Exhibit 10.2

STOCK PURCHASE AGREEMENT

By and Between

JOHNSON & JOHNSON INNOVATION-JJDC, INC.

AND

TRACON PHARMACEUTICALS, INC.

Dated as of September 27, 2016

 

 

 

 

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Table of Contents

 

 

 

Page

 

 

 

1.

Definitions.

1

 

1.1.

Defined Terms

1

 

1.2.

Additional Defined Terms

3

2.

Purchase and Sale of Common Stock

4

3.

Closing Date; Deliveries.

4

 

3.1.

Closing Date

4

 

3.2.

Deliveries

5

4.

Representations and Warranties of the Company

5

 

4.1.

Organization, Good Standing and Qualification.

5

 

4.2.

Capitalization and Voting Rights.

6

 

4.3.

Subsidiaries

7

 

4.4.

Authorization.

7

 

4.5.

No Defaults

7

 

4.6.

No Conflicts

7

 

4.7.

No Governmental Authority or Third Party Consents

8

 

4.8.

Valid Issuance of Shares

8

 

4.9.

Litigation

8

 

4.10.

Licenses and Other Rights; Compliance with Laws

8

 

4.11.

Company SEC Documents; Financial Statements; Trading Market.

8

 

4.12.

Absence of Certain Changes.

10

 

4.13.

Offering

10

 

4.14.

No Integration

10

 

4.15.

No Brokers’ or Finders’ Fees

11

 

4.16.

Investment Company

11

 

4.17.

No General Solicitation

11

 

4.18.

Foreign Corrupt Practices

11

 

4.19.

Regulation M Compliance

11

 

4.20.

Office of Foreign Assets Control

11

 

4.21.

Intellectual Property.

11

 

4.22.

Tests and Preclinical and Clinical Trials

12

 

4.23.

Compliance with Health Care Law

12

 

4.24.

Sensitive Payments

13

 

4.25.

Taxes

13

 

4.26.

Environmental Matters

14

 

4.27.

Labor Matters

14

 

4.28.

Insurance

15

 

4.29.

Property

15

 

4.30.

Transactions with Affiliates

15

 

4.31.

Full Disclosure

15

5.

Representations and Warranties of the Investor

16

 

5.1.

Organization; Good Standing

16

 

5.2.

Authorization

16

 

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Table of Contents

(continued)

 

 

 

Page

 

 

 

 

5.3.

No Conflicts

16

 

5.4.

No Governmental Authority or Third Party Consents

16

 

5.5.

Purchase Entirely for Own Account

16

 

5.6.

Disclosure of Information

17

 

5.7.

Investment Experience and Accredited Investor Status

17

 

5.8.

Acquiring Person

17

 

5.9.

Restricted Securities

17

 

5.10.

Legends

17

6.

Investor’s Conditions to Closing

18

 

6.1.

Representations and Warranties

18

 

6.2.

Covenants

18

 

6.3.

Investor Agreement

18

 

6.4.

No Material Adverse Effect

18

 

6.5.

[Reserved].

18

 

6.6.

Listing

18

7.

Company’s Conditions to Closing

18

 

7.1.

Representations and Warranties

18

 

7.2.

Covenants

19

 

7.3.

Investor Agreement

19

8.

Mutual Conditions to Closing

19

 

8.1.

Absence of Litigation

19

 

8.2.

No Prohibition

19

9.

Termination.

19

 

9.1.

Ability to Terminate

19

 

9.2.

Effect of Termination

20

10.

Additional Covenants and Agreements.

20

 

10.1.

Market Listing

20

 

10.2.

Assistance and Cooperation

20

 

10.3.

Blue Sky Filings

20

 

10.4.

Legend Removal.

20

 

10.5.

Conduct of Business

21

 

10.6.

Securities Laws Disclosure; Publicity

21

11.

Miscellaneous.

22

 

11.1.

Governing Law; Submission to Jurisdiction

22

 

11.2.

Waiver

22

 

11.3.

Notices

22

 

11.4.

Entire Agreement

22

 

11.5.

Amendments

23

 

11.6.

Headings; Nouns and Pronouns; Section References

23

 

11.7.

Severability

23

 

11.8.

Assignment

23

 

11.9.

Successors and Assigns

23

 

11.10.

Counterparts

23

 

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Table of Contents

(continued)

 

 

 

Page

 

 

 

 

11.11.

Third Party Beneficiaries

23

 

11.12.

No Strict Construction

23

 

11.13.

Survival of Warranties

24

 

11.14.

Remedies

24

 

11.15.

Expenses

24

 

11.16.

Limitation of Liability

24

 

 

 

 

EXHIBIT A  FORM OF INVESTOR AGREEMENT

 

 

 

 

 

EXHIBIT B  NOTICES

 

 

 

 

 

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STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of September 27,
2016, by and between Johnson & Johnson Innovation-JJDC, Inc. (the “Investor”), a
New Jersey corporation with its principal place of business at 410 George
Street, New Brunswick, New Jersey 08901, and TRACON Pharmaceuticals, Inc. (the
“Company”), a Delaware corporation, with its principal place of business at 8910
University Center Lane, Suite 700, San Diego, CA 92122.

WHEREAS, pursuant to the terms and subject to the conditions set forth in this
Agreement, the Company desires to issue and sell to the Investor, and the
Investor desires to subscribe for and purchase from the Company, certain shares
of common stock, par value $0.001 per share, of the Company (the “Common
Stock”).

NOW, THEREFORE, in consideration of the following mutual promises and
obligations, and for good and valuable consideration, the adequacy and
sufficiency of which are hereby acknowledged, the Investor and the Company agree
as follows:

1. Definitions.

1.1. Defined Terms.  When used in this Agreement, the following terms shall have
the respective meanings specified therefor below:

“Affiliate” shall mean, with respect to any Person, another Person that
controls, is controlled by or is under common control with such Person;
provided, that with respect to the Investor, “Affiliate” shall mean only the
Investor’s subsidiaries that are wholly-owned directly or indirectly, by the
Investor and any Person that wholly-owns, directly or indirectly, the
Investor.  A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise.  Without limiting the generality of
the foregoing, a Person shall be deemed to control another Person if any of the
following conditions is met: (i) in the case of corporate entities, direct or
indirect ownership of more than fifty percent (50%) of the stock or shares
having the right to vote for the election of directors, and (ii) in the case of
non-corporate entities, direct or indirect ownership of more than fifty percent
(50%) of the equity interest with the power to direct the management and
policies of such non-corporate entities.  For the purposes of this Agreement, in
no event shall the Investor or any of its Affiliates be deemed Affiliates of the
Company or any of its Affiliates, nor shall the Company or any of its Affiliates
be deemed Affiliates of the Investor or any of its Affiliates.

“Agreement” shall have the meaning set forth in the Preamble, including all
Exhibits attached hereto.

“Business Day” shall mean a weekday on which banking institutions in the United
States are generally open for business.

“Company’s Knowledge” shall mean, with respect to the Company and its
Subsidiaries, the knowledge of the Company’s executive officers.

 

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“Effect” shall have the meaning set forth in the definition of “Material Adverse
Effect.”

“Governmental Authority” shall mean any court, agency, authority, department,
regulatory body or other instrumentality of any government or country or of any
national, federal, state, provincial, regional, county, city or other political
subdivision of any such government or country or any supranational organization
of which any such country is a member.

“Intellectual Property” shall mean trademarks, trade names, trade dress, service
marks, copyrights, and similar rights (including registrations and applications
to register or renew the registration of any of the foregoing), patents and
patent applications, trade secrets, and any other similar intellectual property
rights.

“Intellectual Property License” shall mean any license, permit, authorization,
approval, contract or consent granted, issued by or with any Person relating to
the use of Intellectual Property.

“Investor Agreement” shall mean that certain Investor Agreement between the
Investor and the Company, to be dated as of the Closing Date, in substantially
the form of Exhibit A attached hereto, as the same may be amended from time to
time.

“Law” or “Laws” shall mean all laws, statutes, rules, regulations, orders,
judgments, injunctions and/or ordinances of any Governmental Authority.

