LUMOS ANALYTICS INC.
INSIDER TRADING COMPLIANCE POLICY
DRAFT — For Adoption Prior to IPO Effectiveness
Prepared by: Audrey Zhou, Esq. Calderwood & Harkness LLP 1 Market Street, Spear Tower, Suite 3600 San Francisco, CA 94105
Matter Number: 1008-00002
NOTE: This Policy is to become effective immediately upon the effectiveness of the Registration Statement on Form S-1 (SEC File Number 333-264518) filed by Lumos Analytics Inc. with the Securities and Exchange Commission in connection with the initial public offering of the Company's Class A Common Stock on the Nasdaq Global Select Market (proposed ticker symbol: "LMSA"). Until such time, this document remains in draft form and is subject to revision. All Covered Persons should familiarize themselves with this Policy prior to the anticipated effectiveness of the Registration Statement and should direct any questions to the Compliance Officer designated herein.
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ARTICLE I — STATEMENT OF PURPOSE AND POLICY OVERVIEW
Section 1.1 — Purpose
Lumos Analytics Inc., a Delaware corporation ("Lumos," "Lumos AI," or the "Company"), headquartered at 450 Folsom Street, Suite 1200, San Francisco, California 94105, is adopting this Insider Trading Compliance Policy (this "Policy") in connection with the Company's planned initial listing of its Class A Common Stock on the Nasdaq Global Select Market. As Lumos transitions from a privately held company to a publicly traded enterprise, it is essential that all individuals associated with the Company understand and comply with the federal and state securities laws governing trading in the Company's securities, and that the Company maintain robust policies and procedures to prevent insider trading and the misuse of material nonpublic information.
The purpose of this Policy is to prevent violations of federal and state securities laws that prohibit trading in securities while in possession of material nonpublic information ("MNPI"), and to prevent even the appearance of impropriety in connection with any transactions in the Company's securities. The securities laws are founded on the principle that all investors should have equal access to material information about a company, and that persons who possess inside information about a company have an obligation either to disclose such information before trading or to abstain from trading altogether.
This Policy is designed to comply with, and to promote compliance with, the following provisions of federal securities law, among others:
(a) Section 10(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5 promulgated thereunder by the Securities and Exchange Commission (the "SEC"), which broadly prohibit fraud in connection with the purchase or sale of securities, including trading on the basis of MNPI;
(b) Section 14(e) of the Exchange Act and Rule 14e-3 promulgated thereunder, which prohibit trading on the basis of MNPI in connection with tender offers;
(c) Section 16 of the Exchange Act, which imposes reporting obligations and short-swing profit disgorgement requirements on directors, officers, and beneficial owners of more than 10% of a class of registered equity securities;
(d) The Insider Trading Sanctions Act of 1984, which authorizes the SEC to seek civil penalties of up to three times the amount of profit gained or loss avoided through illegal insider trading; and
(e) The Insider Trading and Securities Fraud Enforcement Act of 1988, which, among other things, imposes liability on "controlling persons" who fail to take adequate steps to prevent insider trading by persons under their control and increases criminal penalties for insider trading violations.
Compliance with this Policy is mandatory for all Covered Persons (as defined below). This Policy is intended to supplement, and not to replace, each Covered Person's independent obligation to comply with all applicable securities laws.
Section 1.2 — Policy Statement
It is the policy of Lumos Analytics Inc. that no Covered Person (as defined in Section 2.1 below) may, directly or indirectly, purchase, sell, or otherwise trade in Company Securities (as defined in Section 2.2 below) while in possession of MNPI concerning the Company, and no Covered Person may communicate or "tip" MNPI to any other person who might trade on the basis of such information. This prohibition applies regardless of the manner in which the Covered Person acquired the MNPI, regardless of the purpose for which the Covered Person intends to use the information, and regardless of whether the Covered Person's trading decision was actually influenced by the MNPI.
This Policy applies to trading in all securities of Lumos Analytics Inc., including but not limited to the Company's Class A Common Stock, par value $0.0001 per share (which will be publicly traded on the Nasdaq Global Select Market), and the Company's Class B Common Stock, par value $0.0001 per share (which carries ten votes per share and is currently held by the Company's co-founders, Priya Subramanian and Marcus Henley). The Policy also applies to derivative securities, options, warrants, restricted stock units, and any other instruments whose value is derived from or related to the Company's equity or debt securities.
All Covered Persons are expected to act at all times in a manner consistent with both the letter and the spirit of this Policy. Even where a particular transaction may be technically permissible under the securities laws, Covered Persons should refrain from any transaction that could create the appearance of improper trading or that could embarrass the Company or undermine investor confidence in the integrity of the markets for the Company's securities.
Section 1.3 — Consequences of Violations
The consequences of insider trading violations are severe for both the individuals involved and the Company. The following is a summary of potential penalties:
Civil Penalties. Under the Insider Trading Sanctions Act of 1984, the SEC may seek a civil penalty of up to three times the amount of profit gained or loss avoided by any person who trades in securities while in possession of MNPI, or who tips MNPI to another person who then trades. In addition, the SEC may obtain injunctive relief, disgorgement of profits, and other equitable remedies.
Criminal Penalties. Individuals who engage in insider trading may be subject to criminal prosecution by the United States Department of Justice. Criminal penalties for insider trading include fines of up to $5,000,000 for individuals and up to $25,000,000 for entities, as well as imprisonment of up to 20 years. The criminal penalties apply to both the person who trades on MNPI and the person who tips such information.
