture to or repurchase by the Company in connection with the termination of a Participant’s Continuous Service Status) shall again be available for future grant under the Plan. Notwithstanding the foregoing, subject to the provisions of Section 10 below, in no event shall the maximum aggregate number of Shares that may be issued under the Plan pursuant to Incentive Stock Options exceed the number set forth in the first sentence of this Section 3 plus, to the extent allowable under Section 422 of the Code and the Treasury Regulations promulgated there under, any Shares that again become available for issuance pursuant to the remaining provisions of this Section 3.

 

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4. Administration of the Plan.

(a) General. The Plan shall be administered by the Board, a Committee appointed by the Board, or any combination thereof, as determined by the Board. The Plan may be administered by different administrative bodies with respect to different classes of Participants and, if permitted by Applicable Laws, the Board may authorize one or more officers of the Company to make Awards under the Plan to Employees and Consultants (who are not subject to Section 16 of the Exchange Act) within parameters specified by the Board.

(b) Committee Composition. If a Committee has been appointed pursuant to this Section 4, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of any Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies (however caused) and dissolve a Committee and thereafter directly administer the Plan, all to the extent permitted by Applicable Laws and, in the case of a Committee administering the Plan in accordance with the requirements of Rule 16b-3 or Section 162(m) of the Code, to the extent permitted or required by such provisions.

(c) Powers of the Administrator. Subject to the provisions of the Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its sole discretion:

(i) to determine the Fair Market Value in accordance with Section 2(t) above, provided that such determination shall be applied consistently with respect to Participants under the Plan;

(ii) to select the Employees and Consultants to whom Awards may from time to time be granted;

(iii) to determine the number of Shares to be covered by each Award;

(iv) to approve the form(s) of agreement(s) and other related documents used under the Plan;

(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder, which terms and conditions include but are not limited to the exercise or purchase price, the time or times when Awards may vest and/or be exercised (which may be based on performance criteria), the circumstances (if any) when vesting will be accelerated or forfeiture restrictions will be waived, and any restriction or limitation regarding any Award, Optioned Stock, or Restricted Stock;

(vi) to amend any outstanding Award or agreement related to any Optioned Stock or Restricted Stock, including any amendment adjusting vesting (e.g., in connection with a change in the terms or conditions under which such person is providing services to the Company), provided that no amendment shall be made that would materially and adversely affect the rights of any Participant without his or her consent;

(vii) to determine whether and under what circumstances an Option may be settled in cash under Section 7(c)(iii) below instead of Common Stock;

(viii) subject to Applicable Laws, to implement an Option Exchange Program and establish the terms and conditions of such Option Exchange Program without consent of the holders of capital stock of the Company, provided that no amendment or adjustment to an Option that would materially and adversely affect the rights of any Participant shall be made without his or her consent;

(ix) to approve addenda pursuant to Section 18 below or to grant Awards to, or to modify the terms of, any outstanding Option Agreement or Restricted Stock Purchase Agreement or any agreement related to any Optioned Stock or Restricted Stock held by Participants who are foreign nationals or employed outside of the United States with such terms and conditions as the Administrator deems necessary or appropriate to accommodate differences in local law, tax policy or custom which deviate from the terms and conditions set forth in this Plan to the extent necessary or appropriate to accommodate such differences; and

 

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(x) to construe and interpret the terms of the Plan, any Option Agreement or Restricted Stock Purchase Agreement, and any agreement related to any Optioned Stock or Restricted Stock, which constructions, interpretations and decisions shall be final and binding on all Participants.

(d) Indemnification. To the maximum extent permitted by Applicable Laws, each member of the Committee (including officers of the Company, if applicable), or of the Board, as applicable, shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan or pursuant to the terms and conditions of any Award except for actions taken in bad faith or failures to act in good faith, and (ii) any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit, or proceeding against him or her, provided that such member shall give the Company an opportunity, at its own expense, to handle and defend any such claim, action, suit or proceeding before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under any other power that the Company may have to indemnify or hold harmless each such person.

5. Eligibility.

(a) Recipients of Grants. Nonstatutory Stock Options and Restricted Stock may be granted to Employees and Consultants. Incentive Stock Options may be granted only to Employees, provided that Employees of Affiliates shall not be eligible to receive Incentive Stock Options.

(b) Type of Option. Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.

(c) ISO $100,000 Limitation. Notwithstanding any designation under Section 5(b) above, to the extent that the aggregate Fair Market Value of Shares with respect to which options designated as incentive stock options are exercisable for the first time by any Optionee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess options shall be treated as nonstatutory stock options. For purposes of this Section 5(c), incentive stock options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares subject to an incentive stock option shall be determined as of the date of the grant of such option.

(d) No Employment Rights. Neither the Plan nor any Award shall confer upon any Employee or Consultant any right with respect to continuation of an employment or consulting relationship with the Company (any Parent, Subsidiary or Affiliate), nor shall it interfere in any way with such Employee’s or Consultant’s right or the Company’s (Parent’s, Subsidiary’s or Affiliate’s) right to terminate his or her employment or consulting relationship at any time, with or without cause.

6. Term of Plan. The Plan shall become effective upon its adoption by the Board and shall continue in effect for a term of 10 years unless sooner terminated under Section 14 below.

7. Options.

(a) Term of Option. The term of each Option shall be the term stated in the Option Agreement; provided that the term shall be no more than 10 years from the date of grant thereof or such shorter term as may be provided in the Option Agreement and provided further that, in the case of an Incentive Stock Option granted to a person who at the time of such grant is a Ten Percent Holder, the term of the Option shall be 5 years from the date of grant thereof or such shorter term as may be provided in the Option Agreement.

 

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(b) Option Exercise Price and Consideration.

(i) Exercise Price. The per Share exercise price for the Shares to be issued pursuant to the exercise of an Option shall be such price as is determined by the Administrator and set forth in the Option Agreement, but shall be subject to the following:

(1) In the case of an Incentive Stock Option

a. granted to an Employee who at the time of grant is a Ten Percent Holder, the per Share exercise price shall be no less than 110% of the Fair Market Value on the date of grant;

b. granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value on the date of grant;

(2) Except as provided in subsection (3) below, in the case of a Nonstatutory Stock Option the per Share exercise price shall be such price as is determined by the Administrator, provided that, if the per Share exercise price is less than 100% of the Fair Market Value on the date of grant, it shall otherwise comply with all Applicable Laws, including Section 409A of the Code; and

(3) Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction.

(ii) Permissible Consideration. The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option and to the extent required by Applicable Laws, shall be determined at the time of grant) and may consist entirely of (1) cash;

(1) check; (3) to the extent permitted under, and in accordance with, Applicable Laws, delivery of a promissory note with such recourse, interest, security and redemption provisions as the Administrator determines to be appropriate (subject to the provisions of Section 152 of the Delaware General Corporation Law); (4) cancellation of indebtedness; (5) other previously owned Shares that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which the Option is exercised; (6) a Cashless Exercise; (7) such other consideration and method of payment permitted under Applicable Laws; or (8) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company and the Administrator may, in its sole discretion, refuse to accept a particular form of consideration at the time of any Option exercise.

(c) Exercise of Option.

(i) General.

(1) Exercisability. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator, consistent with the terms of the Plan and reflected in the Option Agreement, including vesting requirements and/or performance criteria with respect to the Company, and Parent, Subsidiary or Affiliate, and/or the Optionee.

(2) Leave of Absence. The Administrator shall have the discretion to determine at any time whether and to what extent the vesting of Options shall be tolled during any leave of absence; provided, however, that in the absence of such determination, vesting of Options shall continue during any paid leave and shall be tolled during any unpaid leave (unless otherwise required by Applicable Laws). Notwithstanding the foregoing, in the event of military leave, vesting shall toll during any unpaid portion of such leave, provided that, upon an Optionee’s returning from military leave (under conditions that would entitle him or her to protection upon such return under the Uniform Services Employment and Reemployment Rights Act), he or she shall be given vesting credit with respect to Options to the same extent as would have applied had the Optionee continued to provide services to the Company (or any Parent, Subsidiary or Affiliate, if applicable) throughout the leave on the same terms as he or she was providing services immediately prior to such leave.

 

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(3) Minimum Exercise Requirements. An Option may not be exercised for a fraction of a Share. The Administrator may require that an Option be exercised as to a minimum number of Shares, provided that such requirement shall not prevent an Optionee from exercising the full number of Shares as to which the Option is then exercisable.

(4) Procedures for and Results of Exercise. An Option shall be deemed exercised when written notice of such exercise has been received by the Company in accordance with the terms of the Option Agreement by the person entitled to exercise the Option and the Company has received full payment for the Shares with respect to which the Option is exercised and has paid, or made arrangements to satisfy, any applicable taxes, withholding, required deductions or other required payments in accordance with Section 9 below. The exercise of an Option shall result in a decrease in the number of Shares that thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

(5) Rights as Holder of Capital Stock. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a holder of capital stock shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock is issued, except as provided in Section 10 below.

(ii) Termination of Continuous Service Status. The Administrator shall establish and set forth in the applicable Option Agreement the terms and conditions upon which an Option shall remain exercisable, if at all, following termination of an Optionee’s Continuous Service Status, which provisions may be waived or modified by the Administrator at any time. To the extent that an Option Agreement does not specify the terms and conditions upon which an Option shall terminate upon termination of an Optionee’s Continuous Service Status, the following provisions shall apply:

(1) General Provisions. If the Optionee (or other person entitled to exercise the Option) does not exercise the Option to the extent so entitled within the time specified below, the Option shall terminate and the Optioned Stock underlying the unexercised portion of the Option shall revert to the Plan. In no event may any Option be exercised after the expiration of the Option term as set forth in the Option Agreement (and subject to this Section 7).

(2) Termination other than Upon Disability or Death or for Cause. In the event of termination of an Optionee’s Continuous Service Status other than under the circumstances set forth in the subsections (3) through (5) below, such Optionee may exercise any outstanding Option at any time within 3 month(s) following such termination to the extent the Optionee is vested in the Optioned Stock.

(3) Disability of Optionee. In the event of termination of an Optionee’s Continuous Service Status as a result of his or her Disability, such Optionee may exercise any outstanding Option at any time within 12 month(s) following such termination to the extent the Optionee is vested in the Optioned Stock.

(4) Death of Optionee. In the event of the death of an Optionee during the period of Continuous Service Status since the date of grant of any outstanding Option, or within 3 month(s) following termination of the Optionee’s Continuous Service Status, the Option may be exercised by any beneficiaries designated in accordance with Section 16 below, or if there are no such beneficiaries, by the Optionee’s estate, or by a person who acquired the right to exercise the Option by bequest or inheritance, at any time within 12 month(s) following the date the Optionee’s Continuous Service Status terminated, but only to the extent the Optionee is vested in the Optioned Stock.

(5) Termination for Cause. In the event of termination of an Optionee’s Continuous Service Status for Cause, any outstanding Option (including any vested portion thereof) held by such Optionee shall immediately terminate in its entirety upon first notification to the Optionee of termination of the Optionee’s Continuous Service Status for Cause. If an Optionee’s Continuous Service Status is suspended pending an investigation of whether the Optionee’s Continuous Service Status will be terminated for Cause, all the Optionee’s rights under any Option, including the right to exercise the Option, shall be suspended during the investigation period. Nothing in this Section 7(c)(ii)(5) shall in any way limit the Company’s right to purchase unvested Shares issued upon exercise of an Option as set forth in the applicable Option Agreement.

 

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(iii) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares an Option previously granted under the Plan based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.

8. Restricted Stock.

(a) Rights to Purchase. When a right to purchase or receive Restricted Stock is granted under the Plan, the Company shall advise the recipient in writing of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, if any (which shall be as determined by the Administrator, subject to Applicable Laws, including any applicable securities laws), and the time within which such person must accept such offer. The permissible consideration for Restricted Stock shall be determined by the Administrator and shall be the same as is set forth in Section 7(b)(ii) above with respect to exercise of Options. The offer to purchase Shares shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator.

(b) Repurchase Option.

(i) General. Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the Participant’s Continuous Service Status for any reason (including death or Disability) at a purchase price for Shares equal to the original purchase price paid by the purchaser to the Company for such Shares and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Administrator may determine.

(ii) Leave of Absence. The Administrator shall have the discretion to determine at any time whether and to what extent the lapsing of Company repurchase rights shall be tolled during any leave of absence; provided, however, that in the absence of such determination, such lapsing shall continue during any paid leave and shall be tolled during any unpaid leave (unless otherwise required by Applicable Laws). Notwithstanding the foregoing, in the event of military leave, the lapsing of Company repurchase rights shall toll during any unpaid portion of such leave, provided that, upon a Participant’s returning from military leave (under conditions that would entitle him or her to protection upon such return under the Uniform Services Employment and Reemployment Rights Act), he or she shall be given vesting credit with respect to Shares purchased pursuant to the Restricted Stock Purchase Agreement to the same extent as would have applied had the Participant continued to provide services to the Company (or any Parent, Subsidiary or Affiliate, if applicable) throughout the leave on the same terms as he or she was providing services immediately prior to such leave.

(c) Other Provisions. The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. In addition, the provisions of Restricted Stock Purchase Agreements need not be the same with respect to each Participant.

(d) Rights as a Holder of Capital Stock. Once the Restricted Stock is purchased, the Participant shall have the rights equivalent to those of a holder of capital stock, and shall be a record holder when his or her purchase and the issuance of the Shares is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Restricted Stock is purchased, except as provided in Section 10 below.

 

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9. Taxes.

(a) As a condition of the grant, vesting and exercise of an Award, the Participant (or in the case of the Participant’s death or a permitted transferee, the person holding or exercising the Award) shall make such arrangements as the Administrator may require for the satisfaction of any applicable U.S. federal, state, local or foreign tax, withholding, and any other required deductions or payments that may arise in connection with such Award. The Company shall not be required to issue any Shares under the Plan until such obligations are satisfied.

(b) The Administrator may, to the extent permitted under Applicable Laws, permit a Participant (or in the case of the Participant’s death or a permitted transferee, the person holding or exercising the Award) to satisfy all or part of his or her tax, withholding, or any other required deductions or payments by Cashless Exercise or by surrendering Shares (either directly or by stock attestation) that he or she previously acquired; provided that, unless specifically permitted by the Company, any such Cashless Exercise must be an approved broker-assisted Cashless Exercise or the Shares withheld in the Cashless Exercise must be limited to avoid financial accounting charges under applicable accounting guidance and any such surrendered Shares must have been previously held for any minimum duration required to avoid financial accounting charges under applicable accounting guidance. Any payment of taxes by surrendering Shares to the Company may be subject to restrictions, including, but not limited to, any restrictions required by rules of the Securities and Exchange Commission.

10. Adjustments Upon Changes in Capitalization, Merger or Certain Other Transactions.

(a) Changes in Capitalization. Subject to any action required under Applicable Laws by the holders of capital stock of the Company, (i) the numbers and class of Shares or other stock or securities: (x) available for future Awards under Section 3 above and (y) covered by each outstanding Award, (ii) the exercise price per Share of each such outstanding Option, and (iii) any repurchase price per Share applicable to Shares issued pursuant to any Award, shall be automatically proportionately adjusted in the event of a stock split, reverse stock split, stock dividend, combination, consolidation, reclassification of the Shares or subdivision of the Shares. In the event of any increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, a declaration of an extraordinary dividend with respect to the Shares payable in a form other than Shares in an amount that has a material effect on the Fair Market Value, a recapitalization (including a recapitalization through a large nonrecurring cash dividend), a rights offering, a reorganization, merger, a spin-off, split-up, change in corporate structure or a similar occurrence, the Administrator shall make appropriate adjustments, in its discretion, in one or more of (i) the numbers and class of Shares or other stock or securities: (x) available for future Awards under Section 3 above and (y) covered by each outstanding Award, (ii) the exercise price per Share of each outstanding Option and (iii) any repurchase price per Share applicable to Shares issued pursuant to any Award, and any such adjustment by the Administrator shall be made in the Administrator’s sole and absolute discretion and shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Award. If, by reason of a transaction described in this Section 10(a) or an adjustment pursuant to this Section 10(a), a Participant’s Award agreement or agreement related to any Optioned Stock or Restricted Stock covers additional or different shares of stock or securities, then such additional or different shares, and the Award agreement or agreement related to the Optioned Stock or Restricted Stock in respect thereof, shall be subject to all of the terms, conditions and restrictions which were applicable to the Award, Optioned Stock and Restricted Stock prior to such adjustment.

(b) Dissolution or Liquidation. In the event of the dissolution or liquidation of the Company, each Award will terminate immediately prior to the consummation of such action, unless otherwise determined by the Administrator.

(c) Corporate Transactions. In the event of (i) a transfer of all or substantially all of the Company’s assets, (ii) a merger, consolidation or other capital reorganization or business combination transaction of the Company with or into another corporation, entity or person, or (iii) the consummation of a transaction, or series of related transactions, in which any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of more than 50% of the Company’s then outstanding capital stock (a “Corporate Transaction”), each outstanding Award (vested or unvested) will be treated as the Administrator determines, which determination may be made without the consent of any Participant and need not treat all outstanding Awards (or portion thereof) in an identical manner. Such determination, without the consent of any Participant, may provide (without limitation) for one or more of the following in the event of a Corporate Transaction: (A) the continuation of such outstanding Awards by the Company (if the Company is the surviving corporation); (B) the assumption of such outstanding Awards by the surviving

 

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corporation or its parent; (C) the substitution by the surviving corporation or its parent of new options or equity awards for such Awards; (D) the cancellation of such Awards in exchange for a payment to the Participants equal to the excess of (1) the Fair Market Value of the Shares subject to such Awards as of the closing date of such Corporate Transaction over (2) the exercise price or purchase price paid or to be paid for the Shares subject to the Awards; or (E) the cancellation of any outstanding Options or an outstanding right to purchase Restricted Stock, in either case, for no consideration.

11. Non-Transferability of Awards.

(a) General. Except as set forth in this Section 11, Awards (or any rights of such Awards) may not be sold, pledged, encumbered, assigned, hypothecated, or disposed of or otherwise transferred in any manner other than by will or by the laws of descent or distribution. The designation of a beneficiary by a Participant will not constitute a transfer. An Option may be exercised, during the lifetime of the holder of the Option, only by such holder or a transferee permitted by this Section 11.

(b) Limited Transferability Rights. Notwithstanding anything else in this Section 11, the Administrator may in its sole discretion provide that any Nonstatutory Stock Options may be transferred by instrument to an inter vivos or testamentary trust in which the Options are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift to Family Members. Further, beginning with (i) the period when the Company begins to rely on the exemption described in Rule 12h-1(f)(1) promulgated under the Exchange Act, as determined by the Board in its sole discretion, and (ii) ending on the earlier of (A) the date when the Company ceases to rely on such exemption, as determined by the Board in its sole discretion, or (B) the date when the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, an Option, or prior to exercise, the Shares subject to the Option, may not be pledged, hypothecated or otherwise transferred or disposed of, in any manner, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b) of the Exchange Act, respectively), other than to (i) persons who are Family Members through gifts or domestic relations orders, or (ii) to an executor or guardian of the Participant upon the death or disability of the Participant. Notwithstanding the foregoing sentence, the Board, in its sole discretion, may permit transfers of Nonstatutory Stock Options to the Company or in connection with a Change of Control or other acquisition transactions involving the Company to the extent permitted by Rule 12h-1(f).

12. Non-Transferability of Stock Underlying Awards.

(a) General. Notwithstanding anything to the contrary, no stockholder shall sell, assign, pledge, encumber or otherwise transfer, whether by sale, gift or otherwise, any Shares (or any rights of such Shares) acquired from any Award (including, without limitation, Shares acquired upon exercise of an Option) to any person or entity unless such transfer is approved by the Company prior to such transfer, which approval may be granted or withheld in the Company’s sole and absolute discretion. Any purported transfer effected in violation of this Section 12 shall be null and void and shall have no force or effect and the Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of the Plan or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

(b) Approval Process. Any stockholder seeking the approval of the Board to transfer some or all of its Shares shall give written notice thereof to the Secretary of the Company and such request for transfer shall be subject to such right of first refusal, transfer provisions and any other terms and conditions as may be set forth in the applicable Option Agreement, Restricted Stock Purchase Agreement or other applicable written agreement.

13. Time of Granting Awards. The date of grant of an Award shall, for all purposes, be the date on which the Administrator makes the determination granting such Award, or such other date as is determined by the Administrator.

14. Amendment and Termination of the Plan. The Board may at any time amend or terminate the Plan, but no amendment or termination shall be made that would materially and adversely affect the rights of any Participant under any outstanding Award, without his or her consent. In addition, to the extent necessary and desirable to comply with Applicable Laws, the Company shall obtain the approval of holders of capital stock with respect to any Plan amendment in such a manner and to such a degree as required.

 

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15. Conditions Upon Issuance of Shares. Notwithstanding any other provision of the Plan or any agreement entered into by the Company pursuant to the Plan, the Company shall not be obligated, and shall have no liability for failure, to issue or deliver any Shares under the Plan unless such issuance or delivery would comply with Applicable Laws, with such compliance determined by the Company in consultation with its legal counsel. As a condition to the exercise of any Option or purchase of any Restricted Stock, the Company may require the person exercising the Option or purchasing the Restricted Stock to represent and warrant at the time of any such exercise or purchase that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is advisable or required by Applicable Laws. Shares issued upon exercise of Options or purchase of Restricted Stock prior to the date, if ever, on which the Common Stock becomes a Listed Security shall be subject to a right of first refusal in favor of the Company pursuant to which the Participant will be required to offer Shares to the Company before selling or transferring them to any third party on such terms and subject to such conditions as is reflected in the applicable Option Agreement or Restricted Stock Purchase Agreement.

16. Beneficiaries. If permitted by the Company, a Participant may designate one or more beneficiaries with respect to an Award by timely filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Participant’s death. Except as otherwise provided in an Award Agreement, if no beneficiary was designated or if no designated beneficiary survives the Participant, then after a Participant’s death any vested Award(s) shall be transferred or distributed to the Participant’s estate or to any person who has the right to acquire the Award by bequest or inheritance.

17. Approval of Holders of Capital Stock. If required by Applicable Laws, continuance of the Plan shall be subject to approval by the holders of capital stock of the Company within 12 months before or after the date the Plan is adopted or, to the extent required by Applicable Laws, any date the Plan is amended. Such approval shall be obtained in the manner and to the degree required under Applicable Laws.

18. Addenda. The Administrator may approve such addenda to the Plan as it may consider necessary or appropriate for the purpose of granting Awards to Employees or Consultants, which Awards may contain such terms and conditions as the Administrator deems necessary or appropriate to accommodate differences in local law, tax policy or custom, which may deviate from the terms and conditions set forth in this Plan. The terms of any such addenda shall supersede the terms of the Plan to the extent necessary to accommodate such differences but shall not otherwise affect the terms of the Plan as in effect for any other purpose.

19. Information to Holders of Options. In the event the Company is relying on the exemption provided by Rule 12h-1(f) under the Exchange Act, the Company shall provide the information described in Rule 701(e)(3), (4) and (5) of the Securities Act of 1933, as amended, to all holders of Options in accordance with the requirements thereunder until such time as the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. The Company may request that holders of Options agree to keep the information to be provided pursuant to this Section confidential. If the holder does not agree to keep the information to be provided pursuant to this Section confidential, then the Company will not be required to provide the information unless otherwise required pursuant to Rule 12h-1(f)(1) of the Exchange Act.

 

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ADDENDUM A

LB Pharmaceuticals 2016 Stock Incentive Plan

(California Participants)

Prior to the date, if ever, on which the Common Stock becomes a Listed Security and/or the Company is subject to the reporting requirements of the Exchange Act, the terms set forth herein shall apply to Awards issued to California Participants. All capitalized terms used herein but not otherwise defined shall have the respective meanings set forth in the Plan.

1. The following rules shall apply to any Option in the event of termination of the Participant’s Continuous Service Status:

(a) If such termination was for reasons other than death, “Permanent Disability” (as defined below), or Cause, the Participant shall have at least 45 days after the date of such termination to exercise his or her Option to the extent the Participant is entitled to exercise on his or her termination date, provided that in no event shall the Option be exercisable after the expiration of the term as set forth in the Option Agreement.

(b) If such termination was due to death or Permanent Disability, the Participant shall have at least 6 months after the date of such termination to exercise his or her Option to the extent the Participant is entitled to exercise on his or her termination date, provided that in no event shall the Option be exercisable after the expiration of the term as set forth in the Option Agreement.

“Permanent Disability” for purposes of this Addendum shall mean the inability of the Participant, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of the Participant’s position with the Company or any Parent or Subsidiary because of the sickness or injury of the Participant.

2. Notwithstanding anything to the contrary in Section 10(a) of the Plan, the Administrator shall in any event make such adjustments as may be required by Section 25102(o) of the California Corporations Code.

3. Notwithstanding anything stated herein to the contrary, no Option shall be exercisable on or after the 10th anniversary of the date of grant and any Award agreement shall terminate on or before the 10th anniversary of the date of grant.

4. The Company shall furnish summary financial information (audited or unaudited) of the Company’s financial condition and results of operations, consistent with the requirements of Applicable Laws, at least annually to each California Participant during the period such Participant has one or more Awards outstanding, and in the case of an individual who acquired Shares pursuant to the Plan, during the period such Participant owns such Shares; provided, however, the Company shall not be required to provide such information if (i) the issuance is limited to key persons whose duties in connection with the Company assure their access to equivalent information or (ii) the Plan or any agreement complies with all conditions of Rule 701 of the Securities Act of 1933, as amended; provided that for purposes of determining such compliance, any registered domestic partner shall be considered a “family member” as that term is defined in Rule 701.

Exhibit 10.2

LB PHARMACEUTICALS INC

2017 STOCK INCENTIVE PLAN

NOTICE OF STOCK OPTION GRANT

[insert name here]

Address:

        

        

You (“you” or “Optionee”) have been granted an option (the “Option”) to purchase Common Stock (“Shares”) of LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), pursuant to the Company’s 2018 Stock Incentive Plan (the “Plan”), the Stock Option Agreement (the “Stock Option Agreement”), and the following terms:

 

 Date of Grant:

        

 Exercise Price Per Share:

   $  

 Total Number of Shares:

        

 Total Exercise Price:

   $  

 Type of Option:

  

     Shares Incentive Stock Option

 

     Shares Nonstatutory Stock Option

 Expiration Date:

        

 Vesting Commencement Date:

        

 Vesting/Exercise Schedule:

  

So long as your Continuous Service Status (as defined in the Plan) does not terminate (and provided that no vesting shall occur following the Termination Date (as defined in Section 5 of the Stock Option Agreement)), the Shares underlying this Option shall vest and become exercisable in accordance with the following schedule: [Fully Vested: The Shares underlying this Option are fully vested and exercisable as of {the Vesting Commencement Date / {insert date}}.] / [Time-based Vesting:      Shares shall vest and become exercisable on {the Date of Grant / the  –month anniversary of the Vesting Commencement Date} and the remaining      Shares shall vest and become exercisable on the   day of each month thereafter (and if there is no corresponding day, the last day of the month).]

 

Notwithstanding the above, or anything contained in the LB Pharmaceuticals Inc 2018 Stock Incentive Plan or Stock Option Agreement, (i) if a Change of Control occurs and irrespective of whether this Option is being assumed,


   substituted, exchanged or terminated in connection with the Change of Control, or (ii) the Company terminates your Continuous Service Status other than for Cause, the vesting and exercisability of this Option shall accelerate such that this Option shall become fully vested and exercisable effective as of immediately prior to consummation of the Change of Control (as defined in the Plan).

 Termination Period:

   You may exercise this Option for 3 month(s) after the Termination Date except as set out in Section 5 of the Stock Option Agreement (but in no event later than the Expiration Date). You are responsible for keeping track of these exercise periods following the Termination Date. The Company will not provide further notice of such periods.

 Transferability:

   You may not transfer this Option except as set forth in Section 6 of the Stock Option Agreement.

[Signature Page Follows]

 

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By your signature and the signature of the Company’s representative or by accepting this grant, you and the Company agree that this Option is granted under and governed by the terms and conditions of this Notice and the LB Pharmaceuticals Inc 2018 Stock Incentive Plan and Option Agreement, both of which are attached to and made a part of this Notice.

Nothing in this Notice or the attached documents confers upon you any right to continue your employment or consulting relationship with the Company for any period of time, nor does it interfere in any way with your right or the Company’s right to terminate that relationship at any time, for any reason, with or without Cause, subject to Applicable Laws. Also, to the extent applicable, the Exercise Price Per Share has been set in good faith compliance with the applicable guidance issued by the IRS under Section 409A of the Code. However, there is no guarantee that the IRS will agree with the valuation, and by signing below, you agree and acknowledge that the Company, its Board, officers, employees, agents and stockholders shall not be held liable for any applicable costs, taxes, or penalties associated with this Option if, in fact, the IRS or any other person (including, without limitation, a successor corporation or an acquirer in a Change of Control) were to determine that this Option constitutes deferred compensation under Section 409A of the Code. You should consult with your own tax advisor concerning the tax consequences of such a determination by the IRS. For purposes of this paragraph, the term “Company” will be interpreted to include any Parent, Subsidiary or Affiliate.

 

THE COMPANY:
LB PHARMACEUTICALS INC
By:  

 

  (Signature)
Name:  

 

Title:  

 

OPTIONEE:

 

(PRINT NAME)

 

(Signature)
Address:
          
          
          

 

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LB PHARMACEUTICALS INC

2018 STOCK INCENTIVE PLAN

STOCK OPTION AGREEMENT

1. Grant of Option. LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), hereby grants to the person (“Optionee”) named in the Notice of Stock Option Grant (the “Notice”), an option (the “Option”) to purchase the total number of shares of Common Stock (the “Shares”) set forth in the Notice, at the exercise price per Share set forth in the Notice (the “Exercise Price”) subject to the terms, definitions and provisions of the LB Pharmaceuticals Inc 2018 Stock Incentive Plan (the “Plan”) adopted by the Company, which is incorporated in this Stock Option Agreement (this “Agreement”) by reference. Unless otherwise defined in this Agreement, capitalized terms used in this Agreement or the Notice shall have the meanings defined in the Plan.

2. Designation of Option. This Option is intended to be an Incentive Stock Option as defined in Section 422 of the Code only to the extent so designated in the Notice, and to the extent it is not so designated or to the extent this Option does not qualify as an Incentive Stock Option, it is intended to be a Nonstatutory Stock Option.

Notwithstanding the above, if designated as an Incentive Stock Option, in the event that the Shares subject to this Option (and all other incentive stock options granted to Optionee by the Company or any Parent or Subsidiary, including under other plans) that first become exercisable in any calendar year have an aggregate fair market value (determined for each Share as of the date of grant of the option covering such Share) in excess of $100,000, the Shares in excess of $100,000 shall be treated as subject to a nonstatutory stock option, in accordance with Section 5(c) of the Plan.

3. Exercise of Option. This Option shall be exercisable during its term in accordance with the Vesting/Exercise Schedule set out in the Notice and with the provisions of Section 7(c) of the Plan as follows:

(a) Right to Exercise.

(i) This Option may not be exercised for a fraction of a share.

(ii) In the event of Optionee’s death, Disability or other termination of Continuous Service Status, the exercisability of this Option is governed by Section 5 below, subject to the limitations contained in this Section 3.

(iii) In no event may this Option be exercised after the Expiration Date set forth in the Notice.


(b) Method of Exercise.

(i) This Option shall be exercisable by execution and delivery of the Exercise Agreement attached hereto as Exhibit A or of any other form of written notice approved for such purpose by the Company which shall state Optionee’s election to exercise this Option, the number of Shares in respect of which this Option is being exercised, and such other representations and agreements as to the holder’s investment intent with respect to such Shares as may be required by the Company pursuant to the provisions of the Plan. Such written notice shall be signed by Optionee and shall be delivered to the Company by such means as are determined by the Company in its discretion to constitute adequate delivery. The written notice shall be accompanied by payment of the aggregate Exercise Price for the purchased Shares.

(ii) As a condition to the grant, vesting and exercise of this Option and as further set forth in Section 9 of the Plan, Optionee hereby agrees to make adequate provision for the satisfaction of (and will indemnify the Company and any Subsidiary or Affiliate for) any applicable taxes or tax withholdings, social contributions, required deductions, or other payments, if any (“Tax-Related Items”), which arise upon the grant, vesting or exercise of this Option, disposition of Shares, receipt of dividends, if any, or otherwise in connection with this Option or the Shares, whether by withholding, direct payment to the Company, or otherwise as determined by the Company in its sole discretion. Regardless of any action the Company or any Subsidiary or Affiliate takes with respect to any or all applicable Tax-Related Items, Optionee acknowledges and agrees that the ultimate liability for all Tax-Related Items is and remains Optionee’s responsibility and may exceed any amount actually withheld by the Company or any Subsidiary or Affiliate. Optionee further acknowledges and agrees that Optionee is solely responsible for filing all relevant documentation that may be required in relation to this Option or any Tax-Related Items other than filings or documentation that is the specific obligation of the Company or any Subsidiary or Affiliate pursuant to Applicable Law, such as but not limited to personal income tax returns or reporting statements in relation to the grant, vesting or exercise of this Option, the holding of Shares or any bank or brokerage account, the subsequent sale of Shares, and the receipt of any dividends. Optionee further acknowledges that the Company makes no representations or undertakings regarding the treatment of any Tax-Related Items and does not commit to and is under no obligation to structure the terms or any aspect of the Option to reduce or eliminate Optionee’s liability for Tax-Related Items or achieve any particular tax result. Further, if Optionee has become subject to tax in more than one jurisdiction, Optionee acknowledges that the Company or any Subsidiary or Affiliate may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

(iii) The Company is not obligated, and will have no liability for failure, to issue or deliver any Shares upon exercise of this Option unless such issuance or delivery would comply with the Applicable Laws, with such compliance determined by the Company in consultation with its legal counsel. Furthermore, Optionee understands that the Applicable Laws of the country in which Optionee is residing or working at the time of grant, vesting, and/or exercise of this Option (including any rules or regulations governing securities, foreign exchange, tax, labor or other matters) may restrict or prevent exercise of this Option. This Option may not be exercised until such time as the Plan has been approved by the holders of capital stock of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such Shares would constitute a violation of any Applicable Laws, including any

 

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applicable U.S. federal or state securities laws or any other law or regulation, including any rule under Part 221 of Title 12 of the Code of Federal Regulations as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by the Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Optionee on the date on which this Option is exercised with respect to such Shares.

(iv) Subject to compliance with Applicable Laws, this Option shall be deemed to be exercised upon receipt by the Company of the appropriate written notice of exercise accompanied by the Exercise Price and the satisfaction of any applicable obligations described in Section 3(b)(ii) above.

4.  Method of Payment. Payment of the Exercise Price shall be by cash or check or, following the initial public offering of the Company’s Common Stock, by Cashless Exercise pursuant to which the Optionee delivers an irrevocable direction to a securities broker (on a form prescribed by the Company and according to a procedure established by the Company).

Optionee understands and agrees that, if required by the Company to comply with Applicable Laws, any cross-border cash remittance made to exercise this Option or transfer proceeds received upon the sale of Shares must be made through a locally authorized financial institution or registered foreign exchange agency and may require Optionee to provide to such entity certain information regarding the transaction. Moreover, Optionee understands and agrees that the future value of the underlying Shares is unknown and cannot be predicted with certainty and may decrease in value, even below the Exercise Price. Optionee understands that neither the Company nor any Subsidiary or Affiliate is responsible for any foreign exchange fluctuation between local currency and the United States Dollar or the selection by the Company or any Subsidiary or Affiliate in its sole discretion of an applicable foreign currency exchange rate that may affect the value of the Option (or the calculation of income or Tax-Related Items thereunder).

5. Termination of Relationship. Following the date of termination of Optionee’s Continuous Service Status for any reason (the “Termination Date”), Optionee may exercise this Option only as set forth in the Notice and this Section 5. If Optionee does not exercise this Option within the Termination Period set forth in the Notice or the termination periods set forth below, this Option shall terminate in its entirety. In no event, may any Option be exercised after the Expiration Date of this Option as set forth in the Notice. For the avoidance of doubt and for purposes of this Option only, termination of Continuous Service Status and the Termination Date will be deemed to occur as of the date Optionee is no longer actively providing services as an Employee or Consultant (except to the extent Optionee is on a Company approved leave of absence) and will not be extended by any notice period or “garden leave” that is required contractually or under Applicable Laws.

(a) General Termination. In the event of termination of Optionee’s Continuous Service Status other than as a result of Optionee’s Disability or death or Optionee’s termination for Cause, Optionee may exercise this Option to the extent vested in the Option at any time within the Termination Period as set forth in the Notice.

 

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(b) Termination upon Disability of Optionee. In the event of termination of Optionee’s Continuous Service Status as a result of Optionee’s Disability, Optionee may, but only within 12 month(s) following the Termination Date, exercise this Option to the extent Optionee is vested in the Option.

(c) Death of Optionee. In the event of termination of Optionee’s Continuous Service Status as a result of Optionee’s death, or in the event of Optionee’s death within 3 month(s) following Optionee’s Termination Date, this Option may be exercised at any time within 12 month(s) following the Termination Date, or if later, 12 month(s) following the date of death by any beneficiaries designated in accordance with Section 16 of the Plan or, if there are no such beneficiaries, by the Optionee’s estate, or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent Optionee is vested in the Option.

(d) Termination for Cause. In the event of termination of Optionee’s Continuous Service Status for Cause, this Option (including any vested portion thereof) shall immediately terminate in its entirety upon first notification to Optionee of such termination for Cause. If Optionee’s Continuous Service Status is suspended pending an investigation of whether Optionee’s Continuous Service Status will be terminated for Cause, all Optionee’s rights under this Option, including the right to exercise this Option, shall be suspended during the investigation period.

6. Non-Transferability of Option; Stockholders Agreements.

(a) This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by him or her. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of Optionee.

(b) As a condition precedent to entering into this Agreement, at the request of the Company, Optionee shall become a party to any stockholders, right of first refusal and/or co-sale, drag-along and/or tag-along, transfer restriction, voting, or similar agreements to which the Company is a party at the time of Optionee’s execution and delivery of this Agreement, or to which the holders of at least 50% of the outstanding shares of Common Stock may become parties after Optionee’s execution and delivery of this Agreement, in each case as such agreement may be amended from time to time (such agreements, collectively, the “Stockholders Agreements”), by executing an adoption agreement, joinder or counterpart signature page agreeing to be bound by and subject to the terms of the Stockholders Agreements as a holder of Common Stock.

7. Lock-Up Agreement. If so requested by the Company or the underwriters in connection with the initial public offering of the Company’s securities registered under the Securities Act of 1933, as amended, Optionee shall not sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company however or whenever acquired (except for those being registered) without the prior written consent of the Company or such underwriters, as the case may be, for 180 days from the effective date of the registration statement, plus such additional period, to the extent required by FINRA rules, up to a maximum of 216 days from the effective date of the registration statement, and Optionee shall execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of such offering.

 

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8. Effect of Agreement. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof (and has had an opportunity to consult counsel regarding the Option terms), and hereby accepts this Option and agrees to be bound by its contractual terms as set forth herein and in the Plan. Optionee hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Administrator regarding any questions relating to this Option. In the event of a conflict between the terms and provisions of the Plan and the terms and provisions of the Notice and this Agreement, the Plan terms and provisions shall prevail.

9. Imposition of Other Requirements. The Company reserves the right to impose other requirements on Optionee’s participation in the Plan, on the Option and on any Award or Shares acquired under the Plan, to the extent the Company reasonably determines it is necessary or advisable in order to comply with Applicable Laws or facilitate the administration of the Plan. Optionee agrees to sign any additional agreements or undertakings that may be reasonably necessary to accomplish the foregoing. Furthermore, Optionee acknowledges that the laws of the country in which Optionee is working at the time of grant, vesting and exercise of the Option or the sale of Shares received pursuant to this Agreement (including any rules or regulations governing securities, foreign exchange, tax, labor, or other matters) may subject Optionee to additional procedural or regulatory requirements that Optionee is and will be solely responsible for and must fulfill.

10. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to Optionee’s current or future participation in the Plan, this Option, the Shares subject to this Option, any other Company Securities or any other Company-related documents, by electronic means. Optionee hereby (i) consents to receive such documents by electronic means, (ii) consents to the use of electronic signatures, and (iii) if applicable, agrees to participate in the Plan and/or receive any such documents through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. To the extent Optionee has been provided with a copy of this Agreement, the Plan, or any other documents relating to this Option in a language other than English, the English language documents will prevail in case of any ambiguities or divergences as a result of translation.

11. No Acquired Rights. In accepting the Option, Optionee acknowledges that the Plan is established voluntarily by the Company, is discretionary in nature, and may be modified, amended, suspended or terminated by the Company at any time. The grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of Options, other Awards or benefits in lieu of Options, even if Options have been granted repeatedly in the past, and all decisions with respect to future grants of Options or other Awards, if any, will be at the sole discretion of the Company. In addition, Optionee’s participation in the Plan is voluntary, and the Option and the Shares subject to the Option are extraordinary items that do not constitute regular compensation for services rendered to the Company or any Subsidiary or Affiliate and are outside the scope of Optionee’s employment contract, if any. The Option and the Shares subject to the Option are not intended to replace any pension rights or compensation and are not part of normal or expected salary or compensation for any purpose, including but not limited to calculating severance payments, if any, upon termination.

 

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12. Data Privacy. Optionee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Optionee’s personal data (as described below) by and among, as applicable, the Company and any Subsidiary or Affiliate for the exclusive purpose of implementing, administering, and managing Optionee’s participation in the Plan. Optionee understands that refusal or withdrawal of consent may affect Optionee’s ability to participate in the Plan or to realize benefits from the Option.

Optionee understands that the Company and any Subsidiary or Affiliate may hold certain personal information about Optionee, including, but not limited to, Optionee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company or any Subsidiary or Affiliate, details of all Options or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Optionee’s favor (“Personal Data”). Optionee understands that Personal Data may be transferred to any Subsidiary or Affiliate or third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the United States, Optionee’s country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Optionee’s country.

13. Miscellaneous.

(a) Governing Law. The validity, interpretation, construction and performance of this Agreement, and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from this Agreement, the parties hereby submit and consent to the exclusive jurisdiction of the State of New York and agree that any such litigation shall be conducted only in the courts of New York or the federal courts of the United States located in New York and no other courts.

(b) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and supersedes all prior or contemporaneous discussions, understandings and agreements, whether oral or written, between them relating to the subject matter hereof.

(c) Amendments and Waivers. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance.

(d) Successors and Assigns. Except as otherwise provided in this Agreement, this Agreement, and the rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and

 

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legal representatives. The Company may assign any of its rights and obligations under this Agreement. No other party to this Agreement may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Agreement, except with the prior written consent of the Company.

(e) Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered personally or by overnight courier or sent by email, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, as subsequently modified by written notice, or if no address is specified on the signature page, at the most recent address set forth in the Company’s books and records.

(f) Severability. If one or more provisions of this Agreement are held to be unenforceable under Applicable Laws, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

(g) Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

(h) Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same agreement. Execution of a facsimile copy will have the same force and effect as execution of an original, and a facsimile signature will be deemed an original and valid signature.

 

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EXHIBIT A

LB PHARMACEUTICALS INC

2018 STOCK INCENTIVE PLAN

EXERCISE AGREEMENT

This Exercise Agreement (this “Agreement”) is made as of      , by and between LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), and       (“Purchaser”). To the extent any capitalized terms used in this Agreement are not defined, they shall have the meaning ascribed to them in the Company’s 2018 Stock Incentive Plan (the “Plan”) and the Option Agreement (as defined below).

1. Exercise of Option. Subject to the terms and conditions hereof, Purchaser hereby elects to exercise his or her option to purchase      shares of the Common Stock (the “Shares”) of the Company under and pursuant to the Plan, the Notice of Stock Option Grant and the Stock Option Agreement granted       (the “Option Agreement”). The purchase price for the Shares shall be $   per Share for a total purchase price of $  . The term “Shares” refers to the purchased Shares and all securities received in connection with the Shares pursuant to stock dividends or splits, all securities received in replacement of the Shares in a recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other property to which Purchaser is entitled by reason of Purchaser’s ownership of the Shares.

2. Time and Place of Exercise. The purchase and sale of the Shares under this Agreement shall occur at the principal office of the Company simultaneously with the execution and delivery of this Agreement, the payment of the aggregate exercise price by any method listed in Section 4 of the Option Agreement, and the satisfaction of any applicable tax, withholding, required deductions or other payments, all in accordance with the provisions of Section 3(b) of the Option Agreement. The Company shall issue the Shares to Purchaser by entering such Shares in Purchaser’s name as of such date in the books and records of the Company or, if applicable, a duly authorized transfer agent of the Company, against payment of the exercise price therefor by Purchaser. The Company will deliver to Purchaser a stock certificate or, in the case of uncertificated securities upon request, a notice of issuance, for the Shares as soon as practicable following such date.

3. Restrictions on Transfer. The Shares are subject to any and all limitations on transfer created by the transfer restrictions set forth in (i) the Company’s certificate of incorporation and bylaws (in each case as amended from time to time), (ii) the Stockholders Agreements (as amended from time to time), and (iii) Applicable Law, and Purchaser shall not assign, encumber or dispose of any interest in the Shares except in compliance with the provisions thereof.


4. Investment and Taxation Representations. In connection with the purchase of the Shares, Purchaser represents to the Company the following:

(a) Purchaser is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Shares. Purchaser is purchasing the Shares for investment for Purchaser’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act or under any applicable provision of state law. Purchaser does not have any present intention to transfer the Shares to any other person or entity.

(b) Purchaser understands that the Shares have not been registered under the Securities Act by reason of a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Purchaser’s investment intent as expressed herein.

(c) Purchaser further acknowledges and understands that the securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser further acknowledges and understands that the Company is under no obligation to register the securities.

(d) Purchaser is familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer of the securities (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions. Purchaser understands that the Company provides no assurances as to whether he or she will be able to resell any or all of the Shares pursuant to Rule 144, which rule requires, among other things, that the Company be subject to the reporting requirements of the Exchange Act, that resales of securities take place only after the holder of the Shares has held the Shares for certain specified time periods, and under certain circumstances, that resales of securities be limited in volume and take place only pursuant to brokered transactions. Notwithstanding this Section 4(d), Purchaser acknowledges and agrees to the restrictions set forth in Section 4(e) below.

(e) Purchaser further understands that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk.

(f) Purchaser represents that Purchaser is not subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (attached hereto as Annex I).

(g) Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.

 

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5. Restrictive Legends and Stop-Transfer Orders.

(a) Legends. Any stock certificate or, in the case of uncertificated securities, any notice of issuance, for the Shares shall bear the following legends (as well as any legends set forth in the Stockholders Agreements, or required by the Company or applicable state and federal corporate and securities laws):

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR “BLUE SKY LAWS,” AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE CORPORATION’S CERTIFICATE OF INCORPORATION, AS MAY BE AMENDED FROM TIME TO TIME (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE CORPORATION). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH CERTIFICATE OF INCORPORATION.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT THE TERMS AND CONDITIONS OF THE BYLAWS OF THE CORPORATION, AS MAY BE AMENDED FROM TIME TO TIME, INCLUDING RESTRICTIONS ON TRANSFER AND RIGHTS OF FIRST REFUSAL AS SET FORTH IN SUCH BYLAWS. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH BYLAWS.

(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

6. No Employment Rights. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a parent, subsidiary or affiliate of the Company, to terminate Purchaser’s employment or consulting relationship, for any reason, with or without Cause.

7. Waiver of Statutory Information Rights. Purchaser acknowledges and understands that, but for the waiver made herein, Purchaser would be entitled, upon written demand under oath stating the purpose thereof, to inspect for any proper purpose, and to make copies and extracts from, the Company’s stock ledger, a list of its stockholders, and its other books and records, and the books and records of subsidiaries of the Company, if any, under the circumstances and in the manner provided in Section 220 of the Delaware General Corporation Law (any and all such rights, and any and all such other rights of Purchaser as may be provided

 

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for in Section 220, the “Inspection Rights”). In light of the foregoing, until the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, Purchaser hereby unconditionally and irrevocably waives the Inspection Rights, whether such Inspection Rights would be exercised or pursued directly or indirectly pursuant to Section 220 or otherwise, and covenants and agrees never to directly or indirectly commence, voluntarily aid in any way, prosecute, assign, transfer, or cause to be commenced any claim, action, cause of action, or other proceeding to pursue or exercise the Inspection Rights. The foregoing waiver applies to the Inspection Rights of Purchaser in Purchaser’s capacity as a stockholder and shall not affect any rights of a director, in his or her capacity as such, under Section 220. The foregoing waiver shall not apply to any contractual inspection rights of Purchaser under any written agreement with the Company.

8. Miscellaneous.

(a) Governing Law. The validity, interpretation, construction and performance of this Agreement, and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from this Agreement, the parties hereby submit and consent to the exclusive jurisdiction of the State of New York and agree that any such litigation shall be conducted only in the courts of New York or the federal courts of the United States located in New York and no other courts.

(b) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and supersedes all prior or contemporaneous discussions, understandings and agreements, whether oral or written, between them relating to the subject matter hereof.

(c) Amendments and Waivers. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance.

(d) Successors and Assigns. Except as otherwise provided in this Agreement, this Agreement, and the rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives. The Company may assign any of its rights and obligations under this Agreement. No other party to this Agreement may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Agreement, except with the prior written consent of the Company.

(e) Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered personally or by overnight courier or sent by email, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, addressed to the party to be notified at such

 

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party’s address as set forth on the signature page, as subsequently modified by written notice, or if no address is specified on the signature page, at the most recent address set forth in the Company’s books and records.

(f) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

(g) Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

(h) Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same agreement. Execution of a facsimile copy will have the same force and effect as execution of an original, and a facsimile signature will be deemed an original and valid signature.

(i) Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to this Agreement or any notices required by applicable law or the Company’s Certificate of Incorporation or Bylaws by email or any other electronic means. Purchaser hereby consents to (i) conduct business electronically (ii) receive such documents and notices by such electronic delivery and (iii) sign documents electronically and agrees to participate through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

[Signature Page Follows]

 

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The parties have executed this Exercise Agreement as of the date first set forth above.

 

THE COMPANY:
LB PHARMACEUTICALS INC
By:  

      

  (Signature)
Name:  

 

Title:  

 

Address:
           
           
PURCHASER:

 

(PRINT NAME)

 

(Signature)  
Address:  
           
           
           
Email:           

 

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ANNEX I

Rule 506(d)(1)(i) to (viii) under the Securities Act of 1933, as amended

(i) Has been convicted, within ten years before such sale (or five years, in the case of issuers, their predecessors and affiliated issuers), of any felony or misdemeanor:

(A) In connection with the purchase or sale of any security;

(B) Involving the making of any false filing with the Commission; or

(C) Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities;

(ii) Is subject to any order, judgment or decree of any court of competent jurisdiction, entered within five years before such sale, that, at the time of such sale, restrains or enjoins such person from engaging or continuing to engage in any conduct or practice:

(A) In connection with the purchase or sale of any security;

(B) Involving the making of any false filing with the Commission; or

(C) Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities;

(iii) Is subject to a final order of a state securities commission (or an agency or officer of a state performing like functions); a state authority that supervises or examines banks, savings associations, or credit unions; a state insurance commission (or an agency or officer of a state performing like functions); an appropriate federal banking agency; the U.S. Commodity Futures Trading Commission; or the National Credit Union Administration that:

(A) At the time of such sale, bars the person from:

(1) Association with an entity regulated by such commission, authority, agency, or officer;

(2) Engaging in the business of securities, insurance or banking; or

(3) Engaging in savings association or credit union activities; or

(B) Constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct entered within ten years before such sale;

(iv) Is subject to an order of the Commission entered pursuant to section 15(b) or 15B(c) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b) or 78o-4(c)) or section 203(e) or (f) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(e) or (f)) that, at the time of such sale:

(A) Suspends or revokes such person’s registration as a broker, dealer, municipal securities dealer or investment adviser;

(B) Places limitations on the activities, functions or operations of such person; or

(C) Bars such person from being associated with any entity or from participating in the offering of any penny stock;

(v) Is subject to any order of the Commission entered within five years before such sale that, at the time of such sale, orders the person to cease and desist from committing or causing a violation or future violation of:

(A) Any scienter-based anti-fraud provision of the federal securities laws, including without limitation section 17(a)(1) of the Securities Act of 1933 (15 U.S.C. 77q(a)(1)), section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78j(b)) and 17 CFR 240.10b-5, section 15(c)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(c)(1)) and section 206(1) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-6(1)), or any other rule or regulation thereunder; or

(B) Section 5 of the Securities Act of 1933 (15 U.S.C. 77e).

(vi) Is suspended or expelled from membership in, or suspended or barred from association with a member of, a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade;

(vii) Has filed (as a registrant or issuer), or was or was named as an underwriter in, any registration statement or Regulation A offering statement filed with the Commission that, within five years before such sale, was the subject of a refusal order, stop order, or order suspending the Regulation A exemption, or is, at the time of such sale, the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued; or

(viii) Is subject to a United States Postal Service false representation order entered within five years before such sale, or is, at the time of such sale, subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the United States Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations.

 

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LB PHARMACEUTICALS INC

RESTRICTED STOCK AWARD AGREEMENT

This Restricted Stock Award Agreement (this “Agreement”) is made effective as of October 3, 2017 (the “Grant Date”) by and between LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), and       (“Grantee”) pursuant to the Company’s 2016 Stock Incentive Plan (the “Plan”). To the extent any capitalized terms used in this Agreement are not defined, they shall have the meaning ascribed to them in the Plan.

1. Grant of Stock. Subject to the terms and conditions of this Agreement, the Company is hereby issuing to Grantee, and Grantee hereby accepts from the Company,       shares of the Company’s Common Stock (the “Shares”). The Company will enter the Shares in Grantee’s name as of such date in the books and records of the Company or, if applicable, a duly authorized transfer agent of the Company. The Company will deliver to Grantee a stock certificate representing the Shares as soon as practicable. As used elsewhere herein, the term “Shares” refers to all of the Shares granted hereunder and all securities received in connection with the Shares pursuant to stock dividends or splits, all securities received in replacement of the Shares in a recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other property to which Grantee is entitled by reason of Grantee’s ownership of the Shares. By Grantee’s signature and the signature of the Company’s representative below, Grantee and the Company agree that this grant of Shares is governed by the terms and conditions of this Agreement and the Plan which is attached to and made a part of this Agreement.

2. Limitations on Transfer.

(a) Transfer Restrictions. The Shares granted to Grantee hereunder are subject to certain transfer restrictions as more fully described in the Amended and Restated Stockholders Agreement of the Company, attached hereto as Exhibit A (the “Stockholders Agreement”). Simultaneously with the execution of this Agreement, Grantee will deliver to the Company an executed counterpart signature page to the Stockholders Agreement.

(b) Vesting.

(i) As of the Grant Date, none of the Shares are non-forfeitable (any Restricted Shares that become non-forfeitable hereunder, the “Vested Shares”), and all of the Shares are subject to forfeiture as and to the extent provided in Section 2(b)(ii) (the “Unvested Shares”), in each case subject to the terms of this Agreement. On the sixth month anniversary of the consummation of the Company’s first underwritten public offering of its Common Stock under the Securities Act of 1933, as amended (the “Securities Act”), all of the Shares shall become Vested Shares.

(ii) If Grantee’s employment or engagement with the Company terminates for any reason, including without limitation by reason of his or her death or disability, all Unvested Shares shall be forfeited immediately and without further action by any party and Grantee shall not be entitled to any payment or compensation whatsoever with respect to the Unvested Shares.

 

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(c) Acceleration of Vesting. Notwithstanding the foregoing, the vesting of the Unvested Shares shall accelerate such that all of the Shares shall become Vested Shares, effective as of immediately prior to consummation of a Change of Control.

3. Investment and Taxation Representations. In connection with the grant of the Shares, Grantee represents to the Company the following:

(a) Grantee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Shares. Grantee does not have any present intention to transfer the Shares to any other person or entity.

(b) Grantee understands that the Shares have not been registered under the Securities Act by reason of a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Grantee’s investment intent as expressed herein.

(c) Grantee further acknowledges and understands that the securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Grantee further acknowledges and understands that the Company is under no obligation to register the securities. Grantee has made no agreement or arrangement with any third party requiring the transfer of the Shares, or any interest therein, by Grantee.

(d) Grantee is familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer of the securities (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions. Grantee understands that the Company provides no assurances as to whether he or she will be able to resell any or all of the Shares pursuant to Rule 144, which rule requires, among other things, that the Company be subject to the reporting requirements of the Exchange Act, that resales of securities take place only after the holder of the Shares has held the Shares for certain specified time periods, and under certain circumstances, that resales of securities be limited in volume and take place only pursuant to brokered transactions. Notwithstanding this Section 3(d), Grantee acknowledges and agrees to the restrictions set forth in Section 3(e) below.

(e) Grantee further understands that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk.

 

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(f) Grantee represents that Grantee is not subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (attached hereto as Annex I).

(g) Grantee understands that Grantee may suffer adverse tax consequences as a result of Grantee’s receipt or disposition of the Shares. Grantee represents that Grantee has consulted any tax consultants Grantee deems advisable in connection with the receipt or disposition of the Shares and that Grantee is not relying on the Company for any tax advice.

4. Restrictive Legends and Stop-Transfer Orders.

(a) Legends. Any stock certificate or, in the case of uncertificated securities, any notice of issuance, for the Shares, shall bear the following legends (as well as any legends required by applicable state and federal corporate and securities laws):

(i) “THE SECURITIES REFERENCED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

(ii) “THE SECURITIES REFERENCED HEREIN MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH AND MAY BE OBTAINED FROM THE SECRETARY OF THE COMPANY AT NO CHARGE.”

(iii) “THE TRANSFER OF SECURITIES REFERENCED HEREIN IS SUBJECT TO RESTRICTIONS REQUIRING APPROVAL OF THE COMPANY PURSUANT TO AND IN ACCORDANCE WITH THE COMPANY’S STOCK PLAN AND STOCKHOLDERS AGREEMENT, COPIES OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS. THE COMPANY SHALL NOT REGISTER OR OTHERWISE RECOGNIZE OR GIVE EFFECT TO ANY PURPORTED TRANSFER OF SHARES OF STOCK THAT DOES NOT COMPLY WITH THE COMPANY’S STOCK PLAN AND STOCKHOLDERS AGREEMENT.”

(b) Stop-Transfer Notices. Grantee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement, the Plan or the Stockholders Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any Grantee or other transferee to whom such Shares shall have been so transferred.

5. No Employment or Engagement Rights. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a parent, subsidiary or affiliate of the Company, to terminate Grantee’s employment or consulting relationship, for any reason, with or without cause.

 

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6. Miscellaneous.

(a) Governing Law. The validity, interpretation, construction and performance of this Agreement, and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from this Agreement, the parties hereby submit and consent to the exclusive jurisdiction of the State of New York and agree that any such litigation shall be conducted only in the courts of New York, New York or the United States District Court for the Southern District of New York, and no other courts.

(b) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and supersedes all prior or contemporaneous discussions, understandings and agreements, whether oral or written, between them relating to the subject matter hereof.

(c) Amendments and Waivers. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance.

(d) Successors and Assigns. Except as otherwise provided herein, this Agreement, and the rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives. No party to this Agreement may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Agreement, except with the prior written consent of the other party.

(e) Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered personally or by overnight courier or sent by email, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, as subsequently modified by written notice, or if no address is specified on the signature page, at the most recent address set forth in the Company’s books and records.

(f) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

(g) Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

 

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(h) Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same agreement. Execution of a facsimile copy will have the same force and effect as execution of an original, and a facsimile signature will be deemed an original and valid signature.

(i) Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to this Agreement or any notices required by applicable law or the Company’s Certificate of Incorporation or the Stockholders Agreement by email or any other electronic means. Grantee hereby consents to (i) conduct business electronically (ii) receive such documents and notices by such electronic delivery and (iii) sign documents electronically and agrees to participate through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

(j) Imposition of Other Requirements. The Company reserves the right to impose other requirements on Grantee’s participation in the Plan and on any Award or Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with Applicable Law or facilitate the administration of the Plan. Grantee agrees to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Furthermore, Grantee acknowledges that the laws of the country in which Grantee is working at the time of grant of this Agreement and the vesting or sale of Shares received pursuant to this Agreement (including any rules or regulations governing securities, foreign exchange, tax, labor, or other matters) may subject Grantee to additional procedural or regulatory requirements that Grantee is and will be solely responsible for and must fulfill.

[Signature Page Follows]

 

8


The parties have executed this Agreement as of the date first set forth above.

 

THE COMPANY:
LB PHARMACEUTICALS INC
By:  

 

  (Signature)
Name:  

 

Title:  

 

Address:

575 Madison Avenue, 10th Floor

New York, NY 10022

GRANTEE:

 

  (Signature)
Address:  
Email:  


EXHIBIT A

STOCKHOLDERS AGREEMENT

(attached)


Annex I

Rule 506(d)(1)(i) to (viii) under the Securities Act of 1933, as amended

(i) Has been convicted, within ten years before such sale (or five years, in the case of issuers, their predecessors and affiliated issuers), of any felony or misdemeanor:

(A) In connection with the purchase or sale of any security;

(B) Involving the making of any false filing with the Commission; or

(C) Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities;

(ii) Is subject to any order, judgment or decree of any court of competent jurisdiction, entered within five years before such sale, that, at the time of such sale, restrains or enjoins such person from engaging or continuing to engage in any conduct or practice:

(A) In connection with the purchase or sale of any security;

(B) Involving the making of any false filing with the Commission; or

(C) Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities;

(iii) Is subject to a final order of a state securities commission (or an agency or officer of a state performing like functions); a state authority that supervises or examines banks, savings associations, or credit unions; a state insurance commission (or an agency or officer of a state performing like functions); an appropriate federal banking agency; the U.S. Commodity Futures Trading Commission; or the National Credit Union Administration that:

(A) At the time of such sale, bars the person from:

(1) Association with an entity regulated by such commission, authority, agency, or officer;

(2) Engaging in the business of securities, insurance or banking; or

(3) Engaging in savings association or credit union activities; or

(B) Constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct entered within ten years before such sale;

(iv) Is subject to an order of the Commission entered pursuant to section 15(b) or 15B(c) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b) or 78o-4(c)) or section 203(e) or (f) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(e) or (f)) that, at the time of such sale:

(A) Suspends or revokes such person’s registration as a broker, dealer, municipal securities dealer or investment adviser;

(B) Places limitations on the activities, functions or operations of such person; or

(C) Bars such person from being associated with any entity or from participating in the offering of any penny stock;

(v) Is subject to any order of the Commission entered within five years before such sale that, at the time of such sale, orders the person to cease and desist from committing or causing a violation or future violation of:

(A) Any scienter-based anti-fraud provision of the federal securities laws, including without limitation section 17(a)(1) of the Securities Act of 1933 (15 U.S.C. 77q(a)(1)), section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78j(b)) and 17 CFR 240.10b-5, section 15(c)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(c)(1)) and section 206(1) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-6(1)), or any other rule or regulation thereunder; or

(B) Section 5 of the Securities Act of 1933 (15 U.S.C. 77e).

(vi) Is suspended or expelled from membership in, or suspended or barred from association with a member of, a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade;

(vii) Has filed (as a registrant or issuer), or was or was named as an underwriter in, any registration statement or Regulation A offering statement filed with the Commission that, within five years before such sale, was the subject of a refusal order, stop order, or order suspending the Regulation A exemption, or is, at the time of such sale, the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued; or

(viii) Is subject to a United States Postal Service false representation order entered within five years before such sale, or is, at the time of such sale, subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the United States Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations.

Exhibit 10.3

LB PHARMACEUTICALS INC

2018 STOCK INCENTIVE PLAN

1. Purposes of the Plan. The purposes of this LB Pharmaceuticals Inc 2018 Stock Incentive Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants, and to promote the success of the Company’s business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant of an Option and subject to the applicable provisions of Section 422 of the Code and the regulations promulgated thereunder. Restricted Stock may also be granted under the Plan.

2. Definitions. As used herein, the following definitions shall apply:

(a) “Administrator” means the Board or a Committee, as determined pursuant to the terms of Section 4(a) of the Plan.

(b) “Affiliate” means (i) an entity other than a Subsidiary which, together with the Company, is under common control of a third person or entity and (ii) an entity other than a Subsidiary in which the Company and /or one or more Subsidiaries own a controlling interest.

(c) “Applicable Laws” means all applicable laws, rules, regulations and requirements, including, but not limited to, all applicable U.S. federal or state laws, any Stock Exchange rules or regulations, and the applicable laws, rules or regulations of any other country or jurisdiction where Options or Restricted Stock are granted under the Plan or Participants reside or provide services, as such laws, rules, and regulations shall be in effect from time to time.

(d) “Award” means any award of an Option or Restricted Stock under the Plan.

(e) “Board” means the Board of Directors of the Company.

(f) “California Participant” means a Participant whose Award is issued in reliance on Section 25102(o) of the California Corporations Code.

(g) “Cashless Exercise” means a program approved by the Administrator in which payment of the Option exercise price or tax withholding obligations or other required deductions may be satisfied, in whole or in part, with Shares subject to the Option, including by delivery of an irrevocable direction to a securities broker (on a form prescribed by the Company) to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of such amount.

(h) “Cause” for termination of a Participant’s Continuous Service Status will exist (unless another definition is provided in an applicable Option Agreement, Restricted Stock Purchase Agreement, employment agreement or other applicable written agreement, in which case such other definition shall be used for purposes of this Plan) if the Participant’s Continuous Service Status is terminated for any of the following reasons: (i) any material breach by Participant of any material written agreement between Participant and the Company and Participant’s failure to cure such breach within 30 days after receiving written notice thereof; (ii) any failure by Participant to


comply with the Company’s material written policies or rules as they may be in effect from time to time; (iii) neglect or persistent unsatisfactory performance of Participant’s duties and Participant’s failure to cure such condition within 30 days after receiving written notice thereof; (iv) Participant’s repeated failure to follow reasonable and lawful instructions from the Board or Chief Executive Officer and Participant’s failure to cure such condition within 30 days after receiving written notice thereof; (v) Participant’s conviction of, or plea of guilty or nolo contendere to, any crime that results in, or is reasonably expected to result in, material harm to the business or reputation of the Company; (vi) Participant’s commission of or participation in an act of fraud against the Company; (vii) Participant’s intentional material damage to the Company’s business, property or reputation; or (viii) Participant’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom the Participant owes an obligation of nondisclosure as a result of his or her relationship with the Company. For purposes of clarity, a termination without “Cause” does not include any termination that occurs as a result of Participant’s death or disability. The determination as to whether a Participant’s Continuous Service Status has been terminated for Cause shall be made in good faith by the Company and shall be final and binding on the Participant. The foregoing definition does not in any way limit the Company’s ability to terminate a Participant’s employment or consulting relationship at any time, and the term “Company” will be interpreted to include any Subsidiary, Parent, Affiliate, or any successor thereto, if appropriate.

(i) “Change of Control” means (i) a sale of all or substantially all of the Company’s assets other than to an Excluded Entity (as defined below), (ii) a merger, consolidation or other capital reorganization or business combination transaction of the Company with or into another corporation, limited liability company or other entity other than an Excluded Entity, or (iii) the consummation of a transaction, or series of related transactions, in which any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of all of the Company’s then outstanding voting securities.

Notwithstanding the foregoing, a transaction shall not constitute a Change of Control if its purpose is to (A) change the jurisdiction of the Company’s incorporation, (B) create a holding company that will be owned in substantially the same proportions by the persons who hold the Company’s securities immediately before such transaction, or (C) obtain funding for the Company in a financing that is approved by the Company’s Board. An “Excluded Entity” means a corporation or other entity of which the holders of voting capital stock of the Company outstanding immediately prior to such transaction are the direct or indirect holders of voting securities representing at least a majority of the votes entitled to be cast by all of such corporation’s or other entity’s voting securities outstanding immediately after such transaction.

(j) “Code” means the Internal Revenue Code of 1986, as amended.

(k) “Committee” means one or more committees or subcommittees of the Board consisting of two (2) or more Directors (or such lesser or greater number of Directors as shall constitute the minimum number permitted by Applicable Laws to establish a committee or sub-committee of the Board) appointed by the Board to administer the Plan in accordance with Section 4 below.

 

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(l) “Common Stock” means the Company’s common stock, par value $0.0001 per share, as adjusted pursuant to Section 10 below.

(m) “Company” means LB Pharmaceuticals Inc, a Delaware corporation.

(n) “Consultant” means any person or entity, including an advisor but not an Employee, that renders, or has rendered, services to the Company, or any Parent, Subsidiary or Affiliate and is compensated for such services, and any Director whether compensated for such services or not.

(o) “Continuous Service Status” means the absence of any interruption or termination of service as an Employee or Consultant. Continuous Service Status as an Employee or Consultant shall not be considered interrupted or terminated in the case of: (i) Company approved sick leave; (ii) military leave; (iii) any other bona fide leave of absence approved by the Company, provided that, if an Employee is holding an Incentive Stock Option and such leave exceeds 3 months then, for purposes of Incentive Stock Option status only, such Employee’s service as an Employee shall be deemed terminated on the 1st day following such 3-month period and the Incentive Stock Option shall thereafter automatically become a Nonstatutory Stock Option in accordance with Applicable Laws, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to a written Company policy. Also, Continuous Service Status as an Employee or Consultant shall not be considered interrupted or terminated in the case of a transfer between locations of the Company or between the Company, its Parents, Subsidiaries or Affiliates, or their respective successors, or a change in status from an Employee to a Consultant or from a Consultant to an Employee.

(p) “Director” means a member of the Board.

(q) “Disability” means “disability” within the meaning of Section 22(e)(3) of the Code.

(r) “Employee” means any person employed by the Company, or any Parent, Subsidiary or Affiliate, with the status of employment determined pursuant to such factors as are deemed appropriate by the Company in its sole discretion, subject to any requirements of Applicable Laws, including the Code. The payment by the Company of a director’s fee shall not be sufficient to constitute “employment” of such director by the Company or any Parent, Subsidiary or Affiliate.

(s) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(t) “Fair Market Value” means, as of any date, the per share fair market value of the Common Stock, as determined by the Administrator in good faith on such basis as it deems appropriate and applied consistently with respect to Participants. Whenever possible, the determination of Fair Market Value shall be based upon the per share closing price for the Shares as reported in The Wall Street Journal for the applicable date.

(u) “Family Members” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships) of the Participant, any person sharing the Participant’s household (other than a tenant or employee), a trust in which these persons (or the Participant) have more than 50% of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than 50% of the voting interests.

 

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(v) “Incentive Stock Option” means an Option intended to, and which does, in fact, qualify as an incentive stock option within the meaning of Section 422 of the Code.

(w) “Involuntary Termination” means (unless another definition is provided in the applicable Option Agreement, Restricted Stock Purchase Agreement, employment agreement or other applicable written agreement) the termination of a Participant’s Continuous Service Status other than for (i) death, (ii) Disability or (iii) for Cause by the Company or a Parent, Subsidiary, Affiliate or successor thereto, as appropriate.

(x) “Listed Security” means any security of the Company that is listed or approved for listing on a national securities exchange or designated or approved for designation as a national market system security on an interdealer quotation system by the Financial Industry Regulatory Authority (or any successor thereto).

(y) “Nonstatutory Stock Option” means an Option that is not intended to, or does not, in fact, qualify as an Incentive Stock Option.

(z) “Option” means a stock option granted pursuant to the Plan.

(aa) “Option Agreement” means a written document, the form(s) of which shall be approved from time to time by the Administrator, reflecting the terms of an Option granted under the Plan and includes any documents attached to or incorporated into such Option Agreement, including, but not limited to, a notice of stock option grant and a form of exercise notice.

(bb) “Option Exchange Program” means a program approved by the Administrator whereby outstanding Options (i) are exchanged for Options with a lower exercise price, Restricted Stock, cash or other property or (ii) are amended to decrease the exercise price as a result of a decline in the Fair Market Value.

(cc) “Optioned Stock” means Shares that are subject to an Option or that were issued pursuant to the exercise of an Option.

(dd) “Optionee” means an Employee or Consultant who receives an Option.

(ee) “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of grant of the Award, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.

(ff) “Participant” means any holder of one or more Awards or Shares issued pursuant to an Award.

(gg) “Plan” means this 2018 Stock Incentive Plan.

 

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(hh) “Restricted Stock” means Shares acquired pursuant to a right to purchase or receive Common Stock granted pursuant to Section 8 below.

(ii) “Restricted Stock Purchase Agreement” means a written document, the form(s) of which shall be approved from time to time by the Administrator, reflecting the terms of Restricted Stock granted under the Plan and includes any documents attached to such agreement.

(jj) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act, as amended from time to time, or any successor provision.

(kk) “Share” means a share of Common Stock, as adjusted in accordance with Section 10 below.

(ll) “Stock Exchange” means any stock exchange or consolidated stock price reporting system on which prices for the Common Stock are quoted at any given time.

(mm) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of grant of the Award, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

(nn) “Ten Percent Holder” means a person who owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary measured as of an Award’s date of grant.

3. Stock Subject to the Plan. Subject to the provisions of Section 10 below, the maximum aggregate number of Shares that may be issued under the Plan is 1,096,783 Shares, all of which Shares may be issued under the Plan pursuant to Incentive Stock Options. The Shares issued under the Plan may be authorized, but unissued, or reacquired Shares. If an Award should expire or become unexercisable for any reason without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unissued Shares that were subject thereto shall, unless the Plan shall have been terminated, continue to be available under the Plan for issuance pursuant to future Awards. In addition, any Shares which are retained by the Company upon exercise of an Award in order to satisfy the exercise or purchase price for such Award or any withholding taxes due with respect to such Award shall be treated as not issued and shall continue to be available under the Plan for issuance pursuant to future Awards. Shares issued under the Plan and later forfeited to the Company due to the failure to vest or repurchased by the Company at the original purchase price paid to the Company for the Shares (including, without limitation, upon forfeiture to or repurchase by the Company in connection with the termination of a Participant’s Continuous Service Status) shall again be available for future grant under the Plan. Notwithstanding the foregoing, subject to the provisions of Section 10 below, in no event shall the maximum aggregate number of Shares that may be issued under the Plan pursuant to Incentive Stock Options exceed the number set forth in the first sentence of this Section 3 plus, to the extent allowable under Section 422 of the Code and the Treasury Regulations promulgated there under, any Shares that again become available for issuance pursuant to the remaining provisions of this Section 3.

 

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4. Administration of the Plan.

(a) General. The Plan shall be administered by the Board, a Committee appointed by the Board, or any combination thereof, as determined by the Board. The Plan may be administered by different administrative bodies with respect to different classes of Participants and, if permitted by Applicable Laws, the Board may authorize one or more officers of the Company to make Awards under the Plan to Employees and Consultants (who are not subject to Section 16 of the Exchange Act) within parameters specified by the Board.

(b) Committee Composition. If a Committee has been appointed pursuant to this Section 4, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of any Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies (however caused) and dissolve a Committee and thereafter directly administer the Plan, all to the extent permitted by Applicable Laws and, in the case of a Committee administering the Plan in accordance with the requirements of Rule 16b-3 or Section 162(m) of the Code, to the extent permitted or required by such provisions.

(c) Powers of the Administrator. Subject to the provisions of the Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its sole discretion:

(i) to determine the Fair Market Value in accordance with Section 2(t) above, provided that such determination shall be applied consistently with respect to Participants under the Plan;

(ii) to select the Employees and Consultants to whom Awards may from time to time be granted;

(iii) to determine the number of Shares to be covered by each Award;

(iv) to approve the form(s) of agreement(s) and other related documents used under the Plan;

(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder, which terms and conditions include but are not limited to the exercise or purchase price, the time or times when Awards may vest and/or be exercised (which may be based on performance criteria), the circumstances (if any) when vesting will be accelerated or forfeiture restrictions will be waived, and any restriction or limitation regarding any Award, Optioned Stock, or Restricted Stock;

(vi) to amend any outstanding Award or agreement related to any Optioned Stock or Restricted Stock, including any amendment adjusting vesting (e.g., in connection with a change in the terms or conditions under which such person is providing services to the Company), provided that no amendment shall be made that would materially and adversely affect the rights of any Participant without his or her consent;

 

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(vii) to determine whether and under what circumstances an Option may be settled in cash under Section 7(c)(iii) below instead of Common Stock;

(viii) subject to Applicable Laws, to implement an Option Exchange Program and establish the terms and conditions of such Option Exchange Program without consent of the holders of capital stock of the Company, provided that no amendment or adjustment to an Option that would materially and adversely affect the rights of any Participant shall be made without his or her consent;

(ix) to approve addenda pursuant to Section 18 below or to grant Awards to, or to modify the terms of, any outstanding Option Agreement or Restricted Stock Purchase Agreement or any agreement related to any Optioned Stock or Restricted Stock held by Participants who are foreign nationals or employed outside of the United States with such terms and conditions as the Administrator deems necessary or appropriate to accommodate differences in local law, tax policy or custom which deviate from the terms and conditions set forth in this Plan to the extent necessary or appropriate to accommodate such differences; and

(x) to construe and interpret the terms of the Plan, any Option Agreement or Restricted Stock Purchase Agreement, and any agreement related to any Optioned Stock or Restricted Stock, which constructions, interpretations and decisions shall be final and binding on all Participants.

(d) Indemnification. To the maximum extent permitted by Applicable Laws, each member of the Committee (including officers of the Company, if applicable), or of the Board, as applicable, shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan or pursuant to the terms and conditions of any Award except for actions taken in bad faith or failures to act in good faith, and (ii) any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit, or proceeding against him or her, provided that such member shall give the Company an opportunity, at its own expense, to handle and defend any such claim, action, suit or proceeding before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under any other power that the Company may have to indemnify or hold harmless each such person.

5. Eligibility.

(a) Recipients of Grants. Nonstatutory Stock Options and Restricted Stock may be granted to Employees and Consultants. Incentive Stock Options may be granted only to Employees, provided that Employees of Affiliates shall not be eligible to receive Incentive Stock Options.

(b) Type of Option. Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.

 

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(c) ISO $100,000 Limitation. Notwithstanding any designation under Section 5(b) above, to the extent that the aggregate Fair Market Value of Shares with respect to which options designated as incentive stock options are exercisable for the first time by any Optionee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess options shall be treated as nonstatutory stock options. For purposes of this Section 5(c), incentive stock options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares subject to an incentive stock option shall be determined as of the date of the grant of such option.

(d) No Employment Rights. Neither the Plan nor any Award shall confer upon any Employee or Consultant any right with respect to continuation of an employment or consulting relationship with the Company (any Parent, Subsidiary or Affiliate), nor shall it interfere in any way with such Employee’s or Consultant’s right or the Company’s (Parent’s, Subsidiary’s or Affiliate’s) right to terminate his or her employment or consulting relationship at any time, with or without cause.

6. Term of Plan. The Plan shall become effective upon its adoption by the Board and shall continue in effect for a term of 10 years unless sooner terminated under Section 14 below.

7. Options.

(a) Term of Option. The term of each Option shall be the term stated in the Option Agreement; provided that the term shall be no more than 10 years from the date of grant thereof or such shorter term as may be provided in the Option Agreement and provided further that, in the case of an Incentive Stock Option granted to a person who at the time of such grant is a Ten Percent Holder, the term of the Option shall be 5 years from the date of grant thereof or such shorter term as may be provided in the Option Agreement.

(b) Option Exercise Price and Consideration.

(i) Exercise Price. The per Share exercise price for the Shares to be issued pursuant to the exercise of an Option shall be such price as is determined by the Administrator and set forth in the Option Agreement, but shall be subject to the following:

(1) In the case of an Incentive Stock Option

a. granted to an Employee who at the time of grant is a Ten Percent Holder, the per Share exercise price shall be no less than 110% of the Fair Market Value on the date of grant;

b. granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value on the date of grant;

(2) Except as provided in subsection (3) below, in the case of a Nonstatutory Stock Option the per Share exercise price shall be such price as is determined by the Administrator, provided that, if the per Share exercise price is less than 100% of the Fair Market Value on the date of grant, it shall otherwise comply with all Applicable Laws, including Section 409A of the Code; and

(3) Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction.

 

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(ii) Permissible Consideration. The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option and to the extent required by Applicable Laws, shall be determined at the time of grant) and may consist entirely of (1) cash; (2) check; (3) to the extent permitted under, and in accordance with, Applicable Laws, delivery of a promissory note with such recourse, interest, security and redemption provisions as the Administrator determines to be appropriate (subject to the provisions of Section 152 of the Delaware General Corporation Law); (4) cancellation of indebtedness; (5) other previously owned Shares that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which the Option is exercised; (6) a Cashless Exercise; (7) such other consideration and method of payment permitted under Applicable Laws; or (8) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company and the Administrator may, in its sole discretion, refuse to accept a particular form of consideration at the time of any Option exercise.

(c) Exercise of Option.

(i) General.

(1) Exercisability. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator, consistent with the terms of the Plan and reflected in the Option Agreement, including vesting requirements and/or performance criteria with respect to the Company, and Parent, Subsidiary or Affiliate, and/or the Optionee.

(2) Leave of Absence. The Administrator shall have the discretion to determine at any time whether and to what extent the vesting of Options shall be tolled during any leave of absence; provided, however, that in the absence of such determination, vesting of Options shall continue during any paid leave and shall be tolled during any unpaid leave (unless otherwise required by Applicable Laws). Notwithstanding the foregoing, in the event of military leave, vesting shall toll during any unpaid portion of such leave, provided that, upon an Optionee’s returning from military leave (under conditions that would entitle him or her to protection upon such return under the Uniform Services Employment and Reemployment Rights Act), he or she shall be given vesting credit with respect to Options to the same extent as would have applied had the Optionee continued to provide services to the Company (or any Parent, Subsidiary or Affiliate, if applicable) throughout the leave on the same terms as he or she was providing services immediately prior to such leave.

(3) Minimum Exercise Requirements. An Option may not be exercised for a fraction of a Share. The Administrator may require that an Option be exercised as to a minimum number of Shares, provided that such requirement shall not prevent an Optionee from exercising the full number of Shares as to which the Option is then exercisable.

(4) Procedures for and Results of Exercise. An Option shall be deemed exercised when written notice of such exercise has been received by the Company in accordance with the terms of the Option Agreement by the person entitled to exercise the Option and the Company has received full payment for the Shares with respect to which the Option is exercised and has paid, or made

 

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arrangements to satisfy, any applicable taxes, withholding, required deductions or other required payments in accordance with Section 9 below. The exercise of an Option shall result in a decrease in the number of Shares that thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

(5) Rights as Holder of Capital Stock. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a holder of capital stock shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock is issued, except as provided in Section 10 below.

(ii) Termination of Continuous Service Status. The Administrator shall establish and set forth in the applicable Option Agreement the terms and conditions upon which an Option shall remain exercisable, if at all, following termination of an Optionee’s Continuous Service Status, which provisions may be waived or modified by the Administrator at any time. To the extent that an Option Agreement does not specify the terms and conditions upon which an Option shall terminate upon termination of an Optionee’s Continuous Service Status, the following provisions shall apply:

(1) General Provisions. If the Optionee (or other person entitled to exercise the Option) does not exercise the Option to the extent so entitled within the time specified below, the Option shall terminate and the Optioned Stock underlying the unexercised portion of the Option shall revert to the Plan. In no event may any Option be exercised after the expiration of the Option term as set forth in the Option Agreement (and subject to this Section 7).

(2) Termination other than Upon Disability or Death or for Cause. In the event of termination of an Optionee’s Continuous Service Status other than under the circumstances set forth in the subsections (3) through (5) below, such Optionee may exercise any outstanding Option at any time within 3 month(s) following such termination to the extent the Optionee is vested in the Optioned Stock.

(3) Disability of Optionee. In the event of termination of an Optionee’s Continuous Service Status as a result of his or her Disability, such Optionee may exercise any outstanding Option at any time within 12 month(s) following such termination to the extent the Optionee is vested in the Optioned Stock.

(4) Death of Optionee. In the event of the death of an Optionee during the period of Continuous Service Status since the date of grant of any outstanding Option, or within 3 month(s) following termination of the Optionee’s Continuous Service Status, the Option may be exercised by any beneficiaries designated in accordance with Section 16 below, or if there are no such beneficiaries, by the Optionee’s estate, or by a person who acquired the right to exercise the Option by bequest or inheritance, at any time within 12 month(s) following the date the Optionee’s Continuous Service Status terminated, but only to the extent the Optionee is vested in the Optioned Stock.

 

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(5) Termination for Cause. In the event of termination of an Optionee’s Continuous Service Status for Cause, any outstanding Option (including any vested portion thereof) held by such Optionee shall immediately terminate in its entirety upon first notification to the Optionee of termination of the Optionee’s Continuous Service Status for Cause. If an Optionee’s Continuous Service Status is suspended pending an investigation of whether the Optionee’s Continuous Service Status will be terminated for Cause, all the Optionee’s rights under any Option, including the right to exercise the Option, shall be suspended during the investigation period. Nothing in this Section 7(c)(ii)(5) shall in any way limit the Company’s right to purchase unvested Shares issued upon exercise of an Option as set forth in the applicable Option Agreement.

(iii) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares an Option previously granted under the Plan based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.

8. Restricted Stock.

(a) Rights to Purchase. When a right to purchase or receive Restricted Stock is granted under the Plan, the Company shall advise the recipient in writing of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid, if any (which shall be as determined by the Administrator, subject to Applicable Laws, including any applicable securities laws), and the time within which such person must accept such offer. The permissible consideration for Restricted Stock shall be determined by the Administrator and shall be the same as is set forth in Section 7(b)(ii) above with respect to exercise of Options. The offer to purchase Shares shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator.

(b) Repurchase Option.

(i) General. Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the Participant’s Continuous Service Status for any reason (including death or Disability) at a purchase price for Shares equal to the original purchase price paid by the purchaser to the Company for such Shares and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at such rate as the Administrator may determine.

(ii) Leave of Absence. The Administrator shall have the discretion to determine at any time whether and to what extent the lapsing of Company repurchase rights shall be tolled during any leave of absence; provided, however, that in the absence of such determination, such lapsing shall continue during any paid leave and shall be tolled during any unpaid leave (unless otherwise required by Applicable Laws). Notwithstanding the foregoing, in the event of military leave, the lapsing of Company repurchase rights shall toll during any unpaid portion of such leave, provided that, upon a Participant’s returning from military leave (under conditions that would entitle him or her to protection upon such return under the Uniform Services Employment and Reemployment Rights Act), he or she shall be given vesting credit with respect to Shares purchased pursuant to the Restricted Stock Purchase Agreement to the same extent as would have applied had the Participant continued to provide services to the Company (or any Parent, Subsidiary or Affiliate, if applicable) throughout the leave on the same terms as he or she was providing services immediately prior to such leave.

 

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(c) Other Provisions. The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. In addition, the provisions of Restricted Stock Purchase Agreements need not be the same with respect to each Participant.

(d) Rights as a Holder of Capital Stock. Once the Restricted Stock is purchased, the Participant shall have the rights equivalent to those of a holder of capital stock, and shall be a record holder when his or her purchase and the issuance of the Shares is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Restricted Stock is purchased, except as provided in Section 10 below.

9. Taxes.

(a) As a condition of the grant, vesting and exercise of an Award, the Participant (or in the case of the Participant’s death or a permitted transferee, the person holding or exercising the Award) shall make such arrangements as the Administrator may require for the satisfaction of any applicable U.S. federal, state, local or foreign tax, withholding, and any other required deductions or payments that may arise in connection with such Award. The Company shall not be required to issue any Shares under the Plan until such obligations are satisfied.

(b) The Administrator may, to the extent permitted under Applicable Laws, permit a Participant (or in the case of the Participant’s death or a permitted transferee, the person holding or exercising the Award) to satisfy all or part of his or her tax, withholding, or any other required deductions or payments by Cashless Exercise or by surrendering Shares (either directly or by stock attestation) that he or she previously acquired; provided that, unless specifically permitted by the Company, any such Cashless Exercise must be an approved broker-assisted Cashless Exercise or the Shares withheld in the Cashless Exercise must be limited to avoid financial accounting charges under applicable accounting guidance and any such surrendered Shares must have been previously held for any minimum duration required to avoid financial accounting charges under applicable accounting guidance. Any payment of taxes by surrendering Shares to the Company may be subject to restrictions, including, but not limited to, any restrictions required by rules of the Securities and Exchange Commission.

10. Adjustments Upon Changes in Capitalization, Merger or Certain Other Transactions.

(a) Changes in Capitalization. Subject to any action required under Applicable Laws by the holders of capital stock of the Company, (i) the numbers and class of Shares or other stock or securities: (x) available for future Awards under Section 3 above and (y) covered by each outstanding Award, (ii) the exercise price per Share of each such outstanding Option, and (iii) any repurchase price per Share applicable to Shares issued pursuant to any Award, shall be automatically proportionately adjusted in the event of a stock split, reverse stock split, stock

 

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dividend, combination, consolidation, reclassification of the Shares or subdivision of the Shares. In the event of any increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, a declaration of an extraordinary dividend with respect to the Shares payable in a form other than Shares in an amount that has a material effect on the Fair Market Value, a recapitalization (including a recapitalization through a large nonrecurring cash dividend), a rights offering, a reorganization, merger, a spin-off, split-up, change in corporate structure or a similar occurrence, the Administrator shall make appropriate adjustments, in its discretion, in one or more of (i) the numbers and class of Shares or other stock or securities: (x) available for future Awards under Section 3 above and (y) covered by each outstanding Award, (ii) the exercise price per Share of each outstanding Option and (iii) any repurchase price per Share applicable to Shares issued pursuant to any Award, and any such adjustment by the Administrator shall be made in the Administrator’s sole and absolute discretion and shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Award. If, by reason of a transaction described in this Section 10(a) or an adjustment pursuant to this Section 10(a), a Participant’s Award agreement or agreement related to any Optioned Stock or Restricted Stock covers additional or different shares of stock or securities, then such additional or different shares, and the Award agreement or agreement related to the Optioned Stock or Restricted Stock in respect thereof, shall be subject to all of the terms, conditions and restrictions which were applicable to the Award, Optioned Stock and Restricted Stock prior to such adjustment.

(b) Dissolution or Liquidation. In the event of the dissolution or liquidation of the Company, each Award will terminate immediately prior to the consummation of such action, unless otherwise determined by the Administrator.

(c) Corporate Transactions. In the event of (i) a transfer of all or substantially all of the Company’s assets, (ii) a merger, consolidation or other capital reorganization or business combination transaction of the Company with or into another corporation, entity or person, or (iii) the consummation of a transaction, or series of related transactions, in which any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of more than 50% of the Company’s then outstanding capital stock (a “Corporate Transaction”), each outstanding Award (vested or unvested) will be treated as the Administrator determines, which determination may be made without the consent of any Participant and need not treat all outstanding Awards (or portion thereof) in an identical manner. Such determination, without the consent of any Participant, may provide (without limitation) for one or more of the following in the event of a Corporate Transaction: (A) the continuation of such outstanding Awards by the Company (if the Company is the surviving corporation); (B) the assumption of such outstanding Awards by the surviving corporation or its parent; (C) the substitution by the surviving corporation or its parent of new options or equity awards for such Awards; (D) the cancellation of such Awards in exchange for a payment to the Participants equal to the excess of (1) the Fair Market Value of the Shares subject to such Awards as of the closing date of such Corporate Transaction over (2) the exercise price or purchase price paid or to be paid for the Shares subject to the Awards; or (E) the cancellation of any outstanding Options or an outstanding right to purchase Restricted Stock, in either case, for no consideration.

 

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11. Non-Transferability of Awards.

(a) General. Except as set forth in this Section 11, Awards (or any rights of such Awards) may not be sold, pledged, encumbered, assigned, hypothecated, or disposed of or otherwise transferred in any manner other than by will or by the laws of descent or distribution. The designation of a beneficiary by a Participant will not constitute a transfer. An Option may be exercised, during the lifetime of the holder of the Option, only by such holder or a transferee permitted by this Section 11.

(b) Limited Transferability Rights. Notwithstanding anything else in this Section 11, the Administrator may in its sole discretion provide that any Nonstatutory Stock Options may be transferred by instrument to an inter vivos or testamentary trust in which the Options are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift to Family Members. Further, beginning with (i) the period when the Company begins to rely on the exemption described in Rule 12h-1(f)(1) promulgated under the Exchange Act, as determined by the Board in its sole discretion, and (ii) ending on the earlier of (A) the date when the Company ceases to rely on such exemption, as determined by the Board in its sole discretion, or (B) the date when the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, an Option, or prior to exercise, the Shares subject to the Option, may not be pledged, hypothecated or otherwise transferred or disposed of, in any manner, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b) of the Exchange Act, respectively), other than to (i) persons who are Family Members through gifts or domestic relations orders, or (ii) to an executor or guardian of the Participant upon the death or disability of the Participant. Notwithstanding the foregoing sentence, the Board, in its sole discretion, may permit transfers of Nonstatutory Stock Options to the Company or in connection with a Change of Control or other acquisition transactions involving the Company to the extent permitted by Rule 12h-1(f).

12. Non-Transferability of Stock Underlying Awards.

(a) General. Notwithstanding anything to the contrary, no stockholder shall sell, assign, pledge, encumber or otherwise transfer, whether by sale, gift or otherwise, any Shares (or any rights of such Shares) acquired from any Award (including, without limitation, Shares acquired upon exercise of an Option) to any person or entity unless such transfer is approved by the Company prior to such transfer, which approval may be granted or withheld in the Company’s sole and absolute discretion. Any purported transfer effected in violation of this Section 12 shall be null and void and shall have no force or effect and the Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of the Plan or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

(b) Approval Process. Any stockholder seeking the approval of the Board to transfer some or all of its Shares shall give written notice thereof to the Secretary of the Company and such request for transfer shall be subject to such right of first refusal, transfer provisions and any other terms and conditions as may be set forth in the applicable Option Agreement, Restricted Stock Purchase Agreement or other applicable written agreement.

 

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13. Time of Granting Awards. The date of grant of an Award shall, for all purposes, be the date on which the Administrator makes the determination granting such Award, or such other date as is determined by the Administrator.

14. Amendment and Termination of the Plan. The Board may at any time amend or terminate the Plan, but no amendment or termination shall be made that would materially and adversely affect the rights of any Participant under any outstanding Award, without his or her consent. In addition, to the extent necessary and desirable to comply with Applicable Laws, the Company shall obtain the approval of holders of capital stock with respect to any Plan amendment in such a manner and to such a degree as required.

15. Conditions Upon Issuance of Shares. Notwithstanding any other provision of the Plan or any agreement entered into by the Company pursuant to the Plan, the Company shall not be obligated, and shall have no liability for failure, to issue or deliver any Shares under the Plan unless such issuance or delivery would comply with Applicable Laws, with such compliance determined by the Company in consultation with its legal counsel. As a condition to the exercise of any Option or purchase of any Restricted Stock, the Company may require the person exercising the Option or purchasing the Restricted Stock to represent and warrant at the time of any such exercise or purchase that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is advisable or required by Applicable Laws. Shares issued upon exercise of Options or purchase of Restricted Stock prior to the date, if ever, on which the Common Stock becomes a Listed Security shall be subject to a right of first refusal in favor of the Company pursuant to which the Participant will be required to offer Shares to the Company before selling or transferring them to any third party on such terms and subject to such conditions as is reflected in the applicable Option Agreement or Restricted Stock Purchase Agreement.

16. Beneficiaries. If permitted by the Company, a Participant may designate one or more beneficiaries with respect to an Award by timely filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Participant’s death. Except as otherwise provided in an Award Agreement, if no beneficiary was designated or if no designated beneficiary survives the Participant, then after a Participant’s death any vested Award(s) shall be transferred or distributed to the Participant’s estate or to any person who has the right to acquire the Award by bequest or inheritance.

17. Approval of Holders of Capital Stock. If required by Applicable Laws, continuance of the Plan shall be subject to approval by the holders of capital stock of the Company within 12 months before or after the date the Plan is adopted or, to the extent required by Applicable Laws, any date the Plan is amended. Such approval shall be obtained in the manner and to the degree required under Applicable Laws.

18. Addenda. The Administrator may approve such addenda to the Plan as it may consider necessary or appropriate for the purpose of granting Awards to Employees or Consultants, which Awards may contain such terms and conditions as the Administrator deems necessary or appropriate to accommodate differences in local law, tax policy or custom, which may deviate from the terms and conditions set forth in this Plan. The terms of any such addenda shall supersede the terms of the Plan to the extent necessary to accommodate such differences but shall not otherwise affect the terms of the Plan as in effect for any other purpose.

 

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19. Information to Holders of Options. In the event the Company is relying on the exemption provided by Rule 12h-1(f) under the Exchange Act, the Company shall provide the information described in Rule 701(e)(3), (4) and (5) of the Securities Act of 1933, as amended, to all holders of Options in accordance with the requirements thereunder until such time as the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. The Company may request that holders of Options agree to keep the information to be provided pursuant to this Section confidential. If the holder does not agree to keep the information to be provided pursuant to this Section confidential, then the Company will not be required to provide the information unless otherwise required pursuant to Rule 12h-1(f)(1) of the Exchange Act.

 

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ADDENDUM A

LB PHARMACEUTICALS 2018 STOCK INCENTIVE PLAN

(CALIFORNIA PARTICIPANTS)

Prior to the date, if ever, on which the Common Stock becomes a Listed Security and/or the Company is subject to the reporting requirements of the Exchange Act, the terms set forth herein shall apply to Awards issued to California Participants. All capitalized terms used herein but not otherwise defined shall have the respective meanings set forth in the Plan.

1. The following rules shall apply to any Option in the event of termination of the Participant’s Continuous Service Status:

(a) If such termination was for reasons other than death, “Permanent Disability” (as defined below), or Cause, the Participant shall have at least 30 days after the date of such termination to exercise his or her Option to the extent the Participant is entitled to exercise on his or her termination date, provided that in no event shall the Option be exercisable after the expiration of the term as set forth in the Option Agreement.

(b) If such termination was due to death or Permanent Disability, the Participant shall have at least 6 months after the date of such termination to exercise his or her Option to the extent the Participant is entitled to exercise on his or her termination date, provided that in no event shall the Option be exercisable after the expiration of the term as set forth in the Option Agreement.

“Permanent Disability” for purposes of this Addendum shall mean the inability of the Participant, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of the Participant’s position with the Company or any Parent or Subsidiary because of the sickness or injury of the Participant.

2. Notwithstanding anything to the contrary in Section 10(a) of the Plan, the Administrator shall in any event make such adjustments as may be required by Section 25102(o) of the California Corporations Code.

3. Notwithstanding anything stated herein to the contrary, no Option shall be exercisable on or after the 10th anniversary of the date of grant and any Award agreement shall terminate on or before the 10th anniversary of the date of grant.

4. The Company shall furnish summary financial information (audited or unaudited) of the Company’s financial condition and results of operations, consistent with the requirements of Applicable Laws, at least annually to each California Participant during the period such Participant has one or more Awards outstanding, and in the case of an individual who acquired Shares pursuant to the Plan, during the period such Participant owns such Shares; provided, however, the Company shall not be required to provide such information if (i) the issuance is limited to key persons whose duties in connection with the Company assure their access to equivalent information or (ii) the Plan or any agreement complies with all conditions of Rule 701 of the Securities Act of 1933, as amended; provided that for purposes of determining such compliance, any registered domestic partner shall be considered a “family member” as that term is defined in Rule 701.

Exhibit 10.4

LB PHARMACEUTICALS INC

2018 STOCK INCENTIVE PLAN

NOTICE OF STOCK OPTION GRANT

[insert name here]

Address:

 

You (“you” or “Optionee”) have been granted an option (the “Option”) to purchase Common Stock (“Shares”) of LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), pursuant to the Company’s 2018 Stock Incentive Plan (the “Plan”), the Stock Option Agreement (the “Stock Option Agreement”), and the following terms:

 

Date of Grant:

        

Exercise Price Per Share:

   $  

Total Number of Shares:

        

Total Exercise Price:

   $  

Type of Option:

  

     Shares Incentive Stock Option

 

     Shares Nonstatutory Stock Option

Expiration Date:

        

Vesting Commencement Date:

        

Vesting/Exercise Schedule:

   So long as your Continuous Service Status (as defined in the Plan) does not terminate (and provided that no vesting shall occur following the Termination Date (as defined in Section 5 of the Stock Option Agreement)), the Shares underlying this Option shall vest and become exercisable in accordance with the following schedule: [Fully Vested: The Shares underlying this Option are fully vested and exercisable as of {the Vesting Commencement Date / {insert date}}.] / [Time-based Vesting:      Shares shall vest and become exercisable on {the Date of Grant / the  –month anniversary of the Vesting Commencement Date} and the remaining      Shares shall vest and become exercisable on the   day of each month thereafter (and if there is no corresponding day, the last day of the month).]
   Notwithstanding the above, or anything contained in the LB Pharmaceuticals Inc 2018 Stock Incentive Plan or Stock Option Agreement, (i) if a Change of Control occurs and irrespective of whether this Option is being assumed, substituted, exchanged or terminated in connection with the Change of Control, or (ii) the Company terminates your Continuous Service Status other than for Cause, the vesting and exercisability of this Option shall accelerate such that this Option shall become fully vested and exercisable effective as of immediately prior to consummation of the Change of Control (as defined in the Plan).

Termination Period:

   You may exercise this Option for 3 month(s) after the Termination Date except as set out in Section 5 of the Stock Option Agreement


   (but in no event later than the Expiration Date). You are responsible for keeping track of these exercise periods following the Termination Date. The Company will not provide further notice of such periods.

Transferability:

   You may not transfer this Option except as set forth in Section 6 of the Stock Option Agreement.

[Signature Page Follows]


By your signature and the signature of the Company’s representative or by accepting this grant, you and the Company agree that this Option is granted under and governed by the terms and conditions of this Notice and the LB Pharmaceuticals Inc 2018 Stock Incentive Plan and Option Agreement, both of which are attached to and made a part of this Notice.

Nothing in this Notice or the attached documents confers upon you any right to continue your employment or consulting relationship with the Company for any period of time, nor does it interfere in any way with your right or the Company’s right to terminate that relationship at any time, for any reason, with or without Cause, subject to Applicable Laws. Also, to the extent applicable, the Exercise Price Per Share has been set in good faith compliance with the applicable guidance issued by the IRS under Section 409A of the Code. However, there is no guarantee that the IRS will agree with the valuation, and by signing below, you agree and acknowledge that the Company, its Board, officers, employees, agents and stockholders shall not be held liable for any applicable costs, taxes, or penalties associated with this Option if, in fact, the IRS or any other person (including, without limitation, a successor corporation or an acquirer in a Change of Control) were to determine that this Option constitutes deferred compensation under Section 409A of the Code. You should consult with your own tax advisor concerning the tax consequences of such a determination by the IRS. For purposes of this paragraph, the term “Company” will be interpreted to include any Parent, Subsidiary or Affiliate.

 

THE COMPANY:
LB PHARMACEUTICALS INC
By:  

 

  (Signature)
Name:  

 

Title:  

 

OPTIONEE:

 

(PRINT NAME)

 

(Signature)
Address:

           

           

           


LB PHARMACEUTICALS INC

2018 STOCK INCENTIVE PLAN

STOCK OPTION AGREEMENT

1. Grant of Option. LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), hereby grants to the person (“Optionee”) named in the Notice of Stock Option Grant (the “Notice”), an option (the “Option”) to purchase the total number of shares of Common Stock (the “Shares”) set forth in the Notice, at the exercise price per Share set forth in the Notice (the “Exercise Price”) subject to the terms, definitions and provisions of the LB Pharmaceuticals Inc 2018 Stock Incentive Plan (the “Plan”) adopted by the Company, which is incorporated in this Stock Option Agreement (this “Agreement”) by reference. Unless otherwise defined in this Agreement, capitalized terms used in this Agreement or the Notice shall have the meanings defined in the Plan.

2. Designation of Option. This Option is intended to be an Incentive Stock Option as defined in Section 422 of the Code only to the extent so designated in the Notice, and to the extent it is not so designated or to the extent this Option does not qualify as an Incentive Stock Option, it is intended to be a Nonstatutory Stock Option.

Notwithstanding the above, if designated as an Incentive Stock Option, in the event that the Shares subject to this Option (and all other incentive stock options granted to Optionee by the Company or any Parent or Subsidiary, including under other plans) that first become exercisable in any calendar year have an aggregate fair market value (determined for each Share as of the date of grant of the option covering such Share) in excess of $100,000, the Shares in excess of $100,000 shall be treated as subject to a nonstatutory stock option, in accordance with Section 5(c) of the Plan.

3. Exercise of Option. This Option shall be exercisable during its term in accordance with the Vesting/Exercise Schedule set out in the Notice and with the provisions of Section 7(c) of the Plan as follows:

(a) Right to Exercise.

(i) This Option may not be exercised for a fraction of a share.

(ii) In the event of Optionee’s death, Disability or other termination of Continuous Service Status, the exercisability of this Option is governed by Section 5 below, subject to the limitations contained in this Section 3.

(iii) In no event may this Option be exercised after the Expiration Date set forth in the Notice.

(b) Method of Exercise.

(i) This Option shall be exercisable by execution and delivery of the


Exercise Agreement attached hereto as Exhibit A or of any other form of written notice approved for such purpose by the Company which shall state Optionee’s election to exercise this Option, the number of Shares in respect of which this Option is being exercised, and such other representations and agreements as to the holder’s investment intent with respect to such Shares as may be required by the Company pursuant to the provisions of the Plan. Such written notice shall be signed by Optionee and shall be delivered to the Company by such means as are determined by the Company in its discretion to constitute adequate delivery. The written notice shall be accompanied by payment of the aggregate Exercise Price for the purchased Shares.

(ii) As a condition to the grant, vesting and exercise of this Option and as further set forth in Section 9 of the Plan, Optionee hereby agrees to make adequate provision for the satisfaction of (and will indemnify the Company and any Subsidiary or Affiliate for) any applicable taxes or tax withholdings, social contributions, required deductions, or other payments, if any (“Tax-Related Items”), which arise upon the grant, vesting or exercise of this Option, disposition of Shares, receipt of dividends, if any, or otherwise in connection with this Option or the Shares, whether by withholding, direct payment to the Company, or otherwise as determined by the Company in its sole discretion. Regardless of any action the Company or any Subsidiary or Affiliate takes with respect to any or all applicable Tax-Related Items, Optionee acknowledges and agrees that the ultimate liability for all Tax-Related Items is and remains Optionee’s responsibility and may exceed any amount actually withheld by the Company or any Subsidiary or Affiliate. Optionee further acknowledges and agrees that Optionee is solely responsible for filing all relevant documentation that may be required in relation to this Option or any Tax-Related Items other than filings or documentation that is the specific obligation of the Company or any Subsidiary or Affiliate pursuant to Applicable Law, such as but not limited to personal income tax returns or reporting statements in relation to the grant, vesting or exercise of this Option, the holding of Shares or any bank or brokerage account, the subsequent sale of Shares, and the receipt of any dividends. Optionee further acknowledges that the Company makes no representations or undertakings regarding the treatment of any Tax-Related Items and does not commit to and is under no obligation to structure the terms or any aspect of the Option to reduce or eliminate Optionee’s liability for Tax-Related Items or achieve any particular tax result. Further, if Optionee has become subject to tax in more than one jurisdiction, Optionee acknowledges that the Company or any Subsidiary or Affiliate may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

(iii) The Company is not obligated, and will have no liability for failure, to issue or deliver any Shares upon exercise of this Option unless such issuance or delivery would comply with the Applicable Laws, with such compliance determined by the Company in consultation with its legal counsel. Furthermore, Optionee understands that the Applicable Laws of the country in which Optionee is residing or working at the time of grant, vesting, and/or exercise of this Option (including any rules or regulations governing securities, foreign exchange, tax, labor or other matters) may restrict or prevent exercise of this Option. This Option may not be exercised until such time as the Plan has been approved by the holders of capital stock of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such Shares would constitute a violation of any Applicable Laws, including any applicable U.S. federal or state securities laws or any other law or regulation, including any rule under Part 221 of Title 12 of the Code of Federal Regulations as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee


to make any representation and warranty to the Company as may be required by the Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Optionee on the date on which this Option is exercised with respect to such Shares.

(iv) Subject to compliance with Applicable Laws, this Option shall be deemed to be exercised upon receipt by the Company of the appropriate written notice of exercise accompanied by the Exercise Price and the satisfaction of any applicable obligations described in Section 3(b)(ii) above.

4. Method of Payment. Payment of the Exercise Price shall be by cash or check or, following the initial public offering of the Company’s Common Stock, by Cashless Exercise pursuant to which the Optionee delivers an irrevocable direction to a securities broker (on a form prescribed by the Company and according to a procedure established by the Company).

Optionee understands and agrees that, if required by the Company to comply with Applicable Laws, any cross-border cash remittance made to exercise this Option or transfer proceeds received upon the sale of Shares must be made through a locally authorized financial institution or registered foreign exchange agency and may require Optionee to provide to such entity certain information regarding the transaction. Moreover, Optionee understands and agrees that the future value of the underlying Shares is unknown and cannot be predicted with certainty and may decrease in value, even below the Exercise Price. Optionee understands that neither the Company nor any Subsidiary or Affiliate is responsible for any foreign exchange fluctuation between local currency and the United States Dollar or the selection by the Company or any Subsidiary or Affiliate in its sole discretion of an applicable foreign currency exchange rate that may affect the value of the Option (or the calculation of income or Tax-Related Items thereunder).

5. Termination of Relationship. Following the date of termination of Optionee’s Continuous Service Status for any reason (the “Termination Date”), Optionee may exercise this Option only as set forth in the Notice and this Section 5. If Optionee does not exercise this Option within the Termination Period set forth in the Notice or the termination periods set forth below, this Option shall terminate in its entirety. In no event, may any Option be exercised after the Expiration Date of this Option as set forth in the Notice. For the avoidance of doubt and for purposes of this Option only, termination of Continuous Service Status and the Termination Date will be deemed to occur as of the date Optionee is no longer actively providing services as an Employee or Consultant (except to the extent Optionee is on a Company approved leave of absence) and will not be extended by any notice period or “garden leave” that is required contractually or under Applicable Laws.

(a) General Termination. In the event of termination of Optionee’s Continuous Service Status other than as a result of Optionee’s Disability or death or Optionee’s termination for Cause, Optionee may exercise this Option to the extent vested in the Option at any time within the Termination Period as set forth in the Notice.

(b) Termination upon Disability of Optionee. In the event of termination of Optionee’s Continuous Service Status as a result of Optionee’s Disability, Optionee may, but only within 12 month(s) following the Termination Date, exercise this Option to the extent Optionee is vested in the Option.


(c) Death of Optionee. In the event of termination of Optionee’s Continuous Service Status as a result of Optionee’s death, or in the event of Optionee’s death within 3 month(s) following Optionee’s Termination Date, this Option may be exercised at any time within 12 month(s) following the Termination Date, or if later, 12 month(s) following the date of death by any beneficiaries designated in accordance with Section 16 of the Plan or, if there are no such beneficiaries, by the Optionee’s estate, or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent Optionee is vested in the Option.

(d) Termination for Cause. In the event of termination of Optionee’s Continuous Service Status for Cause, this Option (including any vested portion thereof) shall immediately terminate in its entirety upon first notification to Optionee of such termination for Cause. If Optionee’s Continuous Service Status is suspended pending an investigation of whether Optionee’s Continuous Service Status will be terminated for Cause, all Optionee’s rights under this Option, including the right to exercise this Option, shall be suspended during the investigation period.

6. Non-Transferability of Option; Stockholders Agreements.

(a) This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by him or her. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of Optionee.

(b) As a condition precedent to entering into this Agreement, at the request of the Company, Optionee shall become a party to any stockholders, right of first refusal and/or co-sale, drag-along and/or tag-along, transfer restriction, voting, or similar agreements to which the Company is a party at the time of Optionee’s execution and delivery of this Agreement, or to which the holders of at least 50% of the outstanding shares of Common Stock may become parties after Optionee’s execution and delivery of this Agreement, in each case as such agreement may be amended from time to time (such agreements, collectively, the “Stockholders Agreements”), by executing an adoption agreement, joinder or counterpart signature page agreeing to be bound by and subject to the terms of the Stockholders Agreements as a holder of Common Stock.

7. Lock-Up Agreement. If so requested by the Company or the underwriters in connection with the initial public offering of the Company’s securities registered under the Securities Act of 1933, as amended, Optionee shall not sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company however or whenever acquired (except for those being registered) without the prior written consent of the Company or such underwriters, as the case may be, for 180 days from the effective date of the registration statement, plus such additional period, to the extent required by FINRA rules, up to a maximum of 216 days from the effective date of the registration statement, and Optionee shall execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of such offering.

8. Effect of Agreement. Optionee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof (and has had an opportunity to consult counsel regarding the Option terms), and hereby accepts this Option and


agrees to be bound by its contractual terms as set forth herein and in the Plan. Optionee hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Administrator regarding any questions relating to this Option. In the event of a conflict between the terms and provisions of the Plan and the terms and provisions of the Notice and this Agreement, the Plan terms and provisions shall prevail.