“Material Adverse Effect” shall mean any change, event or occurrence (each, an
“Effect”) that, individually or when taken together with all other Effects, has
had, or would reasonably be expected to have, (i) a material adverse effect on
the business, financial condition, assets or results of operations of the
Company and its Subsidiaries, taken as a whole, or (ii) a material adverse
effect on the Company’s ability to perform its obligations, or consummate the
Transaction, in accordance with the terms of this Agreement, except in the case
of (i) to the extent that any such Effect results from or arises out of:
(A) changes in conditions in the United States or global economy, capital or
financial markets or the pharmaceutical industry generally, including changes in
interest or exchange rates, (B) changes in general legal, regulatory, political,
economic or business conditions or changes in generally accepted accounting
principles in the United States or interpretations thereof, (C) acts of war,
sabotage or terrorism, or any escalation or worsening of any such acts of war,
sabotage or terrorism, (D) earthquakes, hurricanes, floods or other natural
disasters, (E) the announcement of this Agreement or the Transaction, or (F) any
change in the Company’s stock price or trading volume or any failure to meet
internal projections or forecasts or published revenue or earnings projections
of industry analysts (provided that the underlying events giving rise to any
such change shall not be excluded), provided, however, that the Effects excluded
in clauses (A), (B), (C) and (D) shall only be excluded to the extent such
Effects are not disproportionately adverse on the Company and its Subsidiaries
as compared to other companies of similar size and stage of development
operating in the Company’s industry.

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“Organizational Documents” shall mean (i) the Amended and Restated Certificate
of Incorporation of the Company, as amended through the date of this Agreement
and (ii) the Amended and Restated Bylaws of the Company, as amended through the
date of this Agreement.

“Per Share Purchase Price” shall mean $5.95222 (which represents the simple
average of the daily volume weighted average prices of the Common Stock as
reported on the Trading Market for the five (5) consecutive Trading Days ending
the Trading Day prior to the date of this Agreement), provided, however, that in
the event of any stock dividend, stock split, combination of shares,
recapitalization or other similar change in the capital structure of the Company
after the date hereof and on or prior to the Closing which affects or relates to
the Common Stock, the Per Share Purchase Price shall be appropriately adjusted.

“Person” shall mean any individual, partnership, limited liability company,
firm, corporation, trust, unincorporated organization, government or any
department or agency thereof or other entity, as well as any syndicate or group
that would be deemed to be a Person under Section 13(d)(3) of the Exchange Act.

“Subsidiary” shall mean any direct or indirect subsidiary of the Company.

“Third Party” shall mean any Person (other than a Governmental Authority) other
than the Investor, the Company or any Affiliate of the Investor or the Company.

“Trading Day” shall mean any day on which the Trading Market is open for
business.

“Trading Market” shall mean The NASDAQ Global Market.

“Transaction” shall mean the issuance and sale of the Shares by the Company, and
the purchase of the Shares by the Investor, in accordance with the terms hereof.

“Transaction Agreements” shall mean this Agreement and the Investor Agreement.

1.2. Additional Defined Terms.  In addition to the terms defined in Section 1.1,
the following terms shall have the respective meanings assigned thereto in the
sections indicated below:

 

Defined Term

 

Section

 

 

 

Aggregate Purchase Price

 

Section 2

 

 

 

Closing

 

Section 3.1

 

 

 

Closing Date

 

Section 3.1

 

 

 

Common Stock

 

Preamble

 

 

 

Company

 

Preamble

 

 

 

Company Rights

 

Section 4.21(b)

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Company SEC Documents

 

Section 4.11(a)

 

 

 

Environmental Claim

 

Section 4.26

 

 

 

Environmental Laws

 

Section 4.26

 

 

 

Exchange Act

 

Section 4.11(a)

 

 

 

FDA

 

Section 4.22

 

 

 

GAAP

 

Section 4.11(c)

 

 

 

Investor

 

Preamble

 

 

 

LAS

 

Section 4.7

 

 

 

Permits

 

Section 4.10

 

 

 

Proprietary Rights

 

Section 4.21(b)

 

 

 

Rule 144

 

Section 5.9

 

 

 

SEC

 

Section 4.7

 

 

 

Securities Act

 

Section 4.11(a)

 

 

 

Shares

 

Section 2

 

 

 

Termination Date

 

Section 9.1(b)

 

 

 

Transfer Agent

 

Section 10.4(c)

2. Purchase and Sale of Common Stock.  Subject to the terms and conditions of
this Agreement, at the Closing, the Company shall issue and sell to the
Investor, free and clear of all liens, other than any liens arising as a result
of any action by the Investor, the Exchange Act or the Securities Act or the
Transaction Agreements, and the Investor shall purchase from the Company, a
number of shares of Common Stock (the “Shares”) equal to the amount obtained by
dividing US $5,000,000 by the Per Share Purchase Price, rounded down to the
nearest whole Share, for a total purchase price equal to the number of Shares
multiplied by the Per Share Purchase Price (such amount, the “Aggregate Purchase
Price”).

3. Closing Date; Deliveries.

3.1. Closing Date.  Subject to the satisfaction or waiver of all the conditions
to the Closing set forth in Sections 6, 7 and 8 hereof, the closing of the
purchase and sale of the Shares hereunder (the “Closing”) shall be held on the
Business Day after the satisfaction of the

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conditions to Closing set forth in Sections 6, 7 and 8 (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the satisfaction at such time of such conditions), at 9:00 a.m. New York City
time, at the offices of Dechert LLP, 1095 Avenue of the Americas, New York, NY,
10036, or at such other time, date and location as the parties may agree.  The
date the Closing occurs is hereinafter referred to as the “Closing Date.”

3.2. Deliveries.  

(a) Deliveries by the Company.  At the Closing, the Company shall deliver to the
Investor the Shares, registered in the name of the Investor, and the Company
shall instruct its transfer agent to register such issuance at the time of such
issuance.  The Company shall also deliver at the Closing: (i) a certificate in
form and substance reasonably satisfactory to the Investor and duly executed on
behalf of the Company by an authorized executive officer of the Company,
certifying that the conditions to Closing set forth in Sections 6 and 8.1 of
this Agreement have been fulfilled; (ii) the Investor Agreement, duly executed
by the Company; and (iii) a certificate of the secretary of the Company dated as
of the Closing Date certifying (A) that attached thereto is a true and complete
copy of the by-laws or equivalent organizational documents, in each case as
applicable, for the Company as in effect at the time of the actions by the Board
of Directors of the Company referred to in clause (B) below, and on the Closing
Date; (B) that attached thereto is a true and complete copy of all resolutions
adopted by the Board of Directors of the Company authorizing the execution,
delivery and performance of the Transaction Agreements and the Transaction and
that all such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated hereby as
of the Closing Date; (C) that attached thereto is a true and complete copy of
the certificate of incorporation or equivalent organizational documents, in each
case as applicable, for the Company as in effect at the time of the actions by
the Board of Directors of the Company referred to in clause (B) above, and on
the Closing Date; and (D) as to the incumbency and specimen signature of any
officer of the Company executing a Transaction Agreement on behalf of the
Company.

(b) Deliveries by the Investor.  At the Closing, the Investor shall deliver, or
cause to be delivered, to the Company the Aggregate Purchase Price by wire
transfer of immediately available United States funds to an account designated
by the Company.  The Company shall notify the Investor in writing of the wiring
instructions for such account not less than five (5) Business Days before the
Closing Date.  The Investor shall also deliver, or cause to be delivered, at the
Closing, the Investor Agreement, duly executed by the Investor.

4. Representations and Warranties of the Company.  The Company hereby represents
and warrants to the Investor, as of the date hereof and as of the Closing, as
follows:

4.1. Organization, Good Standing and Qualification.

(a) The Company is a corporation duly incorporated or otherwise organized,
validly existing and in good standing under the Laws of the jurisdiction of its
incorporation or organization, with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted.  The Company has all requisite corporate power and corporate
authority to own, lease and operate its properties and assets, to carry on its

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business as now conducted as described in the Company SEC Documents.  The
Company has all requisite corporate power and corporate authority to enter into
the Transaction Agreements, to issue and sell the Shares and to perform its
obligations under and to carry out the other transactions contemplated by the
Transaction Agreements.

