Exhibit 10.13

 

INVESTOR RIGHTS AGREEMENT

 

THIS INVESTOR RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of
October 24, 2014, by and among (i) (a) BioPharmX Corporation, a Delaware
corporation (the “Company”), (b) James Pekarsky (“Pekarsky”), Anja Krammer
(“Krammer”) and Kin Chan (“Chan”)(together the “Senior Management”) and (ii) the
subscribers for the Company’s Series A Preferred Stock which are parties to the
Subscription Agreement (as defined below)(the “Subscribers”). Capitalized terms
used herein but not otherwise defined herein shall have the respective meanings
set forth in the Subscription Agreement (as defined below).

 

WITNESSETH:

 

WHEREAS, the Company and the Subscribers have entered into that certain
Subscription Agreement dated as of October 24, 2014 (the “Subscription
Agreement”), pursuant to which the Company has agreed to issue to Subscribers
and Subscribers have agreed to purchase from the Company, up to $8,000,000 of
Series A Preferred Stock and Warrants;

 

WHEREAS, in consideration of the Subscribers entering into the Subscription
Agreement, the Company has agreed to provide certain rights set forth in this
Agreement.

 

NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound by this agreement, agree as
follows:

 

1.     Representations and Warranties of the Senior Management.   Each of the
Senior Management, represents and warrants that:

 

1.1 (i) The Senior Management are beneficial owners, free and clear of all
liens, charges or encumbrances of the following numbers of shares of Common
Stock (of record or through a brokerage firm or other nominee arrangement),
which constitutes 58.8% of the outstanding voting power of the Company’s Common
Stock:

 

Pekarsky – 2,500,000 shares;

Krammer – 2,500,000 shares;

Chan – 1,200,000 shares.

 

1.2 Each member of the Senior Management (each of the foregoing, a “Warrantor”)
has full power and authority to make, enter into and carry out the terms of this
Agreement. This Agreement has been duly executed and delivered by each Warrantor
and

 

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constitutes the legal, valid and binding obligations of such Warrantor
enforceable against such Warrantor in accordance with its terms.

 

1.3 The execution and delivery of this Agreement by each Warrantor do not, and
the performance of this Agreement by such Warrantor will not: (i) conflict with
or violate any law, rule regulation, order, decree or judgment applicable to any
Warrantor or by which any Warrantor or any of the properties of any Warrantor is
or may be bound or affected, or the certificate of incorporation or by-laws of
the Company; (ii) result in or constitute (with or without notice or lapse of
time) any breach of or default under any contract to which any Warrantor is a
party or by which any Warrantor or any of the affiliates or properties of any
Warrantor is or may be bound or affected, or (iii) result in the creation of any
encumbrance or restriction on any of the shares of Common Stock in the Company.
The execution and delivery of this Agreement by each Warrantor do not, and the
performance of this Agreement by each Warrantor will not, require any consent or
approval of any person or entity.

 

2.     Covenants and Agreements.

 

Unless the context requires otherwise, the Company hereby covenants and agrees
as follows:

 

2.1 Periodic Reports and Other Information.   As long as each Subscriber that
has purchased not less than 500,000 shares of Series A Preferred holds at least
30% (the “Minimum Holdings”) of its original holdings (a “Qualified
Subscriber”), the Company shall furnish to such Qualified Subscriber, to the
extent not made publicly available and permitted by applicable law and
regulations:

 

(a) Quarterly Reports.   Within fifty (50) days after the end of each fiscal
quarter of the Company, unaudited consolidated quarterly financial statements
for such fiscal quarter, including a balance sheet as of the end of such fiscal
quarter, a statement of income and a statement of cash flows of the Company for
such fiscal quarter, setting forth in each case in comparative form the figures
from the Company’s previous fiscal year and for the three, six or nine months
then ended, as the case may be, prepared in accordance with generally accepted
accounting principles (“GAAP”) applied on a consistent basis (except as noted)
and reviewed by internationally recognized independent certified public
accountants, which fairly present the financial condition, results of operations
and cash flows of the Company at the date thereof and for the periods covered
thereby;

 

(b) Annual Reports.   Within one hundred five (105) days after the end of each
fiscal year of the Company, audited consolidated annual financial statements for
such fiscal year, including a balance sheet as of the end of such fiscal year, a
statement of income and a statement of cash flows of the Company for such year,
setting forth in each case in comparative form the figures from the Company’s
previous fiscal year, if any, prepared in accordance with GAAP applied on a
consistent basis (except as noted) and audited by internationally recognized
independent certified public accountants, which fairly present the financial
condition, results of operations and cash flows of the Company at the date
thereof and for the periods covered thereby;

 

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(c) Business Plan and Annual Budget.   The Company shall prepare and submit to
each Qualified Subscriber and the Company’s Board of Directors (the “Board”) for
their approval at least thirty (30) days prior to the beginning of the next
financial year or period the annual budget (“Annual Budget”) of the Company and
its subsidiaries on a consolidated basis setting out in reasonable detail the
planned annual capital and operating budgets in reasonable detail, projected
revenues, a projected financial statement for such fiscal year on a quarterly
basis, and promptly after preparation from time to time, any revisions to the
forecasts contained therein of the Company and its Subsidiaries and attaching
thereto such notes as are necessary, desirable or customary, together with a
business plan setting forth in reasonable detail the operating goals of the
Company and its Subsidiaries for the following year (the “Business Plan”).

