Exhibit 10.3

 

STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement (“Agreement”) is made and entered into on July 28,
2015 (“Effective Date”), by and between Immune Pharmaceuticals Inc., a Delaware
corporation (“Company”), and the investor whose name appears on the signature
page hereto (“Investor”).

 

Recitals

 

A.           The parties desire that, upon the terms and subject to the
conditions herein, Investor will purchase up to $7.8 million in shares of Series
D Redeemable Convertible Preferred Stock of the Company, which is convertible
into Common Stock at $2.50 per share; and

 

B.           The offer and sale of the Preferred Shares provided for herein are
being made pursuant to the exemptions from registration under Section 4(a)(2) of
the Act as a transaction by an issuer not involving any public offering, and as
a private placement of restricted securities pursuant to Regulation S and Rule
506 of Regulation D.

 

Agreement

 

In consideration of the foregoing, the receipt and adequacy of which are hereby
acknowledged, Company and Investor agree as follows:

 

I.           Definitions. In addition to the terms defined elsewhere in this
Agreement and the Transaction Documents, capitalized terms that are not
otherwise defined have the meanings set forth in the Glossary of Defined Terms
attached hereto as Exhibit 1.

 

II.          Purchase and Sale.

 

A.           Purchase Amount. Subject to the terms and conditions herein and the
satisfaction of the conditions to Closing set forth below, Investor hereby
irrevocably agrees to purchase 503 Preferred Shares of Company at $10,000.00 per
share with a 5.0% original issue discount (“OID”) for the sum of $4,782,589.00
(“Purchase Amount”) in cash.

 

B.           Deliveries. The following documents will be fully executed and
delivered at the Closing:

 

1.          Certificate of Designations (“Certificate of Designations”), in the
form attached hereto as Exhibit 2, as filed with and accepted by the Secretary
of State of Company’s state of incorporation;

 

2.          Transfer Agent Instructions, in the form attached hereto as Exhibit
3;

 

3.          Legal Opinion, in the form attached hereto as Exhibit 4;

 

4.          Officer’s Certificate, in the form attached hereto as Exhibit 5;

 

5.          Secretary’s Certificate, in the form attached hereto as Exhibit 6;

 

 

 

  

6.          Voting Agreements, in the form attached hereto as Exhibit 7, from
ten or fewer stockholders that in the aggregate beneficially own more than 50%
of the total voting power of Common Stock and preferred stock voting together
with the Common Stock as a single class outstanding as of the record date for
Company’s next meeting of stockholders; and

 

7.          Stock certificate for 503 Preferred Shares in the name of Investor.

 

C.           Closing Conditions. The consummation of the transactions
contemplated by this Agreement (“Closing”) is subject to the satisfaction of
each of the following conditions:

 

1.          All documents, instruments and other writings required to be
delivered by Company to Investor pursuant to any provision of this Agreement or
in order to implement and effect the transactions contemplated herein have been
fully executed and delivered, including without limitation those enumerated in
Section II.B above;

 

2.          The Common Stock is listed for and currently trading on the same or
higher Trading Market and, subject to Section IV.L below, Company is in
compliance with all requirements to maintain listing on the Trading Market, and
there is no notice of any suspension or delisting with respect to the trading of
the shares of Common Stock on such Trading Market;

 

3.          The representations and warranties of Company and Investor set forth
in this Agreement are true and correct in all material respects as if made on
such date (except for representations and warranties expressly made as of a
specified date, which shall be true as of such date);

 

4.          No material breach or default has occurred under any Transaction
Document or any other agreement between Company and Investor;

 

5.          Company has the number of duly authorized shares of Common Stock
reserved for issuance as required pursuant to the terms of this Agreement;

 

6.          There is not then in effect any law, rule or regulation prohibiting
or restricting the transactions contemplated in any Transaction Document, or
requiring any consent or approval which will not have been obtained except for
the Approval, nor is there any pending or, to Company’s knowledge threatened,
proceeding or investigation which may have the effect of prohibiting or
adversely affecting any of the transactions contemplated by this Agreement; no
statute, rule, regulation, executive order, decree, ruling or injunction will
have been enacted, entered, promulgated or adopted by any court or governmental
authority of competent jurisdiction that prohibits the transactions contemplated
by this Agreement, and no actions, suits or proceedings will be in progress,
pending or, to Company’s knowledge threatened, by any person other than Investor
or any Affiliate of Investor, that seek to enjoin or prohibit the transactions
contemplated by this Agreement; and

 

7.          Any rights of first refusal, preemptive rights, rights of
participation, or any similar right to participate in the transactions
contemplated by this Agreement, if any, have been waived in writing.

 

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D.           Closing. Immediately when all conditions set forth in Section II.C
have been fully satisfied, Company will issue and sell to Investor and Investor
will purchase 503 Preferred Shares by payment to Company of $4,782,589.00 in
cash, by wire transfer of immediately available funds to an account designated
by Company.

 

E.           Company Option. At any time within 1 Trading Day after the
Registration Statement has been declared effective, Company may, in its sole
discretion, deliver written notice to Investor of Company’s election to sell to
Investor 316 additional Preferred Shares at $10,000.00 per Preferred Share with
a 5.0% OID for the sum of $3,000,000.00. Subject to Approval having been
obtained and the terms and conditions herein, immediately when all conditions in
Section II.C have been fully satisfied as of such date, (1) Investor will
purchase and make payment for the specified number of additional Preferred
Shares by payment to Company in cash, by wire transfer of immediately available
funds to an account designated by Company, and (2) Company will deliver to
Purchaser by reputable overnight courier, immediately upon receipt of the funds,
a stock certificate representing the purchased Preferred Shares.