(b) The Company and each Subsidiary is qualified to transact business and is in
good standing in each jurisdiction in which the character of the properties
owned, leased or operated by it, or the nature of the business conducted by it,
makes such qualification necessary, except where the failure to be so qualified
would not have a Material Adverse Effect.

4.2. Capitalization and Voting Rights.

(a) The authorized capital of the Company as of the date hereof consists of:
(i) 200,000,000 shares of Common Stock of which, as of September 22, 2016,
(x) 12,216,221 shares were issued and outstanding, (y) 3,164,267 shares were
reserved for issuance pursuant to the Company’s stock incentive and employee
stock purchase plans, of which 1,977,988 shares were issuable upon the exercise
or settlement of stock options or restricted stock units outstanding on such
date, and (z) 57,173 shares were reserved for issuance upon the exercise of
warrants to purchase Common Stock that were outstanding on the date hereof, and
(ii) 10,000,000 shares of preferred stock, par value $0.001 per share, of which
no shares are issued and outstanding as of the date of this Agreement. All of
the issued and outstanding shares of Common Stock (A) have been duly authorized
and validly issued, (B) are fully paid and nonassessable and (C) were issued in
compliance with all applicable federal and state securities Laws and not in
violation of any preemptive rights.

(b) All of the authorized shares of Common Stock are entitled to one (1) vote
per share.

(c) Except as described or referred to in Section 4.2(a) above, as disclosed in
the Company SEC Documents, or as provided in the Investor Agreement, as of the
date hereof, there are not: (i) any outstanding equity securities, options,
warrants, rights (including conversion or preemptive rights) or other agreements
pursuant to which the Company is or may become obligated to issue, sell or
repurchase any shares of its capital stock or any other securities of the
Company or (ii) any restrictions on the transfer of capital stock of the Company
other than pursuant to state and federal securities Laws.

(d) Except as provided in the Investor Agreement or as disclosed in the Company
SEC Documents, the Company is not a party to or subject to any agreement or
understanding relating to the voting of shares of capital stock of the Company
or the giving of written consents by a stockholder or director of the Company.

(e) Except as provided in the Investor Agreement or disclosed in the Company SEC
Documents, no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.

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(f) The Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and the Company has taken no action designed to, or which to its
knowledge is likely to have the effect of, terminating the registration of the
Common Stock under the Exchange Act nor has the Company received any
notification that the SEC is contemplating terminating such registration.

4.3. Subsidiaries.  The Company does not have any Subsidiaries that would,
individually or in the aggregate, be a significant subsidiary as defined in Rule
1.02 of Regulation S-X promulgated by the SEC.

4.4. Authorization.

(a) All requisite corporate action on the part of the Company, its directors and
stockholders required by applicable Law for the authorization, execution and
delivery by the Company of the Transaction Agreements, and the performance of
all obligations of the Company hereunder and thereunder, including the
authorization, issuance and delivery of the Shares, has been taken.

(b) This Agreement has been, and upon the execution and delivery of the Investor
Agreement by the Company at the Closing, the Investor Agreement will be, duly
executed and delivered by the Company, and upon the due execution and delivery
of this Agreement and the Investor Agreement by the Investor, this Agreement and
the Investor Agreement will constitute, valid and legally binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms (except with respect to this Agreement and the Investor Agreement as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other Laws of general application relating to or
affecting enforcement of creditors’ rights, (ii) rules of Law governing specific
performance, injunctive relief or other equitable remedies and limitations of
public policy and (iii) to the extent that the enforceability of indemnification
obligations may be limited by applicable Laws).

(c) No stop order or suspension of trading of the Common Stock has been imposed
by the Trading Market, the SEC or any other Governmental Authority and remains
in effect.

4.5. No Defaults.  The Company and each Subsidiary is not in default under or in
violation, and there exists no condition, event or act to the Company’s
Knowledge which after notice, lapse of time, or both, would constitute a default
or violation by the Company, of (a) its Organizational Documents, (b) any
provision of applicable Law or any ruling, writ, injunction, order, Permit,
judgment or decree of any Governmental Authority or (c) any agreement,
arrangement or instrument, whether written or oral, by which the Company or any
of its assets are bound, except in the case of clauses (b) or (c) as would not
have a Material Adverse Effect.

4.6. No Conflicts.  The execution, delivery and performance of the Transaction
Agreements, and compliance with the provisions hereof and thereof by the Company
do not and shall not: (a) violate in any material respect any provision of
applicable Law or any ruling, writ, injunction, order, permit, judgment or
decree of any Governmental Authority, (b) constitute a material breach of, or
default under (or an event which, with notice or lapse of time or both,

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would become a default under) or conflict with, or give rise to any right of
termination, cancellation or acceleration of, any material agreement,
arrangement or instrument, whether written or oral, by which the Company, any of
its Subsidiaries, or any of its assets are bound, (c) violate or conflict with
any of the provisions of the Company’s Organizational Documents or (d) result in
any encumbrance upon any of the Shares, other than restrictions pursuant to the
Investor Agreement or securities Laws, or on any of the properties or assets of
the Company.

4.7. No Governmental Authority or Third Party Consents.  No consent, approval,
authorization or other order of, or filing with, or notice to, any Governmental
Authority or other Third Party is required to be obtained or made by the Company
in connection with the authorization, execution and delivery by the Company of
any of the Transaction Agreements, or with the authorization, issue and sale by
the Company of the Shares, except (a) such filings as may be required to be made
with the Securities and Exchange Commission (the “SEC”) and with any state blue
sky or securities regulatory authority, which filings shall be made in a timely
manner in accordance with all applicable Laws, (b) with respect to the Shares,
the filing with the Trading Market of, and the absence of unresolved issues with
respect to, a Notification Form: Listing of Additional Shares (the “LAS”).

4.8. Valid Issuance of Shares.  When issued, sold and delivered at the Closing
in accordance with the terms hereof for the Aggregate Purchase Price, the Shares
shall be duly authorized, validly issued, fully paid and nonassessable, free
from any liens, encumbrances or restrictions on transfer, including preemptive
rights, rights of first refusal or other similar rights, other than pursuant to
the Transaction Agreements, solely as a result of any action by the Investor or
under federal or state securities Laws.

4.9. Litigation.  There is no material action, suit, proceeding or investigation
pending (of which the Company or any of its Subsidiaries has received notice or
otherwise has knowledge) or, to the Company’s Knowledge, threatened, against the
Company or any of its Subsidiaries, or which the Company intends to initiate
which has had or is reasonably likely to have a Material Adverse Effect.

4.10. Licenses and Other Rights; Compliance with Laws.  Except as would not
result in a Material Adverse Effect, (a) the Company and each Subsidiary has all
franchises, permits, licenses and other rights and privileges
(“Permits”) necessary to permit it to own its properties and to conduct its
business as presently conducted and is in compliance thereunder, (b) the Company
and each Subsidiary has not taken any action that would interfere with the
Company’s or its Subsidiaries’ ability to renew all such Permit(s) and (c) the
Company and each Subsidiary is and has been in compliance with all Laws
applicable to its business, properties and assets, and to the products and
services sold by it.

4.11. Company SEC Documents; Financial Statements; Trading Market.

(a) Since January 1, 2016, the Company has timely filed all required reports,
schedules, forms, statements and other documents (including exhibits and all
other information incorporated therein), and any required amendments to any of
the foregoing, with the SEC (the “Company SEC Documents”).  As of their
respective filing dates, each of the Company SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933,

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as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and the rules and regulations of the SEC
promulgated thereunder applicable to such Company SEC Documents, and no Company
SEC Documents when filed, declared effective or mailed, as applicable, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

(b) As of the date of this Agreement, there are no outstanding or unresolved
comments in comment letters received from the SEC or its staff.

