Exhibit 10.1

 

CAPRICOR THERAPEUTICS, INC.

$14,000,000

cOMMON STOCK

SALES AGREEMENT

 

October 19, 2017

 

 

 

H.C. Wainwright & Co. LLC

430 Park Avenue

New York, NY 10022

 

Ladies and Gentlemen:

 

Capricor Therapeutics, Inc. (the “Company”), confirms its agreement (this
“Agreement”) with H.C. Wainwright & Co. LLC (“HCW”), as follows:

 

1.                Issuance and Sale of Placement Shares. The Company agrees
that, from time to time during the term of this Agreement, on the terms and
subject to the conditions set forth herein, it may issue and sell through HCW,
shares (the “Placement Shares”) of the Company’s common stock, $0.001 par value
per share (the “Common Stock”); provided however, that in no event shall the
Company issue or sell through HCW such number of Placement Shares that (a)
exceeds the number of shares or dollar amount of Common Stock registered on the
effective Registration Statement (as defined below) pursuant to which the
offering is being made, (b) exceeds the number of shares or dollar amount
registered on the Prospectus Supplement (as defined below), or (c) would cause
the Company to exceed the share amount limitations set forth in General
Instruction I.B.6 of Form S-3 (the lesser of (a), (b) or (c), the “Maximum
Amount”). Notwithstanding anything to the contrary contained herein, the parties
hereto agree that compliance with the limitations set forth in this Section 1 on
the number of Placement Shares issued and sold under this Agreement shall be the
sole responsibility of the Company and that HCW shall have no obligation in
connection with such compliance. The issuance and sale of Placement Shares
through HCW will be effected pursuant to the Registration Statement (as defined
below), although nothing in this Agreement shall be construed as requiring the
Company to use the Registration Statement to issue any Placement Shares.

 

The Company has filed, in accordance with the provisions of the Securities Act
of 1933, as amended, and the rules and regulations thereunder, also as amended
(the “Securities Act”), with the Securities and Exchange Commission (the
“Commission”), a registration statement on Form S-3 (File No. 333-207149),
including a base prospectus (the “Base Prospectus”), relating to certain
securities, including the Placement Shares to be issued from time to time by the
Company, and which incorporates by reference documents that the Company has
filed or will file in accordance with the provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, also as
amended (the “Exchange Act”). The Company has prepared a prospectus supplement
to the Base Prospectus included as part of such registration statement
specifically relating to the Placement Shares (the “Prospectus Supplement”). The
Company will furnish to HCW, for use by HCW solely in connection with the
Placements (as defined below) to be conducted in accordance with this Agreement,
copies of the Base Prospectus included as part of such registration statement,
as supplemented by the Prospectus Supplement, relating to the Placement Shares.
Except where the context otherwise requires, such registration statement,
including all documents filed as part thereof or incorporated by reference
therein, and including any information contained in a Prospectus (as defined
below) subsequently filed with the Commission pursuant to Rule 424(b) under the
Securities Act or deemed to be a part of such registration statement pursuant to
Rule 430B of the Securities Act, is herein called the “Registration Statement.”
The Base Prospectus, including all documents incorporated or deemed incorporated
therein by reference to the extent such information has not been superseded or
modified in accordance with Rule 412 under the Securities Act (as qualified by
Rule 430B(g) of the Securities Act), included in the Registration Statement, as
it may be supplemented by the Prospectus Supplement, in the form in which such
Base Prospectus and/or Prospectus Supplement have most recently been filed by
the Company with the Commission pursuant to Rule 424(b) under the Securities
Act, is herein called the “Prospectus.” Any reference herein to the Registration
Statement, the Prospectus or any amendment or supplement thereto shall be deemed
to refer to and include any documents deemed incorporated by reference therein
(pursuant to the Securities Act or the Exchange Act) (the “Incorporated
Documents”), and any reference herein to the terms “amend,” “amendment” or
“supplement” with respect to the Registration Statement or the Prospectus shall
be deemed to refer to and include the filing after the execution hereof of any
document with the Commission incorporated by reference therein.

 

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For purposes of this Agreement, all references to the Registration Statement,
the Prospectus or to any amendment or supplement thereto shall be deemed to
include the most recent copy filed with the Commission pursuant to its
Electronic Data Gathering Analysis and Retrieval System, or if applicable, the
Interactive Data Electronic Application system when used by the Commission
(collectively, “EDGAR”).

 

2.                Placements. Each time that the Company wishes to issue and
sell Placement Shares hereunder (each, a “Placement”), it will notify HCW by
email notice (or other method mutually agreed to in writing by the parties) (a
“Placement Notice”) containing the parameters in accordance with which it
desires the Placement Shares to be sold, which shall at a minimum include the
number of Placement Shares to be issued, the time period during which sales are
requested to be made, any limitation on the number of Placement Shares that may
be sold in any one Trading Day (as defined in Section 3) and any minimum price
below which sales may not be made, a form of which containing such minimum sales
parameters necessary is attached hereto as Schedule 1. The Placement Notice
shall originate from any of the individuals from the Company set forth on
Schedule 2 (with a copy to each of the other individuals from the Company listed
on such schedule), and shall be addressed to each of the individuals from HCW
set forth on Schedule 2, as such Schedule 2 may be amended from time to time.
The Placement Notice shall be effective upon receipt by HCW unless and until (i)
in accordance with the notice requirements set forth in Section 4, HCW declines
to accept the terms contained therein for any reason, in its sole discretion,
(ii) the entire amount of the Placement Shares included in the Placement Notice
have been sold thereunder, (iii) in accordance with the notice requirements set
forth in Section 4, the Company suspends or terminates the Placement Notice,
(iv) the Company issues a subsequent Placement Notice with parameters
superseding those on the earlier dated Placement Notice, or (v) this Agreement
has been terminated under the provisions of Section 11. The amount of any
discount, commission or other compensation to be paid by the Company to HCW in
connection with the sale of the Placement Shares shall be calculated in
accordance with the terms set forth in Schedule 3. It is expressly acknowledged
and agreed that neither the Company nor HCW will have any obligation whatsoever
with respect to a Placement or any Placement Shares unless and until the Company
delivers a Placement Notice to HCW and HCW does not decline such Placement
Notice pursuant to the terms set forth above, and then only upon the terms
specified therein and herein. In the event of a conflict between the terms of
this Agreement and the terms of a Placement Notice, the terms of the Placement
Notice will control.

 

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3.                Sale of Placement Shares by HCW.

 

(a)  Subject to the terms and conditions herein set forth, upon the Company’s
delivery of a Placement Notice, and unless the sale of the Placement Shares
described therein has been declined, suspended, or otherwise terminated in
accordance with the terms of this Agreement, HCW, for the period specified in
the Placement Notice, will use its commercially reasonable efforts consistent
with its normal trading and sales practices and applicable state and federal
laws, rules and regulations and the rules of the NASDAQ Capital Market
(“Exchange”) to sell such Placement Shares up to the amount specified, and
otherwise in accordance with the terms of such Placement Notice. HCW will
provide written confirmation to the Company (including by email correspondence
to each of the individuals of the Company set forth on Schedule 2, if receipt of
such correspondence is actually acknowledged by any of the individuals to whom
the notice is sent, other than via auto-reply) no later than the opening of the
Trading Day (as defined below) immediately following the Trading Day on which it
has made sales of Placement Shares hereunder setting forth the number of
Placement Shares sold on such day, the compensation payable by the Company to
HCW pursuant to Section 2 with respect to such sales and the Net Proceeds (as
defined below) payable to the Company. HCW may sell Placement Shares by any
method permitted by law deemed to be an “at the market” offering as defined in
Rule 415 of the Securities Act, including without limitation sales made through
Exchange, on any other existing trading market for the Common Stock or to or
through a market maker. If expressly authorized by the Company in a Placement
Notice, HCW may also sell Placement Shares in negotiated transactions.
Notwithstanding the provisions of Section 6(kk), HCW shall not purchase
Placement Shares for its own account as principal unless expressly authorized to
do so by the Company in a Placement Notice. The Company acknowledges and agrees
that (i) there can be no assurance that HCW will be successful in selling
Placement Shares, and (ii) HCW will incur no liability or obligation to the
Company or any other person or entity if it does not sell Placement Shares for
any reason other than a failure by HCW to use its commercially reasonable
efforts consistent with its normal trading and sales practices to sell such
Placement Shares as required under this Section 3. For the purposes hereof,
“Trading Day” means any day on which the Company’s Common Stock is purchased and
sold on the principal market on which the Common Stock is listed or quoted.

 

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(b) Limitations on Offering Size. Under no circumstances shall the Company cause
or request the offer or sale of any Placement Shares if, after giving effect to
the sale of such Placement Shares, the aggregate number of Placement Shares sold
pursuant to this Agreement would exceed the lesser of (A) together with all
sales of Placement Shares under this Agreement, the Maximum Amount, and (B) the
amount authorized from time to time to be issued and sold under this Agreement
by the Company’s board of directors, a duly authorized committee thereof or a
duly authorized executive committee, and notified to HCW in writing. Under no
circumstances shall the Company cause or request the offer or sale of any
Placement Shares pursuant to this Agreement, and HCW will not effectuate a sale,
at a price lower than the minimum price authorized from time to time by the
Company’s board of directors, a duly authorized committee thereof or a duly
authorized executive committee, and notified to HCW in writing. Further, under
no circumstances shall the Company cause or permit the aggregate offering amount
of Placement Shares sold pursuant to this Agreement to exceed the Maximum
Amount.

 

4.                Suspension of Sales.

 

(a)              The Company or HCW may, upon notice to the other party in
writing (including by email correspondence to each of the individuals of the
other party set forth on Schedule 2, if receipt of such correspondence is
actually acknowledged by any of the individuals to whom the notice is sent,
other than via auto-reply) or by telephone (confirmed immediately by verifiable
facsimile transmission or email correspondence to each of the individuals of the
other party set forth on Schedule 2), suspend any sale of Placement Shares;
provided, however, that such suspension shall not affect or impair either
party’s obligations with respect to any Placement Shares sold hereunder prior to
the receipt of such notice. Each of the parties agrees that no such notice under
this Section 4 shall be effective against the other unless it is made to one of
the individuals named on Schedule 2 hereto, as such schedule may be amended from
time to time.