 

2.2 Inspection.   The Company shall permit each Qualified Subscriber and any
authorized representative thereof, to visit and inspect the properties of the
Company, including its corporate and financial records, to examine its records
and make copies thereof and to discuss its affairs, finances and accounts with
its officers, at all such reasonable times and as often as may be reasonably
requested upon reasonable notice, provided that such visits and inspections
shall not unduly interrupt the daily operation of the Company or its
subsidiaries or affiliates. Each Qualified Subscriber and its participating
agents and representatives, in exercising rights of inspection hereunder, agree
to maintain the confidentiality of all financial and other confidential
information of the Company, its subsidiaries and affiliates acquired by them. If
requested by the Company, each Qualified Subscriber, in exercising its rights
under this Section 2.2 shall execute a confidentiality agreement with the
Company in such reasonable form and substance as agreed between each Qualified
Subscriber and the Company.

 

2.3 Qualifying Listing.   The Company shall use commercially reasonable efforts
to effect a Qualifying Listing (as defined below) on or before the third
anniversary of the first issuance of the Series A Preferred. For purposes of
this Agreement, a “Qualifying Listing” shall mean the (1) receipt by the Company
of approval to list on any tier of the NYSE or NASDAQ which are registered under
the Securities Exchange Act of 1934, as amended, as a “national securities
exchange,” including the NYSE MKT, NASDAQ Global Select Market, NASDAQ Global
Market, NASDAQ Capital Market or their successors; (2) at a market price of at
least $3.70 per share.

 

2.4 Accountants.   As long as a Qualified Subscriber holds the Minimum Holdings,
the Company hereby covenants and agrees that the Company shall retain
independent public accountants (the “Accountants”) of recognized standing and
acceptable to the Audit Committee of the Board who shall certify the Company’s
consolidated financial statements according to GAAP at the end of each fiscal
year. The Company shall not terminate the services of the Accountants without
the approval of the Audit Committee.

 

3.     Right of Participation in Future Securities Offerings.

 

3.1 Issuance Notice.   Subject to the terms and conditions of this Section and
applicable securities laws, and subject to the consent and approval of the
Company’s underwriter at the time of an offering, if the Company shall effect an
underwritten public offering of its securities at the time of a Qualifying
Listing each Qualified Subscriber shall have the right to sell through

 

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such underwriter the following amounts of shares into which the then remaining
Series A Preferred is convertible (the “Conversion Shares”):

 

(a) If the public offering price (the “IPO Price”) is two (2) times the original
purchase price of the Conversion Shares (the “Original Purchase Price”), but
less than three (3) times the Conversion Price, the Qualified Subscribers may
sell up to 25% of their Conversion Shares;

 

(b) If the IPO Price is three (3) times the Conversion Price, but less than four
(4) times the Original Purchase Price, the Qualified Subscribers may sell up to
15% of their Conversion shares; and

 

(c) If the IPO Price is four (4) times the Original Purchase Price or more, the
Qualified Subscribers may not sell any of their Conversion shares.

 

4.     Tag-Along Right.

 

4.1 Tag-Along Right.   (a)   If member of Senior Management is directly or
indirectly transferring Common Stock to a third party purchaser that is not a
family member or trust (a “Third Party Purchaser”), then each Qualified
Subscriber shall have the right to sell to such Third Party Purchaser a
percentage of its Conversion Shares equal to (i) the percentage of the member of
Senior Management’s Common Stock being sold times (ii) a fraction, the numerator
of which is 1 and the denominator of which is the number of Qualified
Subscribers, at a price equal to the price at which the member of Senior
Management is selling (the “Offer Price”).