(c) The financial statements of the Company included in its Annual Report on
Form 10-K for the fiscal year ended December 31, 2015 and in its subsequent
quarterly reports on Form 10-Q through the date of this Agreement comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with United States generally accepted accounting
principles (“GAAP”) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to the omission of certain notes
not ordinarily accompanying such unaudited financial statements and to normal,
year-end audit adjustments.  Except (i) as set forth in the Company SEC
Documents or (ii) for liabilities incurred in the ordinary course of business
subsequent to the date of the most recent balance sheet contained in the Company
SEC Documents, the Company and each Subsidiary has no material liabilities,
whether absolute or accrued, contingent or otherwise.  There are no material
unconsolidated Subsidiaries of the Company or any material off-balance sheet
arrangements of any type (including any off balance sheet arrangements required
to be disclosed pursuant to Item 303(a)(4) of Regulation S-K promulgated under
the Securities Act) that have not been so described in the Company SEC Documents
filed prior to the date hereof nor any obligations to enter into any such
arrangements.

(d) The Common Stock is listed on the Trading Market, and the Company has taken
no action designed to, or which is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the Trading Market.  The Company has not received any notification
that, and to the Company’s Knowledge there is no indication that, the SEC or the
Trading Market is contemplating terminating such listing or registration.

(e) The Company has implemented and maintains a system of internal control over
financial reporting (to the extent required by Rule 13a-15(a) under the Exchange
Act) that is designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of consolidated financial statements
for external purposes, and, to the Company’s Knowledge, such system of internal
control over financial reporting is effective. The Company has implemented and
maintains disclosure controls and procedures (to the extent required by Rule
13a-15(a) of the Exchange Act) that are designed to ensure that information
required to be disclosed by the Company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported within the
timeframes specified by the SEC’s rules and forms (and such disclosure controls
and procedures are effective at the reasonable assurance

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level), and has disclosed, based on its most recent evaluation of its system of
internal control over financial reporting prior to the date of this Agreement,
to the Company’s outside auditors and the audit committee of the Company Board
(i) any significant deficiencies and material weaknesses to the Company’s
Knowledge in the design or operation of its internal control over financial
reporting (as defined in Rule 13a-15(f) of the Exchange Act) that would
reasonably be expected to adversely affect the Company’s ability to record,
process, summarize and report financial information and (ii) any fraud to the
Company’s Knowledge, that involves management or other employees who have a
significant role in the Company’s internal control over financial reporting.

(f) To the Company’s Knowledge, as of the date hereof, no employee of the
Company has provided or is providing information to any law enforcement agency
regarding the violation of any applicable Law of the type described in Section
806 of the Sarbanes-Oxley Act by the Company.  The Company has not discharged,
demoted or suspended an employee of the Company in the terms and conditions of
employment because of any lawful act of such employee described in Section 806
of the Sarbanes-Oxley Act.

4.12. Absence of Certain Changes.

(a) Except as disclosed in the Company SEC Documents filed prior to the date
hereof, there has not occurred any event that has caused or, to the Company’s
Knowledge would reasonably be expected to cause, a Material Adverse Effect.

(b) Except as set forth in the Company SEC Documents filed prior to the date
hereof, the Company has not (i) declared or paid any dividends, or authorized or
made any distribution upon or with respect to any class or series of its capital
stock, or (ii) sold, exchanged or otherwise disposed of any of its material
assets or rights.

(c) The Company has not admitted in writing its inability to pay its debts
generally as they become due, filed or consented to the filing against it of a
petition in bankruptcy or a petition to take advantage of any insolvency act,
made an assignment for the benefit of creditors, consented to the appointment of
a receiver for itself or for the whole or any substantial part of its property,
or had a petition in bankruptcy filed against it, been adjudicated a bankrupt,
or filed a petition or answer seeking reorganization or arrangement under the
federal bankruptcy laws or any other Laws of the United States or any other
jurisdiction.

4.13. Offering.  Subject to the accuracy of the Investor’s representations set
forth in Sections 5.5, 5.6, 5.7, 5.9 and 5.10, the offer, sale and issuance of
the Shares to be issued in conformity with the terms of this Agreement
constitute transactions which are exempt from the registration requirements of
the Securities Act and from all applicable state registration or qualification
requirements.  Neither the Company nor any Person acting on its behalf will take
any action that would cause the loss of such exemption.

4.14. No Integration.  The Company has not, directly or through any agent, sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Securities Act) which is or will be integrated
with the Shares sold pursuant to this Agreement in a manner that would require
the registration of the Shares under the Securities Act.

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4.15. No Brokers’ or Finders’ Fees.  No broker, finder, investment banker or
other Person is entitled to any brokerage, finder’s or other fee or commission
from the Company in connection with the transactions contemplated by the
Transaction Agreements.

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

4.17. No General Solicitation.  Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Shares by any form of
general solicitation or general advertising.  The Company has offered the Shares
for sale only to the Investor.

4.18. Foreign Corrupt Practices.  Neither the Company, nor to the Company’s
Knowledge, any agent or other person acting on behalf of the Company, has:
(a) directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (b) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (c) except as would not result in a
Material Adverse Effect, failed to disclose fully any contribution made by the
Company (or made by any person acting on its behalf of which the Company is
aware) which is in violation of law or (d) violated in any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or any applicable non-U.S.
anti-bribery Law.

4.19. Regulation M Compliance.  The Company has not, and to the Company’s
Knowledge no one acting on its behalf has, (a) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
any of the Shares, (b) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Shares, or (c) paid or agreed to pay to any
Person any compensation for soliciting another to purchase any other securities
of the Company.

4.20. Office of Foreign Assets Control.  Neither the Company nor, to the
Company’s Knowledge, any director, officer, agent, employee or Affiliate of the
Company is currently subject to any U.S. sanctions administered by the Office of
Foreign Assets Control of the U.S. Treasury Department.

4.21. Intellectual Property.

(a) Except as set forth in the Company SEC Documents, the Intellectual Property
that is owned by the Company and each Subsidiary is owned free from any liens or
restrictions (other than any restrictions set forth in any Intellectual Property
License relating to such Intellectual Property), and all of the Company’s and
its Subsidiaries’ material Intellectual Property Licenses are in full force and
effect in accordance with their terms, are, to the Company’s Knowledge, free of
any liens or restrictions (other than any restrictions set forth in

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any such Intellectual Property License relating to such Intellectual Property),
and neither the Company nor to the Company’s Knowledge any other party thereto,
is in material breach of any such material Intellectual Property License, and no
event has occurred to the Company’s Knowledge that with notice or lapse of time
or both would constitute such a breach or default thereunder or would result in
the termination thereof or would cause or permit the acceleration or other
change of any right or obligation of the loss of any benefit thereunder by the
Company except as set forth in any such Intellectual Property License.  Except
as set forth in the Company SEC Documents filed prior to the date hereof, there
is no material legal claim or demand of any Person pertaining to, or any
proceeding which is pending (of which the Company has received notice or
otherwise exists to the Company’s Knowledge) or, to the Company’s Knowledge,
threatened, (i) challenging the right of the Company in respect of any
Intellectual Property owned or licensed by the Company, or (ii) that claims that
any default exists under any Intellectual Property License, except, in the case
of (i) and (ii) above, where any such claim, demand or proceeding would not have
or reasonably be expected to have a Material Adverse Effect.

(b) Except as set forth in the Company’s SEC Documents: (i) the Company and each
Subsidiary owns, free and clear of any material lien or encumbrance, or has a
valid license to, or has an enforceable right to use, as it is used or held for
use, all material U.S. and non-U.S. patents, trade secrets, know-how,
trademarks, service marks, copyrights, and other proprietary and intellectual
property rights, and all grants and applications with respect to the foregoing
(collectively, the “Proprietary Rights”) necessary for the conduct of the
Company’s business (such Proprietary Rights owned by or licensed to the Company
and each Subsidiary, collectively, the “Company Rights”); and (ii) the Company
and each Subsidiary has taken reasonable measures to protect the Company Rights,
consistent with prudent commercial practices in the biotechnology industry.