 

(b)              Notwithstanding any other provision of this Agreement, during
any period in which the Company is in possession of material non-public
information, the Company and HCW agree that (i) no sale of Placement Shares will
take place, (ii) the Company shall not request the sale of any Placement Shares,
and (iii) HCW shall not be obligated to sell or offer to sell any Placement
Shares.

 

5.                Settlement.

 

(a)              Settlement of Placement Shares. Unless otherwise specified in
the applicable Placement Notice, settlement for sales of Placement Shares will
occur on the third (3rd) Trading Day (or such earlier day as is industry
practice for regular-way trading) following the date on which such sales are
made (each, a “Settlement Date” and the first such settlement date, the “First
Delivery Date”). The amount of proceeds to be delivered to the Company on a
Settlement Date against receipt of the Placement Shares sold (the “Net
Proceeds”) will be equal to the aggregate sales price received by HCW at which
such Placement Shares were sold, after deduction for (i) HCW’s commission,
discount or other compensation for such sales payable by the Company pursuant to
Section 2 hereof, (ii) any other amounts due and payable by the Company to HCW
hereunder pursuant to Section 7(g) (Expenses) hereof, and (iii) any transaction
fees imposed by any governmental or self-regulatory organization in respect of
such sales.

 

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(b)              Delivery of Placement Shares. On or before each Settlement
Date, the Company will, or will cause its transfer agent to, electronically
transfer the Placement Shares being sold by crediting HCW’s or its designee’s
account (provided HCW shall have given the Company written notice of such
designee at least one Trading Day prior to the Settlement Date) at The
Depository Trust Company through its Deposit and Withdrawal at Custodian System
(“DWAC”) or by such other means of delivery as may be mutually agreed upon by
the parties hereto which in all cases shall be freely tradable, transferable,
registered shares in good deliverable form. On each Settlement Date, HCW will
deliver the related Net Proceeds in same day funds to an account designated by
the Company on, or prior to, the Settlement Date. The Company agrees that if the
Company, or its transfer agent (if applicable), defaults in its obligation to
deliver duly authorized Placement Shares on a Settlement Date, in addition to
and in no way limiting the rights and obligations set forth in Section 9(a)
(Indemnification and Contribution) hereto, it will (i) hold HCW harmless against
any loss, claim, damage, or reasonable, documented expense (including reasonable
and documented legal fees and expenses), as incurred, arising out of or in
connection with such default by the Company and (ii) pay to HCW any commission,
discount, or other compensation to which it would otherwise have been entitled
absent such default.

 

6.                Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, HCW that, as of the effective date
of the Registration Statement, each Representation Date (as defined in Section
7(m)), each date on which a Placement Notice is given, and any date on which
Placement Shares are sold hereunder:

 

(a)               Compliance with Registration Requirements. The Registration
Statement has been declared effective by the Commission under the Securities
Act. The Company has complied with all requests of the Commission for additional
or supplemental information related to the Registration Statement or the
Prospectus. No stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement is in effect and no
proceedings for such purpose have been instituted or are pending or, to the best
knowledge of the Company, threatened by the Commission.

 

(b)              No Misstatement or Omission. The Prospectus when filed complied
and, as amended or supplemented, if applicable, will comply in all material
respects with the Securities Act. Each of the Registration Statement, any
Rule 462(b) Registration Statement, the Prospectus and any post-effective
amendments or supplements thereto, at the time it became effective or its date,
as applicable, and as of each of the Settlement Dates, if any, complied in all
material respects with the Securities Act and, as of each Settlement Date, if
any, did not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading. The Prospectus, as amended or
supplemented, as of its date, each date on which a Placement Notice is given,
and as of each of the Settlement Dates, if any, will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The representations and warranties set forth in
the two immediately preceding sentences do not apply to statements in or
omissions from the Registration Statement, any Rule 462(b) Registration
Statement, or any post-effective amendment thereto, or the Prospectus, or any
amendments or supplements thereto, made in reliance upon and in conformity with
information relating to HCW furnished to the Company in writing by HCW expressly
for use therein. There are no material contracts or other documents required to
be described in the Prospectus or to be filed as exhibits to the Registration
Statement which have not been described or filed as required.

 

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(c)               Not an Ineligible Issuer. The Company currently is not an
“ineligible issuer,” as defined in Rule 405 of the rules and regulation of the
Commission. The Company agrees to notify HCW promptly upon the Company becoming
an “ineligible issuer.”

 

(d)              Distribution of Offering Material By the Company. The Company
has not distributed and will not distribute, prior to the completion of HCW’s
distribution of the Placement Shares, any offering material in connection with
the offering and sale of the Placement Shares other than the Prospectus or the
Registration Statement.

 

(e)               The Sales Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to indemnification
and contribution hereunder may be limited by applicable law and public policy
considerations and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.

 

(f) S-3 Eligibility. (i) At the time of filing the Registration Statement and
(ii) at the time of the most recent amendment thereto for the purposes of
complying with Section 10(a)(3) of the Securities Act (whether such amendment
was by post-effective amendment, incorporated report filed pursuant to Section
13 or 15(d) of the Exchange Act or form of prospectus), the Company met the then
applicable requirements for use of Form S-3 under the Securities Act, including
compliance with General Instruction I.B.6 of Form S-3, up to the Maximum Amount.
As of the close of trading on the Exchange on October 2, 2017, a Trading Day
within 60 days prior to the date of this Agreement, the aggregate market
value of the outstanding voting and non-voting common equity (as defined in Rule
405) of the Company held by persons other than affiliates of the Company
(pursuant to Rule 144 of the Securities Act, those that directly, or indirectly
through one or more intermediaries, control, or are controlled by, or are under
common control with, the Company)  (the “Non-Affiliate Shares”), was
approximately $58.3 million (calculated by multiplying (x) the price at which
the common equity of the Company was last sold on the Exchange on October 2,
2017, a Trading Day within 60 days prior to the date of this Agreement times (y)
the number of Non-Affiliate Shares). The Company is not a shell company (as
defined in Rule 405) and has not been a shell company for at least 12 calendar
months previously.

 

(g) Authorization of the Placement Shares. The Placement Shares, when issued and
delivered, will be duly authorized for issuance and sale pursuant to this
Agreement and, when issued and delivered by the Company against payment therefor
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.

 

(h)              No Applicable Registration or Other Similar Rights. Except as
otherwise disclosed in the Prospectus, there are no persons with registration or
other similar rights to have any equity or debt securities registered for sale
under the Registration Statement or included in the offering contemplated by
this Agreement, except for such rights as have been duly waived.

 

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(i)               No Material Adverse Change. Except as otherwise disclosed in
the Prospectus, subsequent to the respective dates as of which information is
given in the Prospectus: (i) there has been no material adverse change, or any
development that could reasonably be expected to result in a material adverse
change, in the condition, financial or otherwise, or in the earnings, business,
operations or prospects, whether or not arising from transactions in the
ordinary course of business, of the Company and its subsidiaries, considered as
one entity (any such change is called a “Material Adverse Change”); (ii) the
Company and its subsidiaries, considered as one entity, have not incurred any
material liability or obligation, indirect, direct or contingent, not in the
ordinary course of business nor entered into any material transaction or
agreement not in the ordinary course of business: and (iii) there has been no
dividend or distribution of any kind declared, paid or made by the Company or,
except for regular quarterly dividends publicly announced by the Company or
dividends paid to the Company or other subsidiaries, by any of its subsidiaries
on any class of capital stock or repurchase or redemption by the Company or any
of its subsidiaries of any class of capital stock.

 

(j)               Independent Accountants. Rose, Snyder & Jacobs LLP, who has
expressed its opinion with respect to the financial statements (which term as
used in this Agreement includes the related notes thereto) and supporting
schedules filed with the Commission or incorporated by reference as a part of
the Registration Statement and included in the Prospectus, is an independent
registered public accounting firm as required by the Securities Act and the
Exchange Act.

 

(k)              Preparation of the Financial Statements. The financial
statements filed with the Commission as a part of or incorporated by reference
in the Registration Statement and included in the Prospectus present fairly, in
all material respects, the consolidated financial position of the Company and
its subsidiaries as of and at the dates indicated and the results of their
operations and cash flows for the periods specified. The supporting schedules
included in or incorporated in the Registration Statement present fairly the
information required to be stated therein. Such financial statements and
supporting schedules have been prepared in accordance with generally accepted
accounting principles as applied in the United States applied on a consistent
basis throughout the periods involved, except as may be expressly stated in the
related notes thereto. No other financial statements or supporting schedules are
required to be included in or incorporated in the Registration Statement.

 

(l)               XBRL. The interactive data in eXtensible Business Reporting
Language included or incorporated by reference in the Registration Statement
fairly presents the information called for in all material respects and has been
prepared in accordance with the Commission’s rules and guidelines applicable
thereto.

 

(m) Incorporation and Good Standing of the Company and its Subsidiaries. The
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Delaware and has corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform its
obligations under this Agreement. Each subsidiary of the Company has been duly
organized and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its organization and has the requisite power and
authority to own, lease and operate its properties and to conduct its business
as described in the Prospectus. Each of the Company and its subsidiaries is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business, except for
such jurisdictions where the failure to so qualify or to be in good standing
would not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Change. Except as described in the Prospectus, all of the
issued and outstanding equity interests of the subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable and are owned by
the Company free and clear of any security interest, mortgage, pledge, lien,
encumbrance or adverse claim. The Company does not own or control, directly or
indirectly, any corporation, association or other entity other than the
subsidiaries listed in Exhibit 21.1 to the Company’s Annual Report on Form 10-K
for the most recently ended fiscal year and other than (i) those subsidiaries
not required to be listed on Exhibit 21.1 by Item 601 of Regulation S-K under
the Exchange Act and (ii) those subsidiaries formed since the last day of the
most recently ended fiscal year.

 

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(n)              Capital Stock Matters. The Common Stock conforms in all
material respects to the description thereof contained in the Prospectus. All of
the issued and outstanding shares of Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable and have been issued in
compliance with federal and state securities laws. None of the outstanding
shares of Common Stock were issued in violation of any preemptive rights, rights
of first refusal or other similar rights to subscribe for or purchase securities
of the Company. There are no authorized or outstanding options, warrants,
preemptive rights, rights of first refusal or other rights to purchase, or
equity or debt securities convertible into or exchangeable or exercisable for,
any capital stock of the Company or any of its subsidiaries other than those
accurately described in all material respects in the Prospectus. The description
of the Company’s stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted thereunder, set forth in
the Prospectus accurately and fairly presents in all material respects the
information required to be shown with respect to such plans, arrangements,
options and rights.