 

III.         Representations and Warranties.

 

A.           Representations Regarding Transaction. Except as set forth under
the corresponding section of the Disclosure Schedules, if any, Company hereby
represents and warrants to, and as applicable covenants with, Investor as of the
Closing:

 

1.          Organization and Qualification. Company and each Subsidiary is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, as applicable, with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Neither Company nor any Subsidiary is in violation or default of any
of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents, except as would not
reasonably be expected to result in a Material Adverse Effect. Each of Company
and each Subsidiary is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not reasonably be expected to result in a
Material Adverse Effect and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

 

2.          Authorization; Enforcement. Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder or thereunder. The execution and delivery of each of the
Transaction Documents by Company and the consummation by it of the transactions
contemplated hereby or thereby have been duly authorized by all necessary action
on the part of Company and no further consent or action is required by Company.
Each of the Transaction Documents has been, or upon delivery will be, duly
executed by Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of Company, enforceable against
Company in accordance with its terms, except (a) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, (b) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (c) insofar as
indemnification and contribution provisions may be limited by applicable law.

 

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3.          No Conflicts. The execution, delivery and performance of the
Transaction Documents by Company, the issuance and sale of the Shares and the
consummation by Company of the other transactions contemplated thereby do not
and will not (a) conflict with or violate any provision of Company’s or any
Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, (b) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, result in the creation of any Lien upon any of the properties or assets
of Company or any Subsidiary, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any material agreement, credit facility, debt or other instrument
(evidencing Company or Subsidiary debt or otherwise) or other understanding to
which Company or any Subsidiary is a party or by which any property or asset of
Company or any Subsidiary is bound or affected, (c) conflict with or result in a
violation of any material law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which
Company or a Subsidiary is subject (including U.S. federal and state securities
laws and regulations), or by which any property or asset of Company or a
Subsidiary is bound or affected, or (d) conflict with or violate the terms of
any material agreement by which Company or any Subsidiary is bound or to which
any property or asset of Company or any Subsidiary is bound or affected; except
in the case of each of clauses (b), (c) and (d), such as would not reasonably be
expected to result in a Material Adverse Effect.

 

4.          Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of Company, threatened
against or affecting Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign)
(collectively, an “Action”), which would reasonably be expected to adversely
affect or challenge the legality, validity or enforceability of any of the
Transaction Documents or the issuance of any Shares hereunder. The Commission
has not issued any stop order or other order suspending the effectiveness of any
registration statement filed by Company or any Subsidiary under the Exchange Act
or the Act.

 

5.          Filings, Consents and Approvals. Neither Company nor any Subsidiary
is required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by Company of the Transaction Documents,
other than the Approval and required federal and state securities filings and
such filings and approvals as are required to be made or obtained under the
applicable Trading Market rules in connection with the transactions contemplated
hereby, each of which has been, or if not yet required to be filed will be,
timely filed.

 

6.          Issuance of Shares. The Shares are duly authorized and, when issued
and paid for in accordance with the applicable Transaction Documents, will be
duly and validly issued, fully paid and nonassessable, free and clear of all
Liens. Company has reserved and will continue to reserve from its duly
authorized capital stock sufficient shares of its Common Stock for issuance
pursuant to the Transaction Documents.

 

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7.          Disclosure; Non-Public Information. Company will timely file a
current report on Form 8-K within two Trading Days of the Effective Date
describing the material terms and conditions of this Agreement. Notwithstanding
any other provision, except with respect to information that must be, and only
to the extent that it actually is, timely publicly disclosed by Company pursuant
to the foregoing sentence, neither Company nor any other Person acting on its
behalf has provided Investor or its representatives, agents or attorneys with
any information that constitutes or might constitute material, non-public
information, including without limitation this Agreement and the Exhibits and
Disclosure Schedules hereto. No information contained in the Disclosure
Schedules constitutes material non-public information. There is no adverse
material information regarding Company that has not been publicly disclosed
prior to the Effective Date. Company understands and confirms that Investor will
rely on the foregoing representations and covenants in effecting transactions in
securities of Company. All disclosure provided to Investor regarding Company,
its business and the transactions contemplated hereby, including without
limitation the Disclosure Schedules, furnished by or on behalf of Company with
respect to the representations and warranties made herein are true and correct
in all material respects and do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.

 

8.          No Integrated Offering. Neither Company, nor any of its Affiliates,
nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering to be integrated with prior
offerings by Company that cause a violation of the Act or any applicable
stockholder approval provisions, including, without limitation, under the rules
and regulations of the Trading Market.

 

9.          Financial Condition. Based on the financial condition of Company and
its projected operating and capital requirements, effective as of the Effective
Date, the Company will require additional capital to carry on its business as
now conducted and as proposed to be conducted. Company does not incur debts
beyond its ability to pay such debts as they mature, taking into account the
timing and amounts of cash to be payable on or in respect of its debt. The
Public Reports set forth as of the dates thereof all outstanding secured and
unsecured Indebtedness of Company or any Subsidiary, or for which Company or any
Subsidiary has commitments, and any material default with respect to any
Indebtedness.

 

10.         Section 5 Compliance. No representation or warranty or other
statement made by Company in the Transaction Documents contains any untrue
statement or omits to state a material fact necessary to make any of them, in
light of the circumstances in which it was made, not misleading. Company is not
aware of any facts or circumstances that would cause the transactions
contemplated by the Transaction Documents, when consummated, to violate Section
5 of the Act or other federal or state securities laws or regulations.

 

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11.         Investment Company. Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Preferred Shares, will not be or be
an Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. Company will conduct its business in a manner
so that it will not become subject to the Investment Company Act.