Controlling Person Liability. Under Section 20A of the Exchange Act, the Company and its supervisory personnel may face "controlling person" liability if they fail to take adequate steps to prevent insider trading by persons under their control. Such liability can result in civil penalties of up to the greater of $1,000,000 or three times the profit gained or loss avoided by the person who traded, even if the controlling person did not participate in or benefit from the trading.
Company Disciplinary Action. In addition to any legal consequences, any Covered Person who violates this Policy will be subject to disciplinary action by the Company, up to and including immediate termination of employment or engagement, removal from the Board of Directors (to the extent permissible under applicable law and the Company's certificate of incorporation and bylaws), forfeiture of equity awards, clawback of incentive compensation, and such other sanctions as the Company deems appropriate. The Company reserves the right to report suspected violations to the SEC, the Department of Justice, and any other applicable regulatory or law enforcement authorities.
Covered Persons should understand that the legal and personal consequences of insider trading can be devastating, and that ignorance of the law or of this Policy is not a defense. The Company takes its compliance obligations seriously and will vigorously enforce this Policy.
ARTICLE II — DEFINITIONS
Section 2.1 — "Covered Persons"
For purposes of this Policy, the term "Covered Persons" includes the following individuals and entities:
(a) Directors. All members of the Board of Directors of the Company, including: Priya Subramanian (Chair of the Board), Marcus Henley, Diane Ochoa, Samuel Adebayo, Catherine Mercer, Jonathan Tsai, and Rebecca Stahl, and any person who may become a director of the Company in the future.
(b) Officers. All officers of the Company, including the Chief Executive Officer (Priya Subramanian), the Chief Technology Officer (Marcus Henley), the Chief Financial Officer (David Lau), the General Counsel and Corporate Secretary (Naomi Feinberg), and the Chief Revenue Officer (Tomás Aguilar), and any person who may become an officer of the Company in the future.
(c) Employees. All employees of the Company, including full-time, part-time, and temporary employees, regardless of position or location. As of the anticipated date of adoption of this Policy, the Company has approximately 1,120 employees.
(d) Consultants and Contractors. All consultants, independent contractors, advisors, and temporary workers who receive or have access to MNPI in connection with their engagement by the Company.
(e) Family Members and Household Members. The spouse, domestic partner, minor children, and any other person sharing the same household as any person described in clauses (a) through (d) above. For the avoidance of doubt, Covered Persons are responsible for ensuring that their family members and household members comply with this Policy and are subject to the same restrictions and obligations as if they were direct Covered Persons.
(f) Controlled Entities. Any corporation, partnership, limited liability company, trust, or other entity controlled by, or under common control with, any person described in clauses (a) through (e) above, including any family trusts, personal holding companies, or investment vehicles through which such persons may hold or trade securities.
The obligations under this Policy apply to Covered Persons at all times during their relationship with the Company and continue to apply after the termination of that relationship with respect to any MNPI obtained during the period of the relationship, until such time as the information becomes public or is no longer material.
Section 2.2 — "Company Securities"
For purposes of this Policy, the term "Company Securities" means any and all securities issued by Lumos Analytics Inc., or any derivative instrument or other financial product whose value is derived from or related to the Company's securities, including but not limited to:
(a) Class A Common Stock. Class A Common Stock, par value $0.0001 per share, which will be publicly traded on the Nasdaq Global Select Market under the proposed ticker symbol "LMSA." Each share of Class A Common Stock entitles the holder to one vote per share on all matters submitted to a vote of stockholders.
(b) Class B Common Stock. Class B Common Stock, par value $0.0001 per share, which entitles the holder to ten votes per share on all matters submitted to a vote of stockholders. As of the date of this Policy, shares of Class B Common Stock are held exclusively by the Company's co-founders, Priya Subramanian and Marcus Henley, and are not publicly traded. Shares of Class B Common Stock automatically convert into shares of Class A Common Stock upon transfer (subject to certain permitted transfers described in the Company's Amended and Restated Certificate of Incorporation) and upon the occurrence of the sunset event described therein.
(c) Derivative Securities. Any options, warrants, restricted stock, restricted stock units ("RSUs"), stock appreciation rights, performance share units, or other derivative securities relating to the Company's common stock, whether granted pursuant to the Lumos Analytics Inc. 2022 Equity Incentive Plan (the "Equity Incentive Plan") or otherwise. As of the anticipated date of adoption of this Policy, the Company has reserved 14,800,000 shares for issuance under the Equity Incentive Plan, of which 11,300,000 options are outstanding at a weighted-average exercise price of $4.82 per share.
(d) Debt Securities. Any bonds, debentures, notes, or other debt securities issued by the Company, including any convertible debt instruments.
(e) Hedging and Derivative Instruments. Any hedging instruments, derivative contracts, exchange-traded options, swap agreements, forward contracts, or similar instruments whose value is derived from or related to the price or value of Company Securities.
Section 2.3 — "Material Nonpublic Information" (MNPI)
Information is considered "material nonpublic information" for purposes of this Policy if it satisfies both the materiality and nonpublic elements described below.
"Material." Information is "material" if there is a substantial likelihood that a reasonable investor would consider the information important in making an investment decision to buy, sell, or hold a security. Stated differently, information is material if it could reasonably be expected to affect the market price of the Company's securities, either positively or negatively. Both positive and negative information can be material. Materiality must be assessed at the time of the trading decision, not with the benefit of hindsight. When in doubt as to whether particular information is material, Covered Persons should assume that it is material and refrain from trading.