 

(o)              Non-Contravention of Existing Instruments; No Further
Authorizations or Approvals Required. Neither the Company nor any of its
subsidiaries is in violation of its charter or by-laws or is in default (or,
with the giving of notice or lapse of time, would be in default) (“Default”)
under any indenture, mortgage, loan or credit agreement, note, contract,
franchise, lease or other instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound, or to which
any of the property or assets of the Company or any of its subsidiaries is
subject (each, an “Existing Instrument”), except for such Defaults as would not,
individually or in the aggregate, result in a Material Adverse Change. The
Company’s execution, delivery and performance of this Agreement and consummation
of the transactions contemplated hereby and by the Prospectus (i) have been duly
authorized by all necessary corporate action and will not result in any
violation of the provisions of the charter or by-laws of the Company or any
subsidiary, (ii) will not conflict with or constitute a breach of, or Default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, or require the consent of any other party to, any
Existing Instrument, except for such conflicts, breaches, Defaults, liens,
charges or encumbrances as would not, individually or in the aggregate, result
in a Material Adverse Change and (iii) will not result in any violation of any
law, administrative regulation or administrative or court decree applicable to
the Company or any subsidiary. No consent, approval, authorization or other
order of, or registration or filing with, any court or other governmental or
regulatory authority or agency, is required for the Company’s execution,
delivery and performance of this Agreement and consummation of the transactions
contemplated hereby and by the Prospectus, except such as have been obtained or
made by the Company and are in full force and effect under the Securities Act,
or that may be required under applicable state securities or blue sky laws and
from the Financial Industry Regulatory Authority (“FINRA”) or Exchange.

 

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(p)              No Material Actions or Proceedings. Except as disclosed in the
Prospectus, there are no legal or governmental actions, suits or proceedings
pending or, to the best of the Company’s knowledge, threatened (i) against or
affecting the Company or any of its subsidiaries, (ii) which has as the subject
thereof any officer or director of, or property owned or leased by, the Company
or any of its subsidiaries or (iii) relating to environmental or discrimination
matters, where in any such case (A) there is a reasonable possibility that such
action, suit or proceeding might be determined adversely to the Company or such
subsidiary and (B) any such action, suit or proceeding, if so determined
adversely, would result in a Material Adverse Change or adversely affect the
consummation of the transactions contemplated by this Agreement. No material
labor dispute with the employees of the Company or any of its subsidiaries
exists or, to the Company’s knowledge, is threatened or imminent.

 

(q)              All Necessary Permits, etc. The Company and each subsidiary
possess such valid and current certificates, authorizations or permits issued by
the appropriate state, federal or foreign regulatory agencies or bodies
necessary to conduct their respective businesses as currently conducted and
described in the Prospectus, other than those the failure to possess or own
would not result in a Material Adverse Change, and neither the Company nor any
subsidiary has received any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could result in a Material Adverse Change.

 

(r)               Tax Law Compliance. Subject to any permitted extensions, the
Company and its consolidated subsidiaries have filed all necessary federal,
state and foreign income, property and franchise tax returns (or have properly
requested extensions thereof) and have paid all taxes required to be paid by any
of them and, if due and payable, any related or similar assessment, fine or
penalty levied against any of them except as may be being contested in good
faith and by appropriate proceedings. The Company has made adequate charges,
accruals and reserves in the applicable financial statements referred to in
Section 6(k) above in respect of all federal, state and foreign income, property
and franchise taxes for all periods as to which the tax liability of the Company
or any of its consolidated subsidiaries has not been finally determined.

 

(s)              Company Not an “Investment Company”. The Company has been
advised of the rules and requirements under the Investment Company Act of 1940,
as amended (the “Investment Company Act”). The Company is not, and after receipt
of payment for the Placement Shares will not be, an “investment company” within
the meaning of Investment Company Act.

 

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(t)               Insurance. Except as otherwise described in the Prospectus,
each of the Company and its subsidiaries are insured by insurers of recognized
financial responsibility with policies in such amounts and with such deductibles
and covering such risks as are generally deemed prudent and customary for their
respective businesses as currently conducted and described in the Prospectus.
The Company has no reason to believe that it or any subsidiary will not be able
(i) to renew its existing insurance coverage as and when such policies expire or
(ii) to obtain comparable coverage from similar institutions as may be necessary
or appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change.

 

(u)              No Price Stabilization or Manipulation. The Company has not
taken and will not take, directly or indirectly, any action designed to or that
might be reasonably expected to cause or result in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Placement Shares.

 

(v)              Related Party Transactions. There are no business relationships
or related-party transactions involving the Company or any subsidiary or any
other person required to be described in the Prospectus which have not been
described as required.

 

(w)             Exchange Act Compliance. The Incorporated Documents, at the time
they were or hereafter are filed with the Commission, complied and will comply
in all material respects with the requirements of the Exchange Act, and, when
read together with the other information in the Prospectus, at the Settlement
Dates, 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 fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.

 

(x)               No Unlawful Contributions or Other Payments. Neither the
Company nor any of its subsidiaries nor, to the Company’s knowledge, any
director, officer, employee or agent of the Company or any subsidiary acting on
behalf of the Company or any of its subsidiaries has  taken any action, directly
or indirectly, that would result in a violation by such persons of the Foreign
Corrupt Practices Act of 1977, as amended, and the rules and regulations
thereunder (the “FCPA”), including, without limitation, making use of the mails
or any means or instrumentality of interstate commerce corruptly in furtherance
of an offer, payment, promise to pay or authorization of the payment of any
money, or other property, gift, promise to give, or authorization of the giving
of anything of value to any “foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any candidate for
foreign political office, in contravention of the FCPA and the Company and, to
the knowledge of the Company, its controlled affiliates have conducted their
businesses in compliance with the FCPA and have instituted and maintain policies
and procedures designed to ensure, and which are reasonably expected to continue
to ensure, continued compliance therewith.

 

 - 10 - 

 

 

(y)              Compliance with Money Laundering Laws. The operations of the
Company and its subsidiaries are and have been conducted at all times in
compliance with applicable financial recordkeeping and reporting requirements of
the Currency and Foreign Transactions Reporting Act of 1970, as amended, the
money laundering statutes of all jurisdictions, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively, the “Money
Laundering Laws”) and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any of its subsidiaries with respect to the Money Laundering Laws is pending
or, the knowledge of the Company, threatened.

 

(z)               Compliance with OFAC. None of the Company, any of its
subsidiaries or, to the knowledge of the Company, any director, officer, agent,
employee or affiliate of the Company or any of its subsidiaries is currently
subject to any U.S. sanctions administered by the Office of Foreign Office
Control of the U.S. Department of the Treasury (“OFAC”); and the Company will
not, directly or indirectly, use the proceeds of the offering of the Placement
Shares hereunder, or lend, contribute or otherwise make available such proceeds
to any subsidiary, joint venture partner or other person or entity, for the
purpose of financing the activities of any person currently subject to any U.S.
sanctions administered by OFAC.

 

(aa)             Company’s Accounting System. The Company maintains a system of
“internal control over financial reporting” (as such term is defined in Rule
13a-15(f) of the General Rules and Regulations under the Exchange Act (the
“Exchange Act Rules”)) that complies with the requirements of the Exchange Act
and has been designed by its respective principal executive and principal
financial officers, or under their supervision, to provide reasonable assurances
that (i) transactions are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with U.S. GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. Except as described in the Prospectus, since the end of the
Company’s most recent audited fiscal year, there has been (A) no material
weakness in the Company’s internal control over financial reporting (whether or
not remediated) and (B) no change in the Company’s internal control over
financial reporting that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.

 

(bb)            Disclosure Controls. The Company maintains disclosure controls
and procedures (as such is defined in Rule 13a-15(e) of the Exchange Act Rules)
that comply with the requirements of the Exchange Act; such disclosure controls
and procedures have been designed to ensure that information required to be
disclosed by the Company in reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the Commission’s rules and forms, including controls and procedures
designed to ensure that such information is accumulated and communicated to the
Company’s management to allow timely decisions regarding disclosures. To the
extent required by the Exchange Act Rules, the Company has conducted evaluations
of the effectiveness of its disclosure controls as required by Rule 13a-15 of
the Exchange Act.

 

 - 11 - 

 

 

(cc) Compliance with Environmental Laws. Except as otherwise described in the
Prospectus, and except as would not, individually or in the aggregate, result in
a Material Adverse Change (i)  to the Company’s knowledge, neither the Company
nor any of its subsidiaries is in violation of any federal, state, local or
foreign law or regulation relating to pollution or protection of human health or
the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or wildlife, including without
limitation, laws and regulations relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum and petroleum products
(collectively, “Materials of Environmental Concern”), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern (collectively,
“Environmental Laws”), which violation includes, but is not limited to,
noncompliance with any permits or other governmental authorizations required for
the operation of the business of the Company or its subsidiaries under
applicable Environmental Laws, or noncompliance with the terms and conditions
thereof, nor has the Company or any of its subsidiaries received any written
communication, whether from a governmental authority, citizens group, employee
or otherwise, that alleges that the Company or any of its subsidiaries is in
violation of any Environmental Law; (ii) there is no claim, action or cause of
action filed with a court or governmental authority, no investigation with
respect to which the Company has received written notice, and no written notice
by any person or entity alleging potential liability for investigatory costs,
cleanup costs, governmental responses costs, natural resources damages, property
damages, personal injuries, attorneys’ fees or penalties arising out of, based
on or resulting from the presence, or release into the environment, of any
Material of Environmental Concern at any location owned, leased or operated by
the Company or any of its subsidiaries, now or in the past (collectively,
“Environmental Claims”), pending or, to the Company’s knowledge, threatened
against the Company or any of its subsidiaries or any person or entity whose
liability for any Environmental Claim the Company or any of its subsidiaries has
retained or assumed either contractually or by operation of law; and (iii) to
the best of the Company’s knowledge, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge, presence or disposal of any
Material of Environmental Concern, that reasonably could result in a violation
of any Environmental Law or form the basis of a potential Environmental Claim
against the Company or any of its subsidiaries or against any person or entity
whose liability for any Environmental Claim the Company or any of its
subsidiaries has retained or assumed either contractually or by operation of
law.