 

12.         Acknowledgments Regarding Investor. Company’s decision to enter into
this Agreement has been based solely on the independent evaluation of Company
and its representatives, and Company acknowledges and agrees that:

 

a.           Investor is not, has never been, and as a result of the
transactions contemplated by the Transaction Documents will not become an
officer, director, insider, control person, to Company’s knowledge 10% or
greater shareholder, or otherwise an affiliate of Company as defined under Rule
12b-2 of the Exchange Act;

 

b.           Investor does not make or has not made any representations,
warranties or agreements with respect to the Shares, this Agreement, or the
transactions contemplated hereby other than those specifically set forth in
Section III.C below;

 

c.           The conversion of Preferred Shares and resale of Conversion Shares
will result in dilution, which may be substantial; the number of Conversion
Shares will increase in certain circumstances; and Company’s obligation to issue
and deliver Conversion Shares in accordance with this Agreement and the
Certificate of Designations is absolute and unconditional regardless of the
dilutive effect that such issuances may have; and

 

d.           Investor is acting solely in the capacity of arm’s length purchaser
with respect to this Agreement and the transactions contemplated hereby; neither
Investor nor any of its Affiliates, agents or representatives has or is acting
as a legal, financial, investment, accounting, tax or other advisor to Company,
or fiduciary of Company, or in any similar capacity; neither Investor nor any of
its Affiliates, agents or representatives has provided any legal, financial,
investment, accounting, tax or other advice to Company; any statement made in
connection with this Agreement or the transactions contemplated hereby is not
advice or a recommendation, and is merely incidental to Investor’s purchase of
the Shares.

 

13.         No Bad Actor Disqualification. Neither Company, any predecessor of
Company, any affiliate of Company, any director, executive officer, other
officer of Company participating in the offering, or any beneficial owner of 20%
or more of Company’s outstanding voting equity securities is subject to any bad
actor disqualification as provided in Rule 506(d) of Regulation D.

 

14.         Offshore Transaction. Company has not, and will not, engage in any
directed selling efforts, as defined in Regulation S, in the United States in
respect of any of the Preferred Shares. Company is offering and selling the
Preferred Shares only in offshore transactions, in accordance with Regulation S.
Company and its Affiliates have complied, and will comply, with the offering
restrictions requirements of Regulation S. Company has only offered, and will
only offer, the Preferred Shares to Investor.

 

B.           Representations Regarding Company. Except as set forth in any
Public Reports and attached exhibits, or under the corresponding section of the
Disclosure Schedules, if any, Company hereby represents and warrants to, and as
applicable covenants with, Investor as of the Closing:

 

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1.          Capitalization. The capitalization of the Company as of the
Effective Date is as described in the Public Reports. No Person has any right of
first refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents which
has not been waived or satisfied. Except as a result of the purchase and sale of
the Shares, there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock or securities convertible into or exercisable for shares of Common
Stock. The issuance and sale of the Shares will not obligate Company to issue
shares of Common Stock or other securities to any Person, other than Investor,
and will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange, or reset price under such securities. All of the
outstanding shares of capital stock of Company are validly issued, fully paid
and nonassessable, have been issued in material compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any stockholder,
the Board of Directors of Company or others is required for the issuance and
sale of the Shares except for the Approval. There are no stockholders
agreements, voting agreements or other similar agreements with respect to
Company’s capital stock to which Company is a party or, to the knowledge of
Company, between or among any of Company’s stockholders.

 

2.          Subsidiaries. All of the direct and indirect subsidiaries of Company
are set forth in the Public Reports or the corresponding section of the
Disclosure Schedules. Company owns, directly or indirectly, all of the capital
stock or other equity interests of each Subsidiary, and all of such directly or
indirectly owned capital stock or other equity interests are owned free and
clear of any Liens. All the issued and outstanding shares of capital stock of
each Subsidiary are duly authorized, validly issued, fully paid, nonassessable
and free of preemptive and similar rights to subscribe for or purchase
securities.

 

3.          Public Reports; Financial Statements. Company has filed all required
Public Reports for the one year preceding the Effective Date. As of their
respective dates or as subsequently amended, the Public Reports complied in all
material respects with the requirements of the Act and the Exchange Act and the
rules and regulations of the Commission promulgated thereunder, as applicable,
and none of the Public Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Company included in the Public Reports, as amended, comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with GAAP,
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of Company and its consolidated subsidiaries as of and for
the dates thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.

 

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4.          Material Changes. Since the end of the most recent year for which an
Annual Report on Form 10-K has been filed with the Commission, (a) there has
been no event, occurrence or development that has had, or that would reasonably
be expected to result in, a Material Adverse Effect, (b) Company has not
incurred any liabilities (contingent or otherwise) other than (i) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice, and (ii) liabilities not required to be reflected in Company’s
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (c) Company has not altered its method of accounting,
(d) Company has not declared or made any dividend or distribution of cash or
other property to its stockholders or purchased, redeemed or made any agreements
to purchase or redeem any shares of its capital stock, and (e) Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company equity incentive plans. Company does not have
pending before the Commission any request for confidential treatment of
information.

 

5.          Litigation. There is no Action pending or, to the knowledge of the
Company, threatened, which would reasonably be expected to result in a Material
Adverse Effect. Neither Company nor any Subsidiary, nor to the knowledge of
Company any director or officer thereof, is or has been the subject of any
Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been, and
to the knowledge of Company, there is not pending or contemplated, any
investigation by the Commission involving Company or any current or former
director or officer of Company.

 

6.          No Bankruptcy. There has not been any petition or application filed,
or any judicial or administrative proceeding commenced which has not been
discharged, by or against the Company or any Subsidiary or with respect to any
of the properties or assets of Company or any Subsidiary under any applicable
law relating to bankruptcy, insolvency, reorganization, fraudulent transfer,
compromise, arrangement of debt, creditors’ rights and no assignment has been
made by the Company or any Subsidiary for the benefit of creditors.