 

(b)    Each member of Senior Management shall give notice to the Qualified
Subscribers of each proposed sale by any of them of Common Stock which gives
rise to the rights of the Qualified Subscribers in this Section, at least
fifteen (15) business days prior to the proposed consummation of such sale,
setting forth the number of shares of Common Stock, the name and address of the
proposed Third Party Purchaser, the proposed amount and form of consideration
and terms and conditions of payment offered by such Third Party Purchaser, the
percentage of shares of Common Stock that each Qualified Subscriber may sell to
such Third Party Purchaser, and a representation that such Third Party Purchaser
has been informed of the “tag-along” rights provided for in this Section and has
agreed to purchase Common Stock in accordance with the terms hereof. The
tag-along rights provided by this Section must be exercised by a Qualified
Subscriber within fifteen (15) business days following receipt of the notice
required by the preceding sentence, by delivery of a written notice to the
member of Senior Management indicating the Qualified Subscriber’s election to
exercise its rights and specifying the number of shares of Common Stock (up to
the maximum number of Conversion Shares owned by the Qualified Subscriber to be
purchased by such Third Party Purchaser) it elects to sell, provided that a
Qualified Subscriber may waive its rights under this Section prior to the
expiration of such fifteen (15) business day period by giving written notice to
the member of Senior Management, with a copy to the Company. The failure of a
Qualified Subscriber to respond within such fifteen (15) business day period
shall be deemed to be a waiver of the Qualified Subscriber’s rights under this
Section.

 

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4.2 Exempt Transfers.   The tag-along rights set forth in this Section 4 shall
not apply to (i) any transfer to a spouse, child, or other dependent or a trust
for the benefit of any of the foregoing persons (a “Permitted Holder”); provided
that any such Permitted Holder agrees in writing to be bound by this Agreement
in place of the relevant transferor, (ii) the sale in an unsolicited broker’s
transaction pursuant to Rule 144 under the Securities Act of 1933, as amended,
or any successor rule or (iii) the Transfer (as defined below) by a member of
Senior Management of no more than 3% of the total outstanding equity interest in
the Company on a fully-diluted basis if, after such Transfer, the members of
Senior Management still hold not less than 20% of the total outstanding equity
interest in the Company on a fully diluted basis (the “Exempt Transfers”).
“Transfer” shall mean sell, transfer, assign, pledge, hypothecate, dispose of,
mortgage, enter into any voting trust or other agreement, option or other
arrangement or understanding with respect thereto, whether directly or
indirectly and whether voluntarily or involuntarily.

 

5.     Board Representation and Committees.

 

5.1 Number of Board Members.   The Company shall, effective upon Closing and
until the termination of this Agreement, take all appropriate actions to fix and
maintain a Board of no more than five (5) voting members and the Company shall
not change the number of voting members of its Board without the prior written
approval of the Qualified Subscribers.

 

5.2 Qualified Subscriber Nominees.   Upon the Qualified Subscriber Election (as
defined below), so long as there remains a Qualified Subscriber, the Qualified
Subscribers shall be entitled to appoint one (1) voting member of the Company’s
Board (a “Qualifying Subscriber Nominee”).

 

5.3 Board Committees.   The Company shall establish Audit and Compensation
Committees of the Board and the Qualified Subscriber Nominee shall serve on both
committees to the extent permitted by applicable law and exchange listing rules.

 

5.4 Qualified Subscribe Election.   If the Qualifying Subscriber provide written
notice to the Company informing the Company of (i) their election (the
“Election”) to be represented on the Board and (ii) the name(s) of the Qualified
Subscriber Nominee, then, as soon as practicable after its receipt of such
notice from a Qualified Subscriber, but in no event later than five (5) business
days after such receipt, the Company shall:

 

(a) provide notice of the Election to the Company’ Board, and

 

(b) to the extent permissible under applicable law a regulations (including
rules of any relevant listing exchange), take all necessary actions so as to
permit the Qualified Subscriber Nominee to be duly appointed or elected as a
member of the Company’s Board as soon as practicable.

 

5.5 Voting Agreement.   The member of Senior Management agree to vote, or cause
to be voted, all of the Company’s voting share owned by such members of Senior
Management (of record or through a brokerage firm or other nominee arrangement),
or over which such member of Senior Management has voting control, from time to
time and at all times, in

 

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whatever manner as shall be necessary to ensure that at each annual or special
meeting of shareholders at which an election of directors is held or pursuant to
any written consent of the shareholders, the Qualified Subscriber Nominees are
duly elected to the Board. The members of Senior Management further covenant not
to frustrate the purpose of the immediately preceding sentence by any means,
including through entering into any agreement or commitment inconsistent with
such purpose, including but not limited to any inconsistent pledge, charge,
hypothecation, voting agreement, voting trust or other disposition of voting
rights of the Common Stock over which the members of Senior Management retain
beneficial ownership or the economic benefits and risks attendant thereto.

 

5.6 Vacancies.   Any vacancies created by the resignation, removal or death of a
Qualified Subscriber Nominee appointed or elected to the Board shall be filled
pursuant to the provisions of this Section.