 

(dd) Intellectual Property. Except for specific matters described in the
Prospectus, the Company and its subsidiaries own, possess or have sufficient
rights to use all trademarks, trade names, patent rights, copyrights, domain
names, licenses, approvals, trade secrets, inventions, technology, know-how and
other intellectual property and similar rights, including registrations and
applications for registration thereof (collectively, “Intellectual Property
Rights”) necessary or material to the conduct of the business now conducted or
proposed in the Prospectus to be conducted by them. Except as disclosed in the
Prospectus (i) to the Company’s knowledge, there are no rights of third parties
to any of the Intellectual Property Rights owned or purported to be owned by the
Company or its subsidiaries, except for those certain rights retained by the
federal and state governments pursuant to the Company’s grants and loan award;
(ii) to the Company’s knowledge there is no infringement, misappropriation,
breach, or default by any third party of any of the Intellectual Property Rights
of the Company or any of its subsidiaries; (iii) there is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or claim by any third
party challenging the Company’s or any of its subsidiaries’ rights in or to, or
the violation of any of the terms of, any of their Intellectual Property Rights;
(iv) there is no pending or, to the Company’s knowledge, threatened action,
suit, proceeding or claim by any third party challenging the validity,
enforceability or scope of any Intellectual Property Rights of the Company or
any of its subsidiaries; (v) there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by any third party that the Company
or any of its subsidiaries infringes, misappropriates or otherwise violates or
conflicts with any Intellectual Property Rights of any third party; (vi) none of
the Intellectual Property Rights used or held for use by the Company or any of
its subsidiaries in their businesses has been obtained or is being used or held
for use by the Company or any of its subsidiaries in violation of any
contractual obligation binding on the Company or any of its subsidiaries, and
(vii) the Company and its subsidiaries have taken reasonable steps in accordance
with normal industry practice to maintain the confidentiality of all
Intellectual Property Rights the value of which to the Company or any subsidiary
is contingent upon maintaining the confidentiality thereof, except in each case
covered by clauses (i) – (vii) such as would not, if determined adversely to the
Company or any of its subsidiaries, individually or in the aggregate, result in
a Material Adverse Change.

 

 - 12 - 

 

 

(ee) Compliance with Applicable Laws. The Company and the subsidiaries: (A)
except as disclosed in the Incorporated Documents, are and at all times have
been in material compliance with all statutes, rules and regulations applicable
to the ownership, testing, development, manufacture, packaging, processing, use,
distribution, marketing, labeling, promotion, sale, offer for sale, storage,
import, export or disposal of any product under development, manufactured or
distributed by the Company or the Subsidiaries (“Applicable Laws”), (B) have not
received any notice of adverse finding, warning letter, or other written
correspondence or notice from any federal, state, local or foreign governmental
or regulatory authority alleging or asserting material noncompliance with any
Applicable Laws or any licenses, certificates, approvals, clearances,
authorizations, permits and supplements or amendments thereto required by any
such Applicable Laws (“Authorizations”), which would, individually or in the
aggregate, result in a Material Adverse Change; (C) possess all material
Authorizations and such Authorizations are valid and in full force and effect
and neither the Company nor the Subsidiaries is in material violation of any
term of any such Authorizations; (D) have not received written notice of any
claim, action, suit, proceeding, hearing, enforcement, investigation,
arbitration or other action any federal, state, local or foreign governmental or
regulatory authority or third party alleging that any Company product, operation
or activity is in material violation of any Applicable Laws or Authorizations
and has no knowledge that any federal, state, local or foreign governmental or
regulatory authority or third party is considering any such claim, litigation,
arbitration, action, suit, investigation or proceeding against the Company; (E)
have not received notice that any federal, state, local or foreign governmental
or regulatory authority has taken, is taking or intends to take action to limit,
suspend, modify or revoke any material Authorizations and has no knowledge that
any federal, state, local or foreign governmental or regulatory authority is
considering such action; and (F) have filed, obtained, maintained or submitted
all reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments as required by any Applicable Laws or
Authorizations except where the failure to file such reports, documents, forms,
notices, applications, records, claims, submissions and supplements or
amendments would not result in a Material Adverse Change, and that all such
reports, documents, forms, notices, applications, records, claims, submissions
and supplements or amendments were materially complete and correct on the date
filed (or were corrected or supplemented by a subsequent submission).

 

 - 13 - 

 

 

(ff) Clinical Studies. All animal and other preclinical studies and clinical
trials conducted by the Company or on behalf of the Company were, and, if still
pending are, to the Company’s knowledge, being conducted in all material
respects in compliance with all Applicable Laws and in accordance with
experimental protocols, procedures and controls generally used by qualified
experts in the preclinical study and clinical trials of new drugs and biologics
as applied to comparable products to those being developed by the Company; the
descriptions of the results of such preclinical studies and clinical trials
contained in the Registration Statement and the Prospectus are accurate in all
material respects, and, except as set forth in the Registration Statement and
the Prospectus, the Company has no knowledge of any other clinical trials or
preclinical studies, the results of which reasonably call into question the
clinical trial or preclinical study results described or referred to in the
Registration Statement and the Prospectus when viewed in the context in which
such results are described; and the Company has not received any written notices
or correspondence from any domestic or foreign governmental agency requiring the
termination or suspension of any preclinical studies or clinical trials
conducted by or on behalf of the Company that are described in the Registration
Statement and the Prospectus or the results of which are referred to in the
Registration Statement and the Prospectus.

 

(gg) Listing. The Company is subject to and in compliance in all material
respects with the reporting requirements of Section 13 or Section 15(d) of the
Exchange Act. The Common Stock is registered pursuant to Section 12(b) or
Section 12(g) of the Exchange Act and is listed on the Exchange, and the Company
has taken no action designed to, or reasonably likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from the Exchange, nor has the Company received any
notification that the Commission or Exchange is contemplating terminating such
registration or listing.

 

(hh)            Brokers. Except for HCW, there is no broker, finder or other
party that is entitled to receive from the Company any brokerage or finder’s fee
or other fee or commission as a result of any transactions contemplated by this
Agreement.

 

(ii)               No Outstanding Loans or Other Indebtedness. Except as
described in the Prospectus, there are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course of business) or
guarantees or indebtedness by the Company to or for the benefit of any of the
officers or directors of the Company or any of the immediate family members of
any of them.

 

(jj) No Reliance. The Company has not relied upon HCW or legal counsel for HCW
for any legal, tax or accounting advice in connection with the offering and sale
of the Placement Shares.

 

(kk) HCW Purchases. The Company acknowledges and agrees that HCW has informed
the Company that HCW may, to the extent permitted under the Securities Act, the
Exchange Act and this Agreement, purchase and sell shares of Common Stock for
its own account while this Agreement is in effect. HCW shall be solely
responsible for compliance with Regulation M in connection with any transactions
described in the preceding sentence.

 

 - 14 - 

 

 

(ll) Any certificate signed by an officer of the Company and delivered to HCW or
to counsel for HCW in connection with this Agreement shall be deemed to be a
representation and warranty by the Company to HCW as to the matters set forth
therein.

 

(mm) The Company acknowledges that HCW and, for purposes of the opinions to be
delivered pursuant to Section 7 hereof, counsel to the Company and counsel to
HCW, will rely upon the accuracy and truthfulness of the foregoing
representations and hereby consents to such reliance.

 

7.                Covenants of the Company. The Company covenants and agrees
with HCW that:

 

(a)              Registration Statement Amendments. After the date of this
Agreement and during any period in which a Prospectus relating to any Placement
Shares is required to be delivered by HCW under the Securities Act (including in
circumstances where such requirement may be satisfied pursuant to Rule 172 under
the Securities Act), (i) the Company will notify HCW promptly of the time when
any subsequent amendment to the Registration Statement, other than the
Incorporated Documents or amendments not related to any Placement Shares, has
been filed with the Commission and/or has become effective or any subsequent
supplement to the Prospectus has been filed and of any request by the Commission
for any amendment or supplement to the Registration Statement or Prospectus
related to any Placement Shares or for additional information related to any
Placement Shares, (ii) the Company will prepare and file with the Commission,
promptly upon HCW’s reasonable request, any amendments or supplements to the
Registration Statement or Prospectus that, in HCW’s reasonable opinion, may be
necessary or advisable in connection with the distribution of the Placement
Shares by HCW (provided, however, that the failure of HCW to make such request
shall not relieve the Company of any obligation or liability hereunder, or
affect HCW’s right to rely on the representations and warranties made by the
Company in this Agreement and provided, further, that the only remedy HCW shall
have with respect to the failure to make such filing shall be to cease making
sales under this Agreement until such amendment or supplement is filed); (iii)
the Company will not file any amendment or supplement to the Registration
Statement or Prospectus, other than documents incorporated by reference,
relating to the Placement Shares or a security convertible into the Placement
Shares unless a copy thereof has been submitted to HCW within a reasonable
period of time before the filing and HCW has not reasonably objected thereto
(provided, however, that (A) the failure of HCW to make such objection shall not
relieve the Company of any obligation or liability hereunder, or affect HCW’s
right to rely on the representations and warranties made by the Company in this
Agreement, (B) the Company has no obligation to provide HCW any advance copy of
such filing or to provide HCW an opportunity to object to such filing if the
filing does not name HCW or does not relate to the transaction herein provided,
and (C) the only remedy HCW shall have with respect to the failure by the
Company to provide HCW with such copy or the filing of such amendment or
supplement despite HCW’s objection shall be to cease making sales under this
Agreement) and the Company will furnish to HCW at the time of filing thereof a
copy of any document that upon filing is deemed to be incorporated by reference
into the Registration Statement or Prospectus, except for those documents
available via EDGAR; and (iv) the Company will cause each amendment or
supplement to the Prospectus, other than documents incorporated by reference, to
be filed with the Commission as required pursuant to the applicable paragraph of
Rule 424(b) of the Securities Act.  