The following is a non-exhaustive list of examples of the types of information that would ordinarily be considered material:
• Quarterly or annual financial results, including revenue, annual recurring revenue ("ARR"), net income or net loss, earnings per share, and Adjusted EBITDA or other non-GAAP financial measures. For context, the Company reported revenue of $187.4 million for the fiscal year ended December 31, 2021, and ARR of $206.8 million as of December 31, 2021.
• Significant changes in ARR, revenue growth rates, customer retention rates, or other key performance indicators.
• Projections of future financial performance, including revenue guidance, ARR targets, or profitability forecasts.
• Significant new customer wins or losses, particularly involving the Company's largest customers. For reference, the Company's top 10 customers represent approximately 34% of its ARR as of the date of adoption of this Policy.
• Entry into, material amendments to, or termination of material contracts, including but not limited to the master agreement with Brindoval Data Centers LLC, the strategic partnership with Nordwell Financial Technologies Inc., and the revolving credit facility with Ashford National Bank.
• Changes in senior management or the composition of the Board of Directors, including the hiring, termination, or resignation of executive officers or directors.
• Proposed or pending mergers, acquisitions, joint ventures, divestitures, or other strategic transactions.
• Significant developments in the Company's intellectual property portfolio, including the grant, denial, or challenge of patents. The Company currently holds 14 issued U.S. utility patents and has 7 pending patent applications.
• Pending or threatened material litigation, arbitration, or regulatory proceedings, or the settlement or resolution of any such proceedings.
• Significant cybersecurity incidents, data breaches, or information security vulnerabilities.
• Changes in the Company's capital structure, including issuances of new securities, stock splits, stock buyback programs, secondary offerings, or changes to the Company's dividend policy.
• Changes in the Company's auditor (currently Meridian & Howe LLP), or any material disagreements with, or concerns raised by, the Company's auditor.
• Developments affecting the Company's dual-class voting structure, including any changes to the sunset provisions governing the automatic conversion of Class B Common Stock to Class A Common Stock.
• Significant changes in the Company's business strategy, product offerings, or market positioning.
• Material developments in the Company's regulatory environment, including changes in data privacy laws, artificial intelligence regulations, or export controls that could significantly affect the Company's operations.
• Any other information that could reasonably be expected to affect the market price of Company Securities.
This list is illustrative and not exhaustive. The determination of whether information is material requires a fact-specific inquiry, and Covered Persons who are uncertain as to whether information in their possession is material should consult with the Compliance Officer before engaging in any transaction in Company Securities.
"Nonpublic." Information is "nonpublic" if it has not been disseminated in a manner making it available to investors generally. Information is generally considered to have been made public when it has been disclosed through a filing with the SEC (such as a Form 8-K, Form 10-Q, or Form 10-K), a press release distributed through a nationally recognized news service, or an investor presentation or conference call that is broadly accessible to the public. Even after information has been publicly disclosed, it is not considered fully "public" for purposes of this Policy until sufficient time has elapsed for the investment community to absorb and analyze the information. As a general guideline, information should not be considered public until at least one full trading day has elapsed following the Company's broad public disclosure of the information. For example, if the Company issues a press release announcing quarterly earnings after the close of trading on a Tuesday, the information would not be considered public until the close of trading on Wednesday.
Covered Persons should be aware that information obtained from sources other than the Company — such as rumors, analyst reports, news articles, or industry sources — may still constitute MNPI if the information originated from the Company or if the Covered Person knows or has reason to believe that the information has not been publicly disclosed by the Company. Similarly, information that has been selectively disclosed to analysts, institutional investors, or other persons (in violation of Regulation FD or otherwise) is not considered public until it has been broadly disseminated.
Section 2.4 — "Compliance Officer"
The Company's General Counsel and Corporate Secretary, Naomi Feinberg, shall serve as the "Compliance Officer" for purposes of this Policy. The Compliance Officer shall have primary responsibility for the interpretation, implementation, and enforcement of this Policy, and shall serve as the principal point of contact for all Covered Persons regarding questions about the Policy and its application.
In the absence or unavailability of the Compliance Officer (due to recusal, vacation, illness, or any other reason), the Chief Financial Officer, David Lau, shall serve as the alternate Compliance Officer and shall have full authority to act in the Compliance Officer's stead for all purposes under this Policy.
For transactions in Company Securities by the Compliance Officer herself (Naomi Feinberg), pre-clearance must be obtained from the Chief Executive Officer, Priya Subramanian, or, if the CEO is unavailable or recused, from the Chair of the Audit Committee of the Board of Directors, Samuel Adebayo.
Section 2.5 — "Section 16 Insiders"
The term "Section 16 Insiders" means all directors and officers of the Company who are subject to the reporting and short-swing profit provisions of Section 16 of the Exchange Act. Section 16 requires that directors, officers, and beneficial owners of more than 10% of a class of registered equity securities file reports with the SEC disclosing their beneficial ownership of, and transactions in, such securities (Forms 3, 4, and 5), and imposes liability for the disgorgement of short-swing profits under Section 16(b).
As of the date of this Policy, the Company's Section 16 Insiders include the following individuals:
Directors: Priya Subramanian, Marcus Henley, Diane Ochoa, Samuel Adebayo, Catherine Mercer, Jonathan Tsai, and Rebecca Stahl.