4.22. Tests and Preclinical and Clinical Trials.  The studies, tests and
preclinical and clinical trials conducted by or, to the Company’s Knowledge, on
behalf of the Company that are described in the Company SEC Documents were and,
if still pending, are being, conducted in all material respects in accordance
with any applicable protocols submitted to the U.S. Food and Drug Administration
(the “FDA”) or any Governmental Authority exercising comparable authority,
procedures and controls pursuant to, where applicable, accepted professional and
scientific standards, and all applicable Laws and regulations; the descriptions
of the studies, tests and preclinical and clinical trials conducted by or, to
the Company’s Knowledge, on behalf of the Company, and the results thereof,
contained in the Company SEC Documents are accurate and complete in all material
respects; to the Company’s Knowledge, there are no subsequent studies, tests or
preclinical and clinical trials, the results of which call into question the
results described in the Company SEC Documents; and the Company has not received
any notices or correspondence from the FDA, any Governmental Authority
exercising comparable authority or any Institutional Review Board requiring the
termination, suspension, material modification or clinical hold of any studies,
tests or preclinical or clinical trials conducted by or on behalf of the
Company.

4.23. Compliance with Health Care Law.  The Company and each Subsidiary is, and,
to the Knowledge of Company, at all times for the two years immediately
preceding the date of this Agreement has been, in compliance with all applicable
federal, state and municipal

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statutes, regulations, rules and orders and other requirements of any
Governmental Authority to which it is subject with respect to health care Laws
and health care regulatory and fraud and abuse matters, including, without
limitation, those relating to third-party reimbursement, the federal health care
program anti-kickback law, 42 U.S.C. § 1320a-7b, the federal physician
self-referral law, 42 U.S.C. § 1395nn, the federal False Claims Act, 31 U.S.C. §
3729 et seq., the Health Insurance Portability and Accountability Act of 1996,
Pub. Law. 104-99, and any and all other health care Laws and regulations, each
as amended from time to time, applicable to the operations of the Company or its
Subsidiaries, except for any such non-compliance which would not, individually
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect.  Neither the Company nor, to the Company’s Knowledge, any Subsidiary is
a party to or has any ongoing reporting obligations pursuant to any corporate
integrity agreements, deferred prosecution agreements, monitoring agreements,
consent decrees, settlement orders, plans of correction or similar agreements
with or imposed by any Governmental Authority. Additionally, none of the Company
or its Subsidiaries nor, to the Company’s Knowledge, any of its respective
employees, officers or directors has been excluded, suspended or debarred from
participation in any U.S. federal health care program or, to the Company’s
Knowledge, is subject to a governmental inquiry, investigation, proceeding, or
other similar action that could reasonably be expected to result in debarment,
suspension, or exclusion.

4.24. Sensitive Payments.  None of the Company or any Subsidiary, or, to the
Company’s Knowledge, any of the Company’s or Subsidiaries’ respective directors,
officers, agents, representatives, shareholders or employees acting on behalf of
the Company, has directly or indirectly made or offered to make any
contribution, gift, bribe, rebate, payoff, influence payment, kickback or other
payment to any Person, regardless of form, whether in money, property or
services, including without limitation: (a) to obtain favorable treatment in
securing business, (b) to pay for favorable treatment for business secured, (c)
to obtain special concessions or for special concessions already obtained, for
or in respect of the Company or any Subsidiary or any Affiliate of any of them,
or (d) to induce or reward the referral of business or services that are billed
to any government or private program.

4.25. Taxes.  The Company has timely filed (after giving effect to any duly
obtained extensions of time in which to make such filings) all material tax
returns that are or were, at any time, required to be filed by it, such tax
returns are complete and accurate in all material respects and all taxes
required, at any time, to be paid have been timely paid or, if not yet due, are
properly accrued for by the Company in accordance with GAAP.  All material taxes
that the Company is or was required by law to have withheld or collected have
been duly withheld or collected and, to the extent required, have been timely
paid to the proper Governmental Authority. The Company has not received notice
from the taxing authority of any jurisdiction that there are and to the
Company’s Knowledge there are no past-due unpaid taxes in any material amount
except as may be being contested in good faith and by appropriate
proceedings.  The Company has not received notice of, and to the Company’s
Knowledge there are not, any material actions, suits, investigations or audits
by any taxing authority in progress with respect to taxes of or relating to the
Company and the Company has not received notice of, and to the Company’s
Knowledge there are not, any outstanding material assessments, claims or
deficiencies with respect to any taxes of the Company that have been proposed,
asserted or assessed.

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4.26. Environmental Matters.  To the Company’s Knowledge, neither the Company
nor any Subsidiary (a) is in violation of any statute, rule, regulation,
decision or order of any Governmental Authority relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, “Environmental Laws”), (b) owns or operates any real
property contaminated with any substance that is in violation of any
Environmental Laws, (c) is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or (d) has received any claim alleging
liability under any Environmental Laws (“Environmental Claim”), which in each
case as to clauses (a), (b), (c) and (d), individually or in the aggregate, has
had or would reasonably be expected to have a Material Adverse Effect. To the
Company’s Knowledge there is no pending investigation or investigation
threatened in writing by any Governmental Authority that reasonably is expected
to result in an Environmental Claim that would reasonably be expected to have a
Material Adverse Effect.

4.27. Labor Matters.

(a) The Company and each Subsidiary is not a party to or bound by any collective
bargaining agreements or other agreements with labor organizations. Neither the
Company nor any Subsidiary has violated any Laws, regulations, orders or
contract terms, affecting the collective bargaining rights of employees, labor
organizations or any Laws, regulations or orders affecting employment
discrimination, equal opportunity employment, or employees’ health, safety,
welfare, wages and hours, except as would not, individually or in the aggregate,
result in a Material Adverse Effect.

(b) (i) There are no labor disputes existing, or to the Company’s Knowledge,
threatened, involving strikes, slow-downs, work stoppages, job actions,
disputes, lockouts or any other disruptions of or by the Company’s employees,
(ii) there are no unfair labor practices or petitions for election pending or,
to the Company’s Knowledge, threatened before the National Labor Relations Board
or any other federal, state or local labor commission relating to the Company’s
employees, (iii) no demand for recognition or certification heretofore made by
any labor organization or group of employees is pending with respect to the
Company and (iv) to the Company’s Knowledge, the Company and each Subsidiary
enjoys good labor and employee relations with its employees and labor
organizations.

(c) The Company and each Subsidiary is, and at all times has been, in compliance
in all material respects with all applicable Laws respecting employment
(including Laws relating to classification of employees and independent
contractors) and employment practices, terms and conditions of employment, wages
and hours, and immigration and naturalization. To the Company’s Knowledge, there
are no claims pending against the Company before the Equal Employment
Opportunity Commission or any other administrative body or in any court
asserting any violation of Title VII of the Civil Rights Act of 1964, the Age
Discrimination Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other federal,
state or local law, statute or ordinance barring discrimination in employment.

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(d) Except as disclosed in the Company’s SEC Documents filed prior to the date
hereof, the Company is not a party to, or bound by, any employment or other
contract or agreement that contains any severance, termination pay or change of
control liability or obligation which, if such payment or obligation were
required to be made or fulfilled, would have a Material Adverse Effect.

(e) To the Company’s Knowledge, each of the Company’s employees is a Person who
is either a United States citizen or a permanent resident entitled to work in
the United States. To the Company’s Knowledge, the Company has no material
liability for the improper classification by the Company of such employees as
independent contractors or leased employees prior to the Closing.

4.28. Insurance.  The Company maintains insurance of the type and in the amount
that the Company reasonably believes is adequate for its business as conducted
as of the date hereof, including, but not limited to, liability insurance for
clinical testing and insurance covering all real and personal property owned or
leased by the Company against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against by similarly situated companies, all
of which insurance is in full force and effect. The Company has not received any
written notice of cancellation of any such insurance from the provider thereof
(except for written notices of cancellation delivered by providers in connection
with the expiration of insurance policies in accordance with their terms, in the
ordinary course of the Company’s business), nor, to the Company’s Knowledge,
will it be unable to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost.