 

 - 15 - 

 

 

(b)              Notice of Commission Stop Orders. The Company will advise HCW,
promptly after it receives notice or obtains knowledge thereof, of the issuance
or threatened issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement, of the suspension of the
qualification of the Placement Shares for offering or sale in any jurisdiction,
or of the initiation or threatening of any proceeding for any such purpose; and
it will promptly use its commercially reasonable efforts to prevent the issuance
of any stop order or to obtain its withdrawal if such a stop order should be
issued.

 

(c)               Delivery of Prospectus; Subsequent Changes. During any period
in which a Prospectus relating to the Placement Shares is required to be
delivered by HCW under the Securities Act with respect to a pending sale of the
Placement Shares (including in circumstances where such requirement may be
satisfied pursuant to Rule 172 under the Securities Act), the Company will use
its commercially reasonable efforts to comply with all requirements imposed upon
it by the Securities Act, as from time to time in force, and to file on or
before their respective due dates (taking into account any extensions available
under the Exchange Act) all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14, 15(d) or any other provision of or under the Exchange
Act. If during such period any event occurs as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances then existing, not misleading, or if during
such period it is necessary to amend or supplement the Registration Statement or
Prospectus to comply with the Securities Act, the Company will promptly notify
HCW to suspend the offering of Placement Shares during such period and the
Company will promptly amend or supplement the Registration Statement or
Prospectus (at the expense of the Company) so as to correct such statement or
omission or effect such compliance.

 

(d)               Listing of Placement Shares. During any period in which the
Prospectus relating to the Placement Shares is required to be delivered by HCW
under the Securities Act with respect to a pending sale of the Placement Shares
(including in circumstances where such requirement may be satisfied pursuant to
Rule 172 under the Securities Act), the Company will use its commercially
reasonable efforts to cause the Placement Shares to be listed on Exchange and to
qualify the Placement Shares for sale under the securities laws of such
jurisdictions as HCW reasonably designates and to continue such qualifications
in effect so long as required for the distribution of the Placement Shares;
provided, however, that the Company shall not be required in connection
therewith to qualify as a foreign corporation or dealer in securities or file a
general consent to service of process in any jurisdiction.

 

(e)               Delivery of Registration Statement and Prospectus. The Company
will furnish to HCW and its counsel (at the expense of the Company) copies of
the Registration Statement, the Prospectus (including all documents incorporated
by reference therein) and all amendments and supplements to the Registration
Statement or Prospectus that are filed with the Commission during any period in
which a Prospectus relating to the Placement Shares is required to be delivered
under the Securities Act (including all documents filed with the Commission
during such period that are deemed to be incorporated by reference therein), in
each case as soon as reasonably practicable and in such quantities as HCW may
from time to time reasonably request and, at HCW’s request, will also furnish
copies of the Prospectus to each exchange or market on which sales of the
Placement Shares may be made; provided, however, that the Company shall not be
required to furnish any document (other than the Prospectus) to HCW to the
extent such document is available on EDGAR.

 

 - 16 - 

 

 

(f)                Earnings Statement. The Company will make generally available
to its security holders as soon as practicable, but in any event not later than
15 months after the end of the Company’s current fiscal quarter, an earnings
statement covering a 12-month period that satisfies the provisions of Section
11(a) and Rule 158 of the Securities Act.

 

(g)               Expenses. The Company, whether or not the transactions
contemplated hereunder are consummated or this Agreement is terminated, in
accordance with the provisions of Section 11 hereunder, will pay all expenses
incident to the performance of the Company’s obligations under this Agreement,
including (i) the preparation, filing, including any fees required by the
Commission, and printing of the Registration Statement (including financial
statements and exhibits) as originally filed and of each amendment and
supplement thereto and each Free Writing Prospectus, in such number as HCW shall
deem reasonably necessary, (ii) the printing and delivery to HCW of such
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Placement Shares, (iii) the preparation, issuance
and delivery of the certificates, if any, for the Placement Shares to HCW,
including any stock or other transfer taxes and any capital duties, stamp duties
or other duties or taxes payable upon the sale, issuance or delivery of the
Placement Shares to HCW, (iv) the fees and disbursements of the counsel,
accountants and other advisors to the Company, (v) the fees and disbursements of
counsel to HCW in connection with entering into the transactions contemplated by
this Agreement up to $20,000, and the quarterly disbursements of counsel to HCW;
(vi) any fees and expenses of the transfer agent and registrar for the Common
Stock, (vii) the filing fees incident to any review by FINRA of the terms of the
sale of the Placement Shares, if any (viii) the fees and expenses incurred in
connection with the listing of the Placement Shares on the Exchange, and (ix)
all trading, execution, settlement, or wiring fees incurred by HCW in connection
with the sale of the Placement Shares. Unless stated otherwise, all such
expenses under this clause (g) shall be paid by the Company promptly upon the
request of HCW, subject to the Company’s receipt of reasonably detailed
documentation with respect to such fees and expenses advanced by HCW. For the
avoidance of doubt, the Company is only responsible for the expenses set forth
above.

 

(h) Use of Proceeds. The Company will use the Net Proceeds as described in the
Prospectus in the section entitled “Use of Proceeds.”

 

 - 17 - 

 

 

(i) Notice of Other Sales. During the pendency of any Placement Notice given
hereunder, and for 5 Trading Days following the termination of any Placement
Notice given hereunder, the Company shall provide HCW notice as promptly as
reasonably possible before it offers to sell, contracts to sell, sells, grants
any option to sell or otherwise disposes of any shares of Common Stock (other
than Placement Shares offered pursuant to the provisions of this Agreement) or
securities convertible into or exchangeable for Common Stock, warrants or any
rights to purchase or acquire Common Stock; provided, that such notice shall not
be required in connection with the (i) issuance, grant or sale of Common Stock,
options to purchase shares of Common Stock or any other equity awards, or Common
Stock issuable upon the exercise of options or other equity awards pursuant to
any stock option, stock bonus, employee stock purchase or other stock plan or
arrangement described in the Prospectus, (ii) the issuance, grant or sale of
Common Stock, or securities convertible into or exercisable for Common Stock, in
connection with any joint venture, commercial, strategic or collaborative
relationship, or the acquisition or license by the Company of the securities,
businesses, property or other assets of another person or entity, (iii) the
issuance or sale of Common Stock pursuant to any dividend reinvestment plan that
the Company may adopt from time to time provided the implementation of such is
disclosed to HCW in advance or (iv) any shares of Common Stock issuable upon the
exchange, conversion or redemption of securities or the exercise or vesting of
warrants, options or other rights in effect or outstanding. Notwithstanding the
foregoing provisions, nothing herein shall be construed to restrict the
Company’s ability, or require the Company to provide notice to HCW, to file a
registration statement under the Securities Act, including another prospectus
supplement in connection with the Registration Statement for the issuance and
sale of shares other than the Placement Shares. Furthermore, nothing herein
shall be construed to restrict the Company’s ability to engage in other
offerings of its securities at the same or different times, without any
obligation to HCW other than as set forth in this Section 7(i).

 

(j)                Change of Circumstances. The Company will, at any time during
a fiscal quarter in which the Company intends to tender a Placement Notice or
sell Placement Shares, advise HCW promptly after it shall have received notice
or obtained knowledge thereof, of any information or fact that would alter or
affect in any material respect any opinion, certificate, letter or other
document provided to HCW pursuant to this Agreement.

 

(k)               Due Diligence Cooperation. During the term of this Agreement,
the Company will cooperate with any reasonable due diligence review conducted by
HCW or its agents in connection with the transactions contemplated hereby,
including, without limitation, providing information and making available
documents and senior corporate officers, during regular business hours and at
the Company’s principal offices, as HCW may reasonably request.

 

(l)                Required Filings Relating to Placement of Placement Shares.
To the extent that the filing of a prospectus supplement with the Commission
with respect to a placement of Placement Shares is required under Rule 424(b)
under the Securities Act, the Company agrees that on or before such dates as the
Securities Act shall require, the Company will (i) file a prospectus supplement
with the Commission under the applicable paragraph of Rule 424(b) under the
Securities Act (each and every filing under Rule 424(b), a “Filing Date”), which
prospectus supplement will set forth, to the extent required, within the
relevant period, the amount of Placement Shares sold through HCW, the Net
Proceeds to the Company and the compensation payable by the Company to HCW with
respect to such Placement Shares (provided that the Company may satisfy its
obligations under this Section 7(l)(i) by effecting a filing in accordance with
the Exchange Act with respect to such information), and (ii) deliver such number
of copies of each such prospectus supplement to each exchange or market on which
such sales were effected as may be required by the rules or regulations of such
exchange or market.

 

 - 18 - 

 

 

(m)              Representation Dates; Certificate. On or prior to the First
Delivery Date and each time after the First Delivery Date the Company (i) amends
or supplements the Registration Statement or the Prospectus relating to the
Placement Shares (other than a prospectus supplement filed in accordance with
Section 7(l) of this Agreement) by means of a post-effective amendment, sticker,
or supplement but not by means of incorporation of document(s) by reference to
the Registration Statement or the Prospectus relating to the Placement Shares;
(ii) files an annual report on Form 10-K under the Exchange Act; (iii) files its
quarterly reports on Form 10-Q under the Exchange Act; or (iv) files a current
report on Form 8-K under the Exchange Act containing amended audited financial
information (other than information “furnished” pursuant to Items 2.02 or 7.01
of Form 8-K or to provide disclosure pursuant to Item 8.01 of Form 8-K relating
to the reclassification of certain properties as discontinued operations in
accordance with Statement of Financial Accounting Standards No. 144 under the
Exchange Act) under the Exchange Act (each date of filing of one or more of the
documents referred to in clauses (i) through (iv) shall be a “Representation
Date”); the Company shall furnish HCW with a certificate, in the form attached
hereto as Exhibit 7(m) within five (5) Trading Days of any Representation Date
if requested by HCW. The requirement to provide a certificate under this Section
7(m) shall be automatically waived for any Representation Date occurring at a
time at which no Placement Notice is pending, which waiver shall continue until
the earlier to occur of the date the Company delivers a Placement Notice
hereunder (which for such calendar quarter shall be considered a Representation
Date, including for purposes of Sections 7(n) and (o) hereof) and the next
occurring Representation Date; provided, however, that such waiver shall not
apply for any Representation Date on which the Company files its annual report
on Form 10-K. Notwithstanding the foregoing, if the Company subsequently decides
to sell Placement Shares following a Representation Date when the Company relied
on such waiver and did not provide HCW with a certificate under this Section
7(m), then before the Company delivers the Placement Notice or HCW sells any
Placement Shares, the Company shall provide HCW with a certificate, in the form
attached hereto as Exhibit 7(m), dated the date of the Placement Notice.

