EXHIBIT 10.2
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR, SUBJECT TO SECTION 11 HEREOF, AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT, OR ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Common Stock of
AKERO THERAPEUTICS, INC.
Dated as of March 12, 2024 (the “Effective Date”)
WHEREAS, AKERO THERAPEUTICS, INC., a Delaware corporation (the “Company”), has entered into a Loan and Security Agreement of June 15, 2022 (as amended and in effect from time to time, including by that certain First Amendment to Loan and Security Agreement dated as of June 7, 2023 and that certain Second Amendment to Loan and Security agreement dated as of February 28, 2024, collectively, the “Loan Agreement”) with Hercules Capital, Inc., a Maryland corporation, in its capacity as administrative and collateral agent (“Agent”), HERCULES PRIVATE CREDIT FUND 1 L.P. (the “Warrantholder”), and the lender parties thereto;
WHEREAS, pursuant to the Loan Agreement and as additional consideration to the Warrantholder for, among other things, its agreements in the Loan Agreement, the Company has agreed to issue to the Warrantholder this Warrant Agreement, evidencing the right to purchase shares of the Company’s Common Stock (this “Warrant”, “Warrant Agreement”, or this “Agreement”);
NOW, THEREFORE, in consideration of the Warrantholder having executed and delivered the Loan Agreement and provided the financial accommodations contemplated therein, and in consideration of the mutual covenants and agreements contained herein, the Company and the Warrantholder agree as follows:
SECTION 1. GRANT OF THE RIGHT TO PURCHASE COMMON STOCK.
(a) For value received, the Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and purchase, from the Company, up to the aggregate number of fully paid and non-assessable shares of Common Stock (as defined below) as determined pursuant to Section 1(b) below, at a purchase price per share equal to the Exercise Price (as defined below). The number and Exercise Price of such shares are subject to adjustment as provided in Section 8. As used herein, the following terms shall have the following meanings:
“Act” means the Securities Act of 1933, as amended.
“Charter” means the Company’s Fourth Amended and Restated Certificate of Incorporation, as may be amended and in effect from time to time.
“Common Stock” means the Company’s common stock, $0.0001 par value per share, as presently constituted under the Charter, and any class and/or series of Company capital stock for or into which such common stock may be converted or exchanged in a reorganization, recapitalization or similar transaction.
“Exercise Price” means $8.17, subject to adjustment from time to time in accordance with the provisions of this Warrant.
“Liquid Sale” means the closing of a Merger Event in which the consideration received by the Company and/or its shareholders, as applicable, consists solely of cash and/or Marketable Securities.
“Marketable Securities” in connection with a Merger Event means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by the Warrantholder in connection with the Merger Event were the Warrantholder to exercise this Warrant on or prior to the closing thereof is then traded on a national securities exchange or over-the-counter market, and (iii) following the closing of such Merger Event, the Warrantholder would not be restricted from publicly re-selling all of the issuer’s shares and/or other securities that would be received by the Warrantholder in such Merger Event were the Warrantholder to exercise this Warrant in full on or prior to the closing of such Merger Event, except to the extent that any such restriction (x) arises solely under federal or state securities laws, rules or regulations, and (y) does not extend beyond six (6) months from the closing of such Merger Event.
“Merger Event” means any of the following: (i) a sale, lease or other transfer of all or substantially all assets of the Company, (ii) any merger or consolidation involving the Company in which the Company is not the surviving entity or in which the outstanding shares of the Company’s capital stock are otherwise converted into or exchanged for shares of capital stock or other securities or property of another entity, or (iii) any sale by holders of the outstanding voting equity securities of the Company in a single transaction or series of related transactions of shares constituting a majority of the outstanding combined voting power of the Company.
“Purchase Price” means, with respect to any exercise of this Warrant, an amount equal to the then-effective Exercise Price multiplied by the number of shares of Common Stock as to which this Warrant is then exercised.
“Warrant Coverage” means one and one-half percent (1.50%) multiplied by the aggregate original principal amount of Term Loan Advances made by Warrantholder (as defined in the Loan Agreement).
(b) Number of Shares. This Warrant shall be exercisable for a number of shares of Common Stock equal to the quotient of (i) the Warrant Coverage, divided by (ii) the Exercise Price, subject to adjustment from time to time in accordance with the provisions of this Warrant.
SECTION 2. TERM OF THE AGREEMENT.
The term of this Agreement and the right to purchase Common Stock as granted herein shall commence on the Effective Date and, subject to Section 8(a) below, shall be exercisable until 5:00 p.m. (Eastern Time) on March 12, 2031.
SECTION 3. EXERCISE OF THE PURCHASE RIGHTS.