 

7.          Labor Relations. No material labor dispute exists or, to the
knowledge of Company, is imminent with respect to any of the employees of
Company, which would reasonably be expected to result in a Material Adverse
Effect.

 

8.          Compliance. Neither Company nor any Subsidiary (a) is in material
default under or in material violation of (and no event has occurred that has
not been waived that, with notice or lapse of time or both, would result in a
default by Company or any Subsidiary under), nor has Company or any Subsidiary
received notice of a claim that it is in material default under or that it is in
material violation of, any indenture, loan or credit agreement or any other
similar agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has been
waived), (b) is in violation of any order of any court, arbitrator or
governmental body, or (c) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws applicable to its business, except in
each case as would not reasonably be expected to have a Material Adverse Effect.

 

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9.          Regulatory Permits. Company and each Subsidiary possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the Public Reports, except where the
failure to possess such permits would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.

 

10.         Title to Assets. Company and each Subsidiary have good and
marketable title in fee simple to all real property owned by them that is
material to the business of Company and each Subsidiary and good and marketable
title in all personal property owned by them that is material to the business of
Company and each Subsidiary, in each case free and clear of all Liens, except
for Liens that do not 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 Company and each Subsidiary and Liens for the payment of federal, state or
other taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by Company and each
Subsidiary are held by them under valid, subsisting and enforceable leases of
which Company and each Subsidiary are in compliance.

 

11.         Patents and Trademarks. Company and each Subsidiary have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the Public Reports and which the failure
to so have would have a Material Adverse Effect (collectively, “Intellectual
Property Rights”). Neither Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by Company or any Subsidiary
violates or infringes upon the rights of any Person. To the knowledge of
Company, all such Intellectual Property Rights are enforceable and there is no
existing infringement by another Person of any of the Intellectual Property
Rights of Company or each Subsidiary.

 

12.         Insurance. Company and each Subsidiary are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which Company and each
Subsidiary are engaged, including but not limited to directors and officers
insurance coverage at least equal to the Purchase Amount. To Company’s
knowledge, such insurance contracts and policies are accurate and complete in
all material respects. Neither Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without an increase in cost that
would constitute a Material Adverse Effect.

 

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13.         Transactions with Affiliates and Employees. None of the officers or
directors of Company and, to the knowledge of Company, none of the employees of
Company is presently a party to any transaction with Company or any Subsidiary
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of Company, any entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $120,000 other than (i)
for payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of Company and (iii) for other
employee benefits, including stock option agreements under any equity incentive
plan of Company.

 

14.         Sarbanes-Oxley; Internal Accounting Controls. Company is in material
compliance with all provisions of the Sarbanes-Oxley Act of 2002, which are
applicable to it as of the date of the Closing. Company presented in its most
recently filed periodic report under the Exchange Act the conclusions of the
certifying officers about the ineffectiveness of Company’s disclosure controls
and procedures based on their evaluations as of the evaluation date. Since the
date of the most recently filed periodic report under the Exchange Act, there
have been no significant changes in Company’s internal accounting controls or
its disclosure controls and procedures or, to Company’s knowledge, in other
factors that could materially affect Company’s internal accounting controls or
its disclosure controls and procedures.

 

15.         Certain Fees. No brokerage or finder’s fees or commissions are or
will be payable to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. Notwithstanding any other
provision, Investor will have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this section that may be due in connection with the transactions
contemplated by this Agreement or the other Transaction Documents.

 

16.         Registration Rights. No Person has any right to cause Company to
effect the registration under the Act of any securities of Company.

 

17.         Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12 of the Exchange Act, and Company has taken no action
designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has
Company received any notification that the Commission is contemplating
terminating such registration. Company has not, in the 12 months preceding the
Effective Date, received notice from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that Company is not in
compliance with the listing or maintenance requirements of such Trading Market.
Company is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and maintenance
requirements.

 

18.         Application of Takeover Protections. Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under Company’s Certificate of Incorporation (or similar
charter documents) or the laws of its state of incorporation that is or could
become applicable to Investor as a result of Investor and Company fulfilling
their obligations or exercising their rights under the Transaction Documents,
including without limitation Company’s issuance of the Shares and Investor’s
ownership of the Shares.

 

10

 

  

19.         Tax Status. Company and each of its Subsidiaries has made or filed
all federal, state and foreign income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that Company and each of its Subsidiaries has set aside on
its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes). Company has not executed a waiver with respect to the statute
of limitations relating to the assessment or collection of any foreign, federal,
statute or local tax. None of Company’s tax returns is presently being audited
by any taxing authority. Company would not be classified as a PFIC for its most
recently completed taxable year, and does not expect to be classified as a PFIC
for its current taxable year.

 

20.         Foreign Corrupt Practices. Neither Company, nor to the knowledge of
Company, any agent or other person acting on behalf of Company, has (a) directly
or indirectly, used any corrupt funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (b) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (c) failed to disclose fully any
contribution made by Company, or made by any person acting on its behalf of
which Company is aware, which is in violation of law, or (d) violated in any
material respect any provision of the Foreign Corrupt Practices Act of 1977, as
amended.

 

21.         Accountants. Company’s accountants are set forth in the Public
Reports and such accountants are an independent registered public accounting
firm.

 

22.         No Disagreements with Accountants or Lawyers. There are no material
disagreements presently existing, or reasonably anticipated by Company to arise,
between Company and the accountants or lawyers formerly or presently employed by
Company.

 

23.         Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company or any Subsidiary.