Executive Officers: Priya Subramanian (Chief Executive Officer), Marcus Henley (Chief Technology Officer), David Lau (Chief Financial Officer), Naomi Feinberg (General Counsel and Corporate Secretary), and Tomás Aguilar (Chief Revenue Officer).
Section 16 Insiders are subject to all of the obligations and restrictions applicable to Covered Persons and Designated Insiders under this Policy, as well as the additional obligations described in Article VII below, including the obligation to file Section 16 reports with the SEC and the prohibition on short-swing profit transactions under Section 16(b). Section 16 Insiders should also be aware that Section 16(c) of the Exchange Act independently prohibits short sales by directors and officers of a public company.
Section 2.6 — "Designated Insiders"
The term "Designated Insiders" means a subset of Covered Persons who have been designated by the Compliance Officer as having regular or periodic access to MNPI and who are therefore subject to the enhanced restrictions set forth in this Policy, including mandatory compliance with the blackout periods described in Article IV, the pre-clearance procedures described in Article V, and the post-trade reporting requirements described in Article VII.
The initial list of Designated Insiders includes the following categories of persons:
(a) All Section 16 Insiders (as listed in Section 2.5 above);
(b) All employees holding the title of Vice President or above;
(c) All employees in the finance, accounting, financial planning and analysis, legal, corporate development, and investor relations departments, regardless of title;
(d) Any additional persons designated by the Compliance Officer from time to time based on the nature of their role, their access to MNPI, or their involvement in particular transactions or projects.
The Compliance Officer shall maintain a current list of all Designated Insiders and shall notify each person in writing upon their designation. A person's status as a Designated Insider may be reviewed and updated from time to time by the Compliance Officer. Designation as a Designated Insider is not intended to be, and should not be construed as, a determination that the person possesses MNPI at any particular time; rather, it reflects the Company's determination that the person's role is such that they may from time to time have access to MNPI and that enhanced safeguards are therefore appropriate.
ARTICLE III — PROHIBITED ACTIVITIES
Section 3.1 — Prohibition on Trading While in Possession of MNPI
No Covered Person may, directly or indirectly, purchase, sell, or otherwise trade in Company Securities at any time when such Covered Person is in possession of MNPI concerning the Company. This prohibition applies to all forms of transactions, including but not limited to:
(a) Open-market purchases and sales of Company Securities;
(b) Transactions through a broker, dealer, or other intermediary;
(c) Transactions through or on behalf of a family member, household member, trust, estate, partnership, limited liability company, corporation, or any other person or entity;
(d) Exercises of stock options (including cashless exercises and sell-to-cover exercises, but not exercises that do not involve a sale of shares in the market);
(e) Sales of shares acquired upon the vesting of restricted stock or RSUs;
(f) Purchases or sales pursuant to an employee stock purchase plan (other than automatic purchases resulting from payroll deductions at the election date, as further described in Section 5.4);
(g) Gifts of Company Securities, to the extent that the donor is aware of MNPI at the time of the gift (because the donor may benefit indirectly, or because the gift may facilitate trading by the donee); and
(h) Any other acquisition or disposition of a direct or indirect pecuniary interest in Company Securities.
This prohibition applies regardless of whether the Covered Person's decision to trade was actually based on or influenced by the MNPI. Under the federal securities laws, the relevant inquiry is whether the person was "aware of" MNPI at the time of the trade, not whether the MNPI was the motivating factor for the trade. Accordingly, Covered Persons should not trade in Company Securities at any time when they are in possession of information that they know, or have reason to believe, constitutes MNPI, even if they believe that their trading decision is based on other, unrelated factors.
Section 3.2 — Prohibition on Tipping
No Covered Person may disclose MNPI to any person outside the Company, including but not limited to family members, friends, social acquaintances, business associates, former colleagues, securities analysts, journalists, or members of the investment community, except on a strict need-to-know basis in connection with the conduct of the Company's business, and only to persons who are bound by appropriate confidentiality obligations (such as a nondisclosure agreement or professional duty of confidentiality).
No Covered Person may recommend or suggest that any other person purchase, sell, or otherwise trade in Company Securities, or in the securities of any other company, while the Covered Person is in possession of MNPI that could affect the value of such securities. This prohibition applies regardless of whether the Covered Person explicitly discloses the underlying MNPI, because even a trading recommendation can constitute an unlawful "tip" if it is based on inside information.
Covered Persons should be aware that a "tipper" — a person who discloses MNPI to another person who then trades — may be held liable for insider trading even if the tipper does not personally trade in the securities. The penalties for tipping are the same as those for trading on MNPI, including civil penalties of up to three times the profit gained or loss avoided by the "tippee" (the person who received the tip and traded on it), criminal fines, and imprisonment.
Section 3.3 — Prohibition on Trading in Securities of Other Companies
If a Covered Person obtains MNPI about another publicly traded company through the course of their work at Lumos — for example, in connection with a customer relationship, a vendor engagement, a potential business combination, a strategic partnership, or any other business matter — the Covered Person is strictly prohibited from trading in the securities of that other company and from disclosing such information to any other person who might trade. By way of illustration and not limitation, Covered Persons who have access to confidential information about the Company's business relationships with Nordwell Financial Technologies Inc., Brindoval Data Centers LLC, or any other customer, vendor, partner, or potential acquisition target must not trade in the securities of those companies, and must not tip such information to any other person.