9. Imposition of Other Requirements. The Company reserves the right to impose other requirements on Optionee’s participation in the Plan, on the Option and on any Award or Shares acquired under the Plan, to the extent the Company reasonably determines it is necessary or advisable in order to comply with Applicable Laws or facilitate the administration of the Plan. Optionee agrees to sign any additional agreements or undertakings that may be reasonably necessary to accomplish the foregoing. Furthermore, Optionee acknowledges that the laws of the country in which Optionee is working at the time of grant, vesting and exercise of the Option or the sale of Shares received pursuant to this Agreement (including any rules or regulations governing securities, foreign exchange, tax, labor, or other matters) may subject Optionee to additional procedural or regulatory requirements that Optionee is and will be solely responsible for and must fulfill.

10. Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to Optionee’s current or future participation in the Plan, this Option, the Shares subject to this Option, any other Company Securities or any other Company-related documents, by electronic means. Optionee hereby (i) consents to receive such documents by electronic means, (ii) consents to the use of electronic signatures, and (iii) if applicable, agrees to participate in the Plan and/or receive any such documents through an on-line or electronic system established and maintained by the Company or a third party designated by the Company. To the extent Optionee has been provided with a copy of this Agreement, the Plan, or any other documents relating to this Option in a language other than English, the English language documents will prevail in case of any ambiguities or divergences as a result of translation.

11. No Acquired Rights. In accepting the Option, Optionee acknowledges that the Plan is established voluntarily by the Company, is discretionary in nature, and may be modified, amended, suspended or terminated by the Company at any time. The grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of Options, other Awards or benefits in lieu of Options, even if Options have been granted repeatedly in the past, and all decisions with respect to future grants of Options or other Awards, if any, will be at the sole discretion of the Company. In addition, Optionee’s participation in the Plan is voluntary, and the Option and the Shares subject to the Option are extraordinary items that do not constitute regular compensation for services rendered to the Company or any Subsidiary or Affiliate and are outside the scope of Optionee’s employment contract, if any. The Option and the Shares subject to the Option are not intended to replace any pension rights or compensation and are not part of normal or expected salary or compensation for any purpose, including but not limited to calculating severance payments, if any, upon termination.

12. Data Privacy. Optionee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Optionee’s personal data (as described below) by and among, as applicable, the Company and any Subsidiary or Affiliate for the exclusive purpose of implementing, administering, and managing Optionee’s participation in the Plan. Optionee understands that refusal or withdrawal of consent may affect Optionee’s ability to participate in the Plan or to realize benefits from the Option.


Optionee understands that the Company and any Subsidiary or Affiliate may hold certain personal information about Optionee, including, but not limited to, Optionee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company or any Subsidiary or Affiliate, details of all Options or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Optionee’s favor (“Personal Data”). Optionee understands that Personal Data may be transferred to any Subsidiary or Affiliate or third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the United States, Optionee’s country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Optionee’s country.

13. Miscellaneous.

(a) Governing Law. The validity, interpretation, construction and performance of this Agreement, and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from this Agreement, the parties hereby submit and consent to the exclusive jurisdiction of the State of New York and agree that any such litigation shall be conducted only in the courts of New York or the federal courts of the United States located in New York and no other courts.

(b) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and supersedes all prior or contemporaneous discussions, understandings and agreements, whether oral or written, between them relating to the subject matter hereof.

(c) Amendments and Waivers. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance.

(d) Successors and Assigns. Except as otherwise provided in this Agreement, this Agreement, and the rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives. The Company may assign any of its rights and obligations under this Agreement. No other party to this Agreement may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Agreement, except with the prior written consent of the Company.

(e) Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered personally or by overnight courier or sent by email, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, as subsequently modified by written notice, or if no address is specified on the signature page, at the most recent address set forth in the Company’s books and records.


(f) Severability. If one or more provisions of this Agreement are held to be unenforceable under Applicable Laws, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

(g) Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

(h) Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same agreement. Execution of a facsimile copy will have the same force and effect as execution of an original, and a facsimile signature will be deemed an original and valid signature.


EXHIBIT A

LB PHARMACEUTICALS INC

2018 STOCK INCENTIVE PLAN

EXERCISE AGREEMENT

This Exercise Agreement (this “Agreement”) is made as of      , by and between LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), and       (“Purchaser”). To the extent any capitalized terms used in this Agreement are not defined, they shall have the meaning ascribed to them in the Company’s 2018 Stock Incentive Plan (the “Plan”) and the Option Agreement (as defined below).

1. Exercise of Option. Subject to the terms and conditions hereof, Purchaser hereby elects to exercise his or her option to purchase      shares of the Common Stock (the “Shares”) of the Company under and pursuant to the Plan, the Notice of Stock Option Grant and the Stock Option Agreement granted       (the “Option Agreement”). The purchase price for the Shares shall be $  per Share for a total purchase price of $  . The term “Shares” refers to the purchased Shares and all securities received in connection with the Shares pursuant to stock dividends or splits, all securities received in replacement of the Shares in a recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other property to which Purchaser is entitled by reason of Purchaser’s ownership of the Shares.

2. Time and Place of Exercise. The purchase and sale of the Shares under this Agreement shall occur at the principal office of the Company simultaneously with the execution and delivery of this Agreement, the payment of the aggregate exercise price by any method listed in Section 4 of the Option Agreement, and the satisfaction of any applicable tax, withholding, required deductions or other payments, all in accordance with the provisions of Section 3(b) of the Option Agreement. The Company shall issue the Shares to Purchaser by entering such Shares in Purchaser’s name as of such date in the books and records of the Company or, if applicable, a duly authorized transfer agent of the Company, against payment of the exercise price therefor by Purchaser. The Company will deliver to Purchaser a stock certificate or, in the case of uncertificated securities upon request, a notice of issuance, for the Shares as soon as practicable following such date.

3. Restrictions on Transfer. The Shares are subject to any and all limitations on transfer created by the transfer restrictions set forth in (i) the Company’s certificate of incorporation and bylaws (in each case as amended from time to time), (ii) the Stockholders Agreements (as amended from time to time), and (iii) Applicable Law, and Purchaser shall not assign, encumber or dispose of any interest in the Shares except in compliance with the provisions thereof.

4. Investment and Taxation Representations. In connection with the purchase of the Shares, Purchaser represents to the Company the following:

(a) Purchaser is aware of the Company’s business affairs and financial


condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Shares. Purchaser is purchasing the Shares for investment for Purchaser’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act or under any applicable provision of state law. Purchaser does not have any present intention to transfer the Shares to any other person or entity.

(b) Purchaser understands that the Shares have not been registered under the Securities Act by reason of a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Purchaser’s investment intent as expressed herein.

(c) Purchaser further acknowledges and understands that the securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser further acknowledges and understands that the Company is under no obligation to register the securities.

(d) Purchaser is familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer of the securities (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions. Purchaser understands that the Company provides no assurances as to whether he or she will be able to resell any or all of the Shares pursuant to Rule 144, which rule requires, among other things, that the Company be subject to the reporting requirements of the Exchange Act, that resales of securities take place only after the holder of the Shares has held the Shares for certain specified time periods, and under certain circumstances, that resales of securities be limited in volume and take place only pursuant to brokered transactions. Notwithstanding this Section 4(d), Purchaser acknowledges and agrees to the restrictions set forth in Section 4(e) below.

(e) Purchaser further understands that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk.

(f) Purchaser represents that Purchaser is not subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (attached hereto as Annex I).

(g) Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.


5. Restrictive Legends and Stop-Transfer Orders.

(a) Legends. Any stock certificate or, in the case of uncertificated securities, any notice of issuance, for the Shares shall bear the following legends (as well as any legends set forth in the Stockholders Agreements, or required by the Company or applicable state and federal corporate and securities laws):

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR “BLUE SKY LAWS,” AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE CORPORATION’S CERTIFICATE OF INCORPORATION, AS MAY BE AMENDED FROM TIME TO TIME (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE CORPORATION). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH CERTIFICATE OF INCORPORATION.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT THE TERMS AND CONDITIONS OF THE BYLAWS OF THE CORPORATION, AS MAY BE AMENDED FROM TIME TO TIME, INCLUDING RESTRICTIONS ON TRANSFER AND RIGHTS OF FIRST REFUSAL AS SET FORTH IN SUCH BYLAWS. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH BYLAWS.

(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

6. No Employment Rights. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a parent, subsidiary or affiliate of the Company, to terminate Purchaser’s employment or consulting relationship, for any reason, with or without Cause.

7. Waiver of Statutory Information Rights. Purchaser acknowledges and understands that, but for the waiver made herein, Purchaser would be entitled, upon written demand under oath stating the purpose thereof, to inspect for any proper purpose, and to make copies and extracts from, the Company’s stock ledger, a list of its stockholders, and its other books and records, and the books and records of subsidiaries of the Company, if any, under the circumstances and in the manner provided in Section 220 of the Delaware General Corporation Law (any and all such rights, and any and all such other rights of Purchaser as may be provided


for in Section 220, the “Inspection Rights”). In light of the foregoing, until the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, Purchaser hereby unconditionally and irrevocably waives the Inspection Rights, whether such Inspection Rights would be exercised or pursued directly or indirectly pursuant to Section 220 or otherwise, and covenants and agrees never to directly or indirectly commence, voluntarily aid in any way, prosecute, assign, transfer, or cause to be commenced any claim, action, cause of action, or other proceeding to pursue or exercise the Inspection Rights. The foregoing waiver applies to the Inspection Rights of Purchaser in Purchaser’s capacity as a stockholder and shall not affect any rights of a director, in his or her capacity as such, under Section 220. The foregoing waiver shall not apply to any contractual inspection rights of Purchaser under any written agreement with the Company.

8. Miscellaneous.

(a) Governing Law. The validity, interpretation, construction and performance of this Agreement, and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from this Agreement, the parties hereby submit and consent to the exclusive jurisdiction of the State of New York and agree that any such litigation shall be conducted only in the courts of New York or the federal courts of the United States located in New York and no other courts.

(b) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and supersedes all prior or contemporaneous discussions, understandings and agreements, whether oral or written, between them relating to the subject matter hereof.

(c) Amendments and Waivers. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance.

(d) Successors and Assigns. Except as otherwise provided in this Agreement, this Agreement, and the rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives. The Company may assign any of its rights and obligations under this Agreement. No other party to this Agreement may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Agreement, except with the prior written consent of the Company.

(e) Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered personally or by overnight courier or sent by email, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, addressed to the party to be notified at such


party’s address as set forth on the signature page, as subsequently modified by written notice, or if no address is specified on the signature page, at the most recent address set forth in the Company’s books and records.

(f) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

(g) Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

(h) Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same agreement. Execution of a facsimile copy will have the same force and effect as execution of an original, and a facsimile signature will be deemed an original and valid signature.

(i) Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to this Agreement or any notices required by applicable law or the Company’s Certificate of Incorporation or Bylaws by email or any other electronic means. Purchaser hereby consents to (i) conduct business electronically (ii) receive such documents and notices by such electronic delivery and (iii) sign documents electronically and agrees to participate through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

[Signature Page Follows]


The parties have executed this Exercise Agreement as of the date first set forth above.

 

THE COMPANY:
LB PHARMACEUTICALS INC
By:  

 

  (Signature)
Name:  

 

Title:  

 

 

Address:

 

 

 

PURCHASER:

 

      

(PRINT NAME)

 

(Signature)  
Address:  

 

 

 

Email:  

 

 

6


ANNEX I

Rule 506(d)(1)(i) to (viii) under the Securities Act of 1933, as amended

 

(i)

Has been convicted, within ten years before such sale (or five years, in the case of issuers, their predecessors and affiliated issuers), of any felony or misdemeanor:

 

  (A)

In connection with the purchase or sale of any security;

 

  (B)

Involving the making of any false filing with the Commission; or

 

  (C)

Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities;

 

(ii)

Is subject to any order, judgment or decree of any court of competent jurisdiction, entered within five years before such sale, that, at the time of such sale, restrains or enjoins such person from engaging or continuing to engage in any conduct or practice:

 

  (A)

In connection with the purchase or sale of any security;

 

  (B)

Involving the making of any false filing with the Commission; or

 

  (C)

Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities;

 

(iii)

Is subject to a final order of a state securities commission (or an agency or officer of a state performing like functions); a state authority that supervises or examines banks, savings associations, or credit unions; a state insurance commission (or an agency or officer of a state performing like functions); an appropriate federal banking agency; the U.S. Commodity Futures Trading Commission; or the National Credit Union Administration that:

 

  (A)

At the time of such sale, bars the person from:

 

  (1)

Association with an entity regulated by such commission, authority, agency, or officer;

 

  (2)

Engaging in the business of securities, insurance or banking; or

 

  (3)

Engaging in savings association or credit union activities; or

 

  (B)

Constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct entered within ten years before such sale;

 

(iv)

Is subject to an order of the Commission entered pursuant to section 15(b) or 15B(c) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b) or 78o-4(c)) or section 203(e) or (f) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(e) or (f)) that, at the time of such sale:

 

  (A)

Suspends or revokes such person’s registration as a broker, dealer, municipal securities dealer or investment adviser;

 

  (B)

Places limitations on the activities, functions or operations of such person; or

 

  (C)

Bars such person from being associated with any entity or from participating in the offering of any penny stock;

 

(v)

Is subject to any order of the Commission entered within five years before such sale that, at the time of such sale, orders the person to cease and desist from committing or causing a violation or future violation of:

 

  (A)

Any scienter-based anti-fraud provision of the federal securities laws, including without limitation section 17(a)(1) of the Securities Act of 1933 (15 U.S.C.

 

7


  77q(a)(1)), section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78j(b)) and 17 CFR 240.10b-5, section 15(c)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(c)(1)) and section 206(1) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-6(1)), or any other rule or regulation thereunder; or

 

  (B)

Section 5 of the Securities Act of 1933 (15 U.S.C. 77e).

 

(vi)

Is suspended or expelled from membership in, or suspended or barred from association with a member of, a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade;

 

(vii)

Has filed (as a registrant or issuer), or was or was named as an underwriter in, any registration statement or Regulation A offering statement filed with the Commission that, within five years before such sale, was the subject of a refusal order, stop order, or order suspending the Regulation A exemption, or is, at the time of such sale, the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued; or

 

(viii)

Is subject to a United States Postal Service false representation order entered within five years before such sale, or is, at the time of such sale, subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the United States Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations.

 

8


LB PHARMACEUTICALS INC

RESTRICTED STOCK AWARD AGREEMENT

This Restricted Stock Award Agreement (this “Agreement”) is made effective as of (the “Grant Date”) by and between LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), and       (“Grantee”) pursuant to the Company’s 2018 Stock Incentive Plan (the “Plan”). To the extent any capitalized terms used in this Agreement are not defined, they shall have the meaning ascribed to them in the Plan.

1.  Grant of Stock. Subject to the terms and conditions of this Agreement, the Company is hereby issuing to Grantee, and Grantee hereby accepts from the Company, shares of the Company’s Common Stock (the “Shares”). The Company will enter the Shares in Grantee’s name as of such date in the books and records of the Company or, if applicable, a duly authorized transfer agent of the Company. The Company will deliver to Grantee a stock certificate representing the Shares as soon as practicable. As used elsewhere herein, the term “Shares” refers to all of the Shares granted hereunder and all securities received in connection with the Shares pursuant to stock dividends or splits, all securities received in replacement of the Shares in a recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other property to which Grantee is entitled by reason of Grantee’s ownership of the Shares. By Grantee’s signature and the signature of the Company’s representative below, Grantee and the Company agree that this grant of Shares is governed by the terms and conditions of this Agreement and the Plan which is attached to and made a part of this Agreement.

2.  Limitations on Transfer.

(a)  Transfer Restrictions. The Shares granted to Grantee hereunder are subject to certain transfer restrictions and the other terms contained in (i) the certificate of incorporation of the Company, as amended from time to time, (ii) the bylaws of the Company, as amended from time to time, and (iii) any stockholders, right of first refusal and/or co-sale, drag-along and/or tag-along, transfer restriction, voting, or similar agreements to which the Company is a party as of the Grant Date, or to which the holders of at least 50% of the outstanding shares of Common Stock may become parties after Grantee’s execution and delivery of this Agreement, including without limitation, the Amended and Restated Stockholders Agreement of the Company, in each case as such agreement may be amended from time to time (the “Stockholders Agreements”) ((i) (ii) and (iii) collectively, the “Governing Documents”). Copies of the applicable Governing Documents are available upon request. Simultaneously with the execution of this Agreement, Grantee will deliver to the Company an executed joinder or counterpart signature page to each of the applicable Stockholders Agreements, including without limitation, the Amended and Restated Stockholders Agreement.

(b)  Vesting.

(i)  As of the Grant Date, none of the Shares are non-forfeitable (any Restricted Shares that become non-forfeitable hereunder, the “Vested Shares”), and all of the Shares are subject to forfeiture as and to the extent provided in Section 2(b)(ii) (the “Unvested Shares”), in each case subject to the terms of this Agreement. {Insert Vesting Schedule} or [On the sixth month anniversary of the consummation of the Company’s first underwritten public offering of its Common Stock under the Securities Act of 1933, as amended (the “Securities Act”), all of the Shares shall become Vested Shares.]

(ii)  If Grantee’s employment or engagement with the Company terminates for any reason, including without limitation by reason of his or her death or disability, all Unvested Shares shall be forfeited immediately and without further action by any party and Grantee shall not be entitled to any payment or compensation whatsoever with respect to the Unvested Shares.

(c)  Acceleration of Vesting. Notwithstanding the foregoing, the vesting of the Unvested Shares shall accelerate such that all of the Shares shall become Vested Shares, effective as of immediately prior to consummation of a Change of Control.

 

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(d)  Repurchase Option.

(i)  If Grantee’s engagement with the Company terminates for any reason, including without limitation by reason of his death or disability, the Company shall upon the date of such termination (the “Termination Date”) have an irrevocable, exclusive option (the “Repurchase Option”) for a period of 90 days from such date to repurchase all or any portion of the Vested Shares held by Grantee as of the Termination Date at the fair market price per Vested Share as determined by the Board of Directors of the Company in its reasonable discretion after consultation with a valuation professional having substantial experience in the valuation of shares of stock in private companies.

(ii)  If the Company elects to exercise the Repurchase Option, the Company shall deliver written notice (the “Repurchase Notice”) to Grantee or Grantee’s executor or other representative as the case may be (collectively, the “Grantee Party”), which notice shall identify the Vested Shares being purchased and the Company’s calculation of the price for such Vested Shares, at any time within 90 days following the Termination Date. The closing of the Repurchase Option shall occur on the 30th day after delivery of the Repurchase Notice at the Company’s principal office, or such other date and place as the Company and the Grantee Party shall mutually agree. At such closing, the Company shall deliver to the Grantee Party a check in the amount of the purchase price for the Vested Shares being purchased, and the Grantee Party shall deliver to the Company any and all certificates for such Vested Shares. Upon delivery of the purchase price as described above (whether or not the Grantee Party delivers such certificates), the Company shall become the legal and beneficial owner of the Vested Shares being repurchased and all rights and interest therein or related thereto, and the Company shall have the right to transfer to its own name the number of Vested Shares being repurchased by the Company, without further action by the Grantee Party.

(e)  Market Stand-off Agreement. Grantee hereby agrees that he will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company of shares of its Common Stock or any other equity securities under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “Securities Act”), on a registration statement on Form S-1 or Form S-3, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days in the case of the Company’s first underwritten public offering of its Common Stock under the Securities Act (the “IPO”), or such other period as may be requested by the Company or an underwriter to accommodate regulatory restrictions on (1) the publication or other distribution of research reports, and (2) analyst recommendations and opinions, including, but not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto), (i) lend; 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; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held immediately before the effective date of the registration statement for such offering or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 2(e) shall apply only to the IPO, shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, or the transfer of any shares to any trust for the direct or indirect benefit of Grantee or the immediate family of Grantee, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, and shall be applicable to Grantee only if all officers and directors are subject to the same restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually owning 1% or more of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock). The underwriters in connection with such registration are intended thirdparty beneficiaries of this Section 2(e) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Grantee further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 2(e) or that are necessary to give further effect thereto.

3.  Escrow of Shares. For purposes of facilitating the enforcement of the provisions of Section 2 above, Grantee agrees to deliver a Stock Power in the form attached to this Agreement as Exhibit A executed by Grantee, in blank, and such stock certificate(s), if any, to the Secretary of the Company, or the Secretary’s designee, to hold such Shares (and stock certificate(s), if any) and Stock Power in escrow and to take all such actions and to effectuate all

 

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such transfers and/or releases as are required in accordance with the terms of this Agreement. Grantee hereby acknowledges that the Secretary of the Company, or the Secretary’s designee, is so appointed as the escrow holder with the foregoing authorities as a material inducement to make this Agreement and that said appointment is coupled with an interest and is accordingly irrevocable. Grantee agrees that said escrow holder shall not be liable to any party hereof (or to any other party). The escrow holder may rely upon any letter, notice or other document executed by any signature purported to be genuine and may resign at any time. Grantee agrees that if the Secretary of the Company, or the Secretary’s designee, resigns as escrow holder for any or no reason, the Board of Directors of the Company shall have the power to appoint a successor to serve as escrow holder pursuant to the terms of this Agreement.

4.  Investment and Taxation Representations. In connection with the grant of the Shares, Grantee represents to the Company the following:

(a)  Grantee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Shares. Grantee does not have any present intention to transfer the Shares to any other person or entity.

(b)  Grantee understands that the Shares have not been registered under the Securities Act by reason of a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Grantee’s investment intent as expressed herein.

(c)  Grantee further acknowledges and understands that the securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Grantee further acknowledges and understands that the Company is under no obligation to register the securities. Grantee has made no agreement or arrangement with any third party requiring the transfer of the Shares, or any interest therein, by Grantee.

(d)  Grantee is familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer of the securities (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions. Grantee understands that the Company provides no assurances as to whether he or she will be able to resell any or all of the Shares pursuant to Rule 144, which rule requires, among other things, that the Company be subject to the reporting requirements of the Exchange Act, that resales of securities take place only after the holder of the Shares has held the Shares for certain specified time periods, and under certain circumstances, that resales of securities be limited in volume and take place only pursuant to brokered transactions. Notwithstanding this Section 3(d), Grantee acknowledges and agrees to the restrictions set forth in Section 3(e) below.

(e)  Grantee further understands that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk.

(f)  Grantee represents that Grantee is not subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (attached hereto as Annex I).

(g)  Grantee understands that Grantee may suffer adverse tax consequences as a result of Grantee’s receipt or disposition of the Shares. Grantee represents that Grantee has consulted any tax consultants Grantee deems advisable in connection with the receipt or disposition of the Shares and that Grantee is not relying on the Company for any tax advice.

 

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5.  Restrictive Legends and Stop-Transfer Orders.

(a)  Legends. Any stock certificate or, in the case of uncertificated securities, any notice of issuance, for the Shares shall bear the following legends (as well as any legends set forth in the Governing Documents, or required by the Company or applicable state and federal corporate and securities laws):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A RESTRICTED STOCK AWARD AGREEMENT AND A STOCK INCENTIVE PLAN OF THE CORPORATION, IN EACH CASE AS MAY BE AMENDED FROM TIME TO TIME (COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE CORPORATION). NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH AGREEMENT AND PLAN.

(b)  Stop-Transfer Notices. Grantee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c)  Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement, the Plan or the Governing Documents or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any Grantee or other transferee to whom such Shares shall have been so transferred.

6.  No Employment or Engagement Rights. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a parent, subsidiary or affiliate of the Company, to terminate Grantee’s employment or consulting relationship, for any reason, with or without cause.

7.  Section 83(b) Election. Grantee understands that Section 83(a) of the Internal Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income the difference between the amount paid for the Shares and the Fair Market Value of the Shares as of the date any restrictions on the Shares lapse. In this context, “restriction” means the right of the Company to buy back the Shares pursuant to the vesting set forth in Section 2(b) above. Grantee understands that Grantee may elect to be taxed at the time the Shares are granted, rather than when the Shares vest, by filing an election under Section 83(b) (an “83(b) Election”) of the Code with the Internal Revenue Service within 30 days from the date of grant. Grantee understands that failure to file such an election in a timely manner may result in adverse tax consequences for Grantee. Grantee further understands that an additional copy of such election form should be filed with Grantee’s federal income tax return for the calendar year in which the date of this Agreement falls. Grantee acknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to the grant of the Shares hereunder, does not purport to be complete, and is not intended or written to be used, and cannot be used, for the purposes of avoiding taxpayer penalties. Grantee further acknowledges that the Company has directed Grantee to seek independent advice regarding the applicable provisions of the Code, the income tax laws of any municipality, state or foreign country in which Grantee may reside, and the tax consequences of Grantee’s death, and Grantee has consulted, and has been fully advised by, Grantee’s own tax advisor regarding such tax laws and tax consequences or has knowingly chosen not to consult such a tax advisor. Grantee further acknowledges that neither the Company nor any subsidiary or representative of the Company has made any warranty or representation to Grantee with respect to the tax consequences of Grantee’s receipt of the Shares or of the making or failure to make an 83(b) Election. GRANTEE (AND NOT THE COMPANY, ITS AGENTS OR ANY OTHER PERSON) SHALL BE SOLELY RESPONSIBLE FOR APPROPRIATELY FILING SUCH FORM WITH THE IRS, EVEN IF GRANTEE REQUESTS THE COMPANY, ITS AGENTS OR ANY OTHER PERSON MAKE THIS FILING ON GRANTEE’S BEHALF.

If Grantee decides to make an 83(b) Election, Grantee agrees that Grantee will execute and deliver to the Company with this executed Agreement, a copy of the 83(b) Election, attached hereto as Exhibit B.

 

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8.  Miscellaneous.

(a)  Governing Law. The validity, interpretation, construction and performance of this Agreement, and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from this Agreement, the parties hereby submit and consent to the exclusive jurisdiction of the State of New York and agree that any such litigation shall be conducted only in the courts of New York, New York or the United States District Court for the Southern District of New York, and no other courts.

(b)  Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and supersedes all prior or contemporaneous discussions, understandings and agreements, whether oral or written, between them relating to the subject matter hereof.

(c)  Amendments and Waivers. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance.

(d)  Successors and Assigns. Except as otherwise provided herein, this Agreement, and the rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives. No party to this Agreement may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Agreement, except with the prior written consent of the other party.

(e)  Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered personally or by overnight courier or sent by email, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, as subsequently modified by written notice, or if no address is specified on the signature page, at the most recent address set forth in the Company’s books and records.

(f)  Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

(g)  Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

(h)  Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same agreement. Execution of a facsimile copy will have the same force and effect as execution of an original, and a facsimile signature will be deemed an original and valid signature.

(i)  Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to this Agreement or any notices required by applicable law or the Company’s Certificate of Incorporation or any other Governing Documents by email or any other electronic means. Grantee hereby consents to (i) conduct business electronically (ii) receive such documents and notices by such electronic delivery and (iii) sign documents electronically and agrees to participate through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

 

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(j)  Imposition of Other Requirements. The Company reserves the right to impose other requirements on Grantee’s participation in the Plan and on any Award or Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with Applicable Law or facilitate the administration of the Plan. Grantee agrees to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Furthermore, Grantee acknowledges that the laws of the country in which Grantee is working at the time of grant of this Agreement and the vesting or sale of Shares received pursuant to this Agreement (including any rules or regulations governing securities, foreign exchange, tax, labor, or other matters) may subject Grantee to additional procedural or regulatory requirements that Grantee is and will be solely responsible for and must fulfill.

[Signature Page Follows]

 

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The parties have executed this Agreement as of the date first set forth above.

 

THE COMPANY:
LB PHARMACEUTICALS INC
By:  

 

Name:  
Title:  
Address:  
575 Madison Avenue, 10th Floor
New York, NY 10022
GRANTEE:
XXXXX  
By:  

 

Name:  
Title:  
Address:  

 

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EXHIBIT A

STOCK POWER

FOR VALUE RECEIVED, the undersigned (“Holder”), hereby sells, assigns and transfers unto      (“Transferee”)      shares of the Common Stock of LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), standing in Holder’s name on the Company’s books as Certificate No. whether held in certificated or uncertificated form, and does hereby irrevocably constitute and appoint       to transfer said stock on the books of the Company with full power of substitution in the premises.

Date:

HOLDER:

 

      

(Signature)  
Address:  
Email:  

This Stock Power may only be used as authorized by the Restricted Stock Award Agreement between the Holder and the Company, dated       and the exhibits thereto.

 

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IF YOU WISH TO MAKE A SECTION 83(B) ELECTION, THE FILING OF SUCH ELECTION IS YOUR RESPONSIBILITY.

THE FORM FOR MAKING THIS SECTION 83(B) ELECTION IS ATTACHED TO THIS AGREEMENT.

YOU MUST FILE THIS FORM WITHIN 30 DAYS OF THE GRANT OF THE SHARES.

YOU (AND NOT THE COMPANY, ANY OF ITS AGENTS OR ANY OTHER PERSON) SHALL BE SOLELY RESPONSIBLE FOR FILING SUCH FORM WITH THE IRS, EVEN IF YOU REQUEST THE COMPANY, ITS AGENTS OR ANY OTHER PERSON TO MAKE THIS FILING ON YOUR BEHALF AND EVEN IF THE COMPANY, ANY OF ITS AGENTS OR ANY OTHER PERSON HAS PREVIOUSLY MADE THIS FILING ON YOUR BEHALF.

The election should be filed by mailing a signed election form by certified mail, return receipt requested to the IRS Service Center where you file your tax returns. See www.irs.gov.

 

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EXHIBIT B

ELECTION UNDER SECTION 83(B)

OF THE INTERNAL REVENUE CODE OF 1986

(attached)

 

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ELECTION UNDER SECTION 83(B)

OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code, to include in taxpayer’s gross income for the current taxable year, the amount of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property described below:

 

1.

The name, address, taxpayer identification number and taxable year of the undersigned are as follows:

 

NAME OF TAXPAYER:    

                         

ADDRESS:  

                               

 

 

 

 

 

IDENTIFICATION NO. OF TAXPAYER:

 

                      

TAXABLE YEAR:  

                            

 

2.

The property with respect to which the election is made is described as follows:

     shares of the Common Stock of LB Pharmaceuticals Inc, a Delaware corporation (the “Company”).

 

3.

The date on which the property was transferred is:

 

4.

The property is subject to the following restrictions:

Forfeiture of the property or a portion thereof upon termination of taxpayer’s employment, engagement or consulting relationship.

 

5.

The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $  .

 

6.

The amount (if any) paid for such property:

The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.

Dated:

GRANTEE:

 

By:  

 

Name:  
Title:  
Address:  
Email:  

 

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Annex I

Rule 506(d)(1)(i) to (viii) under the Securities Act of 1933, as amended

(i)  Has been convicted, within ten years before such sale (or five years, in the case of issuers, their predecessors and affiliated issuers), of any felony or misdemeanor:

(A)  In connection with the purchase or sale of any security;

(B)  Involving the making of any false filing with the Commission; or

(C)  Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities;

(ii)  Is subject to any order, judgment or decree of any court of competent jurisdiction, entered within five years before such sale, that, at the time of such sale, restrains or enjoins such person from engaging or continuing to engage in any conduct or practice:

(A)  In connection with the purchase or sale of any security;

(B)  Involving the making of any false filing with the Commission; or

(C)  Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities;

(iii)  Is subject to a final order of a state securities commission (or an agency or officer of a state performing like functions); a state authority that supervises or examines banks, savings associations, or credit unions; a state insurance commission (or an agency or officer of a state performing like functions); an appropriate federal banking agency; the U.S. Commodity Futures Trading Commission; or the National Credit Union Administration that:

(A)  At the time of such sale, bars the person from:

(1)  Association with an entity regulated by such commission, authority, agency, or officer;

(2)  Engaging in the business of securities, insurance or banking; or

(3)  Engaging in savings association or credit union activities; or

(B)  Constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct entered within ten years before such sale;

(iv)  Is subject to an order of the Commission entered pursuant to section 15(b) or 15B(c) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b) or 78o-4(c)) or section 203(e) or (f) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(e) or (f)) that, at the time of such sale:

(A)  Suspends or revokes such person’s registration as a broker, dealer, municipal securities dealer or investment adviser;

(B)  Places limitations on the activities, functions or operations of such person; or

(C)  Bars such person from being associated with any entity or from participating in the offering of any penny stock;

(v)  Is subject to any order of the Commission entered within five years before such sale that, at the time of such sale, orders the person to cease and desist from committing or causing a violation or future violation of:

(A)  Any scienter-based anti-fraud provision of the federal securities laws, including without limitation section 17(a)(1) of the Securities Act of 1933 (15 U.S.C. 77q(a)(1)), section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78j(b)) and 17 CFR 240.10b-5, section 15(c)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(c)(1)) and section 206(1) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-6(1)), or any other rule or regulation thereunder; or

(B)  Section 5 of the Securities Act of 1933 (15 U.S.C. 77e).

(vi)  Is suspended or expelled from membership in, or suspended or barred from association with a member of, a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade;

(vii)  Has filed (as a registrant or issuer), or was or was named as an underwriter in, any registration statement or Regulation A offering statement filed with the Commission that, within five years before such sale, was the subject of a refusal order, stop order, or order suspending the Regulation A exemption, or is, at the time of such sale, the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued; or

(viii)  Is subject to a United States Postal Service false representation order entered within five years before such sale, or is, at the time of such sale, subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the United States Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations.

 

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Exhibit 10.5

LB PHARMACEUTICALS INC

2023 STOCK INCENTIVE PLAN

1. Purposes of the Plan.

(a) General. The purposes of this LB Pharmaceuticals Inc 2023 Stock Incentive Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants, and to promote the success of the Company’s business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant of an Option and subject to the applicable provisions of Section 422 of the Code and the regulations promulgated thereunder. Restricted Stock may also be granted under the Plan.

(b) Prior Plan. On and after the Effective Date, the Plan replaces Prior Plan, such that no new options, stock appreciation rights, stock awards, stock units or other awards shall be granted under the Prior Plan on and after the Effective Date; provided, however, that awards granted under the Prior Plan before the Effective Date shall remain in effect in accordance with their respective terms.

2. Definitions. As used herein, the following definitions shall apply:

(a) “Administrator” means the Board or a Committee.

(b) “Affiliate” means (i) an entity other than a Subsidiary which, together with the Company, is under common control of a third person or entity and (ii) an entity other than a Subsidiary in which the Company and /or one or more Subsidiaries own a controlling interest.

(c) “Applicable Laws” means all applicable laws, rules, regulations and requirements, including, but not limited to, all applicable U.S. federal or state laws, any Stock Exchange rules or regulations, and the applicable laws, rules or regulations of any other country or jurisdiction where Options or Restricted Stock are granted under the Plan or Participants reside or provide services, as such laws, rules, and regulations shall be in effect from time to time.

(d) “Award” means any award of an Option or Restricted Stock under the Plan.

(e) “Board” means the Board of Directors of the Company.

(f) “California Participant” means a Participant whose Award is issued in reliance on Section 25102(o) of the California Corporations Code.

(g) “Cashless Exercise” means a program approved by the Administrator in which payment of the Option exercise price or tax withholding obligations or other required deductions may be satisfied, in whole or in part, with Shares subject to the Option, including by delivery of an irrevocable direction to a securities broker (on a form prescribed by the Company) to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of such amount.

(h) “Cause” for termination of a Participant’s Continuous Service Status will exist (unless another definition is provided in an applicable Option Agreement, Restricted Stock Agreement, employment agreement or other applicable written agreement, in which case such other definition shall be used for purposes of this Plan) if the Participant’s Continuous Service Status is terminated for any of the following reasons: (i) any breach by Participant of any material written agreement between Participant and the Company and Participant’s failure to cure such breach within 10 business days after receiving written notice thereof; (ii) any failure by Participant to comply with the Company’s material policies or rules as they may be in effect from time to time, which failure does not cease within 10 business days after receiving written notice thereof;

 

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(i) neglect or persistent unsatisfactory performance of Participant’s duties and Participant’s failure to cure such condition within 10 business days after receiving written notice thereof; (iv) Participant’s insubordination or other failure of the Participant to follow a lawful directive of the Board or Chief Executive Officer, which insubordination or failure does not cease within 10 business days after receiving written notice thereof, or which insubordination or failure reoccurs at any time after the date of such notice; (v) Participant’s commission of any felony or commission of any other crime involving fraud, violence or dishonesty; (vi) Participant’s commission of or participation in an act of fraud, dishonesty, or misrepresentation against the Company; (vii) Participant’s intentional material damage to the Company’s business, property or reputation; or (viii) Participant’s unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom the Participant owes an obligation of nondisclosure as a result of his or her relationship with the Company. For purposes of clarity, a termination without “Cause” does not include any termination that occurs as a result of Participant’s death or disability. The determination as to whether a Participant’s Continuous Service Status has been terminated for Cause shall be made in good faith by the Company and shall be final and binding on the Participant. The foregoing definition does not in any way limit the Company’s ability to terminate a Participant’s employment or consulting relationship at any time, and the term “Company” will be interpreted to include any Subsidiary, Parent, Affiliate, or any successor thereto, if appropriate.

(i) “Change of Control” means (i) a sale of all or substantially all of the Company’s assets other than to an Excluded Entity (as defined below), (ii) a merger, consolidation or other capital reorganization or business combination transaction of the Company with or into another corporation, limited liability company or other entity other than an Excluded Entity, or (iii) the consummation of a transaction, or series of related transactions, in which any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of all of the Company’s then outstanding voting securities.

Notwithstanding the foregoing, a transaction shall not constitute a Change of Control if its purpose is to (A) change the jurisdiction of the Company’s incorporation, (B) create a holding company that will be owned in substantially the same proportions by the persons who hold the Company’s securities immediately before such transaction, or (C) obtain funding for the Company in a financing that is approved by the Company’s Board. An “Excluded Entity” means a corporation or other entity of which the holders of voting capital stock of the Company outstanding immediately prior to such transaction are the direct or indirect holders of voting securities representing at least a majority of the votes entitled to be cast by all of such corporation’s or other entity’s voting securities outstanding immediately after such transaction.

(j) “Code” means the Internal Revenue Code of 1986, as amended.

(k) “Committee” means one or more committees or subcommittees of the Board consisting of two (2) or more Directors (or such lesser or greater number of Directors as shall constitute the minimum number permitted by Applicable Laws to establish a committee or sub-committee of the Board) appointed by the Board to administer the Plan in accordance with Section 4 below.

(l) “Common Stock” means the Company’s common stock, $0.0001 par value per share, as adjusted pursuant to Section 10 below.

(m) “Company” means LB Pharmaceuticals Inc, a Delaware corporation.

(n) “Consultant” means any person or entity, including an advisor but not an Employee, that renders, or has rendered, services to the Company, or any Parent, Subsidiary or Affiliate and is compensated for such services, and any Director whether compensated for such services or not.

(o) “Continuous Service Status” means the absence of any interruption or termination of service as an Employee or Consultant. Continuous Service Status as an Employee or Consultant shall not be considered interrupted or terminated in the case of: (i) Company approved sick leave; (ii) military leave; (iii) any other bona fide leave of absence approved by the Company, provided that, if an Employee is holding an Incentive Stock Option and such leave exceeds 3 months then, for purposes of Incentive Stock Option status only, such Employee’s service as an Employee shall be deemed terminated on the 1st day following such 3-month period and the Incentive Stock Option

 

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shall thereafter automatically become a Nonstatutory Stock Option in accordance with Applicable Laws, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to a written Company policy. Also, Continuous Service Status as an Employee or Consultant shall not be considered interrupted or terminated in the case of a transfer between locations of the Company or between the Company, its Parents, Subsidiaries or Affiliates, or their respective successors, or a change in status from an Employee to a Consultant or from a Consultant to an Employee.

(p) “Director” means a member of the Board.

(q) “Disability” means “disability” within the meaning of Section 22(e)(3) of the Code.

(r) “Effective Date” means the date on which this Plan comes into effect by reason of its adoption by the Board.

(s) “Employee” means any person employed by the Company, or any Parent, Subsidiary or Affiliate, with the status of employment determined pursuant to such factors as are deemed appropriate by the Company in its sole discretion, subject to any requirements of Applicable Laws, including the Code. The payment by the Company of a director’s fee shall not be sufficient to constitute “employment” of such director by the Company or any Parent, Subsidiary or Affiliate.

(t) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(u) “Fair Market Value” means, as of any date, (i) if the Shares are listed on a national securities exchange, the last sales price of the Shares on the applicable date on the national securities exchange on which the Common Stock is then traded, or if no sales of Common Stock occur on such date, then on the last preceding date on which there was a sale on such exchange; or (ii) if the Shares are not listed on a national securities exchange, but are traded in an over-the-counter market, the last sales price (or, if there is no last sales price reported, the average of the closing bid and asked prices) of the Shares on the immediately preceding date, or on the last preceding date on which there was a sale of the Common Stock on that market; or (iii) if the Shares are neither listed on a national securities exchange nor traded in an over-the-counter market, the price of the Shares as determined by the Administrator, in good faith on such basis as it deems appropriate. Notwithstanding the foregoing, in the case of the sale of the Shares, the actual sale price shall be the Fair Market Value of such Shares and with respect to the Awards granted on the date of the pricing of the Company’s initial public offering, “Fair Market Value” shall be equal to the price that a Share is offered to the public in connection with such initial public offering.

(v) “Family Members” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in- law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships) of the Participant, any person sharing the Participant’s household (other than a tenant or employee), a trust in which these persons (or the Participant) have more than 50% of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than 50% of the voting interests.

(w) “Incentive Stock Option” means an Option intended to, and which does, in fact, qualify as an incentive stock option within the meaning of Section 422 of the Code.

(x) “Involuntary Termination” means (unless another definition is provided in the applicable Option Agreement, Restricted Stock Agreement, employment agreement or other applicable written agreement) the termination of a Participant’s Continuous Service Status other than for (i) death, (ii) Disability or (iii) for Cause by the Company or a Parent, Subsidiary, Affiliate or successor thereto, as appropriate.

(y) “Listed Security” means any security of the Company that is listed or approved for listing on a national securities exchange or designated or approved for designation as a national market system security on an interdealer quotation system by the Financial Industry Regulatory Authority (or any successor thereto).

 

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(z) “Nonstatutory Stock Option” means an Option that is not intended to, or does not, in fact, qualify as an Incentive Stock Option.

(aa) “Option” means a stock option granted pursuant to the Plan.

(bb) “Option Agreement” means a written document, the form(s) of which shall be approved from time to time by the Administrator, reflecting the terms of an Option granted under the Plan and includes any documents attached to or incorporated into such Option

Agreement, including, but not limited to, a notice of stock option grant and a form of exercise notice.

(cc) “Option Exchange Program” means a program approved by the Administrator whereby outstanding Options (i) are exchanged for Options with a lower exercise price, Restricted Stock, cash or other property or (ii) are amended to decrease the exercise price as a result of a decline in the Fair Market Value.

(dd) “Optioned Stock” means Shares that are subject to an Option or that were issued pursuant to the exercise of an Option.

(ee) “Optionee” means an Employee or Consultant who receives an Option. (ff) “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of grant of the Award, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.

(ff) “Participant” means any holder of one or more Awards or Shares issued pursuant to an Award.

(gg) “Plan” means this 2023 LB Pharmaceuticals Inc Stock Incentive Plan, as it may be amended from time to time.

(i) “Prior Plan” means the LB Pharmaceuticals Inc 2018 Stock Incentive Plan as may have been amended from time to time.

(hh) “Restricted Stock” means Shares acquired pursuant to a right to purchase or receive Common Stock granted pursuant to Section 8 below.

(ii) “Restricted Stock Agreement” means a written document, the form(s) of which shall be approved from time to time by the Administrator, reflecting the terms of Restricted Stock granted under the Plan and includes any documents attached to such agreement.

(jj) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act, as amended from time to time, or any successor provision.

(kk) “Share” means a share of Common Stock, as adjusted in accordance with Section 10 below.

(ll) “Stock Exchange” means any stock exchange or consolidated stock price reporting system on which prices for the Common Stock are quoted at any given time.

(mm) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of grant of the Award, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.

 

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(nn) “Ten Percent Holder” means a person who owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary measured as of an Award’s date of grant.

3. Stock Subject to the Plan. Subject to the provisions of Section 10 below, the maximum aggregate number of Shares that may be issued under the Plan is 8,055,197 Shares, all of which Shares may be issued under the Plan pursuant to Incentive Stock Options. The Shares issued under the Plan may be authorized, but unissued, or reacquired Shares. If an Award should expire or become unexercisable for any reason without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unissued Shares that were subject thereto shall, unless the Plan shall have been terminated, continue to be available under the Plan for issuance pursuant to future Awards. In addition, any Shares which are retained by the Company upon exercise of an Award in order to satisfy the exercise or purchase price for such Award or any withholding taxes due with respect to such Award shall be treated as not issued and shall continue to be available under the Plan for issuance pursuant to future Awards. Shares issued under the Plan and later forfeited to the Company due to the failure to vest or repurchased by the Company at the original purchase price paid to the Company for the Shares (including, without limitation, upon forfeiture to or repurchase by the Company in connection with the termination of a Participant’s Continuous Service Status) shall again be available for future grant under the Plan. Notwithstanding the foregoing, subject to the provisions of Section 10 below, in no event shall the maximum aggregate number of Shares that may be issued under the Plan pursuant to Incentive Stock Options exceed the number set forth in the first sentence of this Section 3 plus, to the extent allowable under Section 422 of the Code and the Treasury Regulations promulgated thereunder, any Shares that again become available for issuance pursuant to the remaining provisions of this Section 3.

4. Administration of the Plan.

(a) General. The Plan shall be administered by the Board, a Committee appointed by the Board, or any combination thereof, as determined by the Board. The Plan may be administered by different administrative bodies with respect to different classes of Participants and, if permitted by Applicable Laws, the Board may authorize one or more officers of the Company to make Awards under the Plan to Employees and Consultants (who are not subject to Section 16 of the Exchange Act) within parameters specified by the Board.

(b) Committee Composition. If a Committee has been appointed pursuant to this Section 4, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of any Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies (however caused) and dissolve a Committee and thereafter directly administer the Plan, all to the extent permitted by Applicable Laws and, in the case of a Committee administering the Plan in accordance with the requirements of Rule 16b-3 or Section 162(m) of the Code, to the extent permitted or required by such provisions.

(c) Powers of the Administrator. Subject to the provisions of the Plan and, in the case of a Committee, the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its sole discretion:

(i) to determine the Fair Market Value in accordance with Section 2(t) above, provided that such determination shall be applied consistently with respect to Participants under the Plan;

(ii) to select the Employees and Consultants to whom Awards may from time to time be granted;

(iii) to determine the number of Shares to be covered by each Award;

(iv) to approve the form(s) of agreement(s) and other related documents used under the Plan;

 

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(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder, which terms and conditions include but are not limited to the exercise or purchase price, the time or times when Awards may vest and/or be exercised (which may be based on performance criteria), the circumstances (if any) when vesting will be accelerated or forfeiture restrictions will be waived, and any restriction or limitation regarding any Award, Optioned Stock, or Restricted Stock;

(vi) to amend any outstanding Award or agreement related to any Award, Optioned Stock, or Restricted Stock, including any amendment adjusting vesting (e.g., in connection with a change in the terms or conditions under which such person is providing services to the Company), provided that no amendment shall be made that would materially and adversely affect the rights of any Participant without his or her consent;

(vii) to determine whether and under what circumstances an Option may be settled in cash under Section 7(c)(iii) below instead of Common Stock;

(viii) subject to Applicable Laws, to implement an Option Exchange Program and establish the terms and conditions of such Option Exchange Program without consent of the holders of capital stock of the Company, provided that no amendment or adjustment to an Option that would materially and adversely affect the rights of any Participant shall be made without his or her consent;

(ix) to approve addenda pursuant to Section 17 below or to grant Awards to, or to modify the terms of, any outstanding Option Agreement or Restricted Stock Agreement or any agreement related to any Award, Optioned Stock, or Restricted Stock held by Participants who are foreign nationals or employed outside of the United States with such terms and conditions as the Administrator deems necessary or appropriate to accommodate differences in local law, tax policy or custom which deviate from the terms and conditions set forth in this Plan to the extent necessary or appropriate to accommodate such differences; and

(x) to construe and interpret the terms of the Plan, any Option Agreement or Restricted Stock Agreement, and any agreement related to any Award, Optioned Stock, or Restricted Stock, which constructions, interpretations and decisions shall be final and binding on all Participants.

(d) Indemnification. To the maximum extent permitted by Applicable Laws, each member of the Committee (including officers of the Company, if applicable), or of the Board, as applicable, shall be indemnified and held harmless by the Company against and from (i) any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan or pursuant to the terms and conditions of any Award except for actions taken in bad faith or failures to act in good faith, and (ii) any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit, or proceeding against him or her, provided that such member shall give the Company an opportunity, at its own expense, to handle and defend any such claim, action, suit or proceeding before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under any other power that the Company may have to indemnify or hold harmless each such person.

5. Eligibility.

(a) Recipients of Grants. Nonstatutory Stock Options and Restricted Stock may be granted to Employees and Consultants. Incentive Stock Options may be granted only to Employees, provided that Employees of Affiliates shall not be eligible to receive Incentive Stock Options. The Administrator’s granting of a particular type of Award to a Participant will not require the Administrator to grant any other type of Award to such Participant.

(b) Type of Option. Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.

(c) ISO $100,000 Limitation. Notwithstanding any designation under Section 5(b) above, to the extent that the aggregate Fair Market Value of Shares with respect to which options designated as incentive stock options are exercisable for the first time by any Optionee during any calendar year (under all plans of the Company

 

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or any Parent or Subsidiary) exceeds $100,000, such excess options shall be treated as nonstatutory stock options. For purposes of this Section 5(c), incentive stock options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares subject to an incentive stock option shall be determined as of the date of the grant of such option.

(d) No Employment Rights. Neither the Plan nor any Award shall confer upon any Employee or Consultant any right with respect to continuation of an employment or consulting relationship with the Company (any Parent, Subsidiary or Affiliate), nor shall it interfere in any way with such Employee’s or Consultant’s right or the Company’s (Parent’s, Subsidiary’s or Affiliate’s) right to terminate his or her employment or consulting relationship at any time, with or without cause.

6. Term of Plan. The Plan shall become effective upon the Effective Date and shall continue in effect for a term of 10 years unless sooner terminated under Section 13 below.

7. Options.

(a) Term of Option. The term of each Option shall be the term stated in the Option Agreement; provided that the term shall be no more than 10 years from the date of grant thereof or such shorter term as may be provided in the Option Agreement and provided further that, in the case of an Incentive Stock Option granted to a person who at the time of such grant is a Ten Percent Holder, the term of the Option shall be 5 years from the date of grant thereof or such shorter term as may be provided in the Option Agreement.

(b) Option Exercise Price and Consideration.

(i) Exercise Price. The per Share exercise price for the Shares to be issued pursuant to the exercise of an Option shall be such price as is determined by the Administrator and set forth in the Option Agreement, but shall be subject to the following:

(1) In the case of an Incentive Stock Option

a. granted to an Employee who at the time of grant is a Ten Percent Holder, the per Share exercise price shall be no less than 110% of the Fair Market Value on the date of grant;

b. granted to any other Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value on the date of grant;

(2) Except as provided in subsection (3) below, in the case of a Nonstatutory Stock Option the per Share exercise price shall be such price as is determined by the Administrator, provided that, if the per Share exercise price is less than 100% of the Fair Market Value on the date of grant, it shall otherwise comply with all Applicable Laws, including Section 409A of the Code; and

(3) Notwithstanding the foregoing, Options may be granted with a per Share exercise price other than as required above pursuant to a merger or other corporate transaction.

(ii) Permissible Consideration. The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option and to the extent required by Applicable Laws, shall be determined at the time of grant) and may consist entirely of (1) cash; (2) check; (3) to the extent permitted under, and in accordance with, Applicable Laws, delivery of a promissory note with such recourse, interest, security and redemption provisions as the Administrator determines to be appropriate (subject to the provisions of Section 152 of the Delaware General Corporation Law); (4) cancellation of indebtedness; (5) other previously owned Shares that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which the Option is exercised; (6) a Cashless Exercise; (7) such other consideration and method of payment permitted under Applicable Laws; or (8) any combination of the foregoing methods of payment. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company and the Administrator may, in its sole discretion, refuse to accept a particular form of consideration at the time of any Option exercise.

 

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(c) Exercise of Option.

(i) General.

(1) Exercisability. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator, consistent with the terms of the Plan and reflected in the Option Agreement, including vesting requirements and/or performance criteria with respect to the Company, and Parent, Subsidiary or Affiliate, and/or the Optionee.

(2) Leave of Absence. The Administrator shall have the discretion to determine at any time whether and to what extent the vesting of Options shall be tolled during any leave of absence; provided, however, that in the absence of such determination, vesting of Options shall continue during any paid leave and shall be tolled during any unpaid leave (unless otherwise required by Applicable Laws). Notwithstanding the foregoing, in the event of military leave, vesting shall toll during any unpaid portion of such leave, provided that, upon an Optionee’s returning from military leave (under conditions that would entitle him or her to protection upon such return under the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended), he or she shall be given vesting credit with respect to Options to the same extent as would have applied had the Optionee continued to provide services to the Company (or any Parent, Subsidiary or Affiliate, if applicable) throughout the leave on the same terms as he or she was providing services immediately prior to such leave.

(3) Minimum Exercise Requirements. An Option may not be exercised for a fraction of a Share. The Administrator may require that an Option be exercised as to a minimum number of Shares, provided that such requirement shall not prevent an Optionee from exercising the full number of Shares as to which the Option is then exercisable.

(4) Procedures for and Results of Exercise. An Option shall be deemed exercised when written notice of such exercise has been received by the Company in accordance with the terms of the Option Agreement by the person entitled to exercise the Option and the Company has received full payment for the Shares with respect to which the Option is exercised and has paid, or made arrangements to satisfy, any applicable taxes, withholding, required deductions or other required payments in accordance with Section 9 below. The exercise of an Option shall result in a decrease in the number of Shares that thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.

(5) Rights as Holder of Capital Stock. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a holder of capital stock shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock is issued, except as provided in Section 10 below.

(ii) Termination of Continuous Service Status. The Administrator shall establish and set forth in the applicable Option Agreement the terms and conditions upon which an Option shall remain exercisable, if at all, following termination of an Optionee’s Continuous Service Status, which provisions may be waived or modified by the Administrator at any time. To the extent that an Option Agreement does not specify the terms and conditions upon which an Option shall terminate upon termination of an Optionee’s Continuous Service Status, the following provisions shall apply:

(1) General Provisions. If the Optionee (or other person entitled to exercise the Option) does not exercise the Option to the extent so entitled within the time specified below, the Option shall terminate and the Optioned Stock underlying the unexercised portion of the Option shall revert to the Plan. In no event may any Option be exercised after the expiration of the Option term as set forth in the Option Agreement (and subject to this Section 7).

 

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(2) Termination other than Upon Disability or Death or for Cause. In the event of termination of an Optionee’s Continuous Service Status other than under the circumstances set forth in the subsections (3) through (5) below, such Optionee may exercise any outstanding Option at any time within 3 month(s) following such termination to the extent the Optionee is vested in the Optioned Stock.

(3) Disability of Optionee. In the event of termination of an Optionee’s Continuous Service Status as a result of his or her Disability, such Optionee may exercise any outstanding Option at any time within 12 month(s) following such termination to the extent the Optionee is vested in the Optioned Stock.

(4) Death of Optionee. In the event of the death of an Optionee during the period of Continuous Service Status since the date of grant of any outstanding Option, or within 3 month(s) following termination of the Optionee’s Continuous Service Status, the Option may be exercised by any beneficiaries designated in accordance with Section 15, or if there are no such beneficiaries, by the Optionee’s estate, or by a person who acquired the right to exercise the Option by bequest or inheritance, at any time within 12 month(s) following the date the Optionee’s Continuous Service Status terminated, but only to the extent the Optionee is vested in the Optioned Stock.

(5) Termination for Cause. In the event of termination of an Optionee’s Continuous Service Status for Cause, any outstanding Option (including any vested portion thereof) held by such Optionee shall immediately terminate in its entirety upon first notification to the Optionee of termination of the Optionee’s Continuous Service Status for Cause. If an Optionee’s Continuous Service Status is suspended pending an investigation of whether the Optionee’s Continuous Service Status will be terminated for Cause, all the Optionee’s rights under any Option, including the right to exercise the Option, shall be suspended during the investigation period. Nothing in this Section 7(c)(ii)(5) shall in any way limit the Company’s right to purchase unvested Shares issued upon exercise of an Option as set forth in the applicable Option Agreement.

(iii) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares an Option previously granted under the Plan based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.

8. Restricted Stock.

(a) Rights to Purchase. When a right to purchase or receive Restricted Stock is granted under the Plan, the Company shall advise the recipient in writing of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase or receive, the price to be paid, if any (which shall be as determined by the Administrator, subject to Applicable Laws, including any applicable securities laws), and the time within which such person must accept such offer. The permissible consideration for Restricted Stock shall be determined by the Administrator and shall be the same as is set forth in Section 7(b)(ii) above with respect to exercise of Options. The offer to purchase or receive Shares shall be accepted by execution of a Restricted Stock Agreement in the form determined by the Administrator.

(b) Repurchase Option.

(i) General. Unless the Administrator determines otherwise, the Restricted Stock Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the Participant’s Continuous Service Status for any reason (including death or Disability), at a purchase price for the Shares equal to the original purchase price paid by the Participant to the Company for such Shares or, if no purchase price was paid, the Fair Market Value of the Shares at the time of the original grant of the Restricted Stock, and may be paid by cancellation of any indebtedness of the Participant to the Company. The repurchase option shall lapse at such rate as the Administrator may determine.

(ii) Leave of Absence. The Administrator shall have the discretion to determine at any time whether and to what extent the lapsing of Company repurchase rights shall be tolled during any leave of absence; provided, however, that in the absence of such determination, such lapsing shall continue during any paid leave and shall be tolled during any unpaid leave (unless otherwise required by Applicable Laws). Notwithstanding

 

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the foregoing, in the event of military leave, the lapsing of Company repurchase rights shall toll during any unpaid portion of such leave, provided that, upon a Participant’s returning from military leave (under conditions that would entitle him or her to protection upon such return under the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended), he or she shall be given vesting credit with respect to Shares purchased pursuant to the Restricted Stock Agreement to the same extent as would have applied had the Participant continued to provide services to the Company (or any Parent, Subsidiary or Affiliate, if applicable) throughout the leave on the same terms as he or she was providing services immediately prior to such leave.

(c) Other Provisions. The Restricted Stock Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. In addition, the provisions of Restricted Stock Agreements need not be the same with respect to each Participant.

(d) Rights as a Holder of Capital Stock. Once the Restricted Stock is purchased, the Participant shall have the rights equivalent to those of a holder of capital stock, and shall be a record holder when his or her purchase and the issuance of the Shares is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Restricted Stock is purchased, except as provided in Section 10 below.

9. Taxes.

(a) As a condition of the grant, vesting and exercise of an Award, the Participant (or in the case of the Participant’s death or a permitted transferee, the person holding or exercising the Award) shall make such arrangements as the Administrator may require for the satisfaction of any applicable U.S. federal, state, local or foreign tax, withholding, and any other required deductions or payments that may arise in connection with such Award. The Company shall not be required to issue any Shares under the Plan until such obligations are satisfied.

(b) The Administrator may, to the extent permitted under Applicable Laws, permit a Participant (or in the case of the Participant’s death or a permitted transferee, the person holding or exercising the Award) to satisfy all or part of his or her tax, withholding, or any other required deductions or payments by Cashless Exercise or by surrendering Shares (either directly or by stock attestation) that he or she previously acquired; provided that, unless specifically permitted by the Company, any such Cashless Exercise must be an approved broker-assisted Cashless Exercise or the Shares withheld in the Cashless Exercise must be limited to avoid financial accounting charges under applicable accounting guidance and any such surrendered Shares must have been previously held for any minimum duration required to avoid financial accounting charges under applicable accounting guidance. Any payment of taxes by surrendering Shares to the Company may be subject to restrictions, including, but not limited to, any restrictions required by rules of the Securities and Exchange Commission.

(c) Notwithstanding any provisions of this Plan to the contrary, the Company does not guarantee to any Participant or any other person with an interest in an Award that (i) any Award intended to be exempt from Code Section 409A shall be so exempt, (ii) any Award intended to comply with Code Section 409A or Code Section 422 shall so comply, or (iii) any Award shall otherwise receive a specific tax treatment under any other applicable tax law, nor in any such case will the Company or any Affiliate be required to indemnify, defend or hold harmless any person with respect to the tax consequences of any Award.

10. Adjustments Upon Changes in Capitalization, Merger or Certain Other Transactions.

(a) Changes in Capitalization. Subject to any action required under Applicable Laws by the holders of capital stock of the Company, (i) the numbers and class of Shares or other stock or securities: (x) available for future Awards under Section 3 above and (y) covered by each outstanding Award, (ii) the exercise price per Share of each such outstanding Option, and (iii) any repurchase price per Share applicable to Shares issued pursuant to any Award, shall be automatically proportionately adjusted in the event of a stock split, reverse stock split, stock dividend, combination, consolidation, reclassification of the Shares or subdivision of the Shares. In the event of any increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, a declaration of an extraordinary dividend with respect to the Shares payable in a form other than Shares in an amount that has a material effect on the Fair Market Value, a recapitalization (including a recapitalization through a large nonrecurring

 

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cash dividend), a rights offering, a reorganization, merger, a spin-off, split-up, change in corporate structure or a similar occurrence, the Administrator shall make appropriate adjustments, in its discretion, in one or more of (i) the numbers and class of Shares or other stock or securities: (x) available for future Awards under Section 3 above and (y) covered by each outstanding Award, (ii) the exercise price per Share of each outstanding Option and (iii) any repurchase price per Share applicable to Shares issued pursuant to any Award, and any such adjustment by the Administrator shall be made in the Administrator’s sole and absolute discretion and shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Award. If, by reason of a transaction described in this Section 10(a) or an adjustment pursuant to this Section 10(a), a Participant’s Award agreement or agreement related to any Optioned Stock or Restricted Stock covers additional or different shares of stock or securities, then such additional or different shares, and the Award agreement or agreement related to the Optioned Stock or Restricted Stock in respect thereof, shall be subject to all of the terms, conditions and restrictions which were applicable to the Award, Optioned Stock and Restricted Stock prior to such adjustment.

(b) Dissolution or Liquidation. In the event of the dissolution or liquidation of the Company, each Award will terminate immediately prior to the consummation of such action, unless otherwise determined by the Administrator.

(c) Corporate Transactions. In the event of (i) a transfer of all or substantially all of the Company’s assets, (ii) a merger, consolidation or other capital reorganization or business combination transaction of the Company with or into another corporation, entity or person, or (iii) the consummation of a transaction, or series of related transactions, in which any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of more than 50% of the Company’s then outstanding capital stock (a “Corporate Transaction”), each outstanding Award (vested or unvested) will be treated as the Administrator determines, which determination may be made without the consent of any Participant and need not treat all outstanding Awards (or portion thereof) in an identical manner. Such determination, without the consent of any Participant, may provide (without limitation) for one or more of the following in the event of a Corporate Transaction: (A) the continuation of such outstanding Awards by the Company (if the Company is the surviving corporation); (B) the assumption of such outstanding Awards by the surviving corporation or its parent; (C) the substitution by the surviving corporation or its parent of new options or equity awards for such Awards; (D) the cancellation of such Awards in exchange for a payment to the Participants equal to the excess of (1) the Fair Market Value of the Shares subject to such Awards as of the closing date of such Corporate Transaction over (2) the exercise price or purchase price paid or to be paid for the Shares subject to the Awards; or (E) the cancellation of any outstanding Options or an outstanding right to purchase Restricted Stock, in either case, for no consideration. Notwithstanding anything under this Plan, any Award agreement or otherwise, any escrow, holdback, earn-out or similar provisions agreed to pursuant to, or in connection with, a Corporate Transaction shall, unless otherwise determined by the Board, apply to any payment or other right a Participant may be entitled to under this Plan, if any, to the same extent and in the same manner as such provisions apply generally to the holders of the Company’s Common Stock with respect to the Corporate Transaction, but only to the extent permitted by Applicable Law, including (without limitation), Section 409A of the Code.

11. Non-Transferability of Awards.

(a) General. Except as set forth in this Section 11, Awards (or any rights of such Awards) may not be sold, pledged, encumbered, assigned, hypothecated, or disposed of or otherwise transferred in any manner other than by will or by the laws of descent or distribution. The designation of a beneficiary by a Participant will not constitute a transfer. An Option may be exercised, during the lifetime of the holder of the Option, only by such holder or a transferee permitted by this Section 11.

(b) Limited Transferability Rights. Notwithstanding anything else in this Section 11, the Administrator may in its sole discretion provide that any Nonstatutory Stock Options may be transferred by instrument to an inter vivos or testamentary trust in which the Options are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift to Family Members. Further, beginning with (i) the period when the Company begins to rely on the exemption described in Rule 12h-1(f)(1) promulgated under the Exchange Act, as determined by the Board in its sole discretion, and (ii) ending on the earlier of (A) the date when the Company ceases to rely on such exemption,

 

11


as determined by the Board in its sole discretion, or (B) the date when the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, an Option, or prior to exercise, the Shares subject to the Option, may not be pledged, hypothecated or otherwise transferred or disposed of, in any manner, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b) of the Exchange Act, respectively), other than to (i) persons who are Family Members through gifts or domestic relations orders, or (ii) to an executor or guardian of the Participant upon the death or disability of the Participant. Notwithstanding the foregoing sentence, the Board, in its sole discretion, may permit transfers of Nonstatutory Stock Options to the Company or in connection with a Change of Control or other acquisition transactions involving the Company to the extent permitted by Rule 12h-1(f).

12. Time of Granting Awards. The date of grant of an Award shall, for all purposes, be the date on which the Administrator makes the determination granting such Award, or such other date as is determined by the Administrator.

13. Amendment and Termination of the Plan. The Board may at any time amend or terminate the Plan, but no amendment or termination shall be made that would materially and adversely affect the rights of any Participant under any outstanding Award, without his or her consent. In addition, to the extent necessary and desirable to comply with Applicable Laws, the Company shall obtain the approval of holders of capital stock with respect to any Plan amendment in such a manner and to such a degree as required. Notwithstanding the foregoing, the authority of the Board and the Administrator under this Section 13 and to otherwise administer the Plan with respect to then-outstanding Awards will extend beyond the date of this Plan’s termination. In addition, all unexpired Awards will continue in force and effect after termination of this Plan except as they may lapse or be terminated by their own terms and conditions.

14. Conditions Upon Issuance of Shares. Notwithstanding any other provision of the Plan or any agreement entered into by the Company pursuant to the Plan, the Company shall not be obligated, and shall have no liability for failure, to issue or deliver any Shares under the Plan unless such issuance or delivery would comply with Applicable Laws, with such compliance determined by the Company in consultation with its legal counsel. As a condition to the exercise of any Option or purchase of any Restricted Stock, the Company may require the person exercising the Option or purchasing the Restricted Stock to represent and warrant at the time of any such exercise or purchase that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is advisable or required by Applicable Laws. Shares issued upon exercise of Options or purchase of Restricted Stock prior to the date, if ever, on which the Common Stock becomes a Listed Security shall be subject to a right of first refusal in favor of the Company pursuant to which the Participant will be required to offer Shares to the Company before selling or transferring them to any third party on such terms and subject to such conditions as is reflected in the applicable Option Agreement or Restricted Stock Agreement.

15. Beneficiaries. If permitted by the Company, a Participant may designate one or more beneficiaries with respect to an Award by timely filing the prescribed form with the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Participant’s death. Except as otherwise provided in an Award agreement, if no beneficiary was designated or if no designated beneficiary survives the Participant, then after a Participant’s death any vested Award(s) shall be transferred or distributed to the Participant’s estate or to any person who has the right to acquire the Award by bequest or inheritance.

16. Approval of Holders of Capital Stock. If required by Applicable Laws, continuance of the Plan shall be subject to approval by the holders of capital stock of the Company within 12 months before or after the date the Plan is adopted or, to the extent required by Applicable Laws, any date the Plan is amended. Such approval shall be obtained in the manner and to the degree required under Applicable Laws.

17. Addenda. The Administrator may approve such addenda to the Plan as it may consider necessary or appropriate for the purpose of granting Awards to Employees or Consultants, which Awards may contain such terms and conditions as the Administrator deems necessary or appropriate to accommodate differences in local law, tax policy or custom, which may deviate from the terms and conditions set forth in this Plan. The terms of any such addenda shall supersede the terms of the Plan to the extent necessary to accommodate such differences but shall not otherwise affect the terms of the Plan as in effect for any other purpose.

 

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18. Information to Holders of Options. In the event the Company is relying on the exemption provided by Rule 12h-1(f) under the Exchange Act, the Company shall provide the information described in Rule 701(e)(3), (4) and (5) of the Securities Act of 1933, as amended, to all holders of Options in accordance with the requirements thereunder until such time as the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. The Company may request that holders of Options agree to keep the information to be provided pursuant to this Section confidential. If the holder does not agree to keep the information to be provided pursuant to this Section confidential, then the Company will not be required to provide the information unless otherwise required pursuant to Rule 12h-1(f)(1) of the Exchange Act.

 

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ADDENDUM A

LB Pharmaceuticals Inc 2023 Stock Incentive Plan

(California Participants)

Prior to the date, if ever, on which the Common Stock becomes a Listed Security and/or the Company is subject to the reporting requirements of the Exchange Act, the terms set forth herein shall apply to Awards issued to California Participants. All capitalized terms used herein but not otherwise defined shall have the respective meanings set forth in the Plan.

1. The following rules shall apply to any Option in the event of termination of the Participant’s Continuous Service Status:

(a) If such termination was for reasons other than death, “Permanent Disability” (as defined below), or Cause, the Participant shall have at least 30 days after the date of such termination to exercise his or her Option to the extent the Participant is entitled to exercise on his or her termination date, provided that in no event shall the Option be exercisable after the expiration of the term as set forth in the Option Agreement.

(b) If such termination was due to death or Permanent Disability, the Participant shall have at least 6 months after the date of such termination to exercise his or her Option to the extent the Participant is entitled to exercise on his or her termination date, provided that in no event shall the Option be exercisable after the expiration of the term as set forth in the Option Agreement.

“Permanent Disability” for purposes of this Addendum shall mean the inability of the Participant, in the opinion of a qualified physician acceptable to the Company, to perform the major duties of the Participant’s position with the Company or any Parent or Subsidiary because of the sickness or injury of the Participant.

2. Notwithstanding anything to the contrary in Section 10(a) of the Plan, the Administrator shall in any event make such adjustments as may be required by Section 25102(o) of the California Corporations Code.

3. Notwithstanding anything stated herein to the contrary, no Option shall be exercisable on or after the 10th anniversary of the date of grant and any Award agreement shall terminate on or before the 10th anniversary of the date of grant.

4. The Company shall furnish summary financial information (audited or unaudited) of the Company’s financial condition and results of operations, consistent with the requirements of Applicable Laws, at least annually to each California Participant during the period such Participant has one or more Awards outstanding, and in the case of an individual who acquired Shares pursuant to the Plan, during the period such Participant owns such Shares; provided, however, the Company shall not be required to provide such information if (i) the issuance is limited to key persons whose duties in connection with the Company assure their access to equivalent information or (ii) the Plan or any agreement complies with all conditions of Rule 701 of the Securities Act of 1933, as amended; provided that for purposes of determining such compliance, any registered domestic partner shall be considered a “family member” as that term is defined in Rule 701.

Exhibit 10.6

AMENDMENT TO THE

LB PHARMACEUTICALS INC

2023 STOCK INCENTIVE PLAN

A. LB Pharmaceuticals Inc, a Delaware corporation (the “Company”) established the Company’s 2023 Stock Incentive Plan by an original instrument adopted by the Company on August 25, 2023 (the “Plan”);

B. The Plan currently provides for 8,055,197 shares of Common Stock to be reserved for issuance under the Plan; and

C. The Company now wishes to amend the Plan to adjust the number of shares of Common Stock reserved under the plan to 12,955,197 shares.

The Plan is amended as follows:

 

1.

The reference in Section 3 to “8,055,197” is amended to reference “12,955,197.”

 

2.

In all other respects, the Plan remains the same.

[SIGNATURE PAGE FOLLOWS]


The Company has caused this Amendment to the Company’s 2023 Stock Incentive Plan to be executed this 2nd day of December, 2024.

 

LB PHARMACEUTICALS INC

By:  

/s/ Heather Turner

  Heather Turner
  Chief Executive Officer

Exhibit 10.7

LB PHARMACEUTICALS INC

2023 STOCK INCENTIVE PLAN

NOTICE OF STOCK OPTION GRANT

 

[Insert Name here]
Address:
         
         

You (“you” or “Optionee”) have been granted an option (the “Option”) to purchase Common Stock (“Shares”) of LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), pursuant to the Company’s 2023 Stock Incentive Plan appended hereto as Appendix 1 (the “Plan”), the Stock Option Agreement appended hereto as Appendix 2 (the “Stock Option Agreement”), and the following terms:

 

Date of Grant:

            

Exercise Price Per Share:

   $1.50            

Total Number of Shares:

            

Total Exercise Price:

   $         

Type of Option:

         Shares Incentive Stock Option
         Shares Nonstatutory Stock Option

Expiration Date:

            

Vesting Commencement Date:

            

Vesting/Exercise Schedule:

  

So long as your Continuous Service Status (as defined in the Plan) does not terminate (and provided that no vesting shall occur following the Termination Date (as defined in Section 5 of the Stock Option Agreement)), the Shares underlying this Option shall vest and become exercisable in accordance with the following schedule: [      [Insert 1/36th of total] of the Total Number of Shares shall vest and become exercisable on the day of each month after the Date of Grant (and if there is no corresponding day, the last day of the month).]

 

Notwithstanding the above, if Optionee is terminated without Cause (as defined in the Plan) by the Company (or a successor, if appropriate) in connection with or following the consummation of a Change of Control (as defined in the Plan), then the vesting and exercisability of this Option

 

1


   shall accelerate such that this Option shall become vested and exercisable to the extent of 100% of the Shares then unvested. The acceleration of vesting provided for in the previous sentence shall occur immediately prior to the Termination Date. In the event of a Change of Control, if the Company’s successor does not agree to assume this Option, or to substitute an equivalent award or right for this Option, and Optionee does not voluntarily resign without continuing with the Company’s successor, then any acceleration of vesting that would otherwise occur upon Optionee’s termination shall occur immediately prior to, and contingent upon, the consummation of such Change of Control.

Termination Period:

   Provided that your Continuous Service Status has not been terminated for Cause, you may exercise this Option (to the extent vested) for 3 months after the Termination Date except as set out in Section 5 of the Stock Option Agreement (but in no event later than the Expiration Date set forth above). You are responsible for keeping track of these exercise periods following the Termination Date. The Company will not provide further notice of such periods.

Transferability:

   You may not transfer this Option except as set forth in Section 6 of the Stock Option Agreement.

[Signature Page Follows]

 

2


By your signature and the signature of the Company’s representative below or by otherwise accepting or exercising this Option, you and the Company agree that this Option is granted under and governed by the terms and conditions of this Notice, the Plan and the Stock Option Agreement, both of which are attached to and made a part of this Notice.

In addition, you agree and acknowledge that your rights to any Shares underlying this Option will vest only as you provide services to the Company over time, that the grant of this Option is not as consideration for services you rendered to the Company prior to your date of hire or engagement, and that nothing in this Notice or the attached documents confers upon you any right to continue your employment or consulting relationship with the Company for any period of time, nor does it interfere in any way with your right or the Company’s right to terminate that relationship at any time, for any reason, with or without cause, subject to Applicable Laws. Also, to the extent applicable, the Exercise Price Per Share has been set in good faith compliance with the applicable guidance issued by the IRS under Section 409A of the Code. However, there is no guarantee that the IRS will agree with the valuation, and by signing below, you agree and acknowledge that the Company, its Directors, officers, employees, agents and stockholders shall not be held liable for any applicable costs, taxes, or penalties associated with this Option if, in fact, the IRS or any other person (including, without limitation, a successor corporation or an acquirer in a Change of Control) were to determine that this Option constitutes deferred compensation under Section 409A of the Code. You should consult with your own tax advisor concerning the tax consequences of such a determination by the IRS. For purposes of this paragraph, the term “Company” will be interpreted to include any Parenbt, Subsidiary or Affiliate.

 

THE COMPANY:
LB PHARMACEUTICALS INC
By:  

 

  (Signature)
Name:  

 

Title:  

 

OPTIONEE:

 

(PRINT NAME)

 

(Signature)
Address:

 

 

 

 

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LB PHARMACEUTICALS INC

2023 STOCK INCENTIVE PLAN

STOCK OPTION AGREEMENT

This Stock Option Agreement is made effective as of    , 2023 by and between LB Pharmaceuticals Inc, a Delaware corporation (the “Company”) and the person (“Optionee”) named in the Notice of Stock Option Grant (the “Notice”), and provides as follows:

1.  Grant of Option. The Company hereby grants to the Optionee an option (the “Option”) to purchase the total number of shares of Common Stock (the “Shares”) set forth in the Notice, at the exercise price per Share set forth in the Notice (the “Exercise Price”) subject to the terms, definitions and provisions of the 2023 LB Pharmaceuticals Inc Stock Incentive Plan (the “Plan”) adopted by the Company, which is incorporated in this Stock Option Agreement (this “Agreement”) by reference. Unless otherwise defined in this Agreement, the terms used in this Agreement or the Notice shall have the meanings defined in the Plan.

2.  Designation of Option. This Option is intended to be an Incentive Stock Option as defined in Section 422 of the Code only to the extent so designated in the Notice, and to the extent it is not so designated or to the extent this Option does not qualify as an Incentive Stock Option, it is intended to be a Nonstatutory Stock Option.

Notwithstanding the above, if designated as an Incentive Stock Option, in the event that the Shares subject to this Option (and all other incentive stock options granted to Optionee by the Company or any Parent or Subsidiary, including under other plans) that first become exercisable in any calendar year have an aggregate fair market value (determined for each Share as of the date of grant of the option covering such Share) in excess of $100,000, the Shares in excess of $100,000 shall be treated as subject to a nonstatutory stock option, in accordance with Section 5(c) of the Plan.

3.  Exercise of Option. This Option shall be exercisable during its term in accordance with the Vesting/Exercise Schedule set out in the Notice and with the provisions of Section 7(c) of the Plan as follows:

(a)  Right to Exercise.

(i)  This Option may not be exercised for a fraction of a share.

(ii)  In the event of Optionee’s death or Disability (if Optionee is a natural person) or other termination of Continuous Service Status, the exercisability of this Option is governed by Section 5 below, subject to the limitations contained in this Section 3.

(iii)  In no event may this Option be exercised after the Expiration Date set forth in the Notice.


(b)  Method of Exercise.

(i)  This Option shall be exercisable by execution and delivery of the Exercise Agreement attached hereto as Attachment A or of any other form of written notice approved for such purpose by the Company which shall state Optionee’s election to exercise this Option, the number of Shares in respect of which this Option is being exercised, and such other representations and agreements as to the holder’s investment intent with respect to such Shares as may be required by the Company pursuant to the provisions of the Plan. Such written notice shall be signed by Optionee and shall be delivered to the Company by such means as are determined by the Company in its discretion to constitute adequate delivery. The written notice shall be accompanied by payment of the aggregate Exercise Price for the purchased Shares.

(ii)  As a condition to the grant, vesting and exercise of this Option and as further set forth in Section 9 of the Plan, Optionee hereby agrees to make adequate provision for the satisfaction of (and will indemnify the Company and any Subsidiary or Affiliate for) any applicable taxes or tax withholdings, social contributions, required deductions, or other payments, if any (“Tax-Related Items”), which arise upon the grant, vesting or exercise of this Option, ownership or disposition of Shares, receipt of dividends, if any, or otherwise in connection with this Option or the Shares, whether by withholding, direct payment to the Company, or otherwise as determined by the Company in its sole discretion. Regardless of any action the Company or any Subsidiary or Affiliate takes with respect to any or all applicable Tax-Related Items, Optionee acknowledges and agrees that the ultimate liability for all Tax-Related Items is and remains Optionee’s responsibility and may exceed any amount actually withheld by the Company or any Subsidiary or Affiliate. Optionee further acknowledges and agrees that Optionee is solely responsible for filing all relevant documentation that may be required in relation to this Option or any Tax-Related Items other than filings or documentation that is the specific obligation of the Company or any Subsidiary or Affiliate pursuant to Applicable Laws, such as but not limited to personal or entity income tax returns or reporting statements in relation to the grant, vesting or exercise of this Option, the holding of Shares or any bank or brokerage account, the subsequent sale of Shares, and the receipt of any dividends. Optionee further acknowledges that the Company makes no representations or undertakings regarding the treatment of any Tax-Related Items and does not commit to and is under no obligation to structure the terms or any aspect of the Option to reduce or eliminate Optionee’s liability for Tax-Related Items or achieve any particular tax result. Optionee also understands that Applicable Laws may require varying Share or option valuation methods for purposes of calculating Tax-Related Items, and the Company assumes no responsibility or liability in relation to any such valuation or for any calculation or reporting of income or Tax-Related Items that may be required of Optionee under Applicable Laws. Further, if Optionee has become subject to Tax-Related Items in more than one jurisdiction, Optionee acknowledges that the Company or any Subsidiary or Affiliate may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

(iii)  The Company is not obligated, and will have no liability for failure, to issue or deliver any Shares upon exercise of this Option unless such issuance or delivery would comply with the Applicable Laws, with such compliance determined by the Company in consultation with its legal counsel. Furthermore, Optionee understands that the Applicable Laws of the country in which Optionee is located, residing or working at the time of grant, vesting, and/or exercise of this Option (including any rules or regulations governing securities, foreign exchange, tax, labor or other matters) may restrict or prevent exercise of this Option. This Option may not be exercised until such time as the Plan has been approved by the holders of capital stock

 

2


of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such Shares would constitute a violation of any Applicable Laws, including any applicable U.S. federal or state securities laws or any other law or regulation, including any rule under Part 221 of Title 12 of the Code of Federal Regulations as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by the Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Optionee on the date on which this Option is exercised with respect to such Shares, subject to Applicable Laws.

(iv)  Subject to compliance with Applicable Laws, this Option shall be deemed to be exercised upon receipt by the Company of the appropriate written notice of exercise accompanied by the Exercise Price and the satisfaction of any applicable obligations described in Section 3(b)(ii) above.

4.  Method of Payment. Unless otherwise specified by the Company in its sole discretion to comply with Applicable Laws or facilitate the administration of the Plan, payment of the Exercise Price shall be by cash or check or, following the initial public offering of the Company’s Common Stock, by Cashless Exercise pursuant to which the Optionee delivers an irrevocable direction to a securities broker (on a form prescribed by the Company and according to a procedure established by the Company).

Optionee understands and agrees that, if required by the Company or Applicable Laws, any cross-border cash remittance made to exercise this Option or transfer proceeds received upon the sale of Shares must be made through a locally authorized financial institution or registered foreign exchange agency and may require Optionee to provide to such entity certain information regarding the transaction. Moreover, Optionee understands and agrees that the future value of the underlying Shares is unknown and cannot be predicted with certainty and may decrease in value, even below the Exercise Price. Optionee understands that neither the Company nor any Subsidiary or Affiliate is responsible for any foreign exchange fluctuation between local currency and the United States Dollar or the selection by the Company or any Subsidiary or Affiliate in its sole discretion of an applicable foreign currency exchange rate that may affect the value of the Option (or the calculation of income or Tax-Related Items thereunder).

5.  Termination of Relationship. Following the date of termination of Optionee’s Continuous Service Status for any reason (the “Termination Date”), Optionee may exercise this Option only as set forth in the Notice and this Section 5. If Optionee does not exercise this Option within the Termination Period set forth in the Notice or the termination periods set forth below, this Option shall terminate in its entirety. In no event may any Option be exercised after the Expiration Date of this Option as set forth in the Notice. For the avoidance of doubt and for purposes of this Option only, termination of Continuous Service Status and the Termination Date will be deemed to occur as of the date Optionee is no longer actively providing services as an Employee or Consultant (except, in certain circumstances, to the extent Optionee is on a Company-approved leave of absence and subject to any Company policy or Applicable Laws regarding such leaves) and will not be extended by any notice period or “garden leave” that may be required contractually or under Applicable Laws, unless otherwise determined by the Company in its sole discretion.

 

3


(a)  General Termination. In the event of termination of Optionee’s Continuous Service Status other than as a result of Optionee’s Disability or death (if Optionee is a natural person) or Optionee’s termination for Cause, Optionee may, to the extent Optionee is vested in the Optioned Stock, exercise this Option during the Termination Period set forth in the Notice.

(b)  Termination upon Disability of Optionee. If Optionee is a natural person, then in the event of termination of Optionee’s Continuous Service Status as a result of Optionee’s Disability, Optionee may, but only within 12 month(s) following the Termination Date, exercise this Option to the extent Optionee is vested in the Optioned Stock.

(c)  Death of Optionee. If Optionee is a natural person, then in the event of termination of Optionee’s Continuous Service Status as a result of Optionee’s death, or in the event of Optionee’s death within 3 month(s) following Optionee’s Termination Date, this Option may be exercised at any time within 12 month(s) following the Termination Date, or if later, 12 month(s) following the date of death by any beneficiaries designated in accordance with Section 15 of the Plan or, if there are no such beneficiaries, by the Optionee’s estate, or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent Optionee is vested in the Optioned Stock.

(d)  Termination for Cause. In the event of termination of Optionee’s Continuous Service Status for Cause, this Option (including any vested portion thereof) shall immediately terminate in its entirety upon first notification to Optionee of such termination for Cause. If Optionee’s Continuous Service Status is suspended pending an investigation of whether Optionee’s Continuous Service Status will be terminated for Cause, all Optionee’s rights under this Option, including the right to exercise this Option, shall be suspended during the investigation period.

6.  Non-Transferability of Option; Shareholders Agreements.

(a)  This Option may not be transferred in any manner otherwise than, if Optionee is a natural person, by will or by the laws of descent or distribution and may be exercised during the lifetime of any natural person Optionee only by him or her. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of Optionee.

(b)  As a condition precedent to entering into this Agreement, or exercising the Options, at the request of the Company, Optionee shall become a party to any shareholders, right of first refusal and/or co-sale, drag-along and/or tag-along, transfer restriction, voting, or similar agreements to which the Company is a party at the time of Optionee’s execution and delivery of this Agreement, or to which the holders of at least 50% of the outstanding shares of Common Stock are parties or may become parties after Optionee’s execution and delivery of this Agreement, in each case as such agreement may be amended from time to time (each, a “Shareholders Agreement”), by executing a joinder agreement, adoption agreement or counterpart signature page agreeing to be bound by and subject to the terms of a Shareholders Agreement as a holder of Common Stock.

 

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7.  Lock-Up Agreement. If so requested by the Company or the underwriters in connection with the initial public offering of the Company’s securities registered under the Securities Act of 1933, as amended, Optionee shall not sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company however or whenever acquired (except for those being registered) without the prior written consent of the Company or such underwriters, as the case may be, for 180 days from the effective date of the registration statement, plus such additional period, to the extent required by FINRA rules, up to a maximum of 216 days from the effective date of the registration statement, and Optionee shall execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of such offering.

8.  Effect of Agreement. Optionee acknowledges receipt of a copy of the Plan and represents that Optionee is familiar with the terms and provisions thereof (and has had an opportunity to consult counsel regarding the Option terms), and hereby accepts this Option and agrees to be bound by its contractual terms as set forth herein and in the Plan. Optionee hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Administrator regarding any questions relating to this Option. In the event of a conflict between the terms and provisions of the Plan and the terms and provisions of the Notice and this Agreement, the Plan terms and provisions shall prevail.

9.  Imposition of Other Requirements. The Company reserves the right, without Optionee’s consent, to cancel or forfeit outstanding grants or impose other requirements on Optionee’s participation in the Plan, on this Option and the Shares subject to this Option and on any other Award or Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with Applicable Laws or facilitate the administration of the Plan. Optionee agrees to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Furthermore, Optionee acknowledges that the Applicable Laws of the country in which Optionee is residing, working, or located at the time of grant, holding, vesting, and exercise of the Option or the holding or sale of Shares received pursuant to the Option (including any rules or regulations governing securities, foreign exchange, tax, labor, or other matters) may subject Optionee to additional procedural or regulatory requirements that Optionee is and will be solely responsible for and must fulfill. The Optionee also understands and agrees that if the Optionee works, resides, is located, in, moves to, or otherwise is or becomes subject to Applicable Laws or Company policies of another jurisdiction at any time, certain country-specific notices, disclaimers and/or terms and conditions may apply to Optionee as from the date of grant, unless otherwise determined by the Company in its sole discretion.

10.  Electronic Delivery and Translation. The Company may, in its sole discretion, decide to deliver any documents related to Optionee’s current or future participation in the Plan, this Option, the Shares subject to this Option, any other Company Securities or any other Company-related documents, by electronic means. By accepting this Option, whether electronically or otherwise, Optionee hereby (i) consents to receive such documents by electronic means, (ii) consents to the use of electronic signatures, and (iii) if applicable, agrees to participate in the Plan and/or receive any such documents through an on-line or electronic system established and maintained by the Company or a third party designated by the Company, including but not limited to the use of electronic signatures or click-through electronic acceptance of terms and conditions. To the extent Optionee has been provided with a copy of this Agreement, the Plan, or any other documents relating to this Option in a language other than English, the English language documents will prevail in case of any ambiguities or divergences as a result of translation.

 

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11.  No Acquired Rights or Employment Rights. In accepting the Option, Optionee acknowledges that the Plan is established voluntarily by the Company, is discretionary in nature, and may be modified, amended, suspended or terminated by the Company at any time. The grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of Options, other Awards or benefits in lieu of Options, even if Options have been granted repeatedly in the past, and all decisions with respect to future grants of Options or other Awards, if any, will be at the sole discretion of the Company. In addition, Optionee’s participation in the Plan is voluntary, and the Option and the Shares subject to the Option are extraordinary items that do not constitute regular compensation for services rendered to the Company or any Subsidiary or Affiliate and are outside the scope of Optionee’s employment contract, consulting agreement, or other applicable written agreement, if any. The Option and the Shares subject to the Option are not intended to replace any pension rights or compensation and are not part of normal or expected salary or compensation for any purpose, including but not limited to calculating severance payments, if any, upon termination. Nothing contained in this Agreement is intended to constitute or create a contract of employment or service, nor shall it constitute or create the right to remain associated with or in the employ or service of the Company or any Subsidiary or Affiliate for any particular period of time. This Agreement shall not interfere in any way with the right of the Company or any Subsidiary or Affiliate to terminate Optionee’s employment or service at any time, subject to Applicable Laws.

12.  Data Privacy. Optionee hereby explicitly and unambiguously consents to the collection, use and transfer, whether in electronic or other form, of Optionee’s Personal Data (as described below) by and among, as applicable, the Company and any Subsidiary or Affiliate or third parties as may be selected by the Company for the exclusive purpose of implementing, administering, and managing Optionee’s participation in the Plan. Optionee understands that refusal or withdrawal of consent will affect Optionee’s ability to participate in the Plan; without providing consent, Optionee will not be able to participate in the Plan or realize benefits (if any) from the Option.

Optionee understands that the Company and any Subsidiary or Affiliate or designated third parties may hold personal information about Optionee, including, but not limited to, Optionee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company or any Subsidiary or Affiliate, details of all Options or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in Optionee’s favor (“Personal Data”). Optionee understands that Personal Data may be transferred to any Subsidiary or Affiliate or third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the United States, Optionee’s country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Optionee’s country. In particular, the Company may transfer Personal Data to the broker or stock plan administrator assisting with the Plan, to its legal counsel and tax/accounting advisor, and to the Subsidiary or Affiliate that is your employer and its payroll provider.

 

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13.  Miscellaneous.

(a)  Governing Law. The validity, interpretation, construction and performance of this Agreement, and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.

(b)  Entire Agreement. This Agreement, together with the Notice to which this Agreement is attached and the Plan, sets forth the entire agreement and understanding of the parties relating to the subject matter herein and therein and supersedes all prior or contemporaneous discussions, understandings and agreements, whether oral or written, between the parties related to the subject matter hereof.

(c)  Amendments and Waivers. Except as contemplated under the Plan, no modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance.

(d)  Successors and Assigns. Except as otherwise provided in this Agreement, this Agreement, and the rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives. The Company may assign any of its rights and obligations under this Agreement. No other party to this Agreement may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Agreement, except with the prior written consent of the Company.

(e)  Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered personally or by overnight courier or sent by email, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, as subsequently modified by written notice, or if no address is specified on the signature page, at the most recent address set forth in the Company’s books and records.

(f)  Severability. If one or more provisions of this Agreement are held to be unenforceable under Applicable Laws, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

(g)  Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

 

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(h) Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same agreement. Execution of a facsimile or scanned copy will have the same force and effect as execution of an original, and a facsimile or scanned signature will be deemed an original and valid signature.

[Signature page follows]

 

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IN WITNESS WHEREOF, the undersigned has executed this Stock Option Agreement as of the date first set forth above.

 

THE COMPANY:
LB PHARMACEUTICALS INC
By:  

 

(Signature)
Name:  

 

Title:  

 

OPTIONEE:

 

(PRINT NAME)

 

(Signature)
Address:

           

           

 

9


LB PHARMACEUTICALS INC

2023 STOCK INCENTIVE PLAN

EXERCISE AGREEMENT

This Exercise Agreement (this “Agreement”) is made as of      , by and between LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), and       (“Purchaser”). To the extent any capitalized terms used in this Agreement are not defined, they shall have the meaning ascribed to them in the Company’s 2023 LB Pharmaceuticals Inc Stock Incentive Plan (the “Plan”), the Notice (as defined below) and the Stock Option Agreement (as defined below).

1. Exercise of Option. Subject to the terms and conditions hereof, Purchaser hereby elects to exercise Purchaser’s option to purchase      shares of the Common Stock (the “Shares”) of the Company under and pursuant to the Plan, the Notice of Stock Option Grant dated       (the “Notice”) and the Stock Option Agreement dated      (the “Stock Option Agreement”). The purchase price for the Shares shall be $   per Share for a total purchase price of $  . The term “Shares” refers to the purchased Shares and all securities received in connection with the Shares pursuant to stock dividends or splits, all securities received in replacement of the Shares in a recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other property to which Purchaser is entitled by reason of Purchaser’s ownership of the Shares.

2. Time and Place of Exercise. The purchase and sale of the Shares under this Agreement shall occur at the principal office of the Company simultaneously with the execution and delivery of this Agreement, the payment of the aggregate exercise price by any method listed in Section 4 of the Stock Option Agreement, and the satisfaction of any applicable tax, withholding, required deductions or other payments, all in accordance with the provisions of Section 3(b) of the Stock Option Agreement. The Company shall issue the Shares to Purchaser by entering such Shares in Purchaser’s name as of such date in the books and records of the Company or, if applicable, a duly authorized transfer agent of the Company, against payment of the exercise price therefor by Purchaser. The Company will deliver to Purchaser a stock certificate or, upon request in the case of uncertificated securities, a notice of issuance, for the Shares as soon as practicable following such date.

3. Call Option.

(a)  The Shares are subject to any and all limitations on transfer created by the transfer restrictions set forth in a Shareholders Agreement, and Applicable Law, and Purchaser shall not assign, encumber or dispose of any interest in the Shares except in compliance with the provisions thereof. In addition, subject to the terms of this Section, if the Optionee’s employment or consulting relationship with the Company terminates or expires for any reason or without reason, the Company shall have the option (the “Call Option”), but not the obligation, to purchase any or all Shares that (x) are subject to purchase by Optionee pursuant to the Stock Option Agreement on the date of termination or expiration of Optionee’s employment or consulting relationship with the Company and are purchased after such termination or expiration date or (y)

 

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were purchased at any time prior to the termination or expiration of the Optionee’s employment or consulting relationship. As used herein, the “Offer Date” shall mean the date on which Optionee’s service as a consultant or employment as an employee with the Company terminates or discontinues.

(b) If the Company elects to exercise its Call Option, the Company shall provide written notice (the “Call Notice”) to the Optionee within 45 days after the later of the Offer Date or the date of acquisition by the Optionee of Shares that are subject to the Call Option of (i) the impending purchase by the Company pursuant to this Section, and (ii) the terms of such purchase pursuant to this Section, including without limitation the Purchase Price (as defined below) and the closing date for such purchase, which shall not be more than 90 days after the date of the Call Notice. If the Company does not deliver such notice within the time specified, the Company shall be deemed to have waived its right to purchase Optionee’s Shares under this Section.

(c) The purchase price for the Shares under this Section (the “Purchase Price”) shall be equal to the amount that would be distributable to the Optionee with respect to such Shares if the Company sold all of its assets at fair market value and immediately liquidated, the Company’s debts and liabilities were satisfied, and the proceeds of the liquidation were distributed pursuant to the Articles of Incorporation of the Company and Applicable Laws, all as determined in good faith by the Board based on such factors as the Board, in the exercise of its reasonable business judgment, considers relevant; provided that if the Optionee’s engagement or employment with the Company was terminated by the Company for “Cause” (as defined below), the Purchase Price shall be no greater than $0.01 per Share. As used in this Section, “Cause” shall have the meaning provided in any engagement or employment agreement between the Company and the Optionee, and if no such definition exists, “Cause” shall mean (i) the breach by the Optionee of any written agreement he or she may have with the Company or any of its affiliates, (ii) embezzlement, fraud, larceny or theft by the Optionee with respect to the Company or any of its affiliates, (iii) the conviction of the Optionee of a felony, the entrance by the Optionee of a plea of guilty or nolo contendere with respect to a felony or the arrest of the Optionee for a felony predicated on an act of dishonesty, embezzlement, fraud, larceny, theft or moral turpitude, or (iv) the willful misconduct or gross negligence of the Optionee in the performance of the services he or she is to perform on the Company’s behalf. The Board shall not take into consideration valuation discounts or premiums pertaining to minority interests, controlling interests, lack of marketability, nonvoting features or otherwise.

(d) The Company and the Optionee shall close and settle the sale of the Shares identified in the Call Notice at the offices of the Company’s legal counsel. The Company shall pay the Purchase Price (i) in cash at closing to the extent of at least fifty percent (50%) of the Purchase Price, and (ii) the balance in the form of a promissory note (the “Promissory Note”) executed by the Company in favor of the Optionee, bearing interest on the unpaid principal balance at an annual rate equal to the annual prime commercial rate prevailing at the primary depository bank of the Company as of the settlement date, providing for five (5) equal annual principal and interest installments and amortization over a term of five (5) years, subject to prepayment in whole or in part at any time or times without penalty, and subject to acceleration upon the occurrence of a Change of Control or the sale or other disposition of at least a majority of the voting securities of the Company (in a single transaction or series of related transactions). At closing, the Company

 

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shall pay the Purchase Price in accordance with the terms of this Section and the Optionee shall deliver any certificates evidencing the Shares being purchased to the Company properly endorsed in blank for transfer. If the Optionee fails to deliver the Shares identified in the Call Notice duly endorsed for transfer to the Company at such closing, then all rights with respect to such Shares, including, without limitation, any right to vote or receive dividends with respect to such Shares, shall forthwith after such closing terminate, except only the right of the holder to receive the payment described above, without interest, upon surrender of their certificate or certificates therefor.

4. Investment and Taxation Representations. In connection with the purchase of the Shares, Purchaser represents to the Company the following:

(a) Purchaser is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Shares. Purchaser is purchasing the Shares for investment for Purchaser’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act or under any applicable provision of state law. Purchaser does not have any present intention to transfer the Shares to any other person or entity.

(b) Purchaser understands that the Shares have not been registered under the Securities Act by reason of a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Purchaser’s investment intent as expressed herein.

(c) Purchaser further acknowledges and understands that the securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser further acknowledges and understands that the Company is under no obligation to register the securities.

(d) Purchaser is familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer of the securities (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions. Purchaser understands that the Company provides no assurances as to whether he or she will be able to resell any or all of the Shares pursuant to Rule 144, which rule requires, among other things, that the Company be subject to the reporting requirements of the Exchange Act, that resales of securities take place only after the holder of the Shares has held the Shares for certain specified time periods, and under certain circumstances, that resales of securities be limited in volume and take place only pursuant to brokered transactions. Notwithstanding this Section 4(d), Purchaser acknowledges and agrees to the restrictions set forth in Section 4(e) below.

(e) Purchaser further understands that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk.

 

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(f) Purchaser represents that Purchaser is not subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (attached hereto as Annex I). Purchaser also agrees to notify the Company if Purchaser becomes subject to such disqualifications after the date hereof.

(g) Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.

5. Restrictive Legends and Stop-Transfer Orders.

(a) Legends. Any stock certificate or, in the case of uncertificated securities, any notice of issuance, for the Shares shall bear the following legends (as well as any legends set forth in a Shareholders Agreement, or required by the Company or applicable state and federal corporate and securities laws):

THE SECURITIES REFERENCED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

THE SECURITIES REFERENCED HEREIN ARE SUBJECT TO A CALL OPTION IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH AND MAY BE OBTAINED FROM THE SECRETARY OF THE COMPANY AT NO CHARGE.

(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.

 

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6. No Employment Rights. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a parent, subsidiary or affiliate of the Company, to terminate Purchaser’s employment or consulting relationship, as and if applicable, for any reason, with or without cause.

7. Waiver of Statutory Information Rights. Purchaser acknowledges and understands that, but for the waiver made herein, Purchaser would be entitled, upon written demand under oath stating the purpose thereof, to inspect for any proper purpose, and to make copies and extracts from, the Company’s stock ledger, a list of its stockholders, and its other books and records, and the books and records of subsidiaries of the Company, if any, under the circumstances and in the manner provided in Section 220 of the Delaware General Corporation Law (any and all such rights, and any and all such other rights of Purchaser as may be provided for in Section 220, the “Inspection Rights”). In light of the foregoing, until the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, Purchaser hereby unconditionally and irrevocably waives the Inspection Rights, whether such Inspection Rights would be exercised or pursued directly or indirectly pursuant to Section 220 or otherwise, and covenants and agrees never to directly or indirectly commence, voluntarily aid in any way, prosecute, assign, transfer, or cause to be commenced any claim, action, cause of action, or other proceeding to pursue or exercise the Inspection Rights. The foregoing waiver applies to the Inspection Rights of Purchaser in Purchaser’s capacity as a stockholder and shall not affect any rights of a director, in his or her capacity as such, under Section 220The foregoing waiver shall not apply to any contractual inspection rights of Purchaser under any written agreement with the Company.

8. Miscellaneous.

(a) Governing Law. The validity, interpretation, construction and performance of this Agreement, and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law.

(b) Entire Agreement. This Agreement, together with the Option Agreement and the Plan, sets forth the entire agreement and understanding of the parties relating to the subject matter herein and supersedes all prior or contemporaneous discussions, understandings and agreements, whether oral or written, between them relating to the subject matter thereof.

(c) Amendments and Waivers. Except as contemplated under the Plan, no modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance.

(d) Successors and Assigns. Except as otherwise provided in this Agreement, this Agreement, and the rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives. The Company may assign any of its rights and obligations under this

 

14


Agreement. No other party to this Agreement may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Agreement, except with the prior written consent of the Company.

(e) Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered personally or by overnight courier or sent by email, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, as subsequently modified by written notice, or if no address is specified on the signature page, at the most recent address set forth in the Company’s books and records.

(f) Severability. If one or more provisions of this Agreement are held to be unenforceable under Applicable Laws, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

(g) Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

(h) Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same agreement. Execution of a facsimile or scanned copy will have the same force and effect as execution of an original, and a facsimile or scanned signature will be deemed an original and valid signature.

(i) Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to this Agreement or any notices required by applicable law or the Company’s Certificate of Incorporation or Bylaws by email or any other electronic means. Purchaser hereby consents to (i) conduct business electronically (ii) receive such documents and notices by such electronic delivery and (iii) sign documents electronically and agrees to participate through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

[Signature Page Follows]

 

15


The parties have executed this Exercise Agreement as of the date first set forth above.

 

THE COMPANY:
LB Pharmaceuticals Inc
By:  

 

(Signature)
Name:  

 

Title:  

 

Address:

 

 

 

PURCHASER:

 

(PRINT NAME)

 

(Signature)
Address:

 

 

 

Email:


LB PHARMACEUTICALS INC

RESTRICTED STOCK AWARD AGREEMENT

This Restricted Stock Award Agreement (this “Agreement”) is made effective as of [Date] (the “Grant Date”) by and between LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), and [Name] (“Grantee”) pursuant to the Company’s 2023 Stock Incentive Plan (the “Plan”). To the extent any capitalized terms used in this Agreement are not defined, they shall have the meaning ascribed to them in the Plan.

1. Grant of Stock. Subject to the terms and conditions of this Agreement, the Company hereby issues to Grantee, and Grantee hereby accepts from the Company, [●] shares of the Company’s Common Stock (the “Shares”). The Company will enter the Shares in Grantee’s name as of the Grant Date in the books and records of the Company or, if applicable, a duly authorized transfer agent of the Company. The Company will issue a stock certificate (if the stock is certificated) representing the Shares as soon as practicable following the Grant Date. As used elsewhere herein, the term “Shares” refers to all of the Shares granted hereunder and all securities received in connection with the Shares pursuant to stock dividends or splits, all securities received in replacement of the Shares in a recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other property to which Grantee is entitled by reason of Grantee’s ownership of the Shares. By Grantee’s signature and the signature of the Company’s representative below, Grantee and the Company agree that this grant of Shares is governed by the terms and conditions of this Agreement and the Plan which is attached to and made a part of this Agreement.

2. Limitations on Transfer.

(a) Transfer Restrictions. The Shares granted to Grantee hereunder are subject to certain transfer restrictions and the other terms contained in (i) the certificate of incorporation of the Company, as amended from time to time (the “Certificate of Incorporation”), (ii) the bylaws of the Company, as amended from time to time, and (iii) any stockholders, right of first refusal and/or co-sale, drag-along and/or tag-along, transfer restriction, voting, or similar agreements to which the Company is a party as of the Grant Date, or to which the holders of at least 50% of the outstanding shares of Common Stock may become parties after Grantee’s execution and delivery of this Agreement, in each case to the extent Grantee is required to be a party thereof, including without limitation, the Right of First Refusal and Co-Sale Agreement dated August 29, 2023 and the Voting Agreement dated August 29, 2023 if, upon the Grant Date, such Grantee holds in the aggregate one percent (1%) or more of the outstanding capital stock of the Company (treating for this purpose all shares of Common Stock issuable upon exercise of or conversion of outstanding options, warrants or convertible securities, as if exercised and/or converted or exchanged) (as amended from time to time, the “Stockholders Agreements”) ((i) (ii) and (iii) collectively, the “Governing Documents”). Copies of the applicable Governing Documents have been made available to Grantee on or prior to the Grant Date. Simultaneously with the execution of this Agreement, Grantee will deliver to the Company an executed joinder or adoption agreement with respect to each Stockholders Agreement to which Grantee is required to become a party pursuant to this Section 2(a).

 

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(b) Vesting.

(i) As of the Grant Date, none of the Shares are non-forfeitable (together with any Shares that become non-forfeitable hereunder, the “Vested Shares”), and [●] of the Shares are subject to forfeiture as and to the extent provided in Section 2(b)(ii) (the “Unvested Shares”), in each case subject to the terms of this Agreement. On the [●] day of each month after the Grant Date, [●] of the Unvested Shares shall vest such that all of the Shares shall have become Vested Shares on [Date]; provided, however, that such scheduled releases shall immediately cease as of the Termination Date (as defined herein). Fractional shares shall be rounded to the nearest whole share.

(ii) If Grantee’s employment or engagement with the Company terminates for any reason or for no reason, including without limitation by reason of Grantee’s death or disability, all Unvested Shares shall be forfeited immediately and without further action by any party and Grantee shall not be entitled to any payment or compensation whatsoever with respect to the Unvested Shares.

(c) Acceleration of Vesting. Notwithstanding the terms of Section 2(b) above, if Grantee is terminated without Cause by the Company (or a successor, if appropriate) in connection with or following the consummation of a Change of Control, then the vesting shall accelerate such that all of the Unvested Shares shall thereupon become Vested Shares. The acceleration of vesting provided for in the previous sentence shall occur immediately prior to the Termination Date (as defined below).

(d) Call Option.

(i) The Shares are subject to any and all limitations on transfer created by the transfer restrictions set forth in the applicable Stockholders Agreements and Applicable Law, and Grantee shall not assign, encumber or dispose of any interest in the Shares except in compliance with the provisions thereof. In addition, subject to the terms of this Section 2(d), if Grantee’s employment or consulting relationship with the Company terminates or expires for any reason or for no reason, including without limitation by reason of Grantee’s death or disability, the Company shall have the option (the “Call Option”), but not the obligation, to purchase any or all Vested Shares. As used herein, the “Offer Date” shall mean the date on which Grantee’s employment as an employee or service as a consultant with the Company terminates or discontinues.

(ii) If the Company elects to exercise the Call Option, the Company shall provide written notice (the “Call Notice”) to Grantee within 45 days after the Offer Date of (A) the impending purchase by the Company pursuant to this Section 2(d), and (B) the terms of such purchase pursuant to this Section 2(d), including without limitation the Purchase Price (as defined below) and the closing date for such purchase, which shall not be more than 90 days after the date of the Call Notice. If the Company does not deliver such notice within the time specified, the Company shall be deemed to have waived its right to purchase Grantee’s Vested Shares under this Section 2(d).

 

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(iii) The purchase price for the Vested Shares under this Section 2(d) (the “Purchase Price”) shall be equal to the product of the number of such Vested Shares times the Fair Market Value of one Vested Share as determined by the Administrator in its sole discretion; provided that notwithstanding anything to the contrary stated herein, if Grantee’s engagement or employment with the Company was terminated by the Company for Cause, the Purchase Price shall be no greater than $0.01 per Share. The Board shall not take into consideration valuation discounts or premiums pertaining to minority interests, controlling interests, lack of marketability, nonvoting features or otherwise.

(iv) The Company and Grantee shall close and settle the sale of the Vested Shares identified in the Call Notice at the offices of the Company’s legal counsel or as otherwise mutually agreed to by the Company and Grantee. The Company shall pay the Purchase Price (A) in cash at closing to the extent of at least fifty percent (50%) of the Purchase Price, and (B) the balance in the form of a promissory note (the “Promissory Note”) executed by the Company in favor of Grantee, bearing interest on the unpaid principal balance at an annual rate equal to the annual prime commercial rate prevailing at the primary depository bank of the Company as of the settlement date, providing for five (5) equal annual principal and interest installments and amortization over a term of five (5) years, subject to prepayment in whole or in part at any time or times without penalty, and subject to acceleration upon the occurrence of a Change of Control. At closing, the Company shall pay the Purchase Price in accordance with the terms of this Section 2(d) and Grantee shall deliver any certificates evidencing the Shares being purchased to the Company properly endorsed in blank for transfer. If Grantee fails to deliver the Shares identified in the Call Notice duly endorsed for transfer to the Company at such closing, then all rights with respect to such Shares, including, without limitation, any right to vote or receive dividends with respect to such Shares, shall forthwith after such closing terminate, except only the right of the holder to receive the payment described above, without interest, upon surrender of their certificate or certificates therefor.

(e) Market Stand-off Agreement. Grantee hereby agrees that Grantee will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company of shares of its Common Stock or any other equity securities under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “Securities Act”), on a registration statement on Form S-1, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days): (i) lend; 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; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held immediately before the effective date of the registration statement for such offering or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 2(e) shall apply only to the IPO, shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement and shall be applicable to Grantee only if all officers and directors are subject to the same restrictions and the Company uses commercially reasonable efforts to

 

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obtain a similar agreement from all stockholders individually owning more than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock). The underwriters in connection with such registration are intended third-party beneficiaries of this Section 2(e) and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Grantee further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 2(e) or that are necessary to give further effect thereto. Any discretionary waiver or termination of the restrictions of any or all of such agreements by the Company or the underwriters shall apply pro rata to all Company stockholders that are subject to such agreements, based on the number of shares subject to such agreements. As used herein, “IPO” means the Company’s first underwritten public offering of its Common Stock under the Securities Act.

3. Escrow of Shares. For purposes of facilitating the enforcement of the provisions of Section 2 above, Grantee agrees to deliver a Stock Power in the form attached to this Agreement as Exhibit A executed by Grantee, in blank, and such stock certificate(s), if any, to the Secretary of the Company, or the Secretary’s designee, to hold such Shares (and stock certificate(s), if any) and Stock Power in escrow and to take all such actions and to effectuate all such transfers and/or releases as are required in accordance with the terms of this Agreement. Grantee hereby acknowledges that the Secretary of the Company, or the Secretary’s designee, is so appointed as the escrow holder with the foregoing authorities as a material inducement to make this Agreement and that said appointment is coupled with an interest and is accordingly irrevocable. Grantee agrees that said escrow holder shall not be liable to any party hereof (or to any other party). The escrow holder may rely upon any letter, notice or other document executed by any signature purported to be genuine and may resign at any time. Grantee agrees that if the Secretary of the Company, or the Secretary’s designee, resigns as escrow holder for any or no reason, the Board of Directors of the Company shall have the power to appoint a successor to serve as escrow holder pursuant to the terms of this Agreement.