4.29. Property.  Neither the Company nor any Subsidiary owns any real property;
and any real property and buildings held under lease by the Company or any
Subsidiary are held under valid, existing and enforceable leases with such
exceptions as are not material and do not materially interfere with the use made
or proposed to be made of such real property and buildings by the Company or its
Subsidiaries.

4.30. Transactions with Affiliates.  Except as set forth in the Company SEC
Documents, none of the officers or directors of the Company or its Subsidiaries
and, to the Company’s Knowledge, none of the employees of the Company or any
Subsidiary is presently a party to any transaction, agreement arrangement with
the Company or any Subsidiary (other than as holders of securities and for
services as employees, officers and directors), that would be required to be
disclosed pursuant to Item 404 of Regulation S-K promulgated under the
Securities Act.

4.31. Full Disclosure.  To the Company’s Knowledge, as of the date hereof, and
other than the transactions that are the subject of the Transaction Agreements
and that certain License and Option Agreement between the Company and an
Affiliate of the Investor dated on or about the date hereof , no material fact
or circumstance exists that would be required to be disclosed in a current
report on Form 8-K or in a registration statement filed under the Securities
Act, were such a registration statement filed on the date hereof, that has not
been disclosed in a Company SEC Document or otherwise disclosed in writing to
the Investor.

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5. Representations and Warranties of the Investor.  The Investor hereby
represents and warrants to the Company that:

5.1. Organization; Good Standing.  The Investor is a corporation duly organized,
validly existing and in good standing under the Laws of New Jersey.  The
Investor has all requisite power and authority to enter into the Transaction
Agreements, to purchase the Shares and to perform its obligations under and to
carry out the other transactions contemplated by the Transaction Agreements.

5.2. Authorization.  All requisite action on the part of the Investor and its
directors and stockholders, required by applicable Law for the authorization,
execution and delivery by the Investor of the Transaction Agreements, and the
performance of all of its obligations thereunder, including the subscription for
and purchase of the Shares, has been taken.  This Agreement has been, and upon
the execution and delivery of the Investor Agreement at the Closing by the
Investor, the Investor Agreement will be, duly executed and delivered by the
Investor and upon the due execution and delivery thereof by the Company, will
constitute valid and legally binding obligations of the Investor, enforceable
against the Investor in accordance with their respective terms (except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other Laws of general application relating to or
affecting enforcement of creditors’ rights and (b) rules of Law governing
specific performance, injunctive relief or other equitable remedies and
limitations of public policy).

5.3. No Conflicts.  The execution, delivery and performance of the Transaction
Agreements and compliance with the provisions thereof by the Investor do not and
shall not: (a) violate any provision of applicable Law or any ruling, writ,
injunction, order, permit, judgment or decree of any Governmental Authority,
(b) constitute a breach of, or default under (or an event which, with notice or
lapse of time or both, would become a default under) or conflict with, or give
rise to any right of termination, cancellation or acceleration of, any
agreement, arrangement or instrument, whether written or oral, by which the
Investor or any of its assets, are bound, or (c) violate or conflict with any of
the provisions of the Investor’s organizational documents (including any
articles or memoranda of organization or association, charter, bylaws or similar
documents), except as would not impair or adversely affect the ability of the
Investor to consummate the Transaction and perform its obligations under the
Transaction Agreements and except, in the case of subsections (a) and (b) as
would not have a material adverse effect on the Investor’s ability to perform
its obligations under the Transaction Agreements or consummate the Transaction
in accordance with the terms of this Agreement.

5.4. No Governmental Authority or Third Party Consents.  No consent, approval,
authorization or other order of any Governmental Authority or other Third Party
is required to be obtained by the Investor in connection with the authorization,
execution and delivery of any of the Transaction Agreements or with the
subscription for and purchase of the Shares.

5.5. Purchase Entirely for Own Account.  The Shares shall be acquired for
investment for the Investor’s own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and the Investor
has no present intention of selling, granting any participation or otherwise
distributing the Shares.  The Investor does not have and

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will not have as of the Closing any contract, undertaking, agreement or
arrangement with any Person to sell, transfer or grant participation to a Person
any of the Shares.

5.6. Disclosure of Information.  The Investor has received all the information
from the Company and its management that the Investor considers necessary or
appropriate for deciding whether to purchase the Shares hereunder.  The Investor
further represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the Company, its financial condition, results
of operations and prospects and the terms and conditions of the offering of the
Shares sufficient to enable it to evaluate its investment.

5.7. Investment Experience and Accredited Investor Status.  The Investor is an
“accredited investor” (as defined in Regulation D under the Securities
Act).  The Investor has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Shares to be purchased hereunder.

5.8. Acquiring Person.  As of the date of this Agreement and immediately prior
to the Closing, neither the Investor nor any of its Affiliates beneficially
owns, or will beneficially own (as determined pursuant to Rule 13d-3 under the
Exchange Act without regard for the number of days in which a Person has the
right to acquire such beneficial ownership, and without regard to Investor’s
rights under this Agreement), any securities of the Company, except for
securities that may be owned by employee benefit plans of the Investor or any of
its Affiliates.

5.9. Restricted Securities.  The Investor understands that the Shares, when
issued, shall be “restricted securities” under the federal securities Laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such Laws the Shares may be resold
without registration under the Securities Act only in certain limited
circumstances.  The Investor represents that it is familiar with Rule 144 of the
Securities Act (“Rule 144”), as presently in effect.

5.10. Legends.  The Investor understands that any certificates representing the
Shares shall bear the following legends:

(a) “These securities have not been registered under the Securities Act of
1933.  They may not be sold, offered for sale, pledged or hypothecated in the
absence of a registration statement in effect with respect to the securities
under the Securities Act or an opinion of counsel (which counsel shall be
reasonably satisfactory to the Company) that such registration is not required
or unless sold pursuant to Rule 144 of the Securities Act.”;

(b) any legend required by applicable state securities Laws; and

(c) “The securities represented by this certificate are subject to and shall be
transferable only upon the terms and conditions of an Investor Agreement dated
as of _________________ __, 2016, by and between TRACON Pharmaceuticals, Inc.
and Johnson & Johnson Innovation-JJDC, Inc., a copy of which is on file with the
Secretary of TRACON Pharmaceuticals, Inc.”

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6. Investor’s Conditions to Closing.  The Investor’s obligation to purchase the
Shares at the Closing is subject to the fulfillment as of the Closing of the
following conditions (unless waived in writing by the Investor):

6.1. Representations and Warranties.  The representations and warranties made by
the Company in Section 4 hereof shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of such Closing
Date, except to the extent such representations and warranties are specifically
made as of a particular date, in which case such representations and warranties
shall be true and correct as of such date; provided, however, that for purposes
of this Section 6.1, all such representations and warranties of the Company
(other than Sections 4.1(a), 4.3, 4.4, 4.5(a), 4.6(c), 4.8, and the first
sentence of 4.11(c) of this Agreement) shall be deemed to be true and correct
for purposes of this Section 6.1 unless the failure or failures of such
representations and warranties to be so true and correct, without regard to any
“material,” “materiality” or “Material Adverse Effect” qualifiers set forth
therein, constitute a Material Adverse Effect.

6.2. Covenants.  All covenants and agreements contained in this Agreement to be
performed or complied with by the Company on or prior to the Closing Date shall
have been performed or complied with in all material respects.

6.3. Investor Agreement.  The Company shall have duly executed and delivered to
the Investor, pursuant to Section 3.2(a) of this Agreement, the Investor
Agreement, and (subject to execution by the Investor) such agreement shall be in
full force and effect.

6.4. No Material Adverse Effect.  From and after the date of this Agreement
until the Closing Date, there shall have occurred no event that has caused a
Material Adverse Effect except any event previously disclosed to the Investor in
writing.

6.5. [Reserved].