 

C.           Representations and Warranties of Investor. Investor hereby
represents and warrants to Company as of the Closing as follows:

 

1.          Organization; Authority. Investor is an entity validly existing and
in good standing under the laws of the jurisdiction of its organization with
full right, company power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations thereunder. The execution, delivery and performance by
Investor of the transactions contemplated by this Agreement have been duly
authorized by all necessary company or similar action on the part of Investor.
Each Transaction Document to which it is a party has been, or will be, duly
executed by Investor, and when delivered by Investor in accordance with the
terms hereof, will constitute the valid and legally binding obligation of
Investor, enforceable against it in accordance with its terms, except (a) as
limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (b) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies, and (c) insofar as indemnification and contribution provisions may be
limited by applicable law.

 

11

 

  

2.          Investor Status. At the time Investor was offered the Shares, it
was, and at the Effective Date it is: (a) an accredited investor as defined in
Rule 501(a) under the Act; (b) not a registered broker-dealer, member of FINRA,
or an affiliate thereof; and (c) not a U.S. Person, and is not acquiring the
Shares for the account or beneficial ownership of any U.S. Person.

 

3.          Experience of Investor. Investor, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Shares, and has so evaluated the merits and
risks of such investment. Investor is able to bear the economic risk of an
investment in the Shares and, at the present time, is able to afford a complete
loss of such investment.

 

4.          Ownership. Investor is acquiring the Preferred Shares as principal
for its own account. Investor will not engage in hedging transactions with
regard to the Shares unless in compliance with the Act, and will resell the
Shares only pursuant to registration under the Act or an available exemption
therefrom.

 

5.          No Short Sales. Neither Investor nor any Affiliate holds any short
position in, nor has engaged in any Short Sales of the Common Stock, or engaged
in any hedging transactions with regard to the Shares prior to the Effective
Date.

 

IV.          Securities and Other Provisions.

 

A.           Investor Due Diligence. Investor will have the right and
opportunity to conduct customary due diligence with respect to any Registration
Statement or Prospectus in which the name of Investor or any Affiliate of
Investor appears.

 

B.           Furnishing of Information. As long as Investor owns any Shares,
Company will timely file all reports required to be filed by Company after the
Effective Date pursuant to the Exchange Act. As long as Investor owns any
Shares, Company will prepare and make publicly available such information as is
required for Investor to sell its Conversion Shares under Rule 144. Company
further covenants that, as long as Investor owns any Shares, Company will take
such further action as Investor may reasonably request, all to the extent
required from time to time to enable Investor to sell its Conversion Shares
without registration under the Act within the limitation of the exemptions
provided by Rule 144.

 

C.           Integration. Company will not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security, as defined in
Section 2 of the Act, that would be integrated with the offer or sale of the
Shares to Investor for purposes of the rules and regulations of any Trading
Market such that it would require stockholder approval prior to the closing of
such other transaction unless stockholder approval is obtained before the
closing of such subsequent transaction.

 

12

 

  

D.           Disclosure and Publicity. Company will notify Investor prior to
issuing any current report, press release, public statement or communication
with respect to the transactions contemplated hereby.

 

E.           Shareholders Rights Plan. No claim will be made or enforced by
Company or, to the knowledge of Company, any other Person that Investor is an
“Acquiring Person” under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by Company, or that Investor could be
deemed to trigger the provisions of any such plan or arrangement, in either such
case, by virtue of receiving Shares under the Transaction Documents or under any
other agreement between Company and Investor. Company will conduct its business
in a manner so that it will not become subject to the Investment Company Act of
1940, as amended.

 

F.           No Non-Public Information. Company covenants and agrees that
neither it nor any other Person acting on its behalf will, provide Investor or
its agents or counsel with any information that Company believes or reasonably
should believe will constitute material non-public information after Closing. On
and after Closing, neither Investor nor any Affiliate of Investor will have any
duty of trust or confidence that is owed directly, indirectly, or derivatively,
to Company or the stockholders of Company, or to any other Person who is the
source of material non-public information regarding Company. Company understands
and confirms that Investor will be relying on the foregoing in effecting
transactions in securities of Company, including without limitation sales of the
Shares.

 

13

 

  

G.           Indemnification of Investor.

 

1.          Obligation to Indemnify. Subject to the provisions of this Section
IV.G, Company will indemnify and hold Investor, its Affiliates, managers and
advisors, and each of their officers, directors, shareholders, partners,
employees, representatives, agents and attorneys, and any person who controls
Investor within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act (collectively, “Investor Parties” and each a “Investor Party”),
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, reasonable costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation (collectively, “Losses”) that any Investor Party may
suffer or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by Company in this
Agreement or in the other Transaction Documents, (b) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, Prospectus, Prospectus Supplement, or any information incorporated by
reference therein, or arising out of or based upon any omission or alleged
omission 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, or (c) any action by a creditor or stockholder of Company who is not
an Affiliate of an Investor Party, challenging the transactions contemplated by
the Transaction Documents; provided, however, that Company will not be obligated
to indemnify any Investor Party for any Losses finally adjudicated to be caused
solely by (i) a false statement of material fact contained within written
information provided by such Investor Party expressly for the purpose of
including it in the applicable Registration Statement, Prospectus, Prospectus
Supplement, or (ii) such Investor Party’s unexcused material breach of an
express provision of this Agreement or another Transaction Document.

 

2.          Procedure for Indemnification. If any action will be brought against
an Investor Party in respect of which indemnity may be sought pursuant to this
Agreement, such Investor Party will promptly notify Company in writing, and
Company will have the right to assume the defense thereof with counsel of its
own choosing. Investor Parties will have the right to employ separate counsel in
any such action and participate in the defense thereof, but the reasonable fees
and expenses of such counsel will be at the expense of Investor Parties except
to the extent that (a) the employment thereof has been specifically authorized
by Company in writing, (b) Company has failed after a reasonable period of time
to assume such defense and to employ counsel or (c) in such action there is, in
the reasonable opinion of such separate counsel, a material conflict with
respect to the dispute in question on any material issue between the position of
Company and the position of Investor Parties such that it would be inappropriate
for one counsel to represent Company and Investor Parties. Company will not be
liable to Investor Parties under this Agreement (i) for any settlement by an
Investor Party effected without Company’s prior written consent, which will not
be unreasonably withheld or delayed; or (ii) to the extent, but only to the
extent that a loss, claim, damage or liability is either attributable to
Investor’s breach of any of the representations, warranties, covenants or
agreements made by Investor in this Agreement or in the other Transaction
Documents. In no event will the Company be liable for the reasonable fees and
expenses for more than one separate firm of attorneys (plus local counsel as
applicable) to represent all Investor Parties.