4. Investment and Taxation Representations. In connection with the grant of the Shares, Grantee represents to the Company the following:

(a) Grantee is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Shares. Grantee does not have any present intention to transfer the Shares to any other person or entity.

(b) Grantee understands that the Shares have not been registered under the Securities Act by reason of a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Grantee’s investment intent as expressed herein.

(c) Grantee further acknowledges and understands that the securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Grantee further acknowledges and understands that the Company is under no obligation to register the securities.

 

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(d) Grantee is familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer of the securities (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions. Grantee understands that the Company provides no assurances as to whether he or she will be able to resell any or all of the Shares pursuant to Rule 144, which rule requires, among other things, that the Company be subject to the reporting requirements of the Exchange Act, that resales of securities take place only after the holder of the Shares has held the Shares for certain specified time periods, and under certain circumstances, that resales of securities be limited in volume and take place only pursuant to brokered transactions. Notwithstanding this Section 4(d), Grantee acknowledges and agrees to the restrictions set forth in Section 4(e) below.

(e) Grantee further understands that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk.

(f) Grantee represents that Grantee is not subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (attached hereto as Annex I).

(g) Grantee understands that Grantee may suffer adverse tax consequences as a result of Grantee’s receipt or disposition of the Shares. Grantee represents that Grantee has consulted any tax consultants Grantee deems advisable in connection with the receipt or disposition of the Shares and that Grantee is not relying on the Company for any tax advice.

5. Restrictive Legends and Stop-Transfer Orders.

(a) Legends. In addition to any legend requirements contained in the Governing Documents, any stock certificate or, in the case of uncertificated securities, any notice of issuance, for the Shares, shall bear the following legends (as well as any legends required by applicable state and federal corporate and securities laws):

“THE SECURITIES REFERENCED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

(b) Stop-Transfer Notices. Grantee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

 

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(c) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement, the Plan or the Governing Documents or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any Grantee or other transferee to whom such Shares shall have been so transferred.

6. No Employment or Engagement Rights. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Company, or a parent, subsidiary or affiliate of the Company, to terminate Grantee’s employment or engagement with the Company, for any reason, with or without cause.

7. Section 83(b) Election. Grantee understands that Section 83(a) of the Internal Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income the difference between the amount paid for the Shares and the Fair Market Value of the Shares as of the date any restrictions on the Shares lapse. In this context, “restriction” means the right of the Company to buy back the Shares pursuant to the vesting set forth in Section 2(b) above. Grantee understands that Grantee may elect to be taxed at the time the Shares are granted, rather than when the Shares vest, by filing an election under Section 83(b) (an “83(b) Election”) of the Code with the Internal Revenue Service within 30 days from the date of grant. Grantee understands that failure to file such an election in a timely manner may result in adverse tax consequences for Grantee. Grantee further understands that an additional copy of such election form should be filed with Grantee’s federal income tax return for the calendar year in which the date of this Agreement falls. Grantee acknowledges that the foregoing is only a summary of the effect of United States federal income taxation with respect to the grant of the Shares hereunder, does not purport to be complete, and is not intended or written to be used, and cannot be used, for the purposes of avoiding taxpayer penalties. Grantee further acknowledges that the Company has directed Grantee to seek independent advice regarding the applicable provisions of the Code, the income tax laws of any municipality, state or foreign country in which Grantee may reside, and the tax consequences of Grantee’s death, and Grantee has consulted, and has been fully advised by, Grantee’s own tax advisor regarding such tax laws and tax consequences or has knowingly chosen not to consult such a tax advisor. Grantee further acknowledges that neither the Company nor any subsidiary or representative of the Company has made any warranty or representation to Grantee with respect to the tax consequences of Grantee’s receipt of the Shares or of the making or failure to make an 83(b) Election. GRANTEE (AND NOT THE COMPANY, ITS AGENTS OR ANY OTHER PERSON) SHALL BE SOLELY RESPONSIBLE FOR APPROPRIATELY FILING SUCH FORM WITH THE IRS, EVEN IF GRANTEE REQUESTS THE COMPANY, ITS AGENTS OR ANY OTHER PERSON MAKE THIS FILING ON GRANTEE’S BEHALF.

If Grantee decides to make an 83(b) Election, Grantee agrees that Grantee will execute and deliver to the Company with this executed Agreement, a copy of the 83(b) Election, attached hereto as Exhibit B.

 

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8. Miscellaneous.

(a) Governing Law. The validity, interpretation, construction and performance of this Agreement, and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from this Agreement, the parties hereby submit and consent to the exclusive jurisdiction of the State of Delaware and agree that any such litigation shall be conducted only in the state courts of Delaware or the United States District Court for the District of Delaware and no other courts.

(b) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and supersedes all prior or contemporaneous discussions, understandings and agreements, whether oral or written, between them relating to the subject matter hereof.

(c) Amendments and Waivers. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance.

(d) Successors and Assigns. Except as otherwise provided in this Agreement, this Agreement, and the rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives. The Company may assign any of its rights and obligations under this Agreement. No other party to this Agreement may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Agreement, except with the prior written consent of the Company.

(e) Notices. Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered personally or by overnight courier or sent by email, or 48 hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, addressed to the party to be notified at such party’s address as set forth on the signature page, as subsequently modified by written notice, or if no address is specified on the signature page, at the most recent address set forth in the Company’s books and records.

(f) Severability. If one or more provisions of this Agreement are held to be unenforceable under Applicable Law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

(g) Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

 

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(h) Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and all of which together shall constitute one and the same agreement. Execution of a facsimile copy will have the same force and effect as execution of an original, and a facsimile signature will be deemed an original and valid signature.

(i) Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to this Agreement or any notices required by Applicable Law or the Company’s Certificate of Incorporation or the Governing Documents by email or any other electronic means. Grantee hereby consents to (i) conduct business electronically (ii) receive such documents and notices by such electronic delivery and (iii) sign documents electronically and agrees to participate through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

(j) Imposition of Other Requirements. The Company reserves the right to impose other requirements on Grantee’s participation in the Plan and on any Award or Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with Applicable Law or facilitate the administration of the Plan. Grantee agrees to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Furthermore, Grantee acknowledges that the laws of the country in which Grantee is working at the time of grant of this Agreement and the vesting or sale of Shares received pursuant to this Agreement (including any rules or regulations governing securities, foreign exchange, tax, labor, or other matters) may subject Grantee to additional procedural or regulatory requirements that Grantee is and will be solely responsible for and must fulfill.

[Signature Page Follows]

 

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The parties have executed this Agreement as of the date first set forth above.

 

THE COMPANY:
LB PHARMACEUTICALS INC
By:  

 

(Signature)

Name:  

 

Title:  

 

Address:
575 Madison Avenue, 10th Floor
New York, NY 10022
Attention: Board of Directors
GRANTEE:
[NAME]

 

(Signature)
Address:

 

 

 

Email:  

 


EXHIBIT A

STOCK POWER

(attached)


STOCK POWER

FOR VALUE RECEIVED, the undersigned (“Holder”), hereby sells, assigns and transfers unto       (“Transferee”)      shares of the Common Stock of LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), standing in Holder’s name on the Company’s books as Certificate No.  whether held in certificated or uncertificated form, and does hereby irrevocably constitute and appoint       to transfer said stock on the books of the Company with full power of substitution in the premises.

 

Date:  

 

    HOLDER:
             [NAME]
     

 

      (Signature)
      Address:
                
                
                
      Email:        

This Stock Power may only be used as authorized by the Restricted Stock Award Agreement between the Holder and the Company, dated [DATE] and the exhibits thereto.


[IF YOU WISH TO MAKE A SECTION 83(B) ELECTION, THE FILING OF SUCH ELECTION IS YOUR RESPONSIBILITY.

THE FORM FOR MAKING THIS SECTION 83(B) ELECTION IS ATTACHED TO THIS AGREEMENT.

YOU MUST FILE THIS FORM WITHIN 30 DAYS OF THE GRANT OF THE SHARES.

YOU (AND NOT THE COMPANY, ANY OF ITS AGENTS OR ANY OTHER PERSON) SHALL BE SOLELY RESPONSIBLE FOR FILING SUCH FORM WITH THE IRS, EVEN IF YOU REQUEST THE COMPANY, ITS AGENTS OR ANY OTHER PERSON TO MAKE THIS FILING ON YOUR BEHALF AND EVEN IF THE COMPANY, ANY OF ITS AGENTS OR ANY OTHER PERSON HAS PREVIOUSLY MADE THIS FILING ON YOUR BEHALF.

The election should be filed by mailing a signed election form by certified mail, return receipt requested to the IRS Service Center where you file your tax returns. See www.irs.gov.]


EXHIBIT B

ELECTION UNDER SECTION 83(B)

OF THE INTERNAL REVENUE CODE OF 1986

(attached)


ELECTION UNDER SECTION 83(B)

OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code, to include in taxpayer’s gross income for the current taxable year, the amount of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property described below:

1. The name, address, taxpayer identification number and taxable year of the undersigned are as follows:

NAME OF TAXPAYER: [NAME]

ADDRESS:        

IDENTIFICATION NO. OF TAXPAYER:      

TAXABLE YEAR: 2024

2. The property with respect to which the election is made is described as follows: 4,000 shares of the Common Stock of LB Pharmaceuticals Inc, a Delaware corporation (the “Company”).

3. The date on which the property was transferred is:      

4. The property is subject to the following restrictions: Forfeiture of the property (or some portion thereof) upon termination of taxpayer’s employment or consulting relationship.

5. The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $  .

6. The amount (if any) paid for such property: $0

The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.

 

Dated:  

 

    Print Name:  

 

            

 

      (Signature)  

 

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ANNEX I

Rule 506(d)(1)(i) to (viii) under the Securities Act of 1933, as amended

(i) Has been convicted, within ten years before such sale (or five years, in the case of issuers, their predecessors and affiliated issuers), of any felony or misdemeanor:

(A) In connection with the purchase or sale of any security;

(B) Involving the making of any false filing with the Commission; or

(C) Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of Grantees of securities;

(ii) Is subject to any order, judgment or decree of any court of competent jurisdiction, entered within five years before such sale, that, at the time of such sale, restrains or enjoins such person from engaging or continuing to engage in any conduct or practice:

(A) In connection with the purchase or sale of any security;

(B) Involving the making of any false filing with the Commission; or

(C) Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of Grantees of securities;

(iii) Is subject to a final order of a state securities commission (or an agency or officer of a state performing like functions); a state authority that supervises or examines banks, savings associations, or credit unions; a state insurance commission (or an agency or officer of a state performing like functions); an appropriate federal banking agency; the U.S. Commodity Futures Trading Commission; or the National Credit Union Administration that:

(A) At the time of such sale, bars the person from:

(1) Association with an entity regulated by such commission, authority, agency, or officer;

(2) Engaging in the business of securities, insurance or banking; or

(3) Engaging in savings association or credit union activities; or

(B) Constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct entered within ten years before such sale;

(iv) Is subject to an order of the Commission entered pursuant to section 15(b) or 15B(c) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(b) or 78o-4(c)) or section 203(e) or (f) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(e) or (f)) that, at the time of such sale:

(A) Suspends or revokes such person’s registration as a broker, dealer, municipal securities dealer or investment adviser;

(B) Places limitations on the activities, functions or operations of such person; or

(C)Bars such person from being associated with any entity or from participating in the offering of any penny stock;

(v) Is subject to any order of the Commission entered within five years before such sale that, at the time of such sale, orders the person to cease and desist from committing or causing a violation or future violation of:

(A) Any scienter-based anti-fraud provision of the federal securities laws, including without limitation section 17(a)(1) of the Securities Act of 1933 (15 U.S.C. 77q(a)(1)), section 10(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78j(b)) and 17 CFR 240.10b-5, section 15(c)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(c)(1)) and section 206(1) of the Investment Advisers Act of 1940 (15 U.S.C. 80b-6(1)), or any other rule or regulation thereunder; or

(B) Section 5 of the Securities Act of 1933 (15 U.S.C. 77e).

(vi) Is suspended or expelled from membership in, or suspended or barred from association with a member of, a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct inconsistent with just and equitable principles of trade;

(vii) Has filed (as a registrant or issuer), or was or was named as an underwriter in, any registration statement or Regulation A offering statement filed with the Commission that, within five years before such sale, was the subject of a refusal order, stop order, or order suspending the Regulation A exemption, or is, at the time of such sale, the subject of an investigation or proceeding to determine whether a stop order or suspension order should be issued; or

(viii) Is subject to a United States Postal Service false representation order entered within five years before such sale, or is, at the time of such sale, subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the United States Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations.

Exhibit 10.12

LB PHARMACEUTICALS INC

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) dated as of      , 20  , is made by and between LB PHARMACEUTICALS INC, a Delaware corporation (the “Company”), and    (“Indemnitee”).

RECITALS

A. The Company desires to attract and retain the services of highly qualified individuals as directors, officers, and employees, and agents.

B. The Company’s Amended and Restated Bylaws (the “Bylaws”) require that the Company indemnify its directors and officers, and empowers the Company to indemnify its employees and other agents, as authorized by the Delaware General Corporation Law (the “Code”), under which the Company is organized and such Bylaws expressly provide that the indemnification provided therein is not exclusive and contemplates that the Company may enter into separate agreements with its directors, officers, and other persons to set forth specific indemnification provisions.

C. Indemnitee does not regard the protection currently provided by applicable law, the Bylaws, the Company’s other governing documents, and available insurance as adequate under the present circumstances, and the Company has determined that Indemnitee and other directors, officers, employees, and agents of the Company may not be willing to serve or continue to serve in such capacities without additional protection.

D. The Company desires and has requested Indemnitee to serve or continue to serve as a director, officer, employee, or agent of the Company, as the case may be, and has proffered this Agreement to Indemnitee as an additional inducement to serve in such capacity.

E. Indemnitee is willing to serve, or to continue to serve, as a director, officer, employee, or agent of the Company, as the case may be, if Indemnitee is furnished the indemnity provided for herein by the Company.

AGREEMENT

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Definitions.

(a) Agent. For purposes of this Agreement, the term “Agent” of the Company means any person who: (i) is or was a director, officer, employee, agent, or other fiduciary of the Company or a subsidiary of the Company; or (ii) is or was serving at the request or for the convenience of, or representing the interests of, the Company or a subsidiary of the Company, as a director, officer, employee, agent, or other fiduciary of a foreign or domestic corporation, partnership, joint venture, trust, or other enterprise.


(b) Change in Control. For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred if:

(i) any natural person, corporation, partnership, limited liability company, or other entity, or “group” (within the meaning of Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than (a) the Company or any subsidiary of the Company, (b) any employee benefit plan of the Company or any subsidiary of the Company or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, (c) an underwriter temporarily holding securities pursuant to a registered public offering of such securities, (d) a corporation, partnership, limited liability company, or other entity Owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company, or (e) any natural person, corporation, partnership, limited liability company, or other entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that is the Owner, directly or indirectly of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities, (each an “Exchange Act Person”) becomes the Owner, directly or indirectly, of securities of the Company representing more than 50% or more of the total voting power represented by the Company’s then outstanding Voting Securities other than by virtue of a merger, consolidation, or similar transaction (provided, however, that a Change in Control shall not be deemed to occur (a) on account of the acquisition of securities of the Company directly from the Company, (b) on account of the acquisition of securities of the Company by an investor, any affiliate thereof, or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities, or (c) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding Voting Securities as a result of a repurchase or other acquisition of Voting Securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional Voting Securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding Voting Securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;

(ii) there is consummated a merger, consolidation, or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation, or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (a) outstanding Voting Securities representing more than 50% of the combined outstanding voting power of the surviving corporation, partnership, limited liability company, or other entity in such merger, consolidation, or similar transaction, or (b) more than 50% of the combined outstanding voting power of the parent of the surviving corporation, partnership, limited liability company, or other entity in such merger, consolidation, or similar transaction, in each case substantially the same proportions as their Ownership of the outstanding Voting Securities of the Company immediately prior to such transaction;

(iii) the stockholders of the Company or the Company’s board of directors (the “Board of Directors”) approves a plan of complete dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company shall otherwise occur, except for a liquidation into a parent corporation;

 

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(iv) There is consummated a sale, lease, exclusive license, or other disposition of all or substantially all of the consolidated assets of the Company and its subsidiaries, other than a sale, lease, license, or other disposition of all or substantially all of the consolidated assets of the Company and its subsidiaries to a corporation, partnership, limited liability company or other entity, more than 50% of the combined voting power of the Voting Securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding Voting Securities of the Company immediately prior to such sale, lease, license, or other disposition; or

(v) individuals who on the date of this Agreement are members of the Company’s Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board of Directors (provided, however, that if the appointment or election (or nomination for election) of any new board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall be considered as a member of the Incumbent Board); or

Notwithstanding the forgoing, the term Change in Control shall not include a sale of assets, merger, or other transaction effected exclusively for the purpose of changing the domicile of the Company.

(c) Expenses. For purposes of this Agreement, the term “Expenses” shall be broadly construed and shall include, without limitation, all direct and indirect costs of any type or nature whatsoever, including, without limitation, all attorneys’, witness, or other professional fees and related disbursements, and other out-of-pocket costs of whatever nature, actually and reasonably incurred by Indemnitee in connection with the investigation, defense, or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement, the Code or otherwise. The term “Expenses” shall also include reasonable compensation for time spent by Indemnitee for which he or she is not compensated by the Company or any subsidiary or third party: (i) for any period during which Indemnitee is not an Agent, in the employment of, or providing services for compensation to, the Company or any subsidiary; and (ii) if the rate of compensation and estimated time involved is approved by the directors of the Company who are not parties to any action with respect to which Expenses are incurred, for Indemnitee while an Agent of, employed by, or providing services for compensation to, the Company or any subsidiary.

(d) Independent Counsel. For purposes of this Agreement, the term “Independent Counsel” means a law firm, or a partner (or, if applicable, member) of such a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party; or (ii) any other party to the proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company will pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, Liabilities, and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

 

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(e) Liabilities. For purposes of this Agreement, the term “Liabilities” shall be broadly construed and shall include, without limitation, judgments, damages, deficiencies, liabilities, losses, penalties, excise taxes, fines, assessments, and amounts paid in settlement, including any interest and any federal, state, local, or foreign taxes imposed as a result of the actual or deemed receipt of any payment under this Agreement.

(f) Ownership. For purposes of this Agreement, the term “Own,” “Owned,” “Owner,” “Ownership” means that a person or corporation, partnership, limited liability company, or other entity will be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or corporation, partnership, limited liability company, or other entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities

(g) Person. For purposes of this Agreement, the term “person” shall mean an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, a business trust, a government or political subdivision, any unincorporated organization, or any other association or entity including any successor (by merger or otherwise) thereof or thereto.

(h) Proceedings. For purposes of this Agreement, the term “proceeding” shall be broadly construed and shall include, without limitation, any threatened, pending, or completed action, suit, claim, counterclaim, cross claim, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing, or any other actual, threatened, or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, or investigative nature, and whether formal or informal in any case, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness, or otherwise by reason of: (i) the fact that Indemnitee is or was a director or officer of the Company; (ii) the fact that any action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action (or failure to act) on Indemnitee’s part while acting as an Agent; or (iii) the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, and in any such case described above, whether or not serving in any such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement, or advancement of Expenses may be provided under this Agreement. If the Indemnitee believes in good faith that a given situation may lead to or culminate in the institution of a proceeding, this shall be considered a proceeding under this paragraph.

(i) Service Entity. For purposes of this Agreement, the term “Service Entity” means the Company and any other corporation, company, partnership, joint venture, trust, employee benefit plan or other enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary.

(j) Subsidiary. For purposes of this Agreement, the term “subsidiary” means any corporation, limited liability company, or other entity, of which more than 50% of the outstanding voting securities or equity interests are owned, directly or indirectly, by the Company and one or more of its subsidiaries, and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan, or other enterprise of which Indemnitee is or was serving at the request of the Company as an Agent.

(k) Voting Securities. For purposes of this Agreement, “Voting Securities” shall mean any securities of the Company that vote generally in the election of directors.

 

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2. Agreement to Serve. Indemnitee will serve, or continue to serve, as the case may be, as an Agent, faithfully and to the best of his or her ability, at the will of such entity designated by the Company and at the request of the Company (or under separate agreement, if such agreement exists), in the capacity Indemnitee currently serves such entity, so long as Indemnitee is duly appointed or elected and qualified in accordance with the applicable provisions of the governance documents of such entity, or until such time as Indemnitee tenders his or her resignation in writing; provided, however, that nothing contained in this Agreement is intended as an employment agreement between Indemnitee and the Company or any of its subsidiaries or to create any right to continued employment of Indemnitee with the Company or any of its subsidiaries in any capacity.

The Company acknowledges that it has entered into this Agreement and assumes the obligations imposed on it hereby, in addition to and separate from its obligations to Indemnitee under the Bylaws, to induce Indemnitee to serve, or continue to serve, as an Agent, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an Agent.

3. Indemnification.

(a) Indemnification in Third Party Proceedings. Subject to Section 10 below, the Company shall indemnify Indemnitee to the fullest extent permitted by the Code, as the same may be amended from time to time (but, to the fullest extent of the law, only to the extent that such amendment permits Indemnitee to broader indemnification rights than the Code permitted prior to adoption of such amendment), if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding, other than a proceeding by or in the right of the Company to procure a judgment in its favor, for any and all Expenses and Liabilities (including all interest, assessments, and other charges paid or payable in connection with or in respect of such Expenses and Liabilities) incurred by Indemnitee in connection with the investigation, defense, settlement, or appeal of such proceeding, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal proceeding had no reasonable cause to believe that Indemnitee’s conduct was unlawful. The parties hereto intend that this Agreement shall provide to the fullest extent permitted by law for indemnification in excess of that expressly permitted by statute, including, without limitation, any indemnification provided by the Amended and Restated Certificate of Incorporation of the Company (the “Certificate of Incorporation”), the Bylaws, vote of its stockholders or disinterested directors, or applicable law.

(b) Indemnification in Derivative Actions and Direct Actions by the Company. Subject to Section 10 below, the Company shall indemnify Indemnitee to the fullest extent permitted by the Code, as the same may be amended from time to time (but, fullest extent permitted by applicable law, only to the extent that such amendment permits Indemnitee to broader indemnification rights than the Code permitted prior to adoption of such amendment), if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding by or in the right of the Company to procure a judgment in its favor, against any and all Expenses actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement, or appeal of such proceedings, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 3(b) in respect of any claim, issue, or matter as to which Indemnitee shall have been finally adjudged by a court competent jurisdiction

 

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to be liable to the Company, unless and only to the extent that the Chancery Court of the State of Delaware (the “Delaware Court”) or any court in which the proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

4. Indemnification of Expenses of Successful Party. Notwithstanding any other provision of this Agreement, in circumstances where indemnification is not available under Section 3(a) or 3(b), as the case may be, to the fullest extent permitted by law and to the extent that Indemnitee is a party to (or a participant in) any proceeding and has been successful on the merits or otherwise in defense of any proceeding or in defense of any claim, issue, or matter therein, in whole or part, including the dismissal of any action without prejudice, the Company shall indemnify Indemnitee against all Expenses and Liabilities in connection with the investigation, defense, or appeal of such proceeding. If Indemnitee is not wholly successful in such proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues, or matters in such proceeding, the Company shall indemnify Indemnitee against all Expenses and Liabilities incurred by Indemnitee, or on Indemnitee’s behalf, in connection with or related to each successfully resolved claim, issue, or matter to the fullest extent permitted by law.

5. Partial Indemnification; Witness Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses and Liabilities incurred by Indemnitee in the investigation, defense, settlement, or appeal of a proceeding, but is precluded by applicable law or the specific terms of this Agreement to indemnification for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of Indemnitee’s acting as an Agent, a witness, or otherwise asked to participate in any proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

6. Advancement of Expenses. To the extent not prohibited by law, the Company shall advance the Expenses incurred by Indemnitee in connection with any proceeding, and such advancement shall be made within twenty (20) days after the receipt by the Company of a statement or statements requesting such advances (which shall include invoices received by Indemnitee in connection with such Expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by applicable law shall not be included with the invoice) and upon request of the Company, an undertaking to repay the advancement of Expenses if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. Advances shall be unsecured, interest free, and without regard to Indemnitee’s ability to repay the Expenses. Advances shall include any and all Expenses incurred by Indemnitee pursuing an action to enforce Indemnitee’s right to indemnification under this Agreement or otherwise and this right of advancement, including expenses incurred preparing and forwarding statements to the Company to support the advances claimed. Indemnitee acknowledges that the execution and delivery of this Agreement shall constitute an undertaking providing that Indemnitee shall, to the fullest extent required by law, repay the advance (without interest) if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. The right to advances under this Section shall continue until final disposition of any proceeding, including any appeal therein. This Section 6 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 10(b).

 

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7. Notice and Other Indemnification Procedures.

(a) Notification of Proceeding. Indemnitee will notify the Company in writing promptly upon being served with any summons, citation, subpoena, complaint, indictment, information, or other document relating to any proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The written notification to the Company shall include a description of the nature of the proceeding and the facts underlying the proceeding. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement.

(b) Request for Indemnification Payments. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification under the terms of this Agreement, and shall request payment thereof by the Company.

(c) Determination of Right to Indemnification Payments. Upon written request by Indemnitee for indemnification pursuant to Section 7(b) hereof, a determination with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following four methods, which shall be at the election of the Board of Directors: (i) by a majority vote of the disinterested directors, even though less than a quorum; (ii) by a committee of disinterested directors designated by a majority vote of the disinterested directors, even though less than a quorum; (iii) if there are no disinterested directors or if the disinterested directors so direct, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the Indemnitee; or (iv) if so directed by the Board of Directors, by the stockholders of the Company; provided, however, that if there has been a Change in Control, then such determination shall be made by Independent Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). For purposes hereof, disinterested directors are those members of the Board of Directors who are not parties to the action, suit, or proceeding in respect of which indemnification is sought by Indemnitee. Indemnification payments requested by Indemnitee under Section 3 hereof shall be made by the Company no later than sixty (60) days after receipt of the written request by Indemnitee. Claims for advancement of Expenses shall be made under the provisions of Section 6 herein.

(d) Application for Enforcement. In the event the Company fails to make timely payments as set forth in Sections 6 or 7(b) herein, Indemnitee shall have the right to apply to any court of competent jurisdiction for the purpose of enforcing Indemnitee’s right to indemnification or advancement of Expenses pursuant to this Agreement. In such enforcement hearing or proceeding, the burden of proof shall be on the Company to prove that indemnification or advancement of Expenses to Indemnitee is not required under this Agreement or permitted by applicable law. Any determination by the Company (including its Board of Directors, a committee thereof, Independent Counsel) or the stockholders of the Company, that Indemnitee is not entitled to indemnification hereunder, shall not be a defense by the Company to the action nor create any presumption that Indemnitee is not entitled to indemnification or advancement of Expenses hereunder.

 

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(e) Indemnification of Certain Expenses. The Company shall indemnify Indemnitee against all Expenses incurred in connection with any hearing or proceeding under this Section 7 unless the Company prevails in such hearing or proceeding on the merits in all material respects.

8. Assumption of Defense. In the event the Company shall be requested by Indemnitee to pay the Expenses of any proceeding, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, or to participate to the extent permissible in such proceeding, with counsel reasonably acceptable to Indemnitee. Upon assumption of the defense by the Company and the retention of such counsel by the Company, the Company shall not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that Indemnitee shall have the right to employ separate counsel in such proceeding at Indemnitee’s sole cost and expense. Notwithstanding the foregoing, if Indemnitee’s counsel delivers a written notice to the Company stating that such counsel has reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or the Company shall not, in fact, have employed counsel or otherwise actively pursued the defense of such proceeding within a reasonable time, then in any such event the fees and Expenses of Indemnitee’s counsel to defend such proceeding shall be subject to the indemnification and advancement of Expenses provisions of this Agreement.

9. Insurance. To the extent that the Company maintains an insurance policy or policies providing liability insurance for Agents (“D&O Insurance”), Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such Agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has D&O Insurance in effect or otherwise potentially available, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

10. Exceptions.

(a) Certain Matters. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee on account of any proceeding with respect to: (i) remuneration paid to Indemnitee if it is determined by final judgment or other final adjudication that such remuneration was in violation of law (and, in this respect, both the Company and Indemnitee have been advised that the Securities and Exchange Commission (the “SEC”) believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication, as indicated in Section 10(d) below); (ii) a final judgment rendered against Indemnitee for an accounting, disgorgement, or repayment of profits made from the purchase or sale by Indemnitee of securities of the Company against Indemnitee or in connection with a settlement by or on behalf of

 

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Indemnitee to the extent it is acknowledged by Indemnitee and the Company that such amount paid in settlement resulted from Indemnitee’s conduct from which Indemnitee received monetary personal profit, pursuant to the provisions of Section 16(b) of the Exchange Act or other provisions of any federal, state, or local statute or rules and regulations thereunder; (iii) a final judgment or other final adjudication that Indemnitee’s conduct was in bad faith, knowingly fraudulent or deliberately dishonest, or constituted willful misconduct (but only to the extent of such specific determination); or (iv) on account of conduct that is established by a final judgment as constituting a breach of Indemnitee’s duty of loyalty to the Company or resulting in any personal profit or advantage to which Indemnitee is not legally entitled. For purposes of the foregoing sentence, a final judgment or other adjudication may be reached in either the underlying proceeding or action in connection with which indemnification is sought or a separate proceeding or action to establish rights and Liabilities under this Agreement.

(b) Claims Initiated by Indemnitee. Any provision herein to the contrary notwithstanding, the Company shall not be obligated to indemnify or advance Expenses to Indemnitee with respect to proceedings or claims initiated or brought by Indemnitee against the Company or its Agents and not by way of defense, except: (i) with respect to proceedings brought to establish or enforce a right to indemnification or advancement under this Agreement or under any other agreement, provision in the Bylaws or the Certificate of Incorporation or applicable law; or (ii) with respect to any other proceeding initiated by Indemnitee that is either approved by the Board of Directors or Indemnitee’s participation is required by applicable law. However, indemnification or advancement of Expenses may be provided by the Company in specific cases if the Board of Directors determines it to be appropriate.

(c) Unauthorized Settlements. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee under this Agreement for any amounts paid in settlement of a proceeding effected without the Company’s written consent. Neither the Company nor Indemnitee shall unreasonably withhold consent to any proposed settlement; provided, however, that the Company may in any event decline to consent to (or to otherwise admit or agree to any liability for indemnification hereunder in respect of) any proposed settlement if the Company is also a party in such proceeding and determines in good faith that such settlement is not in the best interests of the Company and its stockholders.

(d) Securities Act Liabilities. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee or otherwise act in violation of any undertaking appearing in and required by the rules and regulations promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or in any registration statement filed with the SEC under the Securities Act. Indemnitee acknowledges that paragraph (h) of Item 512 of Regulation S-K currently generally

 

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requires the Company to undertake in connection with any registration statement filed under the Securities Act to submit the issue of the enforceability of Indemnitee’s rights under this Agreement in connection with any liability under the Securities Act on public policy grounds to a court of appropriate jurisdiction and to be governed by any final adjudication of such issue. Indemnitee specifically agrees that any such undertaking shall supersede the provisions of this Agreement and to be bound by any such undertaking.

(e) Prior Payments Any provision herein to the contrary notwithstanding except subject to Section 13, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify or advance Expenses to Indemnitee under this Agreement for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, expect with respect to any excess beyond the amount paid under any insurance policy or indemnity policy.

11. Nonexclusivity and Survival of Rights. The provisions for indemnification and advancement of Expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may at any time be entitled under any provision of applicable law, the Certificate of Incorporation, the Bylaws, or other agreements, both as to action in Indemnitee’s official capacity and Indemnitee’s action as an Agent, in any court in which a proceeding is brought, and Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting as an Agent and shall inure to the benefit of the heirs, executors, administrators, and assigns of Indemnitee. The obligations and duties of the Company to Indemnitee under this Agreement shall be binding on the Company and its successors and assigns until terminated in accordance with its terms. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

No amendment, alteration, or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her corporate status prior to such amendment, alteration, or repeal. To the extent that a change in the Code, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Certificate of Incorporation, the Bylaws, and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, by Indemnitee shall not prevent the concurrent assertion or employment of any other right or remedy by Indemnitee.

12. Term. This Agreement shall continue until and terminate upon the later of: (a) five (5) years after the date that Indemnitee shall have ceased to serve as an Agent; or (b) one (1) year after the final termination of any proceeding, including any appeal then pending, in respect to which Indemnitee was granted rights of indemnification or advancement of Expenses hereunder.

 

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No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against an Indemnitee or an Indemnitee’s estate, spouse, heirs, executors, or personal or legal representatives after the expiration of five (5) years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such five (5)-year period; provided, however, that if any shorter period of limitations is otherwise applicable to such cause of action, such shorter period shall govern.

13. Other Rights to Indemnification or Advancement

(a) The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of Expenses and/or insurance provided by one or more other persons, other than a Service Entity, with whom or which Indemnitee may be associated, affiliated, employed or a manager or partner of (each such other person, including any related investment funds or investment firms, a “Secondary Indemnitor”). The relationship between the Company and such other persons with respect to the Indemnitee’s rights to indemnification, advancement of Expenses, and insurance is described by this subsection, subject to the provisions of subsection (b) of this Section 13 with respect to a proceeding concerning Indemnitee’s status with a Service Entity.

(b) The Company hereby acknowledges and agrees:

(i) the Company is the indemnitor of first resort with respect to any request for indemnification or advancement of Expenses made pursuant to this Agreement concerning any proceeding;

(ii) the Company is primarily liable for all indemnification and indemnification or advancement of Expenses obligations for any Proceeding, whether created by law, organizational or constituent documents, contract (including this Agreement) or otherwise;

(iii) any obligation of any other persons with whom or which Indemnitee may be associated (including, without limitation, each Secondary Indemnitor) to indemnify Indemnitee and/or advance Expenses to Indemnitee in respect of any proceeding are secondary to the obligations of the Company’s obligations;

(iv) the Company will indemnify Indemnitee and advance Expenses to Indemnitee hereunder to the fullest extent provided herein without regard to any rights Indemnitee may have against any other person with whom or which Indemnitee may be associated (including, each Secondary Indemnitor) or insurer of any such person; and

(c) the Company irrevocably waives, relinquishes and releases (A) any other person with whom or which Indemnitee may be associated (including, without limitation, each Secondary Indemnitor) from any claim of contribution, subrogation, reimbursement, exoneration or indemnification, or any other recovery of any kind in respect of amounts paid by the Company to Indemnitee pursuant to this Agreement and (B) any right to participate in any claim or remedy of Indemnitee against any person (including, without limitation, each Secondary Indemnitor), whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any person (including, without limitation, each Secondary Indemnitor), directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right.

 

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(d) In the event any other person with whom or which Indemnitee may be associated (including, without limitation, each Secondary Indemnitor) or their insurers advances or extinguishes any liability or loss for Indemnitee, the payor has a right of subrogation against the Company or its insurers for all amounts so paid which would otherwise be payable by the Company or its insurers under this Agreement. In no event will payment by any other person with whom or which Indemnitee may be associated (including, without limitation, each Secondary Indemnitor) or their insurers affect the obligations of the Company hereunder or shift primary liability for the Company’s obligation to indemnify or advance of Expenses to any other person with whom or which Indemnitee may be associated (including, without limitation, each Secondary Indemnitor).

(e) Any indemnification or advancement of Expenses provided by any other person with whom or which Indemnitee may be associated (including, without limitation, each Secondary Indemnitor) is specifically in excess over the Company’s obligation to indemnify and advance Expenses or any valid and collectible insurance (including but not limited to any malpractice insurance or professional errors and omissions insurance) provided by the Company.

(f) The Company and Indemnitee intend that any Service Entity (and its insurers) be the indemnitor of first resort with respect to indemnification and advancement of Expenses for any proceeding related to or arising from Indemnitee’s status with such Service Entity. The Company’s obligation to indemnify and advance Expenses to Indemnitee is secondary to the obligations the Service Entity, or its insurers owe to Indemnitee.

(g) Except as otherwise provided in this Section 13, in the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who, at the request and expense of the Company, shall execute all papers required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights

(h) Notwithstanding anything to the contrary in this Agreement, The Company and Indemnitee agree that each Secondary Indemnitor is an express third-party beneficiary of the terms of this Section 13.

14. Presumptions and Effect of Certain Proceedings.

(a) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination will, to the fullest extent not prohibited by law, presume Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 7 of this Agreement, and the Company will, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption. Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, will be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

 

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(b) If the determination of the Indemnitee’s entitlement to indemnification has not made pursuant to Section 7 within sixty (60) days after the later of (i) receipt by the Company of Indemnitee’s request for indemnification pursuant to Section 7 and (ii) the final disposition of the Proceeding for which Indemnitee requested Indemnification (the “Determination Period”), the requisite determination of entitlement to indemnification will, to the fullest extent not prohibited by law, be deemed to have been made and Indemnitee will be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law. The Determination Period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, the Determination Period may be extended an additional fifteen (15) days if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 7(c) of this Agreement.

(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, will not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(d) For purposes of any determination of good faith, Indemnitee will be deemed to have acted in good faith if Indemnitee acted based on the records or books of account of the Company, any of its subsidiaries or any applicable Service Entity, including financial statements, or on information supplied to Indemnitee by the directors or officers of the Company, its subsidiaries, or any other applicable Service Entity in the course of their duties, or on the advice of legal counsel for the Company, its subsidiaries, or any other applicable Service Entity or on information or records given or reports made to the Company, its subsidiaries or any other applicable Service Entity by an independent certified public accountant or by an appraiser, financial advisor or other expert selected with reasonable care by or on behalf of the Company, its subsidiaries, or any other applicable Service Entity. Further, Indemnitee will be deemed to have acted in a manner “not opposed to the best interests of the Company,” as referred to in this Agreement if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan. The provisions of this Section 14(d) are not exclusive and do not limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(e) The knowledge and/or actions, or failure to act, of any director, officer, trustee, partner, managing member, fiduciary, agent or employee of the Company may not be imputed to Indemnitee for purposes of determining Indemnitee’s right to indemnification under this Agreement.

15. Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification and advancement of Expenses to Indemnitee to the fullest extent now or hereafter permitted by law.

 

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16. Severability. If any provision of this Agreement shall be held to be invalid, illegal, or unenforceable for any reason whatsoever, (a) the validity, legality, and enforceability of the remaining provisions of the Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that are not themselves invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that are not themselves invalid, illegal, or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal, or unenforceable and to give effect to Section 15 hereof.

17. Amendment and Waiver. No supplement, modification, amendment, or cancellation of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

18. Notice. Except as otherwise provided herein, any notice or demand which, by the provisions hereof, is required or which may be given to or served upon the parties hereto shall be in writing and, if by electronic transmission, shall be deemed to have been validly served, given, or delivered when sent, if by overnight delivery, courier, or personal delivery, shall be deemed to have been validly served, given, or delivered upon actual delivery and, if mailed, shall be deemed to have been validly served, given, or delivered three (3) business days after deposit in the United States mail, as registered or certified mail, with proper postage prepaid and addressed to the party or parties to be notified at the addresses set forth on the signature page of this Agreement (or such other address(es) as a party may designate for itself by like notice). If to the Company, notices and demands shall be delivered to the attention of the Secretary of the Company.

19. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.

20. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement. Only one such counterpart need be produced to evidence the existence of this Agreement.

21. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.

22. Entire Agreement. Subject to Section 11 hereof, this Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, and negotiations, written and oral, between the parties with respect to the subject matter of this Agreement; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation, the Bylaws, the Code, and any other applicable law, and shall not be deemed a substitute therefor, and does not diminish or abrogate any rights of Indemnitee thereunder.

 

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23. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement, and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such proceeding; and/or (ii) the relative fault of the Company and Indemnitee in connection with such event(s) and/or transaction(s).

24. Consent to Jurisdiction. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) agree to appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, an agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

 

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IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first above written.

 

LB PHARMACEUTICALS INC

 

 

Name: Heather Turner

Title:  Chief Executive Officer

 

INDEMNITEE

 

 

Name:

Title:

 

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Exhibit 10.13

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”), is made as of November 1, 2024, by and between LB Pharmaceuticals Inc, a Delaware Corporation, (the “Company”) and Heather Turner, an individual residing at *** (the “Executive”). Company and Executive are each a “Party,” and together, the “Parties.”

RECITALS

WHEREAS, the Company wishes to retain the services of the Executive to serve as Chief Executive Officer of the Company and on the terms and conditions set forth herein; and

WHEREAS, the Executive desires to enter into employment with the Company on the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties intending to be legally bound, acknowledge and agree as follows:

1. Position and Duties. Subject to the terms set forth herein, the Company agrees to employ the Executive as Chief Executive Officer of the Company, and the Executive hereby accepts such employment, starting on November 18, 2024 (the “Start Date”). The Executive shall report to the board of directors of the Company (the “Board”). The Executive shall have such duties, authority, and responsibilities as shall be consistent with the duties normally performed by a chief executive officer of companies of similar size in the pharmaceutical industry in which the Company operates. The Executive will diligently and conscientiously perform Executive’s duties and will devote substantially all of the Executive’s business hours to such duties, and during such time will make the best use of the Executive’s energy, knowledge, and training to advancing the Company’s interests. The Executive will accept no other employment or contracting work while employed by the Company, or serve as a member of the board of directors of any for-profit entity or as a member of any advisory board without the express written consent of the Board. Upon termination of the Executive’s employment relationship with the Company for any reason, the Executive shall resign and relinquish any position held as an officer and/or board member of the Company.

2. Compensation and Benefits.

(a) Base Salary. Subject to the terms set forth herein, in consideration for all services rendered by the Executive to the Company, the Company shall pay the Executive an annual base salary of five hundred fifty thousand dollars ($550,000.00) (“Annual Base Salary”) in periodic installments in accordance with the Company’s regular payroll practices in effect from time to time for executive employees, but no less frequently than semi-monthly. The Executive shall be classified as exempt from overtime and the Executive understands and acknowledges that the Executive is not entitled to overtime compensation and that the Annual Base Salary is intended to compensate the Executive for all hours worked.


(b) Target Bonus.

(i) The Executive will be eligible to earn a target bonus of up to fifty percent (50%) of Executive’s Annual Base Salary, in all cases subject to the discretion of the Compensation Committee of the Board of the Company determining that the applicable objectives have been achieved (the “Target Bonus”). Objectives will be determined annually by the Compensation Committee in consultation with the Executive and will include both Company performance the Executive’s personal performance.

(ii) Any such Target Bonus shall not be considered earned until paid. Any Target Bonus awarded will be paid no later than forty-five (45) days after it has been awarded. If the Executive’s employment with the Company is terminated for Cause (as defined below) before any Target Bonus is paid, the Executive shall not be eligible to receive the Target Bonus, regardless of whether the Company already determined the amount of the Target Bonus. If the Company determines the amount of a Target Bonus and thereafter terminates the Executive’s employment with the Company for a reason other than for Cause but before any such Target Bonus has been paid, the Executive will still receive the Executive’s Target Bonus payment subject to the terms provided herein, even if the Executive is no longer working at the Company at the time the Target Bonus is to be paid.

(c) Stock Options.

(i) Subject to Board approval, to the extent not already granted, the Company shall grant to the Executive stock options to purchase shares of Common Stock of the Company up to four million nine hundred thousand (4,900,000) shares under the Company’s 2023 Stock Incentive Plan (the “Plan”), as amended (each an “Option”) at an exercise price per share of $1.50, which is not less than the current fair market value of the underlying Option as of the date of grant.

(ii) The Options shall vest and become exercisable on a cumulative basis with twenty five percent (25%) to vest upon the first anniversary of the Start Date and in thirty-six (36) substantially equal monthly installments over the thirty-six (36) month period beginning on the last day of the month following the first anniversary of the Start Date and the last day of each month thereafter; provided that the Executive continues to have a Service Relationship (as defined in the Plan) with the Company through each such date.

(d) Employee Benefits. During Executive’s term of employment by the Company under this Agreement (the “Employment Period”), the Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, the “Employee Benefit Plans”), on a basis which is no less favorable than is provided to other similarly situated senior executives of the Company, to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plans and applicable law.

 

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(e) Paid Time Off. During the Employment Period, the Executive shall be entitled to twenty (20) days paid vacation per calendar year. This vacation is in addition to Company recognized holidays and paid sick time, if any, in accordance with the Company’s practices and policies as in effect from time to time. The Company reserves the right to amend or cancel its practices and policies at any time in its sole discretion, in accordance with applicable law. If accrued vacation time is not used by the end of the year, the Executive may carry over unused time to the next year; however, the Executive may only accrue vacation up to a maximum of 1.5 times the annual accrual amount. Once Executive reaches the maximum accrual amount, Executive will not accrue any additional vacation time. The Company will pay the Executive for any accrued but unused vacation upon termination of the Executive’s employment.

(f) Housing Stipend. During the Employment Period, the Company shall pay to the Executive an additional amount in cash equal to $10,000 per month for lodging expenses. Such payment shall be payable to the Executive on the Company’s first regular payroll date of each calendar month, less applicable withholdings and deductions, subject to the Executive’s continued service through the applicable payment date.

(g) Expense Reimbursement. The Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the Executive’s duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures.

(h) Withholdings. All payments made subject to this Agreement will be subject to payroll withholdings that the Company reasonably believes are required by law or elected or authorized by the Executive for state and federal income taxes, Social Security, Medicare, and other applicable payroll deductions, in accordance with the Company’s normal payroll practices.

3. Termination of Employment.

(a) At-Will Employment; Accrued Rights. The Parties acknowledge that Executive’s employment relationship with the Company shall be at-will. Either the Company or the Executive may terminate Executive’s employment with or without Cause or Good Reason or advance notice. Upon a termination of the Executive’s employment for any reason, the Executive (or the Executive’s estate) shall be entitled to receive (i) that portion of the Executive’s Annual Base Salary, then in effect, earned and unpaid as of the termination date; (ii) any expenses owed and properly reimbursable to the Executive pursuant to the Company’s expense reimbursement policies; (iii) conversion rights, if applicable, with respect to any life insurance or disability insurance policy provided to the Executive; and (iv) any vested amounts owed to the Executive under the Company’s employee benefit plans or programs and any vested Options in accordance with the terms and conditions of such employee benefit plans or programs and the Plan (collectively, the “Accrued Rights”).

(b) Termination by the Company for Cause or Executive’s Resignation Without Good Reason. Upon termination of the Executive’s employment relationship by the Company for Cause, or by the Executive’s resignation without Good Reason, the Company shall, thereafter, have no obligation to the Executive for any unearned Annual Base Salary, Target Bonus, or any other form of compensation or benefit, except as otherwise required by law. Reimbursement of appropriately documented expenses incurred by the Executive before the termination of employment, to the extent that the Executive would have been entitled to such reimbursement but for the termination of employment, shall be paid by the Company to the Executive.

 

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(c) Termination by the Company Without Cause or Executive’s Resignation for Good Reason Outside of Change in Control Period. In the event that the Company terminates the Executive’s employment without Cause or Executive resigns for Good Reason, and provided that the Severance Preconditions (defined below) are met, (A) the Executive shall receive twelve (12) months’ severance pay at the Executive’s Annual Base Salary then in effect, paid as salary continuation over the twelve (12) month severance period pursuant to the Company’s customary payroll practices, commencing on the first payroll date following the date on which the Release becomes effective and irrevocable, provided that if the Release Execution Period (defined below) spans two calendar years, payments shall begin no earlier than the first payroll date of the later calendar year, and provided further that, the first installment payment shall include all amounts attributable to the period from the Executive’s employment termination date through the first payment date; and (B) if the Executive is eligible for and timely and properly elects group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse the Executive for monthly COBRA premiums payable to continue coverage for the Executive and the Executive’s eligible dependents until the earliest of (x) twelve (12) months following the termination date; (y) the expiration of the Executive’s eligibility for the continuation coverage under COBRA; or (z) the date when the Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment. Such reimbursement shall be paid to the Executive no later than the end of the month immediately following the month in which the Executive timely remits each COBRA premium payment.

(d) Termination by the Company Without Cause or Executive’s Resignation for Good Reason in Connection with Change in Control. If at any time during the time period of three (3) months prior to or twelve (12) months following a Change in Control (defined below), the Company terminates the Executive’s employment without Cause or the Executive resigns for Good Reason, provided the Severance Preconditions are met, the Company will provide Executive with the following severance benefits (in lieu of, and not in addition to, the severance benefits provided in Section 3(c)):

(i) a lump sum severance payment, payable within sixty (60) days after the later of the Change in Control and Executive’s employment termination date (provided that if the Release Execution Period spans two calendar years, payment shall not made until the beginning of the later calendar year), in an amount equal to the sum of: (A) eighteen (18) months of Executive’s Annual Base Salary then in effect; and (B) 1.5 times the Target Bonus opportunity for the year in which Executive’s employment termination date occurs;

(ii) if the Executive is eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive for monthly COBRA premiums payable to continue coverage for the Executive and the Executive’s eligible dependents until the earliest of (x) eighteen (18) months following the termination date; (y) the expiration of the Executive’s eligibility for the continuation coverage under COBRA; or (z) the date when the Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment. Such reimbursement shall be paid to the Executive no later than the end of the month immediately following the month in which the Executive timely remits each COBRA premium payment; and

 

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(iii) the vesting of any outstanding unvested equity that the Executive holds shall be accelerated in full as of the termination date.

(e) Termination in the Event of Executive’s Disability or Death. The Executive’s employment hereunder (i) shall terminate automatically upon the Executive’s death and (ii) may be terminated by the Company for the Executive’s Disability. Upon termination of the Executive’s employment hereunder by reason of the Executive’s Disability or death, the Executive or the Executive’s estate (as the case may be) shall be entitled to receive:

(i) the Accrued Rights; and

(ii) subject to the Executive’s or, in the event of the Executive’s death, the representative of the Executive’s estate, execution and non-revocation of the Release and such Release becoming effective and irrevocable within the Release Execution Period:

(A) a pro-rata portion (based on the number of full days the Executive was employed in the applicable fiscal year) of the Target Bonus, if any, Executive would have earned for the fiscal year in which Executive’s employment termination date occurs, based on actual Company performance of the full fiscal year and payable at the same time annual bonuses are generally paid to executives for such fiscal year; and

(B) if the Executive is (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the monthly COBRA premium paid by the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the Executive and the Executive’s spouse/dependents. Such reimbursement shall be paid to the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) no later than the end of the month immediately following the month in which the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) timely remits the COBRA premium payment. The Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) shall be eligible to receive such reimbursement until the earliest of: (i) the last day of the month that is twenty-six (26) weeks after the termination of the Executive’s employment by reason of the Executive’s Disability or death; (ii) in the event of Executive’s Disability, the date Executive becomes eligible to receive healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility) or (iii) the date the Executive is (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) no longer eligible to receive COBRA continuation coverage. Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act) or incurring an excise tax, the Company shall in lieu thereof provide to Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) a taxable monthly payment in an amount equal to the monthly COBRA premium contemplated by the continuation benefit set forth in this Section.

 

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(iii) Following the termination of the Executive’s employment by reason of the Executive’s Disability or death, except as set forth in this Section 3, the Executive (or Executive’s estate) shall have no further rights to any compensation or any other benefits under this Agreement.

(f) Effect of Termination on Post-Termination Obligations. Upon termination of this Agreement for any reason, the Executive shall continue to be bound by the post-employment obligations and covenants set forth in this Agreement and the CIIAA following Executive’s termination.

(g) No Mitigation. The Executive will not be required to mitigate any of the Company’s payment obligations set forth in this Section 3 by making any efforts to secure other employment, and Executive’s commencement of employment with another employer will not reduce the obligations of the Company under this Section 3, unless specifically provided for herein.

(h) Resignation of Offices. Promptly following any termination of the Executive’s employment with the Company for any reason (other than by reason of the Executive’s death), the Executive shall deliver to the Company reasonably satisfactory written evidence of the Executive’s resignation from all positions that the Executive may then hold as an employee or officer of the Company or any subsidiary of the Company.

4. Definitions.

(a) Cause. For purposes of this Agreement the term “Cause” shall mean any one or more of the following:

i. The Executive’s persistent unsatisfactory performance or material failure to perform the Executive’s duties or any lawful directive of the Board after being given written notice of such deficiencies in the Executive’s performance and failure to cure them within thirty (30) calendar days of such written notice;

ii. The Executive’s indictment for, conviction of, plea of guilty to, or plea of nolo contendere to a felony involving the property or operations of the Company or a crime of moral turpitude;

iii. The Executive’s indictment for, conviction of, plea of guilty to, or plea of nolo contendere to embezzlement, misappropriation or fraud, whether or not related to the Executive’s employment with Company;

iv. The existence of any court order or settlement agreement prohibiting the Executive’s continued employment with the Company;

v. The Executive’s material breach of any material obligation in this Agreement, or any other written agreement between the Executive and Company, or any material misconduct by the Executive that adversely affects the business of the Company or its reputation; or

 

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vi. The Executive’s material failure to comply with the Company’s reasonable and lawful policies or rules of which the Executive is given written notice, as they may be in effect from time to time during the Executive’s employment, and failure to cure them within thirty (30) calendar days of such written notice.

(b) Change in Control. For purposes of this Agreement, “Change in Control” has the meaning ascribed to such term in the Plan.

(c) Disability. For the purposes of this Agreement, “Disability” shall mean that in the good faith judgment of the Board, despite reasonable accommodation, the Executive is unable due to a physical or mental incapacity to perform the essential functions of Executive’s most recent position for: (x) a period of one hundred eighty (180) consecutive days or (y) an aggregate of six (6) months in any twelve (12) consecutive month period.

(d) Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean any one or more of the following, in each case during the Employment Period without the Executive’s written consent:

i. a material reduction of the Executive’s position, authority or responsibilities, or the removal of the Executive from such position, authority or responsibilities, unless the Executive is provided with a new position of equal or greater organizational level, authority, responsibilities and compensation;

ii. a material reduction in the Annual Base Salary other than a general reduction in Annual Base Salary that affects all similarly situated executives in substantially the same proportions;

iii. a material breach by the Company of this Agreement; or

iv. a material change in the geographic location at which the Executive is required to perform services for the Company (except for office relocations that would not increase the Executive’s one way commute by more than twenty-five (25) miles).

provided, however, that Good Reason shall not exist unless: (x) the Executive has given the Company written notice of the conduct of the Company that is alleged to constitute Good Reason within thirty (30) days following the occurrence of such event; (y) the Executive has provided the Company at least thirty (30) days following the date on which such notice is provided to cure such conduct and the Company has failed to do so; and (z) the Executive resigns and voluntarily terminates the Executive’s employment within thirty (30) days following the expiration of the Company’s opportunity to cure such conduct.

(e) Severance Preconditions. For the purposes of this Agreement, the “Severance Preconditions” shall mean that (i) the Executive has executed and not revoked within the applicable revocation period a separation agreement and general release in a form and substance reasonably satisfactory to the Company (the “Release”) and such Release becomes

 

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effective and irrevocable within sixty (60) days following the Executive’s employment termination date (such 60-day period, the “Release Execution Period”); (ii) the Executive remains in compliance with the CIIAA; and (iii) the Executive has provided to the Company the written resignations set forth in Section 3(h).

5. Confidential Information and Intellectual Property Rights. As a condition of employment, the Executive agrees to execute and abide by the Employee Confidential Information and Inventions Assignment Agreement attached as Exhibit A (“CIIAA”). The CIIAA contains provisions that are intended by the Parties to survive and do survive any termination of this Agreement and the CIIAA.

6. Non-Disparagement. The Executive shall not, during or after employment, make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal communications that belittle, disparage or otherwise express disapproval of the Company or any of its affiliates or their respective businesses, or any of their past or present officers, directors, employees, advisors, agents, policies, procedures, practices, decision-making, conduct, professionalism or compliance with standards, except as and to the extent required to comply with applicable federal or state law. This Agreement does not prohibit Executive from reporting possible legal violations to the government or from making other disclosures to the government that are protected under federal or state whistleblower provisions. This Agreement does not prohibit Executive from making truthful statements or disclosures about alleged unlawful acts in the workplace, including sexual harassment.

7. Section 409A. It is intended that any payment or benefit that is provided pursuant to or in connection with this Agreement that is considered to be deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) shall be paid and provided in a manner, and at such time and form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for non-compliance. It is further intended that the payments hereunder shall, to the maximum extent permissible under Section 409A of the Code, be exempt from Section 409A of the Code under either (i) the exception for involuntary separation pay to the extent that all payments are payable within the limitations described in Treasury Regulation Section 1.409A-1(b)(9), or (ii) the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4) to the extent that all payments are payable no later than two and a half months after the end of the first taxable year in which the right to the payment is no longer subject to a substantial risk of forfeiture.

(a) If the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code at such time, any payments to be made or benefits to be delivered in connection with the Executive’s “separation from service” (as defined below) that constitute deferred compensation subject to Section 409A of the Code shall not be made until the earlier of (i) the Executive’s death or (ii) six months plus one day after the Executive’s separation from service (“409A Deferral Period”) as required by Section 409A of the Code. Payments of any such deferred compensation otherwise due to be made in installments or periodically during the 409A Deferral Period shall be accumulated and paid in a lump sum as soon as the 409A Deferral Period ends, and the balance of the payment shall be made as otherwise scheduled.

 

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(b) For purposes of this Agreement, all rights to payments and benefits hereunder shall be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Section 409A of the Code.

(c) For purposes of this Agreement, with respect to the timing of any amounts that constitute deferred compensation subject to Section 409A of the Code that depends on termination of employment or separation from service, termination of employment or separation from service shall mean a “separation from service” within the meaning of Section 409A of the Code where it is reasonably anticipated that no further services would be performed after such date or that the level of bona fide services the Executive would perform after that date (whether as an employee or independent contractor) would permanently decrease to a level less than or equal to twenty percent (20%) of the average level of bona fide services the Executive performed over the immediately preceding thirty-six (36) month period.

8. Section 280G. If any payment or benefit Executive will or may receive from the Company or otherwise (a “Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such Payment shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Executive. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).

Notwithstanding any provisions in this Section above to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for Executive as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.

 

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The Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this Section. The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. If Executive receives a Payment for which the Reduced Amount was determined pursuant to clause (x) above and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Executive agrees to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) above) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) above, Executive shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.

9. Indemnification. The Company will enter into an indemnification agreement with Executive. At all times during the Executive’s service as an officer and/or director and for at least six years thereafter, the Company shall provide that Executive is covered by the Company’s D&O insurance on the same basis as other active officers and directors (without regard to whether the Executive’s service has previously terminated).

10. Representations of the Executive. The Executive represents and warrants that: (i) the Executive has no legal obligations to any other party that would be breached by signing this Agreement or otherwise fulfilling Executive’s obligations hereunder, including but not limited to any non-competition, non-solicitation, non-inducement, confidentiality, assignment of inventions, or other similar agreement; (ii) the Executive has not disclosed any third party’s confidential or proprietary information to the Company or its representatives or agents; (iii) if the Executive learns of any confidential or proprietary information that belongs to any third party, the Executive will not disclose such information to the Company or its representatives or agents, except as allowed by law or any agreement Executive has signed with such party; and (iv) the Executive is not in breach of any confidentiality or non-disclosure agreement that the Executive has signed.

11. Miscellaneous.

(a) Entire Agreement. This Agreement contains the entire agreement and understanding of the Executive and the Company concerning the subject matter hereof and supersedes and replaces all prior negotiations and proposed agreements, whether oral or written. The Executive acknowledges that, by signing this Agreement, the Executive has not relied upon any representations, promises or agreements made by the Company or its employees, officers, directors, or representatives (including any Company attorneys) that are not contained in this Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the Parties hereto.

(b) Headings/Counterparts. The headings of the paragraphs herein are included for reference only and are not intended to affect the interpretation of the Agreement. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same Agreement. Each Party agrees that faxed or electronically transmitted copies of the signature pages of this Agreement and/or any of the other instruments, agreements and documents relating to any of the transactions contemplated hereby, whether sent to the other Party or to such other Party’s counsel, shall be deemed definitively executed and delivered, and with the same force and effect as if manually signed and delivered, for all purposes whatsoever. Neither Party hereto shall raise the use of DocuSign, electronic mail or a facsimile machine to deliver a signature or the fact that any signature was transmitted or communicated through the use of electronic mail or a facsimile machine as a defense to the formation of a contract and each Party forever waives any such defense. All counterparts shall be construed together and shall constitute one instrument, and the signature page from any counterpart may be attached to another counterpart to form a complete copy of this Agreement.

 

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(c) Severability. If any provision of this Agreement or the application thereof is held invalid, such invalidation shall not affect other provisions or applications of this Agreement and to this end the provisions of this Agreement are declared to be severable.

(d) Construction/Joint Drafting. The determination of the terms and conditions of this Agreement has been by mutual agreement of the Parties. Each Party participated jointly in the drafting of this Agreement, and therefore the terms and conditions of this Agreement are not intended to be, and shall not be, construed against any Party by virtue of draftsmanship.

(e) Non-Waiver. Neither the failure nor any delay on the part of either Party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver of any provision of this Agreement will be binding unless made in a writing signed by the Parties hereto.

(f) Assignment. This Agreement shall be binding upon the Company and shall inure to the benefit of the Company including any transferee of the business operation, as a going concern, in which the Executive is employed and shall be binding upon the Executive and the Executive’s heirs and personal representatives. None of the rights or obligations of the Executive hereunder may be assigned or delegated. The Company may assign its rights and obligations under this Agreement in whole or in part to anyone.

(g) Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the internal laws of the State of California.

(h) Resolution of Disputes. To aid the rapid and economical resolution of disputes that may arise in connection with Executive’s employment with the Company, and in exchange for the mutual promises contained in this Agreement, Executive and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, Executive’s employment with the Company, or the termination of Executive’s employment, shall be resolved, to the fullest extent permitted by law, by final, binding and confidential arbitration conducted by JAMS, Inc. (“JAMS”) or its successor, under JAMS’ then applicable rules and procedures appropriate to the relief being sought (available upon request and also currently available at the following web address: (i) https://www.jamsadr.com/rules-employment-arbitration/ and (ii) https://www.jamsadr.com/rules-comprehensive-arbitration/) at a location closest to where Executive last worked for the Company or another mutually agreeable location. Executive acknowledges that by agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge. The Federal Arbitration Act, 9 U.S.C. § 1 et seq., will, to the fullest extent permitted

 

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by law, govern the interpretation and enforcement of this arbitration agreement and any arbitration proceedings. This provision shall not be mandatory for any claim or cause of action to the extent applicable law prohibits subjecting such claim or cause of action to mandatory arbitration and such applicable law is not preempted by the Federal Arbitration Act or otherwise invalid (collectively, the “Excluded Claims”), such as non-individual claims that cannot be waived under applicable law, claims or causes of action alleging sexual harassment or a nonconsensual sexual act or sexual contact, or unemployment or workers’ compensation claims brought before the applicable state governmental agency. In the event Executive or the Company intend to bring multiple claims, including one of the Excluded Claims listed above, the Excluded Claims may be filed with a court, while any other claims will remain subject to mandatory arbitration. Executive acknowledges and agrees that proceedings of any non-individual claim(s) under the California Private Attorneys General Act (“PAGA”) that may be brought in court shall be stayed for the duration and pending a final resolution of the arbitration of any individual or individual PAGA claim. Nothing herein prevents Executive from filing and pursuing proceedings before a federal or state governmental agency, although if Executive chooses to pursue a claim following the exhaustion of any applicable administrative remedies, that claim would be subject to this provision. In addition, with the exception of Excluded Claims arising out of 9 U.S.C. § 401 et seq., all claims, disputes, or causes of action under this section, whether by Executive or the Company, must be brought in an individual capacity, and shall not be brought as a plaintiff (or claimant) or class member in any purported class, representative, or collective proceeding, nor joined or consolidated with the claims of any other person or entity. Executive acknowledges that by agreeing to this arbitration procedure, both Executive and the Company waive all rights to have any dispute be brought, heard, administered, resolved, or arbitrated on a class, representative, or collective action basis. The arbitrator may not consolidate the claims of more than one person or entity, and may not preside over any form of representative or class proceeding. If a court finds, by means of a final decision, not subject to any further appeal or recourse, that the preceding sentences regarding class, representative, or collective claims or proceedings violate applicable law or are otherwise found unenforceable as to a particular claim or request for relief, the Parties agree that any such claim(s) or request(s) for relief be severed from the arbitration and may proceed in a court of law rather than by arbitration. All other claims or requests for relief shall be arbitrated. Executive will have the right to be represented by legal counsel at any arbitration proceeding. Questions of whether a claim is subject to arbitration and procedural questions which grow out of the dispute and bear on the final disposition are matters for the arbitrator to decide, provided however, that if required by applicable law, a court and not the arbitrator may determine the enforceability of this paragraph with respect to Excluded Claims. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based. The arbitrator shall be authorized to award all relief that Executive or the Company would be entitled to seek in a court of law. The Company shall pay all arbitration administrative fees in excess of the administrative fees that Executive would be required to pay if the dispute were decided in a court of law. Each Party is responsible for its own attorneys’ fees, except as may be expressly set forth in the Employee Confidential Information and Inventions Assignment Agreement or as otherwise provided under applicable law. Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction.

 

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(i) Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of delivery, if delivered by hand, (ii) on the date of transmission, if delivered by electronic mail, (iii) on the first business day following the date of deposit, if delivered by guaranteed overnight delivery service, or (iv) on the fourth business day following the date delivered or mailed by the U.S. Postal Service, addressed as follows:

 

If to the Executive:

At the address shown in the books and records of the

Company, currently:

***

If to the Company:

LB Pharmaceuticals Inc

One Penn Plaza, Suite 1025

New York, NY 10119

Attention: Board of Directors

Email: ***

 

with copy, which shall not constitute notice, to:

Divakar Gupta

Cooley LLP 55 Hudson Yards

New York, New York 10001-2163

Notices shall be deemed to be properly addressed, to the Company or to the Executive, if addressed to such person at such person’s address as set forth above, or to such other address or addresses as the addressee previously may have specified by Notice given to the other parties in the manner contemplated by this Section 11(i).

(j) Survival. Upon the termination of this Agreement, the respective rights and obligations of the Parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the Parties under this Agreement.

 

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12. Acknowledgement of Full Understanding. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT EXECUTIVE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT EXECUTIVE HAS BEEN REPRESENTED BY EXECUTIVE’S OWN COUNSEL OR HAS HAD AN OPPORTUNITY TO BE REPRESENTED BY AN ATTORNEY OF EXECUTIVE’S CHOICE BEFORE SIGNING THIS AGREEMENT.

(Remainder of page left blank intentionally; Signatures on the following page)

 

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IN WITNESS WHEREOF, the Parties have duly executed and delivered this Agreement as of the date first above written.

 

EXECUTIVE     LB PHARMACEUTICALS INC
By:   /s/ Heather Turner     By:   /s/ Scott Garland
Name:   Heather Turner     Name:   Scott Garland
      Title:   Chair of the Board

 

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Exhibit A

EMPLOYEE CONFIDENTIAL INFORMATION AND INVENTIONS

ASSIGNMENT AGREEMENT

(See attached)

Exhibit 10.14

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”), is made as of February 3, 2025, by and between LB Pharmaceuticals Inc, a Delaware Corporation, (the “Company”) and Gad Soffer, an individual residing at *** (the “Executive”). The Company and Executive are each a “Party,” and together, the “Parties.”

RECITALS

WHEREAS, the Company wishes to retain the services of the Executive to serve as Chief Business Officer of the Company and on the terms and conditions set forth herein; and

WHEREAS, the Executive desires to enter into employment with the Company on the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties intending to be legally bound, acknowledge and agree as follows:

1. Position and Duties. Subject to the terms set forth herein, the Company agrees to employ the Executive as Chief Business Officer of the Company, and the Executive hereby accepts such employment, starting on February 10, 2025 (the “Start Date”). The Executive shall report to the Chief Executive Officer of the Company (the “CEO”). The Executive shall have such duties, authority, and responsibilities as shall be consistent with the duties normally performed by a chief business officer of companies of similar size in the pharmaceutical industry in which the Company operates. The Executive will diligently and conscientiously perform the duties of chief business officer and will devote substantially all of the Executive’s business hours to such duties, and during such time will make the best use of the Executive’s energy, knowledge, and training to advancing the Company’s interests. The Executive will accept no other employment or contracting work while employed by the Company, or serve as a member of the board of directors of any for-profit entity or as a member of any advisory board without the express written consent of the CEO. Upon termination of the Executive’s employment relationship with the Company for any reason, the Executive shall resign and relinquish any position held as an officer of the Company.

2. Compensation and Benefits.

(a) Base Salary. Subject to the terms set forth herein, in consideration for all services rendered by the Executive to the Company, the Company shall pay the Executive an annual base salary of four hundred and twenty five thousand dollars ($425,000.00) (“Annual Base Salary”) in periodic installments in accordance with the Company’s regular payroll practices in effect from time to time for executive employees, but no less frequently than semi-monthly. The Executive shall be classified as exempt from overtime and the Executive understands and acknowledges that the Executive is not entitled to overtime compensation and that the Annual Base Salary is intended to compensate the Executive for all hours worked.


(b) Target Bonus.

(i) The Executive will be eligible to earn a target bonus of up to forty percent (40%) of Executive’s Annual Base Salary, in all cases subject to the discretion of the Compensation Committee of the board of directors of the Company (the “Board”) of the determining that the applicable objectives have been achieved (the “Target Bonus”). Objectives will be determined annually by the Compensation Committee in consultation with the Executive and will include both Company performance the Executive’s personal performance.

(ii) Any such Target Bonus shall not be considered earned until paid. Any Target Bonus awarded will be paid no later than forty-five (45) days after it has been awarded. If the Executive’s employment with the Company is terminated for Cause (as defined below) before any Target Bonus is paid, the Executive shall not be eligible to receive the Target Bonus, regardless of whether the Company already determined the amount of the Target Bonus. If the Company determines the amount of a Target Bonus and thereafter terminates the Executive’s employment with the Company for a reason other than for Cause but before any such Target Bonus has been paid, the Executive will still receive the Executive’s Target Bonus payment subject to the terms provided herein, even if the Executive is no longer working at the Company at the time the Target Bonus is to be paid.

(c) Stock Options.

(i) Initial Grant. Subject to Board approval, to the extent not already granted, the Company shall grant to the Executive a stock option to purchase shares of Common Stock of the Company up to seven hundred and fifty thousand (750,000) shares under the Company’s 2023 Stock Incentive Plan (the “Plan”), as amended (the “Initial Option”) at an exercise price per share of $1.50 or the then fair market value of the underlying Initial Option as of the date of grant, whichever is greater. The Initial Option shall vest and become exercisable on a cumulative basis with twenty five percent (25%) to vest upon the first anniversary of the Start Date and in thirty-six (36) substantially equal monthly installments over the thirty-six (36) month period beginning on the last day of the month following the first anniversary of the Start Date and the last day of each month thereafter; provided that the Executive continues to have a Service Relationship (as defined in the Plan) with the Company through each such date.

(ii) True-Up Grant. As soon as reasonably practicable following the closing of the Company’s next issuance of preferred shares in a bona fide financing for capital raising purposes (the “Qualified Financing”), subject to approval by the Board and Executive’s continuous service through the date of such grant, the Company will grant Executive an additional option (the “True-Up Option”) to purchase such number of shares of common stock of the Company that would bring Executive’s aggregate, fully-diluted ownership of the Company (for the avoidance of doubt, Executive’s fully-diluted ownership shall include the shares subject to the Initial Option and the True-Up Option as well as any shares held directly or indirectly by the Executive (except for any shares of preferred stock which may have been purchased by Executive), referred to collectively as Executive’s “Ownership”) to an amount equal to no less than one percent (1%) of the Company’s Post-Qualified Financing Fully-Diluted Equity (as defined below) calculated as of immediately subsequent to such closing of the Qualified Financing, provided, that, in the event that the proceeds of such Qualified Financing are paid in multiple tranches, Executive

 

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shall receive a True-Up Option on the closing of each such tranche, such that Executive’s aggregate, fully-diluted ownership of the Company remains at one-percent (1%) of the Company’s Post-Qualified Financing Fully-Diluted Equity as of the date of the closing of each such tranche. If, following the closing of the Qualified Financing, Executive’s Ownership equals or exceeds one percent (1%) of the Post-Qualified Financing Fully-Diluted Equity, then no True-Up Option will be granted. The exercise price per share of the True-Up Option will be determined by the Board at the time of issuance and will be equal to the fair market value of a share of the Company’s common stock as of the date of the True-Up Option grant, as determined by the Board in its sole discretion. The True-Up Option will be subject to the terms and conditions of the Plan (or other Company equity incentive plan then in use), and to a stock option agreement between Executive and the Company in standard form, each of which document is incorporated herein by reference. The True-Up Option will vest and become exercisable on a cumulative basis with twenty five percent (25%) to vest upon the first anniversary of the date of the closing of the Qualified Financing and the balance of the shares vesting in substantially equal monthly installments thereafter over the thirty-six (36) month period thereafter; provided that the Executive continues to have a Service Relationship (as defined in the Plan) with the Company through each such date. For the purposes of this Agreement, “Post-Qualified Financing Fully-Diluted Equity” means fully-diluted equity calculated immediately following the closing of the Qualified Financing including without limitation all shares subject to any stock or similar incentive plan, plus shares of common stock granted pursuant to the True-Up Option or to be granted pursuant to equity awards to other service providers on the date such True-Up Option is granted, as determined by the Board in its sole discretion.

(d) Employee Benefits. During Executive’s term of employment by the Company under this Agreement (the “Employment Period”), the Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, the “Employee Benefit Plans”), on a basis which is no less favorable than is provided to other similarly situated senior executives of the Company, to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plans and applicable law.

(e) Paid Time Off. During the Employment Period, the Executive shall be entitled to twenty (20) days paid vacation per calendar year. This vacation is in addition to Company recognized holidays and paid sick time, if any, in accordance with the Company’s practices and policies as in effect from time to time. The Company reserves the right to amend or cancel its practices and policies at any time in its sole discretion, in accordance with applicable law. Any unused vacation may not be carried over by the Executive to any subsequent year and shall be forfeited at the end of the calendar year. The Company will pay Executive for any accrued but unused vacation upon termination of the Executive’s employment.

(f) Expense Reimbursement. The Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the Executive’s duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures.

 

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(g) Withholdings. All payments made subject to this Agreement will be subject to payroll withholdings that the Company reasonably believes are required by law or elected or authorized by the Executive for state and federal income taxes, Social Security, Medicare, and other applicable payroll deductions, in accordance with the Company’s normal payroll practices.

3. Termination of Employment.

(a) At-Will Employment; Accrued Rights. The Parties acknowledge that Executive’s employment relationship with the Company shall be at-will. Either the Company or the Executive may terminate Executive’s employment with or without Cause or Good Reason or advance notice. Upon a termination of the Executive’s employment for any reason, the Executive (or the Executive’s estate) shall be entitled to receive (i) that portion of the Executive’s Annual Base Salary, then in effect, earned and unpaid as of the termination date; (ii) any expenses owed and properly reimbursable to the Executive pursuant to the Company’s expense reimbursement policies; (iii) conversion rights, if applicable, with respect to any life insurance or disability insurance policy provided to the Executive; and (iv) any vested amounts owed to the Executive under the Company’s employee benefit plans or programs and any vested Options in accordance with the terms and conditions of such employee benefit plans or programs and the Plan (collectively, the “Accrued Rights”).

(b) Termination by the Company for Cause or Executive’s Resignation Without Good Reason. Upon termination of the Executive’s employment relationship by the Company for Cause, or by the Executive’s resignation without Good Reason, the Company shall, thereafter, have no obligation to the Executive for any unearned Annual Base Salary, Target Bonus, or any other form of compensation or benefit, except as otherwise required by law. Reimbursement of appropriately documented expenses incurred by the Executive before the termination of employment, to the extent that the Executive would have been entitled to such reimbursement but for the termination of employment, shall be paid by the Company to the Executive.

(c) Termination by the Company Without Cause or Executive’s Resignation for Good Reason Outside of Change in Control Period. In the event that the Company terminates the Executive’s employment without Cause or Executive resigns for Good Reason, and provided that the Severance Preconditions (defined below) are met, (A) the Executive shall receive nine (9) months’ severance pay at the Executive’s Annual Base Salary then in effect, paid as salary continuation over the nine (9) month severance period pursuant to the Company’s customary payroll practices, commencing on the first payroll date following the date on which the Release becomes effective and irrevocable, provided that if the Release Execution Period (defined below) spans two calendar years, payments shall begin no earlier than the first payroll date of the later calendar year, and provided further that, the first installment payment shall include all amounts attributable to the period from the Executive’s employment termination date through the first payment date; and (B) if the Executive is eligible for and timely and properly elects group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse the Executive for monthly COBRA premiums payable to continue coverage for the Executive and the Executive’s eligible dependents until the earliest of (x) nine (9) months following the termination date; (y) the expiration of the Executive’s eligibility for the continuation coverage under COBRA; or (z) the date when the Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment. Such reimbursement shall be paid to the Executive no later than the end of the month immediately following the month in which the Executive timely remits each COBRA premium payment.

 

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(d) Termination by the Company Without Cause or Executive’s Resignation for Good Reason in Connection with Change in Control. If at any time during the time period of three (3) months prior to or twelve (12) months following a Change in Control (defined below), the Company terminates the Executive’s employment without Cause or the Executive resigns for Good Reason, provided the Severance Preconditions are met, the Company will provide Executive with the following severance benefits (in lieu of, and not in addition to, the severance benefits provided in Section 3(c)):

(i) a lump sum severance payment, payable within sixty (60) days after the later of the Change in Control and Executive’s employment termination date (provided that if the Release Execution Period spans two calendar years, payment shall not made until the beginning of the later calendar year), in an amount equal to the sum of: (A) one (1) year of Executive’s Annual Base Salary then in effect; and (B) 1.5 times the Target Bonus opportunity for the year in which Executive’s employment termination date occurs;

(ii) if the Executive is eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive for monthly COBRA premiums payable to continue coverage for the Executive and the Executive’s eligible dependents until the earliest of (x) twelve (12) months following the termination date; (y) the expiration of the Executive’s eligibility for the continuation coverage under COBRA; or (z) the date when the Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment. Such reimbursement shall be paid to the Executive no later than the end of the month immediately following the month in which the Executive timely remits each COBRA premium payment; and

(iii) the vesting of any outstanding unvested equity that the Executive holds shall be accelerated in full as of the termination date.

(e) Termination in the Event of Executive’s Disability or Death. The Executive’s employment hereunder (i) shall terminate automatically upon the Executive’s death and (ii) may be terminated by the Company for the Executive’s Disability. Upon termination of the Executive’s employment hereunder by reason of the Executive’s Disability or death, the Executive or the Executive’s estate (as the case may be) shall be entitled to receive:

(i) the Accrued Rights; and

(ii) subject to the Executive’s or, in the event of the Executive’s death, the representative of the Executive’s estate, execution and non-revocation of the Release and such Release becoming effective and irrevocable within the Release Execution Period:

(A) a pro-rata portion (based on the number of full days the Executive was employed in the applicable fiscal year) of the Target Bonus, if any, Executive would have earned for the fiscal year in which Executive’s employment termination date occurs, based on actual Company performance of the full fiscal year and payable at the same time annual bonuses are generally paid to executives for such fiscal year; and

 

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(B) if the Executive is (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the monthly COBRA premium paid by the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the Executive and the Executive’s spouse/dependents. Such reimbursement shall be paid to the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) no later than the end of the month immediately following the month in which the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) timely remits the COBRA premium payment. The Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) shall be eligible to receive such reimbursement until the earliest of: (i) the last day of the month that is twenty-six (26) weeks after the termination of the Executive’s employment by reason of the Executive’s Disability or death; (ii) in the event of Executive’s Disability, the date Executive becomes eligible to receive healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility) or (iii) the date the Executive is (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) no longer eligible to receive COBRA continuation coverage. Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act) or incurring an excise tax, the Company shall in lieu thereof provide to Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) a taxable monthly payment in an amount equal to the monthly COBRA premium contemplated by the continuation benefit set forth in this Section.

(iii) Following the termination of the Executive’s employment by reason of the Executive’s Disability or death, except as set forth in this Section 3, the Executive (or Executive’s estate) shall have no further rights to any compensation or any other benefits under this Agreement.

(f) Effect of Termination on Post-Termination Obligations. Upon termination of this Agreement for any reason, the Executive shall continue to be bound by the post-employment obligations and covenants set forth in this Agreement and the CIIAA following Executive’s termination.

(g) No Mitigation. The Executive will not be required to mitigate any of the Company’s payment obligations set forth in this Section 3 by making any efforts to secure other employment, and Executive’s commencement of employment with another employer will not reduce the obligations of the Company under this Section 3, unless specifically provided for herein.

(h) Resignation of Offices. Promptly following any termination of the Executive’s employment with the Company for any reason (other than by reason of the Executive’s death), the Executive shall deliver to the Company reasonably satisfactory written evidence of the Executive’s resignation from all positions that the Executive may then hold as an employee or officer of the Company or any subsidiary of the Company.

 

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4. Definitions.

(a) Cause. For purposes of this Agreement the term “Cause” shall mean any one or more of the following:

i. The Executive’s persistent unsatisfactory performance or material failure to perform the Executive’s duties or any lawful directive of the Board or CEO after being given written notice of such deficiencies in the Executive’s performance and failure to cure them within thirty (30) calendar days of such written notice;

ii. The Executive’s indictment for, conviction of, plea of guilty to, or plea of nolo contendere to a felony involving the property or operations of the Company or a crime of moral turpitude;

iii. The Executive’s indictment for, conviction of, plea of guilty to, or plea of nolo contendere to embezzlement, misappropriation or fraud, whether or not related to the Executive’s employment with Company;

iv. The existence of any court order or settlement agreement prohibiting the Executive’s continued employment with the Company;

v. The Executive’s material breach of any material obligation in this Agreement, or any other written agreement between the Executive and Company, or any material misconduct by the Executive that adversely affects the business of the Company or its reputation; or

vi. The Executive’s material failure to comply with the Company’s reasonable and lawful policies or rules of which the Executive is given written notice, as they may be in effect from time to time during the Executive’s employment, and failure to cure them within thirty (30) calendar days of such written notice.

(b) Change in Control. For purposes of this Agreement, “Change in Control” has the meaning ascribed to such term in the Plan.

(c) Disability. For the purposes of this Agreement, “Disability” shall mean that in the good faith judgment of the Board, despite reasonable accommodation, the Executive is unable due to a physical or mental incapacity to perform the essential functions of Executive’s most recent position for: (x) a period of one hundred eighty (180) consecutive days or (y) an aggregate of six (6) months in any twelve (12) consecutive month period.

(d) Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean any one or more of the following, in each case during the Employment Period without the Executive’s written consent:

i. a material reduction of the Executive’s position, authority or responsibilities, or the removal of the Executive from such position, authority or responsibilities, unless the Executive is provided with a new position of equal or greater organizational level, authority, responsibilities and compensation;

 

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ii. a material reduction in the Annual Base Salary other than a general reduction in Annual Base Salary that affects all similarly situated executives in substantially the same proportions;

iii. a material breach by the Company of this Agreement; or

iv. a material change in the geographic location at which the Executive is required to perform services for the Company (except for office relocations that would not increase the Executive’s one way commute by more than twenty-five (25) miles).

provided, however, that Good Reason shall not exist unless: (x) the Executive has given the Company written notice of the conduct of the Company that is alleged to constitute Good Reason within thirty (30) days following the occurrence of such event; (y) the Executive has provided the Company at least thirty (30) days following the date on which such notice is provided to cure such conduct and the Company has failed to do so; and (z) the Executive resigns and voluntarily terminates the Executive’s employment within thirty (30) days following the expiration of the Company’s opportunity to cure such conduct.

(e) Severance Preconditions. For the purposes of this Agreement, the “Severance Preconditions” shall mean that (i) the Executive has executed and not revoked within the applicable revocation period a separation agreement and general release in a form and substance reasonably satisfactory to the Company (the “Release”) and such Release becomes effective and irrevocable within sixty (60) days following the Executive’s employment termination date (such 60-day period, the “Release Execution Period”); (ii) the Executive remains in compliance with the CIIAA; and (iii) the Executive has provided to the Company the written resignations set forth in Section 3(h).

5. Confidential Information and Intellectual Property Rights. As a condition of employment, the Executive agrees to execute and abide by the Confidentiality and Proprietary Rights Agreement attached as Exhibit A (“CIIAA”). The CIIAA contains provisions that are intended by the Parties to survive and do survive any termination of this Agreement and the CIIAA.

6. Non-Disparagement. The Executive shall not, during or after employment, make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal communications that belittle, disparage or otherwise express disapproval of the Company or any of its affiliates or their respective businesses, or any of their past or present officers, directors, employees, advisors, agents, policies, procedures, practices, decision-making, conduct, professionalism or compliance with standards, except as and to the extent required to comply with applicable federal or state law. This Agreement does not prohibit Executive from reporting possible legal violations to the government or from making other disclosures to the government that are protected under federal or state whistleblower provisions. This Agreement does not prohibit Executive from making truthful statements or disclosures about alleged unlawful acts in the workplace, including sexual harassment.

 

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7. Section 409A. It is intended that any payment or benefit that is provided pursuant to or in connection with this Agreement that is considered to be deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) shall be paid and provided in a manner, and at such time and form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for non-compliance. It is further intended that the payments hereunder shall, to the maximum extent permissible under Section 409A of the Code, be exempt from Section 409A of the Code under either (i) the exception for involuntary separation pay to the extent that all payments are payable within the limitations described in Treasury Regulation Section 1.409A-1(b)(9), or (ii) the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4) to the extent that all payments are payable no later than two and a half months after the end of the first taxable year in which the right to the payment is no longer subject to a substantial risk of forfeiture.

(a) If the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code at such time, any payments to be made or benefits to be delivered in connection with the Executive’s “separation from service” (as defined below) that constitute deferred compensation subject to Section 409A of the Code shall not be made until the earlier of (i) the Executive’s death or (ii) six months plus one day after the Executive’s separation from service (“409A Deferral Period”) as required by Section 409A of the Code. Payments of any such deferred compensation otherwise due to be made in installments or periodically during the 409A Deferral Period shall be accumulated and paid in a lump sum as soon as the 409A Deferral Period ends, and the balance of the payment shall be made as otherwise scheduled.

(b) For purposes of this Agreement, all rights to payments and benefits hereunder shall be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Section 409A of the Code.

(c) For purposes of this Agreement, with respect to the timing of any amounts that constitute deferred compensation subject to Section 409A of the Code that depends on termination of employment or separation from service, termination of employment or separation from service shall mean a “separation from service” within the meaning of Section 409A of the Code where it is reasonably anticipated that no further services would be performed after such date or that the level of bona fide services the Executive would perform after that date (whether as an employee or independent contractor) would permanently decrease to a level less than or equal to twenty percent (20%) of the average level of bona fide services the Executive performed over the immediately preceding thirty-six (36) month period.

8. Section 280G. If any payment or benefit Executive will or may receive from the Company or otherwise (a “Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such Payment shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Executive. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).

 

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Notwithstanding any provisions in this Section above to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for Executive as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.

The Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this Section. The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. If Executive receives a Payment for which the Reduced Amount was determined pursuant to clause (x) above and the Internal Revenue Service determines thereafter that some portion of the Payment is subject

to the Excise Tax, Executive agrees to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) above) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) above, Executive shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.

9. Indemnification. The Company will enter into an indemnification agreement with Executive. At all times during the Executive’s service as an officer and/or director and for at least six years thereafter, the Company shall provide that Executive is covered by the Company’s D&O insurance on the same basis as other active officers and directors (without regard to whether the Executive’s service has previously terminated).

10. Representations of the Executive. The Executive represents and warrants that: (i) the Executive has no legal obligations to any other party that would be breached by signing this Agreement or otherwise fulfilling Executive’s obligations hereunder, including but not limited to any non-competition, non-solicitation, non-inducement, confidentiality, assignment of inventions, or other similar agreement; (ii) the Executive has not disclosed any third party’s confidential or proprietary information to the Company or its representatives or agents; (iii) if the Executive learns of any confidential or proprietary information that belongs to any third party, the Executive will not disclose such information to the Company or its representatives or agents, except as allowed by law or any agreement Executive has signed with such party; and (iv) the Executive is not in breach of any confidentiality or non-disclosure agreement that the Executive has signed.

 

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11. Miscellaneous.

(a) Entire Agreement. This Agreement contains the entire agreement and understanding of the Executive and the Company concerning the subject matter hereof and supersedes and replaces all prior negotiations and proposed agreements, whether oral or written. The Executive acknowledges that, by signing this Agreement, the Executive has not relied upon any representations, promises or agreements made by the Company or its employees, officers, directors, or representatives (including any Company attorneys) that are not contained in this Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the Parties hereto.

(b) Headings/Counterparts. The headings of the paragraphs herein are included for reference only and are not intended to affect the interpretation of the Agreement. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same Agreement. Each Party agrees that faxed or electronically transmitted copies of the signature pages of this Agreement and/or any of the other instruments, agreements and documents relating to any of the transactions contemplated hereby, whether sent to the other Party or to such other Party’s counsel, shall be deemed definitively executed and delivered, and with the same force and effect as if manually signed and delivered, for all purposes whatsoever. Neither Party hereto shall raise the use of DocuSign, electronic mail or a facsimile machine to deliver a signature or the fact that any signature was transmitted or communicated through the use of electronic mail or a facsimile machine as a defense

to the formation of a contract and each Party forever waives any such defense. All counterparts shall be construed together and shall constitute one instrument, and the signature page from any counterpart may be attached to another counterpart to form a complete copy of this Agreement.

(c) Severability. If any provision of this Agreement or the application thereof is held invalid, such invalidation shall not affect other provisions or applications of this Agreement and to this end the provisions of this Agreement are declared to be severable.

(d) Construction/Joint Drafting. The determination of the terms and conditions of this Agreement has been by mutual agreement of the Parties. Each Party participated jointly in the drafting of this Agreement, and therefore the terms and conditions of this Agreement are not intended to be, and shall not be, construed against any Party by virtue of draftsmanship.

(e) Non-Waiver. Neither the failure nor any delay on the part of either Party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver of any provision of this Agreement will be binding unless made in a writing signed by the Parties hereto.

(f) Assignment. This Agreement shall be binding upon the Company and shall inure to the benefit of the Company including any transferee of the business operation, as a going concern, in which the Executive is employed and shall be binding upon the Executive and the Executive’s heirs and personal representatives. None of the rights or obligations of the Executive hereunder may be assigned or delegated. The Company may assign its rights and obligations under this Agreement in whole or in part to anyone.

 

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(g) Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the internal laws of the State of New York.

(h) Resolution of Disputes. To aid the rapid and economical resolution of disputes that may arise in connection with Executive’s employment with the Company, and in exchange for the mutual promises contained in this Agreement, Executive and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, Executive’s employment with the Company, or the termination of Executive’s employment, shall be resolved, to the fullest extent permitted by law, by final, binding and confidential arbitration conducted by JAMS, Inc. (“JAMS”) or its successor, under JAMS’ then applicable rules and procedures appropriate to the relief being sought (available upon request and also currently available at the following web address: (i) https://www.jamsadr.com/rules-employment-arbitration/ and (ii) https://www.jamsadr.com/rules-comprehensive-arbitration/) at a location closest to where Executive last worked for the Company or another mutually agreeable location. Executive acknowledges that by agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge. The Federal Arbitration Act, 9 U.S.C. § 1 et seq., will, to the fullest extent permitted by law, govern. the interpretation and enforcement of this arbitration agreement and any arbitration proceedings. This provision shall not be mandatory for any claim or cause of action to the extent applicable law prohibits subjecting such claim or cause of action to mandatory arbitration and such applicable law is not preempted by the Federal Arbitration Act or otherwise invalid (collectively, the “Excluded Claims”), such as non-individual claims that cannot be waived under applicable law, claims or causes of action alleging sexual harassment or a nonconsensual sexual act or sexual contact, or unemployment or workers’ compensation claims brought before the applicable state governmental agency. In the event Executive or the Company intend to bring multiple claims, including one of the Excluded Claims listed above, the Excluded Claims may be filed with a court, while any other claims will remain subject to mandatory arbitration. Nothing herein prevents Executive from filing and pursuing proceedings before a federal or state governmental agency, although if Executive chooses to pursue a claim following the exhaustion of any applicable administrative remedies, that claim would be subject to this provision. In addition, with the exception of Excluded Claims arising out of 9 U.S.C. § 401 et seq., all claims, disputes, or causes of action under this section, whether by Executive or the Company, must be brought in an individual capacity, and shall not be brought as a plaintiff (or claimant) or class member in any purported class, representative, or collective proceeding, nor joined or consolidated with the claims of any other person or entity. Executive acknowledges that by agreeing to this arbitration procedure, both Executive and the Company waive all rights to have any dispute be brought, heard, administered, resolved, or arbitrated on a class, representative, or collective action basis. The arbitrator may not consolidate the claims of more than one person or entity, and may not preside over any form of representative or class proceeding. If a court finds, by means of a final decision, not subject to any further appeal or recourse, that the preceding sentences regarding class, representative, or collective claims or proceedings violate applicable law or are otherwise found unenforceable as to a particular claim or request for relief, the Parties agree that any such claim(s) or request(s) for relief be severed from the arbitration and may proceed in a court of law

 

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rather than by arbitration. All other claims or requests for relief shall be arbitrated. Executive will have the right to be represented by legal counsel at any arbitration proceeding. Questions of whether a claim is subject to arbitration and procedural questions which grow out of the dispute and bear on the final disposition are matters for the arbitrator to decide, provided however, that if required by applicable law, a court and not the arbitrator may determine the enforceability of this paragraph with respect to Excluded Claims. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based. The arbitrator shall be authorized to award all relief that Executive or the Company would be entitled to seek in a court of law. The Company shall pay all arbitration administrative fees in excess of the administrative fees that Executive would be required to pay if the dispute were decided in a court of law. Each Party is responsible for its own attorneys’ fees, except as may be expressly set forth in the Employee Confidential Information and Inventions Assignment Agreement or as otherwise provided under applicable law. Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction.

(i) Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of delivery, if delivered by hand, (ii) on the date of transmission, if delivered by electronic mail, (iii) on the first business day following the date of deposit, if delivered by guaranteed overnight delivery service, or (iv) on the fourth business day following the date delivered or mailed by the U.S. Postal Service, addressed as follows:

 

If to the Executive:

At the address shown in the books and records of the Company, currently:

***

If to the Company:

LB Pharmaceuticals Inc

One Penn Plaza, Suite 1025

New York, NY 10119

Attention: Chief Executive Officer

Email: ***

 

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with copy, which shall not constitute notice,

to:

Divakar Gupta

Cooley LLP

55 Hudson Yards

New York, New York 10001-2163

Notices shall be deemed to be properly addressed, to the Company or to the Executive, if addressed to such person at such person’s address as set forth above, or to such other address or addresses as the addressee previously may have specified by Notice given to the other parties in the manner contemplated by this Section 11(i).

(j) Survival. Upon the termination of this Agreement, the respective rights and obligations of the Parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the Parties under this Agreement.

12. Acknowledgement of Full Understanding. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT EXECUTIVE HAS FULLY READ, UNDERSTANDS AND

VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT EXECUTIVE HAS BEEN REPRESENTED BY EXECUTIVE’S OWN COUNSEL OR HAS HAD AN OPPORTUNITY TO BE REPRESENTED BY AN ATTORNEY OF EXECUTIVE’S CHOICE BEFORE SIGNING THIS AGREEMENT.

(Remainder of page left blank intentionally; Signatures on the following page)

 

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IN WITNESS WHEREOF, the Parties have duly executed and delivered this Agreement as of the date first above written.

 

EXECUTIVE     LB PHARMACEUTICALS INC
By:   /s/ Gad Soffer     By:   /s/ Heather Turner
Name:   Gad Soffer     Name:   Heather Turner
      Title:   Chief Executive Officer

 

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Exhibit A

CONFIDENTIALITY AND PROPRIETARY RIGHTS AGREEMENT

(See attached)

Exhibit 10.15

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”), is made as of the 25th day of August, 2023, by and between LB Pharmaceuticals Inc, a Delaware Corporation, (the “Company”) and Anna Eramo, MD, an individual residing at *** (the “Executive”) (collectively, the “Parties”).

RECITALS

WHEREAS, the Company wishes to continue to retain the services of the Executive to serve as a Chief Medical Officer (“CMO”) of the Company and on the terms and conditions set forth herein;

WHEREAS, the Company anticipates securing funding through the sale of Series C Preferred Stock pursuant to and subject to the terms of the Series C Preferred Stock Purchase Agreement dated August 29, 2023 (the “Series C Stock Purchase Agreement”);

WHEREAS, this Agreement shall become effective immediately upon the Initial Closing, as such term is defined in the Series C Stock Purchase Agreement (such closing, the “Initial Series C Closing” and the date of the Initial Series C Closing, the “Effective Date”);

WHEREAS, if the Initial Series C Closing does not occur, this Agreement will not take effect and the Parties shall have no obligations under this Agreement; and

WHEREAS, the Executive desires and is willing to continue employment with the Company on the terms and conditions set forth herein;

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties intending to be legally bound, acknowledge and agree as follows:

1. Incorporation of Recitals; Term. The terms set forth in each of the paragraphs under the heading “RECITALS” above are hereby incorporated into this Agreement. The Executive’s employment hereunder shall be for a term commencing on the Effective Date and ending on the one year anniversary of the Effective Date (the “Initial Period”). In the absence of a Non-Renewal Notice (defined herein), upon the expiration of the Initial Period, this Agreement shall automatically renew for successive one (1) year terms (each a “Renewal Period”). If either Party does not want this Agreement to renew beyond the Initial Period or any subsequent Renewal Period (collectively, the “Employment Period”), the non-renewing Party shall give the other Party written notice of non-renewal not less than Ninety (90) days prior to the expiration of the then existing Employment Period (“Non-Renewal Notice”). If either Party gives a Non-Renewal Notice to the other Party, this Agreement shall terminate upon the expiration of the Employment Period (“Non-Renewal”). Notwithstanding the foregoing, this Agreement may be terminated earlier in accordance with Section 4.

 

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2. Position and Duties. During the Employment Period, the Executive will serve as CMO of the Company and report to the Chief Executive Officer of the Company (“CEO”). The Executive shall have such duties, authority, and responsibilities as shall be consistent with the duties normally performed by a CMO of private companies of similar size in the pharmaceutical industry in which the Company operates. The Executive will diligently and conscientiously perform the duties of CMO and will devote substantially all of the Executive’s business hours to such duties, and during such time will make the best use of the Executive’s energy, knowledge, and training to advancing the Company’s interests. The Executive will accept no other employment or contracting work during the Employment Period, or serve as a member of the board of directors of any for-profit entity or as a member of any advisory board without the express written consent of the board of directors the Company (the “Board”). Upon termination of the Executive’s employment relationship with the Company for any reason, the Executive shall resign and relinquish any position held as an officer and/or board member of the Company.

3. Compensation and Benefits.

(a) Base Salary. Subject to the terms set forth herein, in consideration for all services rendered by the Executive to the Company, upon the Initial Series C Closing the Company shall pay the Executive an annual base salary of Three Hundred Twenty-Five Thousand Dollars and No Cents ($325,000) (“Annual Base Salary”) in periodic installments in accordance with the Company’s regular payroll practices in effect from time to time for executive employees, but no less frequently than semi-monthly. The Executive shall be classified as exempt from overtime and the Executive understands and acknowledges that the Executive is not entitled to overtime compensation and that Executive’s Base Salary is intended to compensate the Executive for all hours worked. Executive’s Annual Base Salary will increase automatically upon the occurrence of certain events, if they occur while the Executive is still employed by the Company. If the Initial Series C Closing occurs in 2023, then on January 1, 2024, the Company shall increase Executive’s Annual Base Salary to an annual base salary of Three Hundred Seventy-Five Thousand Dollars and No Cents ($375,000), and if the Initial Series C Closing occurs in 2023 and this Agreement remains in effect on January 1, 2025, then on January 1, 2025, Executive’s Annual Base Salary (as is then in effect) shall increase by 5%.

(b) Target Bonus.

(i) For the twelve (12) month period following the Effective Date, and then for each year of employment thereafter, the Executive will be eligible to earn a target bonus of up to 40% of Executive’s Annual Base Salary, in all cases subject to the Compensation Committee of the Board of the Company determining that the applicable objectives, which shall be mutually agreed to by the Board and the Executive, have been achieved (the “Target Bonus”). Objectives will include 50% Company performance and 50% Executive’s personal performance to be mutually determined and reviewed by the Compensation Committee of the Board and the Executive on a regular basis. If the Compensation Committee of the Board determines that the Executive achieved less than 50% of the Executive’s applicable objectives, then the Compensation Committee may determine that the Executive will receive no Target Bonus.

 

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(ii) Any such Target Bonus shall not be considered earned until awarded, except where pro-rata payout is provided for in this Agreement. Any Target Bonus awarded will be paid no later than forty-five (45) days after it has been awarded. If the Executive’s employment with the Company is terminated for Cause (as defined in Section 4(c)(ii)) before any Target Bonus is paid, the Executive shall not be eligible to receive the Target Bonus, regardless of whether the Company already awarded the Target Bonus. If the Company awards the Executive a Target Bonus and thereafter terminates the Executive’s employment with the Company for a reason other than for Cause but before any such Target Bonus has been paid, the Executive will still receive the Executive’s Target Bonus payment subject to the terms provided herein, even if the Executive is no longer working at the Company at the time the Target Bonus is to be paid.

(c) Stock Options.

(i) Subject to Board approval, to the extent not already granted, the Company shall grant to the Executive stock options to purchase shares of Common Stock of the Company up to 750,000 under the Company’s 2023 Stock Incentive Plan (the “Plan”), as amended (each an “Option”) at an exercise price per share of $1.50, which is not less than the current fair market value of the underlying Option as of the date of grant.

(ii) The Options shall vest and become exercisable on a cumulative basis with 25% to vest upon the first anniversary of the Effective Date of this Agreement and in thirty-six (36) substantially equal monthly installments over the thirty-six (36) month period beginning on the last day of the month following the first anniversary of the Effective Date of this Agreement and the last day of each month thereafter; provided that the Executive continues to have a Service Relationship (as defined in the Plan adopted as upon the Initial Series C Closing) with the Company through each such date.

(iii) Notwithstanding the foregoing, all of the Options shall automatically vest upon the Executive’s Termination by the Company due to Change in Control (defined herein).

(iv) Notwithstanding the foregoing, an additional nine (9) monthly installments of Options shall automatically vest upon Non-Renewal of this Agreement by the Company.

(v) Notwithstanding the foregoing, (A) if the Executive is terminated during the Initial Period without Cause or the Executive resigns for Good Reason, as those terms are defined herein, then an additional fifteen (15) monthly installments of Options shall automatically vest, and (B) if the Executive is terminated during any renewal Period without Cause or the Executive resigns for Good Reason, as those terms are defined herein, then an additional six (6) monthly installments of Options shall automatically vest.

(vi) Notwithstanding the forgoing, in the case of Termination in the Event of Executive’s Disability or Death, a minimum of 25% of the Options shall automatically vest.

(vii) All unvested Options shall automatically terminate upon the Executive’s termination for Cause or resignation without Good Reason (defined herein).

 

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(viii) All Options shall be subject to other standard terms and conditions, not inconsistent with the foregoing, as are contained in the Company’s standard form of Notice of Grant and Stock Option Agreement.

(d) Employee Benefits. During the Employment Period, the Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, the “Employee Benefit Plans”), on a basis which is no less favorable than is provided to other similarly situated senior executives of the Company, to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plans and applicable law.

(e) Paid Time Off. During the Employment Period, the Executive shall be entitled to twenty (20) days paid vacation per calendar year. This vacation is in addition to Company recognized holidays and paid sick time, if any, in accordance with the Company’s practices and policies as in effect from time to time. The Company reserves the right to amend or cancel its practices and policies at any time in its sole discretion, in accordance with applicable law. Any unused vacation may not be carried over by the Executive to any subsequent year. The Company will pay Executive for any accrued but unused vacation upon termination of this Agreement.

(f) For purposes of this Agreement, the benefits set forth in Sections 3(d) through 3(f) above shall be referred to as “Fringe Benefits.”

(g) Expense Reimbursement. The Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the Executive’s duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures.

(h) Withholdings. All payments made under this Section 3, or under any other provision of this Agreement, will be subject to payroll withholdings that the Company reasonably believes are required by law or elected or authorized by the Executive for state and federal income taxes, Social Security, Medicare, and other applicable payroll deductions, in accordance with the Company’s normal payroll practices.

4. Termination of Employment.

(a) Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, the Date of Termination shall be the date of the Executive’s receipt of the Notice of Termination or the day following the expiration of the cure period below if applicable, (ii) if the Executive’s employment is terminated by the Company other than for Cause, Death, or Disability, the Date of Termination shall be the thirtieth (30th) day after the date of the Executive’s receipt of the Notice of Termination, unless otherwise agreed by the Company and the Executive, (iii) if the Executive’s employment is terminated by the Executive for any reason other than Good Reason, the Date of Termination shall be the thirtieth (30th) day after the date of the Company’s receipt of the Notice of Termination, unless otherwise agreed to

 

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by the Company and the Executive, (iv) if the Executive’s employment is terminated by the Executive for Good Reason, the Date of Termination shall be the date of the Company’s receipt of the Notice of Termination or the day following the expiration of the cure period below if applicable, (v) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of the Executive’s death or Disability, as the case may be, and (vi) if the Executive’s employment is terminated as a result of a Non-Renewal of the Employment Period, the Date of Termination shall be upon the expiration of the Employment Period. Notwithstanding the foregoing, for any compensation that qualifies as non-qualified deferred compensation under Code Section 409A (taking into account amounts that are exempt from the requirements of Code Section 409A by reason of the “separation pay” or “short-term deferral” exclusions), the Date of Termination shall be the date the Executive experiences a “separation from service” within the meaning of Code Section 409A.

(b) Accrued Rights. Upon a termination of the Executive’s employment for any reason, the Executive (or the Executive’s estate) shall be entitled to receive (i) that portion of the Executive’s Annual Base Salary, then in effect, earned and unpaid as of the Date of Termination; (ii) any Target Bonus owed to the Executive for the Company’s fiscal year preceding the fiscal year in which the Date of Termination occurs that has not been paid as of the Date of Termination; (iii) any expenses owed and properly reimbursable to the Executive pursuant to the Company’s expense reimbursement policies; (iv) conversion rights, if applicable, with respect to any life insurance or disability insurance policy provided to the Executive; and (v) any vested amounts owed to the Executive under the Company’s employee benefit plans or programs and any vested Options in accordance with the terms and conditions of such employee benefit plans or programs and the Plan (collectively, the “Accrued Rights”).

(c) Termination by the Company for Cause or Executive’s Resignation Without Good Reason.

(i) The Company may terminate the Executive’s employment relationship with the Company at any time for Cause (as defined below). Upon termination of the Executive’s employment relationship by the Company for Cause, or by the Executive’s resignation without Good Reason, the Company shall, thereafter, have no obligation to the Executive for any unearned Annual Base Salary, unearned Target Bonus, Fringe Benefits, or any other form of compensation or benefit, except as otherwise required by law. Reimbursement of appropriately documented expenses incurred by the Executive before the termination of employment, to the extent that the Executive would have been entitled to such reimbursement but for the termination of employment, shall be paid by the Company to the Executive.

(ii) For purposes of this Agreement the term “Cause” shall mean any one or more of the following:

(A) The Executive’s material failure to perform the Executive’s duties or any lawful directive of the Board or CEO after being given written notice of such deficiencies in the Executive’s performance and failure to cure them within thirty (30) calendar days of such written notice;

 

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(B) The Executive’s indictment for, conviction of, plea of guilty to, or plea of nolo contendere to a felony involving the property or operations of the Company or a crime of moral turpitude;

(C) The Executive’s indictment for, conviction of, plea of guilty to, or plea of nolo contendere to embezzlement, misappropriation or fraud, whether or not related to the Executive’s employment with Company;

(D) The existence of any court order or settlement agreement prohibiting the Executive’s continued employment with the Company;

(E) The Executive’s material breach of any material obligation in this Agreement, or any other written agreement between the Executive and Company, or any material misconduct by the Executive that adversely affects the business of the Company or its reputation; or

(F) The Executive’s material failure to comply with the Company’s reasonable and lawful policies or rules of which the Executive is given written notice, as they may be in effect from time to time during the Executive’s employment, and failure to cure them within thirty (30) calendar days of such written notice.

(d) Termination by Mutual Agreement. This Agreement may be terminated at any time by mutual agreement of the Executive and the Company in writing. Upon termination of this Agreement pursuant to this Section 4(b), the Company shall, thereafter, have no obligation to the Executive for the Executive’s unearned Annual Base Salary, unearned Target Bonus, Fringe Benefits, or any other form of compensation or benefit, except as otherwise required by law or under the express written terms of the mutual agreement.

(e) Termination by the Company Without Cause or Executive’s Resignation for Good Reason.

(i) In the event that during the Employment Period the Company terminates the Executive’s employment Without Cause (as defined in this Section 4) or the employment relationship has been terminated by the Executive’s resignation for Good Reason, and provided that the Executive executes a Separation Agreement and General Release in a form and substance reasonably satisfactory to the Company (the “General Release”) and which is not subsequently revoked by the Executive, (A) the Executive shall receive eighteen (18) months’ severance pay at the Executive’s Annual Base Salary then in effect; (B) the Executive shall receive the pro-rata portion (based on the number of full days the Executive was employed in the applicable fiscal year) of the Target Bonus expected to be awarded to the Executive on the anniversary of the year of the Executive’s Date of Termination, based on actual Company performance of the full fiscal year and payable at the same time annual bonuses are generally paid to executives for such fiscal year; and (C) if the Executive is eligible for and timely and properly elects group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse the Executive for eighteen (18) months’ of the monthly COBRA premium paid by the Executive for the Executive and the Executive’s dependents. Such reimbursement shall be paid to the Executive no later than the end

 

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of the month immediately following the month in which the Executive timely remits the COBRA premium payment. Such severance payment shall be made over a period of time pursuant to the Company’s customary payroll procedures (i.e., not in a lump sum). If the Executive fails to return an executed General Release to the Company within the required time period set forth in the General Release, or the Executive subsequently revokes such timely release, the Company shall not have any obligation to pay any amount of severance or other amounts described in this section 4(e)(i). If the Parties terminate this Agreement upon mutual agreement pursuant to Section 4(d) of this Agreement, or if the Executive resigns the Executive’s employment without Good Reason, the Executive will not be eligible to receive, and the Company will have no obligation to pay, any amount of severance or other amounts described in this section 4(e)(i).

(ii) For purposes of this Agreement the term “Good Reason” shall mean any one or more of the following, in each case during the Employment Period without the Executive’s written consent:

(A) a material reduction of the Executive’s position, authority or responsibilities, or the removal of the Executive from such position, authority or responsibilities, unless the Executive is provided with a new position of equal or greater organizational level, authority, responsibilities and compensation;

(B) a material reduction in the Annual Base Salary other than a general reduction in Annual Base Salary that affects all similarly situated executives in substantially the same proportions;

(C) a material breach by the Company of any of this Agreement;

(D) a material change in the geographic location at which the Executive is required to perform services for the Company (except for office relocations that would not increase the Executive’s one way commute by more than twenty-five (25) miles); and

(E) the Company’s failure to obtain an agreement from any successor to the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no succession had taken place, except where such assumption occurs by operation of law;

provided, that no event described in clause (A), (B), (C), (D) or (E) shall constitute Good Reason unless (A) the Executive has given the Company written notice of the termination, setting forth the conduct of the Company that is alleged to constitute Good Reason, within thirty (30) days following the occurrence of such event, and (B) the Executive has provided the Company at least thirty (30) days following the date on which such notice is provided to cure such conduct and the Company has failed to do so.

(f) Termination in the Event of Non-Renewal. Upon the Non-Renewal of this Agreement, this Agreement shall terminate at the end of the Employment Period, and such termination of the Agreement shall not constitute a Termination by the Company without Cause or a resignation by the Executive for Good Reason pursuant to Section 4(e) hereof. If this Agreement is terminated in the event of the Company’s Non-Renewal, and provided that the Executive executes the General Release and does not subsequently revoke the General Release, then the Executive shall be entitled to severance pay in an amount equal to nine (9) months’ salary of Executive’s Annual Base Salary then in effect. In the event of the Executive’s Non-Renewal, the Executive shall not be entitled to payment under this section 4(f).

 

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(g) Termination by the Company in the Event of a Change in Control. Upon a Change in Control of the Company (as defined below), the Company may decide to terminate this Agreement, and such termination of the Agreement shall not constitute a Termination by the Company without Cause pursuant to Section 4(e) hereof. If this Agreement is terminated by the Company in the event of a Change in Control, and provided that the Executive executes the General Release and does not subsequently revoke the General Release, then the Executive shall be entitled to severance pay in an amount equal to (i) one year of Executive’s Annual Base Salary then in effect to be paid in a lump sum within thirty (30) days’ after the Change in Control; (ii) 1.5 times the Target Bonus expected to be awarded to the Executive as of the anniversary of the Effective Date for the year of the Executive’s Date of Termination, based on the Company’s performance and payable upon the closing of the Change in Control transaction; and (iii) if the Executive is eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive for twelve months’ of the monthly COBRA premium paid by the Executive for the Executive and the Executive’s dependents. Such reimbursement shall be paid to the Executive no later than the end of the month immediately following the month in which the Executive timely remits the COBRA premium payment.