(a) Exercise. The purchase rights set forth in this Agreement are exercisable by the Warrantholder, in whole or in part, at any time, or from time to time, prior to the expiration of the term set forth in Section 2, by tendering to the Company at its principal office a notice of exercise in the form attached hereto as Exhibit I (the “Notice of Exercise”), duly completed and executed. Promptly upon receipt of the Notice of Exercise and the payment of the Purchase Price in accordance with the terms set forth below, and in no event later than three (3) business days thereafter, the Company or its transfer agent shall either (i) issue to the Warrantholder a certificate for the number of shares of Common Stock purchased or (ii) credit the same via book entry to the Warrantholder, and the Company shall execute the acknowledgment of exercise in the form attached hereto as Exhibit II (the “Acknowledgment of Exercise”) indicating the number of shares which remain subject to future purchases under this Warrant, if any.
The Purchase Price may be paid at the Warrantholder’s election either (i) by cash or check, or (ii) by surrender of all or a portion of the Warrant for shares of Common Stock to be exercised under this Agreement and, if applicable, an amended Agreement setting forth the remaining number of shares purchasable hereunder, as
determined below (“Net Issuance”). If the Warrantholder elects the Net Issuance method, the Company will issue shares of Common Stock in accordance with the following formula:
X = Y(A-B)
A
Where: X = the number of shares of Common Stock to be issued to the Warrantholder.
Y = the number of shares of Common Stock requested to be exercised under this Agreement.
A = the then-current fair market value of one (1) share of Common Stock at the time of exercise of this Warrant.
B = the then-effective Exercise Price.
For purposes of the above calculation, the current fair market value of shares of Common Stock shall mean with respect to each share of Common Stock:
(i) at all times when the Common Stock is traded on a national securities exchange, inter-dealer quotation system or over-the-counter bulletin board service, the average of the closing prices over a ten (10) day consecutive period ending three days before the day the current fair market value of the securities is being determined,
(ii) if the exercise is in connection with a Merger Event, the fair market value of a share of Common Stock shall be deemed to be the per share value received by the holders of the outstanding shares of Common Stock pursuant to such Merger Event as determined in accordance with the definitive transaction documents executed among the parties in connection therewith, or
(iii) in cases other than as described in the foregoing clauses (i) and (ii), the current fair market value of a share of Common Stock shall be determined in good faith by the Company’s Board of Directors.
Upon partial exercise by either cash or Net Issuance, prior to the expiration or earlier termination hereof, the Company shall promptly issue an amended Agreement representing the remaining number of shares purchasable hereunder. All other terms and conditions of such amended Agreement shall be identical to those contained herein, including, but not limited to the Effective Date hereof.
(b) Exercise Prior to Expiration. To the extent this Warrant is not previously exercised as to all shares of Common Stock subject hereto, and if the then-current fair market value of one share of Common Stock is greater than the Exercise Price then in effect, or, in the case of a Liquid Sale, where the value per share of Common Stock (as determined as of the closing of such Liquid Sale in accordance with the definitive agreements executed by the parties in connection with such Merger Event) to be paid to the holders thereof is greater than the Exercise Price then in effect, this Agreement shall be deemed automatically exercised on a Net Issuance basis pursuant to Section 3(a) (even if not surrendered) as of immediately before its expiration determined in accordance with Section 2. For purposes of such automatic exercise, the fair market value of one share of Common Stock upon such expiration shall be determined pursuant to Section 3(a). To the extent this Warrant or any portion hereof is deemed automatically exercised pursuant to this Section 3(b), the Company agrees to promptly notify the Warrantholder of the number of shares of Common Stock if any, the Warrantholder is to receive by reason of such automatic exercise, and to issue or cause its transfer agent to issue a certificate or a book-entry credit to the Warrantholder evidencing such shares.
SECTION 4. RESERVATION OF SHARES.
During the term of this Agreement, the Company will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the rights to purchase Common Stock as provided for herein. If at any time during the term hereof the number of authorized but unissued shares of Common Stock shall not be sufficient to permit exercise of this Warrant in full, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.
SECTION 5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Agreement, but in lieu of such fractional shares the Company shall make a cash payment therefor in an amount equal to the product of (a) the Exercise Price then in effect multiplied by (b) the fraction of a share.
SECTION 6. NO RIGHTS AS SHAREHOLDER.
Without limitation of any provision hereof, the Warrantholder agrees that this Agreement does not entitle the Warrantholder to any voting rights or other rights as a shareholder of the Company prior to the exercise of any of the purchase rights set forth in this Agreement.
SECTION 7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the registered holder of this Agreement. The Warrantholder’s initial address, for purposes of such registry, is set forth in Section 12(g) below. The Warrantholder may change such address by giving written notice of such changed address to the Company.
SECTION 8. ADJUSTMENT RIGHTS.
The Exercise Price and the number of shares of Common Stock purchasable hereunder are subject to adjustment from time to time, as follows:
SECTION 9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
SECTION 10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Agreement has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder:
SECTION 11. TRANSFERS.
Subject to compliance with applicable federal and state securities laws, this Agreement and all rights hereunder are transferable, in whole or in part, without charge to the holder hereof (except for transfer taxes) upon surrender of this Agreement properly endorsed, provided, that as long as no Event of Default (as defined in the Loan Agreement) has occurred and is continuing, the holder hereof may not, without the Company’s prior written consent, transfer this Agreement or any portion hereof, or any shares issued upon any exercise hereof, to any person or entity who directly competes with the Company (as reasonably determined by Agent upon consultation with Company), it being acknowledged that in all cases, any transfer to an affiliate of the holder hereof shall be allowed. Each taker and holder of this Agreement, by taking or holding the same, consents and agrees that this Agreement, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this Agreement shall have been so endorsed and its transfer recorded on the Company’s books, shall be treated by the Company and all other persons dealing with this Agreement as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented by this Agreement. Subject to the first sentence of this Section 11, the transfer of this Agreement shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit III (the “Transfer Notice”), at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer. Until the Company receives such Transfer Notice, the Company may treat the registered owner hereof as the owner for all purposes. Notwithstanding anything herein or in any legend to the contrary, the Company shall not require an opinion of counsel in connection with any sale, assignment or other transfer by the Warrantholder of this Warrant
(or any portion hereof or any interest herein) or of any shares of Common Stock issued upon any exercise hereof to an affiliate (as defined in Regulation D) of the Warrantholder, provided that such affiliate is an “accredited investor” as defined in Regulation D.
SECTION 12. MISCELLANEOUS.
If to the Warrantholder:
HERCULES PRIVATE CREDIT FUND 1 L.P.
Legal Department
Attention: Chief Legal Officer, Cristy Barnes, and Briana Gironda
1 North B ST, Suite 2000
San Mateo, CA. 94401
Facsimile: [Redacted]
Telephone: [Redacted]
With a copy to (which shall not constitute notice):
DLA PIPER LLP (US)
401 B Street, Suite 1700
San Diego, California 92101-4297
Attn: Matt Schwartz, Esq.
Facsimile: [Redacted]
Telephone: [Redacted]
If to the Company:
AKERO THERAPEUTICS, INC.
Attention: Jonathan M. Young; William White
601 Gateway Blvd, Suite 350
South San Francisco, CA 94080
email: [Redacted]
With a copy to (which shall not constitute notice):
GOODWIN PROCTER LLP
100 Northern Avenue
Boston, MA 02210
Attention: Kevin D. Grumberg, Esq.
Facsimile: [Redacted]
Telephone: [Redacted]
or to such other address as each party may designate for itself by like notice.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION related thereto or, subject to section 11 of the warrant agreement dated MARCH 12, 2024, between the company and HERCULES PRIVATE CREDIT FUND 1 L.P., AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACTOR ANY STATE SECURITIES LAWS.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be executed by its officers thereunto duly authorized as of the Effective Date.
COMPANY:
AKERO THERAPEUTICS, INC.
By: /s/ Jonathan Young________________
Name: _Jonathan Young_________________
Title: Chief Operating Officer_____________
WARRANTHOLDER:
HERCULES PRIVATE CREDIT FUND 1 L.P.
By: Hercules Adviser LLC, its Investment Adviser
Signature: _/s/ Seth Meyer___________
Print Name: Seth Meyer
Title: Authorized Signatory
EXHIBIT I
NOTICE OF EXERCISE
To: AKERO THERAPEUTICS, INC.
(1) The undersigned Warrantholder hereby elects to purchase [_______] shares of the Common Stock of AKERO THERAPEUTICS, INC., pursuant to the terms of the Warrant Agreement dated March 12, 2024 (the “Warrant Agreement”) between AKERO THERAPEUTICS, INC. and the Warrantholder, and [CASH PAYMENT: tenders herewith payment of the Purchase Price in full, together with all applicable transfer taxes, if any.] [NET ISSUANCE: elects pursuant to Section 3(a) of the Warrant Agreement to effect a Net Issuance.]
(2) Please issue a certificate or certificates or book-entry credit(s) representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below.
_________________________________
(Name)
_________________________________
(Address)
WARRANTHOLDER:
HERCULES PRIVATE CREDIT FUND 1 L.P.
By: Hercules Adviser LLC, its Investment Adviser
Signature: _______________________
Print Name: Seth Meyer
Title: Authorized Signatory
EXHIBIT II
The undersigned, AKERO THERAPEUTICS, INC., hereby acknowledges receipt of the “Notice of Exercise” from HERCULES PRIVATE CREDIT FUND 1 L.P. to purchase [____] shares of the Common Stock of AKERO THERAPEUTICS, INC. pursuant to the terms of the Warrant Agreement by and between AKERO THERAPEUTICS, INC. and HERCULES PRIVATE CREDIT FUND 1 L.P. dated March 12, 2024 (the “Warrant Agreement”), and further acknowledges that [______] shares remain subject to purchase under the terms of the Warrant Agreement.
COMPANY: AKERO THERAPEUTICS, INC.
By: ________________________________
Title: ________________________________
Date: ________________________________
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Agreement execute this form and supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Agreement and all rights evidenced thereby are hereby transferred and assigned to
_________________________________________________________________
(Please Print)
whose address is___________________________________________________
_________________________________________________________________
Dated: ____________________________________
Holder’s Signature: _______________________________
Holder’s Address: _______________________________
_____________________________________________________
Signature Guaranteed: ____________________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it appears on the face of the Agreement, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Agreement.