 

3.          Other than the liability of Investor to Company for uncured material
breach of the express provisions of this Agreement, no Investor Party will have
any liability to Company or any Person asserting claims on behalf of or in right
of Company as a result of acquiring the Shares under this Agreement.

 

14

 

  

H.           Reservation of Shares. Company will at all times maintain a reserve
from its duly authorized Common Stock for issuance pursuant to the Transaction
Documents authorized shares of Common Stock in an amount equal to thrice the
number of shares sufficient to immediately issue all Conversion Shares
potentially issuable at such time.

 

I.           Activity Restrictions. For so long as Investor or any of its
Affiliates holds any Shares, except with regard to the Voting Agreements,
neither Investor nor any Affiliate will: (1) vote any shares of Common Stock
owned or controlled by it, sign or solicit any proxies, or seek to advise or
influence any Person with respect to any voting securities of Company; (2)
engage or participate in any actions, plans or proposals which relate to or
would result in (a) acquiring additional securities of Company, alone or
together with any other Person, which would result in beneficially owning or
controlling more than 9.99% of the total outstanding Common Stock or other
voting securities of Company, (b) an extraordinary corporate transaction, such
as a merger, reorganization or liquidation, involving Company or any of its
Subsidiaries, (c) a sale or transfer of a material amount of assets of Company
or any of its Subsidiaries, (d) any change in the present board of directors or
management of Company, including any plans or proposals to change the number or
term of directors or to fill any existing vacancies on the board, (e) any
material change in the present capitalization or dividend policy of Company, (f)
any other material change in Company’s business or corporate structure,
including but not limited to, if Company is a registered closed-end investment
company, any plans or proposals to make any changes in its investment policy for
which a vote is required by Section 13 of the Investment Company Act of 1940,
(g) changes in Company’s charter, bylaws or instruments corresponding thereto or
other actions which may impede the acquisition of control of Company by any
Person, (h) a class of securities of Company being delisted from a national
securities exchange or to cease to be authorized to be quoted in an inter-dealer
quotation system of a registered national securities association, (i) a class of
equity securities of Company becoming eligible for termination of registration
pursuant to Section 12(g)(4) of the Act, or (j) any action, intention, plan or
arrangement similar to any of those enumerated above; or (3) request Company or
its directors, officers, employees, agents or representatives to amend or waive
any provision of this section.

 

J.           No Shorting. Provided no Trigger Event under Sections I.H.(1), (5),
(6), (7), (8), or (9) of the Certificate of Designations has occurred, for so
long as Investor holds any Shares, neither Investor nor any of its Affiliates
will engage in or effect, directly or indirectly, any Short Sale of Common
Stock. For the avoidance of doubt, selling against delivery of Conversion Shares
after delivery of a Conversion Notice is not a Short Sale. There will be no
restriction or limitation of any kind on Investor’s right or ability to sell or
transfer any or all of the Conversion Shares at any time, in its sole and
absolute discretion. Investor may not sell, transfer or assign any Preferred
Shares or any of its rights under this Agreement.

 

K.          Stock Splits. If Company at any time on or after the Effective Date
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
or combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater or lesser
number of shares, the share numbers, prices and other amounts set forth in this
Agreement, as in effect immediately prior to such subdivision or combination,
will be proportionately reduced or increased, as applicable, effective at the
close of business on the date the subdivision or combination becomes effective.

 

15

 

  

L.           Subsequent Financings. As long as Investor holds any Preferred
Shares, Company will not enter into any agreement that in any way restricts its
ability to enter into any agreement, amendment or waiver with Investor,
including without limitation any agreement to offer, sell or issue to Investor
any preferred stock, common stock or other securities of Company. Until six
months after Closing, Company will not enter into any financing that uses a
shelf registration or contains registration rights, other than: (a) with
Investor, (b) in connection with a strategic transaction, (c) the sale of Common
Stock at a fixed price of $3.50 per share or greater, or (d) a debt and warrant
financing up to $10,000,000 with Hercules Growth Capital or its Affiliates. For
the avoidance of doubt, Company may enter into an unregistered financing of debt
or restricted stock with no registration rights.

 

M.          Approval. Company will use its best efforts to obtain shareholder
approval of this Agreement in accordance with the requirements of NASDAQ Listing
Rule 5635(d) or a waiver from NASDAQ of Listing Rule 5635(d) (“Approval”) as
soon as practicable after the Effective Date. Company will not issue any
additional shares of Common Stock until after the record date for its next
meeting of stockholders, and will seek Approval by such meeting. Company, its
board of directors, and each of its directors will vote all proxies given to
them in favor of Approval.

 

N.           Principal Market Regulation. Company will not issue any Conversion
Shares if the issuance of shares of Common Stock would exceed the aggregate
number of shares of Common Stock the Company may issue upon conversion of
Preferred Shares, collectively with certain additional shares of Common Stock
issued or issuable pursuant other Company’s transactions that are aggregated
under the NASDAQ Rules, without breaching Company’s obligations under NASDAQ
Listing Rule 5635(d), except that such limitation will not apply (1) following
Approval or (2) if Investor or Company obtains a written opinion from counsel
that such Approval is not required.