(i) For purposes of this Agreement, “Change in Control,” means any of the following transactions:

(A) a sale of all or substantially all of the assets of the Company in one or more transactions,

(B) a consolidation or merger of the Company with or into any other corporation or other entity, or any other corporate re-organization, as a result of which the shareholders of the Company immediately prior to such consolidation, merger or reorganization own capital stock of the entity surviving such merger, consolidation or reorganization representing less than fifty percent (50%) of the combined voting power of the outstanding securities of the surviving entity immediately after such consolidation, merger or reorganization, or

(C) the sale by the shareholders of the Company existing as of the time immediately after the final Closing (as that term is defined in the Series C Stock Purchase Agreement), in one or more transactions, which results in such shareholders owning less than fifty percent (50%) of the outstanding equity securities of the Company.

(h) Termination in the Event of Executive’s Disability or Death. The Employment Period and the Executive’s employment hereunder (i) shall terminate upon the Executive’s death and (ii) may be terminated by the Company if, in the good faith judgment of the Board, despite reasonable accommodation, the Executive is unable due to a physical or mental incapacity to perform the essential functions of Executive’s most recent position for: (x) a period of one hundred eighty (180) consecutive days or (y) an aggregate of six (6) months in any twelve (12) consecutive month period (such incapacity is hereinafter referred to as “Disability”). Upon termination of the Executive’s employment hereunder by reason of the Executive’s Disability or death, the Executive or the Executive’s estate (as the case may be) shall be entitled to receive:

(i) the Accrued Rights; and

 

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(ii) subject to the Executive’s or, in the event of the Executive’s death, the representative of the Executor’s estate, execution and non-revocation of the General Release:

(A) a pro-rata portion (based on the number of full days the Executive was employed in the applicable fiscal year) of the Target Bonus expected to be awarded to the Executive on the anniversary of the Effective Date for the year of the Executive’s Date of Termination, based on actual Company performance of the full fiscal year and payable at the same time annual bonuses are generally paid to executives for such fiscal year; and

(B) if the Executive is (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the monthly COBRA premium paid by the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the Executive and the Executive’s spouse/dependents. Such reimbursement shall be paid to the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) no later than the end of the month immediately following the month in which the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) timely remits the COBRA premium payment. The Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) shall be eligible to receive such reimbursement until the earliest of: (i) the last day of the month that is twenty-six (26) weeks after the termination of the Executive’s employment by reason of the Executive’s Disability or death; (ii) in the event of Executive’s Disability, the date Executive becomes eligible to receive healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility) or (iii) the date the Executive is (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) no longer eligible to receive COBRA continuation coverage. Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act) or incurring an excise tax, the Company shall in lieu thereof provide to Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) a taxable monthly payment in an amount equal to the monthly COBRA premium that Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) pays to continue Executive’s and Executive’s covered dependents’ (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) group health coverage, which payments shall commence in the month following the month in which the Date of Termination occurs and shall end on the earliest of (x) last day of the month that is twenty-six (26) weeks after the termination of the Executive’s employment by reason of the Executive’s Disability or death, (y) the date the Executive is (or, in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) no longer eligible to receive COBRA continuation coverage and (z) in the event of Executive’s Disability, the date the Executive becomes eligible for substantially similar group health plan coverage from the Executive’s subsequent employer (and the Executive agrees to promptly notify the Company of such eligibility).

 

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(i) Following the termination of the Executive’s employment by reason of the Executive’s Disability or death, except as set forth in this Section 4, the Executive (or Executive’s estate) shall have no further rights to any compensation or any other benefits under this Agreement.

(j) Effect of Termination on Post-Termination Obligations. Upon termination of this Agreement for any reason, the Executive shall continue to be bound by the post-employment obligations and covenants set forth in this Agreement following Executive’s termination.

(k) No Mitigation. The Executive will not be required to mitigate any of the Company’s payment obligations set forth in this Section 4 by making any efforts to secure other employment, and Executive’s commencement of employment with another employer will not reduce the obligations of the Company under this Section 4, unless specifically provided for herein.

(l) Resignation of Offices. Promptly following any Termination of the Executive’s employment with the Company for any reason (other than by reason of the Executive’s death), the Executive shall deliver to the Company reasonably satisfactory written evidence of the Executive’s resignation from all positions that the Executive may then hold as an employee or officer of the Company or any subsidiary of the Company. The Executive shall forfeit payment of any amounts that otherwise become due and payable pursuant to this Section 4 prior to the date the Executive complies with the provisions of this Section 4(1).

5. Confidential Information and Intellectual Property Rights.

(a) Confidential Information. “Confidential Information” means information and material concerning the Company and its employees, that is disclosed to the Executive, by the Executive, or otherwise learned by the Executive as a result of Executive’s employment with the Company that is not generally known to the public or the Company’s competitors, including, but not limited to, such information concerning the Company’s business, financial condition, and financial data; operations, systems of operations and written procedures integral to the Company’s day-to-day operations; assets and liabilities; research and development; marketing and public relations strategies; designs; drawings; formulas; programs; codes, identification of suppliers and resources of goods and services to the Company; information regarding the needs, preferences, buying habits, electronic mail addresses and names and phone numbers of the Company’s members, customers and business contacts; training manuals and videos; sales; products; services; accounts; member or customer lists; purchasers of the Company’s services; technology, intellectual property (patents, design patents, trademarks, trade dress, copyrights and trade secrets); strategies, pricing strategies, business structures, ventures or other business affairs or plans, or information relating to existing or contemplated businesses, products and/or services of the Company; and any other information which the Company does not ordinarily disclose to third parties not in a relationship of confidence with the Company.

 

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However, notwithstanding the foregoing, Confidential Information does not include information: (i) which at the time of disclosure is generally known in the Company’s trade; (ii) which the recipient thereof (“Recipient”) can show by written records was already in its possession at the time of disclosure and not subject to an existing agreement of confidence between the Parties; (iii) which is received from a third party without restriction who is not under obligation of confidentiality with respect to such information; (iv) which is independently developed by Recipient as evidenced by its written records and without violating any other obligation between the Parties.

(b) Intellectual Property Rights. “Intellectual Property Rights” means all of the world-wide legal rights of, in and to the following: (i) patents, patent applications, and invention disclosures; (ii) copyrights and works of authorship, including without limitation textual, masks, audio/visual works, “look and feel,” and derivative works; (iii) trademarks, service marks, trade names, and trade dress, together with all goodwill associated therewith; (iv) trade secrets, know-how, and proprietary and confidential information; (v) moral rights; (vi) design rights; (vii) domain names; (viii) any rights analogous to those set forth in the preceding clauses; and (ix) any applications, registrations, divisions, combinations, continuations, renewals, reissues, extensions, and translations of the foregoing (as applicable); whether existing on the date of this Agreement or thereafter filed, issued, or acquired.

(c) The Executive recognizes that the Company’s Confidential Information and Intellectual Property Rights are extremely valuable to it and that disclosure or use of the Company’s Confidential Information and/or Intellectual Property Rights outside the Company could irreparably damage the Company. The Executive therefore agrees that Executive will not use any Confidential Information and/or Intellectual Property Rights for any purpose other than to benefit the Company. In furtherance of that commitment, the Executive agrees that Executive will preserve and protect the confidentiality of the Confidential Information and Intellectual Property Rights and will not use any Confidential Information and/or Intellectual Property Rights other than for a Company purpose. In addition, the Executive will not disclose Confidential Information and/or Intellectual Property Rights to any person outside the Company unless the Executive first obtains the express written consent of a member of the Board of the Company and has secured the signature of such person on a Company-approved confidentiality agreement.

(d) The Executive understands and agrees that Executive confidentiality obligations under this Section 5 apply during Executive employment and continue after termination of employment with the Company, regardless of the reason for the termination.

(e) The Executive represents that Executive is aware of no confidentiality, non-compete, or other agreement that might in any way restrict the Executive’s employment/function with the Company that Executive has not provided to the Company, in writing, and confirms that the Executive’s former employer has released Executive from any obligation Executive had with respect to the use of confidential information learned in the Executive’s previous employment and which Executive was bound not to disclose.

(f) The Executive understands and agrees that any and all information described as Confidential Information and/or Intellectual Property Rights including, without limitation, records, documents, photographs, correspondence, memoranda, notes, records, computers, computer disks, thumb drives, cell phones, smartphones, tablets, files, keys and other documents or physical materials relating to the Company, whether received, retained, compiled or prepared by the Executive or otherwise coming into the Executive’s possession through or as a

 

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result of the Executive’s employment shall remain the Company’s sole and exclusive property, shall not be used by the Executive in any way whatsoever, and shall be returned to the Company immediately upon request. Without limiting the foregoing, while on working time the Executive shall not photograph, tape, film, copy or otherwise record any likenesses or activities of the Company as they relate to members, customers, vendors, suppliers, Company trade secrets, or Company intellectual property, or post or in any way disseminate any likenesses or activities of the Company as they relate to members, customers, vendors, suppliers, Company trade secrets, or Company intellectual property on any website or any social media outlet without prior written approval from the Company.

(g) Nothing in this Agreement shall prohibit the Executive from disclosing any trade secret pursuant to the Defend Trade Secrets Act of 2016: (i) (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, the Executive will not be deemed to be in violation of this Agreement if Executive files a lawsuit for retaliation for reporting a suspected violation of law and discloses the trade secret to Executive’s attorney and uses the trade secret information in the court proceeding, provided the Executive (1) files any document containing the trade secret under seal; and (2) does not publicly disclose the trade secret, except pursuant to court order.

6. Works Made for Hire and Inventions.

(a) Definitions.

(i) The terms “work,” “trademark,” and “invention” include anything created for Company by the Executive, whether alone or with others, and whether created while an independent contractor, employee, or agent of Company.

(ii) The term “work” means any and all writings, documents, designs, models, drawings, photographs, physical property, reports, etc., that are protectable under Title 17 of the U.S. Code.

(iii) The term “trademark” means any name, word, phrase, logo, design, or other graphic depiction generated during the performance of this Agreement which is or can be used to describe either a product or service of Company.

(iv) The term “invention” means any designs, processes, inventions, or discoveries that may be patentable or otherwise protectable under Title 35 of the U.S. Code.

(b) Title to Works, Trademarks, and Inventions.

(i) While employed by the Company, the Executive may create certain works for Company that may be copyrighted under the laws of the United States. To the extent that any such works are created, the Executive will be considered to have created a work made for hire as defined in 17 U.S.C. § 101, and the Company shall have the sole right to the copyright. In the event that any work created by the Executive does not qualify as a work for hire, the Executive agrees to assign Executive’s right in the work to Company, as provided below.

 

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(ii) It is understood and agreed that the Intellectual Property Rights and entire right, title, and interest throughout the world to all works, trademarks, and/or inventions that are conceived of, prepared, procured, generated, or produced, whether or not reduced by practice, by the Executive, either solely or jointly with others, during the course of, in connection with, or as related to the performance of this Agreement, shall be and hereby are vested and assigned by the Executive to Company.

(iii) It is agreed that the Executive shall promptly disclose to the Company in writing all Works, including, but not limited to, inventions, discoveries, designs, developments, methods, modifications, improvements, processes, algorithms, databases, computer programs, formulae, recipes, techniques, trade secrets, ideas, concepts, methodologies, graphics or images, and audio or visual works and other works of authorship (collectively “Developments”), whether or not patentable or copyrightable, that are created, made, conceived or reduced to practice by the Executive (alone or jointly with others) or under the Executive’s direction during the Employment Period. The Executive acknowledge that all work performed by Executive is on a “work for hire” basis, and the Executive hereby assigns and transfers and, to the extent any such assignment cannot be made at present, will assign and transfer, to the Company and its successors and assigns all of the Executive’s rights, title and interest in all Developments that (a) relate to the business of the Company (including any Developments that relate or could relate to the more generalized industry in which the Company operates or is proposing to operate, whether or not it is directly applicable to the business of the Company) or any of the products or services being researched, developed, manufactured, or sold by the Company or which may be used with such products or services; or (b) result from tasks assigned to the Executive by the Company; or (c) result from the use of premises or personal property (whether tangible or intangible) owned, leased, or contracted for by the Company (“Company-Related Developments”), and all related Intellectual Property Rights. The Executive agrees to advise the Company in writing of any prior Developments that Executive has, alone or jointly with others, conceived, developed, or reduced to practice prior to the commencement of the Executive’s employment with the Company that Executive considers to be Executive property or the property of third parties and that the Executive wishes to have excluded from the scope of this Agreement (“Prior Inventions”).

(iv) If, in the course of the Executive’s employment with the Company, the Executive incorporates a Prior Invention into a Company product, process, or machine or other work done for the Company, the Executive hereby grants to the Company a nonexclusive, royalty-free, paid-up, irrevocable, worldwide license (with the full right to sublicense) to make, have made, modify, use, sell, offer for sale and import such Prior Invention. Notwithstanding the foregoing, the Executive will not incorporate, or permit to be incorporated, Prior Inventions in any Company-Related Development without the Company’s prior written consent.

(v) The Executive will cooperate fully with the Company, both during and after the Executive’s employment with the Company, with respect to the procurement, maintenance, and enforcement of Intellectual Property Rights in Company-Related Developments. The Executive agrees to sign, both during and after the term of this Agreement, all papers, including without limitation copyright applications, patent applications, declarations, oaths, assignments of priority rights, and powers of attorney, which the Company may deem necessary or desirable in order to protect its rights and interests in any Company-Related Development. If the Company is unable, after reasonable effort, to secure the Executive’s signature on any such

 

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papers, the Executive hereby irrevocably designates and appoints each officer of the Company as Executive agent and attorney-in-fact to execute any such papers on Executive behalf, and to take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in any Company-Related Development. The Executive hereby waives and irrevocably quitclaims to the Company or its designee any and all claims, of any nature whatsoever, which Executive now or hereafter has for infringement of any and all proprietary rights assigned to the Company or such designee.

7. Restrictive Covenants.

(a) Non-Competition and Non-Solicitation. Executive agrees that, in consideration of Executive’s employment with the Company pursuant to this Agreement, and other good and valuable consideration, the receipt of which is hereby acknowledged, during Executive’s employment with the Company and nine (9) months after termination thereof, Executive will not either on Executive’s own behalf or on behalf of any third party, except on behalf of the Company, directly or indirectly (other than through Executive’s ownership of equity interest in the Company), as an individual proprietor, principal, manager, agent, consultant, guarantor, advisor, member, owner, participant, partner, stockholder, officer, Executive, director, joint venturer, lender, or in any other capacity whatsoever (other than as a passive holder of not more than five percent (5%) of the total outstanding stock of a publicly-held company):

(i) carry on, engage in, be employed by, consult with, or have any financial interest in any business that relates to the development of a product with similar characteristics to LB102; or that is in process of developing a molecule that would be similar in target indication and properties as the Company’s lead molecule (LB102); or pharmaceuticals to treat schizophrenia (collectively “Company Business”) that compete with the Company Business in the United States, or which Executive knows (or should reasonably know) will come into existence within two years after the Employment Period;

(ii) recruit, offer employment to, solicit or induce, or attempt to induce, any Executive or employees of the Company or any affiliate to terminate their employment with, or otherwise cease their relationship with, the Company or any affiliate;

(iii) solicit, divert, take away, or attempt to divert or take away, the business or patronage (with respect to products or services of the kind or type developed, produced, marketed, furnished or sold by the Company) of any of the Company’s clients, customers, vendors, business or strategic partners, or accounts, or prospective clients, customers, vendors, business or strategic partners, or accounts; or

(iv) persuade or induce any client, customer, vendor, strategic or business partner, or account of the Company to restrict or cease to do business with, invest in, participate with, or otherwise work with the Company, or to reduce the amount of business, investment, participation or work that any such client, customer, vendor, or strategic or business partner has customarily done or actively contemplates doing with the Company.

 

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(b) Covenants are Reasonable. Executive and the Company agree that this covenant not to compete is a reasonable covenant under the circumstances, and further agree that if in the opinion of any court of competent jurisdiction such restraint is not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of this covenant as to the court shall appear not reasonable and to enforce the remainder of the covenant as so amended. Executive agrees that any breach of the covenants contained in this Section 7 would irreparably injure the Company. Accordingly, Executive agrees that the Company may, in addition to pursuing any other remedies it may have in law or in equity, cease making any payments or providing any benefits otherwise required by this Agreement and obtain an injunction against Executive from any court having jurisdiction over the matter restraining any further violation of this Agreement by Executive.

(c) The provisions of Section 7 shall survive termination of this Agreement.

8. Mutual Non-Disparagement. The Executive shall not, during the Employment Period or during the eighteen (18) months after the Date of Termination, make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal communications that belittle, disparage or otherwise express disapproval of the Company or any of its Affiliates or their respective businesses, or any of their past or present officers, directors, employees, advisors, agents, policies, procedures, practices, decision-making, conduct, professionalism or compliance with standards, except as and to the extent required to comply with applicable federal or state law. The Company shall not, and shall use commercially reasonably efforts to make a one-time instruction to its executive officers and directors to not, during the Employment Period or during the eighteen (18) months after the Date of Termination, make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal communications that belittle, disparage or otherwise express disapproval of the Executive, except as and to the extent required to comply with applicable federal or state law.

9. Breach. The Executive acknowledges and confirms that the restrictions contained in this Agreement including those set forth in Section 5, 6, 7, and 8, in view of the nature of the Company’s business, are reasonable and necessary in order to protect the legitimate business interests of the Company, and that any breach or threatened breach of the provisions of this Agreement shall cause irreparable injury to the Company, that money damages will not provide an adequate remedy, and that their enforcement will not impose a hardship on the Executive or significantly impair the Executive’s ability to earn a livelihood. Therefore, in addition to any other relief available to it, the Company shall be entitled to seek preliminary, temporary, and permanent injunctive relief without the necessity of proving irreparable harm or posting bond or other security. If any provisions of this Agreement are ever determined by a court of competent jurisdiction to exceed limitations permitted by law, then such provisions shall be reformed automatically to set forth the maximum limitations permissible by law. If the Executive violates any of the restrictions contained in this Agreement, the relevant restricted period shall be extended by a period equal to the length of time from the commencement of any such violation until such time as such violation shall be deemed, by the Company, to be cured. Nothing contained herein shall be considered as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including any recovery of damages from the Executive.

 

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10. Return of Company Property. On the date that the Executive’s employment with the Company ends, the Executive will deliver to the Company all documents, electronic and other data (whether stored on devices in your possession or with any third-party vendors or on the “cloud”), notes, writings, customer and prospect lists, keys, credit cards, computer programs and all other documents or tangible materials whatsoever, including all copies or duplicates, concerning any part of the Company’s activities or concerning any activities as a Company employee. The Executive acknowledges and agrees that all such documents and tangible materials, and copies or duplicates thereof, including the Executive’s own notes, are the Company’s property which is only entrusted to the Executive on a temporary basis. After returning these documents, data, and other property, the Executive will immediately permanently delete from any electronic media in the Executive’s possession, custody, or control (such as computers, mobile phones, handheld devices, back-up devices and zip drives) or to which the Executive has access (such as the cloud, remote e-mail exchange servers, back-up servers, off-site storage), all Company documents or electronically stored images, and other data or data compilations stored in any medium from which such information can be obtained. The Executive also agrees to provide the Company with list of any documents that the Executive created or is otherwise aware that are password-protected and the password(s) necessary to access such password-protected documents.

11. Section 409A. It is intended that any payment or benefit that is provided pursuant to or in connection with this Agreement that is considered to be deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) shall be paid and provided in a manner, and at such time and form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for noncompliance. It is further intended that the payments hereunder shall, to the maximum extent permissible under Section 409A of the Code, be exempt from Section 409A of the Code under either (i) the exception for involuntary separation pay to the extent that all payments are payable within the limitations described in Treasury Regulation Section 1.409A-1(b)(9), or (ii) the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4) to the extent that all payments are payable no later than two and a half months after the end of the first taxable year in which the right to the payment is no longer subject to a substantial risk of forfeiture.

(a) If the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code at such time, any payments to be made or benefits to be delivered in connection with the Executive’s “Separation from Service” (as defined below) that constitute deferred compensation subject to Section 409A of the Code shall not be made until the earlier of (i) the Executive’s death or (ii) six months plus one day after the Executive’s Separation from Service (“409A Deferral Period”) as required by Section 409A of the Code. Payments of any such deferred compensation otherwise due to be made in installments or periodically during the 409A Deferral Period shall be accumulated and paid in a lump sum as soon as the 409A Deferral Period ends, and the balance of the payment shall be made as otherwise scheduled.

(b) For purposes of this Agreement, all rights to payments and benefits hereunder shall be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Section 409A of the Code.

(c) For purposes of this Agreement, with respect to the timing of any amounts that constitute deferred compensation subject to Section 409A of the Code that depends on termination of employment or separation from service, termination of employment or separation from service shall mean a “separation from service” within the meaning of Section 409A of the Code where it is reasonably anticipated that no further services would be performed after such date

 

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or that the level of bona fide services the Executive would perform after that date (whether as an employee or independent contractor) would permanently decrease to a level less than or equal to twenty percent (20%) of the average level of bona fide services the Executive performed over the immediately preceding thirty-six (36) month period.

12. Indemnification. Except as limited by applicable law, in the event the Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), other than any Proceeding initiated by the Executive or the Company related to any contest or dispute between the Executive, on the one hand, and the Company or any of its affiliates, on the other, with respect to this Agreement or the Executive’s employment hereunder, by reason of the fact that the Executive is or was a director or officer of the Company, or any affiliate of the Company, or is or was serving at the direct request of the Company as a director, officer, member, employee, or agent of another corporation or a partnership, joint venture, trust, or other enterprise, the Executive shall be indemnified and held harmless by the Company to the fullest extent permitted under applicable law and the Company’s bylaws from and against any liabilities, costs, claims, and expenses, including all costs and expenses reasonably incurred in defense of any Proceeding (including attorneys’ fees) (collectively, “Indemnifiable Losses”). Costs and expenses reasonably incurred by the Executive in defense of such Proceeding (including attorneys’ fees and costs) shall be paid by the Company in advance of the final disposition of such Proceeding upon receipt by the Company of: (i) a written request for payment; (ii) appropriate documentation evidencing the incurrence, amount, and nature of the costs and expenses for which payment is being sought; and (iii) an undertaking adequate under applicable law and reasonably acceptable to the Company made by or on behalf of the Executive to repay the amounts so paid if it shall ultimately be determined that the Executive is not entitled to be indemnified by the Company under this Agreement. Notwithstanding the foregoing, the Executive will not be held harmless nor indemnified under this Section 12 for any Indemnifiable Losses arising out of the fraud, intentional misconduct, or knowing and reckless breach of the Executive’s obligations under the Agreement or pursuant to any other terms of Executive’s employment at the Company or any of its affiliates, or if the Executive has acted in bad faith, except to the extent such Indemnifiable Losses are satisfied by the Company’s insurance policy and only to the extent of such insurance coverage. During the Employment Period, the Company or any successor to the Company shall purchase and maintain, at its own expense, directors’ and officers’ liability insurance in respect of acts and omissions of Executive in his capacity as such or as a director or officer of the Company and occurring during Executive’s employment, which will provide coverage for Executive in an amount determined by the Company.

13. Representations of the Executive. The Executive represents and warrants that: (i) the Executive has no legal obligations to any other party that would be breached by signing this Agreement or otherwise fulfilling Executive’s obligations hereunder, including but not limited to any non-competition, non-solicitation, non-inducement, confidentiality, assignment of inventions, or other similar agreement; (ii) the Executive has not disclosed any third party’s confidential or proprietary information to the Company or its representatives or agents; (iii) if the Executive learns of any confidential or proprietary information that belongs to any third party, the Executive will not disclose such information to the Company or its representatives or agents, except as allowed by law or any agreement you have signed with such party; and (iv) the Executive is not in breach of any confidentiality or non-disclosure agreement that the Executive has signed.

 

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14. Miscellaneous.

(a) Entire Agreement. This Agreement along with the Employee Handbook contains the entire agreement and understanding of the Executive and the Company concerning the subject matter hereof and supersedes and replaces all prior negotiations and proposed agreements, whether oral or written. The Executive acknowledges that, by signing this Agreement, the Executive has not relied upon any representations, promises or agreements made by the Company or its employees, officers, directors, or representatives (including any Company attorneys) that are not contained in this Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the Parties hereto.

(b) Headings/Counterparts. The headings of the paragraphs herein are included for reference only and are not intended to affect the interpretation of the Agreement. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same Agreement. Each party agrees that faxed or electronically transmitted copies of the signature pages of this Agreement and/or any of the other instruments, agreements and documents relating to any of the transactions contemplated hereby, whether sent to the other party or to such other party’s counsel, shall be deemed definitively executed and delivered, and with the same force and effect as if manually signed and delivered, for all purposes whatsoever. Neither party hereto shall raise the use of DocuSign, electronic mail or a facsimile machine to deliver a signature or the fact that any signature was transmitted or communicated through the use of electronic mail or a facsimile machine as a defense to the formation of a contract and each party forever waives any such defense. All counterparts shall be construed together and shall constitute one instrument, and the signature page from any counterpart may be attached to another counterpart to form a complete copy of this Agreement.

(c) Severability. If any provision of this Agreement or the application thereof is held invalid, such invalidation shall not affect other provisions or applications of this Agreement and to this end the provisions of this Agreement are declared to be severable.

(d) Construction/Joint Drafting. The determination of the terms and conditions of this Agreement has been by mutual agreement of the Parties. Each party participated jointly in the drafting of this Agreement, and therefore the terms and conditions of this Agreement are not intended to be, and shall not be, construed against any party by virtue of draftsmanship.

(e) Non-Waiver. Neither the failure nor any delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver of any provision of this Agreement will be binding unless made in a writing signed by the Parties hereto.

(f) Assignment. This Agreement shall be binding upon the Company and shall inure to the benefit of the Company including any transferee of the business operation, as a going concern, in which the Executive is employed and shall be binding upon the Executive and the Executive’s heirs and personal representatives. None of the rights or obligations of the Executive hereunder may be assigned or delegated. The Company may assign its rights and obligations under this Agreement in whole or in part to anyone.

 

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(g) Choice of Law/Venue. This Agreement will be governed by, and construed pursuant to, the laws of the State of New York without regard to its conflict of laws principles. Any controversy or claim arising out of or relating to Executive’s employment or this Agreement shall be settled by arbitration administered by the American Arbitration Association under its Employment Arbitration Rules and Mediation Procedures and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Any claims will be heard by a panel of three arbitrators and the arbitration shall take place in the County of New York, State of New York and the Parties consent to New York, New York as the seat of arbitration. In the event that injunctive relief is sought in connection with a dispute related to Sections 5, 6, 7, and/or 8, the Parties agree that venue only in the County of New York, State of New York would be proper and hereby waive any challenge thereto based on lack of personal jurisdiction or inconvenient forum.

(h) Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of delivery, if delivered by hand, (ii) on the date of transmission, if delivered by confirmed facsimile, (iii) on the first business day following the date of deposit, if delivered by guaranteed overnight delivery service, or (iv) on the fourth business day following the date delivered or mailed by the U.S. Postal Service, addressed as follows:

If to the Executive:

At the address shown in the books and records of the Company, currently:

Anna Eramo, MD

***

Email: ***

with a copy, which shall not constitute notice, to:

Fox Rothschild LLP

101 Park Avenue, Suite 1700

New York, NY 10178

Attention: Scott Lavin, Esq.

Bryn Goodman, Esq.

Email: slavin@foxrothschild.com; bgoodman@foxrothschild.com

If to the Company:

LB Pharmaceuticals Inc

575 Madison Avenue, 10th Floor

New York, NY 10022,

Attention: Board of Directors

Email: ***

 

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with copy, which shall not constitute notice, to:

Williams Mullen

200 South 10th Street

Richmond, Virginia 23219

Attention: Andrew W. White, Esq.

Email: awhite@williamsmullen.com

Notices shall be deemed to be properly addressed, to the Company or to the Executive, if addressed to such person at such person’s address as set forth above, or to such other address or addresses as the addressee previously may have specified by Notice given to the other parties in the manner contemplated by this Section 14(h).

(i) Survival. Upon the termination of this Agreement, the respective rights and obligations of the Parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the Parties under this Agreement.

15. Acknowledgement of Full Understanding. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT EXECUTIVE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT EXECUTIVE HAS BEEN REPRESENTED BY EXECUTIVE’S OWN COUNSEL OR HAS HAD AN OPPORTUNITY TO BE REPRESENTED BY AN ATTORNEY OF EXECUTIVE’S CHOICE BEFORE SIGNING THIS AGREEMENT.

IN WITNESS WHEREOF, the Parties have duly executed and delivered this Executive Employment Agreement as of the date first above written.

 

EXECUTIVE     LB PHARMACEUTICALS INC
/s/ Anna Eramo     By:   /s/ Zachary Prensky
Anna Eramo, MD     Name: Zachary Prensky
Date: 8/23/2023     Date: 8/25/2023

 

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Exhibit 10.16

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”), is made as of the 25th day of August, 2023, by and between LB Pharmaceuticals Inc, a Delaware Corporation, (the “Company”) and Marc Panoff, an individual residing at *** (the “Executive”) (collectively, the “Parties”).

RECITALS

WHEREAS, the Company wishes to continue to retain the services of the Executive to serve as a Chief Financial Officer (“CFO”) of the Company and on the terms and conditions set forth herein;

WHEREAS, the Company anticipates securing funding through the sale of Series C Preferred Stock pursuant to and subject to the terms of the Series C Preferred Stock Purchase Agreement dated August 29, 2023 (the “Series C Stock Purchase Agreement”);

WHEREAS, this Agreement shall become effective immediately upon the Initial Closing, as such term is defined in the Series C Stock Purchase Agreement (such closing, the “Initial Series C Closing” and the date of the Initial Series C Closing, the “Effective Date”);

WHEREAS, if the Initial Series C Closing does not occur, this Agreement will not take effect and the Parties shall have no obligations under this Agreement; and

WHEREAS, the Executive desires and is willing to continue employment with the Company on the terms and conditions set forth herein;

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties intending to be legally bound, acknowledge and agree as follows:

1. Incorporation of Recitals; Term. The terms set forth in each of the paragraphs under the heading “RECITALS” above are hereby incorporated into this Agreement. The Executive’s employment hereunder shall be for a term commencing on the Effective Date and ending on the one year anniversary of the Effective Date (the “Initial Period”). In the absence of a Non-Renewal Notice (defined herein), upon the expiration of the Initial Period, this Agreement shall automatically renew for successive one (1) year terms (each a “Renewal Period”). If either Party does not want this Agreement to renew beyond the Initial Period or any subsequent Renewal Period (collectively, the “Employment Period”), the non-renewing Party shall give the other Party written notice of non-renewal not less than Ninety (90) days prior to the expiration of the then existing Employment Period (“Non-Renewal Notice”). If either Party gives a Non-Renewal Notice to the other Party, this Agreement shall terminate upon the expiration of the Employment Period (“Non-Renewal”). Notwithstanding the foregoing, this Agreement may be terminated earlier in accordance with Section 4.

 

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2. Position and Duties. During the Employment Period, the Executive will serve as CFO of the Company and report to the Chief Executive Officer of the Company (“CFO”). The Executive shall have such duties, authority, and responsibilities as shall be consistent with the duties normally performed by a CFO of private companies of similar size in the pharmaceutical industry in which the Company operates. The Executive will diligently and conscientiously perform the duties of CFO and will devote substantially all of the Executive’s business hours to such duties, and during such time will make the best use of the Executive’s energy, knowledge, and training to advancing the Company’s interests. The Executive will accept no other employment or contracting work during the Employment Period, or serve as a member of the board of directors of any for-profit entity or as a member of any advisory board without the express written consent of the board of directors the Company (the “Board”). Upon termination of the Executive’s employment relationship with the Company for any reason, the Executive shall resign and relinquish any position held as an officer and/or board member of the Company.

3. Compensation and Benefits.

(a) Base Salary. Subject to the terms set forth herein, in consideration for all services rendered by the Executive to the Company, upon the Initial Series C Closing the Company shall pay the Executive an annual base salary of Two Hundred Fifty Thousand Dollars and No Cents ($250,000) (“Annual Base Salary”) in periodic installments in accordance with the Company’s regular payroll practices in effect from time to time for executive employees, but no less frequently than semi-monthly. The Executive shall be classified as exempt from overtime and the Executive understands and acknowledges that the Executive is not entitled to overtime compensation and that Executive’s Base Salary is intended to compensate the Executive for all hours worked. Executive’s Annual Base Salary will increase automatically upon the occurrence of certain events, if they occur while the Executive is still employed by the Company. If the Initial Series C Closing occurs in 2023, then on January 1, 2024, the Company shall increase Executive’s Annual Base Salary to an annual base salary of Two Hundred Seventy-Five Thousand Dollars and No Cents ($275,000), and if the Initial Series C Closing occurs in 2023 and this Agreement remains in effect on January 1, 2025, then on January 1, 2025, Executive’s Annual Base Salary (as is then in effect) shall increase by 5%.

(b) Target Bonus.

(i) For the twelve (12) month period following the Effective Date, and then for each year of employment thereafter, the Executive will be eligible to earn a target bonus of up to 30% of Executive’s Annual Base Salary, in all cases subject to the Compensation Committee of the Board of the Company determining that the applicable objectives, which shall be mutually agreed to by the Board and the Executive, have been achieved (the “Target Bonus”). Objectives will include 50% Company performance and 50% Executive’s personal performance to be mutually determined and reviewed by the Compensation Committee of the Board and the Executive on a regular basis. If the Compensation Committee of the Board determines that the Executive achieved less than 50% of the Executive’s applicable objectives, then the Compensation Committee may determine that the Executive will receive no Target Bonus.

 

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(ii) Any such Target Bonus shall not be considered earned until awarded, except where pro-rata payout is provided for in this Agreement. Any Target Bonus awarded will be paid no later than forty-five (45) days after it has been awarded. If the Executive’s employment with the Company is terminated for Cause (as defined in Section 4(c)(ii)) before any Target Bonus is paid, the Executive shall not be eligible to receive the Target Bonus, regardless of whether the Company already awarded the Target Bonus. If the Company awards the Executive a Target Bonus and thereafter terminates the Executive’s employment with the Company for a reason other than for Cause but before any such Target Bonus has been paid, the Executive will still receive the Executive’s Target Bonus payment subject to the terms provided herein, even if the Executive is no longer working at the Company at the time the Target Bonus is to be paid.

(c) Stock Options.

(i) Subject to Board approval, to the extent not already granted, the Company shall grant to the Executive stock options to purchase shares of Common Stock of the Company up to 400,000 under the Company’s 2023 Stock Incentive Plan (the “Plan”), as amended (each an “Option”) at an exercise price per share of $1.50, which is not less than the current fair market value of the underlying Option as of the date of grant.

(ii) The Options shall vest and become exercisable on a cumulative basis with 25% to vest upon the first anniversary of the Effective Date of this Agreement and in thirty-six (36) substantially equal monthly installments over the thirty-six (36) month period beginning on the last day of the month following the first anniversary of the Effective Date of this Agreement and the last day of each month thereafter; provided that the Executive continues to have a Service Relationship (as defined in the Plan adopted as upon the Initial Series C Closing) with the Company through each such date.

(iii) Notwithstanding the foregoing, all of the Options shall automatically vest upon the Executive’s Termination by the Company due to Change in Control (defined herein).

(iv) Notwithstanding the foregoing, an additional nine (9) monthly installments of Options shall automatically vest upon Non-Renewal of this Agreement by the Company.

(v) Notwithstanding the foregoing, (A) if the Executive is terminated during the Initial Period without Cause or the Executive resigns for Good Reason, as those terms are defined herein, then an additional fifteen (15) monthly installments of Options shall automatically vest, and (B) if the Executive is terminated during any renewal Period without Cause or the Executive resigns for Good Reason, as those terms are defined herein, then an additional six (6) monthly installments of Options shall automatically vest.

(vi) Notwithstanding the forgoing, in the case of Termination in the Event of Executive’s Disability or Death, a minimum of 25% of the Options shall automatically vest.

 

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(vii) All unvested Options shall automatically terminate upon the Executive’s termination for Cause or resignation without Good Reason (defined herein).

(viii) All Options shall be subject to other standard terms and conditions, not inconsistent with the foregoing, as are contained in the Company’s standard form of Notice of Grant and Stock Option Agreement.

(d) Employee Benefits. During the Employment Period, the Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, the “Employee Benefit Plans”), on a basis which is no less favorable than is provided to other similarly situated senior executives of the Company, to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plans and applicable law.

(e) Paid Time Off. During the Employment Period, the Executive shall be entitled to twenty (20) days paid vacation per calendar year. This vacation is in addition to Company recognized holidays and paid sick time, if any, in accordance with the Company’s practices and policies as in effect from time to time. The Company reserves the right to amend or cancel its practices and policies at any time in its sole discretion, in accordance with applicable law. Any unused vacation may not be carried over by the Executive to any subsequent year. The Company will pay Executive for any accrued but unused vacation upon termination of this Agreement.

(f) For purposes of this Agreement, the benefits set forth in Sections 3(d) through 3(f) above shall be referred to as “Fringe Benefits.”

(g) Expense Reimbursement. The Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the Executive’s duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures.

(h) Withholdings. All payments made under this Section 3, or under any other provision of this Agreement, will be subject to payroll withholdings that the Company reasonably believes are required by law or elected or authorized by the Executive for state and federal income taxes, Social Security, Medicare, and other applicable payroll deductions, in accordance with the Company’s normal payroll practices.

4. Termination of Employment.

(a) Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, the Date of Termination shall be the date of the Executive’s receipt of the Notice of Termination or the day following the expiration of the cure period below if applicable, (ii) if the Executive’s employment is terminated by the Company other than for Cause, Death, or Disability, the Date of Termination shall be the thirtieth (30th) day after

 

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the date of the Executive’s receipt of the Notice of Termination, unless otherwise agreed by the Company and the Executive, (iii) if the Executive’s employment is terminated by the Executive for any reason other than Good Reason, the Date of Termination shall be the thirtieth (30th) day after the date of the Company’s receipt of the Notice of Termination, unless otherwise agreed to by the Company and the Executive, (iv) if the Executive’s employment is terminated by the Executive for Good Reason, the Date of Termination shall be the date of the Company’s receipt of the Notice of Termination or the day following the expiration of the cure period below if applicable, (v) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of the Executive’s death or Disability, as the case may be, and (vi) if the Executive’s employment is terminated as a result of a Non-Renewal of the Employment Period, the Date of Termination shall be upon the expiration of the Employment Period. Notwithstanding the foregoing, for any compensation that qualifies as non-qualified deferred compensation under Code Section 409A (taking into account amounts that are exempt from the requirements of Code Section 409A by reason of the “separation pay” or “short-term deferral” exclusions), the Date of Termination shall be the date the Executive experiences a “separation from service” within the meaning of Code Section 409A.

(b) Accrued Rights. Upon a termination of the Executive’s employment for any reason, the Executive (or the Executive’s estate) shall be entitled to receive (i) that portion of the Executive’s Annual Base Salary, then in effect, earned and unpaid as of the Date of Termination; (ii) any Target Bonus owed to the Executive for the Company’s fiscal year preceding the fiscal year in which the Date of Termination occurs that has not been paid as of the Date of Termination; (iii) any expenses owed and properly reimbursable to the Executive pursuant to the Company’s expense reimbursement policies; (iv) conversion rights, if applicable, with respect to any life insurance or disability insurance policy provided to the Executive; and (v) any vested amounts owed to the Executive under the Company’s employee benefit plans or programs and any vested Options in accordance with the terms and conditions of such employee benefit plans or programs and the Plan (collectively, the “Accrued Rights”).

(c) Termination by the Company for Cause or Executive’s Resignation Without Good Reason.

(i) The Company may terminate the Executive’s employment relationship with the Company at any time for Cause (as defined below). Upon termination of the Executive’s employment relationship by the Company for Cause, or by the Executive’s resignation without Good Reason, the Company shall, thereafter, have no obligation to the Executive for any unearned Annual Base Salary, unearned Target Bonus, Fringe Benefits, or any other form of compensation or benefit, except as otherwise required by law. Reimbursement of appropriately documented expenses incurred by the Executive before the termination of employment, to the extent that the Executive would have been entitled to such reimbursement but for the termination of employment, shall be paid by the Company to the Executive.

 

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(ii) For purposes of this Agreement the term “Cause” shall mean any one or more of the following:

(A) The Executive’s material failure to perform the Executive’s duties or any lawful directive of the Board or CEO after being given written notice of such deficiencies in the Executive’s performance and failure to cure them within thirty (30) calendar days of such written notice;

(B) The Executive’s indictment for, conviction of, plea of guilty to, or plea of nolo contendere to a felony involving the property or operations of the Company or a crime of moral turpitude;

(C) The Executive’s indictment for, conviction of, plea of guilty to, or plea of nolo contendere to embezzlement, misappropriation or fraud, whether or not related to the Executive’s employment with Company;

(D) The existence of any court order or settlement agreement prohibiting the Executive’s continued employment with the Company;

(E) The Executive’s material breach of any material obligation in this Agreement, or any other written agreement between the Executive and Company, or any material misconduct by the Executive that adversely affects the business of the Company or its reputation; or

(F) The Executive’s material failure to comply with the Company’s reasonable and lawful policies or rules of which the Executive is given written notice, as they may be in effect from time to time during the Executive’s employment, and failure to cure them within thirty (30) calendar days of such written notice.

(d) Termination by Mutual Agreement. This Agreement may be terminated at any time by mutual agreement of the Executive and the Company in writing. Upon termination of this Agreement pursuant to this Section 4(b), the Company shall, thereafter, have no obligation to the Executive for the Executive’s unearned Annual Base Salary, unearned Target Bonus, Fringe Benefits, or any other form of compensation or benefit, except as otherwise required by law or under the express written terms of the mutual agreement.

(e) Termination by the Company Without Cause or Executive’s Resignation for Good Reason.

(i) In the event that during the Employment Period the Company terminates the Executive’s employment Without Cause (as defined in this Section 4) or the employment relationship has been terminated by the Executive’s resignation for Good Reason, and provided that the Executive executes a Separation Agreement and General Release in a form and substance reasonably satisfactory to the Company (the “General Release”) and which is not subsequently revoked by the Executive, (A) the Executive shall receive eighteen (18) months’ severance pay at the Executive’s Annual Base Salary then in effect; (B) the Executive shall receive the pro-rata portion (based on the number of full days the Executive was employed in the applicable fiscal year) of the Target Bonus expected to be awarded to the Executive on the anniversary of the year of the Executive’s Date of Termination, based on actual Company

 

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performance of the full fiscal year and payable at the same time annual bonuses are generally paid to executives for such fiscal year; and (C) if the Executive is eligible for and timely and properly elects group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse the Executive for eighteen (18) months’ of the monthly COBRA premium paid by the Executive for the Executive and the Executive’s dependents. Such reimbursement shall be paid to the Executive no later than the end of the month immediately following the month in which the Executive timely remits the COBRA premium payment. Such severance payment shall be made over a period of time pursuant to the Company’s customary payroll procedures (i.e., not in a lump sum). If the Executive fails to return an executed General Release to the Company within the required time period set forth in the General Release, or the Executive subsequently revokes such timely release, the Company shall not have any obligation to pay any amount of severance or other amounts described in this section 4(e)(i). If the Parties terminate this Agreement upon mutual agreement pursuant to Section 4(d) of this Agreement, or if the Executive resigns the Executive’s employment without Good Reason, the Executive will not be eligible to receive, and the Company will have no obligation to pay, any amount of severance or other amounts described in this section 4(e)(i).

(ii) For purposes of this Agreement the term “Good Reason” shall mean any one or more of the following, in each case during the Employment Period without the Executive’s written consent:

(A) a material reduction of the Executive’s position, authority or responsibilities, or the removal of the Executive from such position, authority or responsibilities, unless the Executive is provided with a new position of equal or greater organizational level, authority, responsibilities and compensation;

(B) a material reduction in the Annual Base Salary other than a general reduction in Annual Base Salary that affects all similarly situated executives in substantially the same proportions;

(C) a material breach by the Company of any of this Agreement;

(D) a material change in the geographic location at which the Executive is required to perform services for the Company (except for office relocations that would not increase the Executive’s one way commute by more than twenty-five (25) miles); and

(E) the Company’s failure to obtain an agreement from any successor to the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no succession had taken place, except where such assumption occurs by operation of law;

provided, that no event described in clause (A), (B), (C), (D) or (E) shall constitute Good Reason unless (A) the Executive has given the Company written notice of the termination, setting forth the conduct of the Company that is alleged to constitute Good Reason, within thirty (30) days following the occurrence of such event, and (B) the Executive has provided the Company at least thirty (30) days following the date on which such notice is provided to cure such conduct and the Company has failed to do so.

 

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(f) Termination in the Event of Non-Renewal. Upon the Non-Renewal of this Agreement, this Agreement shall terminate at the end of the Employment Period, and such termination of the Agreement shall not constitute a Termination by the Company without Cause or a resignation by the Executive for Good Reason pursuant to Section 4(e) hereof. If this Agreement is terminated in the event of the Company’s Non-Renewal, and provided that the Executive executes the General Release and does not subsequently revoke the General Release, then the Executive shall be entitled to severance pay in an amount equal to nine (9) months’ salary of Executive’s Annual Base Salary then in effect. In the event of the Executive’s Non-Renewal, the Executive shall not be entitled to payment under this section 4(f).

(g) Termination by the Company in the Event of a Change in Control. Upon a Change in Control of the Company (as defined below), the Company may decide to terminate this Agreement, and such termination of the Agreement shall not constitute a Termination by the Company without Cause pursuant to Section 4(e) hereof. If this Agreement is terminated by the Company in the event of a Change in Control, and provided that the Executive executes the General Release and does not subsequently revoke the General Release, then the Executive shall be entitled to severance pay in an amount equal to (i) one year of Executive’s Annual Base Salary then in effect to be paid in a lump sum within thirty (30) days’ after the Change in Control; (ii) 1.5 times the Target Bonus expected to be awarded to the Executive as of the anniversary of the Effective Date for the year of the Executive’s Date of Termination, based on the Company’s performance and payable upon the closing of the Change in Control transaction; and (iii) if the Executive is eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive for twelve months’ of the monthly COBRA premium paid by the Executive for the Executive and the Executive’s dependents. Such reimbursement shall be paid to the Executive no later than the end of the month immediately following the month in which the Executive timely remits the COBRA premium payment.

(i) For purposes of this Agreement, “Change in Control,” means any of the following transactions:

(A) a sale of all or substantially all of the assets of the Company in one or more transactions,

(B) a consolidation or merger of the Company with or into any other corporation or other entity, or any other corporate re-organization, as a result of which the shareholders of the Company immediately prior to such consolidation, merger or reorganization own capital stock of the entity surviving such merger, consolidation or reorganization representing less than fifty percent (50%) of the combined voting power of the outstanding securities of the surviving entity immediately after such consolidation, merger or reorganization, or

(C) the sale by the shareholders of the Company existing as of the time immediately after the final Closing (as that term is defined in the Series C Stock Purchase Agreement), in one or more transactions, which results in such shareholders owning less than fifty percent (50%) of the outstanding equity securities of the Company.

 

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(h) Termination in the Event of Executive’s Disability or Death. The Employment Period and the Executive’s employment hereunder (i) shall terminate upon the Executive’s death and (ii) may be terminated by the Company if, in the good faith judgment of the Board, despite reasonable accommodation, the Executive is unable due to a physical or mental incapacity to perform the essential functions of Executive’s most recent position for: (x) a period of one hundred eighty (180) consecutive days or (y) an aggregate of six (6) months in any twelve (12) consecutive month period (such incapacity is hereinafter referred to as “Disability”). Upon termination of the Executive’s employment hereunder by reason of the Executive’s Disability or death, the Executive or the Executive’s estate (as the case may be) shall be entitled to receive:

(i) the Accrued Rights; and

(ii) subject to the Executive’s or, in the event of the Executive’s death, the representative of the Executor’s estate, execution and non-revocation of the General Release:

(A) a pro-rata portion (based on the number of full days the Executive was employed in the applicable fiscal year) of the Target Bonus expected to be awarded to the Executive on the anniversary of the Effective Date for the year of the Executive’s Date of Termination, based on actual Company performance of the full fiscal year and payable at the same time annual bonuses are generally paid to executives for such fiscal year; and

(B) if the Executive is (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the monthly COBRA premium paid by the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the Executive and the Executive’s spouse/dependents. Such reimbursement shall be paid to the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) no later than the end of the month immediately following the month in which the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) timely remits the COBRA premium payment. The Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) shall be eligible to receive such reimbursement until the earliest of: (i) the last day of the month that is twenty-six (26) weeks after the termination of the Executive’s employment by reason of the Executive’s Disability or death; (ii) in the event of Executive’s Disability, the date Executive becomes eligible to receive healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility) or (iii) the date the Executive is (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) no longer eligible to receive COBRA continuation coverage. Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act) or incurring an excise tax, the Company shall in lieu thereof provide to Executive (or in the event of the Executive’s death, the Executive’s

 

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surviving spouse and/or dependents) a taxable monthly payment in an amount equal to the monthly COBRA premium that Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) pays to continue Executive’s and Executive’s covered dependents’ (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) group health coverage, which payments shall commence in the month following the month in which the Date of Termination occurs and shall end on the earliest of (x) last day of the month that is twenty-six (26) weeks after the termination of the Executive’s employment by reason of the Executive’s Disability or death, (y) the date the Executive is (or, in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) no longer eligible to receive COBRA continuation coverage and (z) in the event of Executive’s Disability, the date the Executive becomes eligible for substantially similar group health plan coverage from the Executive’s subsequent employer (and the Executive agrees to promptly notify the Company of such eligibility).

(i) Following the termination of the Executive’s employment by reason of the Executive’s Disability or death, except as set forth in this Section 4, the Executive (or Executive’s estate) shall have no further rights to any compensation or any other benefits under this Agreement.

(j) Effect of Termination on Post-Termination Obligations. Upon termination of this Agreement for any reason, the Executive shall continue to be bound by the post-employment obligations and covenants set forth in this Agreement following Executive’s termination.

(k) No Mitigation. The Executive will not be required to mitigate any of the Company’s payment obligations set forth in this Section 4 by making any efforts to secure other employment, and Executive’s commencement of employment with another employer will not reduce the obligations of the Company under this Section 4, unless specifically provided for herein.

(l) Resignation of Offices. Promptly following any Termination of the Executive’s employment with the Company for any reason (other than by reason of the Executive’s death), the Executive shall deliver to the Company reasonably satisfactory written evidence of the Executive’s resignation from all positions that the Executive may then hold as an employee or officer of the Company or any subsidiary of the Company. The Executive shall forfeit payment of any amounts that otherwise become due and payable pursuant to this Section 4 prior to the date the Executive complies with the provisions of this Section 4(1).

5. Confidential Information and Intellectual Property Rights.

(a) Confidential Information. “Confidential Information” means information and material concerning the Company and its employees, that is disclosed to the Executive, by the Executive, or otherwise learned by the Executive as a result of Executive’s employment with the Company that is not generally known to the public or the Company’s competitors, including, but not limited to, such information concerning the Company’s business, financial condition, and financial data; operations, systems of operations and written procedures integral to the Company’s day-to-day operations; assets and liabilities; research and development; marketing and public relations strategies; designs; drawings; formulas; programs; codes, identification of suppliers and resources of goods and services to the Company; information regarding the needs, preferences,

 

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buying habits, electronic mail addresses and names and phone numbers of the Company’s members, customers and business contacts; training manuals and videos; sales; products; services; accounts; member or customer lists; purchasers of the Company’s services; technology, intellectual property (patents, design patents, trademarks, trade dress, copyrights and trade secrets); strategies, pricing strategies, business structures, ventures or other business affairs or plans, or information relating to existing or contemplated businesses, products and/or services of the Company; and any other information which the Company does not ordinarily disclose to third parties not in a relationship of confidence with the Company.

However, notwithstanding the foregoing, Confidential Information does not include information: (i) which at the time of disclosure is generally known in the Company’s trade; (ii) which the recipient thereof (“Recipient”) can show by written records was already in its possession at the time of disclosure and not subject to an existing agreement of confidence between the Parties; (iii) which is received from a third party without restriction who is not under obligation of confidentiality with respect to such information; (iv) which is independently developed by Recipient as evidenced by its written records and without violating any other obligation between the Parties.

(b) Intellectual Property Rights. “Intellectual Property Rights” means all of the world-wide legal rights of, in and to the following: (i) patents, patent applications, and invention disclosures; (ii) copyrights and works of authorship, including without limitation textual, masks, audio/visual works, “look and feel,” and derivative works; (iii) trademarks, service marks, trade names, and trade dress, together with all goodwill associated therewith; (iv) trade secrets, know-how, and proprietary and confidential information; (v) moral rights; (vi) design rights; (vii) domain names; (viii) any rights analogous to those set forth in the preceding clauses; and (ix) any applications, registrations, divisions, combinations, continuations, renewals, reissues, extensions, and translations of the foregoing (as applicable); whether existing on the date of this Agreement or thereafter filed, issued, or acquired.

(c) The Executive recognizes that the Company’s Confidential Information and Intellectual Property Rights are extremely valuable to it and that disclosure or use of the Company’s Confidential Information and/or Intellectual Property Rights outside the Company could irreparably damage the Company. The Executive therefore agrees that Executive will not use any Confidential Information and/or Intellectual Property Rights for any purpose other than to benefit the Company. In furtherance of that commitment, the Executive agrees that Executive will preserve and protect the confidentiality of the Confidential Information and Intellectual Property Rights and will not use any Confidential Information and/or Intellectual Property Rights other than for a Company purpose. In addition, the Executive will not disclose Confidential Information and/or Intellectual Property Rights to any person outside the Company unless the Executive first obtains the express written consent of a member of the Board of the Company and has secured the signature of such person on a Company-approved confidentiality agreement.

(d) The Executive understands and agrees that Executive confidentiality obligations under this Section 5 apply during Executive employment and continue after termination of employment with the Company, regardless of the reason for the termination.

 

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(e) The Executive represents that Executive is aware of no confidentiality, non-compete, or other agreement that might in any way restrict the Executive’s employment/function with the Company that Executive has not provided to the Company, in writing, and confirms that the Executive’s former employer has released Executive from any obligation Executive had with respect to the use of confidential information learned in the Executive’s previous employment and which Executive was bound not to disclose.

(f) The Executive understands and agrees that any and all information described as Confidential Information and/or Intellectual Property Rights including, without limitation, records, documents, photographs, correspondence, memoranda, notes, records, computers, computer disks, thumb drives, cell phones, smartphones, tablets, files, keys and other documents or physical materials relating to the Company, whether received, retained, compiled or prepared by the Executive or otherwise coming into the Executive’s possession through or as a result of the Executive’s employment shall remain the Company’s sole and exclusive property, shall not be used by the Executive in any way whatsoever, and shall be returned to the Company immediately upon request. Without limiting the foregoing, while on working time the Executive shall not photograph, tape, film, copy or otherwise record any likenesses or activities of the Company as they relate to members, customers, vendors, suppliers, Company trade secrets, or Company intellectual property, or post or in any way disseminate any likenesses or activities of the Company as they relate to members, customers, vendors, suppliers, Company trade secrets, or Company intellectual property on any website or any social media outlet without prior written approval from the Company.

(g) Nothing in this Agreement shall prohibit the Executive from disclosing any trade secret pursuant to the Defend Trade Secrets Act of 2016: (i) (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, the Executive will not be deemed to be in violation of this Agreement if Executive files a lawsuit for retaliation for reporting a suspected violation of law and discloses the trade secret to Executive’s attorney and uses the trade secret information in the court proceeding, provided the Executive (1) files any document containing the trade secret under seal; and (2) does not publicly disclose the trade secret, except pursuant to court order.

6. Works Made for Hire and Inventions.

(a) Definitions.

(i) The terms “work,” “trademark,” and “invention” include anything created for Company by the Executive, whether alone or with others, and whether created while an independent contractor, employee, or agent of Company.

(ii) The term “work” means any and all writings, documents, designs, models, drawings, photographs, physical property, reports, etc., that are protectable under Title 17 of the U.S. Code.

 

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(iii) The term “trademark” means any name, word, phrase, logo, design, or other graphic depiction generated during the performance of this Agreement which is or can be used to describe either a product or service of Company.

(iv) The term “invention” means any designs, processes, inventions, or discoveries that may be patentable or otherwise protectable under Title 35 of the U.S. Code.

(b) Title to Works, Trademarks, and Inventions.

(i) While employed by the Company, the Executive may create certain works for Company that may be copyrighted under the laws of the United States. To the extent that any such works are created, the Executive will be considered to have created a work made for hire as defined in 17 U.S.C. § 101, and the Company shall have the sole right to the copyright. In the event that any work created by the Executive does not qualify as a work for hire, the Executive agrees to assign Executive’s right in the work to Company, as provided below.

(ii) It is understood and agreed that the Intellectual Property Rights and entire right, title, and interest throughout the world to all works, trademarks, and/or inventions that are conceived of, prepared, procured, generated, or produced, whether or not reduced by practice, by the Executive, either solely or jointly with others, during the course of, in connection with, or as related to the performance of this Agreement, shall be and hereby are vested and assigned by the Executive to Company.

(iii) It is agreed that the Executive shall promptly disclose to the Company in writing all Works, including, but not limited to, inventions, discoveries, designs, developments, methods, modifications, improvements, processes, algorithms, databases, computer programs, formulae, recipes, techniques, trade secrets, ideas, concepts, methodologies, graphics or images, and audio or visual works and other works of authorship (collectively “Developments”), whether or not patentable or copyrightable, that are created, made, conceived or reduced to practice by the Executive (alone or jointly with others) or under the Executive’s direction during the Employment Period. The Executive acknowledge that all work performed by Executive is on a “work for hire” basis, and the Executive hereby assigns and transfers and, to the extent any such assignment cannot be made at present, will assign and transfer, to the Company and its successors and assigns all of the Executive’s rights, title and interest in all Developments that (a) relate to the business of the Company (including any Developments that relate or could relate to the more generalized industry in which the Company operates or is proposing to operate, whether or not it is directly applicable to the business of the Company) or any of the products or services being researched, developed, manufactured, or sold by the Company or which may be used with such products or services; or (b) result from tasks assigned to the Executive by the Company; or (c) result from the use of premises or personal property (whether tangible or intangible) owned, leased, or contracted for by the Company (“Company-Related Developments”), and all related Intellectual Property Rights. The Executive agrees to advise the Company in writing of any prior Developments that Executive has, alone or jointly with others, conceived, developed, or reduced to practice prior to the commencement of the Executive’s employment with the Company that Executive considers to be Executive property or the property of third parties and that the Executive wishes to have excluded from the scope of this Agreement (“Prior Inventions”).

 

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(iv) If, in the course of the Executive’s employment with the Company, the Executive incorporates a Prior Invention into a Company product, process, or machine or other work done for the Company, the Executive hereby grants to the Company a nonexclusive, royalty-free, paid-up, irrevocable, worldwide license (with the full right to sublicense) to make, have made, modify, use, sell, offer for sale and import such Prior Invention. Notwithstanding the foregoing, the Executive will not incorporate, or permit to be incorporated, Prior Inventions in any Company-Related Development without the Company’s prior written consent.

(v) The Executive will cooperate fully with the Company, both during and after the Executive’s employment with the Company, with respect to the procurement, maintenance, and enforcement of Intellectual Property Rights in Company-Related Developments. The Executive agrees to sign, both during and after the term of this Agreement, all papers, including without limitation copyright applications, patent applications, declarations, oaths, assignments of priority rights, and powers of attorney, which the Company may deem necessary or desirable in order to protect its rights and interests in any Company-Related Development. If the Company is unable, after reasonable effort, to secure the Executive’s signature on any such papers, the Executive hereby irrevocably designates and appoints each officer of the Company as Executive agent and attorney-in-fact to execute any such papers on Executive behalf, and to take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in any Company-Related Development. The Executive hereby waives and irrevocably quitclaims to the Company or its designee any and all claims, of any nature whatsoever, which Executive now or hereafter has for infringement of any and all proprietary rights assigned to the Company or such designee.

7. Restrictive Covenants.

(a) Non-Competition and Non-Solicitation. Executive agrees that, in consideration of Executive’s employment with the Company pursuant to this Agreement, and other good and valuable consideration, the receipt of which is hereby acknowledged, during Executive’s employment with the Company and nine (9) months after termination thereof, Executive will not either on Executive’s own behalf or on behalf of any third party, except on behalf of the Company, directly or indirectly (other than through Executive’s ownership of equity interest in the Company), as an individual proprietor, principal, manager, agent, consultant, guarantor, advisor, member, owner, participant, partner, stockholder, officer, Executive, director, joint venturer, lender, or in any other capacity whatsoever (other than as a passive holder of not more than five percent (5%) of the total outstanding stock of a publicly-held company):

(i) carry on, engage in, be employed by, consult with, or have any financial interest in any business that relates to the development of a product with similar characteristics to LB102; or that is in process of developing a molecule that would be similar in target indication and properties as the Company’s lead molecule (LB102); or pharmaceuticals to treat schizophrenia (collectively “Company Business”) that compete with the Company Business in the United States, or which Executive knows (or should reasonably know) will come into existence within two years after the Employment Period;

 

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(ii) recruit, offer employment to, solicit or induce, or attempt to induce, any Executive or employees of the Company or any affiliate to terminate their employment with, or otherwise cease their relationship with, the Company or any affiliate;

(iii) solicit, divert, take away, or attempt to divert or take away, the business or patronage (with respect to products or services of the kind or type developed, produced, marketed, furnished or sold by the Company) of any of the Company’s clients, customers, vendors, business or strategic partners, or accounts, or prospective clients, customers, vendors, business or strategic partners, or accounts; or

(iv) persuade or induce any client, customer, vendor, strategic or business partner, or account of the Company to restrict or cease to do business with, invest in, participate with, or otherwise work with the Company, or to reduce the amount of business, investment, participation or work that any such client, customer, vendor, or strategic or business partner has customarily done or actively contemplates doing with the Company.

(b) Covenants are Reasonable. Executive and the Company agree that this covenant not to compete is a reasonable covenant under the circumstances, and further agree that if in the opinion of any court of competent jurisdiction such restraint is not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of this covenant as to the court shall appear not reasonable and to enforce the remainder of the covenant as so amended. Executive agrees that any breach of the covenants contained in this Section 7 would irreparably injure the Company. Accordingly, Executive agrees that the Company may, in addition to pursuing any other remedies it may have in law or in equity, cease making any payments or providing any benefits otherwise required by this Agreement and obtain an injunction against Executive from any court having jurisdiction over the matter restraining any further violation of this Agreement by Executive.

(c) The provisions of Section 7 shall survive termination of this Agreement.

8. Mutual Non-Disparagement. The Executive shall not, during the Employment Period or during the eighteen (18) months after the Date of Termination, make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal communications that belittle, disparage or otherwise express disapproval of the Company or any of its Affiliates or their respective businesses, or any of their past or present officers, directors, employees, advisors, agents, policies, procedures, practices, decision-making, conduct, professionalism or compliance with standards, except as and to the extent required to comply with applicable federal or state law. The Company shall not, and shall use commercially reasonably efforts to make a one-time instruction to its executive officers and directors to not, during the Employment Period or during the eighteen (18) months after the Date of Termination, make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal communications that belittle, disparage or otherwise express disapproval of the Executive, except as and to the extent required to comply with applicable federal or state law.

 

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9. Breach. The Executive acknowledges and confirms that the restrictions contained in this Agreement including those set forth in Section 5, 6, 7, and 8, in view of the nature of the Company’s business, are reasonable and necessary in order to protect the legitimate business interests of the Company, and that any breach or threatened breach of the provisions of this Agreement shall cause irreparable injury to the Company, that money damages will not provide an adequate remedy, and that their enforcement will not impose a hardship on the Executive or significantly impair the Executive’s ability to earn a livelihood. Therefore, in addition to any other relief available to it, the Company shall be entitled to seek preliminary, temporary, and permanent injunctive relief without the necessity of proving irreparable harm or posting bond or other security. If any provisions of this Agreement are ever determined by a court of competent jurisdiction to exceed limitations permitted by law, then such provisions shall be reformed automatically to set forth the maximum limitations permissible by law. If the Executive violates any of the restrictions contained in this Agreement, the relevant restricted period shall be extended by a period equal to the length of time from the commencement of any such violation until such time as such violation shall be deemed, by the Company, to be cured. Nothing contained herein shall be considered as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including any recovery of damages from the Executive.

10. Return of Company Property. On the date that the Executive’s employment with the Company ends, the Executive will deliver to the Company all documents, electronic and other data (whether stored on devices in your possession or with any third-party vendors or on the “cloud”), notes, writings, customer and prospect lists, keys, credit cards, computer programs and all other documents or tangible materials whatsoever, including all copies or duplicates, concerning any part of the Company’s activities or concerning any activities as a Company employee. The Executive acknowledges and agrees that all such documents and tangible materials, and copies or duplicates thereof, including the Executive’s own notes, are the Company’s property which is only entrusted to the Executive on a temporary basis. After returning these documents, data, and other property, the Executive will immediately permanently delete from any electronic media in the Executive’s possession, custody, or control (such as computers, mobile phones, hand-held devices, back-up devices and zip drives) or to which the Executive has access (such as the cloud, remote e-mail exchange servers, back-up servers, off-site storage), all Company documents or electronically stored images, and other data or data compilations stored in any medium from which such information can be obtained. The Executive also agrees to provide the Company with list of any documents that the Executive created or is otherwise aware that are password-protected and the password(s) necessary to access such password-protected documents.

11. Section 409A. It is intended that any payment or benefit that is provided pursuant to or in connection with this Agreement that is considered to be deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) shall be paid and provided in a manner, and at such time and form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for non-compliance. It is further intended that the payments hereunder shall, to the maximum extent permissible under Section 409A of the Code, be exempt from Section 409A of the Code under either (i) the exception for involuntary separation pay to the extent that all payments are payable within the limitations described in Treasury Regulation Section 1.409A-1(b)(9), or (ii) the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4) to the extent that all payments are payable no later than two and a half months after the end of the first taxable year in which the right to the payment is no longer subject to a substantial risk of forfeiture.

 

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(a) If the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code at such time, any payments to be made or benefits to be delivered in connection with the Executive’s “Separation from Service” (as defined below) that constitute deferred compensation subject to Section 409A of the Code shall not be made until the earlier of (i) the Executive’s death or (ii) six months plus one day after the Executive’s Separation from Service (“409A Deferral Period”) as required by Section 409A of the Code. Payments of any such deferred compensation otherwise due to be made in installments or periodically during the 409A Deferral Period shall be accumulated and paid in a lump sum as soon as the 409A Deferral Period ends, and the balance of the payment shall be made as otherwise scheduled.

(b) For purposes of this Agreement, all rights to payments and benefits hereunder shall be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Section 409A of the Code.

(c) For purposes of this Agreement, with respect to the timing of any amounts that constitute deferred compensation subject to Section 409A of the Code that depends on termination of employment or separation from service, termination of employment or separation from service shall mean a “separation from service” within the meaning of Section 409A of the Code where it is reasonably anticipated that no further services would be performed after such date or that the level of bona fide services the Executive would perform after that date (whether as an employee or independent contractor) would permanently decrease to a level less than or equal to twenty percent (20%) of the average level of bona fide services the Executive performed over the immediately preceding thirty-six (36) month period.

12. Indemnification. Except as limited by applicable law, in the event the Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), other than any Proceeding initiated by the Executive or the Company related to any contest or dispute between the Executive, on the one hand, and the Company or any of its affiliates, on the other, with respect to this Agreement or the Executive’s employment hereunder, by reason of the fact that the Executive is or was a director or officer of the Company, or any affiliate of the Company, or is or was serving at the direct request of the Company as a director, officer, member, employee, or agent of another corporation or a partnership, joint venture, trust, or other enterprise, the Executive shall be indemnified and held harmless by the Company to the fullest extent permitted under applicable law and the Company’s bylaws from and against any liabilities, costs, claims, and expenses, including all costs and expenses reasonably incurred in defense of any Proceeding (including attorneys’ fees) (collectively, “Indemnifiable Losses”). Costs and expenses reasonably incurred by the Executive in defense of such Proceeding (including attorneys’ fees and costs) shall be paid by the Company in advance of the final disposition of such Proceeding upon receipt by the Company of: (i) a written request for payment; (ii) appropriate documentation evidencing the incurrence, amount, and nature of the costs and expenses for which payment is being sought; and (iii) an undertaking adequate under applicable law and reasonably acceptable to the Company made by or on behalf of the Executive to repay the amounts so paid if it shall ultimately be determined that the Executive is not entitled to be indemnified by the Company under this Agreement. Notwithstanding the foregoing, the Executive will not be held harmless nor indemnified under this Section 12 for any Indemnifiable Losses arising out of the fraud, intentional misconduct, or knowing and reckless

 

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breach of the Executive’s obligations under the Agreement or pursuant to any other terms of Executive’s employment at the Company or any of its affiliates, or if the Executive has acted in bad faith, except to the extent such Indemnifiable Losses are satisfied by the Company’s insurance policy and only to the extent of such insurance coverage. During the Employment Period, the Company or any successor to the Company shall purchase and maintain, at its own expense, directors’ and officers’ liability insurance in respect of acts and omissions of Executive in his capacity as such or as a director or officer of the Company and occurring during Executive’s employment, which will provide coverage for Executive in an amount determined by the Company.

13. Representations of the Executive. The Executive represents and warrants that: (i) the Executive has no legal obligations to any other party that would be breached by signing this Agreement or otherwise fulfilling Executive’s obligations hereunder, including but not limited to any non-competition, non-solicitation, non-inducement, confidentiality, assignment of inventions, or other similar agreement; (ii) the Executive has not disclosed any third party’s confidential or proprietary information to the Company or its representatives or agents; (iii) if the Executive learns of any confidential or proprietary information that belongs to any third party, the Executive will not disclose such information to the Company or its representatives or agents, except as allowed by law or any agreement you have signed with such party; and (iv) the Executive is not in breach of any confidentiality or non-disclosure agreement that the Executive has signed.

14. Miscellaneous.

(a) Entire Agreement. This Agreement along with the Employee Handbook contains the entire agreement and understanding of the Executive and the Company concerning the subject matter hereof and supersedes and replaces all prior negotiations and proposed agreements, whether oral or written. The Executive acknowledges that, by signing this Agreement, the Executive has not relied upon any representations, promises or agreements made by the Company or its employees, officers, directors, or representatives (including any Company attorneys) that are not contained in this Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the Parties hereto.

(b) Headings/Counterparts. The headings of the paragraphs herein are included for reference only and are not intended to affect the interpretation of the Agreement. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same Agreement. Each party agrees that faxed or electronically transmitted copies of the signature pages of this Agreement and/or any of the other instruments, agreements and documents relating to any of the transactions contemplated hereby, whether sent to the other party or to such other party’s counsel, shall be deemed definitively executed and delivered, and with the same force and effect as if manually signed and delivered, for all purposes whatsoever. Neither party hereto shall raise the use of DocuSign, electronic mail or a facsimile machine to deliver a signature or the fact that any signature was transmitted or communicated through the use of electronic mail or a facsimile machine as a defense to the formation of a contract and each party forever waives any such defense. All counterparts shall be construed together and shall constitute one instrument, and the signature page from any counterpart may be attached to another counterpart to form a complete copy of this Agreement.

 

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(c) Severability. If any provision of this Agreement or the application thereof is held invalid, such invalidation shall not affect other provisions or applications of this Agreement and to this end the provisions of this Agreement are declared to be severable.

(d) Construction/Joint Drafting. The determination of the terms and conditions of this Agreement has been by mutual agreement of the Parties. Each party participated jointly in the drafting of this Agreement, and therefore the terms and conditions of this Agreement are not intended to be, and shall not be, construed against any party by virtue of draftsmanship.

(e) Non-Waiver. Neither the failure nor any delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver of any provision of this Agreement will be binding unless made in a writing signed by the Parties hereto.

(f) Assignment. This Agreement shall be binding upon the Company and shall inure to the benefit of the Company including any transferee of the business operation, as a going concern, in which the Executive is employed and shall be binding upon the Executive and the Executive’s heirs and personal representatives. None of the rights or obligations of the Executive hereunder may be assigned or delegated. The Company may assign its rights and obligations under this Agreement in whole or in part to anyone.

(g) Choice of Law/Venue. This Agreement will be governed by, and construed pursuant to, the laws of the State of New York without regard to its conflict of laws principles. Any controversy or claim arising out of or relating to Executive’s employment or this Agreement shall be settled by arbitration administered by the American Arbitration Association under its Employment Arbitration Rules and Mediation Procedures and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Any claims will be heard by a panel of three arbitrators and the arbitration shall take place in the County of New York, State of New York and the Parties consent to New York, New York as the seat of arbitration. In the event that injunctive relief is sought in connection with a dispute related to Sections 5, 6, 7, and/or 8, the Parties agree that venue only in the County of New York, State of New York would be proper and hereby waive any challenge thereto based on lack of personal jurisdiction or inconvenient forum.

(h) Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of delivery, if delivered by hand, (ii) on the date of transmission, if delivered by confirmed facsimile, (iii) on the first business day following the date of deposit, if delivered by guaranteed overnight delivery service, or (iv) on the fourth business day following the date delivered or mailed by the U.S. Postal Service, addressed as follows:

 

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If to the Executive:

At the address shown in the books and records of the

Company, currently:

Marc Panoff

***

Email: ***

 

with a copy, which shall not constitute notice, to:

Fox Rothschild LLP 101 Park Avenue, Suite 1700

New York, NY 10178

Attention: Scott Lavin, Esq.

Bryn Goodman, Esq.

Email: slavin@foxrothschild.com; bgoodman@foxrothschild.com

If to the Company:

LB Pharmaceuticals Inc 575 Madison Avenue, 10th Floor

New York, NY 10022,

Attention: Board of Directors

Email: ***

 

with copy, which shall not constitute notice,

to:

Williams Mullen

200 South 10th Street

Richmond, Virginia 23219

Attention: Andrew W. White, Esq.

Email: awhite@williamsmullen.com

Notices shall be deemed to be properly addressed, to the Company or to the Executive, if addressed to such person at such person’s address as set forth above, or to such other address or addresses as the addressee previously may have specified by Notice given to the other parties in the manner contemplated by this Section 14(h).

(i) Survival. Upon the termination of this Agreement, the respective rights and obligations of the Parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the Parties under this Agreement.

 

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15. Acknowledgement of Full Understanding. THE EXECUTIVE ACKNOWL-EDGES AND AGREES THAT EXECUTIVE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWL-EDGES AND AGREES THAT EXECUTIVE HAS BEEN REPRESENTED BY EXECUTIVE’S OWN COUNSEL OR HAS HAD AN OPPORTUNITY TO BE REPRESENTED BY AN ATTORNEY OF EXECUTIVE’S CHOICE BEFORE SIGNING THIS AGREEMENT.

IN WITNESS WHEREOF, the Parties have duly executed and delivered this Executive Employment Agreement as of the date first above written.

 

EXECUTIVE     LB PHARMACEUTICALS INC
  /s/ Marc Panoff     By:   /s/ Zachary Prensky
  Marc Panoff     Name:   Zachary Prensky
  Date: 8/25/2023     Date: 8/25/2023

 

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Exhibit 10.17

AMENDMENT NO.1 TO

EXECUTIVE EMPLOYMENT AGREEMENT

This AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT (the “Amendment”) is made and entered into as of June 28, 2024 (the “Amendment Effective Date”), by and between LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), and Marc Panoff, an individual residing at *** (the “Executive,” and together with the Company, the “Parties”). All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Employment Agreement (defined below).

RECITALS

WHEREAS, the Company and the Executive entered into that certain Executive Employment Agreement, made as of August 25, 2023 (the “Employment Agreement”); and

WHEREAS, the Company and the Executive desire to amend the Employment Agreement as provided in this Amendment.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties intending to be legally bound, acknowledge and agree as follows:

1. Section 2 of the Employment Agreement is hereby deleted and replaced in its entirety with the following:

Position and Duties. During the Employment Period, the Executive will serve as Senior Vice President of Finance of the Company and report to the Chief Financial Officer of the Company. The Executive shall have such duties, authority, and responsibilities commensurate with such position and such other duties and responsibilities that are specifically delegated to the Executive from time. The Executive will diligently and conscientiously perform Executive’s duties and will devote substantially all of the Executive’s business hours to such duties, and during such time will make the best use of the Executive’s energy, knowledge, and training to advancing the Company’s interests. The Executive will accept no other employment or contracting work during the Employment Period, or serve as a member of the board of directors of any for-profit entity or as a member of any advisory board without the express written consent of the board of directors the Company (the “Board”). Upon termination of the Executive’s employment relationship with the Company for any reason, the Executive shall resign and relinquish any position held as an officer and/or board member of the Company.

 

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2. Section 3(a) of the Employment Agreement is hereby deleted and replaced in its entirety with the following:

Base Salary. Subject to the terms set forth herein, in consideration for all services rendered by the Executive to the Company, the Company shall pay the Executive an annual base salary of Three Hundred Fifteen Thousand Dollars and No Cents ($315,000) (“Annual Base Salary”) in periodic installments in accordance with the Company’s regular payroll practices in effect from time to time for executive employees, but no less frequently than semi-monthly. The Executive shall be classified as exempt from overtime and the Executive understands and acknowledges that the Executive is not entitled to overtime compensation and that the Annual Base Salary is intended to compensate the Executive for all hours worked.

3. Subject to Board approval, the Company shall grant to the Executive an option to purchase 200,000 shares of Common Stock of the Company under the Plan, as amended (the “Second Option”) at an exercise price per share to be determined by the Board from time to time. The Second Option shall vest and become exercisable on a cumulative basis with 25% to vest upon the first anniversary of the Amendment Effective Date and in thirty-six (36) substantially equal monthly installments over the thirty-six (36) month period beginning on the last day of the month following the first anniversary of the Amendment Effective Date and the last day of each month thereafter; provided that the Executive continues to have a Service Relationship (as defined in the Plan) with the Company through each such date. The Second Option shall be subject to other standard terms and conditions, not inconsistent with the foregoing, as are contained in the Company’s standard form of Notice of Grant and Stock Option Agreement.

4. The Executive hereby consents to the terms set forth in this Amendment and acknowledges and agrees that the terms set forth herein do not constitute “Good Reason,” “Cause” and/or any term with any similar meaning or import under the Employment Agreement. The Executive represents that the Executive’s decision to enter into this Amendment is completely voluntary. Except as otherwise expressly amended by this Amendment, the Employment Agreement shall remain in full force and effect. The Employment Agreement and this Amendment, together with those documents or other agreements between the parties expressly referenced or otherwise incorporated therein, set forth the entire understanding between the parties with regard to the subject matter hereof and supersede any prior oral discussions or written communications and agreements. This Amendment may not be modified or amended except by an instrument in writing signed by the Parties.

[Signature page follows]

 

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The parties have executed this Amendment to Employment Agreement on the day and year first written above.

 

LB PHARMACEUTICALS INC
By:  

/s/ Zachary Prensky

Name:   Zachary Prensky
Title:  
EXECUTIVE

/s/ Marc Panoff

Marc Panoff

 

[Signature page to Amendment No. 1 to Executive Employment Agreement]

Exhibit 10.18

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”), is made as of February 3, 2025, by and between LB Pharmaceuticals Inc, a Delaware Corporation, (the “Company”) and Rich Silva, an individual residing at *** (the “Executive”). Company and Executive are each a “Party,” and together, the “Parties.”

RECITALS

WHEREAS, the Company wishes to retain the services of the Executive to serve as Senior Vice President of Technical Operations of the Company and on the terms and conditions set forth herein; and

WHEREAS, the Executive desires to enter into employment with the Company on the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties intending to be legally bound, acknowledge and agree as follows:

1. Position and Duties. Subject to the terms set forth herein, the Company agrees to employ the Executive as Senior Vice President of Technical Operations of the Company, and the Executive hereby accepts such employment, starting on February 10, 2025 (the “Start Date”). The Executive shall report to the Chief Executive Officer of the Company (the “CEO”). The Executive shall have such duties, authority, and responsibilities as shall be consistent with the duties normally performed by a senior vice president of technical operations of companies of similar size in the pharmaceutical industry in which the Company operates. The Executive will diligently and conscientiously perform Executive’s duties and will devote substantially all of the Executive’s business hours to such duties, and during such time will make the best use of the Executive’s energy, knowledge, and training to advancing the Company’s interests. The Executive will accept no other employment or contracting work while employed by the Company, or serve as a member of the board of directors of any for-profit entity or as a member of any advisory board without the express written consent of the CEO. Upon termination of the Executive’s employment relationship with the Company for any reason, the Executive shall resign and relinquish any position held as an officer of the Company.

2. Compensation and Benefits.

(a) Base Salary. Subject to the terms set forth herein, in consideration for all services rendered by the Executive to the Company, the Company shall pay the Executive an annual base salary of three hundred and seventy five thousand dollars ($375,000.00) (“Annual Base Salary”) in periodic installments in accordance with the Company’s regular payroll practices in effect from time to time for executive employees, but no less frequently than semi-monthly. The Executive shall be classified as exempt from overtime and the Executive understands and acknowledges that the Executive is not entitled to overtime compensation and that the Annual Base Salary is intended to compensate the Executive for all hours worked.


(b) Target Bonus.

(i) The Executive will be eligible to earn a target bonus of up to thirty five percent (35%) of Executive’s Annual Base Salary, in all cases subject to the discretion of the Compensation Committee of the board of directors of the Company (the “Board”) determining that the applicable objectives have been achieved (the “Target Bonus”). Objectives will be determined annually by the Compensation Committee in consultation with the Executive and will include both Company performance the Executive’s personal performance.

(ii) Any such Target Bonus shall not be considered earned until paid. Any Target Bonus awarded will be paid no later than forty-five (45) days after it has been awarded. If the Executive’s employment with the Company is terminated for Cause (as defined below) before any Target Bonus is paid, the Executive shall not be eligible to receive the Target Bonus, regardless of whether the Company already determined the amount of the Target Bonus. If the Company determines the amount of a Target Bonus and thereafter terminates the Executive’s employment with the Company for a reason other than for Cause but before any such Target Bonus has been paid, the Executive will still receive the Executive’s Target Bonus payment subject to the terms provided herein, even if the Executive is no longer working at the Company at the time the Target Bonus is to be paid.

(c) Stock Options.

(i) Subject to Board approval, to the extent not already granted, the Company shall grant to the Executive stock options to purchase shares of Common Stock of the Company up to two hundred and fifty thousand (250,000) shares under the Company’s 2023 Stock Incentive Plan (the “Plan”), as amended (each an “Option”) at an exercise price per share of $1.50, or the then fair market value of the underlying Option as of the date of grant, whichever is greater.

(ii) The Options shall vest and become exercisable on a cumulative basis with twenty five percent (25%) to vest upon the first anniversary of the Start Date and in thirty-six (36) substantially equal monthly installments over the thirty-six (36) month period beginning on the last day of the month following the first anniversary of the Start Date and the last day of each month thereafter; provided that the Executive continues to have a Service Relationship (as defined in the Plan) with the Company through each such date.

(d) Employee Benefits. During Executive’s term of employment by the Company under this Agreement (the “Employment Period”), the Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, the “Employee Benefit Plans”), on a basis which is no less favorable than is provided to other similarly situated senior executives of the Company, to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plans and applicable law.

 

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(e) Paid Time Off. During the Employment Period, the Executive shall be entitled to twenty (20) days paid vacation per calendar year. This vacation is in addition to Company recognized holidays and paid sick time, if any, in accordance with the Company’s practices and policies as in effect from time to time. The Company reserves the right to amend or cancel its practices and policies at any time in its sole discretion, in accordance with applicable law. Any unused vacation may not be carried over by the Executive to any subsequent year and shall be forfeited at the end of the calendar year. The Company will pay the Executive for any accrued but unused vacation upon termination of the Executive’s employment.

(f) Expense Reimbursement. The Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the Executive’s duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures.

(g) Withholdings. All payments made subject to this Agreement will be subject to payroll withholdings that the Company reasonably believes are required by law or elected or authorized by the Executive for state and federal income taxes, Social Security, Medicare, and other applicable payroll deductions, in accordance with the Company’s normal payroll practices.

3. Termination of Employment.

(a) At-Will Employment; Accrued Rights. The Parties acknowledge that Executive’s employment relationship with the Company shall be at-will. Either the Company or the Executive may terminate Executive’s employment with or without Cause or Good Reason or advance notice. Upon a termination of the Executive’s employment for any reason, the Executive (or the Executive’s estate) shall be entitled to receive (i) that portion of the Executive’s Annual Base Salary, then in effect, earned and unpaid as of the termination date; (ii) any expenses owed and properly reimbursable to the Executive pursuant to the Company’s expense reimbursement policies; (iii) conversion rights, if applicable, with respect to any life insurance or disability insurance policy provided to the Executive; and (iv) any vested amounts owed to the Executive under the Company’s employee benefit plans or programs and any vested Options in accordance with the terms and conditions of such employee benefit plans or programs and the Plan (collectively, the “Accrued Rights”).

(b) Termination by the Company for Cause or Executive’s Resignation Without Good Reason. Upon termination of the Executive’s employment relationship by the Company for Cause, or by the Executive’s resignation without Good Reason, the Company shall, thereafter, have no obligation to the Executive for any unearned Annual Base Salary, Target Bonus, or any other form of compensation or benefit, except as otherwise required by law. Reimbursement of appropriately documented expenses incurred by the Executive before the termination of employment, to the extent that the Executive would have been entitled to such reimbursement but for the termination of employment, shall be paid by the Company to the Executive.

 

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(c) Termination by the Company Without Cause or Executive’s Resignation for Good Reason Outside of Change in Control Period. In the event that the Company terminates the Executive’s employment without Cause or Executive resigns for Good Reason, and provided that the Severance Preconditions (defined below) are met, (A) the Executive shall receive nine (9) months’ severance pay at the Executive’s Annual Base Salary then in effect, paid as salary continuation over the nine (9) month severance period pursuant to the Company’s customary payroll practices, commencing on the first payroll date following the date on which the Release becomes effective and irrevocable, provided that if the Release Execution Period (defined below) spans two calendar years, payments shall begin no earlier than the first payroll date of the later calendar year, and provided further that, the first installment payment shall include all amounts attributable to the period from the Executive’s employment termination date through the first payment date; and (B) if the Executive is eligible for and timely and properly elects group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse the Executive for monthly COBRA premiums payable to continue coverage for the Executive and the Executive’s eligible dependents until the earliest of (x) nine (9) months following the termination date; (y) the expiration of the Executive’s eligibility for the continuation coverage under COBRA; or (z) the date when the Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment. Such reimbursement shall be paid to the Executive no later than the end of the month immediately following the month in which the Executive timely remits each COBRA premium payment.

(d) Termination by the Company Without Cause or Executive’s Resignation for Good Reason in Connection with Change in Control. If at any time during the time period of three (3) months prior to or twelve (12) months following a Change in Control (defined below), the Company terminates the Executive’s employment without Cause or the Executive resigns for Good Reason, provided the Severance Preconditions are met, the Company will provide Executive with the following severance benefits (in lieu of, and not in addition to, the severance benefits provided in Section 3(c)):

(i) a lump sum severance payment, payable within sixty (60) days after the later of the Change in Control and Executive’s employment termination date (provided that if the Release Execution Period spans two calendar years, payment shall not made until the beginning of the later calendar year), in an amount equal to the sum of: (A) one (1) year of Executive’s Annual Base Salary then in effect; and (B) 1.5 times the Target Bonus opportunity for the year in which Executive’s employment termination date occurs;

(ii) if the Executive is eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive for monthly COBRA premiums payable to continue coverage for the Executive and the Executive’s eligible dependents until the earliest of (x) twelve (12) months following the termination date; (y) the expiration of the Executive’s eligibility for the continuation coverage under COBRA; or (z) the date when the Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment. Such reimbursement shall be paid to the Executive no later than the end of the month immediately following the month in which the Executive timely remits each COBRA premium payment; and

 

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(iii) the vesting of any outstanding unvested equity that the Executive holds shall be accelerated in full as of the termination date.

(e) Termination in the Event of Executive’s Disability or Death. The Executive’s employment hereunder (i) shall terminate automatically upon the Executive’s death and (ii) may be terminated by the Company for the Executive’s Disability. Upon termination of the Executive’s employment hereunder by reason of the Executive’s Disability or death, the Executive or the Executive’s estate (as the case may be) shall be entitled to receive:

(i) the Accrued Rights; and

(ii) subject to the Executive’s or, in the event of the Executive’s death, the representative of the Executive’s estate, execution and non-revocation of the Release and such Release becoming effective and irrevocable within the Release Execution Period:

(A) a pro-rata portion (based on the number of full days the Executive was employed in the applicable fiscal year) of the Target Bonus, if any, Executive would have earned for the fiscal year in which Executive’s employment termination date occurs, based on actual Company performance of the full fiscal year and payable at the same time annual bonuses are generally paid to executives for such fiscal year; and

(B) if the Executive is (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the monthly COBRA premium paid by the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the Executive and the Executive’s spouse/dependents. Such reimbursement shall be paid to the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) no later than the end of the month immediately following the month in which the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) timely remits the COBRA premium payment. The Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) shall be eligible to receive such reimbursement until the earliest of: (i) the last day of the month that is twenty-six (26) weeks after the termination of the Executive’s employment by reason of the Executive’s Disability or death; (ii) in the event of Executive’s Disability, the date Executive becomes eligible to receive healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility) or (iii) the date the Executive is (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) no longer eligible to receive COBRA continuation coverage. Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act) or incurring an excise tax, the Company shall in lieu thereof provide to Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) a taxable monthly payment in an amount equal to the monthly COBRA premium contemplated by the continuation benefit set forth in this Section.

 

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(iii) Following the termination of the Executive’s employment by reason of the Executive’s Disability or death, except as set forth in this Section 3, the Executive (or Executive’s estate) shall have no further rights to any compensation or any other benefits under this Agreement.

(f) Effect of Termination on Post-Termination Obligations. Upon termination of this Agreement for any reason, the Executive shall continue to be bound by the post-employment obligations and covenants set forth in this Agreement and the CIIAA following Executive’s termination.

(g) No Mitigation. The Executive will not be required to mitigate any of the Company’s payment obligations set forth in this Section 3 by making any efforts to secure other employment, and Executive’s commencement of employment with another employer will not reduce the obligations of the Company under this Section 3, unless specifically provided for herein.

(h) Resignation of Offices. Promptly following any termination of the Executive’s employment with the Company for any reason (other than by reason of the Executive’s death), the Executive shall deliver to the Company reasonably satisfactory written evidence of the Executive’s resignation from all positions that the Executive may then hold as an employee or officer of the Company or any subsidiary of the Company.

4. Definitions.

(a) Cause. For purposes of this Agreement the term “Cause” shall mean any one or more of the following:

i. The Executive’s persistent unsatisfactory performance or material failure to perform the Executive’s duties or any lawful directive of the Board or CEO after being given written notice of such deficiencies in the Executive’s performance and failure to cure them within thirty (30) calendar days of such written notice;

ii. The Executive’s indictment for, conviction of, plea of guilty to, or plea of nolo contendere to a felony involving the property or operations of the Company or a crime of moral turpitude;

iii. The Executive’s indictment for, conviction of, plea of guilty to, or plea of nolo contendere to embezzlement, misappropriation or fraud, whether or not related to the Executive’s employment with Company;

iv. The existence of any court order or settlement agreement prohibiting the Executive’s continued employment with the Company;

v. The Executive’s material breach of any material obligation in this Agreement, or any other written agreement between the Executive and Company, or any material misconduct by the Executive that adversely affects the business of the Company or its reputation; or

 

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vi. The Executive’s material failure to comply with the Company’s reasonable and lawful policies or rules of which the Executive is given written notice, as they may be in effect from time to time during the Executive’s employment, and failure to cure them within thirty (30) calendar days of such written notice.

(b) Change in Control. For purposes of this Agreement, “Change in Control” has the meaning ascribed to such term in the Plan.

(c) Disability. For the purposes of this Agreement, “Disability” shall mean that in the good faith judgment of the Board, despite reasonable accommodation, the Executive is unable due to a physical or mental incapacity to perform the essential functions of Executive’s most recent position for: (x) a period of one hundred eighty (180) consecutive days or (y) an aggregate of six (6) months in any twelve (12) consecutive month period.

(d) Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean any one or more of the following, in each case during the Employment Period without the Executive’s written consent:

i. a material reduction of the Executive’s position, authority or responsibilities, or the removal of the Executive from such position, authority or responsibilities, unless the Executive is provided with a new position of equal or greater organizational level, authority, responsibilities and compensation;

ii. a material reduction in the Annual Base Salary other than a general reduction in Annual Base Salary that affects all similarly situated executives in substantially the same proportions;

iii. a material breach by the Company of this Agreement; or

iv. a material change in the geographic location at which the Executive is required to perform services for the Company (except for office relocations that would not increase the Executive’s one way commute by more than twenty-five (25) miles).

provided, however, that Good Reason shall not exist unless: (x) the Executive has given the Company written notice of the conduct of the Company that is alleged to constitute Good Reason within thirty (30) days following the occurrence of such event; (y) the Executive has provided the Company at least thirty (30) days following the date on which such notice is provided to cure such conduct and the Company has failed to do so; and (z) the Executive resigns and voluntarily terminates the Executive’s employment within thirty (30) days following the expiration of the Company’s opportunity to cure such conduct.

 

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(e) Severance Preconditions. For the purposes of this Agreement, the “Severance Preconditions” shall mean that (i) the Executive has executed and not revoked within the applicable revocation period a separation agreement and general release in a form and substance reasonably satisfactory to the Company (the “Release”) and such Release becomes effective and irrevocable within sixty (60) days following the Executive’s employment termination date (such 60-day period, the “Release Execution Period”); (ii) the Executive remains in compliance with the CIIAA; and (iii) the Executive has provided to the Company the written resignations set forth in Section 3(h).

5. Confidential Information and Intellectual Property Rights. As a condition of employment, the Executive agrees to execute and abide by the Confidentiality and Proprietary Rights Agreement attached as Exhibit A (“CIIAA”). The CIIAA contains provisions that are intended by the Parties to survive and do survive any termination of this Agreement and the CIIAA.

6. Non-Disparagement. The Executive shall not, during or after employment, make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal communications that belittle, disparage or otherwise express disapproval of the Company or any of its affiliates or their respective businesses, or any of their past or present officers, directors, employees, advisors, agents, policies, procedures, practices, decision-making, conduct, professionalism or compliance with standards, except as and to the extent required to comply with applicable federal or state law. This Agreement does not prohibit Executive from reporting possible legal violations to the government or from making other disclosures to the government that are protected under federal or state whistleblower provisions. This Agreement does not prohibit Executive from making truthful statements or disclosures about alleged unlawful acts in the workplace, including sexual harassment.

7. Section 409A. It is intended that any payment or benefit that is provided pursuant to or in connection with this Agreement that is considered to be deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) shall be paid and provided in a manner, and at such time and form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for non-compliance. It is further intended that the payments hereunder shall, to the maximum extent permissible under Section 409A of the Code, be exempt from Section 409A of the Code under either (i) the exception for involuntary separation pay to the extent that all payments are payable within the limitations described in Treasury Regulation Section 1.409A-1(b)(9), or (ii) the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4) to the extent that all payments are payable no later than two and a half months after the end of the first taxable year in which the right to the payment is no longer subject to a substantial risk of forfeiture.

(a) If the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code at such time, any payments to be made or benefits to be delivered in connection with the Executive’s “separation from service” (as defined below) that constitute deferred compensation subject to Section 409A of the Code shall not be made until the earlier of (i) the Executive’s death or (ii) six months plus one day after the Executive’s separation from service (“409A Deferral Period”) as required by Section 409A of the Code. Payments of any such deferred compensation otherwise due to be made in installments or periodically during the 409A Deferral Period shall be accumulated and paid in a lump sum as soon as the 409A Deferral Period ends, and the balance of the payment shall be made as otherwise scheduled.

 

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(b) For purposes of this Agreement, all rights to payments and benefits hereunder shall be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Section 409A of the Code.

(c) For purposes of this Agreement, with respect to the timing of any amounts that constitute deferred compensation subject to Section 409A of the Code that depends on termination of employment or separation from service, termination of employment or separation from service shall mean a “separation from service” within the meaning of Section 409A of the Code where it is reasonably anticipated that no further services would be performed after such date or that the level of bona fide services the Executive would perform after that date (whether as an employee or independent contractor) would permanently decrease to a level less than or equal to twenty percent (20%) of the average level of bona fide services the Executive performed over the immediately preceding thirty-six (36) month period.

8. Section 280G. If any payment or benefit Executive will or may receive from the Company or otherwise (a “Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such Payment shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Executive. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).

Notwithstanding any provisions in this Section above to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for Executive as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.

 

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The Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this Section. The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. If Executive receives a Payment for which the Reduced Amount was determined pursuant to clause (x) above and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Executive agrees to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) above) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) above, Executive shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.

9. Indemnification. The Company will enter into an indemnification agreement with Executive. At all times during the Executive’s service as an officer and/or director and for at least six years thereafter, the Company shall provide that Executive is covered by the Company’s D&O insurance on the same basis as other active officers and directors (without regard to whether the Executive’s service has previously terminated).

10. Representations of the Executive. The Executive represents and warrants that: (i) the Executive has no legal obligations to any other party that would be breached by signing this Agreement or otherwise fulfilling Executive’s obligations hereunder, including but not limited to any non-competition, non-solicitation, non-inducement, confidentiality, assignment of inventions, or other similar agreement; (ii) the Executive has not disclosed any third party’s confidential or proprietary information to the Company or its representatives or agents; (iii) if the Executive learns of any confidential or proprietary information that belongs to any third party, the Executive will not disclose such information to the Company or its representatives or agents, except as allowed by law or any agreement Executive has signed with such party; and (iv) the Executive is not in breach of any confidentiality or non-disclosure agreement that the Executive has signed.

11. Miscellaneous.

(a) Entire Agreement. This Agreement contains the entire agreement and understanding of the Executive and the Company concerning the subject matter hereof and supersedes and replaces all prior negotiations and proposed agreements, whether oral or written. The Executive acknowledges that, by signing this Agreement, the Executive has not relied upon any representations, promises or agreements made by the Company or its employees, officers, directors, or representatives (including any Company attorneys) that are not contained in this Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the Parties hereto.

(b) Headings/Counterparts. The headings of the paragraphs herein are included for reference only and are not intended to affect the interpretation of the Agreement. This Agreement may be executed in any number of counterparts, each of which shall be deemed anoriginal but all of which shall constitute one and the same Agreement. Each Party agrees that faxed or electronically transmitted copies of the signature pages of this Agreement and/or any of the other instruments, agreements and documents relating to any of the transactions contemplated hereby, whether sent to the other Party or to such other Party’s counsel, shall be deemed definitively executed and delivered, and with the same force and effect as if manually signed and

 

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delivered, for all purposes whatsoever. Neither Party hereto shall raise the use of DocuSign, electronic mail or a facsimile machine to deliver a signature or the fact that any signature was transmitted or communicated through the use of electronic mail or a facsimile machine as a defense to the formation of a contract and each Party forever waives any such defense. All counterparts shall be construed together and shall constitute one instrument, and the signature page from any counterpart may be attached to another counterpart to form a complete copy of this Agreement.

(c) Severability. If any provision of this Agreement or the application thereof is held invalid, such invalidation shall not affect other provisions or applications of this Agreement and to this end the provisions of this Agreement are declared to be severable.

(d) Construction/Joint Drafting. The determination of the terms and conditions of this Agreement has been by mutual agreement of the Parties. Each Party participated jointly in the drafting of this Agreement, and therefore the terms and conditions of this Agreement are not intended to be, and shall not be, construed against any Party by virtue of draftsmanship.

(e) Non-Waiver. Neither the failure nor any delay on the part of either Party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver of any provision of this Agreement will be binding unless made in a writing signed by the Parties hereto.

(f) Assignment. This Agreement shall be binding upon the Company and shall inure to the benefit of the Company including any transferee of the business operation, as a going concern, in which the Executive is employed and shall be binding upon the Executive and the Executive’s heirs and personal representatives. None of the rights or obligations of the Executive hereunder may be assigned or delegated. The Company may assign its rights and obligations under this Agreement in whole or in part to anyone.

(g) Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the internal laws of the State of New York.

(h) Resolution of Disputes. To aid the rapid and economical resolution of disputes that may arise in connection with Executive’s employment with the Company, and in exchange for the mutual promises contained in this Agreement, Executive and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims, including, but not limited to, the Massachusetts Antidiscrimination Act, Mass. Gen. Laws ch.151B and the Massachusetts Wage Act, Mass. Gen. Laws ch. 149), arising from or relating to the enforcement, breach, performance, or interpretation of this Agreement, Executive’s employment with the Company, or the termination of Executive’s employment, shall be resolved, to the fullest extent permitted by law, by final, binding and confidential arbitration conducted by JAMS, Inc. (“JAMS”) or its successor, under JAMS’ then applicable rules and procedures appropriate to the relief being sought (available upon request and also currently available at the following web address: (i) https://www.jamsadr.com/rules-employment-arbitration/ and (ii)

 

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https://www.jamsadr.com/rules-comprehensive-arbitration/) at a location closest to where Executive last worked for the Company or another mutually agreeable location. Executive acknowledges that by agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge. The Federal Arbitration Act, 9 U.S.C. § 1 et seq., will, to the fullest extent permitted by law, govern the interpretation and enforcement of this arbitration agreement and any arbitration proceedings. This provision shall not be mandatory for any claim or cause of action to the extent applicable law prohibits subjecting such claim or cause of action to mandatory arbitration and such applicable law is not preempted by the Federal Arbitration Act or otherwise invalid (collectively, the “Excluded Claims”), such as non-individual claims that cannot be waived under applicable law, claims or causes of action alleging sexual harassment or a nonconsensual sexual act or sexual contact, or unemployment or workers’ compensation claims brought before the applicable state governmental agency. In the event Executive or the Company intend to bring multiple claims, including one of the Excluded Claims listed above, the Excluded Claims may be filed with a court, while any other claims will remain subject to mandatory arbitration. Nothing herein prevents Executive from filing and pursuing proceedings before a federal or state governmental agency, although if Executive chooses to pursue a claim following the exhaustion of any applicable administrative remedies, that claim would be subject to this provision. In addition, with the exception of Excluded Claims arising out of 9 U.S.C. § 401 et seq., all claims, disputes, or causes of action under this section, whether by Executive or the Company, must be brought in an individual capacity, and shall not be brought as a plaintiff (or claimant) or class member in any purported class, representative, or collective proceeding, nor joined or consolidated with the claims of any other person or entity. Executive acknowledges that by agreeing to this arbitration procedure, both Executive and the Company waive all rights to have any dispute be brought, heard, administered, resolved, or arbitrated on a class, representative, or collective action basis. The arbitrator may not consolidate the claims of more than one person or entity, and may not preside over any form of representative or class proceeding. If a court finds, by means of a final decision, not subject to any further appeal or recourse, that the preceding sentences regarding class, representative, or collective claims or proceedings violate applicable law or are otherwise found unenforceable as to a particular claim or request for relief, the Parties agree that any such claim(s) or request(s) for relief be severed from the arbitration and may proceed in a court of law rather than by arbitration. All other claims or requests for relief shall be arbitrated. Executive will have the right to be represented by legal counsel at any arbitration proceeding. Questions of whether a claim is subject to arbitration and procedural questions which grow out of the dispute and bear on the final disposition are matters for the arbitrator to decide, provided however, that if required by applicable law, a court and not the arbitrator may determine the enforceability of this paragraph with respect to Excluded Claims. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based. The arbitrator shall be authorized to award all relief that Executive or the Company would be entitled to seek in a court of law. The Company shall pay all arbitration administrative fees in excess of the administrative fees that Executive would be required to pay if the dispute were decided in a court of law. Each Party is responsible for its own attorneys’ fees, except as may be expressly set forth in the Employee Confidential Information and Inventions Assignment Agreement or as otherwise provided under applicable law. Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction.

 

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(i) Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of delivery, if delivered by hand, (ii) on the date of transmission, if delivered by electronic mail, (iii) on the first business day following the date of deposit, if delivered by guaranteed overnight delivery service, or (iv) on the fourth business day following the date delivered or mailed by the U.S. Postal Service, addressed as follows:

 

If to the Executive:

At the address shown in the books and records of the

Company, currently:

 

***

 

If to the Company:

LB Pharmaceuticals Inc

One Penn Plaza, Suite 1025

New York, NY 10119

Attention: Chief Executive Officer

Email:***

 

with copy, which shall not constitute notice,

to:

 

Divakar Gupta

Cooley LLP

55 Hudson Yards

New York, New York 10001-2163

Notices shall be deemed to be properly addressed, to the Company or to the Executive, if addressed to such person at such person’s address as set forth above, or to such other address or addresses as the addressee previously may have specified by Notice given to the other parties in the manner contemplated by this Section 11(i).

(j) Survival. Upon the termination of this Agreement, the respective rights and obligations of the Parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the Parties under this Agreement.

 

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12. Acknowledgement of Full Understanding. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT EXECUTIVE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT EXECUTIVE HAS BEEN REPRESENTED BY EXECUTIVE’S OWN COUNSEL OR HAS HAD AN OPPORTUNITY TO BE REPRESENTED BY AN ATTORNEY OF EXECUTIVE’S CHOICE BEFORE SIGNING THIS AGREEMENT.

(Remainder of page left blank intentionally; Signatures on the following page)

 

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IN WITNESS WHEREOF, the Parties have duly executed and delivered this Agreement as of the date first above written.

 

EXECUTIVE     LB PHARMACEUTICALS INC
By:  

/s/ Richard A. Silva

    By:  

/s/ Heather Turner

Name:   Richard A. Silva     Name:   Heather Turner
      Title:   Chief Executive Officer

 

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Exhibit A

CONFIDENTIALITY AND PROPRIETARY RIGHTS AGREEMENT

(See attached)

Exhibit 10.19

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”), is made as of the 25th day of August, 2023, by and between LB Pharmaceuticals Inc, a Delaware Corporation, (the “Company”) and Zachary Prensky, an individual residing at *** (the “Executive”) (collectively, the “Parties”).

RECITALS

WHEREAS, the Company wishes to continue to retain the services of the Executive to serve as a Chief Executive Officer (“CEO”) of the Company and on the terms and conditions set forth herein;

WHEREAS, the Company anticipates securing funding through the sale of Series C Preferred Stock pursuant to and subject to the terms of the Series C Preferred Stock Purchase Agreement dated August 29, 2023 (the “Series C Stock Purchase Agreement”);

WHEREAS, this Agreement shall become effective immediately upon the Initial Closing, as such term is defined in the Series C Stock Purchase Agreement (such closing, the “Initial Series C Closing” and the date of the Initial Series C Closing, the “Effective Date”);

WHEREAS, if the Initial Series C Closing does not occur, this Agreement will not take effect and the Parties shall have no obligations under this Agreement; and

WHEREAS, the Executive desires and is willing to continue employment with the Company on the terms and conditions set forth herein;

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties intending to be legally bound, acknowledge and agree as follows:

1. Incorporation of Recitals; Term. The terms set forth in each of the paragraphs under the heading “RECITALS” above are hereby incorporated into this Agreement. The Executive’s employment hereunder shall be for a term commencing on the Effective Date and ending on the one year anniversary of the Effective Date (the “Initial Period”). In the absence of a Non-Renewal Notice (defined herein), upon the expiration of the Initial Period, this Agreement shall automatically renew for successive one (1) year terms (each a “Renewal Period”). If either Party does not want this Agreement to renew beyond the Initial Period or any subsequent Renewal Period (collectively, the “Employment Period”), the non-renewing Party shall give the other Party written notice of non-renewal not less than Ninety (90) days prior to the expiration of the then existing Employment Period (“Non-Renewal Notice”). If either Party gives a Non-Renewal Notice to the other Party, this Agreement shall terminate upon the expiration of the Employment Period (“Non-Renewal”). Notwithstanding the foregoing, this Agreement may be terminated earlier in accordance with Section 4.

 

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2. Position and Duties. During the Employment Period, the Executive will serve as CEO of the Company and report to the board of directors of the Company (the “Board”). The Executive shall have such duties, authority, and responsibilities as shall be consistent with the duties normally performed by a CEO of private companies of similar size in the pharmaceutical industry in which the Company operates. The Executive will diligently and conscientiously perform the duties of CEO and will devote substantially all of the Executive’s business hours to such duties, and during such time will make the best use of the Executive’s energy, knowledge, and training to advancing the Company’s interests. The Executive will accept no other employment or contracting work during the Employment Period, or serve as a member of the board of directors of any for-profit entity or as a member of any advisory board without the express written consent of the Board. Upon termination of the Executive’s employment relationship with the Company for any reason, the Executive shall resign and relinquish any position held as an officer and/or board member of the Company.

3. Compensation and Benefits.

(a) Base Salary. Subject to the terms set forth herein, in consideration for all services rendered by the Executive to the Company, upon the Initial Series C Closing the Company shall pay the Executive an annual base salary of Two Hundred Eighty Thousand Dollars and No Cents ($280,000) (“Annual Base Salary”) in periodic installments in accordance with the Company’s regular payroll practices in effect from time to time for executive employees, but no less frequently than semi-monthly. The Executive shall be classified as exempt from overtime and the Executive understands and acknowledges that the Executive is not entitled to overtime compensation and that Executive’s Base Salary is intended to compensate the Executive for all hours worked. Executive’s Annual Base Salary will increase automatically upon the occurrence of certain events, if they occur while the Executive is still employed by the Company. If the Initial Series C Closing occurs in 2023, then on January 1, 2024, the Company shall increase Executive’s Annual Base Salary to an annual base salary of Three Hundred Eight Thousand Dollars and No Cents ($308,000), and if the Initial Series C Closing occurs in 2023 and this Agreement remains in effect on January 1, 2025, then on January 1, 2025, Executive’s Annual Base Salary (as is then in effect) shall increase by 5%.

(b) Target Bonus.

(i) For the twelve (12) month period following the Effective Date, and then for each year of employment thereafter, the Executive will be eligible to earn a target bonus of up to 40% of Executive’s Annual Base Salary, in all cases subject to the Compensation Committee of the Board of the Company determining that the applicable objectives, which shall be mutually agreed to by the Board and the Executive, have been achieved (the “Target Bonus”). Objectives will include 50% Company performance and 50% Executive’s personal performance to be mutually determined and reviewed by the Compensation Committee of the Board and the Executive on a regular basis. If the Compensation Committee of the Board determines that the Executive achieved less than 50% of the Executive’s applicable objectives, then the Compensation Committee may determine that the Executive will receive no Target Bonus.

 

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(ii) Any such Target Bonus shall not be considered earned until awarded, except where pro-rata payout is provided for in this Agreement. Any Target Bonus awarded will be paid no later than forty-five (45) days after it has been awarded. If the Executive’s employment with the Company is terminated for Cause (as defined in Section 4(c)(ii)) before any Target Bonus is paid, the Executive shall not be eligible to receive the Target Bonus, regardless of whether the Company already awarded the Target Bonus. If the Company awards the Executive a Target Bonus and thereafter terminates the Executive’s employment with the Company for a reason other than for Cause but before any such Target Bonus has been paid, the Executive will still receive the Executive’s Target Bonus payment subject to the terms provided herein, even if the Executive is no longer working at the Company at the time the Target Bonus is to be paid.

(c) Stock Options.

(i) Subject to Board approval, to the extent not already granted, the Company shall grant to the Executive stock options to purchase shares of Common Stock of the Company up to 500,000 under the Company’s 2023 Stock Incentive Plan (the “Plan”), as amended (each an “Option”) at an exercise price per share of $1.50, which is not less than the current fair market value of the underlying Option as of the date of grant.

(ii) The Options shall vest and become exercisable on a cumulative basis with 25% to vest upon the first anniversary of the Effective Date of this Agreement and in thirty-six (36) substantially equal monthly installments over the thirty-six (36) month period beginning on the last day of the month following the first anniversary of the Effective Date of this Agreement and the last day of each month thereafter; provided that the Executive continues to have a Service Relationship (as defined in the Plan adopted as upon the Initial Series C Closing) with the Company through each such date.

(iii) Notwithstanding the foregoing, all of the Options shall automatically vest upon the Executive’s Termination by the Company due to Change in Control (defined herein).

(iv) Notwithstanding the foregoing, an additional nine (9) monthly installments of Options shall automatically vest upon Non-Renewal of this Agreement by the Company.

(v) Notwithstanding the foregoing, (A) if the Executive is terminated during the Initial Period without Cause or the Executive resigns for Good Reason, as those terms are defined herein, then an additional fifteen (15) monthly installments of Options shall automatically vest, and (B) if the Executive is terminated during any renewal Period without Cause or the Executive resigns for Good Reason, as those terms are defined herein, then an additional six (6) monthly installments of Options shall automatically vest.