This prohibition applies with equal force to all forms of transactions in the securities of such other companies, including purchases, sales, options, and derivative transactions, and continues until the information has been fully disclosed to the public and the market has had an opportunity to absorb it.
Section 3.4 — Prohibition on Hedging and Pledging
Hedging Transactions. No Covered Person may engage in any hedging transaction with respect to Company Securities, including but not limited to the purchase or sale of puts, calls, or other options contracts on any securities exchange; the use of prepaid variable forward contracts, equity swaps, collars, or exchange funds; short sales against the box; or any other transaction or arrangement that is designed to hedge or offset any decrease in the market value of Company Securities held, directly or indirectly, by the Covered Person. This prohibition applies at all times, regardless of whether the Covered Person is in possession of MNPI and regardless of whether a trading window is open or closed. The purpose of this prohibition is to ensure that all Covered Persons maintain alignment between their economic interests and those of the Company's other stockholders, and to prevent Covered Persons from insulating themselves from the risks associated with ownership of Company Securities while continuing to enjoy the benefits of such ownership.
Short Sales. No Covered Person may engage in short sales of Company Securities at any time. A "short sale" is the sale of securities that the seller does not own at the time of the sale, or that are sold against a delivery obligation that is borrowed from a third party. Short sales of Company Securities are inherently speculative, signal to the market that the seller has a negative view of the Company's prospects, and are inconsistent with the duties of loyalty and alignment that the Company expects of its directors, officers, employees, and other insiders. In addition, short sales by Section 16 Insiders are independently prohibited under Section 16(c) of the Exchange Act.
Pledging. No director or executive officer of the Company may pledge Company Securities as collateral for a loan, including through the use of margin loans, without the prior written approval of the Compliance Officer. Before granting such approval, the Compliance Officer shall consult with the Chair of the Audit Committee, Samuel Adebayo. The Compliance Officer may approve a pledging arrangement only upon a clear demonstration that the director or executive officer has the financial capacity to repay the loan without resort to the pledged securities, and that the pledging arrangement does not create an undue risk of a forced sale of Company Securities at a time when the insider may possess MNPI.
Margin Accounts. No Covered Person may hold Company Securities in a margin account, or otherwise subject Company Securities to a lien or encumbrance that could result in a forced sale of such securities, without the prior written approval of the Compliance Officer. Securities held in a margin account may be sold by the broker without the account holder's consent if the account holder fails to meet a margin call, potentially resulting in a sale at a time when the Covered Person possesses MNPI or during a blackout period.
Section 3.5 — Prohibition on Standing Orders
Covered Persons should exercise extreme caution in connection with any limit orders, stop-loss orders, good-until-cancelled orders, or other standing instructions to brokers or dealers that may result in the execution of a trade in Company Securities at a time when the Covered Person possesses MNPI or during a blackout period. Because the Covered Person may not be able to cancel a standing order before it is executed, the use of standing orders poses a significant risk of inadvertent insider trading violations.
Covered Persons who have placed standing orders with their brokers should cancel all such orders before the commencement of any period during which the Covered Person becomes aware of MNPI or before the commencement of any blackout period. Designated Insiders are strongly encouraged to avoid the use of standing orders altogether, except in the context of an approved Rule 10b5-1 trading plan as described in Article VI below.
ARTICLE IV — BLACKOUT PERIODS
Section 4.1 — Quarterly Blackout Periods (Regular Blackout Windows)
Trading in Company Securities by Designated Insiders is prohibited during each Quarterly Blackout Period, as described below. The Quarterly Blackout Period is designed to restrict trading during the period surrounding the Company's preparation and public release of quarterly and annual financial results, when the risk that Designated Insiders may possess MNPI is at its highest.
The "Quarterly Blackout Period" means the period beginning on the fifteenth (15th) calendar day before the end of each fiscal quarter of the Company and ending at the close of business on the second (2nd) full trading day following the Company's public release (whether by press release, SEC filing, or otherwise) of its financial results for such fiscal quarter (or, in the case of the fourth fiscal quarter, the full fiscal year).
The Company's fiscal year ends on December 31. Accordingly, the approximate dates of the Quarterly Blackout Periods are as follows (actual dates will be confirmed by the Compliance Officer in advance of each period):
For the avoidance of doubt, "full trading day" means any day on which the Nasdaq Stock Market is open for regular trading. If the second full trading day falls on a day that is not a trading day, the blackout period will end at the close of business on the next trading day.
The Compliance Officer will provide advance notice to all Designated Insiders of the specific commencement and termination dates of each Quarterly Blackout Period. Designated Insiders are expected to plan their transactions in Company Securities accordingly and should not assume that they will be able to trade at any particular time.
Section 4.2 — Event-Specific Blackout Periods (Ad Hoc Blackouts)
In addition to the Quarterly Blackout Periods, the Compliance Officer may, in the Compliance Officer's discretion, impose event-specific (or "ad hoc") trading blackout periods at any time when MNPI exists that has not yet been publicly disclosed by the Company. Circumstances that may give rise to an event-specific blackout period include, but are not limited to:
(a) Pending or proposed mergers, acquisitions, divestitures, or other strategic transactions;
(b) Material contract negotiations or pending material amendments to existing contracts;
(c) Material litigation developments, including the filing, settlement, or resolution of significant legal proceedings;
(d) Significant cybersecurity incidents or data breaches;
(e) Pending material changes to the Company's financial guidance or outlook;
(f) Any other circumstance in which the Compliance Officer determines, after consultation with outside counsel if appropriate, that an event-specific blackout period is warranted to prevent potential insider trading violations.