 

O.           Restrictive Legend. The Shares have not been registered under the
Act and may not be resold in the United States unless registered or an exemption
from registration is available. Company is required to refuse to register any
transfer of the Shares not made pursuant to registration under the Act or an
available exemption from registration. Upon the issuance thereof, and only until
such time as the same is no longer required under the applicable securities laws
and regulations, the certificates representing any of the Shares will bear a
legend in substantially the following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE
OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OR TO U.S. PERSONS
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE ACT. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE CONDUCTED unless in compliance with the ACT.

 

16

 

  

Share certificates will be issued without such legend or at Investor’s option
issue electronic delivery at the applicable balance account at DTC, if either
(i) the Shares are registered for resale under the Act, or (ii) Investor
provides an opinion of its counsel to the effect that the Shares may be issued
without restrictive legend.

 

V.          Registration Statement.

 

A.           Filing.

 

1.          Company will at its sole cost and expense prepare and file with the
Commission as promptly as practicable after the Effective Date, and in any event
within 30 days, a Registration Statement on Form S-3 (“Registration Statement”)
registering the delayed and continuous resale of all Conversion Shares pursuant
to Rule 415 under the Act, and will use reasonable best efforts to cause such
Registration Statement to be declared effective under the Act as promptly as
practicable, and to remain continuously effective until all Conversion Shares
may be resold by Investor pursuant to Rule 144 without volume restrictions,
manner-of-sale restrictions, or Company being in compliance with any current
public information requirement (the “Registration Period”).

 

2.          If Company breaches its obligations under the preceding paragraph,
and Company is not thereafter eligible to register for resale the Conversion
Shares on Form S-3, it shall file a Registration Statement on Form S-1, but such
obligation and filing shall not operate to cure or excuse such breach. If at any
after the initial registration Statement is filed on Form S-3, the Registration
Statement may not remain effective on Form S-3, Company shall use reasonable
best efforts to amend the Registration Statement on Form S-1.

 

B.           Procedures. In connection with the Registration Statement, Company
will, as soon as reasonably practicable:

 

1.          Prepare and file with the Commission such pre-effective and
post-effective amendments and supplements to the Registration Statement and the
Prospectus used in connection with the Registration Statement, and file such
reports under the Exchange Act, as may be necessary to cause the Registration
Statement to become effective, to keep the Registration Statement continuously
effective during the Registration Period and not misleading, and as may
otherwise be required or applicable under, and to comply with the provisions of,
the Act with respect to the disposition of all Conversion Shares covered by the
Registration Statement during the Registration Period.

 

2.          Furnish to Investor such number of copies of the Prospectus, and
each amendment or supplement thereto, in conformity with the requirements of the
Act, and such other documents as Investor may reasonably request in order to
facilitate the disposition of Conversion Shares owned by it.

 

17

 

  

3.          Notify Investor: (a) when a Prospectus or any Prospectus supplement
or post-effective amendment is proposed to be filed and, with respect to any
post-effective amendment, when the same has become effective, except for any
filing to be made solely to incorporate by reference a Current Report on Form
8-K, Quarterly Report on Form 10-Q or Annual Report on Form 10-K to be filed
with the Commission; (b) of any request by the Commission or any other federal
or state governmental authority for amendments or supplements to a Registration
Statement or a Prospectus or for additional information; (c) of the issuance by
the Commission of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose; (d) of the
receipt by the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Conversion Shares
for sale in any jurisdiction, or the initiation or threatening of any proceeding
for such purpose, and (e) of the occurrence of any event or circumstance that
makes any statement made in the Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in the
Registration Statement, Prospectus or documents so that, in the case of a
Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, in no event shall any such notice contain any information
which would constitute material, non-public information regarding the Company.

 

4.          Use reasonable best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of, any order suspending the effectiveness of the
Registration Statement, or the lifting of any suspension of the qualification,
or exemption from qualification, of any of the Conversion Shares for sale in any
jurisdiction, at the earliest practicable moment.

 

5.          Incorporate in a Prospectus supplement or post-effective amendment
such information as Investor requests be included therein regarding Investor or
the plan of distribution of the Conversion Shares; and make all required filings
of the Prospectus supplement or such post-effective amendment as soon as
practicable after the Company has received notification of such matters to be
incorporated in such Prospectus supplement or post-effective amendment;
provided, however, that the Company shall not be required to take any action
pursuant to this paragraph that would violate applicable law.

 

6.          Whenever necessary, prepare and deliver to Investor any required
supplement or amendment, including a post-effective amendment, to the
Registration Statement or a supplement to the Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document, including such reports as may be required to be filed
under the Exchange Act, so that, as thereafter delivered, the Prospectus will
not contain 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,
in light of the circumstances under which they were made, not misleading.

 

7.          Use reasonable best efforts to cause all Conversion Shares to be
listed on the Trading Market or such other securities exchange or automated
quotation system, if any, as is then the principal securities exchange or
automated quotation system on which the Common Stock is then listed.

 

18

 

  

8.          Fully cooperate with the Transfer Agent, Investor and its brokers to
facilitate the timely clearing and delivery of Conversion Shares to be sold
pursuant to the Registration Statement free of any restrictive legends and in
such denominations and registered in such names as Investor may reasonably
request, including timely completion and delivery of all forms, documents and
instruments requested by the Transfer Agent or any broker.

 

VI.         General Provisions.

 

A.           Notice. Unless a different time of day or method of delivery is
specifically provided in the Transaction Documents, any and all notices or other
communications or deliveries required or permitted to be provided hereunder will
be in writing and will be deemed given and effective on the earliest of: (a) the
date of transmission, if such notice or communication is delivered via facsimile
or electronic mail prior to 5:00 p.m. Eastern time on a Trading Day and an
electronic confirmation of delivery is received by the sender, (b) the next
Trading Day after the date of transmission, if such notice or communication is
delivered later than 5:00 p.m. Eastern time or on a day that is not a Trading
Day, (c) the next Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The addresses for such
notices and communications are such other address as may be designated in
writing, in the same manner, by such Person.

 

B.           Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by Company and Investor or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought. No waiver of any default with respect
to any provision, condition or requirement of this Agreement will be deemed to
be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor will any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.

 

C.           No Third-Party Beneficiaries. Except as otherwise set forth in
Section IV.G, this Agreement and the Transaction Documents will inure solely to
the benefit of the parties hereto, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person. A Person who is not a party
to this Agreement shall not have any rights under the Contracts (Rights of Third
Parties) Law, 2014 of the Cayman Islands to enforce any term of this Agreement
or any Transaction Document.

 

D.           Fees and Expenses. Company has paid a flat rate documentation fee
to Investor’s counsel incurred in connection with drafting this Agreement and
the other Transaction Documents. Except as otherwise provided in this Agreement,
each party will pay the fees and expenses of its own advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of the Transaction Documents. Company acknowledges and agrees that
Investor’s counsel solely represents Investor, and does not represent Company or
its interests in connection with the Transaction Documents or the transactions
contemplated thereby. Company will pay all stamp and other taxes and duties, if
any, levied in connection with the sale or issuance of the Shares to Investor.

 

19

 

  

E.           Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement will not in any way be affected
or impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, will incorporate such substitute provision in this Agreement.

 

F.           Replacement of Certificates. If any certificate or instrument
evidencing any Shares is mutilated, lost, stolen or destroyed, Company will
issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances will also pay any reasonable third-party costs
associated with the issuance of such replacement certificates.

 

G.           Governing Law. All matters between the parties, including without
limitation questions concerning the construction, validity, enforcement and
interpretation of the Transaction Documents will be governed by and construed
and enforced in accordance with the laws of the Cayman Islands, without regard
to the principles of conflicts of law that would require or permit the
application of the laws of any other jurisdiction, except for corporation law
matters applicable to Company which will be governed by the corporate law of its
jurisdiction of formation. The parties hereby waive all rights to a trial by
jury. In any action, arbitration or proceeding, including appeal, arising out of
or relating to any of the Transaction Documents or otherwise involving the
parties, the prevailing party will be awarded its reasonable attorneys’ fees and
other costs and expenses reasonably incurred in connection with the
investigation, preparation, prosecution or defense of such action or proceeding.

 

H.           Arbitration. Any dispute, controversy, claim or action of any kind
arising out of, relating to, or in connection with this Agreement, or in any way
involving Company and Investor or their respective Affiliates, including any
issues of arbitrability, will be resolved solely by final and binding
arbitration in English before a retired judge at JAMS International, or its
successor, in the Territory of the Virgin Islands, pursuant to the most
expedited and Streamlined Arbitration Rules and Procedures available. Any
interim or final award may be entered and enforced by any court of competent
jurisdiction. The final award will include the prevailing party’s reasonable
arbitration, expert witness and attorney fees, costs and expenses.

 

I.           Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of
Investor and Company will be entitled to specific performance under the
Transaction Documents, and equitable and injunctive relief to prevent any actual
or threatened breach under the Transaction Documents, to the full extent
permitted under applicable laws.

 

J.           Payment Set Aside. To the extent that Company makes a payment or
payments to Investor pursuant to any Transaction Document or Investor enforces
or exercises its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to Company, a trustee, receiver or any other person under any law, including,
without limitation, any bankruptcy law, state or federal law, common law or
equitable cause of action, then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied will be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.

 

20

 

  

K.          Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and will not be deemed to limit or affect
any of the provisions hereof

 

L.           Time of the Essence. Time is of the essence with respect to all
provisions of this Agreement.

 

M.           Survival. The representations and warranties contained herein will
survive the Closing and the delivery of the Shares until all Preferred Shares
issued to Investor have been converted or redeemed.

 

N.           Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party will not be employed
in the interpretation of the Transaction Documents or any amendments hereto. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will
be applied against any party. All currency references in any Transaction
Document are to U.S. dollars.

 

O.           Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together will be considered one and the
same agreement and will become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by portable document format, facsimile or electronic transmission,
such signature will create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force and effect
as if such signature page were an original thereof.

 

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P.           Entire Agreement. This Agreement, including the Exhibits hereto,
which are hereby incorporated herein by reference, contains the entire agreement
and understanding of the parties, and supersedes all prior and contemporaneous
agreements, term sheets, letters, discussions, communications and
understandings, both oral and written, which the parties acknowledge have been
merged into this Agreement. No party, representative, advisor, attorney or agent
has relied upon any collateral contract, agreement, assurance, promise,
understanding, statement or representation not expressly set forth herein. The
parties hereby absolutely, unconditionally and irrevocably waive all rights and
remedies, at law and in equity, directly or indirectly arising out of or
relating to, or which may arise as a result of, any Person’s reliance on any
such statement or assurance.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized signatories on the Effective Date.

 

Company:       IMMUNE PHARMACEUTICALS INC.         By: /s/ Daniel G. Teper    
Name: Daniel G. Teper     Title: Chief Executive Officer    

 

By: /s/ Gad Berdugo     Name: Gad Berdugo     Title: Chief Financial Officer –  
    Executive VP Finance and Administration          

 

Investor:       /s/ Discover Growth Fund     Investor Name          

 

By: /s/ Miles Walton   Name: Miles Walton   Title: on behalf of Osiris
Management Services Ltd., Director         By: /s/ Stacey Olson   Name: Stacey
Olson   Title: on behalf of Osiris Management Services Ltd., Director  

  

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