(vi) Notwithstanding the forgoing, in the case of Termination in the Event of Executive’s Disability or Death, a minimum of 25% of the Options shall automatically vest.

(vii) All unvested Options shall automatically terminate upon the Executive’s termination for Cause or resignation without Good Reason (defined herein).

 

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(viii) All Options shall be subject to other standard terms and conditions, not inconsistent with the foregoing, as are contained in the Company’s standard form of Notice of Grant and Stock Option Agreement.

(d) Employee Benefits. During the Employment Period, the Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, the “Employee Benefit Plans”), on a basis which is no less favorable than is provided to other similarly situated senior executives of the Company, to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plans and applicable law.

(e) Life Insurance. Company shall obtain and/or maintain a ten year level term life insurance policy insuring Executive’s life (the “Life Insurance”). The Life Insurance will provide a death benefit of not less than $1,000,000. In the event of the Executive’s death during the Employment Period, the proceeds of the Life Insurance shall be paid to one or more beneficiaries, as may, from time to time be designated by the Executive on forms acceptable to the carrier of such Life Insurance; provided however, that in the absence of any such designation, the proceeds shall be payable to legal representatives of the Executive’s estate. In the event the Executive shall cease to be employed by the Company for any reason or no reason (other than death), the Company shall assign ownership of the Life Insurance to Executive or as Executive shall direct without reimbursement of prior premiums and without requiring any additional consideration for such assignment.

(f) Paid Time Off. During the Employment Period, the Executive shall be entitled to twenty (20) days paid vacation per calendar year. This vacation is in addition to Company recognized holidays and paid sick time, if any, in accordance with the Company’s practices and policies as in effect from time to time. The Company reserves the right to amend or cancel its practices and policies at any time in its sole discretion, in accordance with applicable law. Any unused vacation may not be carried over by the Executive to any subsequent year. The Company will pay Executive for any accrued but unused vacation upon termination of this Agreement.

(g) For purposes of this Agreement, the benefits set forth in Sections 3(d) through 3(f) above shall be referred to as “Fringe Benefits.”

(h) Expense Reimbursement. The Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the Executive’s duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures.

(i) Withholdings. All payments made under this Section 3, or under any other provision of this Agreement, will be subject to payroll withholdings that the Company reasonably believes are required by law or elected or authorized by the Executive for state and federal income taxes, Social Security, Medicare, and other applicable payroll deductions, in accordance with the Company’s normal payroll practices.

 

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4. Termination of Employment.

(a) Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, the Date of Termination shall be the date of the Executive’s receipt of the Notice of Termination or the day following the expiration of the cure period below if applicable, (ii) if the Executive’s employment is terminated by the Company other than for Cause, Death, or Disability, the Date of Termination shall be the thirtieth (30th) day after the date of the Executive’s receipt of the Notice of Termination, unless otherwise agreed by the Company and the Executive, (iii) if the Executive’s employment is terminated by the Executive for any reason other than Good Reason, the Date of Termination shall be the thirtieth (30th) day after the date of the Company’s receipt of the Notice of Termination, unless otherwise agreed to by the Company and the Executive, (iv) if the Executive’s employment is terminated by the Executive for Good Reason, the Date of Termination shall be the date of the Company’s receipt of the Notice of Termination or the day following the expiration of the cure period below if applicable, (v) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be the date of the Executive’s death or Disability, as the case may be, and (vi) if the Executive’s employment is terminated as a result of a Non-Renewal of the Employment Period, the Date of Termination shall be upon the expiration of the Employment Period. Notwithstanding the foregoing, for any compensation that qualifies as non-qualified deferred compensation under Code Section 409A (taking into account amounts that are exempt from the requirements of Code Section 409A by reason of the “separation pay” or “short-term deferral” exclusions), the Date of Termination shall be the date the Executive experiences a “separation from service” within the meaning of Code Section 409A.

(b) Accrued Rights. Upon a termination of the Executive’s employment for any reason, the Executive (or the Executive’s estate) shall be entitled to receive (i) that portion of the Executive’s Annual Base Salary, then in effect, earned and unpaid as of the Date of Termination; (ii) any Target Bonus owed to the Executive for the Company’s fiscal year preceding the fiscal year in which the Date of Termination occurs that has not been paid as of the Date of Termination; (iii) any expenses owed and properly reimbursable to the Executive pursuant to the Company’s expense reimbursement policies; (iv) conversion rights, if applicable, with respect to any life insurance or disability insurance policy provided to the Executive; and (v) any vested amounts owed to the Executive under the Company’s employee benefit plans or programs and any vested Options in accordance with the terms and conditions of such employee benefit plans or programs and the Plan (collectively, the “Accrued Rights”).

(c) Termination by the Company for Cause or Executive’s Resignation Without Good Reason.

(i) The Company may terminate the Executive’s employment relationship with the Company at any time for Cause (as defined below). Upon termination of the Executive’s employment relationship by the Company for Cause, or by the Executive’s resignation without Good Reason, the Company shall, thereafter, have no obligation to the Executive for any unearned Annual Base Salary, unearned Target Bonus, Fringe Benefits, or any other form of compensation or benefit, except as otherwise required by law. Reimbursement of appropriately documented expenses incurred by the Executive before the termination of employment, to the extent that the Executive would have been entitled to such reimbursement but for the termination of employment, shall be paid by the Company to the Executive.

 

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(ii) For purposes of this Agreement the term “Cause” shall mean any one or more of the following:

(A) The Executive’s material failure to perform the Executive’s duties or any lawful directive of the Board after being given written notice of such deficiencies in the Executive’s performance and failure to cure them within thirty (30) calendar days of such written notice;

(B) The Executive’s indictment for, conviction of, plea of guilty to, or plea of nolo contendere to a felony involving the property or operations of the Company or a crime of moral turpitude;

(C) The Executive’s indictment for, conviction of, plea of guilty to, or plea of nolo contendere to embezzlement, misappropriation or fraud, whether or not related to the Executive’s employment with Company;

(D) The existence of any court order or settlement agreement prohibiting the Executive’s continued employment with the Company;

(E) The Executive’s material breach of any material obligation in this Agreement, or any other written agreement between the Executive and Company, or any material misconduct by the Executive that adversely affects the business of the Company or its reputation; or

(F) The Executive’s material failure to comply with the Company’s reasonable and lawful policies or rules of which the Executive is given written notice, as they may be in effect from time to time during the Executive’s employment, and failure to cure them within thirty (30) calendar days of such written notice.

(d) Termination by Mutual Agreement. This Agreement may be terminated at any time by mutual agreement of the Executive and the Company in writing. Upon termination of this Agreement pursuant to this Section 4(b), the Company shall, thereafter, have no obligation to the Executive for the Executive’s unearned Annual Base Salary, unearned Target Bonus, Fringe Benefits, or any other form of compensation or benefit, except as otherwise required by law or under the express written terms of the mutual agreement.

(e) Termination by the Company Without Cause or Executive’s Resignation for Good Reason.

(i) In the event that during the Employment Period the Company terminates the Executive’s employment Without Cause (as defined in this Section 4) or the employment relationship has been terminated by the Executive’s resignation for Good Reason, and provided that the Executive executes a Separation Agreement and General Release in a form and substance reasonably satisfactory to the Company (the “General Release”) and which is not subsequently revoked by the Executive, (A) the Executive shall receive eighteen (18) months’

 

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severance pay at the Executive’s Annual Base Salary then in effect; (B) the Executive shall receive the pro-rata portion (based on the number of full days the Executive was employed in the applicable fiscal year) of the Target Bonus expected to be awarded to the Executive on the anniversary of the year of the Executive’s Date of Termination, based on actual Company performance of the full fiscal year and payable at the same time annual bonuses are generally paid to executives for such fiscal year; and (C) if the Executive is eligible for and timely and properly elects group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse the Executive for eighteen (18) months’ of the monthly COBRA premium paid by the Executive for the Executive and the Executive’s dependents. Such reimbursement shall be paid to the Executive no later than the end of the month immediately following the month in which the Executive timely remits the COBRA premium payment. Such severance payment shall be made over a period of time pursuant to the Company’s customary payroll procedures (i.e., not in a lump sum). If the Executive fails to return an executed General Release to the Company within the required time period set forth in the General Release, or the Executive subsequently revokes such timely release, the Company shall not have any obligation to pay any amount of severance or other amounts described in this section 4(e)(i). If the Parties terminate this Agreement upon mutual agreement pursuant to Section 4(d) of this Agreement, or if the Executive resigns the Executive’s employment without Good Reason, the Executive will not be eligible to receive, and the Company will have no obligation to pay, any amount of severance or other amounts described in this section 4(e)(i).

(ii) For purposes of this Agreement the term “Good Reason” shall mean any one or more of the following, in each case during the Employment Period without the Executive’s written consent:

(A) a material reduction of the Executive’s position, authority or responsibilities, or the removal of the Executive from such position, authority or responsibilities, unless the Executive is provided with a new position of equal or greater organizational level, authority, responsibilities and compensation;

(B) a material reduction in the Annual Base Salary other than a general reduction in Annual Base Salary that affects all similarly situated executives in substantially the same proportions;

(C) a material breach by the Company of any of this Agreement;

(D) a material change in the geographic location at which the Executive is required to perform services for the Company (except for office relocations that would not increase the Executive’s one way commute by more than twenty-five (25) miles); and

(E) the Company’s failure to obtain an agreement from any successor to the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no succession had taken place, except where such assumption occurs by operation of law;

 

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provided, that no event described in clause (A), (B), (C), (D) or (E) shall constitute Good Reason unless (A) the Executive has given the Company written notice of the termination, setting forth the conduct of the Company that is alleged to constitute Good Reason, within thirty (30) days following the occurrence of such event, and (B) the Executive has provided the Company at least thirty (30) days following the date on which such notice is provided to cure such conduct and the Company has failed to do so.

(f) Termination in the Event of Non-Renewal. Upon the Non-Renewal of this Agreement, this Agreement shall terminate at the end of the Employment Period, and such termination of the Agreement shall not constitute a Termination by the Company without Cause or a resignation by the Executive for Good Reason pursuant to Section 4(e) hereof. If this Agreement is terminated in the event of the Company’s Non-Renewal, and provided that the Executive executes the General Release and does not subsequently revoke the General Release, then the Executive shall be entitled to severance pay in an amount equal to nine (9) months’ salary of Executive’s Annual Base Salary then in effect. In the event of the Executive’s Non-Renewal, the Executive shall not be entitled to payment under this section 4(f).

(g) Termination by the Company in the Event of a Change in Control. Upon a Change in Control of the Company (as defined below), the Company may decide to terminate this Agreement, and such termination of the Agreement shall not constitute a Termination by the Company without Cause pursuant to Section 4(e) hereof. If this Agreement is terminated by the Company in the event of a Change in Control, and provided that the Executive executes the General Release and does not subsequently revoke the General Release, then the Executive shall be entitled to severance pay in an amount equal to (i) one year of Executive’s Annual Base Salary then in effect to be paid in a lump sum within thirty (30) days’ after the Change in Control; (ii) 1.5 times the Target Bonus expected to be awarded to the Executive as of the anniversary of the Effective Date for the year of the Executive’s Date of Termination, based on the Company’s performance and payable upon the closing of the Change in Control transaction; and (iii) if the Executive is eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive for twelve months’ of the monthly COBRA premium paid by the Executive for the Executive and the Executive’s dependents. Such reimbursement shall be paid to the Executive no later than the end of the month immediately following the month in which the Executive timely remits the COBRA premium payment.

(i) For purposes of this Agreement, “Change in Control,” means any of the following transactions:

(A) a sale of all or substantially all of the assets of the Company in one or more transactions,

(B) a consolidation or merger of the Company with or into any other corporation or other entity, or any other corporate re-organization, as a result of which the shareholders of the Company immediately prior to such consolidation, merger or reorganization own capital stock of the entity surviving such merger, consolidation or reorganization representing less than fifty percent (50%) of the combined voting power of the outstanding securities of the surviving entity immediately after such consolidation, merger or reorganization, or

(C) the sale by the shareholders of the Company existing as of the time immediately after the final Closing (as that term is defined in the Series C Stock Purchase Agreement), in one or more transactions, which results in such shareholders owning less than fifty percent (50%) of the outstanding equity securities of the Company.

 

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(h) Termination in the Event of Executive’s Disability or Death. The Employment Period and the Executive’s employment hereunder (i) shall terminate upon the Executive’s death and (ii) may be terminated by the Company if, in the good faith judgment of the Board, despite reasonable accommodation, the Executive is unable due to a physical or mental incapacity to perform the essential functions of Executive’s most recent position for: (x) a period of one hundred eighty (180) consecutive days or (y) an aggregate of six (6) months in any twelve (12) consecutive month period (such incapacity is hereinafter referred to as “Disability”). Upon termination of the Executive’s employment hereunder by reason of the Executive’s Disability or death, the Executive or the Executive’s estate (as the case may be) shall be entitled to receive:

(i) the Accrued Rights; and

(ii) subject to the Executive’s or, in the event of the Executive’s death, the representative of the Executor’s estate, execution and non-revocation of the General Release:

(A) a pro-rata portion (based on the number of full days the Executive was employed in the applicable fiscal year) of the Target Bonus expected to be awarded to the Executive on the anniversary of the Effective Date for the year of the Executive’s Date of Termination, based on actual Company performance of the full fiscal year and payable at the same time annual bonuses are generally paid to executives for such fiscal year; and

(B) if the Executive is (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the monthly COBRA premium paid by the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the Executive and the Executive’s spouse/dependents. Such reimbursement shall be paid to the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) no later than the end of the month immediately following the month in which the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) timely remits the COBRA premium payment. The Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) shall be eligible to receive such reimbursement until the earliest of: (i) the last day of the month that is twenty-six (26) weeks after the termination of the Executive’s employment by reason of the Executive’s Disability or death; (ii) in the event of Executive’s Disability, the date Executive becomes eligible to receive healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility) or (iii) the date the Executive is (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) no longer eligible to receive COBRA continuation coverage. Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act) or incurring an excise tax, the Company shall in lieu thereof provide to Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) a taxable monthly payment in an amount equal to the monthly

 

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COBRA premium that Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) pays to continue Executive’s and Executive’s covered dependents’ (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) group health coverage, which payments shall commence in the month following the month in which the Date of Termination occurs and shall end on the earliest of (x) last day of the month that is twenty-six (26) weeks after the termination of the Executive’s employment by reason of the Executive’s Disability or death, (y) the date the Executive is (or, in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) no longer eligible to receive COBRA continuation coverage and (z) in the event of Executive’s Disability, the date the Executive becomes eligible for substantially similar group health plan coverage from the Executive’s subsequent employer (and the Executive agrees to promptly notify the Company of such eligibility).

(i) Following the termination of the Executive’s employment by reason of the Executive’s Disability or death, except as set forth in this Section 4, the Executive (or Executive’s estate) shall have no further rights to any compensation or any other benefits under this Agreement.

(j) Effect of Termination on Post-Termination Obligations. Upon termination of this Agreement for any reason, the Executive shall continue to be bound by the post-employment obligations and covenants set forth in this Agreement following Executive’s termination.

(k) No Mitigation. The Executive will not be required to mitigate any of the Company’s payment obligations set forth in this Section 4 by making any efforts to secure other employment, and Executive’s commencement of employment with another employer will not reduce the obligations of the Company under this Section 4, unless specifically provided for herein.

(l) Resignation of Offices. Promptly following any Termination of the Executive’s employment with the Company for any reason (other than by reason of the Executive’s death), the Executive shall deliver to the Company reasonably satisfactory written evidence of the Executive’s resignation from all positions that the Executive may then hold as an employee, officer, or director of the Company or any subsidiary of the Company. The Executive shall forfeit payment of any amounts that otherwise become due and payable pursuant to this Section 4 prior to the date the Executive complies with the provisions of this Section 4(1).

5. Confidential Information and Intellectual Property Rights.

(a) Confidential Information. “Confidential Information” means information and material concerning the Company and its employees, that is disclosed to the Executive, by the Executive, or otherwise learned by the Executive as a result of Executive’s employment with the Company that is not generally known to the public or the Company’s competitors, including, but not limited to, such information concerning the Company’s business, financial condition, and financial data; operations, systems of operations and written procedures integral to the Company’s day-to-day operations; assets and liabilities; research and development; marketing and public relations strategies; designs; drawings; formulas; programs; codes, identification of suppliers and resources of goods and services to the Company; information regarding the needs, preferences, buying habits, electronic mail addresses and names and phone numbers of the Company’s members, customers and business contacts; training manuals and videos; sales; products; services;

 

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accounts; member or customer lists; purchasers of the Company’s services; technology, intellectual property (patents, design patents, trademarks, trade dress, copyrights and trade secrets); strategies, pricing strategies, business structures, ventures or other business affairs or plans, or information relating to existing or contemplated businesses, products and/or services of the Company; and any other information which the Company does not ordinarily disclose to third parties not in a relationship of confidence with the Company.

However, notwithstanding the foregoing, Confidential Information does not include information: (i) which at the time of disclosure is generally known in the Company’s trade; (ii) which the recipient thereof (“Recipient”) can show by written records was already in its possession at the time of disclosure and not subject to an existing agreement of confidence between the Parties; (iii) which is received from a third party without restriction who is not under obligation of confidentiality with respect to such information; (iv) which is independently developed by Recipient as evidenced by its written records and without violating any other obligation between the Parties.

(b) Intellectual Property Rights. “Intellectual Property Rights” means all of the world-wide legal rights of, in and to the following: (i) patents, patent applications, and invention disclosures; (ii) copyrights and works of authorship, including without limitation textual, masks, audio/visual works, “look and feel,” and derivative works; (iii) trademarks, service marks, trade names, and trade dress, together with all goodwill associated therewith; (iv) trade secrets, know-how, and proprietary and confidential information; (v) moral rights; (vi) design rights; (vii) domain names; (viii) any rights analogous to those set forth in the preceding clauses; and (ix) any applications, registrations, divisions, combinations, continuations, renewals, reissues, extensions, and translations of the foregoing (as applicable); whether existing on the date of this Agreement or thereafter filed, issued, or acquired.

(c) The Executive recognizes that the Company’s Confidential Information and Intellectual Property Rights are extremely valuable to it and that disclosure or use of the Company’s Confidential Information and/or Intellectual Property Rights outside the Company could irreparably damage the Company. The Executive therefore agrees that Executive will not use any Confidential Information and/or Intellectual Property Rights for any purpose other than to benefit the Company. In furtherance of that commitment, the Executive agrees that Executive will preserve and protect the confidentiality of the Confidential Information and Intellectual Property Rights and will not use any Confidential Information and/or Intellectual Property Rights other than for a Company purpose. In addition, the Executive will not disclose Confidential Information and/or Intellectual Property Rights to any person outside the Company unless the Executive first obtains the express written consent of a member of the Board of the Company (other than the Executive) and has secured the signature of such person on a Company-approved confidentiality agreement.

(d) The Executive understands and agrees that Executive confidentiality obligations under this Section 5 apply during Executive employment and continue after termination of employment with the Company, regardless of the reason for the termination.

 

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(e) The Executive represents that Executive is aware of no confidentiality, non-compete, or other agreement that might in any way restrict the Executive’s employment/function with the Company that Executive has not provided to the Company, in writing, and confirms that the Executive’s former employer has released Executive from any obligation Executive had with respect to the use of confidential information learned in the Executive’s previous employment and which Executive was bound not to disclose.

(f) The Executive understands and agrees that any and all information described as Confidential Information and/or Intellectual Property Rights including, without limitation, records, documents, photographs, correspondence, memoranda, notes, records, computers, computer disks, thumb drives, cell phones, smartphones, tablets, files, keys and other documents or physical materials relating to the Company, whether received, retained, compiled or prepared by the Executive or otherwise coming into the Executive’s possession through or as a result of the Executive’s employment shall remain the Company’s sole and exclusive property, shall not be used by the Executive in any way whatsoever, and shall be returned to the Company immediately upon request. Without limiting the foregoing, while on working time the Executive shall not photograph, tape, film, copy or otherwise record any likenesses or activities of the Company as they relate to members, customers, vendors, suppliers, Company trade secrets, or Company intellectual property, or post or in any way disseminate any likenesses or activities of the Company as they relate to members, customers, vendors, suppliers, Company trade secrets, or Company intellectual property on any website or any social media outlet without prior written approval from the Company.

(g) Nothing in this Agreement shall prohibit the Executive from disclosing any trade secret pursuant to the Defend Trade Secrets Act of 2016: (i) (A) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Further, the Executive will not be deemed to be in violation of this Agreement if Executive files a lawsuit for retaliation for reporting a suspected violation of law and discloses the trade secret to Executive’s attorney and uses the trade secret information in the court proceeding, provided the Executive (1) files any document containing the trade secret under seal; and (2) does not publicly disclose the trade secret, except pursuant to court order.

6. Works Made for Hire and Inventions.

(a) Definitions.

(i) The terms “work,” “trademark,” and “invention” include anything created for Company by the Executive, whether alone or with others, and whether created while an independent contractor, employee, or agent of Company.

(ii) The term “work” means any and all writings, documents, designs, models, drawings, photographs, physical property, reports, etc., that are protectable under Title 17 of the U.S. Code.

(iii) The term “trademark” means any name, word, phrase, logo, design, or other graphic depiction generated during the performance of this Agreement which is or can be used to describe either a product or service of Company.

 

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(iv) The term “invention” means any designs, processes, inventions, or discoveries that may be patentable or otherwise protectable under Title 35 of the U.S. Code.

(b) Title to Works, Trademarks, and Inventions.

(i) While employed by the Company, the Executive may create certain works for Company that may be copyrighted under the laws of the United States. To the extent that any such works are created, the Executive will be considered to have created a work made for hire as defined in 17 U.S.C. § 101, and the Company shall have the sole right to the copyright. In the event that any work created by the Executive does not qualify as a work for hire, the Executive agrees to assign Executive’s right in the work to Company, as provided below.

(ii) It is understood and agreed that the Intellectual Property Rights and entire right, title, and interest throughout the world to all works, trademarks, and/or inventions that are conceived of, prepared, procured, generated, or produced, whether or not reduced by practice, by the Executive, either solely or jointly with others, during the course of, in connection with, or as related to the performance of this Agreement, shall be and hereby are vested and assigned by the Executive to Company.

(iii) It is agreed that the Executive shall promptly disclose to the Company in writing all Works, including, but not limited to, inventions, discoveries, designs, developments, methods, modifications, improvements, processes, algorithms, databases, computer programs, formulae, recipes, techniques, trade secrets, ideas, concepts, methodologies, graphics or images, and audio or visual works and other works of authorship (collectively “Developments”), whether or not patentable or copyrightable, that are created, made, conceived or reduced to practice by the Executive (alone or jointly with others) or under the Executive’s direction during the Employment Period. The Executive acknowledge that all work performed by Executive is on a “work for hire” basis, and the Executive hereby assigns and transfers and, to the extent any such assignment cannot be made at present, will assign and transfer, to the Company and its successors and assigns all of the Executive’s rights, title and interest in all Developments that (a) relate to the business of the Company (including any Developments that relate or could relate to the more generalized industry in which the Company operates or is proposing to operate, whether or not it is directly applicable to the business of the Company) or any of the products or services being researched, developed, manufactured, or sold by the Company or which may be used with such products or services; or (b) result from tasks assigned to the Executive by the Company; or (c) result from the use of premises or personal property (whether tangible or intangible) owned, leased, or contracted for by the Company (“Company-Related Developments”), and all related Intellectual Property Rights. The Executive agrees to advise the Company in writing of any prior Developments that Executive has, alone or jointly with others, conceived, developed, or reduced to practice prior to the commencement of the Executive’s employment with the Company that Executive considers to be Executive property or the property of third parties and that the Executive wishes to have excluded from the scope of this Agreement (“Prior Inventions”).

(iv) If, in the course of the Executive’s employment with the Company, the Executive incorporates a Prior Invention into a Company product, process, or machine or other work done for the Company, the Executive hereby grants to the Company a nonexclusive, royalty-free, paid-up, irrevocable, worldwide license (with the full right to sublicense) to make, have made, modify, use, sell, offer for sale and import such Prior Invention. Notwithstanding the foregoing, the Executive will not incorporate, or permit to be incorporated, Prior Inventions in any Company-Related Development without the Company’s prior written consent.

 

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(v) The Executive will cooperate fully with the Company, both during and after the Executive’s employment with the Company, with respect to the procurement, maintenance, and enforcement of Intellectual Property Rights in Company-Related Developments. The Executive agrees to sign, both during and after the term of this Agreement, all papers, including without limitation copyright applications, patent applications, declarations, oaths, assignments of priority rights, and powers of attorney, which the Company may deem necessary or desirable in order to protect its rights and interests in any Company-Related Development. If the Company is unable, after reasonable effort, to secure the Executive’s signature on any such papers, the Executive hereby irrevocably designates and appoints each officer of the Company as Executive agent and attorney-in-fact to execute any such papers on Executive behalf, and to take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in any Company-Related Development. The Executive hereby waives and irrevocably quitclaims to the Company or its designee any and all claims, of any nature whatsoever, which Executive now or hereafter has for infringement of any and all proprietary rights assigned to the Company or such designee.

7. Restrictive Covenants.

(a) Non-Competition and Non-Solicitation. Executive agrees that, in consideration of Executive’s employment with the Company pursuant to this Agreement, and other good and valuable consideration, the receipt of which is hereby acknowledged, during Executive’s employment with the Company and nine (9) months after termination thereof, Executive will not either on Executive’s own behalf or on behalf of any third party, except on behalf of the Company, directly or indirectly (other than through Executive’s ownership of equity interest in the Company), as an individual proprietor, principal, manager, agent, consultant, guarantor, advisor, member, owner, participant, partner, stockholder, officer, Executive, director, joint venturer, lender, or in any other capacity whatsoever (other than as a passive holder of not more than five percent (5%) of the total outstanding stock of a publicly-held company):

(i) carry on, engage in, be employed by, consult with, or have any financial interest in any business that relates to the development of a product with similar characteristics to LB102; or that is in process of developing a molecule that would be similar in target indication and properties as the Company’s lead molecule (LB102); or pharmaceuticals to treat schizophrenia (collectively “Company Business”) that compete with the Company Business in the United States, or which Executive knows (or should reasonably know) will come into existence within two years after the Employment Period;

(ii) recruit, offer employment to, solicit or induce, or attempt to induce, any Executive or employees of the Company or any affiliate to terminate their employment with, or otherwise cease their relationship with, the Company or any affiliate;

 

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(iii) solicit, divert, take away, or attempt to divert or take away, the business or patronage (with respect to products or services of the kind or type developed, produced, marketed, furnished or sold by the Company) of any of the Company’s clients, customers, vendors, business or strategic partners, or accounts, or prospective clients, customers, vendors, business or strategic partners, or accounts; or

(iv) persuade or induce any client, customer, vendor, strategic or business partner, or account of the Company to restrict or cease to do business with, invest in, participate with, or otherwise work with the Company, or to reduce the amount of business, investment, participation or work that any such client, customer, vendor, or strategic or business partner has customarily done or actively contemplates doing with the Company.

(b) Covenants are Reasonable. Executive and the Company agree that this covenant not to compete is a reasonable covenant under the circumstances, and further agree that if in the opinion of any court of competent jurisdiction such restraint is not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of this covenant as to the court shall appear not reasonable and to enforce the remainder of the covenant as so amended. Executive agrees that any breach of the covenants contained in this Section 7 would irreparably injure the Company. Accordingly, Executive agrees that the Company may, in addition to pursuing any other remedies it may have in law or in equity, cease making any payments or providing any benefits otherwise required by this Agreement and obtain an injunction against Executive from any court having jurisdiction over the matter restraining any further violation of this Agreement by Executive.

(c) The provisions of Section 7 shall survive termination of this Agreement.

8. Mutual Non-Disparagement. The Executive shall not, during the Employment Period or during the eighteen (18) months after the Date of Termination, make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal communications that belittle, disparage or otherwise express disapproval of the Company or any of its Affiliates or their respective businesses, or any of their past or present officers, directors, employees, advisors, agents, policies, procedures, practices, decision-making, conduct, professionalism or compliance with standards, except as and to the extent required to comply with applicable federal or state law. The Company shall not, and shall use commercially reasonably efforts to make a one-time instruction to its executive officers and directors to not, during the Employment Period or during the eighteen (18) months after the Date of Termination, make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal communications that belittle, disparage or otherwise express disapproval of the Executive, except as and to the extent required to comply with applicable federal or state law.

9. Breach. The Executive acknowledges and confirms that the restrictions contained in this Agreement including those set forth in Section 5, 6, 7, and 8, in view of the nature of the Company’s business, are reasonable and necessary in order to protect the legitimate business interests of the Company, and that any breach or threatened breach of the provisions of this Agreement shall cause irreparable injury to the Company, that money damages will not provide an adequate remedy, and that their enforcement will not impose a hardship on the Executive or significantly impair the Executive’s ability to earn a livelihood. Therefore, in addition to any other relief available to it, the Company shall be entitled to seek preliminary, temporary, and permanent injunctive relief without the necessity of proving irreparable harm or posting bond or other

 

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security. If any provisions of this Agreement are ever determined by a court of competent jurisdiction to exceed limitations permitted by law, then such provisions shall be reformed automatically to set forth the maximum limitations permissible by law. If the Executive violates any of the restrictions contained in this Agreement, the relevant restricted period shall be extended by a period equal to the length of time from the commencement of any such violation until such time as such violation shall be deemed, by the Company, to be cured. Nothing contained herein shall be considered as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including any recovery of damages from the Executive.

10. Return of Company Property. On the date that the Executive’s employment with the Company ends, the Executive will deliver to the Company all documents, electronic and other data (whether stored on devices in your possession or with any third-party vendors or on the “cloud”), notes, writings, customer and prospect lists, keys, credit cards, computer programs and all other documents or tangible materials whatsoever, including all copies or duplicates, concerning any part of the Company’s activities or concerning any activities as a Company employee. The Executive acknowledges and agrees that all such documents and tangible materials, and copies or duplicates thereof, including the Executive’s own notes, are the Company’s property which is only entrusted to the Executive on a temporary basis. After returning these documents, data, and other property, the Executive will immediately permanently delete from any electronic media in the Executive’s possession, custody, or control (such as computers, mobile phones, handheld devices, back-up devices and zip drives) or to which the Executive has access (such as the cloud, remote e-mail exchange servers, back-up servers, off-site storage), all Company documents or electronically stored images, and other data or data compilations stored in any medium from which such information can be obtained. The Executive also agrees to provide the Company with list of any documents that the Executive created or is otherwise aware that are password-protected and the password(s) necessary to access such password-protected documents.

11. Section 409A. It is intended that any payment or benefit that is provided pursuant to or in connection with this Agreement that is considered to be deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) shall be paid and provided in a manner, and at such time and form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for noncompliance. It is further intended that the payments hereunder shall, to the maximum extent permissible under Section 409A of the Code, be exempt from Section 409A of the Code under either (i) the exception for involuntary separation pay to the extent that all payments are payable within the limitations described in Treasury Regulation Section 1.409A-1(b)(9), or (ii) the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4) to the extent that all payments are payable no later than two and a half months after the end of the first taxable year in which the right to the payment is no longer subject to a substantial risk of forfeiture.

(a) If the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code at such time, any payments to be made or benefits to be delivered in connection with the Executive’s “Separation from Service” (as defined below) that constitute deferred compensation subject to Section 409A of the Code shall not be made until the earlier of (i) the Executive’s death or (ii) six months plus one day after the Executive’s Separation from Service (“409A Deferral Period”) as required by Section 409A of the Code. Payments of any such deferred compensation otherwise due to be made in installments or periodically during the 409A Deferral Period shall be accumulated and paid in a lump sum as soon as the 409A Deferral Period ends, and the balance of the payment shall be made as otherwise scheduled.

 

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(b) For purposes of this Agreement, all rights to payments and benefits hereunder shall be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Section 409A of the Code.

(c) For purposes of this Agreement, with respect to the timing of any amounts that constitute deferred compensation subject to Section 409A of the Code that depends on termination of employment or separation from service, termination of employment or separation from service shall mean a “separation from service” within the meaning of Section 409A of the Code where it is reasonably anticipated that no further services would be performed after such date or that the level of bona fide services the Executive would perform after that date (whether as an employee or independent contractor) would permanently decrease to a level less than or equal to twenty percent (20%) of the average level of bona fide services the Executive performed over the immediately preceding thirty-six (36) month period.

12. Indemnification. Except as limited by applicable law, in the event the Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (a “Proceeding”), other than any Proceeding initiated by the Executive or the Company related to any contest or dispute between the Executive, on the one hand, and the Company or any of its affiliates, on the other, with respect to this Agreement or the Executive’s employment hereunder, by reason of the fact that the Executive is or was a director or officer of the Company, or any affiliate of the Company, or is or was serving at the direct request of the Company as a director, officer, member, employee, or agent of another corporation or a partnership, joint venture, trust, or other enterprise, the Executive shall be indemnified and held harmless by the Company to the fullest extent permitted under applicable law and the Company’s bylaws from and against any liabilities, costs, claims, and expenses, including all costs and expenses reasonably incurred in defense of any Proceeding (including attorneys’ fees) (collectively, “Indemnifiable Losses”). Costs and expenses reasonably incurred by the Executive in defense of such Proceeding (including attorneys’ fees and costs) shall be paid by the Company in advance of the final disposition of such Proceeding upon receipt by the Company of: (i) a written request for payment; (ii) appropriate documentation evidencing the incurrence, amount, and nature of the costs and expenses for which payment is being sought; and (iii) an undertaking adequate under applicable law and reasonably acceptable to the Company made by or on behalf of the Executive to repay the amounts so paid if it shall ultimately be determined that the Executive is not entitled to be indemnified by the Company under this Agreement. Notwithstanding the foregoing, the Executive will not be held harmless nor indemnified under this Section 12 for any Indemnifiable Losses arising out of the fraud, intentional misconduct, or knowing and reckless breach of the Executive’s obligations under the Agreement or pursuant to any other terms of Executive’s employment at the Company or any of its affiliates, or if the Executive has acted in bad faith, except to the extent such Indemnifiable Losses are satisfied by the Company’s insurance policy and only to the extent of such insurance coverage. During the Employment Period, the Company or any successor to the Company shall purchase and maintain, at its own expense, directors’ and officers’ liability insurance in respect of acts and omissions of Executive in his capacity as such or as a director or officer of the Company and occurring during Executive’s employment, which will provide coverage for Executive in an amount determined by the Company.

 

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13. Representations of the Executive. The Executive represents and warrants that: (i) the Executive has no legal obligations to any other party that would be breached by signing this Agreement or otherwise fulfilling Executive’s obligations hereunder, including but not limited to any non-competition, non-solicitation, non-inducement, confidentiality, assignment of inventions, or other similar agreement; (ii) the Executive has not disclosed any third party’s confidential or proprietary information to the Company or its representatives or agents; (iii) if the Executive learns of any confidential or proprietary information that belongs to any third party, the Executive will not disclose such information to the Company or its representatives or agents, except as allowed by law or any agreement you have signed with such party; and (iv) the Executive is not in breach of any confidentiality or non-disclosure agreement that the Executive has signed.

14. Miscellaneous.

(a) Entire Agreement. This Agreement along with the Employee Handbook contains the entire agreement and understanding of the Executive and the Company concerning the subject matter hereof and supersedes and replaces all prior negotiations and proposed agreements, whether oral or written. The Executive acknowledges that, by signing this Agreement, the Executive has not relied upon any representations, promises or agreements made by the Company or its employees, officers, directors, or representatives (including any Company attorneys) that are not contained in this Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the Parties hereto.

(b) Headings/Counterparts. The headings of the paragraphs herein are included for reference only and are not intended to affect the interpretation of the Agreement. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same Agreement. Each party agrees that faxed or electronically transmitted copies of the signature pages of this Agreement and/or any of the other instruments, agreements and documents relating to any of the transactions contemplated hereby, whether sent to the other party or to such other party’s counsel, shall be deemed definitively executed and delivered, and with the same force and effect as if manually signed and delivered, for all purposes whatsoever. Neither party hereto shall raise the use of DocuSign, electronic mail or a facsimile machine to deliver a signature or the fact that any signature was transmitted or communicated through the use of electronic mail or a facsimile machine as a defense to the formation of a contract and each party forever waives any such defense. All counterparts shall be construed together and shall constitute one instrument, and the signature page from any counterpart may be attached to another counterpart to form a complete copy of this Agreement.

(c) Severability. If any provision of this Agreement or the application thereof is held invalid, such invalidation shall not affect other provisions or applications of this Agreement and to this end the provisions of this Agreement are declared to be severable.

(d) Construction/Joint Drafting. The determination of the terms and conditions of this Agreement has been by mutual agreement of the Parties. Each party participated jointly in the drafting of this Agreement, and therefore the terms and conditions of this Agreement are not intended to be, and shall not be, construed against any party by virtue of draftsmanship.

 

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(e) Non-Waiver. Neither the failure nor any delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver of any provision of this Agreement will be binding unless made in a writing signed by the Parties hereto.

(f) Assignment. This Agreement shall be binding upon the Company and shall inure to the benefit of the Company including any transferee of the business operation, as a going concern, in which the Executive is employed and shall be binding upon the Executive and the Executive’s heirs and personal representatives. None of the rights or obligations of the Executive hereunder may be assigned or delegated. The Company may assign its rights and obligations under this Agreement in whole or in part to anyone.

(g) Choice of Law/Venue. This Agreement will be governed by, and construed pursuant to, the laws of the State of New York without regard to its conflict of laws principles. Any controversy or claim arising out of or relating to Executive’s employment or this Agreement shall be settled by arbitration administered by the American Arbitration Association under its Employment Arbitration Rules and Mediation Procedures and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Any claims will be heard by a panel of three arbitrators and the arbitration shall take place in the County of New York, State of New York and the Parties consent to New York, New York as the seat of arbitration. In the event that injunctive relief is sought in connection with a dispute related to Sections 5, 6, 7, and/or 8, the Parties agree that venue only in the County of New York, State of New York would be proper and hereby waive any challenge thereto based on lack of personal jurisdiction or inconvenient forum.

(h) Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of delivery, if delivered by hand, (ii) on the date of transmission, if delivered by confirmed facsimile, (iii) on the first business day following the date of deposit, if delivered by guaranteed overnight delivery service, or (iv) on the fourth business day following the date delivered or mailed by the U.S. Postal Service, addressed as follows:

If to the Executive:

At the address shown in the books and records of the Company, currently:

Zachary Prensky

***

Email: ***

 

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with a copy, which shall not constitute notice, to:

Fox Rothschild LLP

101 Park Avenue, Suite 1700

New York, NY 10178

Attention: Scott Lavin, Esq.

Bryn Goodman, Esq.

Email: slavin@foxrothschild.com; bgoodman@foxrothschild.com

If to the Company:

LB Pharmaceuticals Inc

575 Madison Avenue, 10th Floor

New York, NY 10022,

Attention: Board of Directors

Email: ***

with copy, which shall not constitute notice, to:

Williams Mullen

200 South 10th Street

Richmond, Virginia 23219

Attention: Andrew W. White, Esq.

Email: awhite@williamsmullen.com

Notices shall be deemed to be properly addressed, to the Company or to the Executive, if addressed to such person at such person’s address as set forth above, or to such other address or addresses as the addressee previously may have specified by Notice given to the other parties in the manner contemplated by this Section 14(h).

(i) Survival. Upon the termination of this Agreement, the respective rights and obligations of the Parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the Parties under this Agreement.

15. Acknowledgement of Full Understanding. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT EXECUTIVE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT EXECUTIVE HAS BEEN REPRESENTED BY EXECUTIVE’S OWN COUNSEL OR HAS HAD AN OPPORTUNITY TO BE REPRESENTED BY AN ATTORNEY OF EXECUTIVE’S CHOICE BEFORE SIGNING THIS AGREEMENT.

 

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IN WITNESS WHEREOF, the Parties have duly executed and delivered this Executive Employment Agreement as of the date first above written.

 

EXECUTIVE   LB PHARMACEUTICALS INC
/s/ Zachary Prensky   By:   /s/ Marc Panoff
Zachary Prensky   Name: Marc Panoff
Date: 8/25/2023   Date: 8/25/2023

 

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Exhibit 10.20

AMENDMENT NO.1 TO

EXECUTIVE EMPLOYMENT AGREEMENT

This AMENDMENT NO. 1 TO EXECUTIVE EMPLOYMENT AGREEMENT (the “Amendment”) is made and entered into as of June 28, 2024 (the “Amendment Effective Date”), by and between LB Pharmaceuticals Inc, a Delaware corporation (the “Company”), and Zachary Prensky, an individual residing at *** (the “Executive,” and together with the Company, the “Parties”). All capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Employment Agreement (defined below).

RECITALS

WHEREAS, the Company and the Executive entered into that certain Executive Employment Agreement, made as of August 25, 2023 (the “Employment Agreement”); and

WHEREAS, the Company and the Executive desire to amend the Employment Agreement as provided in this Amendment.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties intending to be legally bound, acknowledge and agree as follows:

1. Section 3(a) of the Employment Agreement is hereby deleted and replaced in its entirety with the following:

Base Salary. Subject to the terms set forth herein, in consideration for all services rendered by the Executive to the Company, the Company shall pay the Executive an annual base salary of Five Hundred Thousand Dollars and No Cents ($500,000.00) (“Annual Base Salary”) in periodic installments in accordance with the Company’s regular payroll practices in effect from time to time for executive employees, but no less frequently than semi-monthly. The Executive shall be classified as exempt from overtime and the Executive understands and acknowledges that the Executive is not entitled to overtime compensation and that the Annual Base Salary is intended to compensate the Executive for all hours worked.

2. Subject to Board approval, the Company shall grant to the Executive an option to purchase 1,500,000 shares of Common Stock of the Company under the Plan, as amended (the “Second Option”) at an exercise price per share to be determined by the Board from time to time. The Second Option shall vest and become exercisable as follows: 12/48ths of the shares initially subject to the Second Option shall vest upon the first anniversary of the Amendment Effective Date, and the balance of the shares subject to the Second Option shall vest at a rate of 1/48th per month over the following 36 months, in each case subject to the Executive’s Continuous Service Status (as defined in the Plan). The Second Option shall be subject to other standard terms and conditions, not inconsistent with the foregoing, as are contained in the Company’s standard form of Notice of Grant and Stock Option Agreement.

 

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3. The Executive hereby consents to the terms set forth in this Amendment and acknowledges and agrees that the terms set forth herein do not constitute “Good Reason,” “Cause” and/or any term with any similar meaning or import under the Employment Agreement. The Executive represents that the Executive’s decision to enter into this Amendment is completely voluntary. Except as otherwise expressly amended by this Amendment, the Employment Agreement shall remain in full force and effect. The Employment Agreement and this Amendment, together with those documents or other agreements between the parties expressly referenced or otherwise incorporated therein, set forth the entire understanding between the parties with regard to the subject matter hereof and supersede any prior oral discussions or written communications and agreements. This Amendment may not be modified or amended except by an instrument in writing signed by the Parties.

[Signature page follows]

 

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The Parties have executed this Amendment No. 1 to Employment Agreement on the day and year first written above.

 

LB PHARMACEUTICALS INC
By:  

/s/ Marc Panoff

Name:   Marc Panoff
Title:   Senior Vice President of Finance
EXECUTIVE

/s/ Zachary Prensky

Zachary Prensky

 

[Signature page to Amendment No. 1 to Executive Employment Agreement]

Exhibit 10.21

November 26, 2024

Zachary Prensky

Via Email/DocuSign

 

Re:

Transition, Separation, and Consulting Agreement

Dear Zachary:

This letter sets forth the substance of the transition, separation, and consulting agreement (the “Agreement”) that LB Pharmaceuticals Inc (the “Company”) is offering to you to resolve any and all issues relating to your employment and the conclusion of your employment with the Company amicably and on mutually satisfactory terms.

1. SEPARATION. The Company agrees to continue to employ you on the terms and conditions set forth herein through December 31, 2024, which will become your employment termination date (the “Separation Date”), unless your employment terminates sooner pursuant to Section 3(c) below. If termination occurs earlier than December 31, 2024, the actual date of termination shall become the “Separation Date” for purposes of this Agreement. Except as expressly set forth herein, you are hereby deemed to have resigned, effective as of the Separation Date, from all positions, titles, duties, authorities, and responsibilities at or with the Company and its affiliates, and you agree to execute all additional documents and take such further steps as the Company may require to effectuate such resignation consistent with the terms of this Agreement.

2. BOARD SEAT. Subject to the vote of the holders of Legacy Stock (as defined in that certain Voting Agreement, dated August 29, 2023 (the “Voting Agreement”)), you shall serve as the Legacy Preferred/Common Director (as defined in the Voting Agreement). Effective as of the Effective Date, you will resign your seat as the CEO Director (as defined in the Voting Agreement).

3. TRANSITION PERIOD.

(a) Duties. From the Effective Date until the Separation Date (the “Transition Period”), you will remain an employee of the Company on a full-time basis with the title “Advisor to the CEO,” and you will be expected to transition your duties and responsibilities to other Company personnel and perform other lawful duties and tasks as reasonably requested by the Chief Executive Officer of the Company (the “CEO”). During the Transition Period, you must continue to comply with all of the Company’s policies and procedures and with all of your statutory and continuing contractual obligations to the Company (including, without limitation, your obligations under this Agreement). You agree to exercise the highest degree of professionalism and utilize your expertise and creative talents in performing those duties.

(b) Compensation/Benefits. During the Transition Period, you will continue to be paid at the same base salary rate in effect immediately prior to the Effective Date, less applicable withholdings and deduction, and you will continue to be eligible for the Company’s standard benefits, subject to the terms and conditions applicable to such plans and programs. You were

 

1.


previously granted (i) an option to purchase 110,000 shares of the Company’s common stock on November 21, 2018 (the “First Option”), (ii) an option to purchase 25,000 shares of the Company’s common stock on February 19, 2020 (the “Second Option”), (iii) an option to purchase 35,000 shares of the Company’s common stock on August 25, 2020 (the “Third Option”), (iv) an option to purchase 500,000 shares of the Company’s common stock on August 29, 2023 (the “Fourth Option”), and (v) an option to purchase 1,500,000 shares of the Company’s common stock on June 27, 2024 (the “Fifth Option,” and collectively with the First Option, the Second Option, the Third Option, and the Fourth Option, the “Options”), in each case, subject to the terms and conditions of the Company’s applicable stock or equity plan (the “Plan”), and the applicable grant notice and agreement. As of the date first written above, (x) all of the shares subject to the First Option, the Second Option, and the Third Option are vested, (y) 145,833 of the shares subject to the Fourth Option are vested, and (z) none of the shares subject to the Fifth Option are vested. Except as expressly set forth in this Agreement, all terms, conditions, and limitations applicable to the Options will remain in full force and effect pursuant to the applicable Plan, and grant notice and agreement. You agree that, except as set forth in this Agreement, you do not have any other equity or ownership interest, or any right or option to acquire any equity or ownership interest, in the Company.

(c) Termination. Although the Company has no obligation to do so, as part of this Agreement, the Company agrees that it will not terminate your employment other than for “Cause” (as defined in the Executive Employment Agreement made as of August 25, 2023, by and between you and the Company, as amended (the “Employment Agreement”)), before December 31, 2024. If prior to December 31, 2024, the Company terminates your employment with Cause, or you resign your employment, then you will not be entitled to any further compensation or benefits (including, without limitation, the Severance Benefits and the Consulting Agreement set forth below). If prior to December 31, 2024, your employment ends due to your death or disability, then you will remain eligible for the Severance Benefits set forth below, subject to the terms and conditions set forth herein.

(d) Final Payment. In the next scheduled payroll cycle after the Separation Date, the Company will pay you all accrued wages and all accrued and unused vacation earned through the Separation Date, subject to standard payroll deductions and withholdings.

4. SEVERANCE BENEFITS. If you: (i) timely sign this Agreement and allow it to become effective; (ii) comply with your obligations hereunder; (iii) on or within twenty-one (21) days after the Separation Date, execute and return to the Company a supplemental release in the form attached hereto as Exhibit A (the “Release”) and allow the Release to become effective; and (iv) remain employed by the Company through December 31, 2024, or employment ends due to your death or disability, (collectively, the “Severance Preconditions”), then the Company will provide you with the following as your severance benefits (collectively, the “Severance Benefits”):

(a) Cash Severance. The Company will pay you, as severance, an amount equal to eighteen (18) months of your base salary in effect as of the Separation Date to be paid in substantially equal installments over an 18-month period measured from the date the Release becomes effective, in accordance with the Company’s standard payroll practices and subject to applicable withholding taxes (the “Severance Payment”).

 

2.


(b) Pro-Rata Bonus. The Company will pay you a payment equal to the product of (i) the annual bonus, if any, you would have earned for the performance year in which the Separation Date occurs based on achievement of the applicable performance goals for such year and (ii) a fraction, the numerator of which is the number of days you were employed by the Company during the year of termination and the denominator of which is the number of days in such year (the “Pro-Rata Bonus”). This amount shall be paid on the date that annual bonuses are paid to similarly situated executives, but in no event later than two-and-a-half (2 1/2) months following the end of the performance year in which the Separation Date occurs.

(c) Health Insurance. If you are eligible for an you timely and properly elect continued coverage under federal COBRA law or, if applicable, state insurance laws (collectively, “COBRA”), the Company will reimburse you for the monthly COBRA premium paid by you to continue your health insurance coverage (including coverage for eligible dependents, if applicable) through the period (the “COBRA Premium Period”) starting on the Separation Date and ending on the earliest to occur of: (i) June 30, 2026; (ii) the date you become eligible for group health insurance coverage through a new employer; or (iii) the date you cease to be eligible for COBRA continuation coverage for any reason. Such reimbursement shall be paid to you no later than the end of the month immediately following the month in which you timely remit the COBRA premium payment. You must timely pay your premiums, and then provide the Company with proof of same to obtain reimbursement for your COBRA premiums under this section. In the event you become covered under another employer’s group health plan or otherwise cease to be eligible for COBRA during the COBRA Premium Period, you must immediately notify the Company of such event. Notwithstanding the foregoing, if the Company determines, in its sole discretion, that it cannot pay the COBRA premiums without a substantial risk of violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company instead shall pay you, on the first day of each calendar month, a fully taxable cash payment equal to the applicable COBRA premiums for that month for the remainder of the COBRA Premium Period, which you may (but are not obligated to) use toward the cost of COBRA premiums.

5. CONSULTING AGREEMENT. If you satisfy the Severance Preconditions, then the Company will retain you as a consultant under the terms specified in this Section 5 (the “Consulting Agreement”). You acknowledge and agree that prior to entering into this Agreement, the Company is under no obligation to retain your services as a consultant after the Separation Date.

(a) Consulting Services. During the Consulting Period (defined below), you will use your best efforts to provide consulting services as may be reasonably requested by the Company in the areas of your experience and expertise (the “Consulting Services”). You will provide Consulting Services at the request of, and subject to the direction of, the Company’s Chief Executive Officer or his or her designee. It is anticipated that you will provide no more than eight (8) hours of Consulting Services per week during the first three (3) months of the Consulting Period, and thereafter only as reasonably requested from time to time by the Company’s Chief Executive Officer. You agree to exercise the highest degree of professionalism and utilize your expertise and creative talents in performing the Consulting Services. You shall abide by the Company’s applicable policies and procedures during the Consulting Period.

(b) Consideration. As the only consideration due to you for the Consulting Services, you shall receive the benefits described in this Agreement.

 

3.


(c) Equity Awards. Notwithstanding anything to the contrary under the Plan, vesting of each of your outstanding and unvested Options will not cease as of the Separation Date and will continue for the duration of the Consulting Period (defined below), which shall be considered a continuation of your Continuous Service Status (as defined in the Plan). The Options shall continue to be governed by the Plan and all applicable grant notices and agreements.

(d) Independent Contractor Relationship. During the Consulting Period, your relationship with the Company will be that of an independent contractor, and nothing in this Agreement is intended to, or should be construed to, create a partnership, agency, joint venture or employment relationship after the Separation Date. Except as expressly provided in this Agreement, you will not be entitled to, and will not receive, any benefits which the Company may make available to its employees, including but not limited to, group health or life insurance, profit-sharing or retirement benefits.

(e) Limitations on Authority. During the Consulting Period, you will have no responsibilities or authority as a consultant to the Company other than as provided above. You will have no authority to bind the Company to any contractual obligations, whether written, oral or implied, except with the prior written authorization of an officer of the Company. You agree not to represent or purport to represent the Company in any manner whatsoever to any third party unless authorized in advance by the Company, in writing, to do so.

(f) Confidential Information and Inventions. You agree that, during the Consulting Period and thereafter, you will not use or disclose, in any manner that is not authorized by the Company or essential to your performance of specifically requested Consulting Services, any confidential or proprietary information or materials of the Company that you obtain or develop in the course of performing the Consulting Services. Any and all work product you create in the course of performing the Consulting Services will be the sole and exclusive property of the Company. As set forth in the Continuing Obligations (defined below) and subject to the limitations set forth therein, you hereby assign to the Company all right, title, and interest in all inventions, techniques, processes, materials, and other intellectual property developed in the course of performing the Consulting Services.

(g) Other Work Activities. Throughout the Consulting Period, you retain the right to engage in employment, consulting, or other work relationships in addition to your Consulting Services for the Company, so long as such activities do not present a conflict of interest with the Company’s business, or interfere with your continuing obligations owed to the Company, except with the prior written consent of the CEO. In the event that it is unclear to you whether a particular activity would breach this commitment, you agree to contact the CEO to seek clarification.

(h) Termination of Consulting Period. This consulting relationship will commence on the Separation Date and continue until the earliest to occur of the following (the “Consulting Period”): (i) the date on which the Options become fully vested; or (ii) the date either party terminates the Consulting Agreement by providing written notice to the other party. Upon termination or expiration of the Consulting Agreement, the Company will have no further obligations to you, and the Options will cease vesting as of such termination date. Notwithstanding the foregoing, if you or the Company terminates the Consulting Agreement, and provided that on or within twenty-one (21) days after the termination of the Consulting Agreement, you execute and return to the Company a second supplemental release in the form attached hereto as Exhibit A (the “Second Release”) and allow the Second Release to become effective, then an additional six (6) monthly installments of the Fourth Option shall automatically vest.

 

4.


6. NO OTHER COMPENSATION OR BENEFITS. By executing this Agreement, you acknowledge and agree that the Company’s obligations to provide you with any severance benefits or any other payments are hereby extinguished (except for the benefits described in this Agreement). You further expressly acknowledge and agree that the Severance Benefits, and other benefits provided herein, are in full and complete satisfaction of the Company’s obligations, if any, to pay you severance benefits or any other payments pursuant your Employment Agreement, or any other agreements, plans or policies, and that this Agreement hereby supersedes and extinguishes any severance benefits you are or could be eligible to receive under your Employment Agreement, or any other employment agreement, plan, policy or other agreement applicable to you. You acknowledge that, except as expressly provided in this Agreement, you have not earned and will not receive from the Company any additional compensation (including base salary, bonus, incentive compensation, equity, equity acceleration, or vesting), severance, or benefits before or after the Separation Date, with the exception of any vested right you may have under the express terms of a written ERISA-qualified benefit plan (e.g., 401(k) account).

7. EXPENSE REIMBURSEMENTS. You agree that, within thirty (30) calendar days after the Separation Date, you will submit your final documented expense reimbursement statement reflecting all business expenses you incurred through the Separation Date, if any, for which you seek reimbursement. The Company will reimburse you for these expenses pursuant to its regular business practice.

8. RETURN OF COMPANY PROPERTY. By the termination or expiration of the Consulting Period, or sooner if requested by the Company, you will deliver to the Company all documents, electronic and other data (whether stored on devices in your possession or with any third-party vendors or on the “cloud”), notes, writings, customer and prospect lists, keys, credit cards, computer programs and all other documents or tangible materials whatsoever, including all copies or duplicates, concerning any part of the Company’s activities or concerning any activities as a Company employee. After returning these documents, data, and other property, you will immediately permanently delete from any electronic media in your possession, custody, or control (such as computers, mobile phones, hand-held devices, back-up devices and zip drives) or to which you had access (such as the cloud, remote e-mail exchange servers, back-up servers, off-site storage), all Company documents or electronically stored images, and other data or data compilations stored in any medium from which such information can be obtained. You also agree to provide the Company, upon a request, passwords necessary to access password-protected documents that you created or are otherwise aware that are password-protected and the password(s). Notwithstanding the foregoing, the Company agrees and acknowledges that the Dell XTF computer laptop that you used for work purposes is your property and is not subject to this provision; provided that you shall make a good faith effort to permanently delete all Company confidential or proprietary documents, data, and information from such device, and you agree to provide the Company reasonable access to your system as requested to verify such deletion is completed. Your timely compliance with this paragraph is a condition precedent to your receipt of the Severance Benefits described above.

 

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9. RELEASE OF CLAIMS

(a) General Release. In exchange for the consideration provided to you under this Agreement to which you would not otherwise be entitled, you hereby generally and completely release the Company, and its affiliated, related, parent and subsidiary entities, and its and their current and former directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, insurers, affiliates, and assigns (collectively, the “Released Parties”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to or on the date you sign this Agreement (collectively, the “Released Claims”).

(b) Scope of Release. The Released Claims include, but are not limited to: (i) all claims arising out of or in any way related to your employment with the Company, or the termination of that employment; (ii) all claims related to your compensation or benefits from the Company, including salary, bonuses, commissions, vacation, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership, equity, or profits interests in the Company; (iii) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (iv) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (v) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (the “ADEA”), the New York State Human Rights Law, the New York Executive Law, the New York Civil Practice Law and Rules, the New York Judiciary Law, the New York Corrections Law, the New York Labor Law, the New York Civil Rights Law, the New York City Administrative Code, the New York City Human Rights Law, the New York Hours of Labor Law, the New York Wage Payment Law, the New York Minimum Wage Act, the New York Whistleblower Law, and the New York Off-Duty Conduct Lawful Activities Discrimination Law.

(c) Excluded Claims. Notwithstanding the foregoing, the following are not included in the Released Claims (the “Excluded Claims”): (i) any rights or claims for indemnification you may have pursuant to any written indemnification agreement with the Company to which you are a party or under applicable law; (ii) any rights which are not waivable as a matter of law; and (iii) any claims for breach of this Agreement.

(d) Protected Rights. You understand that nothing in this Agreement limits your ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Occupational Safety and Health Administration, the New York State Department of Labor, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”). You further understand this Agreement does not limit your ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. While this Agreement does not limit your right to receive an award for information provided to any Government Agency in connection with a government whistleblower program or protected whistleblower activity, you understand and agree that, to maximum extent permitted by law, you are otherwise waiving any and all rights you may have to individual relief based on any claims that you have released and any rights you have waived by signing this Agreement. Nothing in this Agreement waives any rights you may have under Section 7 of the National Labor Relations Act (subject to the release of claims set forth herein).

 

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(e) ADEA Waiver. You acknowledge that you are knowingly and voluntarily waiving and releasing any rights you may have under the ADEA, and that the consideration given for the waiver and release in this section is in addition to anything of value to which you are already entitled. You further acknowledge that you have been advised, as required by the ADEA, that: (i) your waiver and release do not apply to any rights or claims that may arise after the date that you sign this Agreement; (ii) you should consult with an attorney prior to signing this Agreement (although you may choose voluntarily not to do so); (iii) you have twenty-one (21) calendar days to consider this Agreement (although you may choose voluntarily to sign it earlier, and you agree that changes to this Agreement, whether material or immaterial, do not restart the running of the twenty-one (21) calendar day period); (iv) you have seven (7) calendar days following the date you sign this Agreement to revoke it (by providing written notice of your revocation to me); and (v) this Agreement will not be effective until the date upon which the revocation period has expired, which will be the eighth calendar day after the date that this Agreement is signed by you provided that you do not revoke it (the “Effective Date”).

10. REPRESENTATIONS. You hereby represent that you have been paid all compensation owed and for all hours worked, have received all the leave and leave benefits and protections for which you are eligible pursuant to the Family and Medical Leave Act, the New York Paid Family Leave law, or otherwise, and have not suffered any on-the-job injury for which you have not already filed a workers’ compensation claim.

11. CONTINUING OBLIGATIONS. You and the Company acknowledge and affirm your and the Company’s obligations and restrictions under Sections 5, 6, 7, 8, or 9 of the Employment Agreement (the “Continuing Obligations”), which are incorporated herein by reference, and your agreement to abide by those continuing obligations is a material term of this Agreement. Nothing in the Continuing Obligations prevents or restricts you from engaging in the activities permitted by the “Protected Rights” section above. Nothing in the Continuing Obligations or this Agreement prohibits or restrains you or any other person from responding accurately and fully to any request for information if required by legal process or in connection with a government investigation. In addition, nothing in the Continuing Obligations or this Agreement prohibits or restrains you or any other person from making disclosures protected under the whistleblower provisions of federal or state law or from exercising rights to engage in protected speech under Section 7 of the National Labor Relations Act, if applicable.

12. NO VOLUNTARY ADVERSE ACTION. You agree that you will not voluntarily (except in response to legal compulsion or as permitted under the section of this Agreement entitled “Protected Rights”) assist any person in bringing or pursuing any proposed or pending litigation, arbitration, administrative claim or other formal proceeding against the Company, its parent or subsidiary entities, affiliates, officers, directors, employees or agents.

 

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13. CONFIDENTIALITY. The provisions of this Agreement will be held in strictest confidence by you and will not be publicized or disclosed by you in any manner whatsoever; provided, however, that: (a) you may disclose this Agreement in confidence to your immediate family and to your attorneys, accountants, tax preparers and financial advisors; (b) you may disclose this Agreement pursuant to a government investigation, if necessary to enforce its terms, or as otherwise required by law; and (c) you may disclose this Agreement to the extent permitted by the “Protected Rights” section above or in furtherance of your rights under Section 7 of the National Labor Relations Act, if applicable. You acknowledge and agree that you do not possess any claim or allegation, either asserted or otherwise, involving harassment or discrimination, that may be subject to or covered under N.Y. C.P.L.R. § 5003-b and N.Y. General Obligations Law § 5-336.

14. NO ADMISSIONS. You understand and agree that the promises and payments in consideration of this Agreement shall not be construed to be an admission of any liability or obligation by the Company to you or to any other person, and that the Company makes no such admission.

15. COOPERATION. You agree to cooperate fully with the Company in connection with its actual or contemplated defense, prosecution, or investigation of any claims or demands by or against third parties, or other matters arising from events, acts, or failures to act that occurred during the period of your employment by the Company. Such cooperation includes, without limitation, making yourself available to the Company upon reasonable notice, without subpoena, to provide complete, truthful and accurate information in witness interviews, depositions, and trial testimony. The Company will reimburse you for reasonable out-of-pocket expenses you incur in connection with any such cooperation (excluding foregone wages) and will make reasonable efforts to accommodate your scheduling needs.

16. CHOICE OF LAW/VENUE. This Agreement will be governed by, and construed pursuant to, the laws of the State of New York without regard to its conflict of laws principles. Any controversy or claim arising out of or relating your employment or this Agreement shall be settled by arbitration administered by the American Arbitration Association under its Employment Arbitration Rules and Mediation Procedures and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Any claims will be heard by a panel of three arbitrators and the arbitration shall take place in the County of New York, State of New York and you and the Company consent to New York, New York as the seat of arbitration. In the event that injunctive relief is sought in connection with a dispute related to the Continuing Obligations, you and the Company agree that venue only in the County of New York, State of New York would be proper and hereby waive any challenge thereto based on lack of personal jurisdiction or inconvenient forum.

17. ENTIRE AGREEMENT. Unless specifically provided herein, this Agreement, including its exhibits, contains all of the understandings and representations between you and the Company relating to the subject matter hereof and supersedes all prior and contemporaneous understandings, discussions, agreements, representations, and warranties, both written and oral, regarding such subject matter, including the Employment Agreement; provided, however, that nothing in this Agreement modifies, supersedes, voids, or otherwise alters the Continuing Obligations, which shall remain in full force and effect.

 

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18. SECTION 409A. It is intended that any amounts payable under this Agreement shall be exempt from and avoid the imputation of any tax, penalty or interest under Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) to the fullest extent permissible under applicable law; provided that if any such amount is or becomes subject to the requirements of Section 409A, it is intended that those amounts shall comply with such requirements. This Agreement shall be construed and interpreted consistent with that intent. In furtherance of that intent, if payment or provision of any amount or benefit hereunder that is subject to Section 409A at the time specified herein would subject such amount or benefit to any additional tax under Section 409A, the payment or provision of such amount or benefit shall be postponed to the earliest commencement date on which the payment or provision of such amount or benefit could be made without incurring such additional tax. In no event, however, shall the Company be liable for any tax, interest or penalty imposed on you under Section 409A or any damages for failing to comply with Section 409A. If you are a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) as of the Separation Date, you shall not be entitled to any payment or benefit pursuant to this Agreement that constitutes nonqualified deferred compensation for purposes of Section 409A and that is payable upon a separation from service (within the meaning of Section 409A) until the earlier of (a) the date which is six (6) months after his separation from service for any reason other than death, or (b) the date of your death; provided that this paragraph shall only apply if, and to the extent, required to avoid the imputation of any tax, penalty or interest pursuant to Section 409A. Any amounts otherwise payable to you upon or in the six (6) month period following your separation from service that are not so paid by reason of this paragraph shall be paid (without interest) as soon as practicable (and in any event within thirty (30) days) after the date that is six (6) months after your separation from service (provided that in the event of your death after such separation from service but prior to payment, then such payment shall be made as soon as practicable, and in all events within thirty (30) days, after the date of your death). Neither the Company nor you, individually or in combination, may accelerate any payment or benefit that is subject to Section 409A, except in compliance with Section 409A and the provisions of this Agreement, and no amount that is subject to Section 409A shall be paid prior to the earliest date on which it may be paid without violating Section 409A. For purposes of Section 409A, your right to receive any installment payments hereunder shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., payment shall be made within thirty (30) days following the date of termination), the actual date of payment within the specified period shall be within the sole discretion of the Company.

19. MISCELLANEOUS. You hereby consent to the terms set forth in this Agreement, and you acknowledge and agree that the terms set forth herein do not constitute “Good Reason,” “Cause” and/or any term with any similar meaning or import under the Employment Agreement. You represent that your decision to enter into this Agreement is completely voluntary. This Agreement may not be modified or amended except in a writing signed by both you and a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns. The Company may freely assign this Agreement, without your prior written consent. You may not assign any of your duties hereunder and you may not assign any of your rights hereunder without the written consent of the Company. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination will not affect any other provision of this Agreement and the provision in question will be modified so as to be rendered enforceable. Any ambiguity in this Agreement shall not be construed against either party as the drafter. Any waiver of a breach of this Agreement shall be in writing and shall not be deemed to be a waiver of any successive breach. This Agreement may be executed in

 

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counterparts which shall be deemed to be part of one original, and facsimile and electronic image signatures (including .pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, or other applicable law) shall be equivalent to original signatures.

[Signature Page to Follow]

 

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If this Agreement is acceptable to you, please sign below and return the original to me. You have twenty-one (21) calendar days to decide whether you would like to accept this Agreement, and the Company’s offer contained herein will automatically expire if you do not sign and return it within this timeframe.

We wish you the best in your future endeavors.

Sincerely,

 

LB PHARMACEUTICALS INC
By:   /s/ Scott Garland
  Scott Garland
  Chairman of the Board

EXHIBIT A – Supplemental Release

I HAVE READ, UNDERSTAND AND AGREE FULLY TO THE FOREGOING AGREEMENT:

 

/s/ Zachary Prensky
Zachary Prensky

 

12/02/24
Date

 

11.


EXHIBIT A

SUPPLEMENTAL RELEASE

In consideration for the benefits provided to me by LB Pharmaceuticals Inc (the “Company”) pursuant to the terms of the transition, separation, and consulting agreement between me and the Company to which this Exhibit is attached (the “Agreement”), I agree to the terms below. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement.

I hereby represent that: (a) I have been paid all compensation owed and have been paid for all hours worked for the Company; (b) I have received all the leave and leave benefits and protections for which I am eligible pursuant to the federal Family and Medical Leave Act, the New York Paid Family Leave law or otherwise; and (c) I have not suffered any on-the-job injury for which I have not already filed a workers’ compensation claim.

I hereby generally and completely release the Company and its current and former directors, officers, employees, members, participants, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns (collectively, the “Released Parties”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to or on the date that I sign this Supplemental Release. This general release includes, but is not limited to: (i) all claims arising out of or in any way related to my employment with the Company, or the termination of that employment; (ii) all claims related to my compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, paid time off, expense reimbursements, severance pay, fringe benefits, and contributions to retirement plan; (iii) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (iv) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (v) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (the “ADEA”), the New York State Human Rights Law, the New York Executive Law, the New York Civil Practice Law and Rules, the New York Judiciary Law, the New York Corrections Law, the New York Labor Law, the New York Civil Rights Law, the New York City Administrative Code, the New York City Human Rights Law, the New York Hours of Labor Law, the New York Wage Payment Law, the New York Minimum Wage Act, the New York Whistleblower Law, and the New York Off-Duty Conduct Lawful Activities Discrimination Law.

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA. I also acknowledge that the consideration given for the waiver and releases in this Supplemental Release is in addition to anything of value to which I am already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) my waiver and release does not apply to any rights or claims that arise after the date I sign this Supplemental Release; (b) I should consult with an attorney prior to signing this Release; (c) I have twenty-one (21) calendar days to consider this Supplemental Release (although I may choose

 

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to voluntarily sign it sooner); (d) I have seven (7) days following the date I sign this Supplemental Release to revoke it (by providing written notice of my revocation to the Company); and (e) this Supplemental Release will not be effective until the date upon which the revocation period has expired unexercised, which will be the eighth calendar day after I sign it.

Notwithstanding the foregoing, I am not hereby releasing any of the following claims (the “Excluded Claims”): (a) any rights or claims for indemnification I may have pursuant to any written indemnification agreement with the Company to which I am a party, under the charter, bylaws or operating agreements of the Company, or under applicable law; (b) any rights that cannot be waived as a matter of law; (c) any rights I have to file or pursue a claim for workers’ compensation or unemployment insurance; and (d) any claims arising from the breach of this Supplemental Release. I hereby represent and warrant that, other than the Excluded Claims, I am not aware of any claims that I have or might have against any of the Released Parties that are not included in the Released Claims. Nothing in this Agreement prevents me from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that I have reason to believe is unlawful.

I understand that nothing in this Supplemental Release limits my ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Occupational Safety and Health Administration, the New York State Department of Labor, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”). I further understand this Supplemental Release does not limit my ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. While this Supplemental Release does not limit my right to receive an award for information provided to any Government Agency in connection with a government whistleblower program or protected whistleblower activity, I understand and agree that, to maximum extent permitted by law, I am otherwise waiving any and all rights I may have to individual relief based on any claims that I have released and any rights I have waived by signing this Supplemental Release. Nothing in this Supplemental Release waives any rights I may have under Section 7 of the National Labor Relations Act (subject to the release of claims set forth herein).

 

By:    
  Zachary Prensky
Date:  

 

 

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Exhibit 10.22

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”), is made as of the 12th day of June, 2024, by and between LB Pharmaceuticals Inc, a Delaware Corporation, (the “Company”) and Roger Sawhney, an individual residing at *** (the “Executive”) (collectively, the “Parties”).

RECITALS

WHEREAS, the Company wishes to retain the services of the Executive to serve as a Chief Financial Officer (“CFO”) of the Company and on the terms and conditions set forth herein;

WHEREAS, the Executive desires to enter into employment with the Company on the terms and conditions set forth herein;

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants, promises, and obligations contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties intending to be legally bound, acknowledge and agree as follows:

1. Position and Duties. Subject to the terms set forth herein, the Company agrees to employ the Executive as the Chief Financial Officer (“CFO”) of the Company, and the Executive hereby accepts such employment, starting on July 15, 2024 (the “Start Date”). The Executive shall report to the Chief Executive Officer of the Company (“CEO”). The Executive shall have such duties, authority, and responsibilities as shall be consistent with the duties normally performed by a CFO of companies of similar size in the pharmaceutical industry in which the Company operates. The Executive will diligently and conscientiously perform the duties of CFO and will devote substantially all of the Executive’s business hours to such duties, and during such time will make the best use of the Executive’s energy, knowledge, and training to advancing the Company’s interests. The Executive will accept no other employment or contracting work while employed by the Company, or serve as a member of the board of directors of any for-profit entity or as a member of any advisory board without the express written consent of the board of directors the Company (the “Board”). Upon termination of the Executive’s employment relationship with the Company for any reason, the Executive shall resign and relinquish any position held as an officer and/or board member of the Company.

2. Compensation and Benefits.

(a) Base Salary. Subject to the terms set forth herein, in consideration for all services rendered by the Executive to the Company, the Company shall pay the Executive an annual base salary of Four Hundred and Ten Thousand Dollars and No Cents ($410,000) (“Annual Base Salary”) in periodic installments in accordance with the Company’s regular payroll practices in effect from time to time for executive employees, but no less frequently than semi-monthly. The Executive shall be classified as exempt from overtime and the Executive understands and acknowledges that the Executive is not entitled to overtime compensation and that Executive’s Base Salary is intended to compensate the Executive for all hours worked.


(b) Target Bonus.

(i) The Executive will be eligible to earn a target bonus of up to 40% of Executive’s Annual Base Salary, in all cases subject to the discretion of the Compensation Committee of the Board of the Company determining that the applicable objectives have been achieved (the “Target Bonus”). Objectives will be determined annually by the Compensation Committee in consultation with the Executive and will include both Company performance the Executive’s personal performance.

(ii) Any such Target Bonus shall not be considered earned until awarded. Any Target Bonus awarded will be paid no later than forty-five (45) days after it has been awarded. If the Executive’s employment with the Company is terminated for Cause (as defined below) before any Target Bonus is paid, the Executive shall not be eligible to receive the Target Bonus, regardless of whether the Company already determined the amount of the Target Bonus. If the Company determines the amount of a Target Bonus and thereafter terminates the Executive’s employment with the Company for a reason other than for Cause but before any such Target Bonus has been paid, the Executive will still receive the Executive’s Target Bonus payment subject to the terms provided herein, even if the Executive is no longer working at the Company at the time the Target Bonus is to be paid.

(c) Stock Options.

(i) Subject to Board approval, to the extent not already granted, the Company shall grant to the Executive stock options to purchase shares of Common Stock of the Company up to 950,000 under the Company’s 2023 Stock Incentive Plan (the “Plan”), as amended (each an “Option”) at an exercise price per share of $1.50, which is not less than the current fair market value of the underlying Option as of the date of grant.

(ii) The Options shall vest and become exercisable on a cumulative basis with 25% to vest upon the first anniversary of the Effective Date of this Agreement and in thirty-six (36) substantially equal monthly installments over the thirty-six (36) month period beginning on the last day of the month following the first anniversary of the Effective Date of this Agreement and the last day of each month thereafter; provided that the Executive continues to have a Service Relationship (as defined in the Plan) with the Company through each such date.

(d) Employee Benefits. During the Employment Period, the Executive shall be entitled to participate in all employee benefit plans, practices, and programs maintained by the Company, as in effect from time to time (collectively, the “Employee Benefit Plans”), on a basis which is no less favorable than is provided to other similarly situated senior executives of the Company, to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plans and applicable law.

(e) Paid Time Off. During the Employment Period, the Executive shall be entitled to twenty (20) days paid vacation per calendar year. This vacation is in addition to Company recognized holidays and paid sick time, if any, in accordance with the Company’s practices and policies as in effect from time to time. The Company reserves the right to amend or

 

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cancel its practices and policies at any time in its sole discretion, in accordance with applicable law. Any unused vacation may not be carried over by the Executive to any subsequent year. The Company will pay Executive for any accrued but unused vacation upon termination of the Executive’s employment.

(f) Expense Reimbursement. The Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by the Executive in the performance of the Executive’s duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures.

(g) Withholdings. All payments made subject to this Agreement will be subject to payroll withholdings that the Company reasonably believes are required by law or elected or authorized by the Executive for state and federal income taxes, Social Security, Medicare, and other applicable payroll deductions, in accordance with the Company’s normal payroll practices.

3. Termination of Employment.

(a) At-Will Employment; Accrued Rights. The parties acknowledge that Executive’s employment relationship with the Company shall be at-will. Either the Company or the Executive may terminate Executive’s employment with or without Cause or Good Reason or advance notice. Upon a termination of the Executive’s employment for any reason, the Executive (or the Executive’s estate) shall be entitled to receive (i) that portion of the Executive’s Annual Base Salary, then in effect, earned and unpaid as of the termination date; (ii) any expenses owed and properly reimbursable to the Executive pursuant to the Company’s expense reimbursement policies; (iii) conversion rights, if applicable, with respect to any life insurance or disability insurance policy provided to the Executive; and (iv) any vested amounts owed to the Executive under the Company’s employee benefit plans or programs and any vested Options in accordance with the terms and conditions of such employee benefit plans or programs and the Plan (collectively, the “Accrued Rights”).

(b) Termination by the Company for Cause or Executive’s Resignation Without Good Reason. Upon termination of the Executive’s employment relationship by the Company for Cause, or by the Executive’s resignation without Good Reason, the Company shall, thereafter, have no obligation to the Executive for any unearned Annual Base Salary, Target Bonus, or any other form of compensation or benefit, except as otherwise required by law. Reimbursement of appropriately documented expenses incurred by the Executive before the termination of employment, to the extent that the Executive would have been entitled to such reimbursement but for the termination of employment, shall be paid by the Company to the Executive.

 

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(c) Termination by the Company Without Cause or Executive’s Resignation for Good Reason Outside of Change in Control Period. In the event that the Company terminates the Executive’s employment without Cause or Executive resigns for Good Reason, and provided that the Severance Preconditions are met, (A) the Executive shall receive nine (9) months’ severance pay at the Executive’s Annual Base Salary then in effect, paid as salary continuation over the nine (9) month severance period pursuant to the Company’s customary payroll practices; and (B) if the Executive is eligible for and timely and properly elects group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse the Executive for monthly COBRA premiums payable to continue coverage for the Executive and the Executive’s eligible dependents until the earliest of (x) nine (9) months following the termination date; (y) the expiration of the Executive’s eligibility for the continuation coverage under COBRA; or (z) the date when the Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment. Such reimbursement shall be paid to the Executive no later than the end of the month immediately following the month in which the Executive timely remits each COBRA premium payment.

(d) Termination by the Company Without Cause or Executive’s Resignation for Good Reason in Connection with Change in Control. If at any time during the time period of three (3) months prior to or twelve (12) months following a Change in Control (defined below), the Company terminates the Executive’s employment without Cause or the Executive resigns for Good Reason, provided the Severance Preconditions are met, the Company will provide Executive with the following severance benefits (in lieu of, and not in addition to, the severance benefits provided in Section 3(c)):

(i) a lump sum severance payment, payable within sixty (60) days after the Change in Control, in an amount equal to the sum of: (A) one (1) year of Executive’s Annual Base Salary then in effect; (B) 1.5 times the Target Bonus expected to be awarded to the Executive as of the anniversary of the Effective Date for the year of the Executive’s Date of Termination, based on the Company’s performance;

(ii) if the Executive is eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive for monthly COBRA premiums payable to continue coverage for the Executive and the Executive’s eligible dependents until the earliest of (x) twelve (12) months following the termination date; (y) the expiration of the Executive’s eligibility for the continuation coverage under COBRA; or (z) the date when the Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment). Such reimbursement shall be paid to the Executive no later than the end of the month immediately following the month in which the Executive timely remits each COBRA premium payment; and

(iii) the vesting of any outstanding unvested equity that the Executive holds shall be accelerated in full as of the termination date.

 

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(e) Termination in the Event of Executive’s Disability or Death. The Executive’s employment hereunder (i) shall terminate automatically upon the Executive’s death and (ii) may be terminated by the Company for the Executive’s Disability. Upon termination of the Executive’s employment hereunder by reason of the Executive’s Disability or death, the Executive or the Executive’s estate (as the case may be) shall be entitled to receive:

(i) the Accrued Rights; and

(ii) subject to the Executive’s or, in the event of the Executive’s death, the representative of the Executor’s estate, execution and non-revocation of a release of claims in a form acceptable to the Company:

(A) a pro-rata portion (based on the number of full days the Executive was employed in the applicable fiscal year) of the Target Bonus expected to be awarded to the Executive on the anniversary of the Effective Date for the year of the Executive’s Date of Termination, based on actual Company performance of the full fiscal year and payable at the same time annual bonuses are generally paid to executives for such fiscal year; and

(B) if the Executive is (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) eligible for and timely and properly elects group health plan continuation coverage under COBRA, the Company shall reimburse the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the monthly COBRA premium paid by the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) for the Executive and the Executive’s spouse/dependents. Such reimbursement shall be paid to the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) no later than the end of the month immediately following the month in which the Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) timely remits the COBRA premium payment. The Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) shall be eligible to receive such reimbursement until the earliest of: (i) the last day of the month that is twenty-six (26) weeks after the termination of the Executive’s employment by reason of the Executive’s Disability or death; (ii) in the event of Executive’s Disability, the date Executive becomes eligible to receive healthcare coverage from a subsequent employer (and Executive agrees to promptly notify the Company of such eligibility) or (iii) the date the Executive is (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents are) no longer eligible to receive COBRA continuation coverage. Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act) or incurring an excise tax, the Company shall in lieu thereof provide to Executive (or in the event of the Executive’s death, the Executive’s surviving spouse and/or dependents) a taxable monthly payment in an amount equal to the monthly COBRA premium contemplated by the continuation benefit set forth in this Section.

(iii) Following the termination of the Executive’s employment by reason of the Executive’s Disability or death, except as set forth in this Section 3, the Executive (or Executive’s estate) shall have no further rights to any compensation or any other benefits under this Agreement.

 

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(f) Effect of Termination on Post-Termination Obligations. Upon termination of this Agreement for any reason, the Executive shall continue to be bound by the post-employment obligations and covenants set forth in this Agreement following Executive’s termination.

(g) No Mitigation. The Executive will not be required to mitigate any of the Company’s payment obligations set forth in this Section 3 by making any efforts to secure other employment, and Executive’s commencement of employment with another employer will not reduce the obligations of the Company under this Section 3, unless specifically provided for herein.

(h) Resignation of Offices. Promptly following any termination of the Executive’s employment with the Company for any reason (other than by reason of the Executive’s death), the Executive shall deliver to the Company reasonably satisfactory written evidence of the Executive’s resignation from all positions that the Executive may then hold as an employee or officer of the Company or any subsidiary of the Company.

4. Definitions.

(a) Cause. For purposes of this Agreement the term “Cause” shall mean any one or more of the following:

i. The Executive’s persistent unsatisfactory performance or material failure to perform the Executive’s duties or any lawful directive of the Board or CEO after being given written notice of such deficiencies in the Executive’s performance and failure to cure them within thirty (30) calendar days of such written notice;

ii. The Executive’s indictment for, conviction of, plea of guilty to, or plea of nolo contendere to a felony involving the property or operations of the Company or a crime of moral turpitude;

iii. The Executive’s indictment for, conviction of, plea of guilty to, or plea of nolo contendere to embezzlement, misappropriation or fraud, whether or not related to the Executive’s employment with Company;

iv. The existence of any court order or settlement agreement prohibiting the Executive’s continued employment with the Company;

v. The Executive’s material breach of any material obligation in this Agreement, or any other written agreement between the Executive and Company, or any material misconduct by the Executive that adversely affects the business of the Company or its reputation; or

vi. The Executive’s material failure to comply with the Company’s reasonable and lawful policies or rules of which the Executive is given written notice, as they may be in effect from time to time during the Executive’s employment, and failure to cure them within thirty (30) calendar days of such written notice.

(b) Change in Control. For purposes of this Agreement, “Change in Control” has the meaning ascribed to such term in the Plan.

 

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(c) Disability. For the purposes of this Agreement, “Disability” shall mean that in the good faith judgment of the Board, despite reasonable accommodation, the Executive is unable due to a physical or mental incapacity to perform the essential functions of Executive’s most recent position for: (x) a period of one hundred eighty (180) consecutive days or (y) an aggregate of six (6) months in any twelve (12) consecutive month period.

(d) Good Reason. For purposes of this Agreement, the term “Good Reason” shall mean any one or more of the following, in each case during the Employment Period without the Executive’s written consent:

i. a material reduction of the Executive’s position, authority or responsibilities, or the removal of the Executive from such position, authority or responsibilities, unless the Executive is provided with a new position of equal or greater organizational level, authority, responsibilities and compensation;

ii. a material reduction in the Annual Base Salary other than a general reduction in Annual Base Salary that affects all similarly situated executives in substantially the same proportions;

iii. a material breach by the Company of this Agreement; or

iv. a material change in the geographic location at which the Executive is required to perform services for the Company (except for office relocations that would not increase the Executive’s one way commute by more than twenty-five (25) miles).

provided, however, that Good Reason shall not exist unless: (x) the Executive has given the Company written notice of the conduct of the Company that is alleged to constitute Good Reason within thirty (30) days following the occurrence of such event; (y) the Executive has provided the Company at least thirty (30) days following the date on which such notice is provided to cure such conduct and the Company has failed to do so; and (z) the Executive resigns and voluntarily terminates the Executive’s employment within thirty (30) days following the expiration of the Company’s opportunity to cure such conduct.

(e) Severance Preconditions. For the purposes of this Agreement, the “Severance Preconditions” shall mean that (i) the Executive has executed and not revoked within the applicable revocation period a Separation Agreement and General Release in a form and substance reasonably satisfactory to the Company; (ii) the Executive remains in compliance with the CIIAA; and (iii) the Executive has provided to the Company the written resignations set forth in Section 3(h).

5. Confidential Information and Intellectual Property Rights. As a condition of employment, the Executive agrees to execute and abide by the Employee Confidential Information and Inventions Assignment Agreement attached as Exhibit A (“CIIAA”). The CIIAA contains provisions that are intended by the parties to survive and do survive any termination of this Agreement and the CIIAA.

 

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6. Non-Disparagement. The Executive shall not, during or after employment, make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal communications that belittle, disparage or otherwise express disapproval of the Company or any of its Affiliates or their respective businesses, or any of their past or present officers, directors, employees, advisors, agents, policies, procedures, practices, decision-making, conduct, professionalism or compliance with standards, except as and to the extent required to comply with applicable federal or state law.

7. Section 409A. It is intended that any payment or benefit that is provided pursuant to or in connection with this Agreement that is considered to be deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) shall be paid and provided in a manner, and at such time and form, as complies with the applicable requirements of Section 409A of the Code to avoid the unfavorable tax consequences provided therein for non-compliance. It is further intended that the payments hereunder shall, to the maximum extent permissible under Section 409A of the Code, be exempt from Section 409A of the Code under either (i) the exception for involuntary separation pay to the extent that all payments are payable within the limitations described in Treasury Regulation Section 1.409A-1(b)(9), or (ii) the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4) to the extent that all payments are payable no later than two and a half months after the end of the first taxable year in which the right to the payment is no longer subject to a substantial risk of forfeiture.

(a) If the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code at such time, any payments to be made or benefits to be delivered in connection with the Executive’s “Separation from Service” (as defined below) that constitute deferred compensation subject to Section 409A of the Code shall not be made until the earlier of (i) the Executive’s death or (ii) six months plus one day after the Executive’s Separation from Service (“409A Deferral Period”) as required by Section 409A of the Code. Payments of any such deferred compensation otherwise due to be made in installments or periodically during the 409A Deferral Period shall be accumulated and paid in a lump sum as soon as the 409A Deferral Period ends, and the balance of the payment shall be made as otherwise scheduled.

(b) For purposes of this Agreement, all rights to payments and benefits hereunder shall be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Section 409A of the Code.

(c) For purposes of this Agreement, with respect to the timing of any amounts that constitute deferred compensation subject to Section 409A of the Code that depends on termination of employment or separation from service, termination of employment or separation from service shall mean a “separation from service” within the meaning of Section 409A of the Code where it is reasonably anticipated that no further services would be performed after such date or that the level of bona fide services the Executive would perform after that date (whether as an employee or independent contractor) would permanently decrease to a level less than or equal to twenty percent (20%) of the average level of bona fide services the Executive performed over the immediately preceding thirty-six (36) month period.

8. Section 280G. If any payment or benefit Executive will or may receive from the Company or otherwise (a “Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such Payment shall be equal

 

8


to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Executive. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).

Notwithstanding any provisions in this Section above to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for Executive as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.

The Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this Section. The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. If Executive receives a Payment for which the Reduced Amount was determined pursuant to clause (x) above and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Executive agrees to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) above) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) above, Executive shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.

9. Indemnification. The Company will enter into an indemnification agreement with Executive. At all times during the Executive’s service as an officer and/or director and for at least six years thereafter, the Company shall provide that Executive is covered by the Company’s D&O insurance on the same basis as other active officers and directors (without regard to whether the Executive’s service has previously terminated).

10. Representations of the Executive. The Executive represents and warrants that: (i) the Executive has no legal obligations to any other party that would be breached by signing this Agreement or otherwise fulfilling Executive’s obligations hereunder, including but not limited to any non-competition, non-solicitation, non-inducement, confidentiality, assignment of inventions,

 

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or other similar agreement; (ii) the Executive has not disclosed any third party’s confidential or proprietary information to the Company or its representatives or agents; (iii) if the Executive learns of any confidential or proprietary information that belongs to any third party, the Executive will not disclose such information to the Company or its representatives or agents, except as allowed by law or any agreement you have signed with such party; and (iv) the Executive is not in breach of any confidentiality or non-disclosure agreement that the Executive has signed.

11. Miscellaneous.

(a) Entire Agreement. This Agreement contains the entire agreement and understanding of the Executive and the Company concerning the subject matter hereof and supersedes and replaces all prior negotiations and proposed agreements, whether oral or written. The Executive acknowledges that, by signing this Agreement, the Executive has not relied upon any representations, promises or agreements made by the Company or its employees, officers, directors, or representatives (including any Company attorneys) that are not contained in this Agreement. This Agreement may not be modified or amended except by an instrument in writing signed by the Parties hereto.

(b) Headings/Counterparts. The headings of the paragraphs herein are included for reference only and are not intended to affect the interpretation of the Agreement. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same Agreement. Each party agrees that faxed or electronically transmitted copies of the signature pages of this Agreement and/or any of the other instruments, agreements and documents relating to any of the transactions contemplated hereby, whether sent to the other party or to such other party’s counsel, shall be deemed definitively executed and delivered, and with the same force and effect as if manually signed and delivered, for all purposes whatsoever. Neither party hereto shall raise the use of DocuSign, electronic mail or a facsimile machine to deliver a signature or the fact that any signature was transmitted or communicated through the use of electronic mail or a facsimile machine as a defense to the formation of a contract and each party forever waives any such defense. All counterparts shall be construed together and shall constitute one instrument, and the signature page from any counterpart may be attached to another counterpart to form a complete copy of this Agreement.

(c) Severability. If any provision of this Agreement or the application thereof is held invalid, such invalidation shall not affect other provisions or applications of this Agreement and to this end the provisions of this Agreement are declared to be severable.

(d) Construction/Joint Drafting. The determination of the terms and conditions of this Agreement has been by mutual agreement of the Parties. Each party participated jointly in the drafting of this Agreement, and therefore the terms and conditions of this Agreement are not intended to be, and shall not be, construed against any party by virtue of draftsmanship.

(e) Non-Waiver. Neither the failure nor any delay on the part of either party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver of any provision of this Agreement will be binding unless made in a writing signed by the Parties hereto.

 

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(f) Assignment. This Agreement shall be binding upon the Company and shall inure to the benefit of the Company including any transferee of the business operation, as a going concern, in which the Executive is employed and shall be binding upon the Executive and the Executive’s heirs and personal representatives. None of the rights or obligations of the Executive hereunder may be assigned or delegated. The Company may assign its rights and obligations under this Agreement in whole or in part to anyone.

(g) Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the internal laws of the State of New York.

(h) Resolution of Disputes. To ensure the timely and economical resolution of disputes that may arise in connection with the Executive’s employment with the Company, Executive and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution, or interpretation of this Agreement, the CIIAA, or the Executive’s employment, or the termination of the Executive’s employment, including but not limited to all statutory claims, with the exception of discrimination and harassment claims, will be resolved pursuant to the Federal Arbitration Act, 9 U.S.C. §1-16 (the “FAA”), and to the fullest extent permitted by law, by final, binding and confidential arbitration by a single arbitrator conducted in New York, New York by Judicial Arbitration and Mediation Services Inc. (“JAMS”) under the then applicable JAMS rules appropriate to the relief being sought (the applicable rules are available at the following web addresses: (i) https://www.jamsadr.com/rules-employment-arbitration/ and (ii) https://www.jamsadr.com/rules-comprehensive-arbitration/); provided, however, this arbitration provision not apply to any action or claim that cannot be subject to mandatory arbitration as a matter of law, including, without limitation, claims involving allegations of sexual harassment and discrimination, to the extent such claims are not permitted by applicable law(s) to be submitted to mandatory arbitration and the applicable law(s) are not preempted by the FAA or otherwise invalid (collectively, the “Excluded Claims”). A hard copy of the rules will be provided to the Executive upon request. By agreeing to this arbitration procedure, both the Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. In addition, all claims, disputes, or causes of action under this provision, whether by the Executive or the Company, must be brought in an individual capacity, and shall not be brought as a plaintiff (or claimant) or class member in any purported class or representative proceeding, nor joined or consolidated with the claims of any other person or entity. The arbitrator may not consolidate the claims of more than one person or entity, and may not preside over any form of representative or class proceeding. To the extent that the preceding sentences regarding class claims or proceedings are found to violate applicable law or are otherwise found unenforceable, any claim(s) alleged or brought on behalf of a class shall proceed in a court of law rather than by arbitration. The Company acknowledges that the Executive will have the right to be represented by legal counsel at any arbitration proceeding. Questions of whether a claim is subject to arbitration under this Agreement shall be decided by a federal court in the State of New York. However, procedural questions which grow out of the dispute and bear on the final disposition are matters for the arbitrator. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to

 

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award such relief as would otherwise be permitted by law; (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award; and (c) be authorized to award any or all remedies that the Executive or the Company would be entitled to seek in a court of law. The Executive and the Company shall equally share all JAMS’ arbitration fees. To the extent JAMS does not collect or the Executive otherwise does not pay to JAMS an equal share of all JAMS’ arbitration fees for any reason, and the Company pays JAMS the Executive’s share, the Executive acknowledges and agrees that the Company shall be entitled to recover from the Executive half of the JAMS arbitration fees invoiced to the parties (less any amounts Executive paid to JAMS) in a federal or state court of competent jurisdiction. Except as modified in the CIIAA, each party is responsible for its own attorneys’ fees. Nothing in this Agreement is intended to prevent either the Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction. To the extent a New York federal court determines that any applicable law prohibits mandatory arbitration of Excluded Claims, if the Executive intends to bring multiple claims, including one or more Excluded Claims, the Excluded Claim(s) may be publicly filed with a court, while any other claims will remain subject to mandatory arbitration.

(i) Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of delivery, if delivered by hand, (ii) on the date of transmission, if delivered by electronic mail, (iii) on the first business day following the date of deposit, if delivered by guaranteed overnight delivery service, or (iv) on the fourth business day following the date delivered or mailed by the U.S. Postal Service, addressed as follows:

 

If to the Executive:

At the address shown in the books and records of the

Company, currently:

Roger Sawhney

***

If to the Company:

LB Pharmaceuticals Inc

575 Madison Avenue, 10th Floor

New York, NY 10022,

Attention: Board of Directors

Email: ***

 

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with copy, which shall not constitute notice, to:

Divakar Gupta

Cooley LLP

55 Hudson Yards

New York, New York 10001-2163

Notices shall be deemed to be properly addressed, to the Company or to the Executive, if addressed to such person at such person’s address as set forth above, or to such other address or addresses as the addressee previously may have specified by Notice given to the other parties in the manner contemplated by this Section 11(i).

(j) Survival. Upon the termination of this Agreement, the respective rights and obligations of the Parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the Parties under this Agreement.

12. Acknowledgement of Full Understanding. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT EXECUTIVE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT EXECUTIVE HAS BEEN REPRESENTED BY EXECUTIVE’S OWN COUNSEL OR HAS HAD AN OPPORTUNITY TO BE REPRESENTED BY AN ATTORNEY OF EXECUTIVE’S CHOICE BEFORE SIGNING THIS AGREEMENT.

 

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IN WITNESS WHEREOF, the Parties have duly executed and delivered this Executive Employment Agreement as of the date first above written.

 

EXECUTIVE    

LB PHARMACEUTICALS INC

/s/ Roger Sawhney     By:   /s/ Zachary Prensky
Roger Sawhney     Name: Zachary Prensky
Date: 6/12/2024     Date: 6/19/2024

 

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Exhibit A

CONFIDENTIAL INFORMATION AND INVENTIONS ASSIGNMENT

AGREEMENT

 

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Exhibit 10.23

LB PHARMACEUTICALS, INC.

May 6, 2025 (modified May 21, 2025)

Roger Sawhney

Via Email

 

Re:

Separation Agreement

Dear Roger:

This letter sets forth the substance of the separation agreement (the “Agreement”) which LB Pharmaceuticals Inc. (the “Company”) is offering to you to aid in your employment transition.

1. Separation Date. Your last day of work with the Company and your employment termination date will be May 7, 2025 (the “Separation Date”).

2. Accrued Salary. On the next regular payroll date following the Separation Date, the Company will pay you all accrued salary and all accrued and unused vacation earned through the Separation Date, subject to standard payroll deductions and withholdings. You acknowledge that you will receive these payments regardless of whether or not you execute this Agreement.

3. Severance Benefits. You are eligible for certain severance benefits pursuant to Section 3(c) of your Executive Employment Agreement with the Company dated June 12, 2024 (the “Employment Agreement”). If you return this fully signed and dated Agreement to the Company within the time frame specified below (but no earlier than the Separation Date), do not revoke it, and fully comply with your obligations under this Agreement and your Employment Agreement, then the Company will, in accordance with the Employment Agreement (collectively, the “Severance Preconditions”), provide you with the following severance benefits (the “Severance Benefits”):

(a) Severance. The Company will pay you, as severance, the equivalent of nine (9) months of your base salary in effect as of the Separation Date, subject to standard payroll deductions and withholdings (the “Severance”). The Severance will be paid in roughly equal installments over a nine (9)-month period on the Company’s regular payroll dates, beginning with the first such date to occur at least eight (8) days after the Effective Date (as defined below), provided you have signed and not revoked the Agreement by such date.

(b) COBRA Severance Benefit. If you are eligible for and timely and properly elect group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse you for monthly COBRA premiums payable to continue coverage for you and your eligible dependents until the earliest of: (x) nine (9) months following the Separation Date; (y) the expiration of your eligibility for the continuation coverage under COBRA; and (z) the date when you become eligible for substantially equivalent health insurance coverage in connection with new employment. Such reimbursement shall be paid to you no later than the end of the month immediately following the month in which you timely remit each COBRA premium payment.


(c) Accelerated Vesting Benefit. As an additional Severance Benefit, the Company will accelerate the vesting of certain shares subject to your Option (as defined below) pursuant to Section 6 of this Agreement.

(d) Retention of Laptop Computer. As an additional Severance Benefit, the Company will permit you to retain the Company-issued laptop computer provided to you during your employment; provided, however, that you agree to reasonably cooperate with the Company to confirm all files stored on the computer are intact and all Company confidential information and trade secrets have been saved in a designated location or deleted as instructed by the CEO.

The Company is offering severance to you in reliance on Treasury Regulation Section 1.409A- 1(b)(9) and the short-term deferral exception in Treasury Regulation Section 1.409A-1(b)(4). Any payments made in reliance on Treasury Regulation Section 1.409A-1(b)(4) will be made not later than March 15 of the year following the year in which the Separation Date occurs. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (“Code Section 409A”), your right to receive any installment payments under this letter (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment. To the extent that any Severance Benefits are not otherwise exempt from the application of Code Section 409A, then, if the period during which you may consider and sign this Agreement spans two calendar years, the payment of severance will not be made or begin until the later calendar year.

4. Benefit Plans. If you are currently participating in the Company’s group health insurance plans, including medical, dental, and/or vision, plans, your participation as an employee will end on May 31, 2025. Thereafter, to the extent provided by the federal COBRA law or, if applicable, state insurance laws, and by the Company’s current group health insurance policies, you will be eligible to continue your group health insurance benefits at your own expense, with the potential for certain payments to be made by the Company as described in Section 3(b) above.

5. Unemployment Insurance. You may be eligible for unemployment insurance benefits after the Separation Date. You acknowledge that whether you receive unemployment compensation will be decided by the applicable agency that is charged with unemployment insurance matters in your state, and not by the Company. That agency can provide you with benefits and eligibility information regarding unemployment compensation.

6. Stock Option. You were granted an option to purchase certain shares of the Company’s common stock (the “Option”) pursuant to the Company’s 2023 Stock Incentive Plan (the “Plan”). In accordance with the terms of the Plan and your applicable Option agreement (together with the Plan, the “Option Documents”), vesting of your Option will cease as of Separation Date. As of the Separation Date, no shares subject to the Option have vested. Notwithstanding the foregoing, if you satisfy the Severance Preconditions and subject to approval by the Company’s Board of Directors, the Company will modify and accelerate the vesting of your Option such that 25% of the shares subject to the Option will be treated as vested and exercisable as of the Separation Date. Except as otherwise modified herein, all terms, conditions and limitations applicable to the Option remain in full force and effect pursuant to the Option Documents.


7. Other Compensation or Benefits. You acknowledge that, except as expressly provided in this Agreement, you will not receive any additional compensation, severance, commissions, bonuses or benefits after the Separation Date. You also acknowledge that the Company’s provision of the Severance Benefits set forth in Section 3 above fully satisfy any severance or other obligations under the Employment Agreement.

8. Expense Reimbursements. Within ten (10) days following the Separation Date, you agree to submit your final documented expense reimbursement statement reflecting all business expenses you incurred through the Separation Date, if any, for which you seek reimbursement. The Company will reimburse you for reasonable business expenses pursuant to its regular business practice.

9. Return of Company Property. Within three (3) days following the Separation Date, you agree to return to the Company all Company documents (and all copies thereof) and other Company property that you have had in your possession at any time, including, but not limited to, Company files, notes, drawings, records, business plans and forecasts, financial information, specifications, computer-recorded information, tangible property (including, but not limited to, computers), credit cards, entry cards, identification badges and keys; and, any materials of any kind that contain or embody any proprietary or confidential information of the Company (and all reproductions thereof); provided, however, you may be permitted to retain your Company-issued laptop computer after the Separation Date as described in Section 3(d) above. In addition, if you have used any personally owned computer, device, server, or e-mail system to receive, store, review, prepare or transmit any confidential or proprietary data, materials or information of the Company, then within three (3) days following the Separation Date (or earlier if requested by the Company), you must provide the Company with a computer-useable copy of such information and then permanently delete and expunge such confidential or proprietary information from those systems without retaining any reproductions (in whole or in part); and you agree to provide the Company access to your system, as requested, to verify that the necessary copying and deletion is done. Receipt of the Severance Benefits set forth in Section 3 above is conditioned upon your timely compliance with this section.

10. Proprietary Information and Post-Termination Obligations. Both during and after your employment you acknowledge your continuing obligations under your Confidentiality and Proprietary Rights Agreement (the “Confidential Information Agreement”) not to use or disclose any confidential or proprietary information of the Company and to refrain from certain other activities. A copy of your Confidential Information Agreement is attached hereto as Exhibit A. As you know, the Company will enforce its contract rights. Please familiarize yourself with the enclosed agreement which you signed. Confidential information that is also a “trade secret,” as defined by law, may be disclosed (A) if it is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, in the event that you file a lawsuit for retaliation by the Company for reporting a suspected violation of law, you may disclose the trade secret to your attorney and use the trade secret information in the court proceeding, if you: (A) file any document containing the trade secret under seal; and (B) do not disclose the trade secret, except pursuant to court order.


11. Confidentiality. The provisions of this Agreement will be held in strictest confidence by you and will not be publicized or disclosed in any manner whatsoever; provided, however, that: (a) you may disclose this Agreement to your immediate family; (b) you may disclose this Agreement in confidence to your attorney, accountant, auditor, tax preparer, and financial advisor; and (c) you may disclose this Agreement insofar as such disclosure may be required by law and you may disclose the underlying facts of any claim or potential claim you have for discrimination, retaliation or harassment. Notwithstanding the foregoing, nothing in this Agreement shall limit your right to voluntarily communicate with the Equal Employment Opportunity Commission, United States Department of Labor, the National Labor Relations Board, the Securities and Exchange Commission, other federal government agency, similar state or local agency, or an attorney you retain, or to discuss the terms and conditions of your employment with others to the extent expressly permitted by Section 7 of the National Labor Relations Act. You acknowledge and agree that you do not possess any claim or allegation, either asserted or otherwise, involving harassment or discrimination, that may be subject to or covered under N.Y. C.P.L.R. § 5003-B and the N.Y. General Obligations Law § 5-336.

12. Mutual Non-Disparagement. Consistent with Section 6 of the Employment Agreement, you shall not, during or after employment, make, directly or indirectly, any public or private statements, gestures, signs, signals or other verbal or nonverbal communications that belittle, disparage or otherwise express disapproval of the Company or any of its affiliates or their respective businesses, or any of their past or present officers, directors, employees, advisors, agents, policies, procedures, practices, decision-making, conduct, professionalism or compliance with standards, except as and to the extent required to comply with applicable federal or state law. As part of this Agreement, the Company also agrees not to disparage you in any manner likely to be harmful to you or your business or personal reputation, and the Company’s obligations under this Section are limited to the Company’s current officers and directors. Notwithstanding the foregoing, nothing in this Agreement shall limit your right to voluntarily communicate with the Equal Employment Opportunity Commission, the United States Department of Labor, the National Labor Relations Board, the Securities and Exchange Commission, other federal government agency or similar state or local agency or to discuss the terms and conditions of your employment with others to the extent expressly permitted by Section 7 of the National Labor Relations Act. In addition, nothing in this Section or this Agreement is intended to prohibit or restrain you in any manner from making disclosures protected under the whistleblower provisions of federal or state law or regulation or other applicable law or regulation. You acknowledge and agree that you do not possess any claim or allegation, either asserted or otherwise, involving harassment or discrimination, that may be subject to or covered under N.Y. C.P.L.R. § 5003-B and the N.Y. General Obligations Law § 5-336. Furthermore, you may disclose the underlying facts of any claim or potential claim you may have for discrimination, retaliation or harassment.

13. Cooperation after Termination. During the period in which you are receiving payments under this Agreement, you agree to cooperate fully with the Company in all matters relating to the transition of your work and responsibilities on behalf of the Company, including, but not limited to, any present, prior or subsequent relationships and the orderly transfer of any such work and institutional knowledge to such other persons as may be designated by the Company, by making yourself reasonably available during regular business hours.

14. Release.

(a) General Release of Claims. In exchange for the consideration provided to you under this Agreement to which you would not otherwise be entitled, you hereby generally and completely release the Company, and its affiliated, related, parent and subsidiary entities, and its and their current and former directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, insurers, affiliates, and assigns (the “Company Parties”) from any and all claims, liabilities, demands, causes of action, and obligations, both known and unknown, arising from or in any way related to events, acts, conduct, or omissions occurring at any time prior to and including the date you sign this Agreement.


(b) Scope of Release. This general release includes, but is not limited to: (i) all claims arising from or in any way related to your employment with the Company or the termination of that employment; (ii) all claims related to your compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership, equity, or profits interests in the Company; (iii) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (iv) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (v) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act, as amended (“ADEA”), the New York State Human Rights Law, the New York Executive Law, the New York Civil Practice Law and Rules, the New York Judiciary Law, the New York Corrections Law, the New York Labor Law, the New York Civil Rights Law, the New York City Administrative Code, the New York City Human Rights Law, the New York Hours of Labor Law, the New York Wage Payment Law, the New York Minimum Wage Act, the New York Whistleblower Law, the New York Off-Duty Conduct Lawful Activities Discrimination Law, the New Jersey Law Against Discrimination, the New Jersey Equal Pay Act, the New Jersey Conscientious Employee Protection Act, the New Jersey Civil Rights Act, the New Jersey Family Leave Act, the New Jersey State Wage and Hour Law, and the New Jersey Wage Withholding Protection Law.

(c) ADEA Release. You acknowledge that you are knowingly and voluntarily waiving and releasing any rights you have under the ADEA, and that the consideration given for the waiver and releases you have given in this Agreement is in addition to anything of value to which you were already entitled. You further acknowledge that you have been advised, as required by the ADEA, that: (i) your waiver and release does not apply to any rights or claims arising after the date you sign this Agreement; (ii) you should consult with an attorney prior to signing this Agreement (although you may choose voluntarily not to do so); (iii) you have forty- five (45) days to consider this Agreement (although you may choose voluntarily to sign it sooner); (iv) you have seven (7) days following the date you sign this Agreement to revoke this Agreement (in a written revocation sent to the Company); and (v) this Agreement will not be effective until the date upon which the revocation period has expired, which will be the eighth day after you sign this Agreement provided that you do not revoke it (the “Effective Date”). You further acknowledge that you have received (as Exhibit B hereto) the disclosure statement required under the ADEA which provides you with additional information regarding the group layoff of which you are a part (the “ADEA Disclosure Schedule”).


(d) Exceptions. Notwithstanding the foregoing, you are not releasing the Company hereby from: (i) any claims that may arise from events that occur after the date this waiver is execute; (ii) any existing obligation to indemnify you pursuant to the Articles and Bylaws of the Company, any valid fully executed indemnification agreement with the Company, applicable law, or applicable directors and officers liability insurance; (iii) any claims that cannot be waived by law, including, without limitation, any rights you may have under applicable workers’ compensation laws and your right, if applicable, to file or participate in an investigative proceeding of any federal, state, or local government agency; or (iv) any claims for breach of this Agreement.

15. Protected Rights. You understand that nothing in this Agreement has limited, currently limits, or shall limit your ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Department of Labor, the National Labor Relations Board, the Occupational Safety and Health Administration, the New York State Department of Labor, the Department of Justice, the Securities and Exchange Commission, or any other government agency, law enforcement agency, or commission (“Government Agencies”). You further understand this Agreement does not limit your ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. While this Agreement does not limit your right to receive a government-issued award for information provided to any Government Agency in connection with a government whistleblower program or protected whistleblower activity, you understand and agree that, to maximum extent permitted by law, you are otherwise waiving any and all rights you may have to individual relief based on any claims that you have released and any rights you have waived by signing this Agreement. Nothing in this Agreement has prevented, currently prevents, or shall prevent you from discussing or disclosing information about unlawful acts in the workplace, such as harassment, or discrimination or any other conduct that you have reason to believe is unlawful. Additionally, nothing in this Agreement waives any rights you may have under Section 7 of the National Labor Relations Act (subject to the release of claims set forth herein).

16. Your Acknowledgments and Affirmations. You acknowledge and agree that (i) the consideration given to you in exchange for the waiver and release in this Agreement is in addition to anything of value to which you were already entitled; and (ii) that you have been paid for all time worked, have received all the leave, leaves of absence and leave benefits and protections for which you are eligible, and have not suffered any on-the-job injury for which you have not already filed a claim. You affirm that all of the decisions of the Company Parties regarding your pay and benefits through the date of your execution of this Agreement were not discriminatory based on age, disability, race, color, sex, religion, national origin or any other classification protected by law. You affirm that you will not voluntarily (except in response to legal compulsion or as permitted in Section 15 above) assist any person in bringing or pursuing any proposed or pending litigation, arbitration, administrative claim or other formal proceeding against any of the Company Parties. You further affirm that you have no known workplace injuries or occupational diseases. You acknowledge and affirm that you have not been retaliated against for reporting any allegation of corporate fraud or other wrongdoing by any of the Company Parties, or for exercising any rights protected by law, including any rights protected by the Fair Labor Standards Act, the Family and Medical Leave Act, the New York Paid Family Leave Act, any related statute or local leave or disability accommodation laws, or any applicable state workers’ compensation law.

17. No Admission. This Agreement does not constitute an admission by the Company of any wrongful action or violation of any federal, state, or local statute, or common law rights, including those relating to the provisions of any law or statute concerning employment actions, or of any other possible or claimed violation of law or rights.


18. Breach. You agree that upon any breach of this Agreement you will forfeit all amounts paid or owing to you under this Agreement. Further, you acknowledge that it may be impossible to assess the damages caused by your violation of the terms of Sections 9, 10, 11, and 12 of this Agreement and further agree that any threatened or actual violation or breach of those Sections of this Agreement will constitute immediate and irreparable injury to the Company. You therefore agree that any such breach of this Agreement is a material breach of this Agreement, and, in addition to any and all other damages and remedies available to the Company upon your breach of this Agreement, the Company shall be entitled to an injunction to prevent you from violating or breaching this Agreement. You agree that if the Company is successful in whole or part in any legal or equitable action against you under this Agreement, you agree to pay all of the costs, including reasonable attorneys’ fees, incurred by the Company in enforcing the terms of this Agreement. You also affirm and agree that, consistent with Section 11(h) of the Employment Agreement, any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution or interpretation of this Agreement or your Employment Agreement, your employment with the Company, or the termination of such employment, including but not limited to all statutory claims, will be resolved pursuant to binding and confidential arbitration under the terms and conditions set forth in Section 11(h) of the Employment Agreement.

