Lock-up Agreement for the benefit of Salarius Pharmaceuticals, LLC executed by William K. McVicar
January 3, 2019
Salarius Pharmaceuticals LLC
2450 Holcombe Boulevard, Suite J-608
Houston TX 77021
Ladies and Gentlemen:
In connection with the proposed acquisition of Salarius Pharmaceuticals LLC (Salarius) by Flex Pharma, Inc. (Flex) whereby Falcon Acquisition Sub, LLC, a wholly-owned subsidiary of Flex, will merge with and into Salarius (the Merger), and in consideration of Salarius proceeding with the Merger as contemplated by the Agreement and Plan of Merger dated January 3, 2019 (the Merger Agreement), the receipt and sufficiency of such consideration being hereby acknowledged and accepted, and in order to induce Salarius to close the Merger, the undersigned (Securityholder), a holder of shares of Common Stock, par value $0.0001 per share (the Common Stock), of Flex, Flex restricted stock, or options to purchase shares of Common Stock of Flex (collectively, Securities), hereby agrees with Salarius as follows:
1. During the Lock-Up Period (as defined below), Securityholder shall not, directly or indirectly, without the prior written consent of Salarius (or, from and after the effective time of the Merger (the Effective Time), Flex) and subject to the exceptions set forth in this Lock-up Agreement (a) 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 Securities or any securities convertible into, exchangeable for or that represent the right to receive shares of Flex Common Stock, in each case, whether now owned or hereinafter acquired, owned directly by Securityholder (including holding as a custodian) or with respect to which Securityholder has beneficial ownership within the rules and regulations of the Securities and Exchange Commission (collectively, the Locked-Up Securities), or publicly disclose an intention to effect any such transaction, except as required by applicable law, (b) effect any short sale or enter into any contract, option, commitment or other arrangement or understanding with respect to the direct or indirect sale, transfer, assignment or other disposition of (including, without limitation, by the creation of any Encumbrance or by establishing or increasing a put equivalent position or liquidating or decreasing a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the rules and regulations of the Securities and Exchange Commission promulgated thereunder with respect to) any Locked-Up Securities, or publicly disclose an intention to effect any such transaction, except as required by applicable law, (c) take any action that would make any representation or warranty of Securityholder contained herein untrue or incorrect or have the effect of preventing or disabling Securityholder from performing Securityholders obligations under this Lock-Up Agreement, or (d) make any demand for or exercise any right with respect to the registration of any Securities or any security convertible into or exercisable or exchangeable for Flex Common Stock, in each case, other than (1) transfers of the Locked-Up Securities as a bona fide gift or gifts, (2) transfers or dispositions of the Locked-Up Securities to any trust for the direct or indirect benefit of Securityholder or the immediate family of Securityholder, (3) transfers or dispositions of the Locked-Up Securities by will, other testamentary document or intestate succession to the legal representative, heir, beneficiary or a member of the immediate family of Securityholder, (4) transfers of the Locked-Up Securities to stockholders, direct or indirect affiliates (within the meaning set forth in Rule 405 under the Securities Act of 1933, as amended), current or former partners (general or limited), members or managers of Securityholder, as applicable, or to the estates of any such stockholders, affiliates, partners, members or managers, or to another corporation, partnership, limited liability company or other business entity that controls, is controlled by or is under common control with Securityholder, (5) transfers that occur by operation of law pursuant to a qualified domestic order or in connection with a divorce settlement, (6) transfers or dispositions not involving a change in beneficial ownership and (7) if Securityholder is a trust, transfers or dispositions to any beneficiary of
Securityholder or the estate of any such beneficiary; provided that in the case of any transfer or distribution pursuant to clauses (1)-(7), (x) each transferee, donee or distributee shall execute and deliver to Salarius (or, from and after the Effective Time, Flex) a lock-up letter in substantially the form of this Lock-Up Agreement, (y) such transfer or distribution shall not involve a disposition of value and (z) no filing by any party (donor, donee, transferor or transferee) under the Exchange Act or other public announcement shall be required or shall be made voluntarily in connection with such transfer or distribution (other than (A) a filing at any time on a Form 5 or (B) a filing after the expiration of the Lock-Up Period on a Schedule 13D or Schedule 13G (or Schedule 13D/A or Schedule 13G/A). For purposes of this Lock-Up Agreement, immediate family shall mean any relationship by blood, marriage or adoption, not more remote than first cousin.