During an event-specific blackout period, all Designated Insiders and any other persons specifically notified by the Compliance Officer will be prohibited from trading in Company Securities. The Compliance Officer will notify affected persons of the existence and duration of the event-specific blackout period, but the specific reason for the blackout may not be disclosed if the underlying information is itself MNPI. Affected persons should not attempt to ascertain the reason for any event-specific blackout period, and they should be aware that the mere inquiry into the reason for a blackout may itself raise concerns about the handling of MNPI.
The existence of an event-specific blackout period is itself confidential information and may not be disclosed by any person subject to the blackout to any person who is not subject to the blackout. Any person who discloses the existence of an event-specific blackout period to an unauthorized person may be subject to disciplinary action under this Policy.
Section 4.3 — Trading Windows
Designated Insiders may trade in Company Securities only during "open window" periods — that is, periods that fall outside of any Quarterly Blackout Period and any event-specific blackout period — and only after receiving pre-clearance from the Compliance Officer in accordance with Article V below. The fact that a trading window is open does not relieve any Covered Person of the obligation to refrain from trading while in possession of MNPI; even during an open window, trading is prohibited if the individual is aware of MNPI.
The Compliance Officer will communicate the opening and closing of trading windows to Designated Insiders. Designated Insiders should not assume that a trading window is open unless they have received affirmative confirmation from the Compliance Officer. If a Designated Insider is uncertain whether a trading window is currently open, the Designated Insider should contact the Compliance Officer before placing any trade.
ARTICLE V — PRE-CLEARANCE PROCEDURES
Section 5.1 — Persons Subject to Pre-Clearance
All Designated Insiders, including all directors, executive officers, and other employees or consultants designated pursuant to Section 2.6 above, must obtain written pre-clearance from the Compliance Officer before engaging in any transaction in Company Securities. This pre-clearance requirement applies to all forms of transactions, including purchases, sales, gifts, pledges, transfers, option exercises (including cashless exercises and sell-to-cover exercises), and any other transaction that results in a change in the person's beneficial ownership of Company Securities, except as specifically exempted in Section 5.4 below.
Pre-clearance is required regardless of whether the Designated Insider believes they possess MNPI at the time of the proposed transaction. The purpose of the pre-clearance process is to provide an additional safeguard against inadvertent insider trading by allowing the Compliance Officer to assess whether MNPI exists that may be unknown to the requesting individual.
Section 5.2 — Pre-Clearance Process
To obtain pre-clearance, a Designated Insider must submit a written pre-clearance request to the Compliance Officer using the Pre-Clearance Request Form attached as Exhibit B to this Policy (or such other form as the Compliance Officer may prescribe from time to time). Pre-clearance requests should be submitted at least two (2) business days before the proposed date of the transaction to allow adequate time for review.
The pre-clearance request must include the following information:
(a) The full name and title of the Designated Insider;
(b) A description of the nature of the proposed transaction (e.g., open-market purchase, open-market sale, gift, option exercise, sell-to-cover transaction);
(c) The type of security involved (e.g., Class A Common Stock, stock options, RSUs);
(d) The number of shares or units to be purchased, sold, gifted, or otherwise transacted;
(e) The proposed date or date range for the transaction;
(f) The name and contact information of the broker-dealer or other intermediary through which the transaction will be executed;
(g) A representation as to whether the Designated Insider is aware of any MNPI concerning the Company; and
(h) A representation as to whether the proposed transaction is pursuant to an existing Rule 10b5-1 trading plan approved by the Company.
The Compliance Officer will review the pre-clearance request and will respond in writing (email is acceptable) granting or denying clearance. The Compliance Officer's determination shall be final, and the Compliance Officer is not obligated to provide a reason for the denial of any pre-clearance request. The Compliance Officer may deny pre-clearance for any reason, including without limitation the existence of MNPI known to the Compliance Officer but not known to the requesting Designated Insider, the pendency of an event-specific blackout period, concerns about the appearance of the proposed transaction, or any other consideration that the Compliance Officer deems relevant to the purposes of this Policy.
A pre-clearance approval, once granted, is valid for a period of five (5) business days from the date of approval. If the approved transaction is not completed within that five-business-day period, the pre-clearance approval shall automatically expire, and the Designated Insider must submit a new pre-clearance request before proceeding with the transaction. Designated Insiders should be aware that circumstances may change during the five-business-day approval window, and the Compliance Officer reserves the right to revoke a previously granted pre-clearance if circumstances warrant.
The grant of pre-clearance does not constitute a representation by the Compliance Officer or the Company that the proposed transaction complies with applicable securities laws or that the Designated Insider is not in possession of MNPI. Each Designated Insider retains ultimate responsibility for their own compliance with the securities laws and with this Policy.
Section 5.3 — Pre-Clearance for the Compliance Officer
For any proposed transaction in Company Securities by the Compliance Officer, Naomi Feinberg, pre-clearance must be obtained from the Chief Executive Officer, Priya Subramanian. If the CEO is unavailable or recused, pre-clearance for the Compliance Officer's transactions must be obtained from the Chair of the Audit Committee of the Board of Directors, Samuel Adebayo. The pre-clearance process for the Compliance Officer shall be conducted in the same manner and subject to the same requirements as for all other Designated Insiders.