19. Miscellaneous. This Agreement, including Exhibits A and B, constitutes the complete, final and exclusive embodiment of the entire agreement between you and the Company with regard to this subject matter. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations. This Agreement may not be modified or amended except in a writing signed by both you and a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination will not affect any other provision of this Agreement and the provision in question will be modified by the court so as to be rendered enforceable. This Agreement will be deemed to have been entered into and will be construed and enforced in accordance with the laws of the State of New York as applied to contracts made and to be performed entirely within New York.

If this Agreement is acceptable to you, please sign below and return it to me on or before the date that is forty-five (45) days after you receive this Agreement (but no earlier than the Separation Date). The Company’s severance offer contained herein will automatically expire if you do not sign and return the fully signed Agreement within this timeframe.

[SIGNATURES TO FOLLOW ON NEXT PAGE]


Sincerely,

 

LB PHARMACEUTICALS, INC.

By:   /s/ Heather Turner    5/22/2025
 

Heather Turner

 

Chief Executive Officer

I have read, understand and agree fully to the foregoing Agreement. I understand that this Agreement includes a release of all known and unknown claims, even those unknown claims that, if known by me, would affect my decision to accept this Agreement.

 

/s/ Roger Sawhney

Roger Sawhney

5/22/2025

Date

Exhibt A – Confidential Information Agreement

Exhibit B – ADEA Disclosure Schedule


Exhibit A

Confidentiality and Proprietary Rights Agreement


Exhibit B

ADEA Disclosure Schedule

The following chart was prepared as of May 6, 2025. It shows the employees by job title in the decisional unit whose employment will be terminated pursuant to the business reorganization announced on or about May 6, 2025 (the “Reorganization”) and the factors used to determine who was eligible for termination. Employees who will be terminated will be eligible for benefits based upon their execution of a waiver. These data are subject to change and may be affected by future employment decisions.

Those receiving this disclosure will have forty-five (45) days to review the terms and conditions of the severance package.

The employment of the following individuals employed by the Company (identified by job title and age) will be terminated in the Reorganization:

 

   

Job Title

  

Age

  Chief Scientific Officer    55
    
  Chief Financial Officer    55
    
  Director of Clinical Data Management    42
    
  Project Manager - Drug Development    30
    
  Executive Assistant    27
    
  Administrative Assistant    26
    

The employment of the following individuals employed by the Company (identified by job title and age) will not be terminated as part of the Reorganization.

 

   

Job Title

  

Age

  Head of Clinical Operations    68
    
  Clinical Budget Analyst    64
    
  Senior Vice President of Technical Operations    57
    
  Corporate Controller    56
    
  Senior Vice President of Finance    54
    
  Clinical Trial Associate    52
    


  Chief Executive Officer    52
  Chief Medical Officer    50
  Executive Assistant    50
  Chief Business Officer    48
  Senior Director of Corporate Administration    48
  Senior Director of Data Analysis    35
  IT Manager    31
  Senior Clinical Operations Manager    30
  Senior Accountant    30
  Project Manager - Clinical Operations    26

The factors used to determine eligibility for the Reorganization are:

 

  1)

the Company’s assessment of its current and projected business and cost-reduction needs;

 

  2)

plans for various of its business functions;

 

  3)

ability for certain functions to be absorbed by others;

 

  4)

non-essential, surplus and redundant positions and/or services;

 

  5)

skillset and experience; and

 

  6)

job performance.

Not all criteria were used to make every selection.

Exhibit 10.25

RPC-[NUMBER]

AMENDED AND RESTATED ROYALTY PARTICIPATION AGREEMENT

THIS AMENDED AND RESTATED ROYALTY PARTICIPATION AGREEMENT (this “Agreement”) is made and entered into as of August 28, 2023, by and between LB Pharmaceuticals Inc, a Delaware corporation (the “Company” or “LB”), and [NAME OF HOLDER] (the “Investor”).

WHEREAS, the Company and the Investor previously entered into that certain Royalty Participation Agreement dated July 1, 2016 (the “Prior Agreement”), pursuant to which the Company granted to the Investor a Royalty Participation Certificate (as defined in the Prior Agreement) as additional consideration for the Investor’s purchase of securities from the Company, the proceeds from which were to be used for the purpose of conducting scientific research on the viability of LB-102, a new chemical entity that is a methylated version of amisulpride as described more fully on Appendix A attached hereto (“LB-102”); and

WHEREAS, the Company has proposed to enter into a Series C Preferred Stock Purchase Agreement with certain purchasers, and as an additional inducement to such purchasers to enter into such purchase agreement and purchase from the Company shares of its Series C Preferred Stock, the Company and the Investor desire to amend and restate the Prior Agreement in order to modify the terms of royalties payable to the Investor on future sales of LB-102 and to make certain other modifications to the Prior Agreement, the as set forth herein.

 

1


NOW, THEREFORE, in consideration of the premises and covenants set forth herein, and for other good and valuable consideration, the above parties agree as follows:

SECTION ONE

As partial consideration for the Investor’s investment of $[AMOUNT] in the Founders Round (as defined in the Prior Agreement), the Company hereby grants to the Investor a fully-paid, transferrable and non-assessable (subject to the limitations in Section 4 and 5, below) Royalty Participation Certificate (“RPC”) in the amount of [PERCENT]% (“Base Royalty Rate”) of Net Sales of LB-102, which rate shall increase to [PERCENT]% (the “Increased Royalty Rate,” and together with the Base Royalty Rate, the “Royalty Rate”) with respect to Net Sales made from and after January 1, 2036.

“Net Sales” means (A) with respect to commercial sales made by LB, the total amount invoiced by LB, less the following deductions to the extent included in the total invoiced price or otherwise documented, as determined in accordance with U.S. generally accepted accounting principles (“GAAP”): (i) sales, tariff duties, excise, use and value-added taxes shown on the face on the invoice; (ii) all reasonable and customary discounts, returns, credits and allowances on account of returns actually given; (iii) reasonable and customary arm’s-length negotiated commissions actually paid to independent and non-affiliated third party distributors and sales agents; and (iv) reasonable and customary outbound transportation and transportation insurance, packaging (for shipping purposes only) and freight charges; and (B) with respect to commercial sales of LB-102 made by any third party licensee of LB, the amount of net revenue received or receivable by LB as a result of such third party sales (whether in the form of royalties or other LB-102 revenue-based payments), as determined in accordance

 

2


with GAAP; provided that, for the avoidance of doubt, payments received by LB from a licensee in the form of up-front license payments, milestone payments (other than milestones based solely on sales of LB-102 by the licensee), payments in respect of research and development activities and such similar payments shall not be deemed Net Sales for purposes of this Agreement.

This Agreement is one of a number of such similar royalty participation agreements evidencing total aggregate Base Royalty Rate payments of 2.75% and total Increased Royalty Rate payments of 3.25% granted by LB to various owners of RPCs (the “RPC Owners”), including Investor. LB agrees that its obligations to any one RPC Owner shall not be set aside, made superior in any way whether by note, deed or otherwise, such that payments shall be made or accrued to any RPC Owner that would grant a preference or right to such RPC Owner over and above any other RPC Owner. LB shall not grant any preference in payment, payment terms, information rights or any other rights to any one RPC Owner unless all RPC Owners receive such benefit(s). All payments made by LB to all RPC Owners pursuant to this Agreement shall be made contemporaneously and in exact proportion to the respective royalty amount issued to each RPC Owner.

SECTION TWO

LB shall be responsible to maintain accurate books and records evidencing Net Sales and report such Net Sales to the RPC Owners on a quarterly basis with such reporting sent to RPC Owners within forty-five (45) days of the end of every quarterly period commencing with the quarter in which the first commercial sale of LB-102 occurs. Such reporting obligations shall not cease until LB-102 is no longer commercially sold.

 

3


Payments to the RPC Holder shall be calculated as follows, within the ROW ADJUSTMENT FACTOR as defined in Section 3.

PAYMENT OWED BY LB = (NET SALES OF LB-102 X APPLICABLE

ROYALTY RATE) X ROW ADJUSTMENT FACTOR

For the purpose of this Agreement, any and all payments received by LB in furtherance of clinical studies, trials, experiments or FDA authorized sole-patient IND or other emergency authorization usages shall not be considered Net Sales in any respect and LB shall not be liable for royalty payments on such amounts.

Payment by LB to the Investor shall be made contemporaneously with payments to all RPC Owners and within ninety (90) days following the end of the applicable quarter. All reports and payments made by LB to the Investor shall include a breakdown of royalties by country and/or geographic region. LB shall provide the Investor with standard and customary tax reporting documentation within thirty (30) days after year’s end. The Investor will provide LB any and all tax information, including relevant social security numbers and/or Tax ID# to enable LB to fulfill its tax reporting requirements.

SECTION THREE

For any Net Sales resulting from sales of LB-102 made within the United States and/or Canada, LB shall be responsible to pay the Royalty Rate to the owner of this RPC as stated above in Section 1. The ROW ADJUSTMENT FACTOR therefore for all sales within the United States and Canada shall be 1.00.

 

4


With respect to Net Sales resulting from sales of LB-102 made in all countries outside of the United States and Canada, the following ROW ADJUSTMENT FACTORS shall apply:

Group One (“G1”) The ROW ADJUSTMENT FACTOR shall equal 0.80 Brazil, Japan, South Korea, Australia, New Zealand, Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Switzerland, Sweden, United Kingdom

Group Two (“G2”) The ROW ADJUSTMENT FACTOR shall equal 0.70 China, India, Russia, Vietnam, Singapore, Mexico, Argentina, Bolivia, Chile, Columbia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay, Venezuela, Antigua, Bahamas, Belize, Costa Rica, Columbia, Panama, Jamaica, Honduras

Group Three (“G3”) The ROW ADJUSTMENT FACTOR shall equal 0.60 All Other Countries Not Listed in Either G1 or G2

SECTION FOUR

Subject to compliance with the terms and conditions of this Section 4, this RPC and all rights hereunder are transferable, without charge to the holder hereof (except for transfer taxes), upon surrender of this RPC accompanied by written and notarized instructions of transfer.

The Investor may not transfer this RPC to any individual, entity, corporation, partnership or any other such organization without the written consent of the Company, which shall not be unreasonably withheld. However, no such transfer of this RPC shall be permitted to (1) any person or organization to whom it is unlawful for LB to make payments hereunder, (2) any person or organization that owns, controls or possesses the voting rights in the aggregate to more than 10% of the common stock of LB, or (3) any person or organization that competes with the Company, as determined by the Board of Directors of the Company in its sole discretion.

 

5


All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (a) three (3) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (d) one business day after transmittal electronically by email, and shall be addressed (i) if to the Investor, at the Investor’s address as set forth on the Founders Financing Schedule of Investors listed in the Note Purchase Agreement, and (ii) if to the Company, at the address of its principal; corporate offices (attention: CEO), 575 Madison Avenue 10th Floor, New York, NY 10022 or at such other address as a party may designate by ten (10) days advance written notice to the other party pursuant to the provisions above.

SECTION FIVE

LB may effectuate the purchase of all issued and outstanding RPCs by way of an offer to all RPC Owners simultaneously (“Tender Offer”), which shall become binding on all RPC Owners at such time as the holders of two-thirds of all outstanding RPC interests (“Tender Threshold”) agree in writing to accept the Tender Offer under the terms described therein. The Tender Threshold shall be calculated according to the Base Royalty Rate of each individual RPC Owner. For example, if the aggregate Base Royalty Rates of all outstanding RPCs equals 2.75%, then the required Tender Threshold shall be met if RPC Owners holding an aggregate of at least 1.833% of the total Base Royalty Rate have agreed to the Tender Offer.

 

6


Payment under any Tender Offer shall be made within twenty (20) days of the acceptance of the Tender Offer by enough RPC Owners such that the Tender Threshold is met. Any Tender Offer that does not provide for payments to all RPC Owners contemporaneously and in the exact proportion to the royalty amount issued to each RPC Owner shall not be considered a valid Tender Offer for the purposes of this Section 5.

SECTION SIX

Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in New York City, in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

This Agreement is intended to, and hereby does, supersede the Prior Agreement and is deemed to amend and restate the Prior Agreement in all respects. This Agreement constitutes the full and complete understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly cancelled.

[Signature page follows.]

 

7


IN WITNESS WHEREOF, the parties have executed this Agreement intending to be bound hereby as of the Date specified above.

 

INVESTOR:   

COMPANY:

 

[NAME]   

LB PHARMACEUTICALS INC

 

  

A Delaware Corporation

 

 

   By:   

 

      Zachary Prensky
      Its: Chief Executive Officer

 

8

Exhibit 10.26

LEASE

between

ONE PENN PLAZA LLC,

Landlord,

and

LB PHARMACEUTICALS, INC.,

Tenant.

One Penn Plaza (a/k/a PENN 1)

New York, New York 10119

As of May 20, 2024


TABLE OF CONTENTS

 

Article/Section        Page  

Article 1 DEMISE, TERM, FIXED RENT

     1  

1.1

  Demise      1  

1.2

  Commencement Date      1  

1.3

  Rent Commencement Date      3  

1.4

  Fixed Rent      3  

1.5

  Payments of Fixed Rent      3  

1.6

  Certain Definitions      4  

Article 2 ESCALATION RENT

     6  

2.1

  Operating Expense Definitions      6  

2.2

  Calculation of Operating Expenses      10  

2.3

  Operating Expense Payment      13  

2.4

  Auditing of Operating Expense Statements      16  

2.5

  Tax Definitions      18  

2.6

  Tax Payment      19  

2.7

  Tax Reduction Proceedings      21  

2.8

  Condominium Conversion      23  

2.9

  Building Additions      24  

2.10

  Local Law 97      24  

Article 3 USE

     26  

3.1

  Permitted Use      26  

3.2

  Limitations      27  

3.3

  Rules      27  

3.4

  Risers      28  

3.5

  Promotional Displays      29  

3.6

  Core Toilets      29  

3.7

  Wireless Internet Service      29  

3.8

  Telecommunications      29  

3.9

  Tenant’s Signage      29  

3.10

  Sustainability Practices      30  

Article 4 SERVICES

     31  

4.1

  Certain Definitions      31  

4.2

  Elevator Service      31  

4.3

  Heat, Ventilation and Air-Conditioning      32  

4.4

  Cleaning      33  

4.5

  Water      34  

4.6

  Directory      34  

4.7

  Condenser Water      35  

4.8

  Building Security      35  

4.9

  Building Standard Directional Signage      36  

 

i


4.10

  Building Amenities      36  

4.11

  Labor Harmony      36  

4.12

  No Other Services      37  

Article 5 ELECTRICITY

     37  

5.1

  Capacity      37  

5.2

  Electricity for the Building      37  

5.3

  Submetering      37  

5.4

  Termination of Electric Service      40  

Article 6 INITIAL CONDITION OF THE PREMISES

     40  

6.1

  Condition of Premises      40  

6.2

  Landlord’s Work      41  

6.3

  Notices to Tenant Regarding Landlord’s Work      45  

Article 7 ALTERATIONS

     45  

7.1

  General      45  

7.2

  Basic Alterations      46  

7.3

  Approval Process      46  

7.4

  Performance of Alterations      48  

7.5

  Financial Integrity      49  

7.6

  Effect on Building      51  

7.7

  Time for Performance of Alterations      51  

7.8

  Removal of Alterations and Tenant’s Property      52  

7.9

  Contractors and Supervision      53  

7.10

  Pantry      53  

7.11

  Window Coverings      53  

7.12

  Air-Cooled HVAC Installations      54  

Article 8 REPAIRS

     54  

8.1

  Landlord’s Repairs      54  

8.2

  Tenant’s Repairs      54  

8.3

  Certain Limitations      55  

8.4

  Overtime      55  

Article 9 ACCESS; LANDLORD’S CHANGES

     56  

9.1

  Access      56  

9.2

  Landlord’s Obligation to Minimize Interference      57  

9.3

  Reserved Areas      57  

9.4

  Ducts, Pipes and Conduits      58  

9.5

  Keys      58  

9.6

  Landlord’s Changes      58  

Article 10 UNAVOIDABLE DELAYS AND INTERRUPTION OF SERVICE

     59  

10.1

  Unavoidable Delays      59  

10.2

  Interruption of Services      60  

10.3

  Rent Credit      60  

 

ii


Article 11 REQUIREMENTS

     61  

11.1

  Tenant’s Obligation to Comply with Requirements      61  

11.2

  Landlord’s Obligation to Comply with Requirements      62  

11.3

  Certificate of Occupancy      62  

Article 12 QUIET ENJOYMENT

     63  

12.1

  Quiet Enjoyment      63  

Article 13 SUBORDINATION

     63  

13.1

  Subordination      63  

13.2

  Attornment      64  

13.3

  Amendments to this Lease      66  

13.4

  Tenant’s Estoppel Certificate      66  

13.5

  Landlord’s Estoppel Certificate      67  

13.6

  Rights to Cure Landlord’s Default      67  

13.7

  Zoning Lot Merger Agreement      67  

13.8

  Tenant’s Financial Statements      68  

Article 14 INSURANCE

     69  

14.1

  Tenant’s Insurance      69  

14.2

  Landlord’s Insurance      70  

14.3

  Mutual Waiver of Subrogation      71  

14.4

  Evidence of Insurance      71  

14.5

  No Concurrent Insurance      72  

14.6

  Tenant’s Obligation to Comply with Landlord’s Fire and Casualty Insurance      72  

Article 15 CASUALTY

     72  

15.1

  Notice      72  

15.2

  Landlord’s Restoration Obligations      72  

15.3

  Rent Abatement      73  

15.4

  Landlord’s Termination Right      74  

15.5

  Tenant’s Termination Right      74  

15.6

  Termination Rights at End of Term      75  

15.7

  No Other Termination Rights      76  

Article 16 CONDEMNATION

     76  

16.1

  Effect of Condemnation      76  

16.2

  Condemnation Award      77  

16.3

  Temporary Taking      78  

Article 17 ASSIGNMENT AND SUBLETTING

     78  

17.1

  General Limitations      78  

17.2

  Landlord’s Expenses      80  

17.3

  Recapture Procedure      80  

17.4

  Certain Transfer Rights      84  

17.5

  Preliminary Approval      86  

 

iii


17.6

  Transfer Taxes      87  

17.7

  Transfer Profit      87  

17.8

  Permitted Transfers      89  

17.9

  Special Occupants      91  

Article 18 LANDLORD’S RIGHT TO RELOCATE TENANT

     92  

18.1

  Landlord’s Rights      92  

Article 19 DEFAULT

     94  

19.1

  Events of Default      94  

19.2

  Termination      96  

Article 20 TENANT’S INSOLVENCY

     96  

20.1

  Assignments pursuant to the Bankruptcy Code      96  

20.2

  Replacement Lease      97  

20.3

  Insolvency Events      98  

20.4

  Effect of Stay      99  

20.5

  Rental for Bankruptcy Purposes      100  

Article 21 REMEDIES AND DAMAGES

     100  

21.1

  Certain Remedies      100  

21.2

  No Redemption      101  

21.3

  Calculation of Damages      101  

Article 22 EXPENSES AND LATE CHARGES

     102  

22.1

  Landlord’s Costs      102  

22.2

  Tenant’s Costs      103  

22.3

  Interest on Late Payments      103  

Article 23 SECURITY

     104  

23.1

  Security Deposit      104  

23.2

  Landlord’s Rights      105  

23.3

  Return of Security      106  

23.4

  Transfer of Letter of Credit      106  

23.5

  Renewal of Letter of Credit      106  

Article 24 END OF TERM

     106  

24.1

  End of Term      106  

24.2

  Holdover      107  

Article 25 NO WAIVER

     107  

25.1

  No Surrender      107  

25.2

  No Waiver by Landlord      107  

25.3

  No Waiver by Tenant      108  

Article 26 JURISDICTION

     109  

26.1

  Governing Law      109  

26.2

  Submission to Jurisdiction      109  

26.3

  Waiver of Trial by Jury; Counterclaims      109  

 

iv


Article 27 NOTICES

     110  

27.1

  Addresses; Manner of Delivery      110  

Article 28 BROKERAGE

     111  

28.1

  Broker      111  

Article 29 INDEMNITY

     111  

29.1

  Tenant’s Indemnification of the Landlord Indemnitees      111  

29.2

  Landlord’s Indemnification of the Tenant Indemnitees      112  

29.3

  Indemnification Procedure      113  

Article 30 LANDLORD’S CONSENTS; ARBITRATION

     115  

30.1

  Certain Limitations      115  

30.2

  Expedited Arbitration      115  

Article 31 ADDITIONAL PROVISIONS

     116  

31.1

  Tenant’s Property Delivered to Building Employees      116  

31.2

  Not Binding Until Execution      116  

31.3

  No Third Party Beneficiaries      117  

31.4

  Extent of Landlord’s Liability      117  

31.5

  Extent of Tenant’s Liability      117  

31.6

  Survival      117  

31.7

  Recording      118  

31.8

  Entire Agreement      118  

31.9

  Counterparts and Electronic Signatures      118  

31.10

  Exhibits      118  

31.11

  Gender; Plural      118  

31.12

  Divisibility      118  

31.13

  Vault Space      118  

31.14

  Adjacent Excavation      119  

31.15

  Captions      119  

31.16

  Parties Bound      119  

31.17

  Authority      119  

31.18

  Rent Control      120  

31.19

  Consequential Damages      120  

31.20

  Tenant’s Advertising      120  

31.21

  Specially Designated Nationals; Blocked Persons; Embargoed Persons      121  

 

v


DEFINED TERMS

 

Term    Page  

Affiliate

     4  

Affiliate Occupant Threshold

     91  

Allocation and Protocol Notice

     25  

Alterations

     45  

Alterations Notice

     46  

Alterations Rules

     27  

Amortized Transfer Expenses

     81  

Anticipated Relocation Date

     92  

Applicable Rate

     4  

Architect

     41  

Assessed Valuation

     18  

Average Cost per Kilowatt Hour

     12  

Average Cost per Peak Demand Kilowatt

     12  

Bank Requirements

     104  

Bankruptcy Code

     96  

Base Electrical Capacity

     37  

Base Operating Expense Year

     6  

Base Operating Expenses

     6  

Base Rate

     4  

Base Tax Year

     18  

Base Taxes

     18  

Basic Alteration

     46  

Basic Sublease Provisions

     86  

Broker

     111  

Broker’s Cooperating Broker

     111  

Building

     1  

Building Change

     51  

Building Hours

     31  

Building Standard Installations

     41  

Building Systems

     31  

Business Days

     4  

Carbon Emissions Limits

     24  

Casualty Statement

     74  

Claim

     113  

Claim Against Landlord

     111  

Claim Against Tenant

     112  

Commencement Date

     1  

Condominium Board

     63  

Condominium Declaration

     63  

Consumer Price Index

     4  

 

vi


Contractor’s Liability Policy

     48  

Control

     5  

Decorative Alterations

     45  

Deficiency

     101  

Delivery Outside Date

     2  

Delivery Termination Date

     2  

Delivery Termination Notice

     2  

Delivery Termination Notice Date

     2  

Delivery Termination Outside Date

     2  

Electricity Additional Rent

     38  

Electricity Inclusion Charge

     39  

Embargoed Person

     121  

Escalation Rent

     5  

Event of Default

     94  

Excluded Amounts

     18  

Expedited Arbitration Proceeding

     115  

Expiration Date

     1  

Final Plans

     42  

Final Space Plan

     41  

Fixed Expiration Date

     1  

Fixed Rent

     3  

GAAP

     5  

Governmental Authority

     61  

Green Building Certification and Health & Safety Certification

     30  

Holidays

     5  

HVAC

     31  

HVAC Systems

     31  

Indemnitee

     113  

Indemnitor

     113  

Initial Alterations

     45  

Insolvency Events

     99  

Insolvency Party

     96  

ISO

     69  

Landlord

     1  

Landlord Indemnitees

     112  

Landlord’s Carbon Emission Determination

     25  

Landlord’s Property Policy

     71  

Landlord’s Relocation Work

     93  

Landlord’s Work

     41  

Lease

     1  

Lessor

     63  

Letter of Credit

     104  

Licensed Area

     5  

List

     121  

 

vii


Local Law 97

     24  

Local Law 97 Costs

     25  

Long Lead Work

     43  

Measurement Protocol

     24  

Monthly Operating Expense Payment Amount

     14  

Monthly Tax Payment Amount

     19  

Mortgage

     64  

Mortgagee

     64  

Net Worth Assignment Requirement

     88  

New Premises

     92  

Occupancy Agreement

     78  

OFAC

     121  

Old Premises

     92  

Operating Expense Payment

     10  

Operating Expense Statement

     10  

Operating Expense Year

     10  

Operating Expenses

     6  

Out-of-Pocket Costs

     5  

Overtime Freight Allocation

     32  

Overtime Periods

     31  

Performance Bond/Payment Bond Threshold

     49  

Permitted Party

     78  

Person

     6  

Plan Deadline

     41  

Plan Requirements

     41  

Predecessor Tenant

     98  

Premises

     1  

Property Management Charge

     6  

Proposed Transfer Terms

     80  

Prospective Operating Expense Statement

     14  

Prospective Tax Statement

     19  

Qualified Alteration

     53  

Real Property

     1  

Recapture Date

     81  

Recapture Procedure

     80  

Recapture Sublease

     81  

Recapture Sublease Notice

     81  

Recapture Subtenant

     81  

Recapture Termination

     83  

Recapture Termination Notice

     83  

Relocation Date

     93  

Relocation Effective Notice

     93  

Relocation Effective Notice Delivery Date

     93  

Relocation Notice

     92  

 

viii


Relocation Option

     92  

Rent Commencement Date

     3  

Rentable Area

     6  

Rental

     6  

Requirements

     61  

Reserved Areas

     57  

Revision Deadline

     42  

Risers

     28  

RPAPL

     96  

Rules

     28  

Second Bite Date

     75  

Security Amount

     104  

Settlement

     114  

Short-Term Sublease

     81  

Special Occupant

     91  

Specialty Alteration Approval Request

     52  

Specialty Alterations

     46  

Substantial Completion

     46  

Successor

     64  

Superior Lease

     64  

Sustainability and Certification Costs

     30  

Sustainability Practices

     30  

Swing Space License Agreement

     6  

Tax Payment

     19  

Tax Statement

     19  

Tax Year

     19  

Taxes

     18  

Tenant

     1  

Tenant Changes

     44  

Tenant Extra Work

     42  

Tenant Indemnitees

     112  

Tenant Obligor

     99  

Tenant Work Delays

     44  

Tenant’s Auto Policy

     69  

Tenant’s Carbon Emission Allocation

     24  

Tenant’s Initial Plans

     41  

Tenant’s Liability Policy

     69  

Tenant’s Operating Expense Share

     10  

Tenant’s Property

     46  

Tenant’s Property Policy

     69  

Tenant’s Statements

     68  

Tenant’s Tax Payment Commencement Date

     19  

Tenant’s Tax Share

     19  

Tenant’s Worker’s Compensation Policy

     69  

 

ix


Term

     1  

Term Sheet

     86  

Transfer

     78  

Transfer Date

     80  

Transfer Expenses

     80  

Transfer Inflow

     88  

Transfer Notice

     80  

Transfer Outflow

     88  

Transfer Profit

     87  

Transferee

     80  

Transferor

     80  

Unavoidable Delay

     59  

Usable Area

     6  

Utility Company

     13  

Work Access

     56  

Work Deposit

     50  

Work Letter

     41  

 

x


EXHIBITS

 

Exhibit “A” - Premises

Exhibit “3.3” - Rules

Exhibit “4.4” - Cleaning Specifications

Exhibit “6.2-1” - Final Space Plan

Exhibit “6.2-2” - Work Letter

 

 

xi


THIS LEASE (this “Lease”), dated as of the 20th day of May 2024, by and between ONE PENN PLAZA LLC, a New York limited liability company, having an address at c/o Vornado Office Management LLC, 888 Seventh Avenue, New York, New York 10019, as landlord, and LB PHARMACEUTICALS, INC., a Delaware corporation, having an address at 575 Madison Avenue, 10th Floor, New York, New York 10022, as tenant (the Person that holds the interest of the landlord hereunder at any particular time being referred to herein as “Landlord”; subject to Section 17.1(F) hereof, the Person that holds the interest of the tenant hereunder at any particular time being referred to herein as “Tenant”).

W I T N E S S E T H:

WHEREAS, Landlord wishes to demise and let unto Tenant, and Tenant wishes to hire and take from Landlord, on the terms and subject to the conditions set forth herein, the premises located on a portion of the tenth (10th) floor of the building that is known as PENN 1 and by the street address of One Penn Plaza, New York, New York 10119, as more particularly shown cross-hatched on Exhibit “A” attached hereto and made a part hereof (such premises being referred to herein as the “Premises”; such building being referred to herein as the “Building”; the Building, together with the plot of land on which the Building is constructed, being collectively referred to herein as the “Real Property”).

NOW, THEREFORE, in consideration of the premises, and other good and valuable consideration, the mutual receipt and legal sufficiency of which the parties hereto hereby acknowledge, Landlord and Tenant hereby agree as follows:

Article 1

DEMISE, TERM, FIXED RENT

1.1 Demise.

Subject to the terms hereof, Landlord hereby demises and lets to Tenant and Tenant hereby hires and takes from Landlord the Premises for the term to commence on the Commencement Date and to end on the last day of the calendar month during which occurs the day immediately preceding the date that is seven (7) years after the Rent Commencement Date (the “Fixed Expiration Date”; the Fixed Expiration Date, or such earlier date that the term of this Lease otherwise terminates pursuant to the terms hereof or pursuant to law, being referred to herein as the “Expiration Date”; the term commencing on the Commencement Date and ending on the Expiration Date being referred to herein as the “Term”).

1.2 Commencement Date.

(A) The Term shall commence on the later to occur of (i) July 19, 2024 and (ii) the date that Landlord delivers vacant and exclusive possession of the Premises to Tenant with Landlord’s Work Substantially Complete and otherwise in broom-clean condition (such later date being referred to herein as the “Commencement Date”).

 

1


(B) Landlord shall endeavor to Substantially Complete Landlord’s Work and deliver the Premises to Tenant on or prior to September 15, 2024; provided, however, in no event shall Landlord have any obligation to employ contractors or labor at overtime or premium pay rates or to incur any other overtime costs or expenses whatsoever to complete Landlord’s Work on or by any particular date. If the Commencement Date shall not occur or be deemed to have occurred on or prior to November 1, 2024, as such date shall be delayed by periods of any Unavoidable Delay not to exceed ninety (90) days in the aggregate and/or periods of any Tenant Work Delays (such date, as the same may be so delayed, the “Delivery Outside Date”), then as Tenant’s sole and exclusive remedy therefor (subject to this Section 1.2), Tenant shall receive a credit against the Fixed Rent in an amount equal to the product obtained by multiplying (i) Two Thousand and 80/100 Dollars ($2,000.80), by (ii) the number of days in the period commencing on the Delivery Outside Date until the day immediately preceding the date on which the Commencement Date shall occur or be deemed to have occurred. Any credit against the Fixed Rent to which Tenant is entitled pursuant to this Section 1.2(B) shall be applied, until fully depleted, against the Fixed Rent due and payable under this Lease from and after the Rent Commencement Date.

(C) Notwithstanding the foregoing to the contrary, if the Commencement Date shall not occur or shall not be deemed to occur on or prior to the ninetieth (90th) day following the Delivery Outside Date, as such date may be delayed by periods of any Unavoidable Delay not to exceed ninety (90) days in the aggregate and/or periods of any Tenant Work Delays (such ninetieth (90th) day following the Delivery Outside Date, as the same may be so delayed, the “Delivery Termination Outside Date”), then as Tenant’s sole and exclusive remedy therefor (subject to the terms of this Section 1.2), Tenant shall have the right to terminate this Lease by giving notice thereof (the “Delivery Termination Notice”) to Landlord on or prior to the fifth (5th) Business Day following the Delivery Termination Outside Date (such fifth (5th) Business Day following the Delivery Termination Outside Date, the “Delivery Termination Notice Date”), TIME BEING OF THE ESSENCE (but prior to the date that the Commencement Date shall occur or shall be deemed to occur). If (i) Tenant timely exercises Tenant’s right to terminate this Lease by delivering the Delivery Termination Notice to Landlord on or prior to the Delivery Termination Notice Date and (ii) the Commencement Date shall not occur or shall not be deemed to occur by the tenth (10th) Business Day following the date that Tenant gives such Delivery Termination Notice to Landlord (such tenth (10th) Business Day, the “Delivery Termination Date”), then (a) this Lease shall automatically terminate on the Delivery Termination Date, (b) from and after the Delivery Termination Date, subject to the terms hereof, neither party shall have any right or obligation to the other hereunder, except for those rights and obligations that expressly survive the Expiration Date, and (c) Landlord shall promptly return to Tenant any prepaid Fixed Rent and the unapplied portion of the Letter of Credit; it being understood, however, that if the Commencement Date shall occur or shall be deemed to have occurred on or before the Delivery Termination Date, then (x) the Delivery Termination Notice shall be deemed null and void, (y) this Lease shall remain in full force and effect and (z) Tenant shall have no further right to terminate this Lease pursuant to this Section 1.2(C).

 

2


1.3 Rent Commencement Date.

The term “Rent Commencement Date” shall mean the one hundred eighty-third (183rd) day after the Commencement Date.

1.4 Fixed Rent.

The annual fixed rent for the Premises (the annual fixed rent payable hereunder for the Premises at any particular time being referred to herein as the “Fixed Rent”) shall be an amount equal to:

(1) Seven Hundred Thirty Thousand Two Hundred Ninety-Two and 00/100 Dollars ($730,292.00) per annum ($60,857.67 per month) for the period commencing on the Rent Commencement Date and ending on day immediately preceding the date that is three (3) years after the Rent Commencement Date; and

(2) Seven Hundred Seventy-Four Thousand Eight Hundred Twenty-Two and 00/100 Dollars ($774,822.00) per annum ($64,568.50 per month) for the period commencing on the date that is three (3) years after the Rent Commencement Date and ending on the Fixed Expiration Date.

1.5 Payments of Fixed Rent.

(A) Subject to Section 1.5(E) hereof, Tenant shall pay the Fixed Rent in lawful money of the United States of America that is legal tender in payment of all debts and dues, public and private, at the time of payment, in equal monthly installments, in advance, on the first (1st) day of each calendar month during the Term commencing on the Rent Commencement Date, (i) at the office of Landlord or such other place as Landlord may designate from time to time on at least thirty (30) days of advance notice to Tenant or (ii) by wire transfer in accordance with the provisions of this Section 1.5, without any set-off, offset, abatement or deduction whatsoever (except to the extent otherwise expressly set forth herein).

(B) Landlord shall have the right to require Tenant to pay the Fixed Rent and any other items of Rental when due by wire transfer of immediately available funds to an account that Landlord designates from time to time on at least thirty (30) days of advance notice to Tenant.

(C) Subject to Section 1.5(B) hereof, Tenant shall have the right to pay the Fixed Rent and any other items of Rental by wire transfer of immediately available funds to an account that Landlord designates from time to time on at least thirty (30) days of advance notice to Tenant. Landlord shall so designate an account within thirty (30) days after Tenant’s request therefor from time to time.

 

3


(D) If the Rent Commencement Date is not the first (1st) day of a calendar month, then (x) the Fixed Rent due hereunder for the calendar month during which the Rent Commencement Date occurs shall be adjusted appropriately based on the number of days in such calendar month, and (y) subject to Section 1.5(E) hereof, Tenant shall pay to Landlord such amount (adjusted as aforesaid for such calendar month) on the Rent Commencement Date. If the Expiration Date is not the last day of a calendar month, then the Fixed Rent due hereunder for the calendar month during which the Expiration Date occurs shall be adjusted appropriately based on the number of days in such calendar month.

(E) Tenant shall pay to Landlord on the date hereof an amount equal to Sixty Thousand Eight Hundred Fifty-Seven and 67/100 Dollars ($60,857.67), which Landlord shall apply to the Fixed Rent that first comes due hereunder from and after the Rent Commencement Date until such amount is exhausted.

(F) Unless another due date or time period is provided in this Lease, any additional rent shall be paid by Tenant to Landlord within thirty (30) days after Landlord gives Tenant a statement, invoice or demand therefor. If Tenant shall fail to pay any additional rent when the same shall be due and payable in accordance with the terms of this Lease, Landlord shall have all rights, powers and remedies with respect hereto as are provided herein or by law in the case of nonpayment of any Fixed Rent.

1.6 Certain Definitions.

(A) The term “Affiliate” shall mean a Person that (1) Controls, (2) is under the Control of, or (3) is under common Control with, the Person in question.

(B) The term “Applicable Rate” shall mean, at any particular time, the lesser of (x) four hundred (400) basis points above the Base Rate at such time, and (y) the maximum rate permitted by applicable law at such time.

(C) The term “Base Rate” shall mean the rate of interest announced publicly from time to time by Citibank, N.A., or its successor, as its “prime lending rate” (or such other term as may be used by Citibank, N.A. (or its successor), from time to time, for the rate presently referred to as its “prime lending rate”).

(D) The term “Business Days” shall mean all days, excluding Saturdays, Sundays and Holidays.

(E) The term “Consumer Price Index” shall mean the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor, All Items (1982-84 = 100), seasonally adjusted, for the most specific area that includes the location of the Building (which the parties acknowledge is currently New York – Northern New Jersey – Long Island, NY – NJ – CT – PA), or any successor index thereto. If the Consumer Price Index is converted to a different standard reference base or otherwise revised, then the determination of adjustments provided for herein shall be made with the use of such conversion factor, formula or table for converting the Consumer Price Index as may be published by the Bureau of Labor Statistics or, if said Bureau does not publish such conversion factor, formula or table, then with the use of such conversion factor, formula or table as may be published by

 

4


Prentice-Hall, Inc. or any other nationally recognized publisher of similar statistical information. If the Consumer Price Index ceases to be published, and there is no successor thereto, then Landlord and Tenant shall use diligent efforts, in good faith, to agree upon a substitute index for the Consumer Price Index. Either party shall have the right to submit the issue of the designation of such substitute index to an Expedited Arbitration Proceeding.

(F) The term “Control” shall mean direct or indirect ownership of more than fifty percent (50%) of the outstanding voting stock of a corporation or other majority equity interest if not a corporation and the possession of power to direct or cause the direction of the management and policy of such corporation or other entity, whether through the ownership of voting securities, by statute or by contract.

(G) The term “Escalation Rent” shall mean the Rental payable to Landlord under Article 2 hereof.

(H) The term “GAAP” shall mean generally accepted accounting principles, consistently applied, except that if, at any time from and after the date hereof, the American Institute of Certified Public Accountants adopts international financial reporting standards as the basis for financial reporting in the United States, then references in this Lease to GAAP shall be deemed to be references to such international financial reporting standards, consistently applied.

(I) The term “Holidays” shall mean all days observed as legal holidays by either (x) the State of New York, (y) the United States of America, or (z) the labor unions that service the Building; provided, however, that if (x) all of the labor unions that service the Building do not observe a particular day as a holiday, and (y) the State of New York or the United States of America do not otherwise observe such day as a holiday, then such day shall constitute a Holiday for purposes hereof only to the extent that Landlord requires the services that are provided by members of the particular labor union to perform the corresponding service for Tenant hereunder (so that if, for example, (x) the labor union for office cleaning personnel observes a particular day as a holiday but the labor union for the engineers that operate the HVAC System does not observe such day as a holiday, and (y) the State of New York or the United States of America does not otherwise observe such day as a holiday, then such day shall constitute a Holiday for purposes of determining whether Landlord is required to provide office cleaning services on such day, but such day shall not constitute a Holiday for purposes of determining whether Landlord is required to provide HVAC services on such day).

(J) The term “Licensed Area” shall have the meaning ascribed to such term in the Swing Space License Agreement.

(K) The term “Out-of-Pocket Costs” shall mean costs that a Person pays to a third party that is not an Affiliate of such Person (and, accordingly, Out-of-Pocket Costs shall not include (i) the costs that such Person incurs in compensating its own employees to perform a service or supervise work within the scope of their employment, or (ii) the administrative costs that such Person incurs in operating its own offices).

 

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(L) The term “Person” shall mean any natural person or persons or any legal form of association, including, without limitation, a partnership, a limited partnership, a corporation, and a limited liability company.

(M) The term “Rentable Area” shall mean, with respect to a particular floor area, the area thereof (expressed as a particular number of square feet), as determined in accordance with the standards that the parties used to calculate that the area of the Premises is eight thousand nine hundred six (8,906) square feet in the aggregate.

(N) The term “Rental” shall mean, collectively, the Fixed Rent, the Escalation Rent and the additional rent payable by Tenant to Landlord hereunder, and all other amounts payable by Tenant to Landlord hereunder.

(O) The term “Swing Space License Agreement” shall mean that certain license agreement, dated on or about the date hereof, between Landlord, as licensor, and Tenant, as licensee.

(P) The term “Usable Area” shall mean, with respect to a particular floor area, the usable area thereof (expressed as a particular number of square feet), as determined in accordance with The Recommended Method of Floor Measurement of Office Buildings, Effective January 1, 1987, Revised December 2003, as published by The Real Estate Board of New York, Inc.

Article 2

ESCALATION RENT

2.1 Operating Expense Definitions.

(A) The term “Base Operating Expenses” shall mean the Operating Expenses for the Base Operating Expense Year.

(B) The term “Base Operating Expense Year” shall mean the 2024 calendar year.

(C) The term “Operating Expenses” shall mean, subject to the terms of this Section 2.1 and to Section 2.2(F) hereof, the expenses paid or incurred by or on behalf of Landlord in insuring, maintaining, repairing, managing and operating the Real Property (and employing personnel therefor) and for the operations thereof as reflected on Landlord’s books (which Landlord shall keep in accordance with GAAP). Landlord shall have the right to include in Operating Expenses for a particular Operating Expense Year a property management charge in an amount equal to the product obtained by multiplying (i) three percent (3%), by (ii) the gross rents that Landlord collects from Tenant and the other tenants in the Building during such Operating Expense Year (such amount being referred to herein as the “Property Management Charge”). Operating Expenses shall exclude:

(1) Taxes,

 

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(2) Excluded Amounts,

(3) subject to Section 2.2(F) hereof, payments of interest or principal in respect of Landlord’s debt (including, without limitation, any debt that is secured by Mortgages),

(4) expenses that relate to leasing space in the Building (including, without limitation, the cost of tenant improvements (or allowances that Landlord provides to a tenant therefor), the cost of performing improvements to prepare a particular portion of the Building for occupancy by a tenant, the cost of rent concessions, advertising expenses, leasing commissions, the cost of lease buy-outs and legal fees incurred in connection therewith),

(5) expenses that Landlord incurs in selling, purchasing, financing or refinancing the Real Property,

(6) the cost of any repairs, replacements or improvements to the Building that are required to be capitalized by GAAP (including, without limitation, lease obligations that are required to be capitalized under GAAP) (except in each case as otherwise provided in Section 2.2(F) hereof),

(7) depreciation or amortization expense (subject, however, to Section 2.2(F) hereof),

(8) the cost of electricity that is furnished to the portions of the Building that Landlord has leased, that Landlord is offering for lease, or that otherwise constitutes leasable space that is not used for the general benefit of the occupants of the Building (it being understood that Operating Expenses shall include the cost of electricity that is required to operate the Building Systems as provided in Section 2.2(B) hereof),

(9) salaries and the cost of benefits in either case for personnel above the grade of building manager,

(10) charges for the general overhead costs that Landlord incurs in managing, operating, maintaining, or staffing its offices that are not located at the Building other than the salaries and the costs of benefits of Persons providing services to and properly allocable to the Building,

(11) rent paid or payable under Superior Leases (except to the extent that (I) such rent that is paid or payable under any such Superior Lease is for Taxes or Operating Expenses, and (II) Landlord has not otherwise included such Taxes or Operating Expenses in the calculation of Escalation Rent under this Article 2),

 

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(12) subject to Section 2.2 hereof, any expense for which Landlord is otherwise compensated, whether by virtue of insurance proceeds, condemnation proceeds, claims under warranties, Tenant or other tenants in the Building making payment directly to Landlord for Landlord’s services in the Building or otherwise (other than by virtue of other tenants in the Building making payments to Landlord for Operating Expenses as escalation rental),

(13) the cost of providing any level of service that exceeds the level of service that Landlord furnishes to Tenant hereunder,

(14) legal or arbitration fees and disbursements that are paid or incurred in connection with the negotiation of, or disputes arising out of, any lease for space in the Real Property,

(15) costs that Landlord incurs in restoring the Building after the occurrence of a fire or other casualty or after a partial condemnation thereof (other than the amount of any retained losses),

(16) costs that Landlord incurs in performing, or correcting defects in, Landlord’s Work,

(17) advertising, entertainment and promotional costs that are paid or incurred for the Building,

(18) management fees that Landlord pays to a property manager (it being understood, however, that nothing in this clause (18) limits Landlord’s right to include in Operating Expenses the Property Management Charge),

(19) the expenses paid or incurred by or on behalf of Landlord in owning, maintaining, repairing, managing and operating the portion of the Real Property that is used for retail purposes,

(20) any fee or expenditure that is paid or payable to any Affiliate of Landlord to the extent that such fee or expenditure exceeds the amount that would be reasonably expected to be paid in the absence of such relationship,

(21) interest, penalties and late charges that in any such case are paid or incurred as a result of late payments made by Landlord or by reason of Landlord’s failure to comply with Requirements (to the extent that Landlord is required to comply with such Requirements pursuant to the terms hereof),

(22) costs incurred in operating any sign or other similar device designed principally for advertising or promotion to the extent that Landlord leases or licenses to a third party such sign or device, or the portion of the Building where such sign or device is installed,

(23) the cost of any judgment, settlement, or arbitration award resulting from any liability of Landlord (other than liability for amounts otherwise includible in Operating Expenses hereunder) and all expenses incurred in connection therewith,

 

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(24) amounts payable by Landlord for withdrawal liability or unfunded pension liability to a multi-employer pension plan (under Title IV of the Employee Retirement Income Security Act of 1974, as amended),

(25) costs incurred by Landlord which result from Landlord’s breach of this Lease or Landlord’s negligence or willful misconduct,

(26) costs that Landlord incurs to correct a representation made by Landlord in this Lease,

(27) fines or penalties that are assessed against Landlord by a Governmental Authority by virtue of violations at the Building of applicable Requirements,

(28) fees, dues or contributions that Landlord pays voluntarily to civic organizations, charities, political parties or political action committees,

(29) the cost of providing HVAC during Overtime Periods to portions of the Building that Landlord has leased, that Landlord is offering for lease, or that otherwise constitutes leasable space that is not used for the general benefit of the occupants of the Building (except that Landlord shall have the right to include in Operating Expenses the cost of providing HVAC during Overtime Periods that Landlord ordinarily supplies to the Building generally in accordance with good management practices),

(30) the cost of providing freight elevator or loading dock service during Overtime Periods (except that Landlord shall have the right to include in Operating Expenses the cost of providing freight elevator or loading dock service during Overtime Periods that Landlord ordinarily supplies to the Building generally in accordance with good management practices),

(31) the cost of objects of fine art that Landlord installs in the Building (with the understanding, however, that (x) Landlord shall have the right to include in Operating Expenses the cost of fine art that Landlord installs in the Building to the extent that such installation is required by applicable Requirements (subject, however, to Section 2.2(F) hereof), and (y) nothing contained in this clause (31) precludes Landlord from including in Operating Expenses the cost of maintaining and repairing objects of fine art that Landlord installs in the common areas of the Building),

(32) costs associated with the construction, installation, repair or operation of any broadcasting facility, conference center, luncheon club, athletic facility, child care facility, auditorium, cafeteria, or any other similar specialty facility, except to the extent that any such facility exists in the Building for the general benefit of tenants in the Building with no separate charge or with a charge at a reduced/subsidized rate,

(33) costs that Landlord incurs in operating an ancillary service in the Building in respect of which users pay a separate charge (such as a shoe shine stand, a newsstand, a stationery store or a parking facility),

 

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(34) costs that are duplicative of any other cost that is included in Operating Expenses,

(35) costs that Landlord incurs in organizing or maintaining in good standing the entity that constitutes Landlord, or in authorizing Landlord to do business in the jurisdiction where the Building is located,

(36) the portion of any costs that are properly allocable to any building other than the Building,

(37) in-house accounting fees,

(38) costs incurred in connection with the acquisition or sale of air rights, transferable development rights, easements or other real property interests, and

(39) costs incurred in connection with expanding the Rentable Area of the Building.

(D) The term “Operating Expense Payment” shall mean, with respect to any Operating Expense Year, the product obtained by multiplying (i) the excess (if any) of (A) the Operating Expenses for such Operating Expense Year, over (B) the Base Operating Expenses, by (ii) Tenant’s Operating Expense Share.

(E) The term “Operating Expense Statement” shall mean a statement that shows the Operating Expense Payment for a particular Operating Expense Year.

(F) The term “Operating Expense Year” shall mean the Base Operating Expense Year and each subsequent calendar year.

(G) The term “Tenant’s Operating Expense Share” shall mean, subject to the terms hereof, four thousand one hundred ninety-eight ten-thousandths percent (0.4198%).

2.2 Calculation of Operating Expenses.

(A)

(1) Subject to the terms of this Section 2.2(A), if the entire Rentable Area of the Building (other than the retail portion thereof) is not occupied by Persons conducting business therein for the entire Operating Expense Year, then, for purposes of calculating the Operating Expense Payment, Landlord shall have the right to increase Operating Expenses that vary based on the extent to which the Building is so occupied by the amount that Landlord would have included in Operating Expenses if the entire Rentable Area of the Real Property (other than the retail portion thereof) was occupied by Persons conducting business therein for the entire Operating Expense Year.

 

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(2) Subject to the terms of this Section 2.2(A), if (i) for any particular period, Landlord performs a particular service or a particular level of service for the benefit of Tenant in operating the Real Property, (ii) Tenant does not otherwise pay to Landlord additional rent for the costs incurred by Landlord in performing such service or such level of service, (iii) Landlord includes the cost of performing such service or such level of service in Operating Expenses for purposes of calculating the Operating Expense Payment for the applicable Operating Expense Year, and (iv) Landlord does not perform such service or such level of service for the benefit of all of the other portions of the Real Property that are occupied by Persons conducting business therein for the applicable period, then, for purposes of calculating the Operating Expense Payment, Landlord shall have the right to increase Operating Expenses that vary based on the extent to which Landlord performs such service or such level of service for the benefit of occupants of the Building by the amount that Landlord would have included in Operating Expenses if Landlord performed such service or such level of service for the entire Rentable Area of the Real Property (other than the retail portion thereof) that is occupied by Persons conducting business therein for the applicable period.

(3) Subject to the terms of this Section 2.2(A), if Landlord does not collect rents for all or any portion of the leasable space in the Building for any particular Operating Expense Year (or a portion thereof), then Landlord shall have the right to increase Operating Expenses to reflect the Property Management Charge that Landlord would have incurred if Landlord had collected rents for the entire applicable Operating Expense Year for all of the leasable area in the Building. If (x) a lease for the leasable space in the Building (or a portion thereof) is in effect, and (y) Landlord does not collect rent therefor for any reason (including, without limitation, the effectiveness of a rent abatement or the tenant’s default under the applicable lease), then Landlord shall calculate the Property Management Charge as provided in this Section 2.2(A)(3) at the rental rate that applies thereunder (it being understood that if a rental abatement is in effect, then the Property Management Charge shall be calculated at the rental rate that applies immediately after the last day of the abatement period). If a lease for the leasable space in the Building (or a portion thereof) is not in effect, then Landlord shall calculate the Property Management Charge as provided in this Section 2.2(A)(3) at the average rent for all other space in the Building for which a lease is in effect.

(4) Subject to the terms of this Section 2.2(A), if Landlord, during a particular Operating Expense Year (or a portion thereof), does not perform repair and maintenance on a particular element of the Building because such element of the Building is out of service or not fully in use, then Landlord shall have the right to increase Operating Expenses to reflect the amount of expenses that Landlord would have incurred if Landlord had performed such repair and maintenance for the entire Operating Expense Year. Accordingly, if, for example, during a particular Operating Expense Year, Landlord does not incur costs to repair and maintain the finishes in the lobby of the Building because the lobby is not in service for such Operating Expense Year, then Landlord shall have the right to include in Operating Expenses for such Operating Expense Year the costs that Landlord would have incurred in repairing and maintaining the finishes in the lobby of the Building for the entire Operating Expense Year.

 

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(5) If Landlord shall increase the Operating Expenses for any Operating Expense Year as described in this Section 2.2(A), then Landlord shall increase the Operating Expenses for the Base Operating Expense Year as described in this Section 2.2(A). For purposes of calculating the Operating Expenses for the Base Operating Expense Year, any fee or expenditure that otherwise constitutes an Operating Expense and that is paid or payable to any Affiliate of Landlord shall not be less than the amount that would be reasonably expected to be paid in the absence of such relationship.

(B) Landlord shall have the right to include in Operating Expenses (and Landlord shall include in Base Operating Expenses), for the electricity supplied to the Building Systems and other common elements of the Building, an amount equal to one hundred percent (100%) of the sum of:

(1) the product obtained by multiplying (i) the Average Cost per Peak Demand Kilowatt, by (ii) the number of kilowatts that constituted the peak demand for electricity for the Building Systems and the other common elements of the Building for the applicable period (as registered on a submeter or submeters, or, at Landlord’s option, as determined from time to time by a survey prepared by an independent and reputable electrical consultant) (it being understood that such number of kilowatts as described in clause (ii) above shall not include the number of kilowatts that are attributable to the operation of the Building Systems to the extent that Tenant (or other tenants in the Building) make(s) separate payment to Landlord therefor), and

(2) the product obtained by multiplying (i) the Average Cost per Kilowatt Hour, by (ii) the number of kilowatt hours of electricity used by the Building Systems and the other common elements of the Building for the applicable period (as registered on a submeter or submeters, or, at Landlord’s option, as determined by a survey prepared by an independent and reputable electrical consultant) (it being understood that such number of kilowatt hours as described in clause (ii) above shall not include the number of kilowatt hours that are attributable to the operation of the Building Systems to the extent that Tenant (or other tenants in the Building) make separate payment to Landlord therefor).

(C) The term “Average Cost per Peak Demand Kilowatt” shall mean, with respect to any particular period, the quotient obtained by dividing (x) the aggregate charge imposed by the Utility Company for the Utility Company’s making available electricity that satisfies the Building’s peak demand for electricity during such period, by (y) the number of kilowatts that constituted such peak demand, as reflected on the electric meter or meters for the Building.

(D) The term “Average Cost per Kilowatt Hour” shall mean, with respect to any particular period, the quotient obtained by dividing (x) the aggregate charge imposed by the Utility Company for the electricity supplied to the Building for such period (other than the aggregate charge imposed by the Utility Company for the Utility Company’s making available electricity that satisfies the Building’s peak demand for electricity during such period), by (y) the number of kilowatt hours of electricity used in the Building during such period, as reflected on the electric meter or meters for the Building.

 

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(E) The term “Utility Company” shall mean, collectively, the local electrical energy distribution company and the competitive energy provider that provides electric service for the Building; provided, however, that if Landlord makes arrangements to produce electricity to satisfy all or a portion of the requirements of the Building, then (I) Utility Company shall also refer to the producer of such electricity, and (II) the charges imposed by such producer shall be included in the calculation of Average Cost per Kilowatt Hour and Average Cost per Peak Demand Kilowatt to the extent that such charges do not exceed the charges that Landlord would have otherwise incurred if Landlord had made arrangements to satisfy all of the Building’s electrical requirements from a local electrical energy distribution company and a competitive energy provider.

(F) If (i) Landlord makes an improvement to the Real Property or a replacement of equipment at the Real Property in either case in connection with the maintenance, repair, management or operation thereof, (ii) GAAP requires Landlord to capitalize the cost of such improvement or such replacement, and (iii) such improvement or replacement is made (a) to comply with a Requirement, (b) in lieu of repairs, or (c) for the purpose of saving or reducing Operating Expenses (such as, for example, an improvement that reduces labor costs or an improvement that saves energy costs), then Landlord shall have the right to include in Operating Expenses for each Operating Expense Year the amount that amortizes the cost of such improvement or such replacement, together with interest on the unamortized portion thereof that is calculated at two hundred (200) basis points in excess of the Base Rate, in equal annual installments over the useful life of such improvement or such equipment as determined in accordance with GAAP (until the cost of such improvement or such equipment is amortized fully); provided, however, that (I) for any such improvement or replacement that Landlord makes for the purpose of saving or reducing Operating Expenses, Landlord shall have the right to include in Operating Expenses for each Operating Expense Year the amount that amortizes the cost of such improvement or such replacement, together with interest on the unamortized portion of the cost of such improvement or replacement that is calculated at two hundred (200) basis points in excess of the Base Rate, in equal annual installments over the period that Landlord reasonably determines that the cost of such improvement or replacement (and such interest) will equal the aggregate amount of the reduction in other Operating Expenses for each Operating Expense Year that derives from such improvement or such replacement (with the understanding, however, that such period shall in no event exceed the useful life of such improvement or replacement as determined in accordance with GAAP), and (II) for any such improvement or replacement that Landlord makes in lieu of a repair (and that Landlord does not make to comply with a Requirement or for the purpose of saving or reducing Operating Expenses), the aforesaid amount that Landlord includes in Operating Expenses for any particular Operating Expense Year shall not exceed the cost of the repairs that Landlord would have otherwise made if Landlord did not make such improvement or replacement.

2.3 Operating Expense Payment.

(A) Tenant shall pay the Operating Expense Payment to Landlord in accordance with the terms of this Section 2.3.

 

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(B) Landlord shall have the right to give a statement to Tenant from time to time pursuant to which Landlord sets forth Landlord’s good faith estimate of the Operating Expense Payment for a particular Operating Expense Year (any such statement that Landlord gives to Tenant being referred to herein as a “Prospective Operating Expense Statement”; one-twelfth (1/12th) of the Operating Expense Payment shown on a Prospective Operating Expense Statement being referred to herein as the “Monthly Operating Expense Payment Amount”). If Landlord gives to Tenant a Prospective Operating Expense Statement (or Landlord is deemed to have given to Tenant a Prospective Operating Expense Statement pursuant to Section 2.3(C) hereof), then Tenant shall pay to Landlord, as additional rent, on account of the Operating Expense Payment due hereunder for such Operating Expense Year, the Monthly Operating Expense Payment Amount, on the first (1st) day of each subsequent calendar month for the remainder of such Operating Expense Year, in the same manner as the monthly installments of the Fixed Rent hereunder (it being understood that Tenant shall not be required to commence such payments of the Monthly Operating Expense Payment Amount (x) before the first (1st) day of the Operating Expense Year to which relates the applicable Monthly Operating Expense Payment Amount, or (y) earlier than the thirtieth (30th) day after the date that Landlord gives the Prospective Operating Expense Statement to Tenant). If Landlord gives (or is deemed to have given) to Tenant a Prospective Operating Expense Statement after the first (1st) day of the applicable Operating Expense Year, then Tenant shall also pay to Landlord, within thirty (30) days after the date that Landlord gives the Prospective Operating Expense Statement to Tenant, an amount equal to the excess of (I) the product obtained by multiplying (x) the Monthly Operating Expense Payment Amount, by (y) the number of calendar months that have theretofore elapsed during such Operating Expense Year, over (II) the aggregate amount theretofore paid by Tenant to Landlord on account of the Operating Expense Payment for such Operating Expense Year. If Landlord gives (or is deemed to have given) to Tenant a Prospective Operating Expense Statement for a particular Operating Expense Year, then Landlord shall also provide to Tenant, within two hundred seventy (270) days after the last day of such Operating Expense Year, an Operating Expense Statement for such Operating Expense Year.

(C) Tenant shall pay to Landlord an amount equal to the excess (if any) of (i) the Operating Expense Payment as reflected on an Operating Expense Statement that Landlord gives to Tenant, over (ii) the aggregate amount that Tenant has theretofore paid to Landlord on account of the Operating Expense Payment (if any) as contemplated by Section 2.3(B) hereof, within thirty (30) days after the date that Landlord gives such Operating Expense Statement to Tenant. Tenant shall have the right to credit against the Rental thereafter coming due hereunder an amount equal to the excess (if any) of (i) the aggregate amount that Tenant has theretofore paid to Landlord on account of the Operating Expense Payment as contemplated by Section 2.3(B) hereof, over (ii) the Operating Expense Payment as reflected on such Operating Expense Statement; provided, however, that if the Expiration Date occurs prior to the date that such credit is exhausted, then Landlord shall pay to Tenant the unused portion of such credit on or prior to the thirtieth (30th) day after the Expiration Date (it being understood that Landlord’s obligation to make such payment to Tenant shall survive the Expiration Date). If Landlord gives Tenant an Operating Expense Statement, then, unless Landlord otherwise specifies in such Operating Expense Statement, Landlord shall be deemed to have given to Tenant a Prospective Operating

 

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Expense Statement for the Operating Expense Year immediately succeeding the Operating Expense Year that is covered by such Operating Expense Statement, that reflects an Operating Expense Payment for such immediately succeeding Operating Expense Year in an amount equal to the Operating Expense Payment for such Operating Expense Year that is covered by such Operating Expense Statement.

(D) If the Rent Commencement Date occurs later than the first (1st) day of the Operating Expense Year that immediately succeeds the Base Operating Expense Year, then the Operating Expense Payment for the Operating Expense Year during which the Rent Commencement Date occurs shall be an amount equal to the product obtained by multiplying (X) the Operating Expense Payment that would have been due hereunder if the Rent Commencement Date was the first (1st) day of such Operating Expense Year, by (Y) a fraction, the numerator of which is the number of days in the period beginning on the Rent Commencement Date and ending on the last day of such Operating Expense Year, and the denominator of which is three hundred sixty-five (365) (or three hundred sixty-six (366), if such Operating Expense Year is a leap year).

(E) If the Expiration Date is not the last day of an Operating Expense Year, then the Operating Expense Payment for the Operating Expense Year during which the Expiration Date occurs shall be an amount equal to the product obtained by multiplying (X) the Operating Expense Payment that would have been due hereunder if the Expiration Date was the last day of such Operating Expense Year, by (Y) a fraction, the numerator of which is the number of days in the period beginning on the first (1st) day of such calendar year and ending on the Expiration Date, and the denominator of which is three hundred sixty-five (365) (or three hundred sixty-six (366), if such Operating Expense Year is a leap year).

(F) Landlord’s failure to give Tenant an Operating Expense Statement or a Prospective Operating Expense Statement for any Operating Expense Year shall not impair Landlord’s right to give Tenant an Operating Expense Statement or a Prospective Operating Expense Statement for any other Operating Expense Year.

(G) Landlord shall have the right to give to Tenant an Operating Expense Statement at any time after the last day of the Base Operating Expense Year that reflects the Base Operating Expenses (regardless of whether such Operating Expense Statement reflects a payment that is due from Tenant on account of the Operating Expense Payment).

(H) If the Operating Expenses for the Base Operating Expense Year are redetermined at any time after the date that Landlord gives an Operating Expense Statement to Tenant for an Operating Expense Year, then Landlord shall give to Tenant a revised Operating Expense Statement that recalculates the Operating Expense Payment for an Operating Expense Year (using the Operating Expenses that reflect such redetermination for the Base Operating Expense Year). If such revised Operating Expense Statement indicates that Tenant has underpaid the Operating Expense Payment for any Operating Expense Year, then Tenant shall pay to Landlord an amount equal to the amount of such underpayment within thirty (30) days after Landlord gives such revised Operating Expense Statement to Tenant. If such revised Operating

 

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Expense Statement indicates that Tenant has overpaid the Operating Expense Payment for any Operating Expense Year, then Tenant shall have the right to credit against the Rental thereafter coming due hereunder an amount equal to the amount of such overpayment; provided, however, that if the Expiration Date occurs prior to the date that such credit is exhausted, then Landlord shall pay to Tenant the unused portion of such credit on or prior to the thirtieth (30th) day after the Expiration Date (it being understood that (I) Landlord’s obligation to make such payment to Tenant shall survive the Expiration Date, and (II) nothing contained in this Section 2.3(H) limits Tenant’s rights under Section 2.4 hereof).

(I) If, during any particular Operating Expense Year, Landlord receives a reimbursement, rebate or refund of an Operating Expense that Landlord incurred in a prior Operating Expense Year that occurs after the Base Operating Expense Year, then Landlord shall (x) adjust the Operating Expenses for such Operating Expense Year retroactively, and (y) give promptly to Tenant a revised Operating Expense Statement for such Operating Expense Year. If such revised Operating Expense Statement indicates that Tenant overpaid the Operating Expense Payment for such Operating Expense Year, then Tenant shall be entitled to credit the amount of such overpayment of the Operating Expense Payment against the Rental thereafter coming due hereunder, together with interest thereon calculated at the Base Rate from the date that Tenant paid such overpayment to Landlord to the date that Tenant uses such credit. If (x) Tenant is entitled to a credit against Rental pursuant to this Section 2.3(I), and (y) the Expiration Date occurs prior to the date that such credit is exhausted, then Landlord shall pay to Tenant the unused portion of such credit on or prior to the thirtieth (30th) day after the Expiration Date (and Landlord’s obligation to make such payment shall survive the Expiration Date).

2.4 Auditing of Operating Expense Statements.

(A) Any Operating Expense Statement that Landlord gives to Tenant shall be binding upon Tenant conclusively unless, within ninety (90) days after the date that Landlord gives Tenant such Operating Expense Statement, Tenant gives a notice to Landlord objecting to such Operating Expense Statement. Tenant’s right to give such notice (and conduct the audit contemplated by this Section 2.4(A)) shall survive the Expiration Date (to the extent that the Expiration Date occurs earlier than the ninetieth (90th) day after the date that Landlord gives the applicable Operating Expense Statement to Tenant). Tenant shall have the right to audit the Base Operating Expenses as contemplated by this Section 2.4(A) only after receiving the first Operating Expense Statement that sets forth the Base Operating Expenses (including, without limitation, an Operating Expense Statement that Landlord gives to Tenant as described in Section 2.3(G) hereof), and, accordingly, once Tenant’s right to so audit Base Operating Expenses lapses, Tenant shall not have the right to thereafter audit Base Operating Expenses, notwithstanding that Base Operating Expenses is included in the calculation of the Operating Expense Payment for subsequent Operating Expense Years). If Tenant gives such notice to Landlord, then, subject to the terms of this Section 2.4(A), Tenant may examine Landlord’s books and records relating to such Operating Expense Statement to determine the accuracy thereof, provided that Tenant uses Tenant’s diligent efforts to consummate such examination within a reasonable period after the date that Tenant gives such notice to Landlord. Tenant may perform such examination on reasonable advance notice to

 

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Landlord, at reasonable times, in Landlord’s office or, at Landlord’s option, at the office of Landlord’s managing agent or accountants. Tenant shall not have the right to conduct an audit of Landlord’s books and records as described in this Section 2.4 during the period that an Event of Default has occurred and is continuing. Tenant shall have the right to conduct such examination using Tenant’s own employees. Tenant, in performing such examination, shall also have the right to be accompanied by a certified public accountant from one of the “big-4” firms of certified public accountants (or their successors), or, at Tenant’s option, a certified public accountant from a reputable regional or local certified public accounting firm that is reasonably acceptable to Landlord; provided, however, that Tenant shall not be entitled to be so accompanied by such representative unless Tenant and such certified public accounting firm shall certify to Landlord in a written instrument that is reasonably satisfactory to Landlord that the compensation being paid by Tenant to such certified public accounting firm is not conditioned or otherwise contingent (in whole or in part) on the extent of any reduction in the Operating Expense Payment that derives from such examination. Tenant shall not have the right to conduct any such audit unless Tenant delivers to Landlord a statement, in a form reasonably designated by Landlord, signed by Tenant and Tenant’s certified public accounting firm to which such books and records are proposed to be disclosed, pursuant to which Tenant and such certified public accounting firm agree to maintain the information obtained from such examination in confidence (subject, however, to the disclosure of the information that Tenant or Tenant’s certified public accounting firm derive from such examination as required by law or to Tenant’s counsel or other professional advisors that in either case agree to maintain such information in confidence).

(B) If it is determined ultimately that (i) Landlord, in an Operating Expense Statement, overstated the Operating Expense Payment, and (ii) Tenant overpaid the Operating Expense Payment for a particular Operating Expense Year, then Tenant shall be entitled to credit the amount of such overpayment of the Operating Expense Payment against the Rental thereafter coming due hereunder. If (x) Tenant is entitled to a credit against Rental pursuant to this Section 2.4(B), and (y) the Expiration Date occurs prior to the date that such credit is exhausted, then Landlord shall pay to Tenant the unused portion of such credit on or prior to the thirtieth (30th) day after the Expiration Date (and Landlord’s obligation to make such payment shall survive the Expiration Date). If it is ultimately determined that Landlord overstated Operating Expenses for an Operating Expense Year by five percent (5%) or more, then Landlord shall reimburse Tenant for the reasonable Out-of-Pocket Costs paid or incurred by Tenant in performing Tenant’s audit of Landlord’s books and records; provided, however, that the amount so payable to Tenant shall not exceed fifty percent (50%) of the amount of such overpayment by Tenant. Landlord shall make such reimbursement promptly following Landlord’s receipt of Tenant’s invoice therefor, together with reasonable supporting documentation substantiating such reasonable Out-of-Pocket Costs set forth therein.

(C) Nothing contained in this Section 2.4 shall constitute an extension of the date by which Tenant is required to pay the Operating Expense Payment to Landlord hereunder.

 

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2.5 Tax Definitions.

(A) The term “Assessed Valuation” shall mean the amount for which the Real Property is assessed pursuant to applicable provisions of the New York City Charter and of the Administrative Code of The City of New York, in either case for the purpose of calculating all or any portion of the Taxes.

(B) The term “Base Taxes” shall mean the quotient obtained by dividing (i) the Taxes for the Base Tax Period, by (ii) the number of Tax Years in the Base Tax Period.

(C) The term “Base Tax Period” shall mean the period consisting of two (2) fiscal years commencing on July 1, 2023 and ending on June 30, 2025.

(D) The term “Excluded Amounts” shall mean (w) any taxes imposed on Landlord’s income, (x) franchise, estate, inheritance, capital stock, excise, excess profits, gift, payroll or stamp taxes imposed on Landlord, (y) any transfer taxes or mortgage taxes that are imposed on Landlord in connection with the conveyance of the Real Property or granting or recording a mortgage lien thereon, and (z) any other similar taxes imposed on Landlord.

(E) Subject to the terms of this Section 2.5(E), the term “Taxes” shall mean the aggregate amount of real estate taxes and any general or special assessments that in each case are imposed upon the Real Property, including, without limitation, (i) assessments made for “air” and “development” rights now or hereafter appurtenant to or affecting the Real Property (except that Taxes shall not include assessments made for “air” or “development” rights that Landlord acquires from and after the date hereof), (ii) any fee, tax or charge imposed by any Governmental Authority for any vaults or vault spaces that in either case are appurtenant to the Real Property (except that Taxes shall not include such fee, tax or charge to the extent that Landlord leases or licenses such vaults or vault spaces to a third party), and (iii) any taxes, fees or assessments levied, in whole or in part, for public benefits to the Real Property (including, without limitation, any business improvement district taxes, fees and assessments and taxes, fees and assessments that are levied based on the use of water or energy by Landlord and/or the Building). Taxes shall be calculated without taking into account (a) any discount that Landlord receives by virtue of any early payment of Taxes, (b) any penalties or interest that the applicable Governmental Authority imposes for the late payment of such real estate taxes or assessments, (c) any Excluded Amounts, (d) any real estate taxes that are separately assessed against a sign or billboard that is affixed to the Building or otherwise located on the Real Property, and (e) any exemption, abatement or deferral of Taxes to which the Real Property is entitled under any program that a Governmental Authority adopts to promote the improvement or redevelopment of real property or as a result of the tax-exempt status of any tenant or occupant of the Real Property (or any portion thereof). If, because of any change in the taxation of real estate, any other tax or assessment, however denominated (including, without limitation, any franchise, income, profits, sales, use, occupancy, gross receipts or rental tax), is imposed upon the Real Property, the owner thereof, or the occupancy, rents or income derived therefrom, in substitution for any of the Taxes (to the extent that such substitution is evidenced by either the terms of the legislation imposing such tax or assessment, the legislative history thereof,

 

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or other documents or evidence that reasonably demonstrate that the applicable Governmental Authority intended for such tax or assessment to constitute a substitution for any Taxes), then such other tax or assessment to the extent substituted shall be included in Taxes for purposes hereof (calculated assuming that the Real Property is Landlord’s sole asset and the income therefrom is Landlord’s sole income). If any such real estate taxes or assessments are payable in installments without interest, premium or penalty, then Landlord shall include in Taxes for any particular Tax Year only the installment of such real estate taxes or assessments that the applicable Governmental Authority requires Landlord to pay (and that Landlord actually pays) during such Tax Year.

(F) The term “Tax Payment” shall mean, with respect to any Tax Year, the product obtained by multiplying (i) the excess of (A) Taxes for such Tax Year, over (B) the Base Taxes, by (ii) Tenant’s Tax Share (it being understood that the Tax Payment shall be due with respect to each Tax Year following the first Tax Year in the Base Tax Period).

(G) The term “Tax Statement” shall mean a statement that shows the Tax Payment for a particular Tax Year.

(H) The term “Tax Year” shall mean the first period from July 1 through June 30 (or such other period as hereafter may be duly adopted by the Governmental Authority then imposing Taxes as its fiscal year for real estate tax purposes) in the Base Tax Period and each subsequent period from July 1 through June 30 (or such other period as hereafter may be duly adopted by the Governmental Authority then imposing Taxes as its fiscal year for real estate tax purposes).

(I) The term “Tenant’s Tax Payment Commencement Date” shall mean the date that shall be first (1st) anniversary of the Commencement Date.

(J) The term “Tenant’s Tax Share” shall mean, subject to the terms hereof, three thousand six hundred sixty-one ten-thousandths percent (0.3661%).

2.6 Tax Payment.

(A) Subject to the provisions of this Section 2.6, Tenant shall pay to Landlord, as additional rent, the Tax Payment. Notwithstanding anything to the contrary contained herein, Tenant shall not be obligated to make a Tax Payment until Tenant’s Tax Payment Commencement Date.

(B) Landlord shall have the right to give a statement to Tenant from time to time pursuant to which Landlord sets forth Landlord’s good faith estimate of the Tax Payment for a particular Tax Year (any such statement that Landlord gives to Tenant being referred to herein as a “Prospective Tax Statement”; one-twelfth (1/12th) of the Tax Payment shown on a Prospective Tax Statement being referred to herein as the “Monthly Tax Payment Amount”). If Landlord gives (or is deemed to have given) to Tenant a Prospective Tax Statement, then, subject to the terms of this Section 2.6(B), Tenant shall pay to Landlord, as additional rent, on account of the Tax Payment due hereunder for such Tax Year, the Monthly Tax Payment Amount, on the first (1st) day of each

 

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subsequent calendar month until Tenant has paid to Landlord, pursuant to this Section 2.6(B), the full amount of the Tax Payment as so estimated in the Prospective Tax Statement. Tenant shall pay the Monthly Tax Payment Amount to Landlord in the same manner as the monthly installments of the Fixed Rent hereunder. Landlord shall not have the right to require Tenant to commence Tenant’s payment of the Monthly Tax Payment Amount for a particular Tax Year earlier than the one hundred fiftieth (150th) day of the immediately preceding Tax Year. If Landlord gives (or is deemed to have given) to Tenant a Prospective Tax Statement after the one hundred fiftieth (150th) day of the immediately preceding Tax Year, then Tenant shall also pay to Landlord, within thirty (30) days after the date that Landlord gives the Prospective Tax Statement to Tenant, an amount equal to the excess of (I) the product obtained by multiplying (x) the Monthly Tax Payment Amount, by (y) the number of calendar months that have theretofore elapsed since the one hundred fiftieth (150th) day of the immediately preceding Tax Year, over (II) the aggregate amount theretofore paid by Tenant to Landlord on account of the Tax Payment for the Tax Year to which the Prospective Tax Statement relates. Landlord shall not have the right to use this Section 2.6(B) to collect more than fifty percent (50%) of the Tax Payment shown on a particular Prospective Tax Statement earlier than the thirtieth (30th) day before the date that the first installment of Taxes is due to the applicable Governmental Authority for a particular Tax Year. If Landlord gives (or is deemed to have given) to Tenant a Prospective Tax Statement for a particular Tax Year, then Landlord shall also provide to Tenant, within one hundred eighty (180) days after the last day of such Tax Year, a Tax Statement for such Tax Year.

(C) From and after Tenant’s Tax Payment Commencement Date, Tenant shall pay to Landlord an amount equal to the excess (if any) of (i) the Tax Payment as reflected on a Tax Statement that Landlord gives to Tenant, over (ii) the aggregate amount that Tenant has theretofore paid to Landlord on account of the Tax Payment (if any) as contemplated by Section 2.6(B) hereof, within thirty (30) days after the date that Landlord gives such Tax Statement to Tenant. Tenant shall have the right to credit against the Rental thereafter coming due hereunder an amount equal to the excess (if any) of (i) the aggregate amount that Tenant has theretofore paid to Landlord on account of the Tax Payment as contemplated by Section 2.6(B) hereof, over (ii) the Tax Payment as reflected on such Tax Statement; provided, however, that if the Expiration Date occurs prior to the date that such credit is exhausted, then Landlord shall pay to Tenant the unused portion of such credit on or prior to the thirtieth (30th) day after the Expiration Date (it being understood that Landlord’s obligation to make such payment to Tenant shall survive the Expiration Date). If Landlord gives Tenant a Tax Statement, then, unless Landlord otherwise specifies in such Tax Statement, Landlord shall be deemed to have given to Tenant a Prospective Tax Statement, for the Tax Year immediately succeeding the Tax Year that is covered by such Tax Statement, that reflects a Tax Payment for such immediately succeeding Tax Year in an amount equal to the Tax Payment for such Tax Year that is covered by such Tax Statement.

(D) If Tenant’s Tax Payment Commencement Date occurs later than the first (1st) day of the Tax Year that immediately succeeds the first (1st) Tax Year in the Base Tax Period, then the Tax Payment for the Tax Year during which Tenant’s Tax Payment Commencement Date occurs shall be an amount equal to the product obtained by multiplying (X) the Tax Payment that would have been due hereunder if Tenant’s Tax Payment Commencement Date was the first (1st) day of such Tax Year, by (Y) a fraction, the numerator of which is the number of days in the period beginning on Tenant’s Tax Payment Commencement Date and ending on the last day of such Tax Year, and the denominator of which is three hundred sixty-five (365) (or three hundred sixty-six (366), if such Tax Year includes the month of February in a leap year).

 

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(E) If the Expiration Date is not the last day of a Tax Year, then the Tax Payment for the Tax Year during which the Expiration Date occurs shall be an amount equal to the product obtained by multiplying (X) the Tax Payment that would have been due hereunder if the Expiration Date was the last day of such Tax Year, by (Y) a fraction, the numerator of which is the number of days in the period beginning on the first (1st) day of such Tax Year and ending on the Expiration Date, and the denominator of which is three hundred sixty-five (365) (or three hundred sixty-six (366), if such Tax Year includes the month of February in a leap year).

(F) The Tax Payment shall be computed initially on the basis of the Assessed Valuation in effect on the date that Landlord gives the applicable Tax Statement to Tenant (as the Taxes may have been settled or finally adjudicated prior to such time) regardless of any then pending application, proceeding or appeal to reduce the Assessed Valuation, but shall be subject to subsequent adjustment as provided in Section 2.7 hereof.

(G) Tenant shall pay the Tax Payment regardless of whether Tenant is exempt, in whole or part, from the payment of any Taxes by reason of Tenant’s diplomatic status or otherwise.

(H) If Taxes are required to be paid on any date or dates other than as presently required by the Governmental Authority imposing Taxes, then the due date of the installments of the Tax Payment shall be adjusted so that each such installment is due from Tenant to Landlord thirty (30) days prior to the date that the corresponding payment is due to the Governmental Authority (with the understanding, however, that Tenant shall not be required to pay a Tax Payment to Landlord earlier than the thirtieth (30th) day after the date that Landlord gives the applicable Tax Statement to Tenant).

(I) Landlord’s failure to give to Tenant a Tax Statement for any Tax Year shall not impair Landlord’s right to give to Tenant a Tax Statement for any other Tax Year.

(J) Landlord shall give to Tenant a copy of the relevant tax bill for each Tax Year (to the extent that the applicable Governmental Authority has issued such tax bill to Landlord) promptly after Tenant’s request therefor from time to time.

2.7 Tax Reduction Proceedings.

(A) Landlord (and not Tenant) shall be eligible to institute proceedings to reduce the Assessed Valuation.

 

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(B) If, after a Tax Statement has been sent to Tenant, an Assessed Valuation that Landlord used to compute the Tax Payment for a Tax Year is reduced, and, as a result thereof, a refund of Taxes is actually received by, or credited to, Landlord, then Landlord, promptly after Landlord’s receipt of such refund (or such refund is credited to Landlord, as the case may be), shall send to Tenant a Tax Statement adjusting the Taxes for such Tax Year and setting forth, based on such adjustment, the portion of such refund for which Tenant is entitled a credit as set forth in this Section 2.7(B). Landlord shall have the right to deduct from such refund the Out-of-Pocket Costs that Landlord incurs in obtaining such refund (so that Landlord, in calculating the adjusted Tax Payment, takes into account only the net proceeds of such refund that Landlord receives (or that is credited to Landlord)). Landlord shall credit the portion of such refund to which Tenant is entitled against the Rental thereafter coming due hereunder. If (x) Tenant is entitled to a credit against Rental pursuant to this Section 2.7(B), and (y) the Expiration Date occurs prior to the date that such credit is exhausted, then Landlord shall pay to Tenant the unused portion of such credit on or prior to the thirtieth (30th) day after the Expiration Date (and Landlord’s obligation to make such payment shall survive the Expiration Date). If (i) Landlord receives such refund (or a credit therefor) after the Expiration Date, and (ii) Tenant is entitled to a portion thereof as contemplated by this Section 2.7(B), then Landlord shall pay to Tenant an amount equal to Tenant’s share of such refund (or such credit) within thirty (30) days after the date that such refund is paid to Landlord (or such refund is credited to Landlord, as the case may be) (and Landlord’s obligation to make such payment shall survive the Expiration Date).

(C)

(1) If the Assessed Valuation for a Tax Year in the Base Tax Period is reduced at any time after the date that Landlord gives a Tax Statement to Tenant for a Tax Year, then Landlord shall have the right to give to Tenant a revised Tax Statement that recalculates the Tax Payment for a Tax Year (using the Taxes that reflect such reduction in such Assessed Valuation). Tenant shall pay to Landlord an amount equal to the excess of (i) the Tax Payment as reflected on such revised Tax Statement, over (ii) the Tax Payment as reflected on the prior Tax Statement, within thirty (30) days after Landlord gives such revised Tax Statement to Tenant.

(2) If the Assessed Valuation for a Tax Year in the Base Tax Period is increased at any time after the date that Landlord gives a Tax Statement to Tenant for a Tax Year, then Landlord shall give to Tenant a revised Tax Statement that recalculates the Tax Payment for a Tax Year (using the Taxes that reflect such increase in such Assessed Valuation). Landlord shall credit against the Rental thereafter coming due hereunder an amount equal to Tenant’s overpayment of the Tax Payment (calculated as aforesaid using such increased Assessed Valuation). If (x) Tenant is entitled to a credit against Rental pursuant to this Section 2.7(C)(2), and (y) the Expiration Date occurs prior to the date that such credit is exhausted, then Landlord shall pay to Tenant the unused portion of such credit on or prior to the thirtieth (30th) day after the Expiration Date (and Landlord’s obligation to make such payment shall survive the Expiration Date). If (i) such increase in such Assessed Valuation occurs after the Expiration Date, and (ii) Tenant is entitled to a credit against Rental as contemplated by this Section 2.7(C)(2), then Landlord shall pay to Tenant an amount equal to such credit within thirty (30) days after the date that such increase in such Assessed Valuation occurs (and Landlord’s obligation to make such payment shall survive the Expiration Date).

 

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2.8 Condominium Conversion.

(A) If Landlord files a Condominium Declaration, then with respect to the portion of the Term from and after the date that Taxes are imposed separately on (i) the condominium unit that comprises or the condominium units that comprise the Premises, or (ii) the condominium unit or condominium units of which the Premises is a part, as the case may be, and continuing only during the period that such Condominium Declaration remains in effect, (I) Tenant’s Tax Share shall be recalculated as of the date that Taxes are so imposed separately as the quotient (expressed as a percentage) that is obtained by dividing (x) the number of square feet of Rentable Area in the Premises, by (y) the number of square feet of Rentable Area in the applicable condominium unit, (II) Base Taxes shall be deemed to be an amount equal to the product obtained by multiplying (x) Base Taxes immediately prior to the date that Taxes are imposed separately on such condominium unit, by (y) a fraction, the numerator of which is the number of square feet of Rentable Area comprising such condominium unit, and the denominator of which is the number of square feet of Rentable Area in the Building, and (III) Taxes shall be deemed to mean only the Taxes that are imposed on such condominium unit. It is understood and agreed that if any such condominium regime is no longer in effect, then Tenant’s Tax Share, Taxes and Base Taxes shall all be as set forth herein prior to the implementation of such condominium regime.

(B) If Landlord files a Condominium Declaration, then with respect to the period from and after the date that the Condominium Declaration is effective, and continuing only during the period that such Condominium Declaration remains in effect, (I) Tenant’s Operating Expense Share shall be recalculated as of such date that the Condominium Declaration is declared effective as the quotient (expressed as a percentage) that is obtained by dividing (x) the number of square feet of Rentable Area in the Premises, by (y) the number of square feet of Rentable Area in the applicable condominium unit (other than any retail portion thereof), (II) Base Operating Expenses shall be deemed to be an amount equal to the product obtained by multiplying (x) Base Operating Expenses immediately prior to the date that the Condominium Declaration is effective, by (y) a fraction, the numerator of which is the number of square feet of Rentable Area comprising such condominium unit (other than the retail portion thereof), and the denominator of which is the number of square feet of Rentable Area in the Building (other than the retail portion thereof), and (III) Operating Expenses shall be deemed to mean only the Operating Expenses that apply to such condominium unit (it being understood that the common charges that the Condominium Board assesses against such condominium unit shall constitute Operating Expenses for purposes hereof to the extent that the costs and expenses that comprise such common charges would not have been otherwise excluded from Operating Expenses in accordance with the terms hereof). It is understood and agreed that if any such condominium regime is no longer in effect, then Tenant’s Operating Expense Share, Operating Expenses and Base Operating Expenses shall all be as set forth herein prior to the implementation of such condominium regime.

 

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2.9 Building Additions.

(A) If, prior to Landlord’s filing of a Condominium Declaration, Landlord makes improvements to the Building to expand the Rentable Area thereof, then, with respect to the period from and after the date that Taxes are assessed on the Building to reflect such improvements, (I) Tenant’s Tax Share shall be recalculated as of the date that Taxes are so assessed as the quotient (expressed as a percentage) that is obtained by dividing (x) the number of square feet of Rentable Area in the Premises, by (y) the number of square feet of Rentable Area in the Building (after taking into account such expansion of the Rentable Area thereof) and (II) Base Taxes shall be an amount equal to the product obtained by multiplying (x) Base Taxes immediately prior to the date that Taxes are assessed on the Building to reflect such improvements, by (y) a fraction, the numerator of which is the Taxes that are assessed against the Building (after taking such improvements into account), and the denominator of which is the Taxes that are assessed against the Building (before taking such improvements into account).

(B) If, prior to Landlord’s filing of a Condominium Declaration, Landlord makes improvements to the Building to expand the Rentable Area thereof, then, with respect to the period from and after the date that such improvements are Substantially Completed, (I) Tenant’s Operating Expense Share shall be recalculated as of the date that such improvements are Substantially Completed as the quotient (expressed as a percentage) that is obtained by dividing (x) the number of square feet of Rentable Area in the Premises, by (y) the number of square feet of Rentable Area in the Building (other than any retail portion thereof) (after taking such expansion into account) and (II) Base Operating Expenses shall be deemed to be an amount equal to the product obtained by multiplying (x) Base Operating Expenses prior to the date that such improvements are Substantially Completed, by (y) a fraction, the numerator of which is the Operating Expenses for the Building (after such improvements are Substantially Completed), and the denominator of which is the Operating Expenses for the Building (prior to such improvements being Substantially Completed).

2.10 Local Law 97.

(A) The parties acknowledge that Local Law 97 of 2019 (“Local Law 97”) imposes certain carbon emissions limits on the Building (such limits being referred to herein as the “Carbon Emissions Limits”).

(B) Landlord, from time to time during the Term, shall (i) establish a reasonable allocation in a fair and equitable manner among the tenants in the Building of resources that create carbon emissions, including, without limitation, HVAC and electricity usage that would cause the Carbon Emissions Limits to be satisfied (with the understanding that the Carbon Emissions Limits shall also be allocated in a fair and equitable manner to Landlord in respect of the Building Systems and the common areas of the Building) (the allocation of the Carbon Emissions Limits to Tenant, as finally determined from time to time in accordance with this Section 2.10, is referred to herein as “Tenant’s Carbon Emission Allocation”), (ii) implement a reasonable protocol to measure on a periodic basis the extent to which the carbon emissions that are reasonably allocable to Tenant’s use and occupancy of the Premises exceeds Tenant’s Carbon Emissions Allocation (such protocol, as finally determined in accordance with this Section 2.10, is referred to herein as the “Measurement Protocol”), and (iii) give Tenant notice of Tenant’s Carbon Emission Allocation as determined by Landlord and the Measurement Protocol that Landlord so proposes to implement in

 

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accordance with this Section 2.10 (such notice being referred to herein as the “Allocation and Protocol Notice”). Landlord shall have the right, from time to time, to revise Tenant’s Carbon Emission Allocation or the Measurement Protocol by giving notice thereof to Tenant (which notice shall be treated in the same manner as an Allocation and Protocol Notice for purposes of this Section 2.10).

(C) Promptly following Tenant’s written request to Landlord, from time to time, but not more frequently than quarterly, Landlord shall provide Tenant with Landlord’s reasonable determination of Tenant’s usage of resources that are in excess of Tenant’s Carbon Emission Allocation (determined in accordance with the Measurement Protocol) (“Landlord’s Carbon Emission Determination”).

(D) Tenant shall have the right to object to (i) Landlord’s determination of Tenant’s Carbon Emission Allocation, (ii) the Measurement Protocol that Landlord so proposes, or (iii) Landlord’s Carbon Emission Determination, in each case only by giving Landlord notice thereof within thirty (30) days after the date that Landlord gives Tenant the Allocation and Protocol Notice or Landlord’s Carbon Emission Determination, as the case may be. Either party shall have the right to submit to an Expedited Arbitration Proceeding a dispute between the parties regarding Tenant’s Carbon Emission Allocation, the Measurement Protocol or Landlord’s Carbon Emission Determination.

(E) The parties acknowledge that the parties’ respective obligations under this Section 2.10 to comply with the Carbon Emissions Limits shall not apply unless and until Local Law 97 becomes operative in respect of the Building.

(F) Subject to the terms of this Section 2.10, the costs that Landlord reasonably incurs in complying with Local Law 97 shall be includible in Operating Expenses (such costs being collectively referred to herein as “Local Law 97 Costs”), with the understanding that (i) Landlord’s right to include in Operating Expenses any Local Law 97 Costs that are required to be capitalized in accordance with GAAP shall be limited to the extent that is set forth in Section 2.2(F) hereof, (ii) from and after January 1, 2030, Landlord shall have the right to include in Operating Expenses as Local Law 97 Costs the fines or penalties that are imposed in respect of the Building pursuant to Local Law 97, and (iii) Landlord shall have the right to include in Operating Expenses as Local Law 97 Costs the costs that Landlord may incur to purchase renewable energy credits or greenhouse gas offsets to avoid the fines or penalties that would otherwise be imposed by reason of Local Law 97. Landlord, however, shall not have the right to include in Operating Expenses any Local Law 97 Costs that are attributable to Tenant’s failure to satisfy Tenant’s Carbon Emission Allocation (as determined in accordance with the Measurement Protocol), with the understanding that in such case, Tenant shall pay to Landlord, as additional rent, an amount equal to any such Local Law 97 Costs that are attributable to Tenant’s failure to satisfy Tenant’s Carbon Emission Allocation (as determined in accordance with the Measurement Protocol) within thirty (30) days after the date that Landlord gives Tenant an invoice therefor, together with reasonable supporting documentation for the charges set forth therein. Notwithstanding the foregoing to the contrary, in no event shall Tenant be obligated to pay Local Law 97 Costs attributable to Tenant not satisfying

 

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Tenant’s Carbon Emission Allocation for any particular period if no Local Law 97 Costs are assessed against the Building for such period. Landlord shall also not have the right to include in Operating Expenses any Local Law 97 Costs that are attributable to another tenant’s failure to satisfy such tenant’s allocation of the Carbon Emissions Limits as described in this Section 2.10 (as determined in accordance with the Measurement Protocol).

(G) If Tenant shall purchase renewable energy credits or greenhouse gas offsets during the Term to avoid the fines or penalties that would otherwise be imposed by reason of Local Law 97, then not later than March 31st of each calendar year occurring during the Term, Tenant shall provide to Landlord all data relating to such purchased renewable energy credits or greenhouse gas offsets and such other information related thereto as reasonably requested by Landlord from time to time.

Article 3

USE

3.1 Permitted Use.

(A) Subject to Section 3.2 hereof, Tenant shall use the Premises, and Tenant shall cause any other Person claiming by, through or under Tenant to use the Premises, in either case only as general, administrative and executive offices and for uses reasonably incidental thereto.

(B) Landlord acknowledges that the following items qualify as uses that are incidental to Tenant’s use of the Premises as general, administrative and executive offices (provided that Tenant’s use of the Premises for such purposes supports Tenant’s primary use of the Premises as general, administrative and executive offices and is permitted in accordance with all Requirements (it being acknowledged that Landlord makes no representations that any of such incidental uses are so permitted by Requirements)):

(1) pantries and vending machines;

(2) conference rooms and board rooms;

(3) data processing centers;

(4) duplicating and photographic reproduction facilities;

(5) mailroom and messenger facilities; and

(6) secured storage facilities for Tenant’s Property, including, without limitation, equipment, records and files.

 

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Nothing contained in this Section 3.1(B) impairs Tenant’s obligation to perform Alterations in accordance with the provisions of Article 7 hereof. Landlord and Tenant acknowledge that the parties’ description of particular incidental uses in this Section 3.1(B) does not impair Tenant’s right to use the Premises for other uses that are otherwise reasonably incidental to Tenant’s use of the Premises as general, administrative and executive offices as provided in this Section 3.1.

3.2 Limitations.

Tenant shall not use the Premises or any part thereof, or permit the Premises or any part thereof to be used:

(1) for the conduct of “off-the-street” retail trade;

(2) by any Governmental Authority or any other Person having sovereign or diplomatic immunity (it being understood, however, that this clause (2) shall not prohibit a Permitted Party from permitting representatives of a Governmental Authority to enter a portion of the Premises temporarily to perform audits or other similar regulatory review of such Permitted Party’s business);

(3) for the sale, storage, preparation, service or consumption of food or beverages in any manner whatsoever (except that a Permitted Party has the right to store, prepare, and serve food and beverages, by any reasonable means (including, without limitation, by means of customary vending machines), for consumption by such Permitted Party’s personnel and business guests in the Premises);

(4) as an employment agency, executive search firm or similar enterprise, labor union, school, or vocational training center (except for the training of employees of a Permitted Party who are employed at the Premises);

(5) for gaming or gambling;

(6) for any pornographic or obscene purpose, any commercial sex establishment, any pornographic, obscene, nude or semi-nude performances, modeling or sexual conduct of any kind; or

(7) for an office sharing or co-working business or a conferencing center, subject to Section 17.9 hereof.

3.3 Rules.

Subject to the terms of this Section 3.3, Tenant shall comply with, and Tenant shall cause any other Person claiming by, through or under Tenant to comply with, the rules set forth in Exhibit “3.3” attached hereto and made a part hereof, and other reasonable rules that Landlord hereafter adopts from time to time on reasonable advance notice to Tenant, including, without limitation, rules that govern the performance of Alterations (the “Alterations Rules”, together with such rules

 

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that are attached hereto, and such other reasonable rules, being collectively referred to herein as the “Rules”). Landlord shall not have any obligation to enforce the Rules or the terms of any other lease against any other tenant, and Landlord shall not be liable to Tenant for violation thereof by any other tenant. Landlord shall not enforce any Rule against Tenant (i) that Landlord is not then enforcing against all other office tenants in the Building, or (ii) in a manner that differs in any material respect from the manner in which Landlord is enforcing the applicable Rule against other office tenants in the Building. If a conflict or inconsistency exists between the Rules and the provisions of the remaining portion of this Lease, then the provisions of the remaining portion of this Lease shall control.

3.4 Risers.

Subject to the terms of this Section 3.4, Landlord hereby consents to Tenant’s installing and maintaining, on a non-exclusive basis, electrical lines, telecommunications lines or other similar lines and conduits (collectively, the “Risers”) in the vertical shaft locations reasonably designated by Landlord (taking into account, among other things, the needs of other tenants and the operation of the Building). Landlord shall provide Tenant with reasonably necessary access in accordance with good construction practice for the installation, operation and maintenance of the Risers, provided that such access shall (i) not unreasonably interfere with or interrupt the operation and maintenance of the Building, and (ii) be upon such other terms reasonably designated by Landlord. If Tenant exercises Tenant’s right to install the Risers as contemplated by this Section 3.4, then Tenant, at Tenant’s expense, shall (a) install the Risers (it being agreed that there shall be no additional charge or fee to Tenant for the use of the Risers other than any reimbursement of Landlord’s reasonable Out-of-Pocket Costs pursuant to Article 7 hereof), (b) perform such installation in accordance with the provisions of this Lease, including, without limitation, the provisions pertaining to the performance of Alterations and (c) maintain the Risers in good condition during the Term. Landlord, at Landlord’s cost and expense and at no cost to Tenant, and upon reasonable prior notice to Tenant of not less than ninety (90) days, may, at any time and from time to time during the Term, relocate any of the Risers to a location reasonably designated by Landlord; provided, however, that (x) Landlord shall perform such relocation in a manner that does not interfere with the operation of Tenant’s business in any material respect during ordinary business hours on Business Days, and (y) if Landlord’s aforesaid relocation of any Risers would interfere in any material respect with a system that Tenant uses on a continuous basis for the conduct of Tenant’s business, then Landlord, prior to removing such Risers, shall install and make operative new Risers and cooperate with Tenant to enable Tenant to maintain the continuous operation of such systems. Tenant, upon the Expiration Date, shall not be required to remove the Risers; provided, however, that (1) Landlord reserves the right to require the Risers to be disconnected, capped and sealed, at Tenant’s cost, upon the Expiration Date, and (2) Landlord shall have the right to require Tenant to remove the Risers upon the Expiration Date to the extent required by any Requirement.

 

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3.5 Promotional Displays.

Tenant shall not have the right to use any window in the Premises for any sign or other display that is designed principally for advertising or promotion.

3.6 Core Toilets.

Tenant shall have the right to use the toilets that are located in the core area of the Building on any floor of the Building where the Premises is located and where the Premises does not include the entire Rentable Area of such floor (in common with the other tenants, licensees and other occupants of such floor of the Building).

3.7 Wireless Internet Service.

Subject to the terms of this Section 3.7, Tenant shall have the right to install wireless systems in the Premises, including, without limitation, wireless systems that enable users to access the Internet or cellular telephone systems. Tenant shall not solicit other occupants of the Building to use wireless services that emanate from the Premises. Tenant shall not permit the signals of Tenant’s wireless systems (if any) to emanate beyond the Premises in a manner that interferes in any material respect with any Building Systems or with any other occupant’s use of other portions of the Building. Tenant shall operate Tenant’s wireless systems (if any) in accordance with applicable Requirements. Tenant acknowledges that Landlord may establish Rules in accordance with Section 3.3 hereof to coordinate the use of wireless systems by occupants of the Building (it being understood that such Rules may allocate radio frequencies among occupants of the Building to the extent permitted by applicable Requirements and to the extent reasonably practicable). Tenant shall provide to Landlord from time to time, reasonably promptly after Landlord’s request, a description of technical specifications of the wireless systems (if any) that Tenant uses in the Premises. Nothing contained in this Section 3.7 diminishes Tenant’s obligation to perform Alterations in accordance with the provisions of Article 7 hereof.

3.8 Telecommunications.

Landlord shall permit Tenant to gain access to the facilities of the telecommunications provider(s) that services the Building from time to time through the telecommunication closet on the floor of the Building where the Premises is located (it being understood that Landlord’s granting such access to Tenant shall not constitute Landlord’s agreement to provide telecommunications services to Tenant or to otherwise have responsibility for the operation or security thereof).

3.9 Tenant’s Signage.

Subject to the terms of this Section 3.9, Tenant shall be permitted to install and maintain, at Tenant’s expense, a sign on the entrance door into such portion of the Premises containing only the name and/or logo of Tenant, provided that any such sign shall be subject to Landlord’s prior written approval which shall not be unreasonably withheld, conditioned or delayed. In connection with any such signage installed by Tenant, Tenant shall (i) comply in all respects with the Rules

 

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and all applicable provisions of this Lease (including, without limitation, Article 7 hereof) and (ii) maintain any such signage during the Term, at Tenant’s cost and expense. If Tenant shall install any signage in violation of this Section 3.9, Landlord may remove such signage, and Tenant shall reimburse Landlord for any reasonable Out-of-Pocket Costs incurred in connection with such removal, as additional rent hereunder, within thirty (30) days after Landlord renders an invoice therefor.

3.10 Sustainability Practices.

(A) Tenant acknowledges that Landlord may elect, in Landlord’s sole discretion, to implement energy, water, and waste efficiency, and other environmentally sustainable practices (collectively, the “Sustainability Practices”), and in furtherance of thereof, Landlord may pursue an environmental sustainability monitoring and certification and/or a rating program such as ENERGY STAR, Green Globes-CIEB, LEED, BREEAM, IREM CSP, Fitwel, Fitwel VRM, WELL, WELL Health & Safety or similar programs (“Green Building Certification and Health & Safety Certification”). Tenant agrees that, throughout the Term, Tenant shall reasonably cooperate with Landlord, and to the extent reasonably practicable, Tenant shall comply with Landlord’s Sustainability Practices for the Building and/or Landlord’s efforts to obtain or maintain Green Building Certification and Health & Safety Certification, including, without limitation, matters addressing operations and maintenance, indoor air quality, energy efficiency, water efficiency, water quality, wellness, health safety, recycling programs, exterior maintenance program, transportation and occupant satisfaction surveys, sustainable procurement practices and/or systems upgrades. Landlord shall have the right to include in Operating Expenses any costs that Landlord reasonably incurs in connection with the Sustainability Practices and Green Building Certification and Health & Safety Certification (the “Sustainability and Certification Costs”), with the understanding that Landlord’s right to include in Operating Expenses any Sustainability and Certification Costs that are required to be capitalized in accordance with generally accepted accounting principles, consistently applied, shall be limited to the extent set forth in Section 2.2(F) of this Lease.

(B) During the Term, Landlord and Tenant shall each designate a point of contact for issues, questions and other matters relating to Local Law 97 and Sustainability Practices. The following shall be the designated point of contact for Landlord and Tenant (it being agreed that either party may change such party’s designated point of contact by notice given to the other party in accordance with Article 27 of this Lease):

 

Landlord’s Point of Contact:

  

Tenant’s Point of Contact:

Lauren Moss

Senior Vice President - Chief Sustainability Officer

Vornado Realty Trust

888 Seventh Avenue

New York, New York 10019

Email: ***

Telephone: ***

  

Lauren Stipp

Director of Corporate Administration

LB Pharmaceuticals, Inc.

One Penn Plaza

New York, New York 10119

Email: ***

Telephone: ***

 

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Article 4

SERVICES

4.1 Certain Definitions.

(A) The term “Building Hours” shall mean the period from 8:00 A.M. to 6:00 P.M. on Business Days; provided, however that with respect to the provision of HVAC from the HVAC Systems only, the term “Building Hours” shall mean, the period from 8:00 A.M. to 8:00 P.M. on Business Days.

(B) The term “Building Systems” shall mean the service systems of the Building, including, without limitation, the mechanical, gas, steam, electrical, sanitary, HVAC, elevator, plumbing, and life-safety systems of the Building (it being understood that the Building Systems shall not include any systems that Tenant installs in the Premises as an Alteration).

(C) The term “HVAC” shall mean heat, ventilation and air-conditioning.

(D) The term “HVAC Systems” shall mean the Building Systems that provide HVAC.

(E) The term “Overtime Periods” shall mean any times that do not constitute Building Hours; provided, however, that the Overtime Periods for the freight elevator shall also include the lunch period of the personnel who operate the freight elevator or the related loading facility.

4.2 Elevator Service.

(A) Subject to the terms of Section 9.6(C) hereof, Article 10 hereof and this Section 4.2, Landlord shall provide Tenant with passenger elevator service for the Premises using the Building Systems therefor. Tenant’s use of the passenger elevators shall be in common with other occupants of the Building. Tenant shall have the use of the passenger elevators that service the Premises at all times, except that Landlord, during Overtime Periods, shall have the right to limit reasonably the passenger elevators that Landlord makes available to service the Premises (provided that there is available to Tenant on a non-exclusive basis at all times at least one (1) passenger elevator that services the Premises). Tenant shall use the passenger elevators only for purposes of transporting persons to and from the Premises.

 

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(B) Subject to the terms of Section 9.6(C) hereof, Article 10 hereof and this Section 4.2, Landlord shall provide Tenant with freight elevator service for the Premises using the Building Systems therefor. Tenant’s use of the freight elevator shall be in common with other occupants of the Building. Landlord shall have the right to prescribe reasonable rules from time to time regarding the rights of the occupants in the Building (including, without limitation, Tenant) to use the freight elevator (governing, for example, the responsibility of occupants of the Building to reserve freight elevator use in advance, particularly for Overtime Periods). Tenant shall use the freight elevator in accordance with applicable Requirements. If Tenant uses the freight elevator during Overtime Periods, then Tenant shall pay to Landlord, as additional rent, an amount calculated at the reasonable hourly rates that Landlord charges from time to time therefor, within thirty (30) days after Landlord’s giving to Tenant an invoice therefor; provided, however, that Tenant shall not be required to pay for the first sixteen (16) hours of Tenant’s use of the freight elevator during Overtime Periods (the “Overtime Freight Allocation”) only for (x) Tenant’s initial move into and out of the Licensed Area, (y) Tenant’s initial move into the Premises and/or (z) Tenant’s performance of the Initial Alterations (but not for purposes associated with the ordinary conduct of Tenant’s business). Landlord shall have the right to charge Tenant for a particular minimum number of hours of usage of the freight elevator during Overtime Periods to the extent that the applicable union contract or service contract requires Landlord to engage the necessary personnel (including, without limitation, a freight elevator operator and loading dock attendant) for such minimum number of overtime hours. If (x) Tenant requests Landlord to provide Tenant with freight elevator service during Overtime Periods as provided in this Section 4.2(B), and (y) another tenant in the Building also uses, or other tenants in the Building also use, the applicable freight elevator during such Overtime Period, then Landlord shall allocate equitably the charges described in this Section 4.2(B) among Tenant and such other tenant or tenants.

4.3 Heat, Ventilation and Air-Conditioning.

(A) Subject to the terms of Article 10 hereof and this Section 4.3, Landlord shall operate the HVAC System to provide HVAC at the perimeter of the Premises. Landlord shall not be required to make any installations in the Premises to distribute HVAC within the Premises other than those certain installations expressly agreed to as part of Landlord’s Work. Landlord shall not be required to repair or maintain during the Term (i) any installations that exist in the Premises on the Commencement Date that distribute within the Premises HVAC that the HVAC System provides, or (ii) any system that is located in the Premises on the Commencement Date that provides supplemental HVAC for the Premises (in addition to the HVAC provided by the HVAC System). Tenant shall keep closed the curtains, blinds, shades or screens that Tenant installs on the windows of the Premises in accordance with the terms hereof to the extent reasonably necessary to reduce the interference of direct sunlight with the operation of the HVAC System.

(B) Landlord shall operate the HVAC System for Tenant’s benefit during Overtime Periods if Tenant so advises Landlord not later than 2:00 P.M. on the Business Day immediately preceding the day on which Tenant requires HVAC during Overtime Periods. Notwithstanding the foregoing to the contrary, if Tenant advises Landlord later than 2:00 P.M. on the Business Day immediately preceding the day on which Tenant requires HVAC during Overtime Periods, then Landlord shall endeavor to cause the HVAC System to be operating during such Overtime Periods (as so requested by Tenant); provided, however, any failure of Landlord to

 

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so provide HVAC during Overtime Periods following a late request by Tenant shall not be deemed a default by Landlord hereunder. If Landlord so provides HVAC to the Premises during Overtime Periods (as so requested by Tenant), then Tenant shall pay to Landlord, as additional rent, an amount calculated at the reasonable hourly rates that Landlord charges from time to time therefor, within thirty (30) days after Landlord gives to Tenant an invoice therefor. If (x) Landlord so provides HVAC to the Premises during an Overtime Period (as so requested by Tenant), and (y) another tenant requests or other tenants request HVAC during the same Overtime Period, then Landlord shall reduce equitably Landlord’s aforesaid charge to Tenant for HVAC during such Overtime Period to reflect such other tenant’s use, or such other tenants’ use, of HVAC during such Overtime Period. Landlord shall have the right to charge Tenant for a particular minimum number of hours of usage of the HVAC System during Overtime Periods to the extent that the applicable union contract or service contract requires Landlord to engage the necessary personnel (including, without limitation, a building engineer) for such minimum number of overtime hours.

4.4 Cleaning.

(A) Subject to the terms of Article 10 hereof and this Section 4.4, Landlord shall cause the Premises to be cleaned substantially in accordance with the standards set forth in Exhibit “4.4” attached hereto and made a part hereof. Landlord shall not be required to clean the portions of the Premises (if any) (x) that Tenant uses for the storage, preparation, service or consumption of food or beverages, (y) in which Tenant is performing Alterations, or (z) in which the interior installation has been demolished in all material respects. Tenant shall pay to Landlord, as additional rent, the reasonable costs incurred by Landlord in removing from the Building any of Tenant’s refuse and rubbish to the extent exceeding the amount of refuse and rubbish usually generated by a tenant that uses the Premises for ordinary office purposes. Tenant shall make such payments to Landlord not later than the thirtieth (30th) day after the date that Landlord gives to Tenant an invoice therefor from time to time.

(B) Tenant, at Tenant’s expense, shall exterminate the portions of the Premises that Tenant uses for the storage, preparation, service or consumption of food against infestation by insects and vermin regularly and, in addition, whenever there is evidence of infestation. Tenant shall engage Persons to perform such exterminating that are approved by Landlord, which approval Landlord shall not unreasonably withhold, condition or delay. Tenant shall cause such Persons to perform such exterminating in a manner that is reasonably satisfactory to Landlord.

(C) Tenant, at Tenant’s expense, shall clean daily all portions of the Premises used for the storage, preparation, service or consumption of food or beverages. Tenant shall not have the right to perform any cleaning services (or any other similar facilities management services such as, for example, matron services or handyman services) in the Premises using any Person other than the cleaning contractor that Landlord has engaged from time to time to perform cleaning services in the Building for Landlord; provided, however, that (x) Landlord shall not have the right to require Tenant to use such cleaning contractor unless the rates that such cleaning contractor agrees to charge Tenant for such additional cleaning services are commercially reasonable, and (y) subject to Section 4.11 hereof, Tenant shall have the right to use Tenant’s own employees for such

 

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additional cleaning services. If such cleaning contractor does not agree to charge Tenant for such additional cleaning services (or such similar services) at commercially reasonable rates, then Tenant may employ to perform such additional cleaning services (or such similar services) another cleaning contractor that Landlord approves, which approval Landlord shall not unreasonably withhold, condition or delay.

(D) Tenant shall comply with any refuse disposal program (including, without limitation, any waste recycling program) that Landlord imposes reasonably after having given Tenant reasonable advance notice of the effectiveness thereof or that is required by Requirements.

(E) Tenant shall not clean any window in the Premises, nor require, permit, suffer or allow any window in the Premises to be cleaned, in either case from the outside in violation of Section 202 of the New York Labor Law, any other Requirement, or the rules of the Board of Standards and Appeals, or of any other board or body having or asserting jurisdiction.