6.6. Listing.  The Shares shall be eligible and approved for listing on the
Trading Market.

7. Company’s Conditions to Closing.  The Company’s obligation to issue and sell
the Shares at the Closing is subject to the fulfillment as of the Closing of the
following conditions (unless waived in writing by the Company):

7.1. Representations and Warranties.  The representations and warranties made by
the Investor in Section 5 hereof shall be true and correct as of the date of
this Agreement and as of the Closing Date as though made on and as of such
Closing Date, except to the extent such representations and warranties are
specifically made as of a particular date, in which case such representations
and warranties shall be true and correct as of such date, in the case of
Sections 5.1-5.4, and 5.11, except where any failure to be true and correct
would not have a material adverse effect on the Investor’s ability to perform
its obligations, or consummate the Transaction in accordance with the terms of
this Agreement, in the case of Section 5.5, 5.6 and 5.7, except where any
inaccuracy would not result in the issuance of the Shares hereunder failing to
qualify as an offering of securities not involving any public offering under the
federal securities Laws, and in the case of Section 5.8, except where any
inaccuracy would not be

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material on the Investor’s ability to perform its obligations, or consummate the
Transaction in accordance with the terms of this Agreement.

7.2. Covenants.  All covenants and agreements contained in this Agreement to be
performed or complied with by the Investor on or prior to the Closing Date shall
have been performed or complied with in all material respects.

7.3. Investor Agreement.  The Investor shall have duly executed and delivered to
the Company, pursuant to Section 3.2(b) of this Agreement, the Investor
Agreement, and (subject to execution by the Company) such agreement shall be in
full force and effect.

8. Mutual Conditions to Closing.  The obligations of the Investor and the
Company to consummate the Closing are subject to the fulfillment as of the
Closing Date of the following conditions:

8.1. Absence of Litigation.  There shall be no action, suit, proceeding or
investigation by a Governmental Authority pending or currently threatened in
writing against the Company or the Investor that challenges the validity of any
of the Transaction Agreements, the right of the Company or the Investor to enter
into any Transaction Agreement or to consummate the transactions contemplated
hereby or thereby or otherwise relating to the transactions contemplated by any
Transaction Agreement.

8.2. No Prohibition.  No provision of any applicable Law and no judgment,
injunction (preliminary or permanent), order or decree that prohibits, makes
illegal or enjoins the consummation of the Transaction shall be in effect.

9. Termination.

9.1. Ability to Terminate.  This Agreement may be terminated at any time prior
to the Closing by:

(a) mutual written consent of the Company and the Investor;

(b) either the Company or the Investor, upon written notice to the other no
later than seven (7) calendar days after the date of this Agreement (the
“Termination Date”), if the Transaction shall not have been consummated by the
Termination Date; provided, however, that the right to terminate this Agreement
under this Section 9.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure to consummate the transactions contemplated hereby prior to the
Termination Date;

(c) either the Company or the Investor, upon written notice to the other, if any
of the mutual conditions to the Closing set forth in Section 8 shall have become
incapable of fulfillment by the Termination Date and shall not have been waived
in writing by the other party within three (3) Business Days after receiving
receipt of written notice of an intention to terminate pursuant to this clause
(c) provided, however, that the right to terminate this Agreement under this
Section 9.1(c) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure to consummate the transactions contemplated hereby prior to the
Termination Date;

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9.2. Effect of Termination.  In the event of the termination of this Agreement
pursuant to Section 9.1 hereof, (a) this Agreement (except for this Section 9.2
and Section 11 hereof (other than Section 11.13), and any definitions set forth
in this Agreement and used in such sections) shall forthwith become void and
have no effect, without any liability on the part of any party hereto or its
Affiliates, and (b) all filings, applications and other submissions made
pursuant to this Agreement, to the extent practicable, shall be withdrawn from
the agency or other Person to which they were made or appropriately amended to
reflect the termination of the transactions contemplated hereby; provided,
however, that nothing contained in this Section 9.2 shall relieve any party from
liability for fraud or any intentional or willful breach of this Agreement.

10. Additional Covenants and Agreements.

10.1. Market Listing.  From the date hereof through the Closing Date, the
Company shall use reasonable efforts to (a) maintain the listing and trading of
the Common Stock on the Trading Market and (b) effect the listing of the Shares
on the Trading Market, including, if necessary, submitting an LAS to the Trading
Market no later than fifteen (15) calendar days prior to the Closing Date.

10.2. Assistance and Cooperation.  Prior to the Closing, upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, and to assist and cooperate with the other party in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including using reasonable efforts to accomplish
the following: (a) causing the conditions precedent set forth in Sections 6, 7
and 8 to be satisfied (including, in the case of the Company, promptly notifying
the Investor of any notice from the Trading Market with respect to an LAS, if
required to be filed); (b) obtaining all necessary waivers, consents, approvals,
orders and authorizations from Governmental Authorities and the making of all
necessary registrations, declarations and filings (including registrations,
declarations and filings with Governmental Authorities, if any); (c) obtaining
all necessary consents, approvals or waivers from Third Parties; and
(d) defending any suits, claims, actions, investigations or proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Authority
vacated or reversed.

10.3. Blue Sky Filings.  The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to
qualify the Shares for, sale to the Investor at the Closing under applicable
securities or “Blue Sky” Laws of the states of the United States, and shall
provide evidence of such actions promptly upon request of the Investor.

10.4. Legend Removal.

(a) Upon request of the Investor and subject to Section 10.4(c), the Company
shall cause the certificates evidencing the Shares to not contain the legend set
forth in Section 5.10(a): (i) following a sale of such Shares pursuant to a
registration statement covering the resale of such

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Shares, while such registration statement is effective under the Securities Act,
(ii) following any sale of such Shares pursuant to Rule 144, (iii) if such
Shares are eligible for sale under Rule 144, without the requirement for the
Company to be in compliance with the current public information required under
Rule 144 as to such Shares and without volume or manner-of-sale restrictions
under Rule 144 or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the SEC).

(b) Upon request of the Investor and subject to Section 10.4(c), the Company
shall cause the certificates evidencing the Shares to not contain the legend set
forth in Section 5.10(c) following: (i) a transfer of such Shares to a Person
that is not bound or required to be bound by either the standstill or lock-up
restrictions contained in the Investor Agreement or (ii) the expiration of the
Standstill Term (as defined in the Investor Agreement) and the Lock-Up Term (as
defined in the Investor Agreement); provided that any transfer described in
clause (i) or (ii) above shall have been in compliance with all applicable
provisions of the Investor Agreement.

(c) The Company agrees that at such time as any legend set forth in Section 5.10
is no longer required under this Section 10.4, the Company will, no later than
three (3) Business Days following the delivery by the Investor to the Company or
the Company’s transfer agent (the “Transfer Agent”) of a certificate
representing Shares issued with such legend, deliver or cause to be delivered to
the Investor a certificate representing such Shares that is free from such
legend, or, in the event that such shares are uncertificated, remove any such
legend in the Company’s stock records.  The Company may not make any notation on
its records or give instructions to the Transfer Agent that enlarge the
restrictions on transfer set forth in Section 5.10.  

10.5. Conduct of Business.  During the period from the date hereof until the
Closing, except as consented to in writing by the Investor, the Company shall
not (a) declare, set aside or pay any dividend or make any other distribution or
payment (whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or establish a record date for any of the
foregoing, or (b) make any other actual, constructive or deemed distribution in
respect of any shares of its capital stock or otherwise make any payments to
stockholders in their capacity as such, except pursuant to repurchases of equity
pursuant to the terms of its equity compensation plans.

10.6. Securities Laws Disclosure; Publicity.  Any press release the Company or
the Investor, or any of their respective Affiliates, issues with respect to the
Transaction must be agreed to by both parties.  The Company shall not publicly
disclose the name of the Investor or an Affiliate of the Investor, or include
the name of the Investor or an Affiliate of the Investor in any press release or
filing with the SEC or any regulatory agency or Trading Market, without the
prior written consent of the Investor, except (a) as required by federal
securities law in connection with (i) any registration statement contemplated by
the Investor Agreement and (ii) the filing of final Transaction Agreements
(including signature pages thereto) with the SEC, (b) to the extent such
disclosure is required by law, request of the staff of the SEC or Trading Market
regulations, in which case the Company shall provide the Investor with prior
written

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notice of such disclosure permitted under this subclause (b) or (c) the
information is already in the public domain through no breach of this Section
10.6.  