 

6.     Senior Management Additional Voting Agreement.

 

6.1 Voting Agreement.   At all times that more than 60% of the Series A
Preferred issued by the Company under the Subscription Agreement remains
outstanding, the members of Senior Management agree to vote, or cause to be
voted, all of the Company’s voting shares owned by such members of Senior
Management (of record or through a brokerage firm or other nominee arrangement),
or over which such member of Senior Management has voting control, from time to
time and at all times, in favor of any transaction which would result in a sale
of more than 50% of the voting stock of the Company or substantially all of its
assets, if such transaction is approved in writing by the holders of more than
50% of the then outstanding Series A Preferred. The members of Senior Management
further covenant not to frustrate the purpose of the immediately preceding
sentence by any means, including through entering into any agreement or
commitment inconsistent with such purpose, including but not limited to any
inconsistent pledge, charge, hypothecation, voting agreement, voting trust or
other disposition of voting rights of the Common Stock over which the members of
Senior Management retain beneficial ownership or the economic benefits and risks
attendant thereto.

 

7.     Miscellaneous.

 

7.1 Termination.   This Agreement will be terminated at such time that less than
10% of the Series A Preferred (or after conversion shares) originally issued
pursuant to the Subscription Agreement remains outstanding.

 

7.2 Specific Enforcement.   Upon a breach by the Company or any member of the
Senior Management of this Agreement, the Subscribers shall be entitled to
injunctive relief against the Company or such member of the Senior Management if
such relief is applicable and available, as a remedy at law would be inadequate
and insufficient. Nothing in this Section shall be construed as limiting the
Subscribers’ remedies in any way.

 

7.3 Notices.   All notices, requests, consents and other communication hereunder
shall be in writing and shall be personally delivered or delivered by overnight
courier or mailed by first-class registered or certified mail, postage prepaid,
return receipt requested, or by facsimile

 

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transmission. Every notice hereunder shall be deemed to have been duly given or
served on the date on which personally delivered, with receipt acknowledged,
upon transmission by facsimile and confirmed facsimile receipt, or two (2) days
after the same shall have been deposited with a reputable international
overnight courier.

 

(a) If to a Subscriber, at its address as set forth in the Subscription
Agreement, or at such other address as may have been furnished to the Company by
it in writing.

 

(b) If to any member of the Senior Management, at the address set forth on
Schedule I to this Agreement, or at such other address as may have been
furnished to the Company by it in writing.

 

(c) If to the Company at:

 

BioPharmX Corporation

1098 Hamilton Court

Menlo Park, California 94025

Attention: James Pekarsky, CEO

Fax: 650-900-4130

 

with a copy to:

 

Ofsink, LLC

900 Third Avenue, 5th Floor

New York, New York 10022

Fax: 646-244-9844

 

7.4 Amendments and Waiver.   Unless otherwise specifically stated herein, any
term of this Agreement may be amended with the written consent of the party
against whom enforcement may be sought and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively). In the case of the Subscribers, a waiver may be
effected by written consent of greater than 50% of the then outstanding Series A
Preferred. No waivers of or exceptions to any term, condition or provision of
this Agreement, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such term, condition or
provision.

 

7.5 Entire Agreement.   This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof.

 

7.6 Severability.   The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement to the extent permitted by law.

 

7.7 Governing Law.   This Agreement shall be governed by an construed in
accordance with the laws of the State of New York.

 

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7.8 Successors and Assigns.   Except as otherwise provided herein, the terms and
conditions of this Agreement shall be binding upon, and inure to the benefit of,
the respective representatives, successors and assigns of the parties hereto.

 

7.9 Counterparts.   This Agreement may be executed in a number of counterparts,
by facsimile, each of which shall be deemed to be an original as of those whose
signature appears thereon, and all of which shall together constitute one and
the same instrument. This Agreement shall become binding when one or more of the
counterparts hereof, individually or taken together, are signed by all the
parties.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the undersigned have executed this Investor Rights Agreement
as of the day and year written above.

 

 

THE COMPANY:

 

 

 

 

 

BIOPHARMX CORPORATION

 

 

 

 

 

By:

/s/ James Pekarsky

 

Name:

James Pekarsky

 

Title:

Chief Executive Officer

 

 

 

 

 

SENIOR MANAGEMENT:

 

 

 

 

 

/s/ James Pekarsky

 

James Pekarsky

 

 

 

 

 

/s/ Anja Krammer

 

Anja Krammer

 

 

 

 

 

/s/ Kin Chan

 

Kin Chan

 

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THE SUBSCRIBER:

 

Accepted and Agreed to:

KIP Overseas Expansion Platform Fund

 

 

By:

/s/ Baek Yer Hyun

 

 

 

 

Name:

Baek Yer Hyun

 

 

 

 

Title:

Authorized Signatory

 

 

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