4.5 Water.

Subject to this Section 4.5, Landlord shall, at Landlord’s expense (but subject to recoupment pursuant to Article 2 hereof), provide, through the Building Systems, (i) hot and cold water to the lavatories located in the core of the Building on the floor on which the Premises is located for ordinary cleaning and lavatory purposes and (ii) hot and cold water at one (1) connection point at the perimeter of the Premises only for ordinary drinking, pantry and cleaning purposes. Landlord shall not be required to make any installations in the Premises to distribute water within the Premises. Landlord shall not be required to repair or maintain during the Term any installations that exist in the Premises on the Commencement Date that distribute water in the Premises. If Landlord reasonably determines that Tenant’s consumption of domestic water is in excess of the ordinary domestic water usage for office tenants, then Landlord, at Landlord’s cost, may install a water meter to measure Tenant’s consumption of domestic water. Tenant shall pay, as additional rent, for any such water consumption as shown on such meter without mark-up (i.e., not more than the rate that the applicable Governmental Authority charges to Landlord therefor) on or prior to the thirtieth (30th) day after the date that Landlord gives to Tenant an invoice therefor together with reasonable supporting documentation for the charges that are set forth therein. If Landlord installs a water meter as aforesaid, then Landlord shall maintain such water meter in accordance with the terms of Section 8.1 hereof. Nothing contained in this Section 4.5 limits the provisions of Article 10 hereof.

4.6 Directory.

Tenant acknowledges that Landlord has not installed a directory for the Building in the lobby thereof. If Landlord hereafter installs any such directory in the lobby of the Building for the purpose of listing the tenants of the Building generally, then Landlord shall make available for Tenant’s use Tenant’s Operating Expense Share of listings on the lobby directory for the Building for purposes of listing the names of the personnel of Permitted Parties. If Landlord so installs such directory, then Landlord shall modify such directory to add or delete names of the personnel of Permitted Parties promptly after Tenant’s request from time to time, except that Tenant shall not

 

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have the right to make any such request more frequently than once in any particular period of ninety (90) days. Tenant shall pay to Landlord, as additional rent, a reasonable charge for any such modifications requested by Tenant, within thirty (30) days after the date that Landlord gives to Tenant an invoice therefor (it being understood that Tenant shall not be required to pay such charge for Tenant’s initial listings on such directory). Notwithstanding anything to the contrary contained herein, Landlord reserves the right to remove any directory in the lobby of the Building at any time (without making a replacement).

4.7 Condenser Water.

Subject to the terms of Article 10 hereof and this Section 4.7, Tenant, at Tenant’s expense, and at Tenant’s election, may tap into the applicable Building System to obtain condenser water for any supplemental air-conditioning system that Tenant installs as part of the Initial Alterations in accordance with the provisions of Article 7 hereof. Any such supplemental air-conditioning system that Tenant installs shall not have a capacity of more than two (2) tons. Tenant’s rights to use such condenser water capacity under this Section 4.7 shall lapse on the first (1st) anniversary of the Commencement Date to the extent of any unused portion of the aforesaid condenser water capacity that Landlord has made available to Tenant for a supplemental air-conditioning system that Tenant installs as part of the Initial Alterations. Any installations that are required to connect Tenant’s supplemental air-conditioning system to the condenser water pipes shall be made by Tenant, at Tenant’s cost, using contractors that Landlord designates reasonably and otherwise in accordance with the provisions of Article 7 hereof. Tenant shall pay to Landlord, as additional rent, (i) the Out-of-Pocket Costs that Landlord incurs in making such connection (but no so called “tap-in fee”) and (ii) an annual charge in the amount of Three Hundred Fifty and 00/100 Dollars ($350.00) per ton of capacity of the system so connected (which amount per ton shall be increased on each anniversary of the Commencement Date to reflect the percentage increase, if any, in the Consumer Price Index from the Consumer Price Index that is in effect on the Commencement Date). Tenant shall pay such amounts to Landlord, as additional rent, on or prior to the thirtieth (30th) day after the date that Landlord gives to Tenant an invoice therefor from time to time.

4.8 Building Security.

Subject to the terms of this Section 4.8, Landlord shall provide security services to or security systems in the Building in conformity with the standards that are customary for first-class office buildings that are comparable to the Building in the vicinity of the Building. On or prior to the Commencement Date, Landlord shall provide to Tenant, at Landlord’s expense (subject, however, to Article 2 hereof), an initial set of up to forty (40) access cards to the Building access system for Tenant’s employees; provided, however, (i) Tenant shall reasonably cooperate with Landlord so that Landlord can issue the initial set of access cards to the Building on or prior to the Commencement Date, (ii) any Building access cards beyond such forty (40) access card limit and/or any additional Building access cards thereafter required by Tenant during the Term shall be provided to Tenant, at Tenant’s expense, and (iii) Tenant shall pay to Landlord, as additional rent, a reasonable charge for such additional Building access cards within thirty (30) days after the date that Landlord gives to Tenant an invoice therefor. Tenant acknowledges that (a) Landlord, in

 

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agreeing to arrange for such security personnel, does not ensure the security of the Building, and (b) accordingly, Tenant remains responsible for making the Alterations in, and adopting procedures for, the Premises that Tenant considers adequate to provide for Tenant’s security. Tenant, at Tenant’s cost and expense, shall have the right to install a security system in the Premises that is compatible with (and ties into) the security system at the Building in order to enable Tenant to utilize a single security or access card provided by Landlord to access both the Building and the Premises, and Landlord shall reasonably cooperate and assist Tenant with the integration of Tenant’s security system with the Building’s security system; provided, however, the foregoing shall not obligate Landlord to modify or replace the Building’s security system to enable such integration.

4.9 Building Standard Directional Signage.

Landlord shall install Building standard directional signage in the elevator lobby located on any multi-tenanted floor that is part of the Premises.

4.10 Building Amenities.

Subject to the terms of this Section 4.10, Tenant, at Tenant’s cost and expense, shall be entitled to use any of the amenities that are then part of Landlord’s amenity offerings for the general benefit of tenants and occupants in the Building; it being acknowledged that such amenity offerings for the general benefit of tenants and occupants in the Building may from time to time include amenity offerings located at other building(s) in THE PENN DISTRICT that are owned and managed by Landlord and/or Landlord’s affiliates. Tenant acknowledges that such amenity offerings and the location, use, size and/or operation thereof may (i) be modified, limited and/or discontinued from time to time, (ii) be operated by a third-party operator, managed by a third-party and/or leased to a third-party, (iii) be available for use by Landlord, Landlord’s affiliates, tenants and occupants of the Building, tenants and occupants of any other buildings owned by Landlord and/or Landlord’s affiliates, members of the general public and/or any other persons and/or (iv) be subject to a fee structure (e.g., with or without a usage, membership and/or license fee), in each case as determined by Landlord or such third-party, in the sole and absolute discretion of Landlord or such third-party.

4.11 Labor Harmony.

If (i) Tenant employs, or permits the employment of, any contractor, mechanic or laborer in the Premises, whether in connection with any Alteration or otherwise, (ii) such employment interferes or causes any conflict with other contractors, mechanics or laborers engaged in the maintenance, repair, management or operation of the Building or any adjacent property owned or managed by Landlord, and (iii) Landlord gives Tenant notice thereof (which notice may be given verbally to the person employed by Tenant with whom Landlord’s representative ordinarily discusses matters relating to the Premises), then Tenant shall cause all contractors, mechanics or laborers causing such interference or conflict to leave the Building promptly and shall take such other action as may be reasonably necessary to resolve such conflict.

 

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4.12 No Other Services.

Landlord shall not be required to provide any services to support Tenant’s use and occupancy of the Premises, except to the extent expressly set forth in this Lease.

Article 5

ELECTRICITY

5.1 Capacity.

Subject to the terms of this Article 5, Landlord shall provide to the electrical closet on the floor of the Building where the Premises is located, for Tenant’s use, six and 0/100 (6) watts of electrical capacity (demand load) per square foot of Usable Area in the Premises (exclusive of the electrical capacity that is required to operate the Building Systems) (such electrical capacity being referred to herein as the “Base Electrical Capacity”). Tenant, during the Term, shall use electricity in the Premises only in such manner that complies with the requirements of the Utility Company. Tenant shall not permit the demand for electricity in the Premises to exceed the Base Electrical Capacity.

5.2 Electricity for the Building.

Landlord shall arrange with a Utility Company to provide electricity for the Building. Landlord shall not be liable to Tenant for any failure or defect in the supply or character of electricity furnished to the Building, except to the extent that such failure or defect results from Landlord’s negligence or willful misconduct. Landlord shall not be required to make any installations in the Premises to distribute electricity within the Premises. Landlord shall not be required to maintain or repair during the Term any installations that exist in the Premises on the Commencement Date that distribute electricity within the Premises. Tenant shall deliver to Landlord data regarding the consumption of electricity in the Premises, to the extent that such consumption data shall be available and in Tenant’s possession and control, promptly after Landlord’s request therefor from time to time.

5.3 Submetering.

(A) Subject to the provisions of this Section 5.3, Landlord shall measure Tenant’s demand for and consumption of electricity in the Premises using a submeter that is, or submeters that are, installed and maintained by Landlord. Landlord shall pay the cost of installing and maintaining such submeter or submeters. If, at any time during the Term, Tenant performs Alterations that require modifications to the aforesaid submeter or submeters that Landlord installs, or that require a supplemental submeter or supplemental submeters, then Landlord shall perform such modification, or the installation of such supplemental submeter or submeters, at Tenant’s cost, and Tenant shall reimburse Landlord for such costs, as additional rent, within thirty (30) days after Landlord gives Tenant an invoice therefor.

 

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(B) Tenant shall pay to Landlord, as additional rent, an amount (the “Electricity Additional Rent”) equal to one hundred three percent (103%) of the sum of:

(1) the product obtained by multiplying (x) the Average Cost per Peak Demand Kilowatt, by (y) the number of kilowatts that constituted the peak demand for electricity in the Premises for the applicable billing period, as registered on the submeter or submeters for the Premises, and

(2) the product obtained by multiplying (x) the Average Cost per Kilowatt Hour, by (y) the number of kilowatt hours of electricity used in the Premises for the applicable billing period, as registered on the submeter or submeters for the Premises.

(C) Landlord shall give Tenant an invoice for the Electricity Additional Rent from time to time (but no less frequently than quarter-annually). Tenant shall pay the Electricity Additional Rent to Landlord on or prior to the thirtieth (30th) day after the date that Landlord gives to Tenant each such invoice. Tenant shall not have the right to object to Landlord’s calculation of the Electricity Additional Rent unless Tenant gives Landlord notice of any such objection on or prior to the ninetieth (90th) day after the date that Landlord gives Tenant the applicable invoice for the Electricity Additional Rent. If Tenant gives Landlord a notice objecting to Landlord’s calculation of the Electricity Additional Rent, as aforesaid, then Tenant shall have the right to review Landlord’s submeter readings and Landlord’s calculation of the Electricity Additional Rent, at Landlord’s offices or, at Landlord’s option, at the offices of Landlord’s managing agent, in either case at reasonable times and on reasonable advance notice to Landlord. Either party shall have the right to submit a dispute regarding the Electricity Additional Rent to an Expedited Arbitration Proceeding.

(D) If a submeter measuring Tenant’s electrical demand and consumption in the Premises has not been installed in the Premises, or the submeters measuring Tenant’s electrical demand and consumption in the Premises have not been installed in the Premises, in either case on or prior to the date hereof, then (x) Landlord shall order such submeter or such submeters promptly after the date hereof, and (y) Landlord shall use commercially reasonable efforts to ensure that a submeter or submeters are installed prior to the Commencement Date. To the extent that a submeter or submeters shall not be so installed prior to the Commencement Date, (i) Landlord shall install such submeter or such submeters promptly after the Commencement Date, (ii) Landlord and Tenant shall cooperate with each other in good faith to coordinate the installation of such submeter or such submeters with Tenant’s performance of the Initial Alterations and (iii) Landlord, in installing such submeter or such submeters, shall have the right to interrupt electrical service to the Premises temporarily and in accordance with good construction practice.

 

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(E) Subject to the terms of this Section 5.3(E), if, prior to Landlord’s installing a submeter or the submeters in the Premises or prior to the date that such submeter or submeters are operational, Tenant commences the performance of the Initial Alterations, then Tenant shall pay to Landlord, as additional rent, a fee for electricity service in an amount equal to the product obtained by multiplying (I) $0.0041, by (II) the number of square feet of Rentable Area in the Premises (or the portion thereof in which Tenant is performing the Initial Alterations), by (III) the number of days in the period commencing on the date that Tenant so commences the Initial Alterations and ending on the earlier of (a) the date immediately preceding the date that Tenant first occupies the Premises (or the applicable portion thereof) for the conduct of business, and (b) the date immediately preceding the date that the submeter for the Premises (or the applicable portion thereof) is operational or the submeters for the Premises (or the applicable portion thereof) are operational. Landlord shall give Tenant an invoice for the aforesaid fee from time to time (but not less frequently than monthly). Tenant shall pay the aforesaid fee to Landlord on or prior to the thirtieth (30th) day after the date that Landlord gives each such invoice to Tenant.

(F) Subject to the terms of this Section 5.3(F), if, prior to Landlord’s installing a submeter or submeters in the Premises or prior to the date that such submeter or submeters are operational, Tenant occupies all or any portion of the Premises for the conduct of business, then Tenant shall pay to Landlord, as additional rent, a fee for electricity service in an amount equal to the product obtained by multiplying (I) $0.0048 (which amount shall be increased on each anniversary of the Commencement Date to reflect the percentage increase, if any, in the Consumer Price Index from the Consumer Price Index that is in effect on Commencement Date), by (II) the number of square feet of Rentable Area in the Premises (or the portion thereof that Tenant is occupying for the conduct of business), by (III) the number of days in the period commencing on the date that Tenant occupies the Premises (or the applicable portion thereof) for the conduct of business and ending on the date immediately preceding the date that the submeter for the Premises or the applicable portion thereof is operational or that the submeters for the Premises or the applicable portion thereof are operational (such fee being referred to herein as the “Electricity Inclusion Charge”). Landlord shall give Tenant an invoice for the Electricity Inclusion Charge from time to time (but not less frequently than monthly). Tenant shall pay the Electricity Inclusion Charge to Landlord on or prior to the thirtieth (30th) day after the date that Landlord gives each such invoice to Tenant. If (a) the monthly amount that Tenant would have paid to Landlord as the Electricity Additional Rent for the period that Tenant occupies the Premises or the applicable portion thereof for the conduct of business prior to the date that the submeter is, or the submeters are, operational (as determined using the average monthly submeter readings for the period of three (3) months after the date that the submeter is, or the submeters are, operational), exceeds (b) the Electricity Inclusion Charge for any particular period of one (1) month, then Tenant shall pay to Landlord an amount equal to such excess for each such month within thirty (30) days after Landlord gives to Tenant an invoice therefor. If (i) the Electricity Inclusion Charge for any particular period of one (1) month, exceeds (ii) the monthly amount that Tenant would have paid to Landlord as the Electricity Additional Rent for the period that Tenant occupies the Premises or the applicable portion thereof for the conduct of business prior to the date that the submeter is, or the submeters are, operational (as determined using the average monthly submeter readings for the period of three (3) months after the date that the submeter is, or the submeters are, operational), then Landlord, at Landlord’s option, shall either (x) refund promptly to Tenant an amount equal to such excess for each such month, or (y) credit such excess for each such month against the monthly installments of Rental next becoming due and payable hereunder (together with interest on such

 

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excess calculated at the Base Rate from the date that Tenant is entitled to such credit). If Landlord gives Tenant such credit for such excess, and the Expiration Date occurs before the date that such credit is exhausted, then Landlord shall pay to Tenant the unused portion of such credit on or prior to the thirtieth (30th) day after the Expiration Date (and Landlord’s obligation to make such payment shall survive the Expiration Date).

5.4 Termination of Electric Service.

(A) If Landlord is required by any Requirement to discontinue furnishing electricity to the Premises as contemplated by this Lease, then this Lease shall continue in full force and effect and shall be unaffected thereby, except that from and after the effective date of any such Requirement, (x) Landlord shall not be obligated to furnish electricity to the Premises, and (y) Tenant shall not be obligated to pay to Landlord the charges for electricity as described in this Article 5.

(B) If Landlord discontinues Landlord’s furnishing electricity to the Premises pursuant to a Requirement, then Tenant shall use Tenant’s diligent efforts to obtain electricity for the Premises directly from the Utility Company. Tenant shall pay directly to the Utility Company the cost of such electricity. Tenant shall have the right to use the electrical facilities that then exist in the Building to obtain such direct electric service (without Landlord having any liability or obligation to Tenant in connection therewith). Nothing contained in this Section 5.4 shall permit Tenant to use electrical capacity in the Building that exceeds the Base Electrical Capacity. Tenant, at Tenant’s expense, shall make any additional installations that are required for Tenant to obtain electricity from the Utility Company.

(C) Landlord shall not discontinue furnishing electricity to the Premises as contemplated by this Section 5.4 (to the extent permitted by applicable Requirements) until Tenant obtains electric service directly from the Utility Company.

Article 6

INITIAL CONDITION OF THE PREMISES

6.1 Condition of Premises.

Subject to this Article 6 and Section 8.1 hereof, (a) Tenant shall accept possession of the Premises vacant, broom-clean, with Landlord’s Work Substantially Complete and otherwise in the condition that exists on the Commencement Date “as is,” and (b) Landlord shall have no obligation to perform any work or make any installations in order to prepare the Building or the Premises for Tenant’s occupancy. Except as expressly set forth herein, Landlord has made no representations or promises with respect to the Building, the Real Property or the Premises. On the Commencement Date, the common areas of the Building in Tenant’s path of travel to the Premises and the core restrooms on the floor of the Building in which the Premises is located shall be in compliance with Requirements, including, the Americans with Disabilities Act of 1990, as in effect on the Commencement Date. On or before the Commencement Date, Landlord shall discharge of

 

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record any violation of applicable Requirements noted of record with respect to the Premises with which Landlord is otherwise required to comply hereunder, to the extent, in each instance, that such violation of applicable Requirements with respect to the Premises would prohibit or otherwise materially interfere with Tenant’s use and occupancy of the Premises on the Commencement Date for general, administrative and executive office purposes as permitted under Section 3.1 hereof.

6.2 Landlord’s Work.

(A) Subject to the terms of this Section 6.2, Landlord shall, at Landlord’s expense, perform the work necessary to construct the Premises (such work, “Landlord’s Work”) in accordance with the Final Plans which shall be prepared by Spin Design, Inc. (the “Architect”), at Landlord’s expense, which Final Plans shall be based upon (i) that certain drawing prepared by Architect and dated March 19, 2024 (the “Final Space Plan”), a copy of which is attached hereto as Exhibit “6.2-1” and made a part hereof and (ii) that certain work specification letter (the “Work Letter”), a copy of which is attached hereto as Exhibit “6.2-2” and made a part hereof. Landlord shall perform Landlord’s Work using a comparable quality of materials and finishes to those set forth in the Work Letter, and to the extent not specified in the Work Letter, using a comparable quality of materials and finishes to those existing in the Premises on the date hereof, to the extent the foregoing materials and finishes are currently available, or such other reasonably comparable materials and finishes (such materials and finishes are hereinafter referred to as the “Building Standard Installations”). Notwithstanding anything to the contrary contained herein, Landlord shall not be obligated to install any supplemental air-conditioning system, furniture or built-ins or telecommunication wiring or equipment even if same are shown on the Final Space Plan, Tenant’s Initial Plans or the Final Plans.

(B) Tenant shall promptly provide the Architect with all reasonable input and information necessary to enable the Architect to deliver to Landlord on or prior to April 30, 2024 (the “Plan Deadline”) in the manner set forth in Section 6.2(D) hereof, six (6) copies of the plans and specifications based on the Final Space Plan and the Work Letter (“Tenant’s Initial Plans”), which shall be (i) one hundred percent (100%) complete and ready to bid and build (including, without limitation, layout, architectural, mechanical, structural, engineering and plumbing drawings, to the extent applicable), (ii) stamped and approved by the Architect, and (iii) in format containing sufficient detail (a) for Landlord and Landlord’s consultants to reasonably assess the proposed work to prepare the Premises for Tenant’s initial occupancy and (b) to permit Landlord to make all necessary filings with Governmental Authorities to obtain the required permits, approvals and certificates to allow Landlord to commence Landlord’s Work (the requirements set forth in clauses (i)-(iii) hereof, the “Plan Requirements”). As of the date hereof, Landlord hereby confirms that Landlord has received Tenant’s Initial Plans on or prior to the Plan Deadline.

(C) Tenant shall promptly provide the Architect with all reasonable input and information necessary to enable the Architect to revise Tenant’s Initial Plans if and to the extent that Landlord objects or comments thereto and deliver to Landlord in the manner set forth in Section 6.2(D) hereof, six (6) copies of Tenant’s Initial Plans, as so revised, which revised plans shall (i) address all of Landlord’s objections and comments to Landlord’s reasonable satisfaction

 

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and (ii) satisfy all of the Plan Requirements (the Tenant’s Initial Plans either (a) revised as aforesaid, or (b) if Landlord shall not object or comment thereto, as applicable, shall constitute the “Final Plans”). Tenant shall promptly provide the Architect with all reasonable input and information necessary to enable the Architect to deliver the Final Plans to Landlord on or prior to the earlier to occur of (x) the date which is five (5) days following the date that Landlord gives Tenant Landlord’s objections and/or comments, if any, to Tenant’s Initial Plans and (y) May 7, 2024 (such earlier date, the “Revision Deadline”). As of the date hereof, Landlord hereby confirms that Landlord has received revisions to Tenant’s Initial Plans on or prior to the Revision Deadline and such plans, as revised, constitute the Final Plans.

(D) Notwithstanding anything to the contrary set forth in this Lease, Tenant shall provide the Architect with all reasonable input and information necessary to enable the Architect to deliver (i) five (5) copies of Tenant’s Initial Plans and the Final Plans to Landlord at the Building, Attention: Property Manager and (ii) one (1) copy of Tenant’s Initial Plans and the Final Plans to Landlord, c/o Vornado Office Management LLC, 888 Seventh Avenue, 44th Floor, New York, New York 10019, Attention: Carlos Lopez. Tenant’s Initial Plans and the Final Plans delivered by the Architect shall be clearly labeled in LARGE, BOLD AND CAPITAL LETTERS on the exterior thereof “TENANT’S PLANS ENCLOSED- TIME SENSITIVE”.

(E) Landlord shall perform Landlord’s Work (i) in a good and workmanlike manner and (ii) in accordance with all applicable Requirements.

(F) On or prior to thirty (30) days after Landlord’s rendition of a statement therefor, Tenant shall pay Landlord for Landlord’s actual, Out-of-Pocket Costs to perform any Tenant Extra Work, which statement shall have annexed thereto documentation that reasonably substantiates the charges set forth thereon. For purposes hereof, the term “Tenant Extra Work” shall mean collectively, (i) any above Building Standard Installations (to the extent the hard and soft costs incurred in connection therewith exceed the hard and soft costs which Landlord would have incurred in preparing plans for and constructing Building Standard Installations), and/or (ii) any portion of Landlord’s Work that is denoted on the Final Plans and/or the Work Letter (including, without limitation, the “Note” and “Legends” sections of the Final Plans) as “Tenant Alternates”, “Alternate Pricing”, “Alt. Pricing” or similar language denoting any alternatives from the Final Space Plan, the Work Letter and/or the Building Standard Installations. The cost for performing any Tenant Extra Work shall be determined in accordance with Landlord’s standard bidding procedure. Landlord shall notify Tenant as promptly as reasonably practicable after Landlord’s bidding procedure is completed of the estimated price for each item of Tenant Extra Work. On or prior to five (5) Business Days after Landlord gives Tenant notice of such estimated price, Tenant shall notify Landlord if Tenant (w) elects for Landlord to perform a particular item of Tenant Extra Work, (x) elects for Landlord not to perform a particular item of Tenant Extra Work and instead elects to have Landlord perform the particular item of work at Landlord’s cost using Building Standard Installations (if such item is capable of being replaced with a Building Standard Installation), (y) elects to choose a finish or specification that costs less than the original estimated price given by Landlord to Tenant but for which Tenant would pay Landlord pursuant to the terms of this Section 6.2(F), or (z) elects, at Tenant’s cost and expense, to perform such item

 

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of Tenant Extra Work itself, in which event Tenant shall perform such item as an Alteration; provided, however, Landlord shall be permitted to install a Building Standard Installation or otherwise in lieu of any such item if Tenant’s delay in performing such item would delay Landlord’s Work. If Tenant elects the immediately preceding clause (z), then such item of work shall be performed by Tenant as an Alteration, in accordance with the applicable terms and provisions of this Lease, governing Alterations except that such item of work shall be deemed to be approved by Landlord to the extent Tenant performs such item or work in accordance with the Final Plans. In the event that any item of Tenant Extra Work creates a field condition that requires a change to Landlord’s Work resulting in an increase of the cost of Landlord’s Work, Landlord shall have the right before proceeding with such change to require Tenant (a) to agree in writing to such increase in cost within two (2) Business Days from the date of Landlord’s request (which request may be verbal) for Tenant’s agreement and (b) to pay such increase, as additional rent, within thirty (30) days of Landlord’s invoice therefor; it being understood, however, that Landlord shall not have the aforesaid right unless such field condition arises as a result of any item of Tenant Extra Work. If Tenant shall fail or refuse to so agree to and/or pay for such increase then Landlord shall have the right (but not the obligation) to either refuse to perform such Tenant Extra Work, and continue the performance of Landlord’s Work without making the changes thereto contemplated by such Tenant Extra Work or to revise the scope of Landlord’s Work so as not to require a change resulting from a field condition.

(G) Landlord shall have the right to delegate Landlord’s obligations to perform all or any portion of Landlord’s Work to an Affiliate of Landlord (it being understood, however, that the delegation of such obligations by Landlord to an Affiliate of Landlord shall not diminish Landlord’s liability for the performance of Landlord’s Work in accordance with the terms of this Section 6.2). Landlord shall also have the right to assign to such Affiliate of Landlord the rights of Landlord hereunder to receive from Tenant the payments for the performance of Tenant Extra Work (it being understood that if (i) Landlord so assigns such rights to such Affiliate of Landlord, and (ii) Landlord gives Tenant notice thereof, then Tenant shall pay directly to such Affiliate any such amounts otherwise due and payable to Landlord hereunder). Landlord shall not be required to maintain or repair during the Term any items of Landlord’s Work, except as otherwise expressly provided in this Lease, it being agreed that Landlord shall make available to Tenant any guaranties or warranties received by Landlord in connection with Landlord’s Work to the extent such guaranties and warranties shall not be rendered invalid thereby.

(H) The following terms shall have the following meanings as used herein:

(1) The term “Long Lead Work” shall mean any item which is not a stock item and must be specially manufactured, fabricated or installed or is of such an unusual, delicate or fragile nature that there is a substantial risk that (a) there will be a delay in its manufacture, fabrication, delivery or installation, or (b) after delivery of such item the same will need to be reshipped or redelivered or repaired so that, in Landlord’s reasonable judgment, the item in question cannot be completed when the standard items are completed even though the items of Long Lead Work in question are (1) ordered together with the other items required and (2) installed or performed (after the manufacture or fabrication thereof) in order and sequence that such Long

 

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Lead Work and other items are normally installed or performed in accordance with good construction practice. In addition, Long Lead Work shall include any standard item, which in accordance with good construction practice should be completed after the completion of any item of work in the nature of the items described in the immediately preceding sentence. Landlord shall give Tenant notice if any item of Landlord’s Work that shall be Long Lead Work (which notice may be given in accordance with terms of Section 6.3 hereof), and propose replacement(s) for such item that shall be reasonably comparable thereto (and, to the extent that such item of Long Lead Work shall be a Building Standard Installation, then any such proposed replacement shall also be a Building Standard Installation), and Tenant shall have two (2) Business Days after the date that Landlord gives such notice to Tenant to replace such item with another item so that it shall not be Long Lead Work.

(2) The term “Tenant Work Delays” shall mean (a) the performance of any items of Tenant Extra Work that delay Landlord in the performance of Landlord’s Work and (b) Tenant’s acts or omissions (including, without limitation, (1) changes or change orders to plans or finishes, including, without limitation, changes or change orders to the Final Space Plan, the Final Plans, the Work Letter, and/or the Building Standard Installations, (2) delay or failure to provide all reasonable input and information necessary to enable the Architect to deliver Tenant’s Initial Plans to Landlord on or prior to the Plan Deadline and/or the Final Plans to Landlord on or prior to the Revision Deadline, in either case in compliance with the Plan Requirements and in accordance with the provisions of Section 6.2(D) hereof, (3) delay or failure to notify or respond to requests of Landlord, (4) delay or failure to notify Landlord within the applicable periods under this Lease of Tenant’s decision in connection with items of Tenant Extra Work, (5) delay or failure to make any of the payments required by Section 6.2(F) hereof within the time periods specified therein, (6) any changes made to the Final Space Plan, the Work Letter and/or the Final Plans to change or remove any Long Lead Work, in each case after the expiration of the two (2) Business Day period referred to in Section 6.2(H)(1) hereof and/or (7) any other circumstance expressly noted under this Lease as giving rise to a delay in the performance of Landlord’s Work) that delay Landlord in the performance of Landlord’s Work and in each case, of which are not cured within two (2) Business Days following notice thereof given by Landlord (which notice may be made by Landlord in accordance with terms of Section 6.3). Notwithstanding the foregoing or anything to the contrary contained herein, Landlord and Tenant acknowledge and agree that Landlord shall not be obligated to notify Tenant as aforesaid of any delays described in clauses (2), (4), (5) and/or (6) hereof (it being agreed that any such delay shall automatically constitute a Tenant Work Delay if and to the extent that the same actually delays Landlord in the performance and completion of Landlord’s Work).

(I) Tenant, during the Term, shall not remove any portion of Landlord’s Work (or Alterations that replace Landlord’s Work (or such portion thereof) (such Alterations, “Tenant Changes”)) unless Tenant replaces Landlord’s Work (or such portion thereof), or such Tenant Changes, as the case may be, with Tenant Changes that have a fair value that is equal to or greater than the portion of Landlord’s Work (it being understood that such Tenant Changes that Tenant performs to replace Landlord’s Work (or such portion thereof), or such other Tenant Changes, as the case may be, shall constitute the property of Landlord as contemplated by this Section 6.2(I)).

 

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(J) Notwithstanding the provisions of Section 1.2 and 1.3 hereof to the contrary, in the event that Substantial Completion of Landlord’s Work shall be delayed by reason of any Tenant Work Delays and/or items of Long Lead Work, then only for purposes of determining the date on which the Commencement Date and the Rent Commencement Date shall occur, the Substantial Completion of Landlord’s Work shall be deemed to have occurred on the date Landlord’s Work would have otherwise been Substantially Complete but for such Tenant Work Delays and/or such items of Long Lead Work, notwithstanding that Landlord has not yet delivered possession of the Premises to Tenant.

6.3 Notices to Tenant Regarding Landlord’s Work.

Notwithstanding the provisions of Article 27 hereof to the contrary, any notices required to be given by Landlord to Tenant pursuant to this Article 6 shall be deemed given if sent to Tenant via electronic mail to the attention of Tenant’s designated representative, Lauren Stipp, via electronic mail at ***.

Article 7

ALTERATIONS

7.1 General.

(A) Except as otherwise provided in this Article 7, Tenant shall not make any Alterations without Landlord’s prior consent, which shall be granted or withheld by Landlord in accordance with this Article 7.

(B) Tenant may make Decorative Alterations without Landlord’s prior consent.

(C) The term “Alterations” shall mean alterations, installations, improvements, additions or other physical changes in each case in or to the Premises that are made by or on behalf of Tenant or any other Person claiming by, through or under Tenant; provided, however, that Alterations shall not include Landlord’s Work (other than any items of Tenant Extra Work comprising Landlord’s Work which shall be deemed to be Alterations hereunder).

(D) The term “Decorative Alterations” shall mean Alterations that constitute merely decorative or cosmetic changes to the Premises (such as, for example, the installation of carpeting or other customary floor coverings or painting or the installation of customary wall coverings) that in each case do not involve electrical, plumbing or mechanical connections.

(E) The term “Initial Alterations” shall mean the Alterations to prepare the Premises for Tenant’s initial occupancy.

 

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(F) The term “Specialty Alterations” shall mean Alterations that (i) perforate a floor slab in the Premises or a wall that encloses the core of the Building, (ii) require the reinforcement of a floor slab in the Premises, (iii) consist of the installation of a raised flooring system, (iv) consist of the installation of a vault or other similar device or system that is intended to secure the Premises or a portion thereof in a manner that exceeds the level of security that a reasonable Person uses for ordinary office space, (v) involve material plumbing connections (such as kitchens and executive bathrooms outside of the Building core) or (vi) consist of the installation of an internal staircase.

(G) The term “Substantial Completion” or words of similar import shall mean that the applicable work has been substantially completed in accordance with the applicable plans and specifications, if any, it being agreed that (i) such work shall be deemed substantially complete notwithstanding the fact that minor or insubstantial details of construction or demolition, mechanical adjustment or decorative items remain to be performed, and (ii) with respect to work that is being performed in the Premises, such work shall be deemed substantially complete only if the incomplete elements thereof do not interfere materially with Tenant’s use and occupancy of the Premises for the conduct of business.

(H) The term “Tenant’s Property” shall mean Tenant’s personal property (other than fixtures), including, without limitation, Tenant’s movable fixtures, movable partitions, telephone equipment, computer equipment, furniture, furnishings and decorations.

7.2 Basic Alterations.

(A) Landlord shall not unreasonably withhold, condition or delay its consent to any proposed Alteration, provided that such Alteration (i) does not materially affect the external aesthetic appearance of the Building at street level, (ii) does not affect adversely any part of the Building other than the Premises, (iii) does not require any alterations, installations, improvements, additions or other physical changes to be performed in or made to any portion of the Building other than the Premises, (iv) does not affect adversely the proper functioning of any Building System, (v) does not reduce the value or utility of the Building, (vi) does not affect adversely the structure of the Building, (vii) does not impede Landlord’s access to Reserved Areas in any material respect, and (viii) does not violate or render invalid the certificate of occupancy for the Building or any part thereof (any Alteration that satisfies the requirements described in clauses (i) through (viii) above being referred to herein as a “Basic Alteration”).

(B) Nothing contained in this Section 7.2 limits the provisions of Section 7.11 hereof.

7.3 Approval Process.

(A) Tenant shall not perform any Alteration (other than Decorative Alterations) unless Tenant first gives to Landlord a notice thereof (an “Alterations Notice”) that (i) refers specifically to this Section 7.3, (ii) includes six (6) copies of the plans and specifications for the proposed Alteration (including, without limitation, layout, architectural, mechanical and structural drawings, to the extent applicable) in CADD format that contain sufficient detail for Landlord and Landlord’s consultants to reasonably assess the proposed Alteration, and (iii) indicates whether Tenant considers the proposed Alterations to constitute a Basic Alteration.

 

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(B) Subject to the terms of this Article 7, Landlord shall have the right to object to a proposed Alteration (other than a Decorative Alteration) only by giving notice thereof to Tenant and setting forth in such notice a statement in reasonable detail of the grounds for Landlord’s objections.

(C) If (i) Tenant gives Landlord an Alterations Notice to Landlord that (x) does not indicate that Tenant plans to perform the applicable Alterations without Landlord’s consent and (y) provides that Landlord is obligated to respond to such Alterations Notice within fifteen (15) Business Days (or ten (10) Business Days with respect to the resubmission of disapproved plans), (ii) Landlord fails to respond within fifteen (15) Business Days (or ten (10) Business Days with respect to the resubmission of disapproved plans) after Tenant gives Landlord such Alterations Notice, (iii) Tenant (not sooner than the expiration of such fifteen (15) Business Day period (or ten (10) Business Day period with respect to the resubmission of disapproved plans)) gives a second (2nd) Alterations Notice to Landlord that provides in LARGE, BOLD AND CAPITAL LETTERS as follows: “LANDLORD’S FAILURE TO RESPOND TO THIS SECOND (2nd) ALTERATIONS NOTICE WITHIN TEN (10) BUSINESS DAYS SHALL BE DEEMED TO BE LANDLORD’S CONSENT TO THE ALTERATION CONTAINED HEREIN”, and (iv) Landlord fails to so respond to such second notice within ten (10) Business Days after Tenant gives the second (2nd) Alterations Notice to Landlord, then as Tenant’s sole and exclusive remedy for such failure, Landlord shall be deemed to have consented to the Alteration(s) described in such Alterations Notice; provided, however, that in no event shall Landlord be deemed to have consented to any Alteration that is otherwise expressly prohibited by the terms of this Lease.

(D) Subject to the terms of this Article 7, Landlord shall have the right to (a) disapprove any plans and specifications for a particular Alteration in part, (b) reserve Landlord’s approval of items shown on such plans and specifications pending Landlord’s review of other plans and specifications that Tenant is otherwise required to provide to Landlord hereunder, and (c) condition Landlord’s approval of such plans and specifications upon Tenant’s making revisions to the plans and specifications or supplying additional information (which Landlord shall have the right to request only reasonably if the applicable Alteration constitutes a Basic Alteration other than a Decorative Alteration). Nothing contained in this Section 7.3(D) limits the provisions of Section 7.2 hereof or Section 7.3(B) hereof.

(E) Tenant acknowledges that (i) the review of plans or specifications for an Alteration by or on behalf of Landlord, or (ii) the preparation of plans or specifications for an Alteration by Landlord’s architect or engineer (or any architect or engineer designated by Landlord), is solely for Landlord’s benefit, and, accordingly, Landlord makes no representation or warranty that such plans or specifications comply with any Requirements or are otherwise adequate or correct.

 

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7.4 Performance of Alterations.

(A) Tenant, at Tenant’s expense, prior to the performance of any Alteration, shall obtain all permits, approvals and certificates required by any Governmental Authorities in connection therewith. Landlord shall have the right to require Tenant to make all filings with Governmental Authorities to obtain such permits, approvals and certificates using an expeditor designated reasonably by Landlord (provided that the charges imposed by such expeditor are commercially reasonable). Landlord shall execute any applications for any permits, approvals or certificates required to be obtained by Tenant in connection with any permitted Alteration (provided that the applicable Requirement requires Landlord to execute such application) within ten (10) Business Days after Tenant’s request from time to time and shall otherwise cooperate reasonably with Tenant in connection therewith. Tenant shall not have the right to require Landlord to so execute such applications prior to the date that Landlord approves (or is deemed to have approved) the applicable Alteration. Tenant shall reimburse Landlord, as additional rent, for any reasonable Out-of-Pocket Costs, including, without limitation, reasonable attorneys’ fees and disbursements, that Landlord incurs in so executing such applications and cooperating with Tenant, within thirty (30) days after the date that Landlord gives to Tenant an invoice therefor from time to time.

(B) Prior to performing any Alteration, Tenant shall maintain on behalf of its contractors (of any tier) and vendors or cause its contractors (of any tier) and vendors to maintain (1) worker’s compensation and disability insurance in amounts not less than the statutory limits required by Requirements (covering all persons to be employed by Tenant, and Tenant’s contractors, subcontractors, and vendors in connection with such Alteration); (2) commercial general liability insurance (covering bodily injury including death, personal injury and property damage), in each case in customary form, and in amounts that are not less than Five Million Dollars ($5,000,000) per occurrence and in the annual policy aggregate with respect to general contractors and Three Million Dollars ($3,000,000) per occurrence and in the annual policy aggregate with respect to subcontractors, such policies shall be endorsed to name the Landlord Indemnitees as additional insureds; it being understood that the foregoing insurance shall be required in addition to Tenant’s Liability Policy (the insurance described in this clause (2) is collectively referred to herein as “Contractor’s Liability Policy”); and (3) commercial auto liability insurance, if the contractor or vendor uses a vehicle at the Real Property, covering all vehicles with a minimum combined single limit of One Million Dollars ($1,000,000). The Contractor’s Liability Policy (including any endorsements which are a part thereof) cannot exclude coverage to the Landlord Indemnitees for claims arising out of bodily injury to a contractor’s (of any tier) or vendor’s employees if such claim arises during the course of employment (i.e., third party claims). A contractor’s or vendor’s liability shall in no way be limited by the amount of insurance recovery or the amount of insurance in force, or available, or required by any provisions of this Lease. The limits listed above are minimum requirements only. Tenant shall include in any agreement that Tenant consummates with a contractor or vendor in either case for a particular Alteration, and Tenant shall cause any contractor to include in any agreement that such contractor consummates with a subcontractor regarding the applicable Alteration, a provision pursuant to which the contractor, subcontractor or vendor agrees to indemnify the Landlord Indemnitees, and hold the

 

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Landlord Indemnitees harmless, from and against, any Claim Against Landlord that arises from any wrongful act or wrongful omission of such contractor, such subcontractor or such vendor, and such provision shall state expressly that the Landlord Indemnitees constitute third-party beneficiaries thereof. Prior to the start of any such Alterations and prior to the expiration of any policy, Tenant shall deliver to Landlord certificates of insurance (on a form reasonably acceptable to Landlord) along with copies of endorsements naming Landlord Indemnitees as additional insureds. The liabilities of any contractor or vendor shall survive and not be terminated, reduced or otherwise limited by any expiration or termination of such insurance coverage. Neither approval nor failure to disapprove insurance furnished by the contractor or vendor shall relieve the contractor, its subcontractors or vendors from responsibility to provide insurance as required herein.

(C) Within thirty (30) days after the Substantial Completion of each Alteration (other than Decorative Alterations), Tenant, at Tenant’s expense, shall (1) obtain certificates of final approval for each Alteration to the extent required by any Governmental Authority, (2) furnish Landlord with copies of such certificates, and (3) give to Landlord copies of the “as-built” plans and specifications for such Alterations in CADD format.

(D) All Alterations (other than Decorative Alterations) shall be made and performed substantially in accordance with the plans and specifications therefor as approved by Landlord. All Alterations shall be made and performed in accordance with all Requirements and the Rules. All materials and equipment incorporated in the Premises as a result of any Alterations shall be first-quality.

7.5 Financial Integrity.

(A)

(1) Tenant shall not permit any materials or equipment that are incorporated as fixtures into the Premises in connection with any Alterations to be subject to any lien, encumbrance, chattel mortgage or title retention or security agreement.

(2) Subject to the terms of Section 7.5(A)(3) hereof, if Tenant proposes to make any Alteration at a cost for labor and materials (as reasonably estimated by Landlord’s architect, engineer or contractor) in excess of Seventy-Five Thousand and 00/100 Dollars ($75,000.00) (the “Performance Bond/Payment Bond Threshold”), either individually or in the aggregate with any other Alterations constructed in any particular period of twelve (12) consecutive months, then (i) Landlord shall have the option to require Tenant to deliver a performance bond and a payment bond that covers Tenant’s obligation to pay the applicable contractor and the applicable contractor’s obligation to pay its subcontractors (in either case issued by a surety company and in form reasonably satisfactory to Landlord), each in an amount equal to one hundred twenty percent (120%) of such estimated cost; provided, however, that on each anniversary of the Commencement Date, the aforesaid Performance Bond/Payment Bond Threshold shall be adjusted to reflect the percentage increase in the Consumer Price Index from the Consumer Price Index that is in effect on the Commencement Date, and (ii) if Landlord shall so require Tenant to deliver a performance

 

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bond or a payment bond, then Tenant shall not make any such Alterations in excess of the Performance Bond/Payment Bond Threshold prior to Tenant’s delivery of a performance bond or payment bond to Landlord. Tenant shall not be required to deliver a performance bond or payment bond as provided in this Section 7.5(A)(2) in connection with the Initial Alterations and/or the Decorative Alterations.

(3) If Tenant is obligated to deliver a performance bond and a payment bond to Landlord as provided in Section 7.5(A)(2) hereof, then Tenant shall have the right to deposit with Landlord an amount in cash equal to the amount of such bonds that is otherwise required by Section 7.5(A)(2) hereof (such amount in cash being referred to herein as the “Work Deposit”). If Tenant deposits the Work Deposit with Landlord, then (i) Tenant shall not have the obligation to deliver to Landlord the performance bond and the payment bond as provided in Section 7.5(A)(2) hereof for the applicable Alteration, and (ii) Landlord shall disburse the Work Deposit (or the applicable portion thereof) to Tenant or Tenant’s designee from time to time, within ten (10) days after Tenant’s request therefor (but in no event more frequently than once during any particular calendar month), provided that Tenant delivers to Landlord, simultaneously with each such disbursement, waivers of lien from all contractors, subcontractors, materialmen, architects, engineers and other Persons who may file a lien against the Real Property for material theretofore supplied, or labor or services theretofore performed, in connection with the applicable Alterations. If any mechanic’s lien is filed against the Real Property for work claimed to have been done for, or for materials claimed to have been furnished to, Tenant (or any Person claiming by, through or under Tenant), then Landlord shall have the right (but not the obligation) to use the Work Deposit to discharge such mechanic’s lien. Nothing contained in this Section 7.5(A)(3) diminishes Tenant’s obligations under Section 7.5(A)(4) hereof. Landlord shall pay to Tenant any remaining balance of the Work Deposit for a particular Alteration within ten (10) days after the date that (x) Tenant has Substantially Completed the applicable Alteration, and (y) Tenant has delivered to Landlord waivers of lien from all contractors, subcontractors, materialmen, architects, engineers and other Persons who may file a lien against the Real Property in connection with such Alterations.

(4) Tenant shall discharge of record any mechanic’s lien that is filed against the Real Property for work claimed to have been done for, or for materials claimed to have been furnished to, Tenant (or any Person claiming by, through or under Tenant) within thirty (30) days after Tenant has received notice thereof, at Tenant’s expense, by payment or filing the bond required by law. Nothing contained in this Section 7.5(A)(4) (x) limits Tenant’s right to challenge the claim that is made by the Person that files a mechanic’s lien, provided that Tenant discharges such lien of record as aforesaid, or (y) obligates Tenant to discharge of record any mechanic’s lien that derives from Landlord’s acts or omissions.

(B) Subject to the terms of this Section 7.5(B), within thirty (30) days after the Substantial Completion of any Alterations (other than Decorative Alterations), Tenant shall deliver to Landlord: (i) waivers of lien from all contractors, subcontractors, materialmen, architects, engineers and other Persons who may file a lien against the Real Property in connection with such Alterations, and (ii) a certificate from a licensed architect that Tenant engages in accordance with the terms of this Article 7 certifying that, in his or her opinion, the Alterations have been

 

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Substantially Completed in substantial accordance with the final detailed plans and specifications for such Alterations as approved by Landlord. Tenant shall not be required to deliver to Landlord any waiver of lien if Tenant is disputing in good faith the payment which would otherwise entitle Tenant to such waiver, provided that (x) Tenant keeps Landlord advised in a timely fashion of the status of such dispute and the basis therefor, and (y) Tenant delivers to Landlord the waiver of lien promptly after the date that the dispute is settled. Nothing contained in this Section 7.5(B), however, shall relieve Tenant from complying with the provisions of Section 7.5(A)(4) hereof.

7.6 Effect on Building.

Subject to the terms of this Section 7.6, if (i) as a result of any Alterations, any alterations, installations, improvements, additions or other physical changes are required to be performed in or made to any portion of the Building other than the Premises in order to comply with any Requirements (any such alterations, installations, improvements, additions or changes being referred to herein as a “Building Change”), and (ii) such Building Change would not otherwise have had to be performed or made pursuant to applicable Requirements at such time but for such Alterations, then (x) Landlord may perform such Building Change, and (y) Tenant shall pay to Landlord the reasonable Out-of-Pocket Costs thereof, as additional rent, within thirty (30) days after Landlord gives to Tenant an invoice therefor together with reasonable supporting documentation for the charges set forth therein. Landlord shall seek to accomplish any such Building Change in a manner that minimizes the cost thereof to the extent reasonably practicable. Landlord shall give Tenant reasonable advance notice of Landlord’s performance of the Building Change, and shall consult reasonably from time to time with Tenant in connection therewith (with the understanding that such consultations shall include, without limitation, Landlord’s providing Tenant with the information that Landlord has in its possession regarding the expected cost of such Building Change). Tenant shall not be required to pay for the cost of performing a Building Change as contemplated by this Section 7.6 if (a) Tenant submits to Landlord for Landlord’s approval the plans and specifications for the applicable Alteration, (b) the representative of Landlord who has principal responsibility for approving the applicable Alteration has personal knowledge that the applicable Alteration requires such Building Change, and (c) Landlord fails to advise Tenant of such Building Change concurrently with Landlord’s approval of the applicable Alteration.

7.7 Time for Performance of Alterations.

If the performance of any Alteration by or on behalf of Tenant, or any other Person claiming by, through or under Tenant, during Building Hours interferes with or interrupts the maintenance, repair, management or operation of the Building in any material respect or interferes with or interrupts the use and occupancy of the Building by other tenants in the Building in any material respect, then Landlord shall have the right to require Tenant to perform such Alteration at other times that Landlord reasonably designates from time to time.

 

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7.8 Removal of Alterations and Tenant’s Property.

(A) On or prior to the Expiration Date, Tenant, at Tenant’s expense, shall remove Tenant’s Property from the Premises, and, at Tenant’s option, Tenant also may remove, at Tenant’s expense, any or all Alterations made by or on behalf of Tenant or any other Person claiming by, through or under Tenant; provided, however, in any case, that Tenant shall repair and restore in a good and workmanlike manner to good condition any damage to the Premises or the Building caused by such removal and further provided that Landlord shall not have the right to require Tenant to remove any Qualified Alterations. Landlord, upon notice to Tenant given at least sixty (60) days prior to the Expiration Date, may require Tenant to remove any Specialty Alterations from the Premises, and to repair and restore in a good and workmanlike manner to good condition any damage to the Premises or the Building caused by such removal; provided, however, that Landlord shall not have the right to require Tenant to remove any Qualified Alterations. If (x) the Expiration Date is not the Fixed Expiration Date, and (y) Landlord gives a notice to Tenant on or prior to the thirtieth (30th) day after the Expiration Date to the effect that Landlord does not wish to retain a particular Specialty Alteration, then Tenant shall pay to Landlord the reasonable Out-of-Pocket Costs that are incurred by Landlord (i) in so removing such Specialty Alterations, and (ii) in so repairing and restoring any such damage to the Building or the Premises, within thirty (30) days after Landlord submits to Tenant an invoice therefor together with reasonable supporting documentation for the charges set forth therein; provided, however, that Landlord shall not have the right to give any such notice to Tenant in respect of Qualified Alterations. Any Alterations that remain in the Premises after the Expiration Date shall be deemed to be the property of Landlord (with the understanding, however, that Tenant shall remain liable to Landlord for any default of Tenant in respect of Tenant’s obligations under this Section 7.8(A)).

(B) Prior to Tenant’s performance of a Specialty Alteration, Tenant shall have the right to request (simultaneously with Tenant’s submission of an Alterations Notice, including Tenant’s submission to Landlord of plans and specifications for such Specialty Alteration) that Landlord advise Tenant if Tenant shall be required to remove (or pay the cost to remove) such Specialty Alteration upon the Expiration Date or earlier termination of the Term, provided, however, that such request (a “Specialty Alteration Approval Request”) shall state in LARGE, BOLD AND CAPITAL LETTERS as follows: “LANDLORD TO ADVISE TENANT IF TENANT SHALL BE OBLIGATED TO REMOVE THE SPECIALTY ALTERATION(S) DESCRIBED HEREIN AT THE EXPIRATION OR EARLIER TERMINATION OF THE TERM. LANDLORD’S FAILURE TO RESPOND TO THIS SPECIALTY ALTERATION APPROVAL REQUEST SHALL BE DEEMED TO INDICATE THAT LANDLORD SHALL NOT REQUIRE REMOVAL OF THE APPLICABLE SPECIALTY ALTERATION(S) DESCRIBED HEREIN.” Landlord shall have the right to require removal of the applicable Specialty Alteration upon the expiration or earlier termination of the Term in Landlord’s sole discretion. If (i) Tenant gives a Specialty Alteration Approval Request in accordance with the terms hereof and (ii) Landlord advises Tenant that removal shall not be required, or fails to respond to such request, then Landlord shall not have the right to require Tenant to remove (or pay the cost to remove) such Specialty Alteration upon the Expiration Date (any such Specialty Alteration which Tenant shall not be required to remove (or to pay the cost of removal) as aforesaid being referred to herein as a “Qualified Alteration”).

 

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7.9 Contractors and Supervision.

(A) All Alterations (other than Decorative Alterations) shall be performed only under the supervision of a licensed architect that Landlord approves, which approval Landlord shall not unreasonably withhold, condition or delay.

(B) Subject to the provisions of this Section 7.9(B), Tenant shall perform all Alterations (other than Decorative Alterations) using contractors, subcontractors, engineers and mechanics that in each case Landlord designates from time to time and charge commercially reasonable prices. Landlord shall give Tenant a notice containing a list of such contractors, such subcontractors and such engineers that Landlord designates promptly after Tenant’s request therefor from time to time (it being understood that Landlord shall include in such list the names of at least three (3) subcontractors for each trade and at least three (3) general contractors).

(C) Tenant shall have the right (but not the obligation) to request that Landlord perform supervisory project management services for any Alterations that Tenant performs during the Term in accordance with the terms of this Article 7. If Tenant makes any such request, then Landlord and Tenant shall seek in good faith to determine the terms of Tenant’s engagement of Landlord to perform such services (it being understood that such terms shall include, without limitation, the payment of a fee by Tenant to Landlord for such supervisory services on market terms).

(D) Tenant shall pay to Landlord, from time to time, as additional rent, the reasonable Out-of-Pocket Costs incurred by Landlord in connection with an Alteration (other than Decorative Alterations) (including, without limitation, the reasonable Out-of-Pocket Costs that Landlord incurs in reviewing the plans and specifications for such Alterations, and inspecting the progress of such Alterations), within thirty (30) days after Landlord gives Tenant an invoice therefor together with reasonable supporting documentation for the charges set forth therein.

7.10 Pantry.

Landlord shall not unreasonably withhold, condition or delay Landlord’s approval of an Alteration consisting of the installation of a pantry in the Premises for the purpose of warming food for Tenant’s personnel and business guests (but not for use as a public restaurant). Any vending machines that Tenant installs in the Premises and that involve plumbing connections shall have a waterproof pan located thereunder, connected to a drain.

7.11 Window Coverings.

Tenant shall install on the windows of the Premises only the curtains, blinds, shades, or screens that Landlord approves, which approval Landlord shall not unreasonably withhold, condition or delay (it being understood that Landlord, in considering whether to grant such approval, shall have the right to take into account the impact of Tenant’s proposed installation on the exterior appearance of the Building).

 

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7.12 Air-Cooled HVAC Installations.

Tenant shall not have the right to install a supplementary HVAC system for the Premises that requires vents or louvers to be installed on the exterior of the Building.

Article 8

REPAIRS

8.1 Landlord’s Repairs.

Subject to the terms of this Article 8 and to Article 15 hereof and Article 16 hereof, Landlord shall maintain and make all necessary repairs to and replacements of (i) the Building Systems that service the Premises, (ii) the structural portions of the Building (including, without limitation, the structural components of the Building that are located within the Premises), (iii) the roof of the Building, (iv) the sidewalks that are adjacent to the Building, (v) the exterior walls of the Premises, (vi) the windows of the Premises, (vii) the public portions of the Building, and (viii) the Premises (to the extent that the necessity for such repair derives from a Work Access) in each case in conformity with the standards that are customary for first-class office buildings in the vicinity of the Building. Nothing contained in this Section 8.1 requires Landlord to maintain or repair the systems within the Premises that distribute within the Premises electricity, HVAC or water.

8.2 Tenant’s Repairs.

(A) Subject to the terms of this Article 8 and to Article 15 hereof and Article 16 hereof, Tenant, at Tenant’s expense, shall take good care of the Premises (including, without limitation, (i) the fixtures and equipment that are installed in the Premises on the Commencement Date, (ii) the Alterations, and (iii) the systems within the Premises that distribute within the Premises electricity, HVAC or water). Tenant shall make all repairs to the Premises as and when needed to preserve the Premises in good condition, except for reasonable wear and tear, obsolescence and damage for which Tenant is not responsible pursuant to the provisions of Article 15 hereof. Nothing contained in this Section 8.2(A) shall require Tenant to perform any repairs to the Premises that are Landlord’s obligation to perform under Section 8.1 hereof. All repairs made by Tenant as contemplated by this Section 8.2(A) shall be in conformity with the standards that are customary for first-class office buildings in the vicinity of the Building. Tenant shall perform such repairs in accordance with the terms of Article 7 hereof including, without limitation, Sections 7.4 and 7.9 thereof.

 

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(B) Subject to the terms of this Section 8.2(B), if (a) Landlord gives Tenant a notice that Tenant has failed to perform a repair that this Section 8.2 obligates Tenant to perform, and (b) Tenant fails to proceed with reasonable diligence to make such repair within thirty (30) days after the date that Landlord gives such notice to Tenant (or such shorter period that Landlord designates in such notice to the extent reasonably required under the circumstances to alleviate an imminent threat to persons or property), then (i) Landlord may make such repair, and (ii) Tenant shall pay to Landlord, as additional rent, the reasonable Out-of-Pocket Costs thereof, with interest thereon at the Applicable Rate calculated from the date that Landlord incurs such expenses, within thirty (30) days after Landlord gives Tenant an invoice therefor together with reasonable supporting documentation for the charges set forth therein. If (x) a particular repair that this Section 8.2 obligates Tenant to perform cannot be performed with reasonable diligence during the aforesaid period of thirty (30) days (or during such shorter period that Landlord designates, as the case may be), and (y) Tenant commences such repair during such period of thirty (30) days (or such shorter period that Landlord designates), then Landlord shall not have the right to perform such repair on Tenant’s behalf as otherwise described in this Section 8.2(B) unless Tenant fails to pursue such repair with reasonable continuity and diligence. Nothing contained in this Section 8.2(B) limits the remedies that are available to Landlord after the occurrence of an Event of Default.

8.3 Certain Limitations.

(A) Tenant, at Tenant’s expense, shall repair in accordance with the terms set forth in Section 8.2 hereof all damage to the Premises, or to any other part of the Building or the Building Systems, in each case to the extent resulting from the negligence or willful misconduct of, or Alterations made by, Tenant or any other Person claiming by, through or under Tenant; provided, however, that Landlord shall have the right to perform any such repair to the extent that such repair affects the structure of the Building or such repair affects any Building System, in which case Tenant shall pay to Landlord an amount equal to the Out-of-Pocket Costs that Landlord reasonably incurs in performing such repair, on or prior to the thirtieth (30th) day after the date that Landlord gives to Tenant an invoice therefor together with reasonable supporting documentation for the charges set forth therein. Nothing contained in this Section 8.3(A) limits the provisions of Section 14.3 hereof.

(B) Landlord, at Landlord’s expense, shall repair promptly all damage to the Premises that results from Landlord’s negligence or willful misconduct. Nothing contained in this Section 8.3(B) limits the provisions of Section 14.3 hereof.

8.4 Overtime.

Subject to the provisions of this Section 8.4, Landlord shall have no obligation to employ contractors or labor at overtime or premium pay rates in connection with Landlord’s making repairs as contemplated by this Article 8. If Landlord’s repair (or the condition that Landlord is required to repair) (i) denies Tenant from having reasonable access to the Premises, (ii) threatens the health or safety of any occupant of the Premises, or (iii) materially interferes with Tenant’s ability to conduct its business in the Premises during Tenant’s ordinary business hours, then Landlord shall employ contractors or labor at overtime or premium pay rates to the extent reasonably necessary. Landlord, at Tenant’s request, shall also perform any other repair that this Article 8 requires

 

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Landlord to perform, to the extent reasonably practicable, using contractors or labor at overtime or premium pay rates, in which case Tenant shall pay to Landlord, as additional rent, an amount equal to the excess of (x) the Out-of-Pocket Costs that Landlord incurs in performing such repair (using contractors or labor at overtime or premium pay rates), over (y) the Out-of-Pocket Costs that Landlord would have incurred in performing such repair without using contractors at overtime or premium pay rates, within thirty (30) days after the date that Landlord gives to Tenant an invoice therefor together with reasonable supporting documentation for the charges set forth therein (it being understood that if more than one tenant requests that Landlord perform any such repair using contractors or labor at overtime or premium pay rates, then Landlord shall allocate such costs among such tenants equitably).

Article 9

ACCESS; LANDLORD’S CHANGES

9.1 Access.

(A) Subject to the terms of this Lease, Tenant, during the Term, shall have access to the Premises at all times, twenty-four (24) hours per day, every day of the year.

(B) Subject to the terms of this Section 9.1(B), Landlord and Landlord’s designees may enter the Premises at reasonable times upon reasonable prior notice to Tenant (which notice may be given verbally to the person employed by Tenant with whom Landlord’s representative ordinarily discusses matters relating to the Premises) to (i) examine the Premises, (ii) show the Premises to prospective tenants during the last twelve (12) months of the Term, (iii) show the Premises to prospective purchasers or master lessees of Landlord’s interest in the Real Property, (iv) show the Premises to Mortgagees or Lessors (or prospective Mortgagees or Lessors), (v) gain access to Reserved Areas, or (vi) make repairs, alterations, improvements, additions or restorations that (I) Landlord is required to make pursuant to the terms of this Lease (including, without limitation, Landlord’s Work), or (II) are reasonably necessary in connection with the maintenance, repair, or operation of the Real Property (Landlord’s entry upon the Premises to perform such repairs, alterations, improvements, additions or restorations being referred to herein as a “Work Access”). Landlord shall not be required to give Tenant advance notice of the entry by Landlord or Landlord’s designees into the Premises as contemplated by this Section 9.1(B) to the extent necessary by reason of the occurrence of an emergency (with the understanding, however, that Landlord shall give Tenant notice of such emergency access as promptly as reasonably practicable thereafter). Landlord, in connection with a Work Access, shall have the right to bring into the Premises, and store in the Premises in a reasonable manner for the duration of the Work Access, the materials and tools that Landlord reasonably requires to perform the applicable repair, alteration, improvement, addition or restoration. Landlord shall have no liability to Tenant for any loss sustained by Tenant by reason of Landlord’s entry upon the Premises; provided, however, that (w) nothing contained in this Section 9.1(B) diminishes Landlord’s obligation to repair the Premises (to the extent that the necessity for such repair derives from a Work Access) as provided in Section 8.1 hereof, (x) subject to Section 14.3 hereof, Landlord shall remain liable to Tenant for

 

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personal injury or property damage that derives from Landlord’s negligence or willful misconduct in connection with any such entry upon the Premises, (y) nothing contained in this Section 9.1(B) limits Tenant’s rights to an abatement of Rental after a fire or other casualty as provided herein and (z) nothing contained in this Section 9.1(B) limits Tenant’s rights to an abatement of Rental as provided in Section 10.3 hereof.

9.2 Landlord’s Obligation to Minimize Interference.

(A) Subject to Section 9.2(B) hereof, Landlord shall use commercially reasonable efforts to minimize interference with Tenant’s use of the Premises in connection with Landlord’s accessing the Premises as contemplated by Section 9.1 hereof.

(B) Subject to the provisions of this Section 9.2(B), Landlord shall have no obligation to employ contractors or labor at overtime or premium pay rates in connection with a Work Access as contemplated by this Article 9. If a Work Access (i) denies Tenant from having reasonable access to the Premises, (ii) threatens the health or safety of any occupant of the Premises, or (iii) materially interferes with Tenant’s ability to conduct its business in the Premises during Tenant’s ordinary business hours, then Landlord shall employ contractors or labor at overtime or premium pay rates to the extent reasonably necessary. Landlord, at Tenant’s request, shall also conduct a Work Access, to the extent reasonably practicable, using contractors or labor at overtime or premium pay rates, in which case Tenant shall pay to Landlord, as additional rent, an amount equal to the excess of (x) the Out-of-Pocket Costs that Landlord incurs in conducting such Work Access (using contractors or labor at overtime or premium pay rates), over (y) the Out-of-Pocket Costs that Landlord would have incurred in conducting such Work Access without using contractors at overtime or premium pay rates, within thirty (30) days after the date that Landlord gives to Tenant an invoice therefor together with reasonable supporting documentation for the charges set forth therein (it being understood that if more than one tenant requests that Landlord conduct such Work Access using contractors or labor at overtime or premium pay rates, then Landlord shall allocate such costs among such tenants equitably).

9.3 Reserved Areas.

The Premises shall not include (i) the demising walls of the Premises (except for the interior face thereof), (ii) the walls of the Premises that constitute the curtain wall for the Building (except for the interior face thereof), (iii) balconies, terraces and roofs that are adjacent to the Premises, and (iv) space that is used for Building Systems or other purposes associated with the operation, repair, management or maintenance of the Real Property, including, without limitation, shafts, stacks, stairways, chutes, pipes, conduits, ducts, fan rooms, mechanical rooms, plumbing facilities, and service closets (except to the extent expressly provided herein) (the areas described in clauses (iii) and (iv) above being collectively referred to herein as the “Reserved Areas”).

 

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9.4 Ducts, Pipes and Conduits.

Landlord shall have the right to install, use and maintain ducts, cabling, pipes and conduits in and through the Premises, provided that (a) such ducts, cabling, pipes and conduits are concealed within or above partitioning columns, walls or ceilings, except that if such ducts, cabling, pipes or conduits are installed in areas that are utility areas (such as storage areas, mailrooms or mud rooms), then such ducts, cabling, pipes or conduits may also be installed on partitioning walls, columns or ceilings, (b) such ducts, cabling, pipes and conduits do not reduce the Usable Area of the Premises by more than a de minimis amount, and (c) Landlord installs such ducts, cabling, pipes and conduits in a manner that minimizes, to the extent reasonably practicable, any adverse effect on an Alteration theretofore performed in the Premises. If Landlord requires access to the Premises to make the installations as contemplated by this Section 9.4, then Landlord shall perform such installations in accordance with the terms hereof that govern a Work Access.

9.5 Keys.

Tenant shall provide Landlord, from time to time, with the keys to the Premises (or with the appropriate means to access the Premises using Tenant’s electronic security systems).

9.6 Landlord’s Changes.

(A) Subject to Section 9.6(B) hereof, Tenant shall have the right to use, in common with the other occupants of the Building, the portions of the Building that Landlord dedicates from time to time as common area for the general use of the occupants of the Building.

(B) Landlord, from time to time, shall have the right to change the arrangement or location of the public portions of the Building, including, without limitation, lobbies, entrances, passageways, doors, corridors, stairs and toilets that in each case are not located in the Premises, provided any such change does not (a) unreasonably reduce or unreasonably interfere with Tenant’s access to the Building or the Premises, (b) reduce the floor area of the Premises (except to a de minimis extent), or (c) reduce to a material extent the level or quality of services that are available to Tenant on the Commencement Date.

(C) Landlord, from time to time, shall have the right to change, or reduce the number of, the passenger or freight elevators serving the Premises, provided that such change or reduction does not reduce to a material extent the passenger or freight elevator service standards that the passenger and freight elevators meet on the date hereof.

(D) Landlord, from time to time, shall have the right to change the name, number or designation by which the Building is commonly known.

(E)

(1) Landlord shall have the right, from time to time, to close, obstruct or darken the windows of the Premises temporarily to the extent required to comply with a Requirement or to perform repairs, maintenance, alterations, or improvements to the Building. Landlord shall have the right to close, obstruct or darken the windows of the Premises permanently to the extent required to comply with a Requirement that does not become applicable to the Building by virtue of Landlord’s performance of elective construction in the Building.

 

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(2) If, at any time, the windows of the Premises are closed, obstructed or darkened temporarily, as aforesaid, then Landlord shall perform (or cause to be performed) such repairs, maintenance, alterations or improvements, or shall comply with the applicable Requirement (or cause such Requirement to be complied with), in each case with reasonable diligence, and otherwise take such action as may be reasonably necessary to minimize the period during which such windows are temporarily closed, obstructed or darkened (it being understood, however, that subject to Section 8.4 hereof, Landlord shall not be required to perform such repairs, maintenance, alterations or improvements using contractors or labor at overtime or premium pay rates).

Article 10

UNAVOIDABLE DELAYS AND INTERRUPTION OF SERVICE

10.1 Unavoidable Delays.

(A) The term “Unavoidable Delay” shall mean any cause beyond the reasonable control of the applicable party, including, without limitation, strikes, labor troubles, mechanical breakdown, shortages or unavailability of labor, fuel, steam, water, gas, electricity or materials, epidemic, pandemic, governmental actions (including any directives (including any public health directives) or orders or other Requirements issued or adopted by any Governmental Authority, whether temporary or permanent, including, without limitation, in connection with any epidemic or pandemic), governmental preemption, enemy action, acts of war, national emergency, fire or other casualty, civil commotion, acts of terrorism or the occurrence of an act of God.

(B) Subject to Section 1.2, Section 10.3, Article 15 hereof and Article 16 hereof, this Lease and the obligation of Tenant to pay Rental hereunder and to perform all of Tenant’s other covenants shall not be affected, impaired or excused, and Landlord shall not have any liability to Tenant, to the extent that Landlord is unable to perform Landlord’s covenants under this Lease by reason of any Unavoidable Delay; provided, however, that Landlord shall not have the right to claim under this Section 10.1(B) that Landlord’s failure to have funds available to make a payment of money constitutes an Unavoidable Delay.

(C) Subject to Section 10.3, Article 15 hereof and Article 16 hereof, this Lease and the obligation of Landlord to perform all of Landlord’s covenants and agreements hereunder shall not be affected, impaired or excused, and Tenant shall not have any liability to Landlord, to the extent that Tenant is unable to perform Tenant’s covenants under this Lease by reason of any Unavoidable Delay; provided, however, that Tenant shall neither have the right to claim under this Section 10.1(C) that Tenant’s insolvency, financial condition or failure to have funds available to make a payment of money constitutes an Unavoidable Delay nor shall any matter be deemed to be beyond Tenant’s reasonable control if the same could be remedied by the satisfaction of a lien, judgment or other monetary obligation.

 

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10.2 Interruption of Services.

Subject to Section 10.3 hereof, Landlord, from time to time, shall have the right to interrupt or curtail the level of service provided by the Building Systems to the extent reasonably necessary to accommodate the performance of repairs, additions, alterations, replacements or improvements that in Landlord’s reasonable judgment are desirable or necessary. Landlord shall give Tenant reasonable advance notice of any such interruption or curtailment (to the extent that Landlord does not need to arrange for such interruption or curtailment to manage an emergency) and schedule any such interruption or curtailment at times that minimizes, to the extent reasonably practicable, the effect of such interruption or curtailment on Tenant’s ability to conduct its business in the Premises during Tenant’s ordinary business hours. If such interruption or curtailment of the level of service provided by the Building Systems (i) denies Tenant from having reasonable access to the Premises, (ii) threatens the health or safety of any occupant of the Premises, or (iii) materially interferes with Tenant’s ability to conduct its business in the Premises during Tenant’s ordinary business hours, then Landlord shall employ contractors or labor at overtime or premium pay rates to the extent reasonably necessary. Landlord, at Tenant’s request, shall also schedule any such interruption or curtailment, to the extent reasonably practicable, using contractors or labor at overtime or premium pay rates, in which case Tenant shall pay to Landlord, as additional rent, an amount equal to the excess of (x) the Out-of-Pocket Costs that Landlord incurs in so scheduling such interruption or curtailment (using contractors or labor at overtime or premium pay rates), over (y) the Out-of-Pocket Costs that Landlord would have incurred in scheduling such interruption or curtailment without using contractors at overtime or premium pay rates, within thirty (30) days after the date that Landlord gives to Tenant an invoice therefor together with reasonable supporting documentation for the charges set forth therein (it being understood that if more than one tenant requests that Landlord conduct such interruption or curtailment of services using contractors or labor at overtime or premium pay rates, then Landlord shall allocate such costs among such tenants equitably).

10.3 Rent Credit.

Subject to the terms of this Section 10.3, if for any reason other than an Unavoidable Delay or the actions or omissions of Tenant or any other Person claiming by, through or under Tenant, (I) (i) Landlord fails to perform Landlord’s covenants hereunder, (ii) Landlord interrupts or curtails the level of service provided by Building Systems as contemplated by Section 10.2 hereof, or (iii) Landlord performs repairs, alterations, improvements, additions or restorations in the Building, and (II) Tenant, by reason of the event described in clause (I) above, is unable for at least seven (7) consecutive days to operate Tenant’s business in the Premises (or a portion thereof) in substantially the same manner that Tenant conducted its business prior to such event, then Tenant shall be entitled to a credit to apply against the Fixed Rent and the Escalation Rent thereafter coming due hereunder in an amount equal to the product obtained by multiplying (A) the quotient obtained by dividing (a) the sum of the Fixed Rent and the Escalation Rent for the Premises, by (b) three hundred sixty-five (365) (or three hundred sixty-six (366) in a leap year), by (c) the number of square feet of Rentable Area in the Premises, by (B) the number of square feet of Rentable Area of the portion of the Premises which is unusable, as aforesaid, by (C) the number

 

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of days in the period commencing on (and including) the date immediately following the date that is seven (7) days after the event that is described in clause (I) above and ending on the date that such portion of the Premises becomes usable. If (x) Tenant is entitled to a credit against Rental pursuant to this Section 10.3, and (y) the Expiration Date occurs prior to the date that such credit is exhausted, then Landlord shall pay to Tenant the unused portion of such credit on or prior to the thirtieth (30th) day after the Expiration Date (and Landlord’s obligation to make such payment shall survive the Expiration Date). This Section 10.3 shall not apply in respect of the occurrence of a fire or other casualty or in respect of a condemnation. This Section 10.3 shall not limit the provisions of Section 5.2 hereof.

Article 11

REQUIREMENTS

11.1 Tenant’s Obligation to Comply with Requirements.

(A) Subject to the terms of this Article 11, Tenant, at Tenant’s expense, shall comply with all Requirements applicable to the Premises, including, without limitation, (i) Requirements that are applicable to the performance of Alterations, (ii) Requirements that become applicable by reason of Alterations having been performed, (iii) Requirements that are applicable by reason of the specific nature or type of business operated by Tenant (or any other Person claiming by, through or under Tenant) in the Premises and (iv) Local Law No. 88 of the City of New York. Tenant shall not be required to make any Alteration or other changes to the structural components of the Building or to the Building Systems in either case to comply with any Requirement unless (a) such Alteration or other change is required by reason of Alterations having been performed by Tenant (or another Person claiming by, through or under Tenant), or (b) such Alteration or other change is required by reason of the specific nature of the use of the Premises by Tenant (or such other Person) (as opposed to the use of the Premises for general, administrative and executive office purposes as permitted under Section 3.1 hereof), or (c) such Alteration or other change is required to install, modify or replace any fire suppression device or system in the Premises (including, without limitation, sprinkler systems).

(B) The term “Requirements” shall mean, collectively, (i) all present and future laws, rules, orders, ordinances, regulations, statutes, requirements, codes and executive orders of all Governmental Authorities, and of any applicable fire rating bureau, or other body exercising similar functions, and (ii) all requirements that the issuer of Landlord’s Property Policy imposes (including, without limitation, any such requirements that such issuer requires as the basis for the premium that such issuer charges Landlord for Landlord’s Property Policy), provided that such requirements that the issuer of Landlord’s Property Policy imposes are reasonably consistent with the requirements imposed by reputable insurers of comparable properties in The City of New York.

(C) The term “Governmental Authority” shall mean the United States of America, the State of New York, The City of New York, any political subdivision thereof and any agency, department, commission, board, bureau or instrumentality of any of the foregoing, or any quasi-governmental authority, now existing or hereafter created, having jurisdiction over the Real Property or any portion thereof.

 

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(D) Subject to the terms of this Section 11.1(D), if (a) Landlord gives Tenant a notice that Tenant has failed to comply with a Requirement as required by this Section 11.1, and (b) Tenant fails to proceed with reasonable diligence to comply with such Requirement within thirty (30) days after the date that Landlord gives such notice to Tenant (or such shorter period that Landlord designates in such notice to the extent reasonably required under the circumstances to alleviate an imminent threat to persons or property), then (i) Landlord may perform the work and otherwise take steps that are required to comply with such Requirement, and (ii) Tenant shall pay to Landlord, as additional rent, the reasonable Out-of-Pocket Costs thereof, with interest thereon at the Applicable Rate calculated from the date that Landlord incurs such expenses, within thirty (30) days after Landlord gives Tenant an invoice therefor together with reasonable supporting documentation for the charges set forth therein. If (x) Tenant’s compliance with a particular Requirement as required by this Section 11.1 cannot be accomplished with reasonable diligence during the aforesaid period of thirty (30) days (or during such shorter period that Landlord designates, as the case may be), and (y) Tenant commences such compliance during such period of thirty (30) days (or such shorter period that Landlord designates), then Landlord shall not have the right to perform the work and otherwise take steps that are required to comply with such Requirement on Tenant’s behalf as otherwise described in this Section 11.1(D) unless Tenant fails to pursue such compliance with reasonable continuity and diligence. Nothing contained in this Section 11.1(D) limits the remedies that are available to Landlord after the occurrence of an Event of Default.

11.2 Landlord’s Obligation to Comply with Requirements.

Landlord shall comply with all Requirements applicable to the Premises and the Building (including, without limitation, Requirements in respect of which the violation thereof impedes Tenant’s performance of Alterations in the Premises) other than those Requirements with respect to which Tenant is required to comply pursuant to Section 11.1 hereof, subject, however, to Landlord’s right to contest in good faith the applicability or legality thereof (provided that Landlord’s contesting such Requirements does not interfere in any material respect with Tenant’s use and occupancy of the Premises).

11.3 Certificate of Occupancy.

(A) Subject to the terms of this Section 11.3(A), Landlord covenants that from and after the Commencement Date a temporary or permanent certificate of occupancy covering the Premises (or such other certificate as may be required by Requirements from time to time to lawfully occupy the Premises) shall be in full force and effect permitting the Premises to be used for the general office purposes that are permitted under Article 3 hereof. Nothing contained herein constitutes Landlord’s covenant, representation or warranty that the Premises or any part thereof lawfully may be used or occupied for any particular purpose or in any particular manner; provided, however, that Landlord shall not have the right to amend the certificate of occupancy for the

 

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Premises (or such other certificate as may be required by Requirements from time to time to lawfully occupy the Premises) in a manner that limits the uses that Tenant may perform in the Premises in accordance with Article 3 hereof. Landlord shall have no liability to Tenant under this Section 11.3(A) to the extent such certificate of occupancy (or such other certificate) is not in full force and effect by reason of Tenant’s default hereunder or by reason of Alterations.

(B) Tenant shall use the Premises only in a manner that conforms with the certificate of occupancy that is in effect for the Premises. Tenant shall not have the right to amend the certificate of occupancy for the Premises or the Building without Landlord’s prior approval.

Article 12

QUIET ENJOYMENT

12.1 Quiet Enjoyment.

Landlord covenants that Tenant may peaceably and quietly enjoy the Premises for the Term, subject, nevertheless, to the terms and conditions of this Lease.

Article 13

SUBORDINATION

13.1 Subordination.

(A) This Lease shall be subject and subordinate to the priority of each Superior Lease in respect of which the Lessor is not an Affiliate of Landlord. This Lease shall be subject and subordinate to the lien of each Mortgage in respect of which the Mortgagee is not an Affiliate of Landlord. This Lease shall be subject and subordinate to any Condominium Declaration (with the understanding that Landlord shall not permit any such Condominium Declaration to impair Tenant’s rights under this Lease, or to expand Tenant’s obligations under this Lease, except, in either case, to a de minimis extent). The subordination and non-disturbance provisions of this Article shall be self-operative without the execution or delivery of any further instrument or agreement.

(B) The term “Condominium Board” shall mean the board that governs the business and affairs of the condominium that is created by the Condominium Declaration.

(C) The term “Condominium Declaration” shall mean a condominium declaration that submits the ownership of the fee interest in the Premises to a condominium form of ownership in accordance with Article 9-B of the New York Real Property Law (as such declaration may be amended from time to time).

(D) The term “Lessor” shall mean a lessor under a Superior Lease. 63

 

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(E) The term “Mortgage” shall mean any trust indenture or mortgage which now or hereafter encumbers Landlord’s estate in the Premises.

(F) The term “Mortgagee” shall mean any trustee, mortgagee or holder of a Mortgage.

(G) The term “Superior Lease” shall mean any lease pursuant to which Landlord now or hereafter obtains or retains its interest in the Premises (to the extent that Landlord’s interest in the Premises is a leasehold estate).

13.2 Attornment.

If, at any time prior to the Expiration Date, a Person succeeds to Landlord’s interest in the Real Property by reason of a foreclosure under a Mortgage or by reason of the termination of a Superior Lease or by reason of the exercise of a power of sale that is granted under the Condominium Declaration, as the case may be (any such Person being referred to herein as the “Successor”), then Tenant, at the Successor’s election, shall attorn, from time to time, to the Successor, in either case upon the then executory terms of this Lease, for the remainder of the Term. If the Successor is not an Affiliate of the Person that constituted Landlord immediately prior to such Successor’s obtaining an interest in the Premises, then the Successor shall not be:

(A) liable for any act or omission of any prior landlord (including, without limitation, the then defaulting landlord), except to the extent that (i) such act or omission continues after the date that the Successor succeeds to Landlord’s interest in the Real Property, and (ii) such act or omission of such prior landlord is of a nature that the Successor can cure by performing a service or making a repair, or

(B) subject to any defenses, offsets or abatements that Tenant has against any prior landlord (including, without limitation, the then defaulting landlord) (except that the foregoing shall not limit any offsets or abatements expressly permitted under this Lease), or

(C) bound by any payment of Rental that Tenant has made to any prior landlord (including, without limitation, the then defaulting landlord) more than thirty (30) days in advance of the date that such payment is due (other than the Rental that Tenant pays in advance pursuant to Section 1.5(E) hereof), or

(D) bound by any obligation to make any payment to or on behalf of Tenant to the extent that such obligation accrues prior to the date that the Successor succeeds to Landlord’s interest in the Real Property, or

 

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(E) bound by any obligation to perform any work or to make improvements to the Premises, except for:

(1) repairs and maintenance that Landlord is required to perform pursuant to the provisions of this Lease and that first become necessary, or the need for which continues, after the date that the Successor succeeds to Landlord’s interest in the Real Property,

(2) repairs to the Premises that become necessary by reason of a fire or other casualty that occurs from and after the date that the Successor succeeds to Landlord’s interest in the Real Property and that Landlord is required to perform pursuant to Article 15 hereof,

(3) repairs to the Premises or any part thereof that become necessary by reason of a fire or other casualty that occurs prior to the date that the Successor succeeds to Landlord’s interest in the Real Property and that Landlord is required to perform pursuant to Article 15 hereof, to the extent that the Successor can make such repairs from the net proceeds of Landlord’s Property Policy that are actually made available to the Successor (with the understanding, however, that if (i) a fire or other casualty occurs prior to the date that the Successor succeeds to Landlord’s interest in the Real Property, (ii) Landlord is required to repair the resulting damage to the Building pursuant to Article 15 hereof, and (iii) the Successor cannot make such repairs from such net proceeds, then Tenant shall have the right to terminate this Lease by giving notice thereof to the Successor within fifteen (15) days after the date that the Successor gives Tenant notice that the Successor does not intend to perform such repairs),

(4) repairs to the Premises as a result of a partial condemnation that occurs from and after the date that the Successor succeeds to Landlord’s interest in the Real Property and that Landlord is required to perform pursuant to Article 16 hereof, and

(5) repairs to the Premises as a result of a partial condemnation that occurs prior to the date that the Successor succeeds to Landlord’s interest in the Real Property and that Landlord is required to perform pursuant to Article 16 hereof, to the extent that the Successor can make such repairs from the net proceeds of any condemnation award made available to the Successor (with the understanding, however, that if (i) a partial condemnation occurs prior to the date that the Successor succeeds to Landlord’s interest in the Real Property, (ii) Landlord is required to make repairs to the Building pursuant to Article 16 hereof by reason of such partial condemnation, and (iii) the Successor cannot make such repairs from such net proceeds, then Tenant shall have the right to terminate this Lease by giving notice thereof to the Successor within fifteen (15) days after the date that the Successor gives Tenant notice that the Successor does not intend to perform such repairs),

(F) bound by any amendment or modification of this Lease made without the consent of the Successor after the date that Tenant is given notice of the applicable Mortgage or the applicable Superior Lease (as the case may be), or

(G) bound to return the Letter of Credit until the Letter of Credit has come into the Successor’s actual possession and Tenant is entitled to the Letter of Credit pursuant to the terms of this Lease.

 

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The provisions of this Section 13.2 shall apply notwithstanding that, as a matter of law, this Lease terminates upon the termination of any Superior Lease, the termination of any Condominium Declaration or the foreclosure of a Mortgage. No further instrument shall be required to give effect to Tenant’s attorning to a Successor as contemplated by this Section 13.2. Tenant, however, upon demand of any Successor, shall execute, from time to time, instruments, in a recordable form and in a form reasonably satisfactory to the Successor, confirming the foregoing provisions of this Section 13.2.

13.3 Amendments to this Lease.

Tenant shall execute and deliver, from time to time, amendments to this Lease, promptly after the request by Landlord and/or any Mortgagee, to the extent that (x) such amendments are reasonably required by a Mortgagee or a Lessor that in either case is not an Affiliate of Landlord (or are reasonably required by a proposed Mortgagee or proposed Lessor that in either case is not an Affiliate of Landlord and that consummates the applicable Mortgage or the applicable Superior Lease contemporaneously with Tenant’s execution and delivery of such amendment hereof), and (y) Landlord gives to Tenant reasonable evidence to the effect that such Mortgagee or Lessor requires such amendments; provided, however, that Tenant shall not be required to agree to any such amendments to this Lease that (i) increase Tenant’s monetary obligations under this Lease, (ii) adversely affect or diminish Tenant’s rights under this Lease (except in either case to a de minimis extent), or (iii) increase Tenant’s other obligations under this Lease (except to a de minimis extent); it being understood that the obligation to give additional notices to a Mortgagee or a Lessor shall not be deemed to increase Tenant’s obligations under this Lease.

13.4 Tenant’s Estoppel Certificate.

Tenant, within ten (10) Business Days after Landlord’s request from time to time (but not more frequently than three (3) times in any particular period of twelve (12) months), shall deliver to Landlord a written statement executed by Tenant, in form reasonably satisfactory to Landlord, (1) stating that this Lease is then in full force and effect and has not been modified (or if this Lease is not in full force and effect, stating the reasons therefor, or if this Lease is modified, setting forth all modifications), (2) setting forth the date to which the Fixed Rent, the Escalation Rent and other items of Rental have been paid, (3) stating whether, to the actual knowledge of Tenant (but without having made any investigation), Landlord is in default under this Lease, and, if Landlord is in default, setting forth the specific nature of all such defaults, and (4) stating any other matters reasonably requested by Landlord and related to this Lease. Tenant acknowledges that any such statement that Tenant delivers to Landlord pursuant to this Section 13.4 may be relied upon by (x) any purchaser or owner of the Real Property or any interest therein (including, without limitation, any Lessor), or (y) any Mortgagee.

 

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13.5 Landlord’s Estoppel Certificate.

Landlord, within ten (10) Business Days after Tenant’s request from time to time (but not more frequently than three (3) times in any particular period of twelve (12) months), shall deliver to Tenant a written statement executed by Landlord, in form reasonably satisfactory to Landlord and Tenant, (i) stating that this Lease is then in full force and effect and has not been modified (or if this Lease is not in full force and effect, stating the reasons therefor, or if this Lease is modified, setting forth all modifications), (ii) setting forth the date to which the Fixed Rent, the Escalation Rent and any other items of Rental have been paid, (iii) stating whether, to the actual knowledge of Landlord (but without having made any investigation), Tenant is in default under this Lease, and, if Tenant is in default, setting forth the specific nature of all such defaults, and (iv) stating any other matters reasonably requested by Tenant and related to this Lease. Landlord acknowledges that any statement delivered by Landlord to Tenant pursuant to this Section 13.5 may be relied upon by (w) any Person that extends credit to Tenant, (x) any assignee of Tenant’s interest hereunder, (y) any subtenant of all or any part of the Premises, or (z) any Person that acquires Control of Tenant (provided that such assignment, sublease or transfer of Control is accomplished in a manner that complies with the provisions of Article 16 hereof).

13.6 Rights to Cure Landlord’s Default.

If (x) a Superior Lease or Mortgage exists, (y) the Lessor or Mortgagee is not an Affiliate of Landlord, and (z) Landlord gives Tenant notice thereof, then Tenant shall not seek to terminate this Lease by reason of Landlord’s default hereunder until Tenant has given written notice of such default to such Lessor or such Mortgagee in either case at the address that has been furnished to Tenant. If any such Lessor or Mortgagee notifies Tenant, within ten (10) Business Days after the date that such Lessor or Mortgagee receives such notice from Tenant, that such Lessor or Mortgagee intends to remedy such act or omission of Landlord, then Tenant shall not have the right to so terminate this Lease unless such Lessor or Mortgagee fails to remedy such act or omission of Landlord within a reasonable period of time not to exceed sixty (60) days after the date that such Lessor or Mortgagee gives such notice to Tenant, or if (i) such act or omission cannot be remedied with reasonable diligence during such period of sixty (60) days, (ii) such Lessor or Mortgagee takes reasonable steps during such period of sixty (60) days to commence such Lessor’s or Mortgagee’s remedying of such act or omission, and (iii) such Lessor or Mortgagee prosecutes diligently the remedying of such act or omission, then such additional time as may be reasonably necessary to remedy such act or omission of Landlord (it being understood that such Lessor or Mortgagee shall not have any liability to Tenant for the failure of such Lessor or Mortgagee to so remedy such act or omission of Landlord during such period).

13.7 Zoning Lot Merger Agreement.

Tenant hereby waives irrevocably any rights that Tenant may have in connection with any zoning lot merger or transfer of development rights with respect to the Real Property, including, without limitation, any rights that Tenant may have to be a party to, to contest, or to execute any Declaration of Restrictions (as such term is used in Section 12-10 of the Zoning Resolution of The City of New York effective December 15, 1961, as amended) with respect to the Real Property, which would cause the Premises to be merged with or unmerged from any other zoning lot pursuant to such Zoning Resolution or to any document of a similar nature and purpose. Tenant agrees that this Lease shall be subject and subordinate to any Declaration of Restrictions or any other document of similar nature and purpose now or hereafter affecting the Real Property (it being

 

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understood, however, that Landlord shall not permit such Declaration of Restrictions or any such other document to impair Tenant’s rights hereunder, or expand Tenant’s obligations hereunder, except, in either case, to a de minimis extent). In confirmation of such subordination and waiver, Tenant, from time to time, shall execute and deliver promptly any certificate or instrument that Landlord reasonably requests.

13.8 Tenant’s Financial Statements.

Subject to the terms of this Section 13.8, (i) if an Event of Default shall be continuing hereunder, (ii) in the event of any proposed or contemplated sale of the Building (or the portion thereof in which the Premises is located), debt financing or refinancing of the Building (or the portion thereof in which the Premises is located), sale of a direct or indirect interest in Landlord, or debt financing that is secured by a pledge of a direct or indirect interest in Landlord, or other transfer or similar transaction, and/or (iii) if required by applicable Requirements (including, without limitation, if required in connection with any filings made with the Securities and Exchange Commission or any law, rule, regulation or requirement of a stock exchange, rating agency or regulator), Tenant shall, within ten (10) Business Days after Landlord’s request therefor, provide to Landlord (a) the balance sheet of Tenant and each Predecessor Tenant (if any) in either case dated as of the last day of the most recently completed fiscal year, (b) the income statement of Tenant and each Predecessor Tenant (if any) for the most recently completed fiscal year, and (c) the statement of changes in financial condition of Tenant and each Predecessor Tenant (if any) for the most recently completed fiscal year (such financial statements being collectively referred to herein as “Tenant’s Statements”). If any Tenant’s Statements for the most recently completed fiscal year shall not be available at the time of Landlord’s request therefor, then (x) Tenant, within such ten (10) Business Day period, shall notify Landlord that such Tenant’s Statements are not available and deliver Tenant’s Statements for the fiscal year immediately preceding the most recently completed fiscal year and (y) Tenant shall, on or prior to the one hundred twentieth (120th) day after the last day of the most recently completed fiscal year, provide Tenant’s Statements for such fiscal year to Landlord. Tenant shall cause Tenant’s Statements to be prepared in accordance with GAAP, and to be accompanied by an unqualified opinion of a certified public accountant (or, if Tenant’s Statements shall not be audited in the ordinary course of business, accompanied by a certification from Tenant’s chief financial officer or other authorized signatory). For a period of one (1) year after Tenant gives to Landlord a particular Tenant’s Statement, Landlord shall not disclose Tenant’s Statements to any third party, except that Landlord may disclose Tenant’s Statements (i) to Persons who are directors, members, partners, trustees, employees, agents or advisors to Landlord or Landlord’s Affiliates and who have been directed to maintain the confidentiality of Tenant’s Statements in accordance with the terms hereof, (ii) to Persons that provide (or that propose to provide), directly or indirectly, debt or equity capital to Landlord or Landlord’s Affiliates and that have been directed to maintain the confidentiality of Tenant’s Statements in accordance with the terms hereof, (iii) to Persons that purchase (or that propose to purchase) the Real Property or any portion thereof and that have been directed to maintain the confidentiality of Tenant’s Statements in accordance with the terms hereof, (iv) to Lessors (or prospective Lessors) that have been directed to maintain the confidentiality of Tenant’s Statements in accordance with the terms hereof, (v) to Persons that provide professional services for Landlord

 

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(such as, for example, Landlord’s attorneys and accountants) and that have been directed to maintain the confidentiality of Tenant’s Statements in accordance with the terms hereof, (vi) to the extent required by law, rule, regulation or requirement of a stock exchange, rating agency or regulator or in connection with any legal or regulatory proceeding, (vii) to the extent reasonably required by Landlord in enforcing Landlord’s rights hereunder, and (viii) to the extent that Tenant’s Statements are otherwise available to the general public, are already in Landlord’s possession (having been provided by a source other than Tenant), or come into Landlord’s possession from a source other than Tenant who is not known by Landlord to be bound by a confidentiality obligation to Tenant with respect thereto. Tenant shall not have any obligation to provide Tenant’s Statements to Landlord as provided in this Section 13.8 during the period that (x) the stock of Tenant is publicly traded on a recognized stock exchange, and (y) Tenant’s Statements are available to the general public under filings that Tenant makes with the Securities and Exchange Commission.

Article 14

INSURANCE

14.1 Tenant’s Insurance.

(A) Tenant, at Tenant’s expense, shall obtain and keep in full force and effect (i) an insurance policy for Tenant’s Property and the Specialty Alterations, in either case to the extent insurable under standard form “all-risk” property insurance policies, covering the perils listed in the current edition of the Insurance Services Office, Inc. (“ISO”), special causes of loss form CP 10 30, including, without limitation, coverage for acts of terrorism (if such coverage for acts of terrorism is available on commercially reasonable terms), in an amount equal to one hundred percent (100%) of the replacement value thereof (subject, however, at Tenant’s option, to a reasonable deductible) (the insurance policy described in this clause (i) being referred to herein as ”Tenant’s Property Policy”), (ii) a policy of worker’s compensation insurance, to the extent required by law (such policy being referred to herein as “Tenant’s Worker’s Compensation Policy”), (iii) a commercial automobile liability policy covering any vehicle that Tenant brings upon the Real Property (regardless of whether Tenant owns or hires such vehicle) with a combined single limit of not less than One Million Dollars ($1,000,000) (such policy being referred to herein as “Tenant’s Auto Policy”, and (iv) a policy of commercial general liability insurance on an occurrence basis, providing coverage that is at least as broad as the current edition of ISO Form CG 00 01 (the insurance policy described in this clause (iv) being collectively referred to herein as “Tenant’s Liability Policy”). Tenant’s Property Policy and Tenant’s Liability Policy shall name Tenant as a named insured. Tenant’s Liability Policy (including, without limitation, any policy that Tenant obtains as described in Section 14.1(D) hereof) and Tenant’s Auto Policy shall be endorsed to name the Landlord Indemnitees as additional insureds thereunder.

(B) Tenant’s Property Policy shall contain a provision that no act or omission of Tenant shall affect or limit the obligation of the insurer to pay the amount of any loss sustained. All of the insurance policies that Section 14.1(A) obligates Tenant to carry shall provide that at least thirty (30) days of advance written notice of cancellation is given to Landlord, except that

 

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such period of thirty (30) days may be reduced to no less than ten (10) days for non-payment of premium. If Tenant receives any notice of cancellation or any other notice from the insurance carrier which may adversely affect the coverage of the insureds under Tenant’s Property Policy or Tenant’s Liability Policy, then Tenant shall immediately deliver to Landlord a copy of such notice. Tenant’s Liability Policy shall have no exclusions limiting liability assumed under an insured’s contract (including, without limitation, tort liability of another assumed by the insured in a business contract). The minimum limits of liability under Tenant’s Liability Policy shall be Five Million Dollars ($5,000,000) per occurrence for bodily injury (or death), personal injury and/or damage to property, which minimum amount Landlord may increase from time to time to the amount of insurance that in Landlord’s reasonable judgment is then being customarily required by prudent landlords of first-class buildings in the vicinity of the Building from tenants leasing space similar in size, nature and location to the Premises.

(C) Tenant shall cause Tenant’s Liability Policy, Tenant’s Worker’s Compensation Policy, Tenant’s Auto Policy and Tenant’s Property Policy to be issued by reputable insurers that are (x) eligible to do business in the State of New York, and (y) rated in Best’s Insurance Guide, or any successor thereto, as having a general policyholder rating of A and a financial rating of at least VIII (it being understood that if such ratings are no longer issued, then such insurer’s financial integrity shall conform to the standards that constitute such ratings from Best’s Insurance Guide as of the date hereof).

(D) Tenant has the right to satisfy Tenant’s obligation to carry Tenant’s Liability Policy with an umbrella insurance policy if such umbrella insurance policy contains an aggregate per location endorsement that provides the required level of protection for the Premises. Tenant has the right to satisfy Tenant’s obligation to carry Tenant’s Property Policy with a blanket insurance policy if such blanket insurance policy provides, on a per occurrence basis, that a loss that relates to any other location does not impair or reduce the level of protection available for the Premises below the amount required by this Lease.

(E) Tenant’s liability hereunder is not limited to the amount of Tenant’s insurance recovery, to the amount of insurance that Tenant maintains in force, to the amount of insurance that Tenant is required to maintain in accordance with the terms of this Section 14.1, or to the amount of any insurance that Tenant is required to carry, or that Tenant is permitted to carry, under applicable Requirements. Landlord’s review of, or approval of, any insurance that Tenant carries shall not limit Tenant’s obligation to carry the insurance that this Section 14.1 requires Tenant to carry.

14.2 Landlord’s Insurance.

(A) Subject to the terms of this Section 14.2, Landlord shall obtain and keep in full force and effect covering the Building and the Alterations, to the extent insurable on commercially reasonable terms under then available standard forms of “all-risk” insurance policies, covering the perils listed in the current edition of the ISO special causes of loss form CP 10 30, including, without limitation, coverage for acts of terrorism (if such coverage for acts of

 

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terrorism is available on commercially reasonable terms), in an amount equal to one hundred percent (100%) of the replacement value thereof (such insurance being referred to herein as “Landlord’s Property Policy”). Tenant acknowledges that (i) Landlord’s Property Policy may encompass rent insurance, and (ii) Landlord may also obtain a commercial general liability insurance policy, as well as other types of insurance policies as reasonably deemed necessary by Landlord or Mortgagee.

(B) Landlord shall not be liable to Tenant for any failure to insure any Alterations unless Tenant notifies Landlord of the completion of such Alterations and the cost thereof, and maintains adequate records with respect to such Alterations to facilitate the adjustment of any insurance claims with respect thereto. Landlord shall have the right to provide that the coverage of Landlord’s Property Policy is subject to a reasonable deductible. Tenant shall cooperate with Landlord and Landlord’s insurance companies in the adjustment of any claims for any damage to the Building or the Alterations. Landlord shall not be required to carry insurance on Tenant’s Property or the Specialty Alterations. Landlord shall not be required to carry insurance against any loss suffered by Tenant due to the interruption of Tenant’s business.

14.3 Mutual Waiver of Subrogation.

Landlord and Tenant shall each obtain an appropriate clause in, or endorsement on, Landlord’s Property Policy or Tenant’s Property Policy (as the case may be) pursuant to which the insurance companies waive subrogation or consent to a waiver of right of recovery. Landlord and Tenant also agree that, (I) whether or not having obtained such clauses or endorsements of waiver of subrogation or consent to a waiver of right of recovery, they each waive and shall not make any claim against or seek to recover from the Landlord Indemnitees or the Tenant Indemnitees (as the case may be) for any loss or damage (including the cost of any deductibles or self-insured retentions) to its property or the property of others resulting from fire or other hazards covered by Landlord’s Property Policy or Tenant’s Property Policy (as the case may be) (with the understanding, therefore, that the party that sustains such loss or damage shall not have a claim against the other party to reimburse the party that sustains such loss or damage for the amount of such party’s deductible or self-insured retention), and (II) in the event that either party fails to carry or maintain the insurance required by this Article 14, then Landlord or Tenant, as the case may be, shall not make any claim against or seek to recover from the Landlord Indemnitees or the Tenant Indemnitees (as the case may be) for any loss or damage to its property or the property of others resulting from fire or other hazards that would have been covered had Landlord or Tenant, as the case may be, carried insurance as required under this Article 14. Each party is required to obtain such an endorsement as long as such endorsements are commercially available.

14.4 Evidence of Insurance.

On or prior to the Commencement Date, each party shall deliver to the other party appropriate certificates of insurance required to be carried by the parties pursuant to this Article 14, including copies of endorsements or clauses in the applicable insurance policies that evidence waivers of subrogation and naming of additional insureds in either case as required by Section

 

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14.3 hereof (it being understood that Acord 25 shall suffice for Tenant’s Liability Policy, Tenant’s Auto Policy and Tenant’s Worker’s Compensation Policy and Acord 27 or 28 shall suffice for Tenant’s Property Policy and Landlord’s Property Policy). Each party shall deliver to the other party evidence of each renewal or replacement of a policy prior to the expiration of such policy.

14.5 No Concurrent Insurance.

Tenant shall not obtain any property insurance (under Tenant’s Property Policy or otherwise) that covers the property that is covered by Landlord’s Property Policy.

14.6 Tenant’s Obligation to Comply with Landlord’s Fire and Casualty Insurance.

If (i) Tenant (or any other Person claiming by, through or under Tenant) uses the Premises for any purpose other than general office use , and (ii) the use of the Premises by Tenant (or such other Person) causes the premium for Landlord’s Property Policy to exceed the premium that would have otherwise applied therefor if Tenant (or such Person) used the Premises for general office use, then Tenant shall pay to Landlord, as additional rent, an amount equal to such excess, on or prior to the thirtieth (30th) day after the date that Landlord gives to Tenant an invoice therefor, together with reasonable supporting documentation for the charges set forth therein. Nothing contained in this Section 14.6 expands Tenant’s rights under Article 3 hereof.

Article 15

CASUALTY

15.1 Notice.

Tenant shall notify Landlord promptly of any fire or other casualty that occurs in the Premises.

15.2 Landlord’s Restoration Obligations.

Subject to the terms of this Section 15.2, Landlord, with reasonable diligence, shall repair the damage to (i) the Premises (including, without limitation, the Alterations and Landlord’s Work), (ii) the Building Systems that service the Premises, and (iii) the common elements of the Building that Tenant uses to gain access to the Premises, in each case to the extent caused by fire or other casualty. The restoration work to be performed by Landlord shall include, without limitation, Landlord’s Work and any portion of Landlord’s Work that Landlord did not Substantially Complete on the date that the fire or other casualty occurred. Landlord shall commence the performance of such repairs as promptly as reasonably practicable after the occurrence of such fire or other casualty. Landlord shall use commercially reasonable efforts to perform such repairs diligently, in a good and workmanlike manner, and in a manner that minimizes to the extent reasonably practicable interference with Tenant’s use and occupancy of any portion of the Premises that remains tenantable. Landlord shall not be required to restore Tenant’s Property or the Specialty Alterations. Landlord shall not be required to commence such

 

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restoration until Tenant gives Landlord the notice described in Section 15.1 hereof (unless Landlord otherwise has received actual notice of the fire or other casualty). Landlord shall not be obligated to restore any Alterations unless (i) Tenant has Substantially Completed the performance thereof, (ii) Tenant has given Landlord notice to the effect that Tenant has Substantially Completed such Alterations, (iii) Tenant has given Landlord notice of the cost incurred by Tenant in performing such Alterations, and (iv) Tenant has maintained records with respect to such Alterations in a form that allows Landlord to make a full insurance recovery therefor under Landlord’s Property Policy. If (x) Tenant, as part of the Initial Alterations, demolishes all or a material part of the interior installation that exists in the Premises on the Commencement Date, and (y) the Premises (including any Alterations) is damaged by fire or other casualty at any time prior to the date that Tenant Substantially Completes the Initial Alterations therein, then Landlord’s obligation to repair the Premises (and any Alterations) shall be limited to (w) the performance of Landlord’s Work (to the extent that the performance of Landlord’s Work remains feasible after such fire or other casualty), (x) the part of the Building Systems serving the Premises on the Commencement Date, but not the distribution portions of such Building Systems located within the Premises, (y) the floor and ceiling slabs of the Premises, and (z) the exterior walls of the Premises, all to substantially the same condition that existed on the Commencement Date. Landlord shall have the right to adapt the restoration of the Premises as contemplated by this Section 15.2 to comply with applicable Requirements that are then in effect. Landlord shall not be obligated to restore the Premises as provided in this Section 15.2 to the extent that this Lease terminates by reason of such fire or other casualty as provided in this Article 15.

15.3 Rent Abatement.

(A) Subject to Section 15.3(B) hereof, the Fixed Rent and the Escalation Rent that is otherwise due and payable hereunder shall be reduced in the proportion that the number of square feet of Rentable Area of the part of the Premises that is not usable or accessible by Tenant by reason of such fire or other casualty bears to the total Rentable Area of the Premises immediately prior to such fire or other casualty, for the period commencing on the date of such fire or other casualty and ending on the date that Landlord Substantially Completes the restoration described in Section 15.2 hereof or the applicable portion of the Premises becomes accessible, as the case may be.

(B) If a fire or other casualty occurs in the Premises after the Commencement Date and prior to the Rent Commencement Date, then the aggregate abatement of Fixed Rent and the Escalation Rent to which Tenant is entitled as contemplated by Section 15.3(A) hereof (from and after the Rent Commencement Date) shall be an amount equal to the aggregate abatement of Fixed Rent and the Escalation Rent to which Tenant would have been entitled under Section 15.3(A) hereof if the Rent Commencement Date had occurred immediately prior to such fire or other casualty.

 

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15.4 Landlord’s Termination Right.

If the Building is so damaged by fire or other casualty that, in Landlord’s opinion, substantial alteration, demolition, or reconstruction of the Building is required (regardless of whether the Premises have been damaged or rendered untenantable), then Landlord may terminate this Lease by giving Tenant notice thereof on or prior to the one hundred twentieth (120th) day after such fire or other casualty; provided, however, that if the Premises are not substantially damaged or rendered substantially untenantable by such fire or other casualty, then Landlord may not so terminate this Lease unless Landlord elects to terminate leases (including this Lease) affecting at least seventy percent (70%) of the leasable area of the Building (excluding any portion of the Building leased to or occupied by Landlord or Landlord’s Affiliates). Landlord also shall have the right to terminate this Lease if the owners of the condominium established by the Condominium Declaration do not make the election contemplated by Section 339-cc of the New York Real Property Law to restore the Building after a fire or other casualty (to the extent that such election is required to be made by such unit owners). If Landlord elects to terminate this Lease as aforesaid, then (I) the Term shall expire on a date set by Landlord that (A) is not sooner than (i) the tenth (10th) day after the date that Landlord gives such notice (if all or substantially all of the Premises is rendered untenantable by such fire or other casualty), and (ii) the ninetieth (90th) day after the date that Landlord gives such notice (if less than all or substantially all of the Premises is rendered untenantable by such fire or other casualty), and (B) is not later than the first (1st) anniversary of the date on which such fire or other casualty occurs, and (II) Tenant, on such date set by Landlord, shall vacate the Premises and surrender the Premises to Landlord in accordance with the terms of this Lease that govern Tenant’s obligations upon the expiration or earlier termination of the Term. Upon the termination of this Lease under this Section 15.4, the Rental shall be apportioned and any prepaid portion of the Rental for any period after the date that the abatement of Rental as described in Section 15.3 hereof becomes effective shall be refunded promptly by Landlord to Tenant (and Landlord’s obligation to make such refund shall survive the Expiration Date).

15.5 Tenant’s Termination Right.

(A) Landlord, within forty-five (45) days after the earlier to occur of (x) the date that Tenant gives Landlord notice of the occurrence of a fire or other casualty as contemplated by Section 15.1 hereof, and (y) the date that Landlord otherwise has actual notice of such fire or other casualty, shall give to Tenant a statement prepared by a reputable and independent contractor setting forth such contractor’s estimate in good faith as to the time required for Landlord to Substantially Complete the restoration described in Section 15.2 hereof (such statement that Landlord gives to Tenant being referred to herein as the “Casualty Statement”); provided, however, that Landlord shall not be required to give Tenant a Casualty Statement if Landlord has theretofore exercised Landlord’s right to terminate this Lease under Section 15.4 hereof. If the estimated time period as set forth in the Casualty Statement exceeds twelve (12) months from the date of the applicable fire or other casualty, then Tenant may elect to terminate this Lease by giving notice to Landlord not later than the thirtieth (30th) day after the date that Landlord gives the Casualty Statement to Tenant. If Tenant makes such election to so terminate this Lease, then the Term shall expire on the thirtieth (30th) day after Tenant gives such notice to Landlord.

 

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(B) This Lease shall terminate if (i) a fire or other casualty occurs, and, by reason thereof, Landlord has an obligation to perform a restoration as contemplated by Section 15.2 hereof, (ii) Tenant does not exercise Tenant’s right to terminate this Lease under Section 15.5(A) hereof in connection with such fire or other casualty (or Tenant does not have the right to terminate this Lease under Section 15.5(A) hereof in connection with such fire or other casualty), (iii) Landlord fails to Substantially Complete the performance of the restoration work that Landlord is required to perform on or prior to the date that is sixty (60) days after the last day of the estimated time period set forth in the Casualty Statement (the date described in this clause (iii) being referred to herein as the “Second Bite Date”), (iv) Tenant gives Landlord notice no earlier than the Second Bite Date to the effect that this Lease will terminate under this Section 15.5(B) if Landlord fails to Substantially Complete the restoration within thirty (30) days after the Second Bite Date, and (v) Landlord fails to Substantially Complete the restoration within thirty (30) days after the Second Bite Date.

(C) If the Term terminates as provided in this Section 15.5, then (I) Tenant shall vacate the Premises and surrender the Premises to Landlord on the date of such termination “as is” and otherwise in accordance with the terms of this Lease that govern Tenant’s obligations upon the expiration or earlier termination of the Term, (II) any Rental due hereunder shall be apportioned as of the date of such termination, and (III) any portion of the Rental that is then prepaid by Tenant and relates to the period after the date that the abatement of Rental as described in Section 15.3 hereof becomes effective shall be promptly refunded by Landlord to Tenant (with the understanding that Landlord’s obligation to make any such refund shall survive such termination of this Lease).

15.6 Termination Rights at End of Term.

Subject to the terms of this Section 15.6, if the Premises are substantially damaged by a fire or other casualty that occurs during the period of twelve (12) months immediately preceding the Fixed Expiration Date, then either Landlord or Tenant may elect to terminate this Lease by notice given to the other party within thirty (30) days after such fire or other casualty occurs. If either party makes such election, then the Term shall expire on the thirtieth (30th) day after the notice of such election is given, and, accordingly, Tenant, on or prior to such thirtieth (30th) day, shall vacate the Premises and surrender the Premises to Landlord in accordance with the provisions of this Lease that govern Tenant’s obligation to deliver vacant and exclusive possession of the Premises to Landlord upon the expiration of the Term. Upon the termination of this Lease under this Section 15.6, the Rental shall be apportioned and any prepaid portion of the Rental for any period after the Expiration Date shall be refunded promptly by Landlord to Tenant (and Landlord’s obligation to make such refund shall survive the Expiration Date). For purposes of this Section 15.6, the term “substantially damaged” shall mean that: (a) a fire or other casualty precludes Tenant from using more than thirty percent (30%) of the Premises for the conduct of its business, and (b) Tenant’s inability to so use the Premises (or the applicable portion thereof) is reasonably expected to continue until at least the earlier to occur of (i) the Fixed Expiration Date, and (ii) the ninetieth (90th) day after the date that such fire or other casualty occurs.

 

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15.7 No Other Termination Rights.

Tenant shall have no right to cancel this Lease by virtue of a fire or other casualty except to the extent specifically set forth herein. This Article 15 is intended to constitute an “express agreement to the contrary” for purposes of Section 227 of the New York Real Property Law.

Article 16

CONDEMNATION

16.1 Effect of Condemnation.

(A) Subject to the provisions of Section 16.2 hereof, if the entire Real Property, the entire Building or the entire Premises is condemned or otherwise acquired by the exercise of the power of eminent domain, then this Lease shall terminate as of the date that such condemnation or acquisition is consummated.