2. Furthermore, notwithstanding the restrictions imposed by this Lock-Up Agreement, Securityholder may, without the prior written consent of Salarius (or, from and after the Effective Time, Flex), (a) exercise an option (including a net or cashless exercise of an option to the extent permitted pursuant to the terms thereof) to purchase shares of Flex Common Stock, and transfer shares of Flex Common Stock to Flex to cover tax withholding obligations of Securityholder in connection with any such option exercise, provided that the underlying shares of Flex Common Stock shall continue to be subject to the restrictions on transfer set forth in this Lock-Up Agreement, (b) establish a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of Flex Common Stock, provided that such plan does not provide for any transfers of Flex Common Stock during the Lock-Up Period, (c) transfer or dispose of shares of Flex Common Stock acquired on the open market following the Closing Date, and (d) transfer Locked-Up Securities to Salarius or Flex, as applicable, pursuant to arrangements under which Salarius or Flex, as applicable, has the option to repurchase such Locked-Up Securities or a right of first refusal with respect to transfers of such Locked-Up Securities; provided that, with respect to each of clauses (a)-(b), no filing under the Exchange Act or other public announcement shall be required or shall be made voluntarily in connection with such transfer or disposition during the Lock-Up Period (other than in respect of a required filing under the Exchange Act in connection with the exercise of an option to purchase Flex Common Stock following such individuals termination of employment with Flex (or termination of such individuals service as a member of the board of directors of Flex) that would otherwise expire during the Lock-Up Period, provided that reasonable notice shall be provided to Salarius and Flex prior to any such filing, and provided, further, that, for the avoidance of doubt, the underlying shares of Flex Common Stock shall continue to be subject to the restrictions on transfer set forth in this Lock-Up Agreement).
3. As used in this Lock-Up Agreement, the term Lock-Up Period shall mean from and after the date hereof until the earlier to occur of (a) 90 days after the closing of the Merger or (b) such date and time as the Merger Agreement shall be terminated pursuant to Article 9 thereof or otherwise. Upon termination or expiration of the Lock-Up Period, this Lock-Up Agreement shall terminate and be of no further force or effect and no party shall have any further obligations or liabilities hereunder; provided, however, such termination or expiration shall not relieve any party from liability for any willful breach of this Lock-Up Agreement or acts of bad faith prior to termination hereof. As used in this Lock-Up Agreement, the term Encumbrance means any lien, pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim, infringement, interference, option, right of first refusal, preemptive right or similar restriction of any nature (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset).
Securityholder also agrees and consents to the entry of stop transfer instructions with Flexs transfer agent and registrar against the transfer of the Locked-Up Securities, except in compliance with this Lock-Up Agreement. In furtherance of the foregoing, Flex and its transfer agents is hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this Lock-Up Agreement. An attempted transfer in violation of this Lock-Up Agreement will be of no effect and null and void, regardless of whether the purported transferee has any actual or constructive knowledge of the transfer restrictions set forth in this Lock-Up Agreement, and will not be recorded on the stock transfer books of Flex.
Securityholder understands that Salarius will proceed with the Merger in reliance on this Lock-Up Agreement. Moreover, Securityholder understands and agrees that Salarius is relying upon the accuracy, completeness, and truth of Securityholders representations, warranties, agreements, and certifications contained in this Lock-Up Agreement.
Securityholder hereby represents and warrants that Securityholder has full power and authority to enter into this Lock-Up Agreement. All authority herein conferred or agreed to be conferred and any obligations of Securityholder shall be binding upon the successors, assigns, heirs or personal representatives of Securityholder.
Securityholder agrees that this Lock-Up Agreement and any claim, controversy or dispute arising under or related to this Lock-Up Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof that would cause the laws of another jurisdiction to apply. In respect of any action or suit arising out of or relating to this Lock-Up Agreement, Securityholder hereby: (a) irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction over such action or proceeding, in another state court located within the State of Delaware or, if no state court located within the State of Delaware has jurisdiction over such action or proceeding, in the federal district court for the District of Delaware); and (b) irrevocably waives the right to trial by jury.
Securityholder 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, prior registration rights agreement, prior market standoff agreement or any other prior lock-up or similar prior agreement to which Securityholder and either Salarius or Flex may be a party, this Lock-Up Agreement supersedes such prior agreement.
This Lock-Up Agreement may be executed by facsimile or electronic (i.e., PDF) transmission, which is deemed an original.
(Signature Page Follows)
Very truly yours,
|William K. McVicar|
|(Print Name of Stockholder)|
|/s/ William K. McVicar|
(Name and Title of Signatory,
if Signing on Behalf of an Entity)
Omitted Lock-up Agreements
Peter Barton Hutt