11. Miscellaneous.

11.1. Governing Law; Submission to Jurisdiction.  This Agreement shall be
governed by and construed in accordance with the Laws of the State of Delaware,
without regard to the conflict of laws principles thereof that would require the
application of the Law of any other jurisdiction.  Any action brought, arising
out of, or relating to this Agreement shall be brought in the Court of Chancery
of the State of Delaware.  Each party hereby irrevocably submits to the
exclusive jurisdiction of said Court in respect of any claim relating to the
validity, interpretation and enforcement of this Agreement, and hereby waives,
and agrees not to assert, as a defense in any action, suit or proceeding in
which any such claim is made that it is not subject thereto or that such action,
suit or proceeding may not be brought or is not maintainable in such courts, or
that the venue thereof may not be appropriate or that this agreement may not be
enforced in or by such courts.  The parties hereby consent to and grant the
Court of Chancery of the State of Delaware jurisdiction over such parties and
over the subject matter of any such claim and agree that mailing of process or
other papers in connection with any such action, suit or proceeding in the
manner provided in Section 11.3 or in such other manner as may be permitted by
law, shall be valid and sufficient thereof.

11.2. Waiver.  Waiver by a party of a breach hereunder by the other party shall
not be construed as a waiver of any subsequent breach of the same or any other
provision.  No delay or omission by a party in exercising or availing itself of
any right, power or privilege hereunder shall preclude the later exercise of any
such right, power or privilege by such party.  No waiver shall be effective
unless made in writing with specific reference to the relevant provision(s) of
this Agreement and signed by a duly authorized representative of the party
granting the waiver.

11.3. Notices.  All notices, instructions and other communications hereunder or
in connection herewith shall be in writing, shall be sent to the address of the
relevant party set forth on Exhibit C attached hereto and shall be (a) delivered
personally, (b) sent by registered or certified mail, return receipt requested,
postage prepaid, (c) sent via a reputable nationwide overnight courier service
or (d) sent by facsimile transmission or electronic mail, with a confirmation
copy to be sent by registered or certified mail, return receipt requested,
postage prepaid.  Any such notice, instruction or communication shall be deemed
to have been delivered upon receipt if delivered by hand, three (3) Business
Days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, one (1) Business Day after it is sent via a reputable
nationwide overnight courier service or when transmitted with electronic
confirmation of receipt, if transmitted by facsimile or electronic mail (if such
transmission is made during regular business hours of the recipient on a
Business Day; or otherwise, on the next Business Day following such
transmission).  Either party may change its address by giving notice to the
other party in the manner provided above.

11.4. Entire Agreement.  This Agreement and the Investor Agreement (once
executed) contain the entire agreement among the parties with respect to the
subject matter

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hereof and thereof and supersede all prior and contemporaneous arrangements or
understandings, whether written or oral, with respect hereto and thereto.

11.5. Amendments.  No provision in this Agreement shall be supplemented, deleted
or amended except in a writing executed by an authorized representative of each
of the Investor and the Company.

11.6. Headings; Nouns and Pronouns; Section References.  Headings in this
Agreement are for convenience of reference only and shall not be considered in
construing this Agreement.  Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and
the singular form of names and pronouns shall include the plural and
vice-versa.  References in this Agreement to a section or subsection shall be
deemed to refer to a section or subsection of this Agreement unless otherwise
expressly stated.

11.7. Severability.  If, under applicable Laws, any provision hereof is invalid
or unenforceable, or otherwise directly or indirectly affects the validity of
any other material provision(s) of this Agreement in any jurisdiction (“Modified
Clause”), then, it is mutually agreed that this Agreement shall endure and that
the Modified Clause shall be enforced in such jurisdiction to the maximum extent
permitted under applicable Laws in such jurisdiction; provided that the parties
shall consult and use all reasonable efforts to agree upon, and hereby consent
to, any valid and enforceable modification of this Agreement as may be necessary
to avoid any unjust enrichment of either party and to match the intent of this
Agreement as closely as possible, including the economic benefits and rights
contemplated herein.

11.8. Assignment.  Except for an assignment of this Agreement or any rights
hereunder by the Investor to an Affiliate, neither this Agreement nor any of the
rights or obligations hereunder may be assigned by either the Investor or the
Company without (a) the prior written consent of Company in the case of any
assignment by the Investor or (b) the prior written consent of the Investor in
the case of an assignment by the Company.

11.9. Successors and Assigns.  This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.

11.10. Counterparts.  This Agreement may be executed in counterparts, each of
which shall be deemed an original but which together shall constitute one and
the same instrument.

11.11. Third Party Beneficiaries.  None of the provisions of this Agreement
shall be for the benefit of or enforceable by any Third Party, including any
creditor of any party hereto.  No Third Party shall obtain any right under any
provision of this Agreement or shall by reason of any such provision make any
claim in respect of any debt, liability or obligation (or otherwise) against any
party hereto.

11.12. No Strict Construction.  This Agreement has been prepared jointly and
will not be construed against either party.

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11.13. Survival of Warranties.  The representations and warranties of the
Company and the Investor contained in this Agreement shall survive the Closing
and the delivery of the Shares for a period of one year.

11.14. Remedies.  The rights, powers and remedies of the parties under this
Agreement are cumulative and not exclusive of any other right, power or remedy
which such parties may have under any other agreement or Law.  No single or
partial assertion or exercise of any right, power or remedy of a party hereunder
shall preclude any other or further assertion or exercise thereof.

11.15. Expenses.  Each party shall pay its own fees and expenses in connection
with the preparation, negotiation, execution and delivery of the Transaction
Agreements.

11.16. Limitation of Liability.  IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE
OTHER PARTY (OR THE OTHER PARTY’S AFFILIATES) IN CONNECTION WITH THIS AGREEMENT
FOR LOST REVENUE, LOST PROFITS, LOST SAVINGS, LOSS OF USE, DAMAGE TO GOODWILL,
OR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE OR INDIRECT
DAMAGES UNDER ANY THEORY, INCLUDING CONTRACT, NEGLIGENCE, OR STRICT LIABILITY,
EVEN IF THAT PARTY HAS BEEN PLACED ON NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.

(Signature Page Follows)

 

 

 

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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first above written.

 

JOHNSON & JOHNSON INNOVATION-JJDC, INC.

 

 

 

By:

 

/s/ Marian T Nakada

 

 

Name: Marian T Nakada

 

 

Title: VP Venture Investments

 

 

 

TRACON PHARMACEUTICALS, INC.

 

 

 

By:

 

/s/ Charles Theuer

 

 

Name: Charles Theuer

 

 

Title: CEO

 

 

 

(Signature Page to Stock Purchase Agreement)

 

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EXHIBIT A

FORM OF INVESTOR AGREEMENT

 

 

 

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EXHIBIT B

NOTICES

(a)

If to the Investor:

Johnson & Johnson Innovation--JJDC, Inc.

255 Main Street 7th floor

Cambridge, MA 02142

Attention: Marian T. Nakada, Ph.D

Facsimile: (732) 247-5309

with a copy to:

Johnson & Johnson Law Department

Johnson & Johnson

One Johnson & Johnson Plaza

New Brunswick, NJ 08933

Attention: Steven Rosenberg & Scott Orchard

Facsimile: (732) 524-5334

with a copy to (which shall not constitute notice

pursuant to Section 11.3):

Dechert LLP

1095 Avenue of the Americas

New York, NY 10036

Attention: Kristopher Brown & Tony Chan

Facsimile: (212) 698-3599"

(b)

If to the Company:

TRACON Pharmaceuticals, Inc.

8910 University Center Lane, Suite 700

San Diego, CA 92122

Attention: Charles Theuer & Patricia Bitar

with a copy to:

Cooley LLP

4401 Eastgate Mall

San Diego, CA 92121

Attention: Sean Clayton & Kay Chandler