 

(n)               Legal Opinion. (i) On or prior to the First Delivery Date, the
Company shall cause to be furnished to HCW a written opinion and negative
assurance letter of Sidley Austin LLP, or other counsel reasonably satisfactory
to HCW (“Company Counsel”), in form and substance reasonably satisfactory to HCW
and its counsel, dated the date that such opinion and negative assurance letter
are required to be delivered and (ii) within the later of (A) five (5) Trading
Days of each Representation Date with respect to which the Company is obligated
to deliver a certificate in the form attached hereto as Exhibit 7(m), and (B)
the date a Placement Notice is first delivered by the Company following a
Representation Date, the Company shall cause to be furnished to HCW a negative
assurance letter of Company Counsel, in form and substance reasonably
satisfactory to HCW and its counsel, dated the date that the negative assurance
letter is required to be delivered (the “Opinion Date”), substantially similar
to the forms attached hereto as Exhibit 7(n)(i) (solely with respect to the
opinion and negative assurance letter to be delivered on or prior to the First
Delivery Date) and Exhibit 7(n)(ii) (for negative assurance letters to be
delivered in connection with all subsequent Representation Dates), respectively,
modified, as necessary, to relate to the Registration Statement and the
Prospectus as then amended or supplemented; provided, however, that in lieu of
such negative assurance letters for subsequent Representation Dates, counsel may
furnish HCW with a letter (a “Reliance Letter”) to the effect that HCW may rely
on a prior negative assurance letter delivered under this Section 7(n) to the
same extent as if it were dated the date of such Reliance Letter (except that
statements in such prior negative assurance letter shall be deemed to relate to
the Registration Statement and the Prospectus as amended or supplemented at such
Representation Date).

 

 - 19 - 

 

 

(o)               Comfort Letter. On or prior to the First Delivery Date and
within five (5) Trading Days of each subsequent Representation Date with respect
to which the Company is obligated to deliver a certificate in the form attached
hereto as Exhibit 7(m), other than pursuant to Section 7(m)(iii), the Company
shall cause its independent accountants to furnish HCW letters (the “Comfort
Letters”), dated the date the Comfort Letter is delivered, in form and substance
satisfactory to HCW, (i) confirming that they are an independent registered
public accounting firm within the meaning of the Securities Act and the PCAOB,
(ii) stating, as of such date, the conclusions and findings of such firm with
respect to the financial information and other matters ordinarily covered by
accountants’ “comfort letters” to HCW in connection with registered public
offerings (the first such letter, the “Initial Comfort Letter”) and (iii)
updating the Initial Comfort Letter with any information that would have been
included in the Initial Comfort Letter had it been given on such date and
modified as necessary to relate to the Registration Statement and the
Prospectus, as amended and supplemented to the date of such letter.

 

(p)               Market Activities. The Company will not, directly or
indirectly, (i) take any action designed to cause or result in, or that
constitutes or might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Placement Shares or (ii) sell, bid for, or purchase the
Placement Shares to be issued and sold pursuant to this Agreement, or pay anyone
any compensation for soliciting purchases of the Placement Shares other than
HCW; provided, however, that the Company may bid for and purchase shares of its
Common Stock in accordance with Rule 10b-18 under the Exchange Act.

 

(q)               Insurance. The Company and its subsidiaries shall maintain, or
cause to be maintained, insurance in such amounts and covering such risks as is
reasonable and customary for the business for which it is engaged.

 

(r)                Compliance with Laws. The Company and each of its
subsidiaries will use commercially reasonable efforts to maintain, or cause to
be maintained, all material environmental permits, licenses and other
authorizations required by federal, state and local law in order to conduct
their businesses as described in the Prospectus, and the Company and each of its
subsidiaries shall conduct their businesses, or cause their businesses to be
conducted, in substantial compliance with such permits, licenses and
authorizations and with applicable environmental laws, except where the failure
to maintain or be in compliance with such permits, licenses and authorizations
could not reasonably be expected to result in a Material Adverse Change.

 

 - 20 - 

 

 

(s)               Investment Company Act. The Company will conduct its affairs
in such a manner so as to reasonably ensure that neither it nor its subsidiaries
will be or become, at any time prior to the termination of this Agreement, an
“investment company,” as such term is defined in the Investment Company Act,
assuming no change in the Commission’s current interpretation as to entities
that are not considered an investment company.

 

(t)                Securities Act and Exchange Act. The Company will use its
best efforts to comply with all requirements imposed upon it by the Securities
Act and the Exchange Act as from time to time in force, so far as necessary to
permit the continuance of sales of, or dealings in, the Placement Shares as
contemplated by the provisions hereof and the Prospectus.

 

(u)              No Offer to Sell. Other than any free writing prospectus (as
defined in Rule 405 under the Securities Act) approved in advance by the Company
and HCW in its capacity as principal or agent hereunder, neither HCW nor the
Company (including its agents and representatives, other than HCW in its
capacity as such) will make, use, prepare, authorize, approve or refer to any
written communication (as defined in Rule 405 under the Securities Act),
required to be filed with the Commission, that constitutes an offer to sell or
solicitation of an offer to buy Placement Shares hereunder.

 

(v)               Sarbanes-Oxley Act. The Company and its subsidiaries will use
their best efforts to comply with all effective applicable provisions of the
Sarbanes-Oxley Act applicable to the Company.

 

8.                Conditions to HCW’s Obligations. The obligations of HCW
hereunder with respect to a Placement will be subject to the continuing accuracy
and completeness of the representations and warranties made by the Company
herein, to the due performance by the Company of its obligations hereunder, to
the completion by HCW of a due diligence review satisfactory to HCW in its
reasonable judgment, and to the continuing satisfaction (or waiver by HCW in its
sole discretion) of the following additional conditions:

 

(a)               Registration Statement Effective. The Registration Statement
shall be effective and shall be available for the sale of all Placement Shares
contemplated to be issued by any Placement Notice hereunder.

 

(b)               No Material Notices. None of the following events shall have
occurred and be continuing: (i) receipt by the Company or any of its
subsidiaries of any request for additional information from the Commission or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement, the response to which would require
any post-effective amendments or supplements to the Registration Statement or
the Prospectus; (ii) the issuance by the Commission or any other federal or
state governmental authority of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that
purpose; (iii) receipt by the Company of any notification from the Commission or
any other federal or state governmental authority with respect to the suspension
of the qualification or exemption from qualification of any of the Placement
Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; or (iv) the occurrence of any event that makes any
material statement made in the Registration Statement or the Prospectus or any
material 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, the related Prospectus or such documents so that, in the
case of the Registration Statement, it will not contain any materially 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 not misleading and,
that in the case of the Prospectus, it will not contain any materially 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 the light of the
circumstances under which they were made, not misleading.

 

 - 21 - 

 

 

(c)               No Misstatement or Material Omission. HCW shall not have
advised the Company that the Registration Statement or Prospectus, or any
amendment or supplement thereto, contains an untrue statement of fact that in
HCW’s reasonable opinion is material, or omits to state a fact that in HCW’s
reasonable opinion is material and is required to be stated therein or is
necessary to make the statements therein not misleading.

 

(d)               Material Changes. Except as contemplated in the Prospectus, or
disclosed in the Company’s reports filed with the Commission, there shall not
have been any material adverse change, on a consolidated basis, in the
authorized capital stock of the Company or any Material Adverse Change or any
development that could reasonably be expected to result in a Material Adverse
Change.

 

(e)               Company Counsel Legal Opinion. HCW shall have received the
opinion and negative assurance letters or Reliance Letters of Company Counsel
required to be delivered pursuant to Section 7(n) on or before the date on which
such delivery of such opinion and negative assurance letter is required pursuant
to Section 7(n).

 

(f)               HCW Counsel Legal Opinion. HCW shall have received from HCW’s
legal counsel, such opinion or opinions, on or before the date on which the
delivery of the Company Counsel legal opinion is required pursuant to Section
7(n), with respect to such matters as HCW may reasonably require, and the
Company shall have furnished to such counsel such documents as they request for
enabling them to pass upon such matters.

 

(g)               Comfort Letter. HCW shall have received the Comfort Letter
required to be delivered pursuant to Section 7(o) on or before the date on which
such delivery of such Comfort Letter is required pursuant to Section 7(o).

 

(h)               Representation Certificate. HCW shall have received the
certificate required to be delivered pursuant to Section 7(m) on or before the
date on which delivery of such certificate is required pursuant to Section 7(m).

 

(i)                Secretary’s Certificate. On or prior to the First Delivery
Date, HCW shall have received a certificate, signed on behalf of the Company by
its corporate Secretary, in form and substance satisfactory to HCW and its
counsel.

 

(j)                No Suspension. Trading in the Common Stock shall not have
been suspended on Exchange.

 

 - 22 - 

 

 

(k)               Other Materials. On each date on which the Company is required
to deliver a certificate pursuant to Section 7(m), the Company shall have
furnished to HCW such appropriate further information, certificates and
documents as HCW may have reasonably requested. All such opinions, certificates,
letters and other documents shall have been in compliance with the provisions
hereof. The Company will furnish HCW with such conformed copies of such
opinions, certificates, letters and other documents as HCW shall have reasonably
requested.

 

(l)                Securities Act Filings Made. All filings with the Commission
required by Rule 424 under the Securities Act to have been filed prior to the
issuance of any Placement Notice hereunder shall have been made within the
applicable time period prescribed for such filing by Rule 424.

 

(m)              Approval for Listing. The Placement Shares shall either have
been (i) approved for listing on Exchange, subject only to notice of issuance,
or (ii) the Company shall have filed an application for listing of the Placement
Shares on Exchange at, or prior to, the issuance of any Placement Notice.

 

(n)              No Termination Event. There shall not have occurred any event
that would permit HCW to terminate this Agreement pursuant to Section 11(a).