Section 5.4 — Transactions Exempt from Pre-Clearance
The following transactions are exempt from the pre-clearance requirements set forth in this Article V; however, all of these transactions remain subject to the overarching prohibition against trading while in possession of MNPI set forth in Section 3.1 above:
(a) Vesting of Equity Awards. The vesting of shares of restricted stock or the settlement of RSUs, to the extent that such vesting or settlement occurs automatically in accordance with the terms of the applicable award agreement and does not involve any discretionary sale of shares by the Covered Person. For the avoidance of doubt, any sale of shares acquired upon vesting (including a sell-to-cover transaction to satisfy tax withholding obligations) is not exempt from pre-clearance.
(b) Cash Exercises of Stock Options (Hold). The exercise of stock options in exchange for cash (i.e., a "cash exercise") where the Covered Person pays the full exercise price in cash and retains all shares acquired upon exercise, without any contemporaneous sale of shares in the market. For the avoidance of doubt, "cashless" exercises (also known as "broker-assisted" exercises) and "sell-to-cover" exercises are not exempt from pre-clearance because they involve a sale of shares.
(c) Employee Stock Purchase Plan Purchases. Automatic purchases of Company stock through any employee stock purchase plan ("ESPP") that result from periodic payroll deductions made at the time of the participant's initial election to participate in the ESPP. However, any change in a participant's ESPP contribution rate, any new enrollment election, or any withdrawal from the ESPP during a blackout period or while in possession of MNPI is subject to pre-clearance.
(d) Bona Fide Gifts to Charitable Organizations. Bona fide gifts of Company Securities to tax-exempt charitable organizations described in Section 501(c)(3) of the Internal Revenue Code, provided that the Covered Person provides prior written notification to the Compliance Officer of the intended gift and the Compliance Officer does not object within two (2) business days of receiving such notification.
(e) Transactions Pursuant to Approved Rule 10b5-1 Plans. Transactions executed pursuant to a Rule 10b5-1 trading plan that has been previously reviewed and approved by the Compliance Officer in accordance with Article VI below, provided that the plan was adopted during an open trading window when the individual was not in possession of MNPI and the applicable cooling-off period has expired.
Covered Persons should note that even though the foregoing transactions are exempt from the pre-clearance requirement, the fundamental prohibition against trading while in possession of MNPI applies to all transactions at all times. No exemption from pre-clearance creates a "safe harbor" for trading on MNPI.
ARTICLE VI — RULE 10b5-1 TRADING PLANS
Section 6.1 — Overview
Rule 10b5-1(c) under the Exchange Act provides an affirmative defense to insider trading liability for transactions in securities that are made pursuant to a trading plan that satisfies certain conditions. Specifically, Rule 10b5-1(c)(1)(i) provides that a person's purchase or sale of securities is not made "on the basis of" MNPI if the person demonstrates that the transaction was made pursuant to a binding contract, instruction, or written plan (a "10b5-1 Plan" or "Plan") that:
(a) Was entered into in good faith at a time when the person was not aware of MNPI;
(b) Specifies the amount of securities to be purchased or sold, the price at which such securities are to be purchased or sold, and the date on which such securities are to be purchased or sold, or provides a written formula, algorithm, or computer program for determining such amounts, prices, and dates;
(c) Does not permit the person to exercise any subsequent influence over how, when, or whether to effect the transactions; and
(d) Satisfies the applicable cooling-off period, certification, and other requirements set forth in Rule 10b5-1 as amended by the SEC.
The Company encourages Designated Insiders to consider the use of 10b5-1 Plans as a means of providing an orderly mechanism for transactions in Company Securities that minimizes the risk of insider trading liability. However, the adoption and use of 10b5-1 Plans is subject to the requirements set forth in this Article VI.
Section 6.2 — Adoption and Amendment of 10b5-1 Plans
Any Designated Insider wishing to establish a 10b5-1 Plan must submit the proposed plan to the Compliance Officer for review and approval prior to the adoption or execution of the plan. The submission should include the Rule 10b5-1 Plan Submission Cover Sheet attached as Exhibit C to this Policy, together with a complete copy of the proposed plan and any related agreements with brokers or other intermediaries.
The following requirements must be satisfied for any 10b5-1 Plan adopted by a Designated Insider:
(a) Adoption During Open Window. A 10b5-1 Plan may only be adopted or executed during an open trading window, when the Designated Insider is not in possession of MNPI and is not subject to any event-specific blackout period.
(b) Cooling-Off Period. No trades may be executed under a new or amended 10b5-1 Plan until the expiration of the applicable cooling-off period, as follows:
(i) For directors and executive officers (Section 16 Insiders): The cooling-off period is the later of (A) ninety (90) days after the date of adoption or amendment of the plan, or (B) two (2) business days following the Company's filing with the SEC of its Form 10-Q or Form 10-K for the fiscal quarter in which the plan was adopted or amended, subject to a maximum cooling-off period of one hundred twenty (120) days.
(ii) For all other Designated Insiders: The cooling-off period is thirty (30) days after the date of adoption or amendment of the plan.
(c) Insider Certification. Each 10b5-1 Plan adopted by a Designated Insider must include a written representation by the Designated Insider certifying that: (i) at the time of adoption of the plan, the Designated Insider is not aware of any MNPI about the Company or Company Securities; and (ii) the plan is being adopted in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 or this Policy.
(d) Single Active Plan. No Designated Insider may have more than one active 10b5-1 Plan at any time, except that a Designated Insider may maintain a separate plan that provides solely for eligible sell-to-cover transactions to satisfy tax withholding obligations arising from the vesting of equity awards. For purposes of this Policy, a plan is considered "active" from the date of its adoption until the earlier of (i) the completion of all transactions contemplated by the plan, (ii) the expiration of the plan by its terms, or (iii) the termination of the plan.
(e) Single-Trade Plans. A Designated Insider may not adopt more than one 10b5-1 Plan that is designed to effect a single transaction (a "single-trade plan") in any consecutive twelve (12)-month period. This limitation is intended to prevent the misuse of single-trade plans as a means of circumventing the protections afforded by the pre-clearance process and blackout period restrictions.
The Compliance Officer will review each proposed 10b5-1 Plan for compliance with this Policy and Rule 10b5-1 and will notify the Designated Insider in writing whether the plan has been approved. The Compliance Officer may consult with outside counsel (Calderwood & Harkness LLP) in connection with the review of any proposed plan. The Compliance Officer may require modifications to the plan as a condition of approval.
Section 6.3 — Modification and Termination of 10b5-1 Plans
Any modification of an existing 10b5-1 Plan — including any change to the amount, price, or timing of transactions, any change to the formula or algorithm governing trades, or any change to the duration of the plan — is treated as the termination of the existing plan and the adoption of a new plan. Accordingly, any modification is subject to all of the requirements applicable to the adoption of a new plan, including the requirement to adopt the modification during an open trading window when the Designated Insider is not in possession of MNPI, and the requirement to observe a new cooling-off period before the first trade under the modified plan.
Termination of a 10b5-1 Plan before its scheduled completion date must be reported promptly to the Compliance Officer and should be undertaken only with the prior approval of the Compliance Officer. Designated Insiders should be aware that frequent or untimely terminations and re-adoptions of 10b5-1 Plans may call into question the good-faith nature of the plans and may undermine the availability of the affirmative defense under Rule 10b5-1. The SEC has stated that a pattern of terminating plans shortly before a trade would have been executed, or adopting and terminating plans in rapid succession, is inconsistent with the requirement that plans be adopted and operated in good faith.
Section 6.4 — Company's Right to Refuse or Suspend
The Company reserves the right, in its sole discretion, to refuse to approve any proposed 10b5-1 Plan, or to require the suspension of trades under an existing 10b5-1 Plan, under any of the following circumstances:
(a) The Compliance Officer determines that the proposed plan does not comply with Rule 10b5-1 or this Policy;
(b) The Company has imposed or intends to impose an event-specific blackout period that would conflict with scheduled trades under the plan;
(c) The Compliance Officer determines that execution of trades under the plan could create the appearance of impropriety or could adversely affect the Company's interests;
(d) The Company becomes aware of facts or circumstances suggesting that the plan was not adopted in good faith or that the plan is being used as part of a scheme to evade the prohibitions of Rule 10b-5; or
(e) Any other circumstance in which the Compliance Officer, after consultation with outside counsel if appropriate, determines that suspension or refusal is warranted.
The Company's decision to refuse or suspend a 10b5-1 Plan shall be communicated to the affected Designated Insider in writing, but the Company is not obligated to disclose the specific reasons for the decision if doing so would require disclosure of MNPI.
ARTICLE VII — POST-TRADE REPORTING AND SECTION 16 COMPLIANCE
Section 7.1 — Section 16 Filing Obligations
Section 16(a) of the Exchange Act requires that each Section 16 Insider file reports with the SEC disclosing their beneficial ownership of, and transactions in, Company Securities. The specific filing obligations are as follows:
(a) Form 3 — Initial Statement of Beneficial Ownership. Each Section 16 Insider must file a Form 3 with the SEC disclosing their beneficial ownership of Company Securities within ten (10) days of becoming a Section 16 Insider. In connection with the Company's initial public offering, all Section 16 Insiders will be required to file their initial Form 3 on or before the date of effectiveness of the Registration Statement on Form S-1.
(b) Form 4 — Statement of Changes in Beneficial Ownership. Each Section 16 Insider must file a Form 4 with the SEC within two (2) business days of any change in their beneficial ownership of Company Securities, including any purchase, sale, gift, option exercise, vesting of equity awards, or other transaction. Given the extremely tight filing deadline, Section 16 Insiders must provide advance notice of any proposed transaction to the General Counsel's office to ensure that the necessary Form 4 can be prepared and filed in a timely manner.
(c) Form 5 — Annual Statement of Beneficial Ownership. Each Section 16 Insider must file a Form 5 with the SEC within forty-five (45) days after the end of the Company's fiscal year (i.e., by February 14 of the following year) to report any transactions that were not previously reported on a Form 4, including certain exempt transactions. If all transactions have been previously reported on Forms 4, a Form 5 is still required unless the Section 16 Insider has filed all required reports and has no transactions to report.
The Company, through the General Counsel's office, will assist Section 16 Insiders with the preparation and timely filing of all Section 16 reports, including the establishment and maintenance of EDGAR filing codes. However, the ultimate legal responsibility for the accuracy and timeliness of Section 16 filings rests with the individual Section 16 Insider, and late or inaccurate filings may result in SEC enforcement action, public disclosure of delinquent filings (on the Company's proxy statement), and reputational harm. Section 16 Insiders should provide prompt and complete information to the General Counsel's office regarding all transactions in Company Securities and should not execute any transaction without providing advance notice sufficient to permit timely filing of the required Form 4.
Section 7.2 — Section 16(b) Short-Swing Profits