(B) If only a part of the Real Property and not the entire Premises is so acquired or condemned, then:

(1) except as hereinafter provided in this Section 16.1, this Lease shall remain effective, and, from and after the date that the condemnation or acquisition is consummated, (w) the Fixed Rent shall be reduced in the proportion that the number of square feet of Rentable Area of the part of the Premises so acquired or condemned bears to the total Rentable Area of the Premises immediately prior to such acquisition or condemnation, (x) Tenant’s Tax Share shall be redetermined based upon the proportion that the number of square feet of Rentable Area of the Premises that is remaining after such acquisition or condemnation bears to the number of square feet of Rentable Area of the Building that is remaining after such acquisition or condemnation, and (y) Tenant’s Operating Expense Share shall be redetermined based upon the proportion that the number of square feet of Rentable Area of the Premises remaining after such acquisition or condemnation bears to the number of square feet of Rentable Area of the Building remaining after such acquisition or condemnation (other than any retail portion of the Building);

(2) on or prior to the sixtieth (60th) day after the date that the condemnation or acquisition is consummated, Landlord shall have the right to terminate this Lease by giving notice to Tenant if either (i) at least fifteen percent (15%) of the Usable Area of the Premises is so acquired or condemned, or (ii) Landlord terminates leases (including this Lease) for at least seventy percent (70%) of the Usable Area of the Building (excluding any portion of the Building leased to or occupied by Landlord or Landlord’s Affiliates); and

 

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(3) if (a) the part of the Real Property so acquired or condemned contains more than fifteen percent (15%) of the Usable Area of the Premises immediately prior to such acquisition or condemnation, or (b) by reason of such acquisition or condemnation, Tenant no longer has reasonable means of access to the Premises, then Tenant may elect to terminate this Lease by giving notice to Landlord on or prior to the sixtieth (60th) day after the date that Tenant is given notice of such acquisition or condemnation being consummated.

The Term shall expire on the thirtieth (30th) day after the date that Landlord or Tenant gives any such notice to terminate this Lease.

(C) Landlord shall refund to Tenant, promptly after the date that such taking or acquisition becomes effective, any Rental that Tenant has theretofore paid for the Premises (or the applicable portion thereof that is so taken or acquired) to the extent that such Rental is properly allocable to the period after the date that such taking or acquisition becomes effective (and Landlord’s obligation to make such refund shall survive the Expiration Date).

(D) If this Lease terminates pursuant to the provisions of this Section 16.1, then the Rental for the portion of the Premises that is not taken or acquired shall be apportioned as of the termination date. Landlord shall refund promptly to Tenant any Rental that Tenant has theretofore paid for any period after the date that such termination becomes effective (and Landlord’s obligation to make such refund shall survive the Expiration Date).

(E) If a part of the Premises is so acquired or condemned and this Lease and the Term is not terminated pursuant to the foregoing provisions of this Section 16.1, then Landlord, at Landlord’s expense, shall restore the part of the Premises that is not so acquired or condemned to a self-contained rental unit inclusive of Alterations that Tenant has theretofore Substantially Completed, except that if such acquisition or condemnation occurs prior to the Substantial Completion of the Initial Alterations, then Landlord shall only be required to restore the part of the Premises not so acquired or condemned to a self-contained rental unit exclusive of any Alterations.

16.2 Condemnation Award.

Subject to Section 16.3 hereof, Landlord shall be entitled to receive the entire award for any such acquisition or condemnation of all or any part of the Real Property. Tenant shall have no claim against Landlord or the condemning authority for the value of any unexpired portion of the Term, and, accordingly, Tenant hereby expressly assigns to Landlord all of its right in and to any such award. Nothing contained in this Section 16.2 shall be deemed to prevent Tenant from making a separate claim in any condemnation proceedings for the value of any Tenant’s Property included in such taking, for any moving expenses or for the costs incurred by Tenant in performing the Initial Alterations (prior to Tenant’s Substantial Completion thereof) in the portion of the Premises that is not so condemned or acquired.

 

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16.3 Temporary Taking.

If the whole or any part of the Premises is acquired or condemned temporarily during the Term, then (a) Tenant shall give prompt notice thereof to Landlord, (b) the Term shall not be reduced or affected in any way, (c) Tenant shall continue to pay in full all items of Rental payable by Tenant hereunder without reduction or abatement, and (d) Tenant shall be entitled to receive for itself any award or payments for such use, provided, however, that if the acquisition or condemnation is for a period extending beyond the Term, then such award or payment shall be apportioned equitably between Landlord and Tenant. Tenant, at Tenant’s expense, shall make Alterations to restore the Premises to the condition existing prior to any such temporary acquisition or condemnation.

Article 17

ASSIGNMENT AND SUBLETTING

17.1 General Limitations.

(A) Subject to the terms of this Article 17, without the prior consent of Landlord in each instance, which consent shall be granted or withheld by Landlord in accordance with this Article 17, Tenant shall not, and Tenant shall not permit any other Permitted Party to, consummate a Transfer. The term “Transfer” shall mean:

(1) (a) an assignment of a Permitted Party’s rights under, or a delegation of such Permitted Party’s duties under, the applicable Occupancy Agreement by express assignment or by operation of law or by other means, (b) a mortgage or other encumbrance of such Permitted Party’s interest in the applicable Occupancy Agreement, in whole or in part, (c) a subletting, or further subletting, of the Premises or any part thereof, or (d) the occupancy of the Premises or any part thereof by any Person other than such Permitted Party and any Special Occupants; and

(2) any transaction that modifies or supplements (or further modifies or supplements) an Occupancy Agreement to decrease the rental that is payable thereunder, to change the premises that is demised thereby, or to change the term thereof, in either case in any material respect (it being understood that (i) a termination or cancellation of an Occupancy Agreement shall not constitute a Transfer for purposes hereof, and (ii) such modification or supplement shall be treated for purposes hereof as a transaction on the terms of such Occupancy Agreement, as so modified or supplemented, for the balance of the term thereof).

(B) The term “Occupancy Agreement” shall mean the lease, sublease, license or other agreement pursuant to which a Permitted Party has the right to occupy the Premises.

(C) The term “Permitted Party” shall mean Tenant and any other Person that has the right to occupy the Premises (or any part thereof) in accordance with the terms of this Article 17 (other than a Person that has the right to occupy the Premises (or the applicable part thereof) by virtue of Landlord’s exercising Landlord’s rights under Section 17.3 hereof).

(D) Subject to Section 17.8 hereof, the transfer of Control in a Permitted Party, however accomplished, whether in a single transaction or in a series of unrelated or related transactions, shall constitute an assignment of such Permitted Party’s interest in the applicable Occupancy Agreement for purposes of this Article 17.

 

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(E) The consent by Landlord to any Transfer shall not relieve Tenant from its obligation to obtain the prior consent of Landlord to any other Transfer to the extent required by this Lease.

(F) The assignment by any Person that constitutes Tenant of the tenant’s interest under this Lease shall not relieve such Person of the obligations of the tenant under this Lease. Such Person’s liability under this Lease shall continue notwithstanding (x) the subsequent release of any other Person that constitutes Tenant from liability under this Lease, (y) any limitation on any such other Person’s liability hereunder by virtue of the Bankruptcy Code, or (z) any modification or amendment of this Lease that Landlord consummates with any such other Person that constitutes Tenant subsequently; provided, however, that if such other Person is not an Affiliate of such Person, then any such modification or amendment shall not expand such Person’s liability hereunder.

(G) Notwithstanding anything to the contrary contained herein, Tenant shall not, and Tenant shall not permit any other Permitted Party to, (i) enter into any lease, sublease, license, concession or other agreement for use or occupancy of the Premises or any portion thereof which provides for a rental or other payment for such use or occupancy based in whole or in part on the net income or profits derived by any Person from the property leased, occupied or used, or which would require the payment of any consideration that would not qualify as “rents from real property,” as that term is defined in Section 856(d) of the Internal Revenue Code of 1986, as amended or (ii) permit the Premises, or any portion thereof, to be used or occupied by or for the benefit of any Person that the Office of Foreign Assets Control of the United States Department of the Treasury has listed on its list of Specially Designated Nationals and Blocked Persons.

(H) If Tenant assigns the tenant’s interest under this Lease in violation of the terms of this Article 17, then such assignment shall be void and of no force and effect against Landlord; provided, however, that Landlord (x) may collect an amount equal to the then Rental from the assignee as a fee for such assignee’s use and occupancy, and (y) shall apply the net amount collected to the Rental reserved in this Lease. If the Premises or any part thereof are sublet to, occupied by, or used by any Person other than Tenant (regardless of whether such subletting, occupancy or use violates this Article 17), then Landlord (a) after the occurrence of an Event of Default, may collect amounts from the subtenant, user or occupant as a fee for its use and occupancy, and (b) shall apply the net amount collected to the Rental reserved in this Lease. No such assignment, subletting, occupancy or use, with or without Landlord’s prior consent, nor any such collection or application of fees for use and occupancy, shall (i) be deemed a waiver by Landlord of any term, covenant or condition of this Lease, (ii) be deemed the acceptance by Landlord of such assignee, subtenant, occupant or user as tenant hereunder, or (iii) relieve Tenant of the obligations of the tenant under this Lease.

 

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17.2 Landlord’s Expenses.

Tenant shall reimburse Landlord for any reasonable Out-of-Pocket Costs that Landlord incurs in connection with any proposed Transfer (not to exceed Ten Thousand and 00/100 Dollars ($10,000.00) in the aggregate per any particular proposed Transfer), including, without limitation, reasonable attorneys’ fees and disbursements, and the reasonable costs of making investigations as to the acceptability of the proposed Transferee, within thirty (30) days after Landlord gives to Tenant an invoice therefor together with reasonable supporting documentation for the charges set forth therein.

17.3 Recapture Procedure.

(A) Tenant shall have the right to institute the procedure described in this Section 17.3 (the “Recapture Procedure”) only by giving to Landlord notice thereof (a “Transfer Notice”), which:

(1) refers expressly to this Section 17.3 and indicates that such notice constitutes a Transfer Notice,

(2) either (a) includes a copy of the documents that Tenant intends to use to evidence the proposed Transfer, or (b) sets forth the material terms under which Tenant intends to consummate the Transfer (including, for example, (I) the rental to be paid by a subtenant (including any rent concessions), (II) the consideration to be paid by or to an assignee, (III) the work allowance to which a subtenant is entitled, (IV) the term of a proposed sublease, and (V) the nature and cost of any work that Tenant intends to perform to prepare the Premises for occupancy by the subtenant or assignee),

(3) identifies the Person to which Tenant proposes to make the Transfer (the Person to which a Transfer is made being referred to herein as a “Transferee”), and

(4) sets forth the date on which Tenant proposes that the term of a Transfer that constitutes a sublease, license or other similar agreement that grants occupancy rights will commence, or that a Transfer that constitutes an assignment will occur, as the case may be (such date being referred to herein as the “Transfer Date”) (it being understood that the Transfer Date shall be no sooner than forty-five (45) days, and no later than two hundred seventy (270) days, after the date that Tenant gives the Transfer Notice to Landlord) (the material terms of a proposed Transfer as set forth in the Transfer Notice being referred to herein as the “Proposed Transfer Terms” and it being agreed, however, that submittal of a Term Sheet pursuant to and in accordance with Section 17.5 hereof shall satisfy the requirement to submit Proposed Transfer Terms with the Transfer Notice).

(B) The term “Transfer Expenses” shall mean the actual Out-of-Pocket Costs that the Permitted Party that makes the applicable Transfer (the “Transferor”) pays solely in consummating a Transfer, including, without limitation, (i) brokerage commissions, (ii) allowances that a Transferor makes available to the Transferee to fund the cost of Alterations that

 

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the Transferee makes to the Premises, (iii) costs that a Transferor pays in making Alterations to prepare the Premises solely for the Transferee’s initial occupancy, (iv) the amount payable to Landlord under Section 17.2 hereof for such Transfer, (v) reasonable attorneys’ fees and disbursements that a Transferor pays in connection with consummating such Transfer, (vi) the amount of the free rent and other rent concessions that a Transferor grants to the Transferee and (vii) the transfer taxes (and other similar charges and fees) that Tenant pays pursuant to Section 17.6 hereof.

(C) The term “Amortized Transfer Expenses” shall mean, with respect to any period, the amount of the Transfer Expenses that amortize during such period if the Transfer Expenses are amortized, in equal monthly installments, with interest calculated at the Base Rate, over the period that the Transferee is obligated to make payments to a Transferor in respect of the applicable Transfer.

(D) The term “Recapture Date” shall mean the thirtieth (30th) day after the date that Tenant gives the Transfer Notice to Landlord.

(E)

(1) If (x) Tenant gives a Transfer Notice to Landlord, and (y) the Transfer described in the Transfer Notice constitutes a sublease for the Premises with respect to which the term thereof expires on or prior to the date that is one (1) year before the Fixed Expiration Date (any sublease that expires before such date being referred to herein as a “Short-Term Sublease”), then Landlord shall have the right to sublease (or to cause the Recapture Subtenant to sublease) the Premises from Tenant, on the terms set forth in this Section 17.3(E), by giving notice thereof (the “Recapture Sublease Notice”) to Tenant not later than the Recapture Date (as to which date time shall be of the essence) (any such sublease of the Premises that Landlord elects to consummate under this Section 17.3(E) being referred to herein as a “Recapture Sublease”).

(2) If Landlord gives a Recapture Sublease Notice to Tenant, then Tenant shall, and Landlord shall (or Landlord shall cause the Recapture Subtenant to), consummate a Recapture Sublease for the Premises on the following terms:

(a) Landlord shall give to Tenant, within ten (10) Business Days after the date that Landlord gives to Tenant the Recapture Sublease Notice, a proposed sublease that conforms with the terms set forth in this Section 17.3(E) and is otherwise on the terms set forth in this Lease. Tenant shall execute and deliver such sublease promptly after Landlord’s submission thereof to Tenant. Landlord shall execute and deliver (or cause the Recapture Subtenant to execute and deliver) such sublease promptly after Tenant delivers to Landlord the counterpart thereof that is executed by Tenant.

(b) Landlord shall have the right to designate that the subtenant under the Recapture Sublease is a Person other than Landlord (the Person that constitutes the subtenant under a Recapture Sublease being referred to herein as the “Recapture Subtenant”).

 

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(c) The rental payable by the Recapture Subtenant to Tenant shall be calculated on either of the following methods, as designated by Landlord (with the understanding that Landlord shall be deemed to have elected clause (i) below if Landlord does not designate otherwise in the Recapture Sublease Notice):

(i) the excess of (I) the rental that would have been payable by the Transferee for the applicable calendar month as contemplated by the Proposed Transfer Terms, over (II) the Amortized Transfer Expenses for such month that would have resulted from the Proposed Transfer Terms; or

(ii) the Fixed Rent and the Escalation Rent that is due under this Lease for the Premises.

(d) The term of the Recapture Sublease shall commence on the Transfer Date and shall extend for the term set forth in the Transfer Notice as part of the Proposed Transfer Terms (with the understanding that the Recapture Subtenant shall have the right to extend the term of the Recapture Sublease for a term that corresponds, or for terms that correspond, to any renewal right or renewal rights that are set forth in the Transfer Notice as part of the Proposed Transfer Terms).

(e) If, during the term of the Recapture Sublease (or during the period that the Recapture Subtenant, or any Person claiming by, through or under the Recapture Subtenant, remains in occupancy of the Premises after the term of the Recapture Sublease expires or earlier terminates), an event or circumstance occurs that is attributable to the Recapture Subtenant (or a Person claiming by, through or under the Recapture Subtenant), then such event or circumstance shall not constitute a default by Tenant hereunder (and, accordingly, Tenant shall not have liability to Landlord in connection therewith).

(f) Tenant shall have the right to offset against the Rental due hereunder an amount equal to the rental that the Recapture Subtenant fails to pay when due to Tenant.

(g) The Recapture Subtenant (and any Person claiming by, through or under the Recapture Subtenant), during the term of the Recapture Sublease, shall have the right to make alterations to the Premises; provided, however, that the Recapture Subtenant shall be required to restore the Premises upon the expiration of the term of the Recapture Sublease to the extent required by the applicable Proposed Transfer Terms.

(h) The Recapture Subtenant shall have the right to further sublease the Premises, or assign the Recapture Subtenant’s rights as subtenant under the Recapture Sublease, to any third party, without Tenant having any rights to consent thereto or to receive additional payments from the Recapture Subtenant in connection therewith.

 

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(i) The Recapture Subtenant shall not have the right to receive from Tenant any free rent, tenant improvement allowance or other similar concession that constitutes part of the Proposed Transfer Terms.

(F)

(1) If (x) Tenant gives a Transfer Notice to Landlord, and (y) the Transfer described in the Transfer Notice constitutes either a sublease for the Premises (other than a Short-Term Sublease) or an assignment, then Landlord shall have the right to terminate this Lease, on the terms set forth in this Section 17.3(F), by giving notice thereof (the “Recapture Termination Notice”) to Tenant not later than the Recapture Date (any such termination of this Lease being referred to herein as a “Recapture Termination”).

(2) If Landlord gives to Tenant a Recapture Termination Notice, then the Term shall terminate on the Transfer Date. If the Term so terminates on the Transfer Date, then Tenant, on the Transfer Date, shall vacate the Premises and deliver exclusive possession thereof to Landlord in accordance with the terms of this Lease that govern Tenant’s obligations upon the expiration or earlier termination of the Term.

(3) If (x) Landlord elects to consummate a Recapture Termination, and (y) the Transfer described in the applicable Transfer Notice constitutes a sublease or sublicense, then Tenant shall pay to Landlord, as additional rent, on the first day of each calendar month during the period from the Transfer Date to the date that the term of such sublease or sublicense would have expired under the Proposed Transfer Terms, an amount equal to the excess (if any) of:

(a) the Fixed Rent and the Escalation Rent that would have otherwise been due under this Lease since the Transfer Date for the Premises, over

(b) the sum of (A) the excess of (I) the rental that would have been payable by the Transferee since the Transfer Date as contemplated by the Proposed Transfer Terms, over (II) the Amortized Transfer Expenses under the Proposed Transfer Terms that would have theretofore accrued, and (B) the amounts theretofore paid by Tenant to Landlord under this Section 17.3(F)(3) in respect of such Recapture Termination.

Tenant’s obligation to pay such amount to Landlord shall survive the termination of this Lease.

(4) If (x) Landlord elects to consummate a Recapture Termination, and (y) the Transfer described in the applicable Transfer Notice constitutes an assignment of Tenant’s interest under this Lease, then Tenant shall pay to Landlord the sum of:

(a) the present value of the consideration (if any) that would have been payable by Tenant to the Transferee under the Proposed Transfer Terms (calculated as of the Transfer Date using a discount rate equal to the Base Rate), and

 

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(b) the excess, if any, of (I) the present value of the Transfer Expenses that Tenant would have incurred under the Proposed Transfer Terms, over (II) the present value of the consideration (if any) that would have been payable by the Transferee to Tenant under the Proposed Transfer Terms (in either case calculated as of the Transfer Date using a discount rate equal to the Base Rate).

Tenant shall pay the amounts described in clauses (a) and (b) above on the Transfer Date. Tenant’s obligation to pay such amounts to Landlord shall survive the termination of this Lease.

17.4 Certain Transfer Rights.

Subject to Section 17.8 hereof, Landlord shall not unreasonably withhold, condition or delay Landlord’s consent to a Permitted Party’s consummating a Transfer, provided that:

(A) Tenant has theretofore instituted the Recapture Procedure for such Transfer; provided, however, that Tenant shall not be required to have instituted the Recapture Procedure for a Transfer that is proposed to be consummated by a Permitted Party other than Tenant;

(B) Landlord’s right to elect to consummate a Recapture Sublease or a Recapture Termination (as the case may be) with respect to the proposed Transfer has lapsed (without Landlord’s having exercised Landlord’s rights to consummate a Recapture Sublease or a Recapture Termination (as the case may be)); provided, however, that this Section 17.4(B) shall not apply for a Transfer that is proposed to be consummated by a Permitted Party other than Tenant;

(C) the Transfer is on terms that are at least as favorable to the Transferor as the Proposed Transfer Terms; provided, however, that this Section 17.4(C) shall not apply for a Transfer that is proposed to be consummated by a Permitted Party other than Tenant;

(D) the Transfer occurs no earlier than the thirtieth (30th) day before the Transfer Date and no later than the thirtieth (30th) day after the Transfer Date; provided, however, that this Section 17.4(D) shall not apply for a Transfer that is proposed to be consummated by a Permitted Party other than Tenant;

(E) Tenant submits to Landlord a counterpart of the documents that the Transferor intends to use to consummate the proposed Transfer, which have been executed and delivered by the proposed Transferor and the proposed Transferee, and which are subject to no conditions to the effectiveness thereof (other than Landlord’s granting Landlord’s consent thereto);

(F) the Premises has not been listed or otherwise publicly advertised at a rental rate that is less than the prevailing rental rate set by Landlord for comparable space in the Building, or, if there is no comparable space, the prevailing rental rate reasonably determined by Landlord (it being agreed that nothing contained in this clause (F) prohibits a Permitted Party from (I) consummating a Transfer at a rental rate that is less than such prevailing rate, or (II) disseminating broker’s fliers or other marketing materials that indicate that the rental rate for the Premises is available upon request);

 

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(G) no Event of Default has occurred and is continuing;

(H) the proposed Transferee has a financial standing (taking into consideration the obligations of the Transferee under the applicable Occupancy Agreement) that is reasonably satisfactory to Landlord;

(I) the proposed Transferee is of a character, is engaged in a business, and proposes to use the Premises in a manner that in each case is in keeping with the standards of a first-class office building in the vicinity of the Building;

(J) the proposed Transferee, or any Affiliate of the proposed Transferee, does not occupy any space in the Building or in any of the buildings owned by Landlord’s Affiliates and known by the street addresses of Two Penn Plaza, New York, New York and/or Eleven Penn Plaza, New York, New York;

(K) neither the proposed Transferee, nor an Affiliate of the proposed Transferee, is a Person with whom Landlord is then engaged in bona fide negotiations regarding the leasing or subleasing of space in the Building or in any of the buildings owned by Landlord’s Affiliates and known as the street addresses of Two Penn Plaza, New York, New York and/or Eleven Penn Plaza, New York, New York;

(L) any sublease (or further sublease) of the Premises does not consist of less than the entire Rentable Area thereof;

(M) the use of the Premises by the Transferee does not violate any rights that Landlord has theretofore granted to a third party;

(N) the Transferor and each other Permitted Party (if any) whose interest is superior to the interest of the Transferor, and the Transferee, executes and delivers to Landlord a consent to the Transfer in a form reasonably designated by Landlord;

(O) if the Transfer constitutes an assignment of the tenant’s interest under this Lease, the assignee has expressly assumed all of the obligations of Tenant hereunder to the extent accruing from and after the date that the Transfer is effective; and

(P) if the Transfer constitutes a sublease (or a further sublease), such sublease provides expressly that (i) such sublease is subject and subordinate to this Lease (and to the terms thereof), and (ii) if this Lease terminates, then Landlord, at Landlord’s option, may take over all of the right, title and interest of the Transferor under such sublease, and the Transferee, at Landlord’s option, shall attorn to Landlord pursuant to the then executory provisions of such sublease, except that Landlord shall not be:

 

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(1) liable for any act or omission of the Transferor under such sublease (except for any such acts or omissions that (x) continue after the date that Landlord succeeds to the interest of the Transferor under such sublease, and (y) may be remedied by the providing a service or performing a repair),

(2) subject to any defense or offsets which the Transferee may have against the Transferor that accrue prior to the date that Landlord succeeds to the interest of the Transferor,

(3) bound by any previous payment that the Transferee made to the Transferor more than thirty (30) days in advance of the date that such payment was due,

(4) bound by any obligation to make any payment to or on behalf of the Transferee that accrues prior to the date that Landlord succeeds to the interest of the Transferor under such sublease,

(5) bound by any obligation to perform any work or to make improvements to the Premises (other than the obligation to perform maintenance, repairs or restoration that in each case first becomes necessary from and after the date that Landlord succeeds to the interest of the Transferor under such sublease) (with the understanding, however, that if (I) the Premises is damaged by fire or other casualty, or affected by condemnation, prior to the date that Landlord succeeds to the interest of the Transferor under such sublease, (II) Landlord would have otherwise been required to perform the restoration of the Premises, or the applicable portion thereof, that is required by virtue of such fire or other casualty, or such condemnation, in accordance with the terms hereof, and (III) Landlord does not elect to perform such restoration by giving notice thereof to the subtenant on or prior to the tenth (10th) day after the date that Landlord so succeeds, then such subtenant shall have the right to terminate such sublease (and such subtenant’s obligation to so attorn to Landlord, as aforesaid) by giving notice thereof to Landlord within ten (10) days after the last day of such period of ten (10) days during which Landlord has the right to give such notice to such subtenant),

(6) bound by any amendment or modification of such sublease made without Landlord’s consent, or

(7) bound to return the Transferee’s security deposit, if any, until such deposit has come into Landlord’s actual possession and the Transferee is entitled to such security deposit pursuant to the terms of such sublease (the requirements of a proposed sublease as set forth in this Section 17.4(P) being collectively referred to herein as the “Basic Sublease Provisions”).

17.5 Preliminary Approval.

Tenant shall have the right to submit to Landlord a statement that describes in reasonable detail the basic terms of a proposed Transfer that a Permitted Party proposes to consummate, and that identifies, and provides reasonable information that describes, the prospective Transferee (any such statement being referred to herein as a “Term Sheet”). Landlord shall not unreasonably withhold, condition or delay Landlord’s approval of the transaction described in the Term Sheet,

 

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provided that the transaction as described therein satisfies the requirements set forth in clauses (A), (C), (D), (F), (G), (H), (I), (J), (K), (L), and (M) of Section 17.4 hereof. Tenant acknowledges that the applicable Transfer shall remain subject to Landlord’s approval pursuant to Section 17.4 hereof (except that the scope of Landlord’s review of the applicable Transfer under Section 17.4 hereof shall be limited as provided in this Section 17.5). If (i) Tenant gives to Landlord a Term Sheet in respect of a particular proposed Transfer as contemplated by this Section 17.5, (ii) Landlord approves (or is deemed to have approved) such Transfer under this Section 17.5, (iii) Tenant submits to Landlord a counterpart of the definitive documents that the applicable Permitted Party proposes to use for the applicable Transfer within one hundred eighty (180) days after the date that Tenant submits the Term Sheet to Landlord, and (iv) the terms of such definitive documents are consistent in all material respects with the terms set forth in the Term Sheet, then Landlord shall not have the right to withhold consent to the applicable Transfer pursuant to clauses (A), (C), (D), (F), (G), (H), (I), (J), (K) and (L) of Section 17.4 hereof (it being understood, however, that Landlord shall retain the right to object to the proposed Transfer to the extent that the applicable Transfer does not satisfy the requirements set forth in clauses (E), (M), (N), (O), and (P) of Section 17.4 hereof). Landlord acknowledges that Tenant has the right to give a Term Sheet to Landlord in respect of a particular proposed Transfer prior to the Recapture Date (with the understanding, however, that nothing contained in this Section 17.5 limits Landlord’s rights under Section 17.3 hereof).

17.6 Transfer Taxes.

Tenant shall pay any transfer taxes (and other similar charges and fees) that any Governmental Authority imposes in connection with any Transfer (including, without limitation, any such transfer taxes, charges or fees that a Governmental Authority imposes in connection with Landlord’s exercising Landlord’s rights to consummate a Recapture Sublease or a Recapture Termination (as the case may be)).

17.7 Transfer Profit.

(A) Subject to the terms of this Section 17.7 and Section 17.8 hereof, Tenant shall pay as additional rent to Landlord, on the first (1st) day of each calendar month during the Term in the same manner as Fixed Rent, an amount equal to the excess of (I) fifty percent (50%) of the Transfer Profit for each Transfer that is determined as of the last day of the immediately preceding calendar month, over (II) the aggregate amount of the payments that Tenant has theretofore paid to Landlord for such Transfer under this Section 17.7(A).

(B)

(1) The term “Transfer Profit” shall mean, with respect to any particular Transfer, the excess (if any) of (x) the Transfer Inflow for such Transfer for the period beginning on the first (1st) day of the term of the applicable Transfer (if such Transfer is a sublease or sublicense) or the date that such Transfer becomes effective (if such Transfer is an assignment of the tenant’s interest under this Lease or an assignment of the subtenant’s interest under a sublease or a sublicense (or further sublease or sublicense)) (as the case may be), over (y) the sum of (a) the Transfer Outflow for such Transfer for such period, and (b) the Amortized Transfer Expenses for such Transfer for such period.

 

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(2) The term “Transfer Inflow” shall mean, with respect to any particular Transfer for any particular period, the amount that the Transferor receives during such period from or on behalf of the Transferee in connection with the applicable Transfer (including, without limitation, amounts received by the Transferor which are nominally for something other than real property or personal property and which are in substance received in exchange for leasing the Premises or the applicable portion thereof); provided, however, should any amount included in the Transfer Inflow cause the Transfer Profit to fail to qualify as “rents from real property,” as that term is defined in Section 856(d) of the Internal Revenue Code of 1986, as amended, the fair market value of such amount, as determined by Landlord in its sole discretion, shall be excluded from the Transfer Inflow and no Transfer Profit shall be paid to Landlord with respect to such excluded amount.

(3) The term “Transfer Outflow” shall mean:

(a) with respect to any Transfer that is a sublease or sublicense (or a further sublease or sublicense), the aggregate amount that the Transferor pays during the applicable period for the Premises to the counterparty under the Occupancy Agreement through which the Transferor derives its rights to the Premises, and

(b) with respect to any Transfer that is an assignment of the tenant’s interest under this Lease or the subtenant’s interest under a sublease or sublicense (or further sublease or sublicense), zero.

(C) If the Transferor (or an Affiliate thereof) receives in a transaction that occurs concurrently with the applicable Transfer consideration from the Transferee (or an Affiliate thereof) for the sale or lease of personal property or for services that the Transferor (or an Affiliate thereof) agrees to provide for the Transferee (or an Affiliate thereof), then (I) the Transfer Inflow shall include (in addition to the consideration that the Transferor receives for the Transfer) an amount equal to such other consideration, and (II) the Transfer Outflow shall include (in addition to the items that are otherwise includible in Transfer Outflow for purposes hereof) (a) the cost that the Transferor (or such Affiliate thereof) incurs in acquiring the personal property that the Transferor (or such Affiliate thereof) sells to the Transferee (or an Affiliate thereof) in such concurrent transaction (to the extent that such cost has not theretofore been amortized in accordance with GAAP), (b) the amortization of the cost that the Transferor (or such Affiliate thereof) incurs in acquiring any personal property that the Transferor (or such Affiliate thereof) leases to the Transferee, or (c) the cost that the Transferor (or an Affiliate thereof) incurs in providing such services, as the case may be.

 

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17.8 Permitted Transfers.

(A) The term “Net Worth Assignment Requirement” shall mean the requirement that Tenant has provided to Landlord, not later than the tenth (10th) Business Day after the applicable assignment has been consummated, an audited balance sheet for the applicable Permitted Party and the assignee that in either case is dated no earlier than the last day of the most recently ended fiscal quarter (or the last day of the fiscal quarter that immediately precedes the most recently ended fiscal quarter, if the applicable assignment occurs less than sixty (60) days after the last day of the most recently ended fiscal quarter) and that reflects that the assignee’s tangible net worth, as determined in accordance with GAAP, is not less than the greater of (I) the tangible net worth of the applicable Permitted Party on the Commencement Date (if the Transferor is Tenant) or on the first day of the term of the Occupancy Agreement through which the Transferor holds its interest in the Premises (if the Transferor is not Tenant), and (II) the tangible net worth of such Permitted Party on the date of such most recent balance sheet, as aforesaid.

(B) A Permitted Party shall have the right to assign such Permitted Party’s entire interest under the applicable Occupancy Agreement to an Affiliate of such Permitted Party without (x) Landlord’s prior approval, (y) Landlord’s having the right to consummate a Recapture Termination in respect thereof, and (z) Tenant’s being required to pay Transfer Profit to Landlord in connection therewith, provided that in each case (i) Tenant gives to Landlord, not later than the tenth (10th) Business Day after any such assignment is consummated, an instrument, duly executed by such Permitted Party and the aforesaid Affiliate of such Permitted Party, in form reasonably satisfactory to Landlord, to the effect that such Affiliate assumes all of the obligations of such Permitted Party under such Occupancy Agreement to the extent arising from and after the date of such assignment, (ii) Tenant, with such notice, provides Landlord with reasonable evidence to the effect that the Person to which such Permitted Party is so assigning such Permitted Party’s interest under such Occupancy Agreement constitutes an Affiliate of such Permitted Party, and (iii) the Net Worth Assignment Requirement is satisfied.

(C) The merger or consolidation of a Permitted Party into or with another Person shall be permitted without (x) Landlord’s prior approval, (y) Landlord’s having the right to consummate a Recapture Termination in respect thereof, and (z) Tenant’s being required to pay Transfer Profit to Landlord in connection therewith, provided that in each case (i) such merger or consolidation is not principally for the purpose of transferring such Permitted Party’s interest in the applicable Occupancy Agreement, (ii) Tenant gives Landlord notice of such merger or consolidation not later than the tenth (10th) Business Day after the occurrence thereof, (iii) Tenant, within ten (10) Business Days after such merger or consolidation, provides Landlord with reasonable evidence that the requirement described in clause (i) above has been satisfied, and (iv) the Net Worth Assignment Requirement is satisfied.

(D) The assignment of a Permitted Party’s entire interest under the applicable Occupancy Agreement in connection with the sale of all or substantially all of the assets of such Permitted Party shall be permitted without (x) Landlord’s prior approval, (y) Landlord’s having the right to consummate a Recapture Termination in respect thereof, and (z) Tenant’s being required to pay Transfer Profit to Landlord in connection therewith, provided that in each case (i) Tenant gives to Landlord, not later than the tenth (10th) Business Day after any such assignment is consummated, an instrument, duly executed by such Permitted Party and the Transferee, in form reasonably satisfactory to Landlord, to the effect that such Transferee assumes all of the obligations

 

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of such Permitted Party to the extent arising under the applicable Occupancy Agreement from and after the date of such assignment, (ii) such sale of all or substantially all of the assets of such Permitted Party is not principally for the purpose of transferring such Permitted Party’s interest in such Occupancy Agreement, (iii) Tenant, within ten (10) Business Days after such sale, provides Landlord with reasonable evidence that the requirement described in clause (ii) above has been satisfied, and (iv) the Net Worth Assignment Requirement is satisfied.

(E) The direct or indirect transfer of shares or equity interests in a Permitted Party (including, without limitation, the issuance of treasury stock, or the creation or issuance of a new class of stock, in either case in the context of an initial public offering or in the context of a subsequent offering of equity securities) shall be permitted without (x) Landlord’s prior approval, (y) Landlord’s having the right to consummate a Recapture Termination in respect thereof, and (z) Tenant’s being required to pay Transfer Profit to Landlord in connection therewith, provided that in each case (i) such transfer is not principally for the purpose of transferring the interest of such Permitted Party under the applicable Occupancy Agreement, (ii) as to any such transfer which results in a change of Control, Tenant gives Landlord notice of such transfer not later than the tenth (10th) Business Day after the occurrence thereof, and (iii) ) as to any such transfer which results in a change of Control, Tenant, within ten (10) Business Days after the date that such transfer occurs, provides Landlord with reasonable evidence that the requirement described in clause (i) has been satisfied (except that Tenant shall not be required to comply with this clause (iii) to the extent that such direct or indirect transfer of shares or equity interests is accomplished through the public “over-the-counter” securities market or through any recognized stock exchange).

(F) (1) A Permitted Party shall have the right to sublease or license (or further sublease or sublicense) the Premises (or any part thereof) to an Affiliate of such Permitted Party, without (x) Landlord’s prior approval, (y) Landlord’s having the right to consummate a Recapture Termination or a Recapture Sublease in respect thereof, and (z) Tenant’s being required to pay Transfer Profit to Landlord in connection therewith, provided that in each case (i) Tenant gives to Landlord a copy of such sublease or license, not later than the tenth (10th) Business Day after any such sublease or license is consummated, (ii) Tenant, with such copy of such sublease or license, provides Landlord with reasonable evidence to the effect that the Person to which such Permitted Party is so subleasing or licensing the Premises (or any part thereof) constitutes an Affiliate of such Permitted Party, and (iii) such sublease includes the Basic Sublease Provisions.

(2) Notwithstanding the foregoing to the contrary, Affiliate(s) of a Permitted Party may use or occupy the Premises (or portions of the Premises) with such Permitted Party without (i) Landlord’s prior approval, (ii) Landlord having the right to consummate a Recapture Termination or a Recapture Sublease in respect thereof and (iii) Tenant being required to pay Transfer Profit to Landlord in connection therewith, provided that in each case (a) no demising walls are erected in the Premises separating the space used by any such Affiliate(s) from the remainder of the Premises, (b) any such Affiliate(s) shall use and occupy the Premises in conformity with all applicable provisions of this Lease, (c) a Permitted Party shall be fully responsible for any defaults or Events of Default caused by or due to any act or omission of any such Affiliate(s), (d) the use or occupancy of the Premises by such Affiliate(s) shall not create any

 

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right, title or interest of such Affiliate(s) in or to the Premises, (e) at least five (5) days prior to the use or occupancy of the Premises (or portions of the Premises) by any such Affiliate(s) with a Permitted Party, Landlord shall be provided with (x) the name and address of such Affiliate(s) using or occupying the Premises (or portions of the Premises), (y) the anticipated duration of the use or occupancy of the Premises (or portions of the Premises) by such Affiliate(s), and (z) reasonable evidence to the effect that the Person(s) using or occupying the Premises with a Permitted Party constitute(s) an Affiliate of the Permitted Party, (f) if the portion of the Premises used by any such Affiliate(s) without entering into an Occupancy Agreement shall not exceed ten percent (10%) of the Rentable Area of the Premises in the aggregate (the “Affiliate Occupant Threshold”), (g) the portion of the Premises used by any such Affiliate(s) exceeds the Affiliate Occupancy Threshold or if an Occupancy Agreement shall otherwise be executed with any such use and occupancy, the Permitted Party gives Landlord a copy of the applicable Occupancy Agreement not later than thirty (30) days after the commencement of such use or occupancy, and (h) the cessation of an Affiliate relationship between the Person(s) using or occupying the Premises and the Permitted Party while such use or occupancy is continuing shall be deemed a transaction to which all of the terms of this Article 17 shall apply. Within ten (10) Business Days after request by Landlord from time to time, the Permitted Party shall provide Landlord with a list of the names of all Affiliate(s) then occupying all or any portion of the Premises pursuant to this Section 17.8(F)(2) and a description of the spaces occupied thereby.

(G) If (I) (i) a Permitted Party assigns such Permitted Party’s entire interest under the applicable Occupancy Agreement to an Affiliate of such Permitted Party, or (ii) a Permitted Party subleases or licenses (or further subleases or sublicenses) the Premises (or any part thereof) to an Affiliate of such Permitted Party, in either case without Landlord’s consent as provided in this Section 17.8 and without paying to Landlord any Transfer Profit that derives therefrom, and (II) the assignee or subtenant or sublicensee subsequently assigns the interest of such assignee or such subtenant or sublicensee under the applicable Occupancy Agreement to a third party in a Transfer that is not governed by the provisions of this Section 17.8 or further subleases or sublicenses the Premises to a third party in a Transfer that is not governed by the provisions of this Section 17.8, then, for purposes of calculating the Transfer Profit that is due to Landlord for such subsequent assignment or sublease or sublicense, the parties shall assume that the assignment or sublease or sublicense that the Permitted Party consummated without Landlord’s approval under this Section 17.8 did not occur previously (and, accordingly, the parties, in calculating Transfer Profit for such Transfer that is not governed by this Section 17.8, shall include any Transfer Profit that resulted from the prior Transfer from the Permitted Party to its Affiliate).

17.9 Special Occupants.

Tenant may permit portions of the Premises to be occupied, at any time and from time to time, by Persons who are not members, officers or employees of Tenant (each such Person who is permitted to occupy portions of the Premises pursuant to this Section 17.9 being referred to herein as a “Special Occupant”), without (x) Landlord’s prior approval, (y) Landlord’s having the right to consummate a Recapture Termination or a Recapture Sublease in respect thereof, and (z) Tenant’s being required to pay Transfer Profit to Landlord in connection therewith, provided that, in each

 

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case, (i) no demising walls are erected in the Premises separating the space used by a Special Occupant from the remainder of the Premises, (ii) the Special Occupant uses the Premises in conformity with all applicable provisions of this Lease, (iii) the use of any portion of the Premises by any Special Occupant shall not create any real property interest of the Special Occupant in or to the Premises, (iv) the portion of the Premises used by all Special Occupants shall not exceed ten percent (10%) of the Rentable Area of the Premises, (v) such Person maintains a business relationship with Tenant (other than by virtue of such occupancy) and such business relationship extends during the term of such occupancy, (vi) the Special Occupant does not pay for its occupancy rights an amount greater than the Rental that is reasonably allocable to the portion of the Premises that the Special Occupant has the right to occupy (it being understood that amounts that the Special Occupant pays to Tenant to reimburse Tenant reasonably for customary office services shall not be included in the calculation of the amount that the Special Occupant pays for its occupancy rights as provided in this clause (vi)), and (vii) at least ten (10) days prior to a Special Occupant taking occupancy of a portion of the Premises, Tenant gives notice to Landlord advising Landlord of (1) the name and address of such Special Occupant, (2) the character and nature of the business to be conducted by such Special Occupant, (3) the number of square feet of Rentable Area to be occupied by such Special Occupant, (4) the duration of such occupancy, and (5) the fee, if any, to be paid by such Special Occupant for its use of the applicable portion of the Premises. Within ten (10) Business Days after request by Landlord from time to time, Tenant shall provide Landlord with a list of the names of all Special Occupants then occupying any portion of the Premises and a description of the spaces occupied thereby.

Article 18

LANDLORD’S RIGHT TO RELOCATE TENANT

18.1 Landlord’s Rights.

(A) Subject to the terms of this Section 18.1, Landlord, at any time following the date of this Lease, shall have the one-time right to relocate Tenant from the Premises (the Premises from which Tenant is being relocated pursuant to this Section 18.1 being referred to herein as the “Old Premises”) to other space in the Building (such other space being referred to as the “New Premises”; Landlord’s aforesaid right to relocate Tenant from the Old Premises to the New Premises being referred to herein as the “Relocation Option”).

(B) Landlord shall have the right to exercise the Relocation Option only by giving notice thereof (the “Relocation Notice”) to Tenant not later than (i) in connection with any exercise of the Relocation Option prior to the Commencement Date, not later than August 15, 2024 (and in any event, not later than the date of Landlord’s execution of a lease or other occupancy agreement with respect to the Old Premises) and (ii) in connection with any exercise of the Relocation Option from and after the Commencement Date, not later than sixty (60) days before the date that Landlord reasonably anticipates that such relocation will become effective (the date that Landlord reasonably anticipates such relocation will become effective being referred to herein as the “Anticipated Relocation Date”). A Relocation Notice shall not be effective for purposes of

 

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this Section 18.1 unless (x) Landlord specifies therein the Anticipated Relocation Date, and (y) Landlord includes therewith a floor plan identifying the New Premises. The New Premises shall (i) be comprised of Rentable Area equal to or greater than the Rentable Area of the Old Premises; it being agreed, however, that in no event shall the Fixed Rent, Tenant’s Operating Expense Share or Tenant’s Tax Share increase as a result of the New Premises being comprised of a Rentable Area that shall be greater than the Rentable Area of the Old Premises, (ii) be substantially similar in configuration to the Old Premises and (iii) be located on or above the tenth (10th) floor of the Building.

(C) Landlord, at Landlord’s expense, shall construct in the New Premises, not later than the date that such relocation shall be effective, an interior installation that is as comparable as reasonably practicable to the interior installation that then exists in the Old Premises (it being agreed that if Landlord’s Work in the Old Premises shall not have been Substantially Completed in the Old Premises, then such interior installation in the New Premises shall be as comparable as reasonably practicable to scope of Landlord’s Work that was required to be performed in the Old Premises). Tenant shall cooperate reasonably with Landlord, at no cost to Tenant, in connection with Landlord’s designing and performing the construction of such interior installation in the New Premises (the design and construction of such interior installation being referred to herein as “Landlord’s Relocation Work”); provided, however, if (i) Landlord gives Tenant notice that Tenant has failed to cooperate reasonably with Landlord and (ii) Tenant fails to reasonably cooperate with Landlord within three (3) Business Days after the date that Landlord gives such notice to Tenant (or if Tenant cures such failure within three (3) Business Days and thereafter fails to continuously cooperate reasonably with Landlord), then Landlord shall have the right to design and perform the construction of such interior installation without such cooperation by Tenant. If Tenant has performed any Alterations and/or Specialty Alterations in the Old Premises, then Landlord’s Relocation Work shall constitute the same Alterations and Specialty Alterations (as the case may be) in the New Premises as the corresponding Alterations and Specialty Alterations constituted in the Old Premises (from and after the date that Landlord completes the installation thereof in accordance with the terms of this Section 18.1). Landlord shall provide Tenant with notice of the date that Landlord’s Relocation Work is Substantially Complete (such notice from Landlord to Tenant being referred to herein as the “Relocation Effective Notice” and the date that Landlord provides Tenant with such notice, the “Relocation Effective Notice Delivery Date”).

(D) If the Commencement Date shall have occurred or be deemed to have occurred on or prior to the Relocation Effective Notice Delivery Date, (i) Tenant shall vacate the Old Premises and surrender vacant and exclusive possession of the Old Premises to Landlord on or before the date that is ten (10) Business Days after the Relocation Effective Notice Delivery Date, provided that (a) Landlord has theretofore delivered vacant and exclusive possession of the New Premises to Tenant in accordance with the terms of this Section 18.1, and (b) in no event shall Tenant be required to so vacate the Old Premises prior to the Anticipated Relocation Date (the date that Tenant is required to so vacate the Old Premises being referred to herein as the “Relocation Date”); provided, however, the provisions of Article 24 hereof shall be applicable, mutatis mutandis, in the event that Tenant shall fail to so vacate the Old Premises by the Relocation

 

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Date, (ii) Tenant shall not be required to remove any Alterations from the Old Premises by virtue of Landlord’s exercise of the Relocation Option, (iii) Landlord shall reimburse Tenant for any reasonable moving expenses and for any other reasonable costs and expenses incurred by Tenant in so relocating to the New Premises from the Old Premises (including, without limitation, any reasonable cost and expenses incurred by Tenant in connection with updating Tenant’s stationary and/or business cards), within thirty (30) days after Tenant’s request therefor and Tenant’s submission to Landlord of reasonable supporting documentation therefor and (iv) from and after the Relocation Date, all references to the Premises herein shall mean the New Premises rather than the Old Premises.

(E) If the Commencement Date shall not have occurred or be deemed to have occurred prior to the Relocation Effective Notice Delivery Date, then from and after the Relocation Effective Notice Delivery Date, (i) all references to the Premises herein shall mean the New Premises rather than the Old Premises, (ii) the “Commencement Date” shall be deemed to mean the later to occur of (a) July 19, 2024 and (b) the date that Landlord delivers vacant and exclusive possession of the New Premises to Tenant with Landlord’s Relocation Work Substantially Complete and otherwise in broom-clean condition, (iii) the “Delivery Outside Date” shall be deemed to mean the date that shall be two hundred forty (240) days following the date on which the permits required to commence Landlord’s Relocation Work have been issued by the applicable Governmental Authority, as such date shall be delayed by periods of any Unavoidable Delay not to exceed ninety (90) days in the aggregate and/or periods of any Tenant Work Delays and (iv) the “Delivery Termination Outside Date” shall be deemed to mean the one hundred twentieth (120th) day following the Delivery Outside Date, as such date may be delayed by periods of any Unavoidable Delay not to exceed ninety (90) days in the aggregate and/or periods of any Tenant Work Delays.

Article 19

DEFAULT

19.1 Events of Default.

The term “Event of Default” shall mean the occurrence of any of the following events:

(A) Tenant fails to pay any installment of Fixed Rent when due and such failure continues for five (5) Business Days after the date that Landlord gives notice of such failure to Tenant; provided, however, that if (x) Tenant fails to pay any installment of Fixed Rent when due, (y) Tenant has theretofore failed to pay at least three (3) installments of Fixed Rent when due during the immediately preceding period of twelve (12) months, and (z) Landlord has theretofore given Tenant notice of Tenant’s aforesaid failure to pay when due at least three (3) installments of Fixed Rent during such period of twelve (12) months, then Tenant’s failure to pay such installment of Fixed Rent shall constitute an Event of Default (without Landlord’s being required to first give Tenant notice of such failure and an opportunity to cure such failure, as aforesaid);

 

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(B) Tenant fails to pay any installment of Rental (other than Fixed Rent) when due and such failure continues for five (5) Business Days after the date that Landlord gives notice of such failure to Tenant;

(C) a Permitted Party’s interest under the applicable Occupancy Agreement devolves upon or passes to any other Person, whether by operation of law or otherwise, except as expressly permitted under Article 17 hereof, and such Transfer is not reversed within ten (10) days after the date that such Transfer occurs;

(D) Tenant defaults in respect of Tenant’s obligations under Section 4.11 hereof, and such default continues for more than three (3) Business Days after Landlord gives Tenant notice thereof;

(E) Tenant defaults in respect of Tenant’s obligations under Section 7.5(A)(4) hereof, and such default continues for more than five (5) Business Days after Landlord gives Tenant notice thereof;

(F) if (i) Tenant shall deliver a Letter of Credit, (ii) Landlord presents the Letter of Credit for payment in accordance with the terms hereof, (iii) the issuer thereof fails to make payment thereon in accordance with the terms thereof, and (iv) either Tenant or such issuer fails to make such payment to Landlord within two (2) Business Days after the date that Landlord gives Tenant notice of such failure of such issuer;

(G) if Tenant fails to provide Landlord with a replacement Letter of Credit or post a cash security deposit after Landlord presents the Letter of Credit for payment to apply the proceeds thereof after the occurrence of an Event of Default as provided in Section 23.2 hereof within five (5) Business Days after the date that Landlord gives Tenant notice demanding that Tenant provide such replenishment and/or replacement;

(H) an Insolvency Event occurs;

(I) Tenant defaults in the observance or performance of any other covenant of this Lease on Tenant’s part to be observed or performed and Tenant fails to remedy such default within thirty (30) days after Landlord gives Tenant notice thereof, except that if (i) such default cannot be remedied with reasonable diligence during such period of thirty (30) days, (ii) Tenant takes reasonable steps during such period of thirty (30) days to commence Tenant’s remedying of such default, and (iii) Tenant prosecutes diligently Tenant’s remedying of such default to completion, then an Event of Default shall not occur by reason of such default;

(J) the Premises are abandoned; or

(K) an event of default beyond any applicable notice and cure periods occurs and is continuing under the Swing Space License Agreement.

 

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19.2 Termination.

If (1) an Event of Default occurs, and (2) Landlord, at any time thereafter, at Landlord’s option, gives a notice to Tenant stating that this Lease and the Term shall expire and terminate on the third (3rd) Business Day after the date that Landlord gives Tenant such notice, then this Lease and the Term and all rights of Tenant under this Lease shall expire and terminate as of the third (3rd) Business Day after the date that Landlord gives Tenant such notice, and Tenant immediately shall quit and surrender the Premises, but Tenant shall nonetheless remain liable for all of its obligations hereunder, as provided in Article 21 hereof and Article 22 hereof; provided, however, that if the Event of Default derives from an Insolvency Event, then the provisions of Article 20 hereof shall apply. Notwithstanding anything to the contrary contained in this Article 19, in the event of a monetary default by Tenant under this Lease, Landlord retains its right to avail itself of any and all remedies provided for in Section 711(2) of the New York Real Property Actions and Proceedings Law (the “RPAPL”) and, in the event that Landlord elects to avail itself of its rights thereunder, no Event of Default need be declared by Landlord and no notices need be served by Landlord under this Article 19 or this Lease; instead, in such instances, Landlord shall be required to serve upon Tenant only such notice(s) as may be required by said Section 711(2) of the RPAPL, including, without limitation, a statutory demand for rent.

Article 20

TENANT’S INSOLVENCY

20.1 Assignments pursuant to the Bankruptcy Code.

(A) The term “Bankruptcy Code” shall mean 11 U.S.C. Section 101 et seq., or any statute of similar nature and purpose.

(B) If Tenant, Tenant’s trustee or Tenant as debtor-in-possession (each, an “Insolvency Party”) proposes to assign the tenant’s interest hereunder pursuant to the provisions of the Bankruptcy Code to any Person that has made a bona fide offer to accept an assignment of the tenant’s interest under this Lease on terms acceptable to Tenant, then the Insolvency Party shall give to Landlord notice of such proposed assignment no later than twenty (20) days after the date that the Insolvency Party receives such offer, but in any event no later than ten (10) days before the date that the Insolvency Party makes application to a court of competent jurisdiction for authority and approval to consummate such assignment. Such notice given by the Insolvency Party to Landlord shall (a) set forth the name and address of such Person that has made such bona fide offer, (b) set forth all of the terms and conditions of such bona fide offer, and (c) confirm that such Person will provide to Landlord adequate assurance of future performance that conforms with the terms of Section 20.1(D) hereof. Landlord shall have the right to accept an assignment of this Lease upon the same terms and conditions and for the same consideration, if any, as the bona fide offer made by such Person (less any brokerage commissions that would otherwise be payable by the Insolvency Party out of the consideration to be paid by such Person in connection with such assignment of the tenant’s interest under this Lease), by giving notice thereof to the Insolvency Party at any time prior to the effective date of such proposed assignment.

 

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(C) Tenant shall pay to Landlord an amount equal to the reasonable Out-of-Pocket Costs that Landlord incurs in connection with Tenant’s assignment of the tenant’s interest hereunder pursuant to the provisions of the Bankruptcy Code, within thirty (30) days after Landlord’s submission to Tenant of an invoice therefor that contains reasonable supporting documentation for the charges described therein.

(D) A Person that submits a bona fide offer to take by assignment the tenant’s interest under this Lease as described in Section 20.1(B) hereof shall be deemed to have provided Landlord with adequate assurance of future performance only if such Person (a) deposits with Landlord simultaneously with such assignee’s taking by assignment the tenant’s interest under this Lease an amount equal to the then annual Fixed Rent, as security for the faithful performance and observance by such assignee of the tenant’s obligations of this Lease (and such Person gives to Landlord, at least five (5) days prior to the date that the proposed assignment becomes effective, information reasonably satisfactory to Landlord that indicates that such Person has the ability to post such deposit), (b) gives to Landlord, at least five (5) days prior to the date that the proposed assignment becomes effective, such Person’s financial statements, audited by a certified public accountant in accordance with GAAP, for the three (3) fiscal years that immediately precede such assignment, that indicate that such Person has a tangible net worth of at least ten (10) times the then annual Fixed Rent for each of such three (3) years, and (c) gives to Landlord, at least five (5) days prior to the date that the proposed assignment becomes effective, such other information or takes such action that in either case Landlord, in its reasonable judgment, determines is necessary to provide adequate assurance of the performance by such assignee of the obligations of the tenant under this Lease; provided, however, that in no event shall such adequate assurance of future performance be less favorable to Landlord than the assurance contemplated by Section 365(b)(3) of the Bankruptcy Code (notwithstanding that this Lease may not be construed as a lease of real property in a shopping center).

(E) If Tenant’s interest under this Lease is assigned to any Person pursuant to the provisions of the Bankruptcy Code, then any such assignee shall (x) be deemed without further act or deed to have assumed all the obligations of the tenant arising under this Lease from and after the date of such assignment, and (y) execute and deliver to Landlord upon demand an instrument confirming such assumption.

(F) Nothing contained in this Article 20 limits Landlord’s rights against Tenant under Article 17 hereof.

20.2 Replacement Lease.

If (i) Tenant is not the Person that constituted Tenant initially, and (ii) either (I) this Lease is disaffirmed or rejected pursuant to the Bankruptcy Code, or (II) this Lease terminates by reason of occurrence of an Insolvency Event, then, subject to the terms of this Section 20.2, the Persons that constituted Tenant hereunder previously, including, without limitation, the Person that constituted Tenant initially (each such Person that previously constituted Tenant hereunder (but does not then constitute Tenant hereunder), and with respect to which Landlord exercises

 

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Landlord’s rights under this Section 20.2, being referred to herein as a “Predecessor Tenant”) shall (1) pay to Landlord the aggregate Rental that is then due and owing by Tenant to Landlord under this Lease to and including the date of such disaffirmance, rejection or termination, and (2) enter into a new lease, between Landlord, as landlord, and the Predecessor Tenant, as tenant, for the Premises, and for a term commencing on the effective date of such disaffirmance, rejection or termination and ending on the Fixed Expiration Date, at the same Fixed Rent and upon the then executory terms that are contained in this Lease, except that (a) the Predecessor Tenant’s rights under the new lease shall be subject to the possessory rights of Tenant under this Lease and the possessory rights of any Person claiming by, through or under Tenant or by virtue of any statute or of any order of any court, and (b) such new lease shall require all defaults existing under this Lease to be cured by the Predecessor Tenant with reasonable diligence. Landlord shall have the right to require the Predecessor Tenant to execute and deliver such new lease on the terms set forth in this Section 20.2 only by giving notice thereof to Tenant and to the Predecessor Tenant within thirty (30) days after Landlord receives notice of any such disaffirmance or rejection (or, if this Lease terminates by reason of Landlord making an election to do so, then Landlord may exercise such right only by giving such notice to Tenant and the Predecessor Tenant within thirty (30) days after this Lease so terminates). If the Predecessor Tenant defaults in its obligation to enter into said new lease for a period of ten (10) days following Landlord’s request therefor, then, in addition to all other rights and remedies by reason of such default, either at law or in equity, Landlord shall have the same rights and remedies against such Predecessor Tenant as if such Predecessor Tenant had entered into such new lease and such new lease had thereafter been terminated as of the commencement date thereof by reason of such Predecessor Tenant’s default thereunder.

20.3 Insolvency Events.

This Lease shall terminate automatically upon the occurrence of any of the following events:

(A) a Tenant Obligor commences or institutes any case, proceeding or other action (a) seeking relief on its behalf as debtor, or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, or (b) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property; or

(B) a Tenant Obligor makes a general assignment for the benefit of creditors; or

(C) any case, proceeding or other action is commenced or instituted against a Tenant Obligor (a) seeking to have an order for relief entered against it as debtor or to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, or (b) seeking appointment of a receiver, trustee, custodian or

 

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other similar official for it or for all or any substantial part of its property, which in either of such cases (i) results in any such entry of an order for relief, adjudication of bankruptcy or insolvency or such an appointment or the issuance or entry of any other order having a similar effect, and (ii) remains undismissed for a period of ninety (90) days; or

(D) any case, proceeding or other action is commenced or instituted against a Tenant Obligor seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its property which results in the entry of an order for any such relief which is not vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof; or

(E) a Tenant Obligor takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clauses (A), (B), (C), or (D) above; or

(F) a trustee, receiver or other custodian is appointed for any substantial part of a Tenant Obligor’s assets, and such appointment is not vacated or stayed within fifteen (15) Business Days (the events described in this Section 20.3 being collectively referred to herein as “Insolvency Events”).

The term “Tenant Obligor” shall mean (a) Tenant, (b) any Person that comprises Tenant (if Tenant is comprised of more than one (1) Person), (c) any partner in Tenant (if Tenant is a general partnership), (d) any general partner in Tenant (if Tenant is a limited partnership), (e) any Person that has guaranteed all or any part of the obligations of Tenant hereunder, and (f) any Person that previously constituted Tenant hereunder. If this Lease terminates pursuant to this Section 20.3, then (I) Tenant immediately shall quit and surrender the Premises, and (II) Tenant shall nonetheless remain liable for all of its obligations hereunder, as provided in Article 21 hereof and Article 22 hereof.

20.4 Effect of Stay.

Notwithstanding anything to the contrary contained herein, if (i) Landlord’s right to terminate this Lease after the occurrence of an Event of Default, or the termination of this Lease upon the occurrence of an Insolvency Event, is stayed by order of any court having jurisdiction over an Insolvency Event, or by federal or state statute, (ii) the trustee appointed in connection with an Insolvency Event, or Tenant or Tenant as debtor-in-possession, fails to assume Tenant’s obligations under this Lease on or prior to the earliest to occur of (a) the last day of the period prescribed therefor by law, (b) the one hundred twentieth (120th) day after entry of the order for relief, or (c) a date that is otherwise designated by the court, or (iii) said trustee, Tenant or Tenant as debtor-in-possession fails to provide adequate protection of Landlord’s right, title and interest in and to the Premises or adequate assurance of the complete and continuous future performance of Tenant’s obligations under this Lease as provided in Section 20.1(D) hereof, then Landlord, to the extent permitted by law or by leave of the court having jurisdiction over such proceeding, shall have the right, at its election, to terminate this Lease on five (5) Business Days of advance notice to Tenant, Tenant as debtor-in-possession or said trustee, and, upon the expiration of said period of five (5) Business Days, this Lease shall cease and expire as aforesaid and Tenant, Tenant as debtor-in-possession or said trustee shall immediately quit and surrender the Premises as aforesaid.

 

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20.5 Rental for Bankruptcy Purposes.

Notwithstanding anything contained in this Lease to the contrary, all amounts payable by Tenant to or on behalf of Landlord under this Lease, regardless of whether such amounts are expressly denominated as Rental, shall constitute rent for the purposes of Section 502(b)(6) of the Bankruptcy Code, and Tenant’s payment obligations with respect thereto shall constitute obligations to be timely performed pursuant to Section 365(d) of the Bankruptcy Code.

Article 21

REMEDIES AND DAMAGES

21.1 Certain Remedies.

(A) If (x) an Event of Default occurs and this Lease and the Term expires and comes to an end as provided in Article 19 hereof, or (y) this Lease terminates as provided in Section 20.3 hereof, then:

(1) Tenant shall immediately quit and peacefully surrender the Premises to Landlord, and Landlord and its agents may, without prejudice to any other remedy which Landlord may have, (a) re-enter the Premises or any part thereof, without notice, either by summary proceedings, or by any other applicable action or proceeding, or by lawful force (without being liable to indictment, prosecution or damages therefor), (b) repossess the Premises and dispossess Tenant and any other Persons from the Premises, and (c) remove any and all of their property and effects from the Premises; and

(2) Landlord, at Landlord’s option, may relet the whole or any portion or portions of the Premises from time to time, either in the name of Landlord or otherwise, to such tenant or tenants, for such term or terms ending before, on or after the Fixed Expiration Date, at such rental or rentals and upon such other conditions, which may include concessions and free rent periods, as Landlord, in its sole discretion, may determine.

(B) Landlord shall have no obligation to relet the Premises or any part thereof and shall not be liable for refusal or failure to relet the Premises or any part thereof, or, in the event of any such reletting, for refusal or failure to collect any rent due upon any such reletting. Any such refusal or failure on Landlord’s part shall not relieve Tenant of any liability under this Lease or otherwise affect any such liability. Landlord, at Landlord’s option, may make such repairs, replacements, alterations, additions, improvements, decorations and other physical changes in and to the Premises as Landlord, in its sole discretion, considers advisable or necessary in connection with any such reletting or proposed reletting, without relieving Tenant of any liability under this Lease or otherwise affecting any such liability.

 

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(C) In the event of a breach or threatened breach by Tenant, or any Persons claiming by, through or under Tenant, of any term, covenant or condition of this Lease, Landlord shall have the right to (1) enjoin or restrain such breach, (2) invoke any other remedy allowed by law or in equity as if re-entry, summary proceedings and other special remedies were not provided in this Lease for such breach, and (3) seek any declaratory, injunctive or other equitable relief, and specifically enforce this Lease. The right to invoke the remedies hereinbefore set forth are cumulative and nonexclusive and shall not preclude Landlord from invoking any other remedy allowed at law or in equity.

21.2 No Redemption.

Tenant, on its own behalf and on behalf of all Persons claiming by, through or under Tenant, including all creditors, does hereby waive any and all rights which Tenant and all such Persons might have under any present or future law to redeem the Premises, or to re-enter or repossess the Premises, or to restore the operation of this Lease, after (a) Tenant has been dispossessed by a judgment or by warrant of any court or judge, or (b) any re-entry by Landlord, or (c) any expiration or termination of this Lease and the Term, whether such dispossess, re-entry, expiration or termination is by operation of law or pursuant to the provisions of this Lease. The words “re-enter,” “re-entry” and “re-entered” as used in this Lease shall not be deemed to be restricted to their technical legal meanings.

21.3 Calculation of Damages.

(A) If this Lease terminates by reason of the occurrence of an Event of Default, by reason of the occurrence of an Insolvency Event or by operation of law (including, without limitation, a judgment of possession in a summary proceeding), then Tenant shall pay to Landlord, on demand, and Landlord shall be entitled to recover:

(1) all Rental payable under this Lease by Tenant to Landlord (x) to the date that this Lease terminates, or (y) to the date of re-entry upon the Premises by Landlord, as the case may be;

(2) the excess of (a) the Rental for the period which otherwise would have constituted the unexpired portion of the Term, over (b) the net amount, if any, of rents collected under any reletting effected pursuant to the provisions of clause (2) of Section 21.1(A) hereof for any part of such period (such excess being referred to herein as a “Deficiency”), as damages (it being understood that (x) such net amount described in clause (b) above shall be calculated by deducting from the rents collected under any such reletting all of Landlord’s expenses in connection with the termination of this Lease, Landlord’s re-entry upon the Premises and such reletting, including, but not limited to, all repossession costs, brokerage commissions, legal expenses, attorneys’ fees and disbursements, alteration costs, contributions to work and other expenses of preparing the Premises for such reletting, (y) any such Deficiency shall be paid in monthly installments by Tenant on the days specified in this Lease for payment of installments of Fixed Rent or Escalation Rent (as the case may be), and (z) Landlord shall be entitled to recover from Tenant each monthly Deficiency as it arises, and no suit to collect the amount of the Deficiency for any month shall prejudice Landlord’s right to collect the Deficiency for any subsequent month by a similar proceeding); and

 

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(3) regardless of whether Landlord has collected any monthly Deficiency as aforesaid, and in lieu of any further Deficiency, as and for liquidated and agreed final damages, an amount equal to the excess (if any) of (a) the Rental for the period which otherwise would have constituted the unexpired portion of the Term (commencing on the date immediately succeeding the last date with respect to which a Deficiency, if any, was collected), over (b) the then fair and reasonable net effective rental value of the Premises for the same period (which is calculated by (X) deducting from the fair and reasonable rental value of the Premises the expenses that Landlord would reasonably expect to incur in reletting the Premises, including, but not limited to, all repossession costs, brokerage commissions, legal expenses, attorneys’ fees and disbursements, alteration costs, contributions to work and other expenses of preparing the Premises for such reletting, and (Y) taking into account the time period that Landlord would reasonably require to consummate a reletting of the Premises to a new tenant), both discounted to present value at the Base Rate. If, before presentation of proof of such liquidated damages to any court, commission or tribunal, the Premises, or any part thereof, have been relet by Landlord to any Person other than an Affiliate of Landlord for the period which otherwise would have constituted the unexpired portion of the Term, or any part thereof, then the amount of rent reserved upon such reletting shall be deemed, prima facie, to be the fair and reasonable rental value of the Premises (or the applicable part thereof) so relet during the term of the reletting.

(B) If the Premises, or any part thereof, are relet together with other space in the Building, then the rents collected or reserved under any such reletting and the expenses of any such reletting shall be equitably apportioned for the purposes of this Section 21.3. Tenant acknowledges and agrees that in no event shall it be entitled to any rents collected or payable under any reletting, regardless of whether such rents exceed the Rental reserved in this Lease.

(C) Nothing contained in this Article 21 shall be deemed to limit or preclude the recovery by Landlord from Tenant of the maximum amount allowed to be obtained as damages by any applicable statute or rule of law, or of any sums or damages to which Landlord may be lawfully entitled in addition to the damages set forth in this Section 21.3.

Article 22

EXPENSES AND LATE CHARGES

22.1 Landlord’s Costs.

(A) Tenant shall pay to Landlord an amount equal to the reasonable Out-of-Pocket Costs that Landlord incurs in instituting or prosecuting any legal proceeding against Tenant (or any other Person claiming by, through or under Tenant) to the extent that such legal proceeding derives from the occurrence of an Event of Default, together with interest thereon calculated at the Applicable Rate from the date that Landlord incurs such costs, within thirty (30) days after Landlord gives to Tenant an invoice therefor (it being understood that (x) Landlord shall have the

 

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right to collect such amount from Tenant as additional rent to the extent that Landlord incurs such costs during the Term and as damages to the extent that Landlord incurs such costs after the Expiration Date, and (y) the amount that Landlord has the right to collect from Tenant under this Section 22.1(A) shall be adjusted appropriately to reflect the extent to which Landlord is successful in such legal proceeding).

(B) Tenant shall pay to Landlord an amount equal to the reasonable Out-of-Pocket Costs that Landlord incurs in defending successfully against a claim made by Tenant (or any other Person claiming by, through or under Tenant) against Landlord that relates to this Lease in a legal proceeding, together with interest thereon calculated at the Applicable Rate from the date that Landlord incurs such costs, within thirty (30) days after Landlord gives to Tenant an invoice therefor (it being understood that (x) Landlord shall have the right to collect such amount from Tenant as additional rent to the extent that Landlord incurs such costs during the Term and as damages to the extent that Landlord incurs such costs after the Expiration Date, and (y) the amount that Landlord has the right to collect from Tenant under this Section 22.1(B) shall be adjusted appropriately to reflect the extent to which Landlord is successful in defending against such claim).

22.2 Tenant’s Costs.

(A) Landlord shall pay to Tenant an amount equal to the reasonable Out-of-Pocket Costs that Tenant incurs in instituting or prosecuting any legal proceeding against Landlord (or any other Person claiming by, through or under Landlord) to the extent that such legal proceeding derives from the occurrence of a default by Landlord (finally adjudicated as such), together with interest thereon calculated at the Applicable Rate from the date that Tenant incurs such costs, within thirty (30) days after Tenant gives to Landlord an invoice therefor that includes reasonable supporting documentation for the charges set forth therein (it being understood that the amount that Tenant has the right to collect from Landlord under this Section 22.2(A) shall be adjusted appropriately to reflect the extent to which Tenant is successful in such legal proceeding).

(B) Landlord shall pay to Tenant an amount equal to the reasonable Out-of-Pocket Costs that Tenant incurs in defending successfully against a claim made by Landlord (or any other Person claiming by, through or under Landlord) against Tenant that relates to this Lease in a legal proceeding, together with interest thereon calculated at the Applicable Rate from the date that Tenant incurs such costs, within thirty (30) days after Tenant gives to Landlord an invoice therefor (it being understood that the amount that Tenant has the right to collect from Landlord under this Section 22.2(B) shall be adjusted appropriately to reflect the extent to which Tenant is successful in defending such claim).

22.3 Interest on Late Payments.

If Tenant fails to pay any item of Rental on or prior to the tenth (10th) day after the date that such payment is due, then Tenant shall pay to Landlord, in addition to such item of Rental, as a late charge and as additional rent, an amount equal to interest at the Applicable Rate on the amount unpaid, computed from the date such payment was due to and including the date of payment, except that on not more than one (1) occasion in any particular period of twelve (12)

 

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months during the Term, such interest shall not accrue until Landlord has first given Tenant notice of Tenant’s failure to pay the item of Rental and such failure continues for ten (10) days after the date that Landlord gives such notice to Tenant. Nothing contained in this Section 22.3 limits Landlord’s rights and remedies, by operation of law or otherwise, after the occurrence of an Event of Default.

Article 23

SECURITY

23.1 Security Deposit.

Subject to the terms of this Article 23, Tenant, on the date hereof, shall deliver to Landlord, as security for the performance of Tenant’s obligations under this Lease, an unconditional, irrevocable and transferable letter of credit (the “Letter of Credit”) that (i) is in an amount equal to Four Hundred Eighty-Six Thousand Eight Hundred Sixty-One and 33/100 Dollars ($486,861.33) (the “Security Amount”), (ii) is in a form that is reasonably satisfactory to Landlord, (iii) is issued for a term of not less than one (1) year, (iv) is issued for the account of Landlord, (v) automatically renews for periods of not less than one (1) year unless the issuer thereof otherwise advises Landlord on or prior to the thirtieth (30th) day before the applicable expiration date, (vi) allows Landlord the right to draw thereon in part from time to time or in full and (vii) is issued by, and drawn on, a bank that (a) has a Standard & Poor’s rating of at least “A-” (or, if Standard & Poor’s hereafter ceases the publication of ratings for banks, a rating of a reputable rating agency as reasonably designated by Landlord that most closely approximates a Standard & Poor’s rating of “A” as of the date hereof) or such other rating approved by Landlord in Landlord’s sole discretion, (b) has not been declared insolvent or placed into receivership in either case by Federal Deposit Insurance Corporation or another governmental entity that has regulatory authority over such bank, and (c) that either (I) has an office in the city where the Building is located at which Landlord can present the Letter of Credit for payment, or (II) has an office in the United States and allows Landlord to draw upon the Letter of Credit without presenting a draft in person (such as, for example, by submitting a draft by fax or overnight delivery service) (the aforesaid requirements for the bank that issues the Letter of Credit being collectively referred to herein as the “Bank Requirements”). As of the date hereof, TD Bank, N.A. shall be deemed to satisfy the Bank Requirements; it being understood, however, that if at any time during the Term, (x) the Standard & Poor’s rating for TD Bank, N.A. falls below “BBB+” (or, if Standard & Poor’s hereafter ceases the publication of ratings for banks, the rating of a reputable rating agency as reasonably designated by Landlord that most closely approximates a Standard & Poor’s rating for TD Bank, N.A. falls below “BBB+”), or (y) TD Bank, N.A. fails to satisfy any of the other Bank Requirements, then TD Bank, N.A. shall no longer be deemed to satisfy the Bank Requirements, and Tenant shall be obligated to deliver a replacement Letter of Credit, issued by a bank that satisfies the Bank Requirements (and otherwise meets the requirements set forth in this Section 23.1), subject to and in accordance with the provisions of Section 23.2 hereof

 

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23.2 Landlord’s Rights.

If (a) an Event of Default occurs and is continuing, (b) an Insolvency Event occurs, (c) Tenant fails to vacate the Premises and surrender possession thereof in accordance with the terms of this Lease upon the Expiration Date, (d) Tenant fails to vacate the Licensed Area and surrender possession thereof in accordance with the terms of the Swing Space License Agreement upon the License Expiration Date (as such term is defined in the Swing Space License Agreement) or (e) if this Lease terminates by operation of law as a result of an Event of Default or Landlord electing to avail its rights under Section 711(2) of the RPAPL(including, without limitation, a judgment of possession in a summary proceeding), then Landlord may present the Letter of Credit for payment and apply the proceeds thereof (i) to the payment of any Rental and/or the License fee under the Swing Space License Agreement that then remains unpaid, or (ii) to any damages to which Landlord is entitled hereunder and that Landlord incurs by reason of any of the events described in clauses (a) through (e) of this Section 23.2. If Landlord so applies any part of the proceeds of the Letter of Credit, then Tenant, within five (5) Business Days after Landlord’s demand, shall (x) deliver Landlord a cash security deposit in the amount of the proceeds of the Letter of Credit so applied or (y) provide Landlord with a replacement Letter of Credit so that Landlord has the full amount of the required security at all times during the Term; it being agreed, however, that if Tenant shall deliver a cash security deposit under clause (x) hereof, Tenant shall provide a replacement Letter of Credit to Landlord within thirty (30) days thereafter and any unapplied portion of such cash security deposit shall be promptly returned to Tenant following delivery of a replacement Letter of Credit. If at any time the issuer of the Letter of Credit does not meet the Bank Requirements (it being understood that if Standard & Poor’s hereafter ceases the publication of ratings for banks, the parties, in determining whether the issuer of the Letter of Credit meets the Bank Requirements, shall substitute for the rating of Standard & Poor’s a rating of a reputable rating agency as reasonably designated by Landlord that most closely approximates a Standard & Poor’s rating of “A” as of the date hereof), then Tenant shall deliver to Landlord a replacement Letter of Credit, issued by a bank that satisfies the Bank Requirements (and otherwise meets the requirements set forth in Section 23.1 hereof) within fifteen (15) Business Days after the date that Landlord gives Tenant notice of such issuer’s failure to satisfy the Bank Requirements. If Tenant fails to deliver to Landlord such replacement Letter of Credit within such period of fifteen (15) Business Days, then Landlord, in addition to Landlord’s other rights at law, in equity or as otherwise set forth herein, shall have the right to present the Letter of Credit for payment and retain the proceeds thereof as security in lieu of the Letter of Credit (it being agreed that Landlord shall have the right to use, apply and transfer such proceeds in the manner described in this Article 23). Tenant shall reimburse Landlord for any reasonable costs that Landlord incurs in so presenting the Letter of Credit for payment within thirty (30) days after Landlord submits to Tenant an invoice therefor. Nothing contained in this Section 23.2 limits Landlord’s rights or remedies in equity, at law, or as otherwise set forth herein.

 

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23.3 Return of Security.

Landlord shall return to Tenant the Letter of Credit (to the extent not theretofore presented for payment in accordance with the terms hereof) promptly (and in any event, within sixty (60) days) after Tenant performs all of the obligations of Tenant hereunder upon the expiration or earlier termination of the Term. Landlord’s obligations under this Section 23.3 shall survive the expiration or earlier termination of the Term.

23.4 Transfer of Letter of Credit.

Tenant, at Tenant’s expense, shall cause the issuer of the Letter of Credit to amend the Letter of Credit to name a new beneficiary thereunder in connection with Landlord’s assignment of Landlord’s rights under this Lease to a Person that succeeds to Landlord’s interest in the Real Property, promptly after Landlord’s request from time to time.

23.5 Renewal of Letter of Credit.

If Tenant fails to provide Landlord with a replacement Letter of Credit that complies with the requirements of this Article 23 on or prior to the thirtieth (30th) day before the expiration date of the Letter of Credit that is then expiring, then Landlord may present the Letter of Credit for payment and retain the proceeds thereof as security in lieu of the Letter of Credit (it being agreed that Landlord shall have the right to use, apply and transfer such proceeds in the manner described in this Article 23). Tenant shall reimburse Landlord for any reasonable costs that Landlord incurs in so presenting the Letter of Credit for payment within thirty (30) days after Landlord submits to Tenant an invoice therefor. Landlord also shall have the right to so present the Letter of Credit and so retain the proceeds thereof as security in lieu of the Letter of Credit at any time from and after the thirtieth (30th) day before the Expiration Date if the Letter of Credit expires earlier than the ninetieth (90th) day after the Expiration Date.

Article 24

END OF TERM

24.1 End of Term.

On the Expiration Date, Tenant shall quit and surrender to Landlord the Premises, vacant, broom-clean, in good order and condition, ordinary wear and tear and damage for which Tenant is not responsible under the terms of this Lease excepted, and otherwise in compliance with the provisions hereof. Tenant expressly waives, for itself and for any Person claiming by, through or under Tenant, any rights which Tenant or any such Person may have under the provisions of Section 2201 of the New York Civil Practice Law and Rules and of any successor law of like import then in force in connection with any holdover summary proceedings that Landlord institutes to enforce the provisions of this Article 24.

 

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24.2 Holdover.

If vacant and exclusive possession of the Premises is not surrendered to Landlord on the Expiration Date, then Tenant shall pay to Landlord on account of use and occupancy of the Premises, for each month (or any portion thereof) during which Tenant (or a Person claiming by, through or under Tenant) holds over in the Premises after the Expiration Date, an amount equal to one hundred fifty percent (150%) of the aggregate Rental that was payable under this Lease during the last month of the Term, except that (i) Tenant shall pay an amount equal to one hundred seventy-five percent (175%) of the aggregate Rental that was payable under this Lease during the last month of the Term for the period commencing on the thirty-first (31st) day of such holdover period and (ii) Tenant shall pay an amount equal to two hundred percent (200%) of the aggregate Rental that was payable under this Lease during the last month of the Term for the period commencing on the sixty-first (61st) day of such holdover period. Landlord’s right to collect such amount from Tenant for use and occupancy shall be in addition to any other rights or remedies that Landlord may have hereunder or at law or in equity (including, without limitation, Landlord’s right to recover Landlord’s damages from Tenant that derive from vacant and exclusive possession of the Premises not being surrendered to Landlord on the Expiration Date); provided, however, that Landlord shall not have the right to recover any consequential damages from Tenant unless Tenant (or a Person claiming by, through or under Tenant) holds over in possession of the Premises for more than sixty (60) days after the Expiration Date. Nothing contained in this Section 24.2 shall permit Tenant to retain possession of the Premises after the Expiration Date or limit in any manner Landlord’s right to regain possession of the Premises, through summary proceedings or otherwise. Landlord’s acceptance of any payments from Tenant after the Expiration Date shall be deemed to be on account of the amount to be paid by Tenant in accordance with the provisions of this Article 24.

Article 25

NO WAIVER

25.1 No Surrender.

(A) Landlord shall be deemed to have accepted a surrender of the Premises only if Landlord executes and delivers to Tenant a written instrument providing expressly therefor.

(B) No employee of Landlord or of Landlord’s agents shall have any power to accept the keys to the Premises prior to the Expiration Date. The delivery of such keys to any employee of Landlord or of Landlord’s agents shall not operate as a termination of this Lease or a surrender of the Premises. If Tenant at any time desires to have Landlord sublet the Premises on Tenant’s account, then Landlord or Landlord’s agents are authorized to receive said keys for such purpose without releasing Tenant from any of Tenant’s obligations under this Lease.

25.2 No Waiver by Landlord.

(A) Landlord’s failure to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of this Lease, or any of the Rules, shall not be deemed to be a waiver thereof. The receipt by Landlord of Rental with knowledge of the breach of any covenant of this Lease by Tenant shall not be deemed a waiver of such breach.

 

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(B) No payment by Tenant or receipt by Landlord of a lesser amount than the monthly Fixed Rent or other item of Rental herein stipulated shall be deemed to be other than on account of the earliest stipulated Fixed Rent or other item of Rental, or as Landlord may elect to apply such payment. No endorsement or statement on any check or any letter accompanying any check or payment as Fixed Rent or other item of Rental shall be deemed to be an accord and satisfaction. Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Fixed Rent or other item of Rental or to pursue any other remedy provided in this Lease or otherwise available to Landlord at law or in equity.

(C) Landlord’s failure during the Term to prepare and deliver any invoices, and Landlord’s failure during the Term to make a demand for payment under any of the provisions of this Lease, shall not in any way be deemed to be a waiver of, or cause Landlord to forfeit or surrender, its rights to collect any item of Rental which may have become due during the Term (except to the extent otherwise expressly set forth herein). Tenant’s liability for such amounts shall survive the expiration or earlier termination of this Lease (except to the extent otherwise expressly set forth herein).

(D) No provision of this Lease shall be deemed to have been waived by Landlord, unless such waiver is in writing signed by Landlord.

25.3 No Waiver by Tenant.

(A) Tenant’s failure to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of this Lease on Landlord’s part to be performed, shall not be deemed to be a waiver. The payment by Tenant of any item of Rental or performance of any obligation of Tenant hereunder with knowledge of any breach by Landlord of any covenant of this Lease shall not be deemed a waiver of such breach, nor shall it prejudice Tenant’s right to pursue any remedy against Landlord in this Lease provided or otherwise available to Tenant in law or in equity. No provision of this Lease shall be deemed to have been waived by Tenant, unless such waiver is in writing signed by Tenant.

(B) Tenant’s failure during the Term to make a demand for payment under any of the provisions of this Lease shall not in any way be deemed to be a waiver of, or cause Tenant to forfeit or surrender, its rights to collect any amount which may have become due during the Term (except to the extent otherwise expressly set forth herein). Landlord’s liability for such amounts shall survive the expiration or earlier termination of this Lease (except to the extent otherwise expressly set forth herein).

 

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Article 26

JURISDICTION

26.1 Governing Law.

This Lease shall be construed and enforced in accordance with the laws of the State of New York.

26.2 Submission to Jurisdiction.

Tenant hereby (a) irrevocably consents and submits to the jurisdiction of any federal, state, county or municipal court sitting in the State of New York for purposes of any action or proceeding brought therein by Landlord against Tenant concerning any matters relating to this Lease, (b) irrevocably waives all objections as to venue and any and all rights it may have to seek a change of venue with respect to any such action or proceedings, (c) agrees that the laws of the State of New York shall govern in any such action or proceeding and waives any defense to any action or proceeding granted by the laws of any other country or jurisdiction unless such defense is also allowed by the laws of the State of New York, and (d) agrees that any final unappealable judgment rendered against it in any such action or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or in any other manner provided by law. Tenant further agrees that any action or proceeding by Tenant against Landlord concerning any matters arising out of or in any way relating to this Lease shall be brought only in the State of New York, County of New York.

26.3 Waiver of Trial by Jury; Counterclaims.

(A) Landlord and Tenant hereby waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant’s use or occupancy of the Premises, or for the enforcement of any remedy under any statute, emergency or otherwise.

(B) If Landlord commences any summary proceeding against Tenant, then Tenant shall not interpose any counterclaim of whatever nature or description in any such proceeding (except to the extent that applicable law precludes Tenant from asserting such counterclaim in another proceeding), and shall not seek to consolidate such proceeding with any other action which may have been or will be brought in any other court by Tenant. Nothing contained in this Section 26.3(B) limits Tenant’s right to assert claims against Landlord in a separate proceeding.

 

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Article 27

NOTICES

27.1 Addresses; Manner of Delivery.

Except as otherwise expressly provided in this Lease, any bills, statements, consents, notices, demands, requests or other communications that a party desires or is required to give to the other party under this Lease shall (1) be in writing, (2) be deemed sufficiently given if (a) delivered by hand (against a signed receipt), (b) sent by registered or certified mail (return receipt requested), or (c) sent by a nationally-recognized overnight courier (with verification of delivery), and (3) be addressed in each case:

if to Tenant, at:

Prior to the Commencement Date:

575 Madison Avenue, 10th Floor

New York, New York 10022

Attn.: Zachary Prensky, CEO

From and after the Commencement Date:

One Penn Plaza

New York, New York 10119

Attn.: Zachary Prensky, CEO

In either case, with a copy of any notice of default to:

Fox Rothschild LLP

101 Park Avenue, 17th Floor

New York, NY 10178

Attn.: Scott A. Lavin, Esq.

if to Landlord, at:

c/o Vornado Office Management LLC

888 Seventh Avenue

New York, New York 10019

Attn.: Executive Vice President, Co-Head of Real Estate

with a copy to:

 

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c/o Vornado Realty Trust

210 Route 4 East

Paramus, New Jersey 07652

Attn.: President and Chief Financial Officer

or to such other address or addresses as Landlord or Tenant may designate from time to time on at least ten (10) Business Days of advance notice given to the other in accordance with the provisions of this Article 27. Any such bill, statement, consent, notice, demand, request, or other communication shall be deemed to have been given (x) on the date that it is hand delivered, as aforesaid, or (y) three (3) Business Days after the date that it is mailed, as aforesaid, or (z) on the first (1st) Business Day after the date that it is sent by a nationally-recognized overnight courier, as aforesaid. Any such bills, statements, consents, notices, demands, requests or other communications that the Person that is the property manager for the Building gives to Tenant in accordance with the terms of this Article 27 shall be deemed to have been given by Landlord (except that Landlord, at any time and from time to time, shall have the right to terminate or suspend such property manager’s right to give such bills, statements, consents, notices, demands, requests or other communications to Tenant by giving not less than five (5) days of advance notice thereof to Tenant). Notices hereunder may also be given on behalf of either party by its attorneys.

Article 28

BROKERAGE

28.1 Broker.

Landlord and Tenant each represent to the other that it has not dealt with any broker, finder or salesperson in connection with this Lease other than Newmark Company Real Estate, Inc. d/b/a Newmark (the “Broker”) and Jones Lang LaSalle Brokerage Inc. (the “Broker’s Cooperating Broker”). Landlord shall pay the Broker any commission or other compensation due in connection with this Lease pursuant to the terms of a separate written agreement between Landlord and the Broker. Landlord and Tenant acknowledge that the Broker shall pay the Broker’s Cooperating Broker any commission or other compensation due in connection with this Lease pursuant to the terms of a separate written agreement between the Broker and the Broker’s Cooperating Broker.

Article 29

INDEMNITY

29.1 Tenant’s Indemnification of the Landlord Indemnitees.

(A) Subject to the terms of Section 14.3 and this Section 29.1, Tenant shall, to the fullest extent permitted by law, indemnify the Landlord Indemnitees, and hold the Landlord Indemnitees harmless, from and against, all losses, damages, liabilities, costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) that are incurred by a Landlord Indemnitee and that derive from a claim (a “Claim Against Landlord”) made by a third party against such Landlord Indemnitee arising from or alleged to arise from:

 

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(1) a wrongful act or wrongful omission of any Tenant Indemnitee during the Term (including, without limitation, claims that derive from a Permitted Party’s conducting such Permitted Party’s business in the Premises) (it being understood that Tenant shall not have responsibility under this clause (1) for any wrongful act or wrongful omission of a Recapture Subtenant);

(2) an event or circumstance that occurs during the Term in the Premises or in another portion of the Building with respect to which Tenant has exclusive use pursuant to the terms hereof (subject, however, to Landlord’s rights of access under Article 9 hereof) (it being understood that Tenant’s liability under this clause (2) shall not apply to the extent that Landlord exercises Landlord’s rights under Section 17.3 hereof with respect to the Premises);

(3) the breach of any covenant to be performed by Tenant hereunder;

(4) a misrepresentation made by Tenant hereunder (including, without limitation, a misrepresentation of Tenant under Section 28.1 hereof);

(5) a Person with whom a Permitted Party has dealt making a claim for a leasing commission or other similar compensation in connection with a Transfer; or

(6) Landlord’s cooperating with Tenant as contemplated by Section 7.4(A) hereof.

Tenant shall not be required to indemnify the Landlord Indemnitees, and hold the Landlord Indemnitees harmless, in either case as aforesaid, to the extent that it is finally determined that the negligence or willful misconduct of a Landlord Indemnitee contributed to the loss or damage sustained by the Person making the Claim Against Landlord. Nothing contained in this Section 29.1 limits the provisions of Section 31.19 hereof.

(B) The term “Landlord Indemnitees” shall mean, collectively, Landlord, Landlord’s managing agent, each Lessor, each Mortgagee, the Condominium Board and their respective partners, members, managers, officers, directors, employees, trustees and agents.

(C) The term “Tenant Indemnitees” shall mean each Permitted Party and their respective partners, members, managers, officers, directors, employees, trustees and agents.

(D) The parties intend that the Landlord Indemnitees (other than Landlord) shall be third-party beneficiaries of this Section 29.1.

29.2 Landlord’s Indemnification of the Tenant Indemnitees.

(A) Subject to the terms of Section 14.3 and this Section 29.2, Landlord shall, to the fullest extent permitted by law, indemnify the Tenant Indemnitees, and hold the Tenant Indemnitees harmless, from and against, all losses, damages, liabilities, costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) that are incurred by a Tenant Indemnitee and that derive from a claim (a “Claim Against Tenant”) made by a third party against such Tenant Indemnitee arising from or alleged to arise from:

 

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(1) the breach of any covenant to be performed by Landlord hereunder;

(2) a misrepresentation made by Landlord hereunder (including, without limitation, a misrepresentation of Landlord under Section 28.1 hereof);

(3) Landlord’s failure to pay the Broker a commission or other compensation in connection herewith; or

(4) a wrongful act or wrongful omission of any Landlord Indemnitee (including, without limitation, a wrongful act or wrongful omission of the Person that has the right to occupy the Premises by virtue of Landlord’s exercising Landlord’s rights under Section 17.3 hereof).

Landlord shall not be required to indemnify the Tenant Indemnitees, and hold the Tenant Indemnitees harmless, in either case as aforesaid, to the extent that it is finally determined that the negligence or willful misconduct of a Tenant Indemnitee contributed to the loss or damage sustained by the Person making the Claim Against Tenant.

(B) The parties intend that the Tenant Indemnitees (other than Tenant) shall constitute third-party beneficiaries of this Section 29.2.

29.3 Indemnification Procedure.

(A) If at any time a Claim Against Tenant is made or threatened against a Tenant Indemnitee, or a Claim Against Landlord is made or threatened against a Landlord Indemnitee, then the Person entitled to indemnity under this Article 29 (the “Indemnitee”) shall give to the other party (the “Indemnitor”) notice of such Claim Against Tenant or such Claim Against Landlord, as the case may be (the “Claim”); provided, however, that the Indemnitee’s failure to provide such notice shall not impair the Indemnitee’s rights to indemnity as provided in this Article 29 except to the extent that the Indemnitor is prejudiced materially thereby. Such notice shall state the basis for the Claim and the amount thereof (to the extent such amount is determinable at the time that such notice is given).

(B) The Indemnitor shall have the right to defend against the Claim using attorneys that the Indemnitor designates and that the Indemnitee approves (it being understood that (I) the Indemnitee shall not unreasonably withhold, condition or delay such approval, (II) the Indemnitee shall be deemed to have approved such attorneys if the Indemnitee fails to respond within ten (10) days to the Indemnitor’s request for approval, and (III) the attorneys designated by the Indemnitor’s insurer shall be deemed approved by the Indemnitee for purposes hereof). The Indemnitor’s failure to notify the Indemnitee of the Indemnitor’s election to defend against the Claim within thirty (30) days after the Indemnitee gives such notice to the Indemnitor shall be deemed a waiver by the Indemnitor of its aforesaid right to defend against the Claim.

 

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(C) Subject to the terms of this Section 29.3(C), if the Indemnitor elects to defend against the Claim pursuant to Section 29.3(B) hereof, then the Indemnitee may participate, at the Indemnitee’s expense, in defending against the Claim. The Indemnitor shall have the right to control the defense against the Claim (and, accordingly, the Indemnitee shall cause its counsel to act accordingly). If there exists a conflict between the interests of the Indemnitor and the interests of the Indemnitee, then the Indemnitor shall pay the reasonable fees and disbursements of any counsel that the Indemnitee retains in so participating in the defense against the Claim. Except as otherwise provided in this Section 29.3(C), the Indemnitor shall not be required to pay the costs that Indemnitee otherwise incurs in engaging counsel to consult with Indemnitee in connection with the Claim.

(D) If the Claim is a Claim Against Landlord, then Landlord shall cooperate reasonably with Tenant in connection therewith. If the Claim is a Claim Against Tenant, then Tenant shall cooperate reasonably with Landlord in connection therewith.

(E) The Indemnitor shall not consent to the entry of any judgment or award regarding the Claim, or enter into any settlement regarding the Claim, except in either case with the prior approval of the Indemnitee (any such entry of any judgment or award regarding a Claim to which the Indemnitor consents, or any such settlement regarding a claim to which the Indemnitor agrees, being referred to herein as a “Settlement”). The Indemnitee shall not unreasonably withhold, condition or delay the Indemnitee’s approval of a proposed Settlement, provided that (I) the Indemnitor pays, in cash, to the Person making the Claim, the entire amount of the Settlement contemporaneously with the Indemnitee’s approval thereof (so that neither the Indemnitor nor the Indemnitee have any material obligations regarding the applicable Claim that remain executory from and after the consummation of the Settlement), or (II) the Person making the Claim releases the Indemnitee from any obligations owed to such Person pursuant to such Settlement that remain executory after the consummation thereof). If (x) the terms of the Settlement do not provide for the Indemnitor’s making payment, in cash, to the Person making the Claim, the entire amount of the Settlement, contemporaneously with the Indemnitee’s approval thereof (so that either the Indemnitor or the Indemnitee have any material obligations regarding the applicable Claim that remain executory from and after the consummation of the Settlement), (y) the Person making the Claim does not release the Indemnitee from any obligations owed to such Person pursuant to such Settlement that remain executory after the consummation thereof, and (z) the Indemnitee does not approve the proposed Settlement, then the Indemnitor’s aggregate liability under this Article 29 for the Claim (including, without limitation, the costs incurred by the Indemnitor for legal costs and other costs of defense) shall not exceed an amount equal to the sum of (i) the aggregate legal costs and defense costs that the Indemnitor incurred to the date that the Indemnitor proposes such Settlement, (ii) the amount that the Indemnitor would have otherwise paid to the Person making the applicable Claim under the terms of the proposed Settlement, and (iii) the aggregate legal costs and defense costs that the Indemnitor would have reasonably expected to incur in consummating the proposed Settlement.

(F) If the Indemnitor does not elect to defend against the Claim as contemplated by this Section 29.3, then the Indemnitee may defend against, or settle, such claim, action or proceeding in any manner that the Indemnitee deems appropriate, and the Indemnitor shall be liable for the Claim to the extent provided in this Article 29.

 

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(G) The provisions of this Article 29 shall survive the Expiration Date.

Article 30

LANDLORD’S CONSENTS; ARBITRATION

30.1 Certain Limitations.

Subject to the terms of Section 30.2 hereof, Tenant hereby waives any claim against Landlord for Landlord’s unreasonably withholding, unreasonably conditioning or unreasonably delaying any consent or approval requested by Tenant in cases where Landlord expressly agreed herein not to unreasonably withhold, unreasonably condition or unreasonably delay such consent or approval. If there is a determination that such consent or approval has been unreasonably withheld, unreasonably conditioned or unreasonably delayed, then (1) the requested consent or approval shall be deemed to have been granted, and (2) Landlord shall have no liability to Tenant for its refusal or failure to give such consent or approval. Tenant’s sole remedy for Landlord’s unreasonably withholding, conditioning or delaying consent or approval shall be as provided in this Article 30.

30.2 Expedited Arbitration.

(A) If (i) this Lease obligates Landlord to not unreasonably withhold, condition or delay Landlord’s consent or approval for a particular matter, (ii) Landlord withholds, delays or conditions its consent or approval for such matter, and (iii) Tenant believes that Landlord did so unreasonably, then Tenant shall have the right to submit the issue of whether Landlord unreasonably withheld, delayed or conditioned such consent or approval to an Expedited Arbitration Proceeding only by giving notice thereof to Landlord on or prior to the thirtieth (30th) day after the date that Landlord denied or conditioned such consent or approval, or the thirtieth (30th) day after the date that Tenant claims that Landlord’s delaying such consent or approval first became unreasonable, as the case may be.

(B) The sole decision to be made in the Expedited Arbitration Proceeding under Section 30.2(A) hereof shall be whether Landlord unreasonably withheld, delayed or conditioned its consent with respect to the particular matter being arbitrated. If the decision in the Expedited Arbitration Proceeding is that Landlord unreasonably withheld, conditioned, or delayed consent with respect to such matter, then (i) Landlord shall be deemed to have consented to such matter, and (ii) Landlord shall execute and deliver documentation that is reasonably requested by Tenant to evidence such consent.

 

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(C) The term “Expedited Arbitration Proceeding” shall mean a binding arbitration proceeding conducted in The City of New York under the Commercial Arbitration Rules of the American Arbitration Association (or its successor) and administered pursuant to the Expedited Procedures provisions thereof; provided, however, that with respect to any such arbitration, (i) the list of arbitrators referred to in Section E-4(b) shall be returned within five (5) Business Days from the date of mailing; (ii) the parties shall notify the American Arbitration Association (or its successor) by telephone, within four (4) Business Days, of any objections to the arbitrator appointed and, subject to clause (vii) below, shall have no right to object if the arbitrator so appointed was on the list submitted by the American Arbitration Association (or its successor) and was not objected to in accordance with Section E-4(c) as modified by clause (i) above; (iii) the notification of the hearing referred to in Section E-7 shall be four (4) Business Days in advance of the hearing; (iv) the hearing shall be held within seven (7) Business Days after the appointment of the arbitrator; (v) the arbitrator shall have no right to award damages or vary, modify or waive any provision of this Lease; (vi) the decision of the arbitrator shall be final and binding on the parties; and (vii) the arbitrator shall not have been employed by either party (or their respective Affiliates) during the period of three (3) years prior to the date of the Expedited Arbitration Proceeding. The arbitrator shall determine the extent to which each party is successful in such Expedited Arbitration Proceeding in addition to rendering a decision on the dispute submitted. If the arbitrator determines that one (1) party is entirely unsuccessful, then such party shall pay all of the fees of such arbitrator. If the arbitrator determines that both parties are partially successful, then each party shall be responsible for such arbitrator’s fees only to the extent such party is unsuccessful (e.g., if Landlord is eighty percent (80%) successful and Tenant is twenty percent (20%) successful, then Landlord shall be responsible for twenty percent (20%) of such arbitrator’s fees and Tenant shall be responsible for eighty percent (80%) of such arbitrator’s fees).

(D) Nothing contained in this Section 30.2 impairs other sections of this Lease that provide for the submission of particular matters to an Expedited Arbitration Proceeding (in which case the provisions of Section 30.2(C) shall apply in respect thereof but the provisions of Section 30.2(A) and Section 30.2(B) shall not apply, except to the extent that a particular dispute involves Tenant’s contention that Landlord unreasonably withheld, conditioned or delayed a consent or approval for a particular matter).

Article 31

ADDITIONAL PROVISIONS

31.1 Tenant’s Property Delivered to Building Employees.

Any Building employee to whom any property is entrusted by or on behalf of Tenant shall be deemed to be acting as Tenant’s agent with respect to such property.

31.2 Not Binding Until Execution.

This Lease shall not be binding upon Landlord or Tenant unless and until Landlord and Tenant have executed and unconditionally delivered a fully executed counterpart of this Lease to each other.

 

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31.3 No Third Party Beneficiaries.

Landlord and Tenant hereby acknowledge that they do not intend for any other Person to constitute a third-party beneficiary hereof, except to the extent otherwise set forth herein.

31.4 Extent of Landlord’s Liability.

(A) The obligations of Landlord under this Lease shall not be binding upon the Person that constitutes Landlord initially after the sale, conveyance, assignment or transfer by such Person of its interest in the Building or the Real Property, as the case may be (or upon any other Person that constitutes Landlord after the sale, conveyance, assignment or transfer by such Person of its interest in the Building or the Real Property, as the case may be), to the extent such obligations accrue from and after the date of such sale, conveyance, assignment or transfer.

(B) The members, managers, partners, shareholders, directors, officers and principals, direct and indirect, comprising Landlord shall not be liable for the performance of Landlord’s obligations under this Lease. Tenant shall look solely to Landlord to enforce Landlord’s obligations hereunder.

(C) The liability of Landlord for Landlord’s obligations under this Lease shall be limited to Landlord’s interest in the Real Property and the proceeds thereof (including, without limitation, proceeds of a sale or refinancing of Landlord’s interest in the Real Property, casualty insurance proceeds, and condemnation awards). Tenant shall not look to any property or assets of Landlord (other than Landlord’s interest in the Real Property and such proceeds thereof) in seeking either to enforce Landlord’s obligations under this Lease or to satisfy a judgment for Landlord’s failure to perform such obligations.

31.5 Extent of Tenant’s Liability.

If Tenant is a corporation, limited partnership, limited liability partnership or limited liability company, then (i) the members, managers, limited partners, shareholders, directors, officers and principals, direct and indirect, comprising Tenant shall not be liable for the performance of Tenant’s obligations under this Lease, and (ii) Landlord shall look solely to Tenant to enforce Tenant’s obligations hereunder. If more than one Person constitutes Tenant hereunder, then all such Persons that constitute Tenant shall have joint and several liability for the obligations of Tenant hereunder.

31.6 Survival.

Subject to the terms hereof, Tenant’s liability for all amounts that are due and payable to Landlord hereunder shall survive the Expiration Date.

 

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31.7 Recording.

Tenant shall not record this Lease. Tenant shall not record a memorandum of this Lease. Landlord shall have the right to record a memorandum of this Lease. If Landlord submits to Tenant a memorandum hereof that is in reasonable form, then Tenant shall execute, acknowledge and deliver such memorandum promptly after Landlord’s submission thereof to Tenant.

31.8 Entire Agreement.

This Lease contains the entire agreement between the parties and supersedes all prior understandings, if any, with respect thereto. This Lease shall not be modified, changed, or supplemented, except by a written instrument executed by both parties.

31.9 Counterparts and Electronic Signatures.

This Lease may be executed in counterparts, it being understood that all such counterparts, taken together, shall constitute one and the same agreement. An executed counterpart of this Lease transmitted by email or other electronic transmission or using electronic signature technology (e.g., via DocuSign or similar electronic technology) shall be (i) deemed an original counterpart of this Lease and (ii) legally binding upon the parties hereto to the same extent as delivery of an original counterpart of this Lease.

31.10 Exhibits.

If any inconsistency exists between the terms and provisions of this Lease and the terms and provisions of the Exhibits hereto, then the terms and provisions of this Lease shall prevail.

31.11 Gender; Plural.

Wherever appropriate in this Lease, personal pronouns shall be deemed to include the other gender and the singular to include the plural.

31.12 Divisibility.

If any term of this Lease, or the application thereof to any Person or circumstance, is held to be invalid or unenforceable, then the remainder of this Lease or the application of such term to any other Person or any other circumstance shall not be thereby affected, and each term shall remain valid and enforceable to the fullest extent permitted by law.

31.13 Vault Space.

If (i) Tenant uses or occupies any vaults, vault space or other space outside the boundaries of the Real Property that in each case is located below grade, and (ii) such space is diminished by any Governmental Authority or by any utility company, then such diminution shall not constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of Rental, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Landlord.

 

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31.14 Adjacent Excavation.

If an excavation is made upon land adjacent to the Building, or is authorized to be made, then Tenant, upon reasonable advance notice, shall grant to the Person causing or authorized to cause such excavation a license to enter upon the Premises for the purpose of doing such work as said Person deems necessary to preserve the Building from injury or damage and to support the same by proper foundations, without any claim for damages or indemnity against Landlord, or diminution or abatement of Rental. Landlord acknowledges that Landlord’s right to access the Premises as provided in this Section 31.14 is subject to the provisions of Article 9 hereof.

31.15 Captions.

The captions are inserted only for convenience and for reference and in no way define, limit or describe the scope of this Lease or the intent of any provision thereof.

31.16 Parties Bound.

The covenants, conditions and agreements contained in this Lease shall bind and inure to the benefit of Landlord and Tenant and their respective legal representatives, successors, and, except as otherwise provided in this Lease, their assigns.

31.17 Authority.

(A) Tenant hereby represents and warrants to Landlord that (i) Tenant is duly organized, validly existing and in good standing under the laws of the State of Delaware, and possesses all licenses and authorizations necessary to carry on its business, (ii) Tenant has full power and authority to carry on its business, enter into this Lease and consummate the transaction contemplated by this Lease, (iii) the individual executing and delivering this Lease on Tenant’s behalf has been duly authorized to do so, (iv) this Lease has been duly executed and delivered by Tenant, (v) this Lease constitutes a valid, legal, binding and enforceable obligation of Tenant (subject to bankruptcy, insolvency or creditor rights laws generally, and principles of equity generally), (vi) the execution, delivery and performance of this Lease by Tenant will not cause or constitute a default under, or conflict with, the organizational documents of Tenant or any agreement to which Tenant is a party, (vii) the execution, delivery and performance of this Lease by Tenant will not violate any Requirement, (viii) all consents, approvals, authorizations, orders or filings of or with any court or governmental agency or body, if any, required on the part of Tenant for the execution, delivery and performance of this Lease have been obtained or made and (ix) the Office of Foreign Assets Control of the United States Department of the Treasury has not listed Tenant or any of Tenant’s Affiliates, or any Person that Controls, is Controlled by, or is under common Control with Tenant, on its list of Specially Designated Nationals and Blocked Persons.

 

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(B) Landlord hereby represents and warrants to Tenant that (i) Landlord is duly organized, validly existing and in good standing under the laws of the State of New York, and possesses all licenses and authorizations necessary to carry on its business, (ii) Landlord has full power and authority to carry on its business, enter into this Lease and consummate the transaction contemplated by this Lease, (iii) the individual executing and delivering this Lease on Landlord’s behalf has been duly authorized to do so, (iv) this Lease has been duly executed and delivered by Landlord, (v) this Lease constitutes a valid, legal, binding and enforceable obligation of Landlord (subject to bankruptcy, insolvency or creditor rights laws generally, and principles of equity generally), (vi) the execution, delivery and performance of this Lease by Landlord will not cause or constitute a default under, or conflict with, the organizational documents of Landlord or any agreement to which Landlord is a party, (vii) the execution, delivery and performance of this Lease by Landlord does not violate any Requirement, and (viii) all consents, approvals, authorizations, orders or filings of or with any court or governmental agency or body, if any, required on the part of Landlord for the execution, delivery and performance of this Lease have been obtained or made.

31.18 Rent Control.

If at the commencement of, or at any time or times during, the Term, the Rental reserved in this Lease is not fully collectible by reason of any Requirement, then Tenant shall enter into such agreements and take such other steps (without additional expense to Tenant) as Landlord may reasonably request and as may be legally permissible to allow Landlord to collect the maximum rents which may from time to time during the continuance of such legal rent restriction be legally permissible (and not in excess of the amounts reserved therefor under this Lease). Upon the termination of such legal rent restriction prior to the expiration of the Term, (a) the Rental shall become and thereafter be payable hereunder in accordance with the amounts reserved in this Lease for the periods following such termination, and (b) Tenant shall pay to Landlord, if legally permissible, an amount equal to the excess of (i) the items of Rental which would have been paid pursuant to this Lease but for such legal rent restriction, over (ii) the rents paid by Tenant to Landlord during the period or periods such legal rent restriction was in effect.

31.19 Consequential Damages.

Tenant shall have no liability for any consequential, indirect or punitive damages that Landlord suffers (it being understood, however, that nothing contained in this Section 31.19 limits Landlord’s right to recover damages (x) as expressly provided in Section 21.3(A) hereof and in Section 24.2 hereof, or (y) for Tenant’s failure to remove Specialty Alterations to the extent provided in Section 7.8(A) hereof). Landlord shall have no liability for any consequential, indirect or punitive damages that are suffered by Tenant or any Person claiming by, through or under Tenant.

31.20 Tenant’s Advertising.

Tenant shall not use a picture, photograph or drawing of the Building (or a silhouette thereof) in Tenant’s letterhead or promotional materials without Landlord’s prior approval.

 

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31.21 Specially Designated Nationals; Blocked Persons; Embargoed Persons.

(A) Tenant represents and warrants to Landlord that (a) Tenant and each person or entity directly or indirectly owning an interest in Tenant is (i) not currently identified on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control of the Department of the Treasury (“OFAC”) and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation (collectively, the “List”), and (ii) not a person or entity with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United States, (b) none of the funds or other assets of Tenant constitute property of, or are beneficially owned, directly or indirectly, by, any Embargoed Person, (c) no Embargoed Person has any interest of any nature whatsoever in Tenant (whether directly or indirectly), (d) none of the funds of Tenant have been derived from any unlawful activity with the result that the investment in Tenant is prohibited by Requirements or that this Lease is in violation of Requirements, and (e) Tenant has implemented procedures, and will consistently apply those procedures, to ensure the foregoing representations and warranties remain true and correct at all times. The term “Embargoed Person” means any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Tenant is prohibited by Requirements or Tenant is in violation of Requirements.

(B) Tenant covenants and agrees (a) to comply with all Requirements relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect, (b) to immediately notify Landlord in writing if any of the representations, warranties or covenants set forth in this paragraph or the preceding paragraph are no longer true or have been breached or if Tenant has a reasonable basis to believe that they may no longer be true or have been breached, (c) not to use funds from any “Prohibited Person” (as such term is defined in the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism) to make any payment due to Landlord under this Lease and (d) at the request of Landlord, to provide such information as may be requested by Landlord to determine Tenant’s compliance with Requirements.

(C) Tenant hereby acknowledges and agrees that Tenant’s inclusion on the List at any time during the Term shall be an Event of Default. Notwithstanding anything herein to the contrary, Tenant shall not permit the Premises or any portion thereof to be used or occupied by any person or entity on the List or by any Embargoed Person (on a permanent, temporary or transient basis), and any such use or occupancy of the Premises by any such person or entity shall be an Event of Default.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURE PAGE TO FOLLOW]

 

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This page constitutes the signature page to the Lease, dated as of the 20th day of May 2024, between ONE PENN PLAZA LLC, as landlord, and LB PHARMACEUTICALS, INC., as tenant, for certain space in the building known as PENN 1 and by the street address of One Penn Plaza, New York, New York 10119

IN WITNESS WHEREOF, Landlord and Tenant have duly executed and delivered this Lease as of the date first above written.

 

ONE PENN PLAZA LLC, Landlord
By:   VNO PENN District Holdings II LLC, as managing member
  By:   VNO PENN District Holdings LLC, its sole member
    By:   Vornado Realty L.P., its sole member
      By:   Vornado Realty Trust, its general partner
        By:   /s/ Glen J. Weiss
          Glen J. Weiss
          Executive Vice President,
          Co-Head of Real Estate
LB PHARMACEUTICALS, INC., Tenant
By:   /s/ Zachary Prensky
  Name: Zachary Prensky
  Title: President & CEO
Tenant’s EIN: 81-1854347

Exhibit 21.1

List of Subsidiaries of LB Pharmaceuticals Inc

None.

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated June 27, 2025, relating to the financial statements of LB Pharmaceuticals Inc (the Company), which is contained in that Prospectus. Our report contains an explanatory paragraph regarding the Company’s ability to continue as a going concern.

We also consent to the reference to us under the caption “Experts” in the Prospectus.

/s/ BDO USA, P.C.

New York, New York

August 22, 2025