 

9.                Indemnification and Contribution.

 

(a)               Company Indemnification. The Company agrees to indemnify and
hold harmless HCW, the directors, officers, partners, employees and agents of
HCW and each person, if any, who (i) controls HCW within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, or (ii) is
controlled by or is under common control with HCW (a “HCW Affiliate”) from and
against any and all losses, claims, liabilities, expenses and damages
(including, but not limited to, any and all reasonable investigative, legal and
other expenses incurred in connection with, and any and all amounts paid in
settlement (in accordance with Section 9(c)) of, any action, suit or proceeding
between any of the indemnified parties or between any indemnified party and any
third party, or otherwise, or any claim asserted), as and when incurred, to
which HCW, or any such person, may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, liabilities, expenses or
damages arise out of or are based, directly or indirectly, on (x) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus or in any free writing prospectus or
based on written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify the Common Stock under the securities laws
thereof or filed with the Commission, (y) the omission or alleged omission to
state in any such document a material fact required to be stated in it or
necessary to make the statements in it, not misleading; provided, however, that
this indemnity agreement shall not apply to the extent that such loss, claim,
liability, expense or damage arises from the sale of the Placement Shares
pursuant to this Agreement and is caused directly or indirectly by an untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information relating to HCW and furnished to the
Company in writing by HCW expressly for use therein. This indemnity agreement
will be in addition to any liability that the Company might otherwise have.

 

 - 23 - 

 

 

(b)              HCW Indemnification. HCW agrees to indemnify and hold harmless
the Company and its directors, officers, employees and agents of the Company and
each person, if any, who (i) controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, or (ii) is
controlled by or is under common control with the Company (each, a “Capricor
Affiliate”) from and against any and all losses, claims, liabilities, expenses
and damages (including, but not limited to, any and all reasonably
investigative, legal and other expenses incurred in connection with, and any and
all amounts paid in settlement (in accordance with Section 9(a)) of, any action,
suit or proceeding between any indemnified party and any third party, or
otherwise, or any claim asserted), as and when incurred, to which the Company,
or any Capricor Affiliate, may become subject under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, liabilities, expenses or
damages arise out of or are based, directly or indirectly, on untrue statements
or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendments thereto) or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with
information relating to HCW and furnished to the Company in writing by HCW
expressly for use therein.

 

 

(c)               Procedure. Any party that proposes to assert the right to be
indemnified under this Section 9 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Section 9, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party
will not relieve the indemnifying party from (i) any liability that it might
have to any indemnified party otherwise than under this Section 9 and (ii) any
liability that it may have to any indemnified party under the foregoing
provision of this Section 9 unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the indemnifying
party or to the extent the indemnifying party has been damaged or prejudiced
thereby. If any such action is brought against any indemnified party and it
notifies the indemnifying party of its commencement, the indemnifying party will
be entitled to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving notice of the
commencement of the action from the indemnified party, jointly with any other
indemnifying party similarly notified, to assume the defense of the action, with
counsel reasonably satisfactory to the indemnified party, and after notice from
the indemnifying party to the indemnified party of its election to assume the
defense, the indemnifying party will not be liable to the indemnified party for
any legal or other expenses incurred by the indemnified party, except as
provided below. The indemnified party will have the right to employ its own
counsel in any such action, but the fees, expenses and other charges of such
counsel will be at the expense of such indemnified party unless (1) the
employment of counsel by the indemnified party has been authorized in writing by
the indemnifying party, (2) the indemnified party has reasonably concluded
(based on advice of counsel) that there may be legal defenses available to it or
other indemnified parties that are different from or in addition to those
available to the indemnifying party, or (3) a conflict or potential conflict
exists (based on advice of counsel to the indemnified party) between the
indemnified party and the indemnifying party (in which case the indemnifying
party will not have the right to direct the defense of such action on behalf of
the indemnified party), in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified party or parties. All such
fees, disbursements and other charges will be reimbursed by the indemnifying
party promptly as they are incurred, subject to the indemnifying party’s receipt
of reasonably detailed documentation with respect to such fees, disbursements
and other charges.

 

 - 24 - 

 

 

(d)               So long as the indemnifying party is conducting the defense of
the claim for liability in accordance with this Section 9, the indemnified party
will reasonably cooperate with the indemnifying party’s defense of such claim.
The indemnified party will not consent to the entry of any judgment or enter
into any settlement with respect to the claim without the prior written consent
of the indemnifying party and an indemnifying party will not, in any event, be
liable for any settlement of or entry of any judgment with respect to any action
or claim effected without the indemnifying party’s written consent. No
indemnifying party shall, without the prior written consent of each indemnified
party (which consent shall not be unreasonably withheld or delayed), settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated by this Section
9 (whether or not any indemnified party is a party thereto), unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising or that may arise out of such
claim, action or proceeding.

 

(e)               Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in the
foregoing paragraphs of this Section 9 is applicable in accordance with its
terms but for any reason is held to be unavailable from the Company or HCW, the
Company and HCW will contribute to the total losses, claims, liabilities,
expenses and damages (including any investigative, legal and other expenses
reasonably incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claim asserted, but after deducting any
contribution received by the Company from persons other than HCW, such as
persons who control the Company within the meaning of the Securities Act,
officers of the Company who signed the Registration Statement and directors of
the Company, who also may be liable for contribution) to which the Company and
HCW may be subject in such proportion as shall be appropriate to reflect the
relative benefits received by the Company on the one hand and HCW on the other
hand. Notwithstanding the foregoing, such obligation of contribution shall only
apply if the parties seeking contribution complied in all respects with the
conditions relative to indemnification set forth in Sections 9(c) and (d) above.
The relative benefits received by the Company on the one hand and HCW on the
other hand shall be deemed to be in the same proportion as the total Net
Proceeds from the sale of the Placement Shares (before deducting expenses)
received by the Company bear to the total compensation received by HCW (before
deducting expenses) from the sale of Placement Shares on behalf of the Company.
If, but only if, the allocation provided by the foregoing sentence is not
permitted by applicable law, the allocation of contribution shall be made in
such proportion as is appropriate to reflect not only the relative benefits
referred to in the foregoing sentence but also the relative fault of the
Company, on the one hand, and HCW, on the other, with respect to the statements
or omission that resulted in such loss, claim, liability, expense or damage, or
action in respect thereof, as well as any other relevant equitable
considerations with respect to such offering. Such relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or HCW, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
HCW agree that it would not be just and equitable if contributions pursuant to
this Section 9(e) were to be determined by pro rata allocation or by any other
method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, liability, expense, or damage, or action
in respect thereof, referred to above in this Section 9(e) shall be deemed to
include, for the purpose of this Section 9(e), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim to the extent consistent with Section 9(c)
hereof. Notwithstanding the foregoing provisions of this Section 9(e), HCW shall
not be required to contribute any amount in excess of the commissions received
by it under this Agreement and no person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 9(e), any person who
controls a party to this Agreement within the meaning of the Securities Act, and
any officers, directors, partners, employees or agents of HCW, will have the
same rights to contribution as that party, and each officer of the Company who
signed the Registration Statement will have the same rights to contribution as
the Company, subject in each case to the provisions hereof. Any party entitled
to contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 9(e), will notify any such party or parties from whom
contribution may be sought, but the omission to so notify will not relieve that
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 9(e) except to the extent that the
failure to so notify such other party materially damaged such party or
prejudiced the substantive rights or defenses of the party from whom
contribution is sought. Except for a settlement entered into pursuant to the
last sentence of Section 9(d) hereof, no party will be liable for contribution
with respect to any action or claim settled without its written consent if such
consent is required pursuant to Section 9(d) hereof.

 

 - 25 - 

 

 

10.               Representations and Agreements to Survive Delivery. The
indemnity and contribution agreements contained in Section 9 of this Agreement
and all representations and warranties of the Company herein or in certificates
delivered pursuant hereto shall survive, as of their respective dates,
regardless of (i) any investigation made by or on behalf of HCW, any controlling
persons of HCW, or the Company (or any of their respective officers, directors
or controlling persons), (ii) delivery and acceptance of the Placement Shares
and payment therefor or (iii) any termination of this Agreement.

 

11.               Termination.

 

(a)               HCW shall have the right by giving written notice as
hereinafter specified at any time to terminate this Agreement if (i) any
Material Adverse Change, or any development that would reasonably be expected to
result in a Material Adverse Change has occurred that, in the reasonable
judgment of HCW, may materially impair the ability of HCW to sell the Placement
Shares hereunder, (ii) the Company shall have failed, refused or been unable to
perform any agreement on its part to be performed hereunder; provided, however,
in the case of any failure of the Company to deliver (or cause another person to
deliver) any certification, opinion, or letter required under Sections 7(m), (n)
or (o), HCW’s right to terminate shall not arise unless such failure to deliver
(or cause to be delivered) continues for more than thirty (30) days from the
date such delivery was required; (iii) any other condition of HCW’s obligations
hereunder is not fulfilled; or (iv), any suspension or limitation of trading in
the Placement Shares or in securities generally on Exchange shall have occurred.
Any such termination shall be without liability of any party to any other party
except that the provisions of Section 7(g) (Expenses), Section 9
(Indemnification and Contribution), Section 10 (Representations and Agreements
to Survive Delivery), Section 16 (Applicable Law; Consent to Jurisdiction) and
Section 17 (Waiver of Jury Trial) hereof shall remain in full force and effect
notwithstanding such termination. If HCW elects to terminate this Agreement as
provided in this Section 11(a), HCW shall provide the required written notice as
specified in Section 12 (Notices).

 

(b)               The Company shall have the right, by giving ten (10) days’
notice as hereinafter specified to terminate this Agreement in its sole
discretion at any time after the date of this Agreement. Any such termination
shall be without liability of any party to any other party except that the
provisions of Section 7(g), Section 9, Section 10, Section 16 and Section 17
hereof shall remain in full force and effect notwithstanding such termination.

 

(c)               HCW shall have the right, by giving ten (10) days’ notice as
hereinafter specified to terminate this Agreement in its sole discretion at any
time after the date of this Agreement. Any such termination shall be without
liability of any party to any other party except that the provisions of Section
7(g), Section 9, Section 10, Section 16 and Section 17 hereof shall remain in
full force and effect notwithstanding such termination.

 

(d)              Unless earlier terminated pursuant to this Section 11, this
Agreement shall automatically terminate upon the issuance and sale of all of the
Placement Shares through HCW on the terms and subject to the conditions set
forth herein; provided that the provisions of Section 7(g), Section 9, Section
10, Section 16 and Section 17 hereof shall remain in full force and effect
notwithstanding such termination.

 

(e)               This Agreement shall remain in full force and effect unless
terminated pursuant to Sections 11(a), (b), (c) or (d) above or otherwise by
mutual agreement of the parties; provided, however, that any such termination by
mutual agreement shall in all cases be deemed to provide that Section 7(g),
Section 9, Section 10, Section 16 and Section 17 shall remain in full force and
effect.

 

(f)                Any termination of this Agreement shall be effective on the
date specified in such notice of termination; provided, however, that such
termination shall not be effective until the close of business on the date of
receipt of such notice by HCW or the Company, as the case may be. If such
termination shall occur prior to the Settlement Date for any sale of Placement
Shares, such Placement Shares shall settle in accordance with the provisions of
this Agreement.

 

 - 26 - 

 

 

12.               Notices. All notices or other communications required or
permitted to be given by any party to any other party pursuant to the terms of
this Agreement shall be in writing, unless otherwise specified in this
Agreement, and if sent to HCW, shall be delivered to HCW at H.C. Wainwright &
Co. LLC, 430 Park Avenue, New York, NY 10022, email: atm@hcwco.com, Attention:
Head of Investment Banking with a copy to Duane Morris LLP, 1037 Raymond
Boulevard, Newark, NJ 07102, attention: Dean M. Colucci, e-mail
dmcolucci@duanemorris.com; or if sent to the Company, shall be delivered to
Capricor Therapeutics Inc. Inc., 8840 Wilshire Blvd, 2nd Floor, Beverly Hills,
CA 90211, attention: Linda Marbán, e-mail: lmarban@capricor.com, with a copy to
Sidley Austin LLP, 1001 Page Mill Road, Building One, Palo Alto, CA 94304,
attention: Rob R. Carlson, Esq. e-mail: rob.carlson@sidley.com. Each party to
this Agreement may change such address for notices by sending to the parties to
this Agreement written notice of a new address for such purpose. Each such
notice or other communication shall be deemed given (i) when delivered
personally, by email or by verifiable facsimile transmission (with an original
to follow) on or before 4:30 p.m., New York City time, on a Business Day (as
defined below), or, if such day is not a Business Day on the next succeeding
Business Day, (ii) on the next Business Day after timely delivery to a
nationally-recognized overnight courier, (iii) on the Business Day actually
received if deposited in the U.S. mail (certified or registered mail, return
receipt requested, postage prepaid) and (iv) if sent by e-mail, on the Business
Day on which receipt is confirmed by the individual to whom the notice is sent,
other than via auto-reply. For purposes of this Agreement, “Business Day” shall
mean any day on which the Exchange and commercial banks in the City of New York
are open for business.

 

An electronic communication (“Electronic Notice”) shall be deemed written notice
for purpose of this Section 12 if sent to the electronic mail address specified
by the receiving party under separate cover. Electronic Notice shall be deemed
to be received at the time the party sending Electronic Notice receives
confirmation of receipt by the receiving party, other than via auto-reply. Any
party receiving Electronic Notice may request and shall be entitled to receive
the notice on paper, in a non-electronic form (“Non-electronic Notice”) which
shall be sent to the requesting party within ten (10) days of receipt of the
written request for Non-electronic Notice.

 

13.              Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the Company and HCW and their respective
successors and the affiliates, controlling persons, officers and directors
referred to in Section 9 hereof. References to any of the parties contained in
this Agreement shall be deemed to include the successors and permitted assigns
of such party. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. Neither party may assign its rights or obligations under this
Agreement without the prior written consent of the other party; provided,
however, that HCW may assign its rights and obligations hereunder to an
affiliate of HCW without obtaining the Company’s consent, so long as such
affiliate is a registered broker-dealer.

 

 - 27 - 

 

 

14.               Adjustments for Share Splits. The parties acknowledge and
agree that all share-related numbers contained in this Agreement shall be
adjusted to take into account any share split, share dividend or similar event
effected with respect to the Common Stock.

 

15.               Entire Agreement; Amendment; Severability. This Agreement
(including all schedules and exhibits attached hereto and Placement Notices
issued pursuant hereto) constitutes the entire agreement and supersedes all
other prior and contemporaneous agreements and undertakings, both written and
oral, among the parties hereto with regard to the subject matter hereof. Neither
this Agreement nor any term hereof may be amended except pursuant to a written
instrument executed by the Company and HCW. In the event that any one or more of
the provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable as written by a court of competent
jurisdiction, then such provision shall be given full force and effect to the
fullest possible extent that it is valid, legal and enforceable, and the
remainder of the terms and provisions herein shall be construed as if such
invalid, illegal or unenforceable term or provision was not contained herein,
but only to the extent that giving effect to such provision and the remainder of
the terms and provisions hereof shall be in accordance with the intent of the
parties as reflected in this Agreement.

 

16.              Applicable Law; Consent to Jurisdiction. This Agreement shall
be governed by, and construed in accordance with, the internal laws of the State
of New York without regard to the principles of conflicts of laws. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection with any transaction
contemplated hereby, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof (certified or registered mail, return
receipt requested) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.

 

17.              Waiver of Jury Trial. The Company and HCW each hereby
irrevocably waives any right it may have to a trial by jury in respect of any
claim based upon or arising out of this Agreement or any transaction
contemplated hereby.

 

18.               Absence of Fiduciary Relationship. The Company acknowledges
and agrees that:

 

(a)               HCW has been retained solely to act as sales agent in
connection with the sale of the Placement Shares and that no fiduciary, advisory
or agency relationship between the Company and HCW has been created in respect
of any of the transactions contemplated by this Agreement, irrespective of
whether HCW has advised or is advising the Company on other matters;

 

(b)               the Company is capable of evaluating and understanding and
understands and accepts the terms, risks and conditions of the transactions
contemplated by this Agreement;

 

 - 28 - 

 

 

(c)               the Company has been advised that HCW and its affiliates are
engaged in a broad range of transactions which may involve interests that differ
from those of the Company and that HCW has no obligation to disclose such
interests and transactions to the Company by virtue of any fiduciary, advisory
or agency relationship; and

 

(d)               the Company waives, to the fullest extent permitted by law,
any claims it may have against HCW, for breach of fiduciary duty or alleged
breach of fiduciary duty in connection with the sale of Placement Shares under
this Agreement, and agrees that HCW shall have no liability (whether direct or
indirect) to the Company in respect of such a fiduciary claim or to any person
asserting a fiduciary duty claim on behalf of or in right of the Company,
including stockholders, partners, employees or creditors of the Company.

 

19.               Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of an executed
Agreement by one party to the other may be made by facsimile or other electronic
transmission.

 

[Remainder of Page Intentionally Blank]

 

 - 29 - 

 

 

If the foregoing correctly sets forth the understanding between the Company and
HCW, please so indicate in the space provided below for that purpose, whereupon
this letter shall constitute a binding agreement between the Company and HCW.

 

  Very truly yours,           CAPRICOR THERAPEUTICS, INC.           By:  /s/
Karen Krasney   Name:  Karen Krasney   Title: Executive Vice President and
General Counsel           ACCEPTED as of the date   first-above written:        
  H.C. WAINWRIGHT & CO., LLC           By:  /s/ Mark Viklund   Name:   Mark
Viklund   Title: Chief Executive Officer

 

 - 30 - 

 

 

SCHEDULE 1

 

form of PLACEMENT NOTICE

 

 

From:Capricor Therapeutics, Inc.

To:H.C. Wainwright & Co., LLC

Subject:At the Market Offering—Placement Notice

Date:_______________, 20___

 

Gentlemen:

 

Pursuant to the terms and subject to the conditions contained in the Sales
Agreement between Capricor Therapeutics, Inc. (the “Company”), and H.C.
Wainwright & Co., LLC (“HCW”) dated October 19, 2017 (the “Agreement”), I hereby
request on behalf of the Company that HCW sell up to [ ] shares of the Company’s
common stock, par value $0.001 per share, at a minimum market price of $_______
per share. Sales should begin on the date of this Notice and shall continue
until [DATE] [all shares are sold][the aggregate sales price of the shares
reaches $[ ]].

  

 

 

 

SCHEDULE 2

 

 

Notice Parties

 

The Company   Linda Marbán lmarban@capricor.com   Leland Gershell
lgershell@capricor.com   Karen Krasney kkrasney@capricor.com   AJ Bergmann
abergmann@capricor.com     HCW   Michael Vasinkevich mv@hcwco.com   Craig
Schwabe cs@hcwco.com   Peter Fry pfry@hcwco.com   Charles Worthman
csworthman@hcwco.com   Norman Yun nyun@hcwco.com

 

With a copy to atm@hcwco.com

  

 

 

 

SCHEDULE 3

 

 

Compensation

 

HCW shall be paid compensation equal to 3.0% of the gross proceeds from the
sales of Placement Shares pursuant to the terms of this Agreement.

 

 

 

 

Exhibit 7(m)

 

OFFICER CERTIFICATE

 

 

The undersigned, the duly qualified and elected _______________________, of
Capricor Therapeutics Inc. (“Company”), a Delaware corporation, does hereby
certify in such capacity and on behalf of the Company, pursuant to Section 7(m)
of the Sales Agreement dated October 19, 2017 (the “Sales Agreement”) between
the Company and H.C. Wainwright & Co., LLC, that to the best of the knowledge of
the undersigned:

 

(i)       The representations and warranties of the Company in Section 6 of the
Sales Agreement (A) to the extent such representations and warranties are
subject to qualifications and exceptions contained therein relating to
materiality or Material Adverse Change, are true and correct on and as of the
date hereof with the same force and effect as if expressly made on and as of the
date hereof, except for those representations and warranties that speak solely
as of a specific date and which were true and correct as of such date, and (B)
to the extent such representations and warranties are not subject to any
qualifications or exceptions, are true and correct in all material respects as
of the date hereof as if made on and as of the date hereof with the same force
and effect as if expressly made on and as of the date hereof except for those
representations and warranties that speak solely as of a specific date and which
were true and correct in all material respects as of such date; and

 

(ii)       The Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied pursuant to the Sales
Agreement at or prior to the date hereof.

 

Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Sales Agreement.

 

  CAPRICOR THERAPEUTICS INC.         By:       Name:     Title:            

Date: