Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of March 30,
2020, is by and among Trovagene, Inc., a Delaware corporation with headquarters
located at 11055 Flintkote Avenue, Suite B, San Diego, CA 92121 (the ”Company”),
and Lincoln Park Capital Fund, LLC, an Illinois limited liability company (the
“Buyer”).

 

RECITALS

 

A.                 The Buyer wishes to purchase, and the Company wishes to sell,
upon the terms and subject conditions stated in this Agreement, (i) (X) 800,000
shares of Common Stock (as defined herein) (collectively, the “Common Shares”),
and (Y) a Series I Warrant, in the form attached hereto as Exhibit A-1 (the
“Series I Warrant”), to initially purchase an aggregate of up to 131,967 shares
of Common Stock (collectively, the “Series I Warrant Shares”, and, together with
the Series I Warrant, the “Series I Securities”), at an exercise price of $0.01
per share, in each case pursuant to the Company’s shelf registration statement
on Form S-3 (Registration Number 333-232321) (the “Registration Statement”),
which has been declared effective in accordance with the Securities Act of 1933,
as amended (the “1933 Act”), by the United States Securities and Exchange
Commission (the “SEC”), and (ii) a Series J Warrant, in the form attached hereto
as Exhibit A-2 (the “Series J Warrant”, and together with the Series I Warrant,
the “Warrants”), to initially purchase an aggregate of up to 931,967 shares of
Common Stock (collectively, the “Series J Warrant Shares”, and together with the
Series J Warrant, the “Series J Securities”, and collectively with the Series I
Warrant Shares, the “Warrant Shares”), at an exercise price of $0.948 per share,
in reliance upon the exemption from securities registration afforded by Section
4(a)(2) of the Securities Act of 1933, and Rule 506(b) of Regulation D
(“Regulation D”) as promulgated by the SEC under the 1933 Act.

 

B.                 The Common Shares, the Warrants and the Warrant Shares are
collectively referred to herein as the “Securities”.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyer hereby
agree as follows:

 

1.PURCHASE AND SALE OF COMMON SHARES AND WARRANTS.

 

(a)               Purchase of Common Shares and Warrants. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to the Buyer, and the Buyer agrees to purchase
from the Company on the Closing Date (as defined below), (i) 800,000 Common
Shares, (ii) the Series I Warrant to initially acquire an aggregate of up to
131,967 Series I Warrant Shares and (iii) the Series J Warrant to initially
acquire an aggregate of up to 931,967 Series J Warrant Shares.

 

(b)               Closing. The closing (the “Closing”) of the purchase of the
Common Shares and the Warrants by the Buyer shall occur at the offices of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., 666 Third Avenue, New York, NY
10017. The date and time of the Closing (the “Closing Date”) shall be 10:00
a.m., New York time, on the first (1st) Business Day (as defined below) on which
the conditions to the Closing set forth in Sections 6 and 7 below are satisfied
or waived (or such other date as is mutually agreed to by the Company and the
Buyer). As used herein “Business Day” means any day other than a Saturday,
Sunday or other day on which commercial banks in New York, New York are
authorized or required by law to remain closed.

 

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(c)               Purchase Price. The aggregate gross purchase price for the
Common Shares and the Warrants to be purchased by the Buyer hereunder shall be
$1,000,000 (the “Purchase Price”).

 

(d)               Form of Payment; Deliveries. On the Closing Date, (i) the
Buyer shall pay the Purchase Price (less the amount withheld pursuant to Section
4(g)) to the Company for the Common Shares and the Warrants to be issued and
sold to the Buyer at the Closing, by wire transfer of immediately available
funds in accordance with the Flow of Funds Letter (as defined below) and (ii)
the Company shall (A) cause Philadelphia Stock Transfer, Inc. (together with any
subsequent transfer agent, the “Transfer Agent”) through the Depository Trust
Company (“DTC”) Fast Automated Securities Transfer Program, to credit 800,000
Common Shares to the Buyer’s or its designee’s balance account with DTC through
its Deposit/Withdrawal at Custodian system, (B) deliver to the Buyer the Series
I Warrant pursuant to which the Buyer shall have the right to initially acquire
an aggregate of up to 131,967 Series I Warrant Shares, duly executed on behalf
of the Company and registered in the name of the Buyer or its designee, and (C)
deliver to the Buyer the Series J Warrant pursuant to which the Buyer shall have
the right to initially acquire an aggregate of up to 931,967 Series J Warrant
Shares, duly executed on behalf of the Company and registered in the name of the
Buyer or its designee.

 

2.BUYER’S REPRESENTATIONS AND WARRANTIES.

 

The Buyer represents and warrants to the Company that, as of the date hereof and
as of the Closing Date:

 

(a)               Organization; Authority. The Buyer is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite power and authority to enter
into and to consummate the transactions contemplated by this Agreement and
otherwise to carry out its obligations hereunder.

 

(b)               Validity; Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of the Buyer and shall
constitute the legal, valid and binding obligations of the Buyer enforceable
against the Buyer in accordance with its terms, except as such enforceability
may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.

 

(c)               No Public Sale or Distribution of Series J Securities. The
Buyer is acquiring the Series J Securities for its own account and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof in violation of applicable securities laws, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, by making the
representations herein, the Buyer does not agree, or make any representation or
warranty, to hold any of the Securities for any minimum or other specific term
and reserves the right to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an exemption under the 1933 Act.
The Buyer is acquiring the Securities hereunder in the ordinary course of its
business. The Buyer does not presently have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Securities in
violation of applicable securities laws.

 

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(d)               Accredited Investor Status. At the time the Buyer was offered
the Securities, it was, and as of the date hereof it is, an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the 1933 Act.

 

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

 

(f)                Reliance on Exemptions. The Buyer understands that the Series
J Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
the Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.

 

(g)               Information. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Buyer. The Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by the Buyer or
its advisors, if any, or its representatives shall modify, amend or affect the
Buyer’s right to rely on the Company’s representations and warranties contained
herein or any representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or delivered in
connection with this Agreement or the consummation of the transaction
contemplated hereby. The Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Securities.

 

(h)               No Governmental Review. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.

 

(i)                 Transfer or Resale. The Buyer understands that except as
provided in Section 4(g) hereof: (i) the Series J Securities have not been and
are not being registered under the 1933 Act or any state securities laws, and
may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) the Buyer shall have delivered to the
Company (if requested by the Company) an opinion of counsel to the Buyer, in a
form reasonably acceptable to the Company, to the effect that the Series J
Warrant or the Series J Warrant Shares to be sold, assigned or transferred may
be sold, assigned or transferred pursuant to an exemption from such
registration, or (C) the Buyer provides the Company with reasonable assurance
that the Series J Warrant or Series J Warrant Shares can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or
a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the
Series J Warrant or Series J Warrant Shares made in reliance on Rule 144 may be
made only in accordance with the terms of Rule 144, and further, if Rule 144 is
not applicable, any resale of the Series J Warrant or Series J Warrant Shares
under circumstances in which the seller (or the Person (as defined below)
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC promulgated
thereunder; and (iii) neither the Company nor any other Person is under any
obligation to register the Series J Warrant or any of the Series J Warrant
Shares under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder.

 

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(j)                Residency. The Buyer is a resident of the State of Illinois.

 

(k)               Certain Trading Activities. The Buyer represents and warrants
to the Company that at no time prior to the date of this Agreement has any of
the Buyer, its agents, representatives or affiliates engaged in or effected, in
any manner whatsoever, directly or indirectly, any (i) “short sale” (as such
term is defined in Rule 200 of Regulation SHO of the Securities Exchange Act of
1934, as amended (the “1934 Act”)) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common
Stock.

 

(l)                 General Solicitation. The Buyer is not purchasing the Series
J Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar.

 

(m)             Manipulation of Price. Since the time that such Buyer was first
contacted by the Company or its agent regarding the investment in the Company
contemplated herein, the Buyer has not, and, to the knowledge of the Buyer, no
Person acting on its behalf has, directly or indirectly, (i) taken 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
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company.

 

3.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and warrants to the Buyer that, as of the date hereof and
as of the Closing Date:

 

(a)               Organization and Qualification. Each of the Company and each
of its Subsidiaries are entities duly organized and validly existing and in good
standing under the laws of the jurisdiction in which they are formed, and have
the requisite power and authority to own their properties and to carry on their
business as now being conducted and as presently proposed to be conducted. Each
of the Company and each of its Subsidiaries is duly qualified as a foreign
entity to do business and is in good standing in every jurisdiction in which its
ownership of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not reasonably be expected to have a
Material Adverse Effect (as defined below). As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on (i) the business,
properties, assets, liabilities, operations (including results thereof),
condition (financial or otherwise) or prospects of the Company or any
Subsidiary, individually or taken as a whole, (ii) the transactions contemplated
hereby or in any of the other Transaction Documents or any other agreements or
instruments to be entered into in connection herewith or therewith or (iii) the
authority or ability of the Company to perform any of their respective
obligations under any of the Transaction Documents (as defined below). All of
the direct and indirect Subsidiaries of the Company are set forth in the SEC
Documents. The Company owns, directly or indirectly, all of the capital stock or
other equity interests of each Subsidiary free and clear of any Liens, and all
of the issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities. If the Company has no
Subsidiaries, all other references to the Subsidiaries or any of them in the
Transaction Documents shall be disregarded. “Subsidiaries” means any Person in
which the Company, directly or indirectly, (A) owns any of the outstanding
capital stock or holds any equity or similar interest of such Person or (B)
controls or operates all or any part of the business, operations or
administration of such Person, and each of the foregoing, is individually
referred to herein as a “Subsidiary”.

 

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(b)               Authorization; Enforcement; Validity. The Company has the
requisite power and authority to enter into and perform its obligations under
this Agreement and the other Transaction Documents and to issue the Securities
in accordance with the terms hereof and thereof. The execution and delivery of
this Agreement and the other Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the offer and sale of the Common Shares, the
offer and sale of the Series I Securities and the reservation for issuance and
issuance of the Series I Warrant Shares issuable upon exercise of the Series I
Warrant, the offer and sale of the Series J Securities and the reservation for
issuance and issuance of the Series J Warrant Shares issuable upon exercise of
the Series J Warrant) have been duly authorized by the Company’s board of
directors and (other than (i) the filing with the SEC of the prospectus
supplement relating to the offer and sale of the Common Shares and the Series I
Securities pursuant to Rule 424(b) under the 1933 Act (the “Prospectus
Supplement”) supplementing the base prospectus forming part of the Registration
Statement (the “Prospectus”), (ii) the filing of a Form D with the SEC relating
to the offer and sale of the Series J Securities pursuant to Regulation D, (iii)
the filing of a Notice of Additional Listing with The Nasdaq Capital Market (the
“Principal Market”) and (iv) any other filings as may be required by any state
securities authorities) no further filing, consent or authorization is required
by the Company, its board of directors or its stockholders or other governing
body. This Agreement has been, and the other Transaction Documents will be prior
to the Closing, duly executed and delivered by the Company, and each constitutes
the legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with its respective terms, except as such enforceability
may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of applicable creditors’ rights and
remedies and except as rights to indemnification and to contribution may be
limited by federal or state securities law. “Transaction Documents” means,
collectively, this Agreement, the Warrants, the Irrevocable Transfer Agent
Instructions (as defined below) and each of the other agreements and instruments
entered into or delivered by any of the parties hereto in connection with the
transactions contemplated hereby and thereby, as may be amended from time to
time.

 

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(c)               Issuance of Securities; Registration Statement. The issuance
of the Common Shares and the Warrants are duly authorized and, upon issuance and
payment in accordance with the terms of the Transaction Documents shall be
validly issued, fully paid and non-assessable and free from all preemptive or
similar rights, mortgages, defects, claims, liens, pledges, charges, taxes,
rights of first refusal, encumbrances, security interests and other encumbrances
(collectively “Liens”) with respect to the issuance thereof. As of the Closing,
the Company shall have reserved from its duly authorized capital stock not less
than 100% of the maximum number of shares of Common Stock issuable upon exercise
of the Warrants (without taking into account any limitations on the exercise of
the Warrants set forth in the Warrants). Upon exercise in accordance with the
terms of the Series I Warrants, the Series I Warrant Shares, when issued, will
be validly issued, fully paid and nonassessable and free from all preemptive or
similar rights or Liens with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Stock. Upon exercise
in accordance with the terms of the Series J Warrants, the Series J Warrant
Shares, when issued, will be validly issued, fully paid and nonassessable and
free from all preemptive or similar rights or Liens with respect to the issue
thereof, with the holders being entitled to all rights accorded to a holder of
Common Stock. Upon receipt of the Common Shares and the Warrants at the Closing,
upon receipt of Series I Warrant Shares upon exercise of the Series I Warrants
and upon receipt of Series J Warrant Shares upon exercise of the Series J
Warrants, the Buyer will have good and marketable title to such Common Shares,
Warrants, Series I Warrant Shares and Series J Warrant Shares, respectively.
Subject to the accuracy of the representations and warranties of the Buyer in
this Agreement, the offer and sale of the Series J Securities to the Buyer under
this Agreement and the Series J Warrant, as applicable, are exempt from
registration under the 1933 Act under Section 4(a)(2) of the 1933 Act and Rule
506(b) of Regulation D. The offer and sale of all of the Common Shares and the
Series I Securities to the Buyer under this Agreement and the Series I Warrants,
as applicable, is registered under the 1933 Act pursuant to the Registration
Statement, and all of the Common Shares and the Series I Securities are freely
transferable and freely tradable by the Buyer without restriction. The
Registration Statement was declared effective under the Securities Act by the
SEC on June 13, 2016, and any post-effective amendment thereto has also been
declared effective by the SEC under the 1933 Act. The Company has not received
from the SEC any notice pursuant to Rule 401(g)(1) under the 1933 Act objecting
to the use of the shelf registration statement form. No stop order suspending
the effectiveness of the Registration Statement or any related registration
statement filed by the Company with the SEC under Rule 462(b) under the 1933 Act
is in effect and no proceedings for such purpose have been instituted or are
pending or, to the knowledge of the Company, are contemplated or threatened by
the SEC. At the time of (i) the initial filing of the Registration Statement
with the SEC and (ii)  the most recent amendment thereto for the purposes of
complying with Section 10(a)(3) of the Securities Act (whether such amendment
was by post-effective amendment, incorporated report filed pursuant to Section
13 or 15(d) of the 1934 Act or form of prospectus), the Company met the then
applicable requirements for use of Form S-3 under the 1933 Act. The Company and
the offer, issuance and sale of the Common Shares and the Series I Securities to
the Buyer hereunder and under the Series I Warrant, as applicable, meet the
requirements for and comply with the applicable conditions set forth in Form S-3
under the Securities Act, including compliance with General Instructions I.A and
I.B.6. of Form S-3. The Registration Statement and the offer, issuance and sale
of the Common Shares and the Series I Securities as contemplated hereby and by
the Series I Warrant, as applicable, meet the requirements of Rule 415(a)(1)(x)
under the 1933 Act and comply in all material respects with said Rule. The
Registration Statement is effective and available for the offer, issuance and
sale of all of the Common Shares and the Series I Securities thereunder, and the
Company has not received any notice that the SEC has issued or intends to issue
a stop-order with respect to the Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of the Registration
Statement, either temporarily or permanently, or intends or has threatened in
writing to do so. The “Plan of Distribution” section under the Registration
Statement permits the issuance and sale of the Common Shares and the Series I
Securities hereunder and under the Series I Warrant, as applicable. At the time
the Registration Statement and any amendment thereto became effective and on the
date of this Agreement, the Registration Statement and any amendment thereto
complied and complies in all material respects with the requirements of the 1933
Act and did not and does not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Prospectus and any amendment or
supplements thereto (including, without limitation the Prospectus Supplement),
at the time the Prospectus or any amendment or supplement thereto was issued and
on the date of this Agreement, complied and complies in all material respects
with the requirements of the 1933 Act and did not and does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. At the earliest time after the filing of
the Registration Statement that the Company or another offering participant made
a bona fide offer (within the meaning of Rule 164(h)(2) under the 1933 Act)
relating to the Common Shares and the Series I Securities, the Company was not
and is not an “Ineligible Issuer” (as defined in Rule 405 under the 1933 Act).
The Company has not distributed any offering material in connection with the
offer or sale of the Common Shares and the Series I Securities, other than the
Registration Statement, the Prospectus and the Prospectus Supplement.

 

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(d)               No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
offer and sale of the Common Shares, the offer and sale of the Series I
Securities and the reservation for issuance and issuance of the Series I Warrant
Shares issuable upon exercise of the Series I Warrant, the offer and sale of the
Series J Securities and the reservation for issuance and issuance of the Series
J Warrant Shares issuable upon exercise of the Series J Warrant) will not (i)
result in a violation of the Certificate of Incorporation (as defined below)
(including, without limitation, any certificate of designation contained
therein), Bylaws (as defined below), or the certificate of incorporation,
certificate of formation, memorandum of association, articles of association,
bylaws or other organizational documents of any of the Company’s Subsidiaries,
or any capital stock or other securities of the Company or any of its
Subsidiaries, (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) in any respect
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including, without limitation,
foreign, federal and state securities laws and regulations and the rules and
regulations of the Principal Market and including all applicable foreign,
federal and state laws, rules and regulations) applicable to the Company or any
of its Subsidiaries or by which any property or asset of the Company or any of
its Subsidiaries is bound or affected.

 

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(e)               Consents. Neither the Company nor any Subsidiary is required
to obtain any consent from, authorization or order of, or make any filing or
registration with (other than (i) the filing with the SEC of the Prospectus
Supplement relating to the offer, issuance and sale of the Common Shares and the
Series I Securities to the Buyer, (ii) the filing with the SEC of a Form D
relating to the offer, issuance and sale of the Series J Securities to the Buyer
pursuant to Regulation D, (iii) the filing of a Notice of Additional Listing
with the Principal Market and (iv) any other filings as may be required by any
state securities authorities), any Governmental Entity (as defined below) or any
regulatory or self-regulatory agency or any other Person in order for it to
execute, deliver or perform any of its respective obligations under or
contemplated by the Transaction Documents, in each case, in accordance with the
terms hereof or thereof. All consents, authorizations, orders, filings and
registrations which the Company or any Subsidiary is required to obtain pursuant
to the preceding sentence have been or will be obtained or effected on or prior
to the Closing Date, and neither the Company nor any of its Subsidiaries are
aware of any facts or circumstances which might prevent the Company or any of
its Subsidiaries from obtaining or effecting any of the registration,
application or filings contemplated by the Transaction Documents. The Company is
not currently in violation of the requirements of the Principal Market and has
no knowledge of any facts or circumstances which could reasonably lead to
delisting or suspension of the Common Stock in the foreseeable future.
“Governmental Entity” means any nation, state, county, city, town, village,
district, or other political jurisdiction of any nature, federal, state, local,
municipal, foreign, or other government, governmental or quasi-governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal), multi-national
organization or body; or body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature or instrumentality of any of the foregoing,
including any entity or enterprise owned or controlled by a government or a
public international organization or any of the foregoing.

 

(f)                Acknowledgment Regarding Buyer’s Purchase of Securities. The
Company acknowledges and agrees that the Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that the Buyer is not (i) an
officer or director of the Company or any of its Subsidiaries, (ii) an
“affiliate” (as defined in Rule 144) of the Company or any of its Subsidiaries
or (iii) to its knowledge, a “beneficial owner” of more than 10% of the shares
of Common Stock (as defined for purposes of Rule 13d-3 of the 1934 Act). The
Company further acknowledges that the Buyer is not acting as a financial advisor
or fiduciary of the Company or any of its Subsidiaries (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by the Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer’s
purchase of the Securities. The Company further represents to the Buyer that the
Company’s decision to enter into the Transaction Documents has been based solely
on the independent evaluation by the Company and its representatives.

 

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(g)               No General Solicitation; Placement Agent’s Fees. Neither the
Company, nor any of its Subsidiaries or affiliates, nor any Person acting on its
or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer,
issuance and sale of the Series J Securities. The Company shall be responsible
for the payment of any placement agent’s fees, financial advisory fees, or
brokers’ commissions relating to or arising out of the transactions contemplated
by the Transaction Documents. The Company shall pay, and hold the Buyer harmless
against, any liability, loss or expense (including, without limitation,
attorney's fees and out-of-pocket expenses) arising in connection with any such
claim. Neither the Company nor any of its Subsidiaries has engaged any placement
agent or other agent in connection with the offer and sale of any of the
Securities contemplated by the Transaction Documents.

 

(h)               No Integrated Offering. None of the Company, its Subsidiaries
or any of their affiliates, nor any Person acting on their behalf has, directly
or indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would cause the issuance of any of
the Securities to require approval of stockholders of the Company under any
applicable stockholder approval laws, rules or regulations, including, without
limitation, under the rules of any exchange or automated quotation system on
which any securities of the Company are listed or designated for quotation. None
of the Company, its Subsidiaries or any of their affiliates, nor any Person
acting on their behalf has, directly or indirectly, made any offers, issuances
or sales of any security (including, without limitation, the offer, issuance and
sale of the Common Shares and the Series I Securities to the Buyer hereunder and
under the Series I Warrant, as applicable) or solicited any offers to buy any
security (including, without limitation, any of the Common Shares, the Series I
Warrant or any of the Series I Warrant Shares), under circumstances that would
require registration of the offer, issuance or sale of the Series J Warrant or
any of the Series J Warrant Shares under the 1933 Act, whether through
integration with the offering of the Common Shares and the Series I Securities
to the Buyer hereunder and under the Series I Warrant, as applicable, pursuant
to the Registration Statement, any prior offering of securities of the Company
or otherwise.

 

(i)                 Dilutive Effect. The Company understands and acknowledges
that the number of Series I Warrant Shares and the number of Series J Warrant
Shares will increase in certain circumstances. The Company further acknowledges
that its obligation to issue (i) the Series I Warrant Shares upon exercise of
the Series I Warrant in accordance with this Agreement and the Series I Warrant
and (ii) the Series J Warrant Shares upon exercise of the Series J Warrant in
accordance with this Agreement and the Series J Warrant, in each case is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company.

 

(j)                 Application of Takeover Protections; Rights Agreement. The
Company and its board of directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, interested
stockholder, business combination, poison pill (including, without limitation,
any distribution under a rights agreement), stockholder rights plan or other
similar anti- takeover provision under the Certificate of Incorporation, Bylaws
or other organizational documents or the laws of the jurisdiction of its
incorporation or otherwise which is or could become applicable to the Buyer as a
result of the transactions contemplated by this Agreement, including, without
limitation, the Company’s issuance of the Securities and the Buyer’s ownership
of the Securities. The Company and its board of directors have taken all
necessary action, if any, in order to render inapplicable any stockholder rights
plan or similar arrangement relating to accumulations of beneficial ownership of
shares of Common Stock or a change in control of the Company or any of its
Subsidiaries.

 

-9-

 

 

(k)               SEC Documents; Financial Statements. During the two (2) years
prior to the date hereof, the Company has timely filed all reports, schedules,
forms, proxy statements, statements and other documents required to be filed by
it with the SEC pursuant to the reporting requirements of the 1934 Act (all of
the foregoing filed prior to the date hereof and all exhibits and appendices
included therein and financial statements, notes and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
“SEC Documents”). The Company has delivered or has made available to the Buyer
or its representatives true, correct and complete copies of each of the SEC
Documents not available on the EDGAR system. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, 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 the light of the circumstances under
which they were made, not misleading. As of their respective dates, the
financial statements of the Company included in the SEC Documents complied in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto as in effect as of the
time of filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles (“GAAP”), consistently applied, during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) 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 normal year-end audit adjustments which will not be
material, either individually or in the aggregate). The reserves, if any,
established by the Company or the lack of reserves, if applicable, are
reasonable based upon facts and circumstances known by the Company on the date
hereof and there are no loss contingencies that are required to be accrued by
the Statement of Financial Accounting Standard No. 5 of the Financial Accounting
Standards Board which are not provided for by the Company in its financial
statements or otherwise. No other information provided by or on behalf of the
Company to the Buyer which is not included in the SEC Documents (including,
without limitation, information in the disclosure schedules to this Agreement)
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein not misleading, in the
light of the circumstance under which they are or were made. The Company is not
currently contemplating to amend or restate any of the financial statements
(including, without limitation, any notes or any letter of the independent
accountants of the Company with respect thereto) included in the SEC Documents
(the “Financial Statements”), nor is the Company currently aware of facts or
circumstances which would require the Company to amend or restate any of the
Financial Statements, in each case, in order for any of the Financials
Statements to be in compliance with GAAP and the rules and regulations of the
SEC. The Company has not been informed by its independent accountants that they
recommend that the Company amend or restate any of the Financial Statements or
that there is any need for the Company to amend or restate any of the Financial
Statements.

 

-10-

 

 

(l)                 Absence of Certain Changes. Since the date of the Company’s
most recent audited financial statements contained in a Form 10-K, there has
been no material adverse change and no material adverse development in the
business, assets, liabilities, properties, operations (including results
thereof), condition (financial or otherwise) or prospects of the Company or any
of its Subsidiaries. Since the date of the Company’s most recent audited
financial statements contained in a Form 10-K, neither the Company nor any of
its Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, outside of the ordinary course of business or
(iii) made any capital expenditures, individually or in the aggregate, outside
of the ordinary course of business. Neither the Company nor any of its
Subsidiaries has taken any steps to seek protection pursuant to any law or
statute relating to bankruptcy, insolvency, reorganization, receivership,
liquidation or winding up, nor does the Company or any Subsidiary have any
knowledge or reason to believe that any of their respective creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge of any fact
which would reasonably lead a creditor to do so. The Company and its
Subsidiaries, individually and on a consolidated basis, are not as of the date
hereof, and after giving effect to the transactions contemplated hereby to occur
at the Closing, will not be Insolvent (as defined below). For purposes of this
Section 3(l), “Insolvent” means, (i) with respect to the Company and its
Subsidiaries, on a consolidated basis, (A)   the present fair saleable value of
the Company’s and its Subsidiaries’ assets is less than the amount required to
pay the Company’s and its Subsidiaries’ total Indebtedness (as defined below),
(B)   the Company and its Subsidiaries are unable to pay their debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (C) the Company and its Subsidiaries
intend to incur or believe that they will incur debts that would be beyond their
ability to pay as such debts mature; and (ii) with respect to the Company and
each Subsidiary, individually, (A) the present fair saleable value of the
Company’s or such Subsidiary’s (as the case may be) assets is less than the
amount required to pay its respective total Indebtedness, (B) the Company or
such Subsidiary (as the case may be) is unable to pay its respective debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured or (C) the Company or such Subsidiary
(as the case may be) intends to incur or believes that it will incur debts that
would be beyond its respective ability to pay as such debts mature. Neither the
Company nor any of its Subsidiaries has engaged in any business or in any
transaction, and is not about to engage in any business or in any transaction,
for which the Company’s or such Subsidiary’s remaining assets constitute
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted.

 

(m)             No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has occurred or
exists, or is reasonably expected to exist or occur with respect to the Company,
any of its Subsidiaries or any of their respective businesses, properties,
liabilities, prospects, operations (including results thereof) or condition
(financial or otherwise), that (i) would be required to be disclosed by the
Company under applicable securities laws on a registration statement on Form S-1
filed with the SEC relating to an issuance and sale by the Company of its Common
Stock and which has not been publicly announced, (ii) could have a material
adverse effect on the Buyer’s investment hereunder or (iii) could have a
Material Adverse Effect.

 

-11-

 

 

(n)               Conduct of Business; Regulatory Permits. Neither the Company
nor any of its Subsidiaries is in violation of any term of or in default under
its Certificate of Incorporation, any certificate of designation, preferences or
rights of any other outstanding series of preferred stock of the Company, or any
organizational charter, certificate of formation, memorandum of association,
articles of association, certificate of incorporation or bylaws of any of the
Subsidiaries. Neither the Company nor any of its Subsidiaries is in violation of
any judgment, decree or order or any statute, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries, and neither the Company
nor any of its Subsidiaries will conduct its business in violation of any of the
foregoing, except in all cases for possible violations which could not,
individually or in the aggregate, have a Material Adverse Effect. The Company
and each of its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate regulatory authorities necessary to conduct
their respective businesses, except where the failure to possess such
certificates, authorizations or permits would not have, individually or in the
aggregate, a Material Adverse Effect, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit. There is no
agreement, commitment, judgment, injunction, order or decree binding upon the
Company or any of its Subsidiaries or to which the Company or any of its
Subsidiaries is a party which has or would reasonably be expected to have the
effect of prohibiting or materially impairing any business practice of the
Company or any of its Subsidiaries, any acquisition of property by the Company
or any of its Subsidiaries or the conduct of business by the Company or any of
its Subsidiaries as currently conducted other than such effects, individually or
in the aggregate, which have not had and would not reasonably be expected to
have a Material Adverse Effect on the Company or any of its Subsidiaries.

 

(o)               Foreign Corrupt Practices. Neither the Company, any of its
Subsidiaries or to the knowledge of the Company, any director, officer, agent,
employee, nor any other person acting for or on behalf of the foregoing
(individually and collectively, a “Company Affiliate”) have violated the U.S.
Foreign Corrupt Practices Act (the “FCPA”) or any other applicable anti-bribery
or anti-corruption laws, nor has any Company Affiliate offered, paid, promised
to pay, or authorized the payment of any money, or offered, given, promised to
give, or authorized the giving of anything of value, to any officer, employee or
any other person acting in an official capacity for any Governmental Entity to
any political party or official thereof or to any candidate for political office
(individually and collectively, a “Government Official”) or to any person under
circumstances where such Company Affiliate knew or was aware of a high
probability that all or a portion of such money or thing of value would be
offered, given or promised, directly or indirectly, to any Government Official,
for the purpose of:

 

(i)                 (A) influencing any act or decision of such Government
Official in his/her official capacity, (B) inducing such Government Official to
do or omit to do any act in violation of his/her lawful duty, (C) securing any
improper advantage, or (D) inducing such Government Official to influence or
affect any act or decision of any Governmental Entity, or

 

(ii)               assisting the Company or its Subsidiaries in obtaining or
retaining business for or with, or directing business to, the Company or its
Subsidiaries.

 

(p)               Sarbanes-Oxley Act. The Company and each Subsidiary is in
compliance in all material respects with any and all applicable requirements of
the Sarbanes-Oxley Act of 2002, as amended, and any and all applicable rules and
regulations promulgated by the SEC thereunder.

 

-12-

 

 

(q)               Transactions With Affiliates. Except as disclosed in the SEC
Documents, no current or former employee, partner, director, officer or
stockholder (direct or indirect) of the Company or its Subsidiaries, or any
associate, or, to the knowledge of the Company, any affiliate of any thereof, or
any relative with a relationship no more remote than first cousin of any of the
foregoing, is presently, or has ever been, (i) a party to any transaction with
the Company or its Subsidiaries (including any contract, agreement or other
arrangement providing for the furnishing of services by, or rental of real or
personal property from, or otherwise requiring payments to, any such director,
officer or stockholder or such associate or affiliate or relative Subsidiaries
(other than for ordinary course services as employees, officers or directors of
the Company or any of its Subsidiaries)) or (ii) the direct or indirect owner of
an interest in any corporation, firm, association or business organization which
is a competitor, supplier or customer of the Company or its Subsidiaries (except
for a passive investment (direct or indirect) in less than 5% of the common
stock of a company whose securities are traded on or quoted through an Eligible
Market (as defined below)), nor does any such Person receive income from any
source other than the Company or its Subsidiaries which relates to the business
of the Company or its Subsidiaries or should properly accrue to the Company or
its Subsidiaries. No employee, officer, stockholder or director of the Company
or any of its Subsidiaries or member of his or her immediate family is indebted
to the Company or its Subsidiaries, as the case may be, nor is the Company or
any of its Subsidiaries indebted (or committed to make loans or extend or
guarantee credit) to any of them, other than (i) for payment of salary for
services rendered, (ii) reimbursement for reasonable expenses incurred on behalf
of the Company, and (iii) for other standard employee benefits made generally
available to all employees or executives (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
the Company).

 

(r)               Equity Capitalization.

 

(i)                 Definitions:

 

(A)             “Common Stock” means (x) the Company’s shares of common stock,
$0.0001 par value per share, and (y) any capital stock into which such common
stock shall have been changed or any share capital resulting from a
reclassification of such common stock.

 

(B)              “Preferred Stock” means (x) the Company’s blank check preferred
stock, $0.001 par value per share, the terms of which may be designated by the
board of directors of the Company in a certificate of designations and (y) any
capital stock into which such preferred stock shall have been changed or any
share capital resulting from a reclassification of such preferred stock (other
than a conversion of such preferred stock into Common Stock in accordance with
the terms of such certificate of designations).

 

(ii)               Authorized and Outstanding Capital Stock. As of the date
hereof, the authorized capital stock of the Company consists of (A) 150,000,000
shares of Common Stock, of which, 10,210,337 are issued and outstanding
(excluding the Common Shares) and 10,778,059 shares are reserved for issuance
pursuant to Convertible Securities (as defined below) (excluding the Warrant
Shares issuable upon exercise of the Warrants) exercisable or exchangeable for,
or convertible into, shares of Common Stock and (B) 20,000,000 shares of
Preferred Stock, 277,100 are designated as Series A Convertible Preferred Stock,
60,600 of which are issued and outstanding, 8,860 are designated as Series B
Convertible Preferred Stock, 0 of which are issued and outstanding and 200,000
are designated as Series C Convertible Preferred Stock, 0 of which are issued
and outstanding. 0 shares of Common Stock are held in the treasury of the
Company.

 

-13-

 

 

(iii)            Valid Issuance; Available Shares; Affiliates. All of such
outstanding shares are duly authorized and have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. Schedule 3(r)(iii) sets
forth the number of shares of Common Stock that are (A) reserved for issuance
pursuant to Convertible Securities (as defined below) (other than the Warrants)
and (B) that are, as of the date hereof, owned by Persons who are “affiliates”
(as defined in Rule 405 of the 1933 Act and calculated based on the assumption
that only officers, directors and holders of at least 10% of the Company’s
issued and outstanding Common Stock are “affiliates” without conceding that any
such Persons are “affiliates” for purposes of federal securities laws) of the
Company or any of its Subsidiaries. To the Company’s knowledge, no Person owns
10% or more of the Company’s issued and outstanding shares of Common Stock
(calculated based on the assumption that all Convertible Securities (as defined
below), whether or not presently exercisable or convertible, have been fully
exercised or converted (as the case may be) taking account of any limitations on
exercise or conversion (including “blockers”) contained therein without
conceding that such identified Person is a 10% stockholder for purposes of
federal securities laws).

 

(iv)             Existing Securities; Obligations. Except as disclosed in the
SEC Documents: (A) none of the Company’s or any Subsidiary’s shares, interests
or capital stock is subject to preemptive rights or any other similar rights or
Liens suffered or permitted by the Company or any Subsidiary; (B) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares, interests or
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares, interests or
capital stock of the Company or any of its Subsidiaries or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any shares, interests or capital stock of the Company or any
of its Subsidiaries; (C) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except pursuant to this Agreement); (D)
there are no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (E) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of any or all of the Securities; and (F) neither the Company nor any
Subsidiary has any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement.

 

-14-

 

 

(v)               Organizational Documents. The Company has furnished to the
Buyer true, correct and complete copies of the Company’s Certificate of
Incorporation, as amended and as in effect on the date hereof (the “Certificate
of Incorporation”), and the Company’s bylaws, as amended and as in effect on the
date hereof (the “Bylaws”), and the terms of all Convertible Securities and the
material rights of the holders thereof in respect thereto.

 

(s)               Indebtedness and Other Contracts. Neither the Company nor any
of its Subsidiaries, (i)   except as set forth in the SEC Documents, has any
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing Indebtedness of the
Company or any of its Subsidiaries or by which the Company or any of its
Subsidiaries is or may become bound, (ii) is a party to any contract, agreement
or instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) has any financing
statements securing obligations in any amounts filed in connection with the
Company or any of its Subsidiaries; (iv) is in violation of any term of, or in
default under, any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (v) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries have any liabilities or obligations required to be disclosed in the
SEC Documents which are not so disclosed in the SEC Documents, other than those
incurred in the ordinary course of the Company’s or its Subsidiaries’ respective
businesses and which, individually or in the aggregate, do not or could not have
a Material Adverse Effect. For purposes of this Agreement: (x) “Indebtedness” of
any Person means, without duplication (A) all indebtedness for borrowed money,
(B) all obligations issued, undertaken or assumed as the deferred purchase price
of property or services (including, without limitation, “capital leases” in
accordance with GAAP) (other than trade payables entered into in the ordinary
course of business consistent with past practice), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with GAAP, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien upon or
in any property or assets (including accounts and contract rights) owned by any
Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (A) through (G) above; (y) “Contingent
Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any Indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto; and (z) “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and any Governmental
Entity or any department or agency thereof.

 

-15-

 

 

(t)                 Litigation. There is no action, suit, arbitration,
proceeding, inquiry or investigation before or by the Principal Market, any
court, public board, other Governmental Entity, self- regulatory organization or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries, the Common Stock or any of the
Company’s or its Subsidiaries’ officers or directors, whether of a civil or
criminal nature or otherwise, in their capacities as such, which is outside of
the ordinary course of business or individually or in the aggregate material to
the Company or any of its Subsidiaries. To the Company’s knowledge, no director,
officer or employee of the Company or any of its Subsidiaries has willfully
violated 18 U.S.C. §1519 or engaged in spoliation in reasonable anticipation of
litigation. Without limitation of the foregoing, there has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the SEC involving the Company, any of its Subsidiaries or any
current or former director or officer of the Company or any of its Subsidiaries.
The SEC has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company under the 1933
Act or the 1934 Act, including, without limitation, the Registration Statement.
After reasonable inquiry of its employees, the Company is not aware of any fact
which might result in or form the basis for any such action, suit, arbitration,
investigation, inquiry or other proceeding. Neither the Company nor any of its
Subsidiaries is subject to any order, writ, judgment, injunction, decree,
determination or award of any Governmental Entity.

 

(u)               Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for, and neither the Company
nor any such Subsidiary has any reason to believe that it will 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 at a cost that would not have a Material Adverse Effect.

 

(v)               Employee Relations. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or employs any
member of a union. The Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer (as defined in Rule 501(f)
promulgated under the 1933 Act) or other key employee of the Company or any of
its Subsidiaries has notified the Company or any such Subsidiary that such
officer intends to leave the Company or any such Subsidiary or otherwise
terminate such officer’s employment with the Company or any such Subsidiary. No
executive officer or other key employee of the Company or any of its
Subsidiaries is, or is now expected to be, in violation of any material term of
any employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant, and the continued employment of each such executive
officer or other key employee (as the case may be) does not subject the Company
or any of its Subsidiaries to any liability with respect to any of the foregoing
matters. The Company and its Subsidiaries are in compliance with all federal,
state, local and foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of employment and wages
and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

 

-16-

 

 

(w)               Title.

 

(i)                 Real Property. Each of the Company and its Subsidiaries
holds good title to all real property, leases in real property, facilities or
other interests in real property owned or held by the Company or any of its
Subsidiaries (the “Real Property”) owned by the Company or any of its
Subsidiaries (as applicable). The Real Property is free and clear of all Liens
and is not subject to any rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature except for (a) Liens for
current taxes not yet due and (b) zoning laws and other land use restrictions
that do not impair the present or anticipated use of the property subject
thereto. Any Real Property held under lease by the Company or any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company or any of
its Subsidiaries.

 

(ii)               Fixtures and Equipment. Each of the Company and its
Subsidiaries (as applicable) has good title to, or a valid leasehold interest
in, the tangible personal property, equipment, improvements, fixtures, and other
personal property and appurtenances that are used by the Company or its
Subsidiary in connection with the conduct of its business (the “Fixtures and
Equipment”). The Fixtures and Equipment are structurally sound, are in good
operating condition and repair, are adequate for the uses to which they are
being put, are not in need of maintenance or repairs except for ordinary,
routine maintenance and repairs and are sufficient for the conduct of the
Company’s and/or its Subsidiaries’ businesses (as applicable) in the manner as
conducted prior to the Closing. Each of the Company and its Subsidiaries owns
all of its Fixtures and Equipment free and clear of all Liens except for (a)
Liens for current taxes not yet due and (b) zoning laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto.

 

(x)               FDA. As to each product subject to the jurisdiction of the
U.S. Food and Drug Administration (“FDA”) under the Federal Food, Drug and
Cosmetic Act, as amended, and the regulations thereunder (“FDCA”) that is
manufactured, packaged, labeled, tested, distributed, sold, and/or marketed by
the Company or any of its Subsidiaries (each such product, a “Pharmaceutical
Product”), such Pharmaceutical Product is being manufactured, packaged, labeled,
tested, distributed, sold and/or marketed by the Company in compliance with all
applicable requirements under FDCA and similar laws, rules and regulations
relating to registration, investigational use, premarket clearance, licensure,
or application approval, good manufacturing practices, good laboratory
practices, good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the failure to
be in compliance would not have a Material Adverse Effect. There is no pending,
completed or, to the Company’s knowledge, threatened, action (including any
lawsuit, arbitration, or legal or administrative or regulatory proceeding,
charge, complaint, or investigation) against the Company or any of its
Subsidiaries, and none of the Company or any of its Subsidiaries has received
any notice, warning letter or other communication from the FDA or any other
governmental entity, which (i) contests the premarket clearance, licensure,
registration, or approval of, the uses of, the distribution of, the
manufacturing or packaging of, the testing of, the sale of, or the labeling and
promotion of any Pharmaceutical Product, (ii) withdraws its approval of,
requests the recall, suspension, or seizure of, or withdraws or orders the
withdrawal of advertising or sales promotional materials relating to, any
Pharmaceutical Product, (iii) imposes a clinical hold on any clinical
investigation by the Company or any of its Subsidiaries, (iv) enjoins production
at any facility of the Company or any of its Subsidiaries, (v) enters or
proposes to enter into a consent decree of permanent injunction with the Company
or any of its Subsidiaries, or (vi) otherwise alleges any violation of any laws,
rules or regulations by the Company or any of its Subsidiaries, and which,
either individually or in the aggregate, would have a Material Adverse Effect.
The properties, business and operations of the Company have been and are being
conducted in all material respects in accordance with all applicable laws, rules
and regulations of the FDA. The Company has not been informed by the FDA that
the FDA will prohibit the marketing, sale, license or use in the United States
of any product proposed to be developed, produced or marketed by the Company nor
has the FDA expressed any concern as to approving or clearing for marketing any
product being developed or proposed to be developed by the Company.

 

-17-

 

 

(y)               Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, original works of
authorship, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and other intellectual property
rights and all applications and registrations therefor (“Intellectual Property
Rights”) necessary to conduct their respective businesses as now conducted. None
of the Company's Intellectual Property Rights have expired or terminated or have
been abandoned or are expected to expire or terminate or are expected to be
abandoned, within three years from the date of this Agreement. The Company does
not have any knowledge of any infringement by the Company or its Subsidiaries of
Intellectual Property Rights of others. There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company or any of its
Subsidiaries, being threatened, against the Company or any of its Subsidiaries
regarding its Intellectual Property Rights. Neither the Company nor any of its
Subsidiaries is aware of any facts or circumstances which might give rise to any
of the foregoing infringements or claims, actions or proceedings. The Company
and its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their Intellectual Property Rights.

 

(z)               Environmental Laws. The Company and its Subsidiaries (i) are
in compliance with all federal, state, local and foreign laws relating to
pollution or protection of human health or the environment (including ambient
air, surface water, groundwater, land surface or subsurface strata), including
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands, or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations, issued, entered, promulgated or approved thereunder (“Environmental
Laws”); (ii) have received all permits licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective businesses;
and (iii) are in compliance with all terms and conditions of any such permit,
license or approval where in each clause (i), (ii) and (iii), the failure to so
comply could be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.

 

-18-

 

 

(aa)             [Intentionally Omitted.]

 

(bb)            Tax Status. The Company and each of its Subsidiaries (i) has
timely made or filed all foreign, federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has timely paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and (iii) has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company and its Subsidiaries know of no basis for any
such claim. The Company is not operated in such a manner as to qualify as a
passive foreign investment company, as defined in Section 1297 of the U.S.
Internal Revenue Code of 1986, as amended (the “Code”).

 

(cc)             Internal Accounting and Disclosure Controls. The Company and
each of its Subsidiaries maintains internal control over financial reporting (as
such term is defined in Rule 13a-15(f) under the 1934 Act) that is effective to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles, including that (i) transactions
are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities is permitted
only in accordance with management’s general or specific authorization, (iv) the
recorded accountability for assets and liabilities is compared with the existing
assets and liabilities at reasonable intervals and appropriate action is taken
with respect to any difference and (v) the interactive data in XBRL included or
incorporated by references in the Registration Statement, the Prospectus and the
Prospectus Supplement fairly present the information called for in all material
respects and are prepared in accordance with the SEC’s rules and guidelines
applicable thereto. The Company maintains disclosure controls and procedures (as
such term is defined in Rule 13a- 15(e) under the 1934 Act) that are effective
in ensuring that information required to be disclosed by the Company in the
reports that it files or submits under the 1934 Act is recorded, processed,
summarized and reported, within the time periods specified in the rules and
forms of the SEC, including, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the 1934 Act is accumulated and
communicated to the Company’s management, including its principal executive
officer or officers and its principal financial officer or officers, as
appropriate, to allow timely decisions regarding required disclosure. Neither
the Company nor any of its Subsidiaries has received any notice or
correspondence from any accountant, Governmental Entity or other Person relating
to any potential material weakness or significant deficiency in any part of the
internal controls over financial reporting of the Company or any of its
Subsidiaries.

 

(dd)            Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company or any of its
Subsidiaries and an unconsolidated or other off balance sheet entity that is
required to be disclosed by the Company in its 1934 Act filings and is not so
disclosed or that otherwise could be reasonably likely to have a Material
Adverse Effect.

 

-19-

 

 

(ee)             Investment Company Status. The Company is not, and upon
consummation of the sale of the Securities will not be, an “investment company,”
an affiliate of an “investment company,” a company controlled by an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter”
for, an “investment company” as such terms are defined in the Investment Company
Act of 1940, as amended.

 

(ff)              Manipulation of Price. Neither the Company nor any of its
Subsidiaries has, and, to the knowledge of the Company, no Person acting on
their behalf has, directly or indirectly, (i) taken any action designed to cause
or to result in the stabilization or manipulation of the price of any security
of the Company or any of its Subsidiaries to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased, or paid any compensation
for soliciting purchases of, any of the Securities, (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company or any of its Subsidiaries or (iv) paid or agreed to
pay any Person for research services with respect to any securities of the
Company or any of its Subsidiaries.

 

(gg)            U.S. Real Property Holding Corporation. Neither the Company nor
any of its Subsidiaries is, or has ever been, and so long as any of the
Securities are held by the Buyer, shall become, a U.S. real property holding
corporation within the meaning of Section 897 of the Code, and the Company and
each Subsidiary shall so certify upon the Buyer’s request.

 

(hh)            Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income or similar taxes) which are required to be paid in
connection with the issuance, sale and transfer of the Securities to be sold to
the Buyer hereunder will be, or will have been, fully paid or provided for by
the Company, and all laws imposing such taxes will be or will have been complied
with.

 

(ii)               Bank Holding Company Act. Neither the Company nor any of its
Subsidiaries is subject to the Bank Holding Company Act of 1956, as amended (the
“BHCA”) and to regulation by the Board of Governors of the Federal Reserve
System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries
or affiliates owns or controls, directly or indirectly, five percent (5%) or
more of the outstanding shares of any class of voting securities or twenty-five
percent (25%) or more of the total equity of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve. Neither the
Company nor any of its Subsidiaries or affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.

 

(jj)               Shell Company Status. The Company is not, and has never been,
an issuer identified in, or subject to, Rule 144(i).

 

(kk)             Illegal or Unauthorized Payments; Political Contributions.
Neither the Company nor any of its Subsidiaries nor, to the Company’s knowledge,
any of the officers, directors, employees, agents or other representatives of
the Company or any of its Subsidiaries or any other business entity or
enterprise with which the Company or any Subsidiary is or has been affiliated or
associated, has, directly or indirectly, made or authorized any payment,
contribution or gift of money, property, or services, whether or not in
contravention of applicable law, (i) as a kickback or bribe to any Person or
(ii) to any political organization, or the holder of or any aspirant to any
elective or appointive public office except for personal political contributions
not involving the direct or indirect use of funds of the Company or any of its
Subsidiaries.

 

-20-

 

 

(ll)              Money Laundering. The Company and its Subsidiaries are in
compliance with, and have not previously violated, the USA Patriot Act of 2001
and all other applicable U.S. and non-U.S. anti-money laundering laws and
regulations, including, but not limited to, the laws, regulations and Executive
Orders and sanctions programs administered by the U.S. Office of Foreign Assets
Control, including, without limitation, (i) Executive Order 13224 of September
23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons
Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079
(2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.

 

(mm)           Management. Except as set forth in Schedule 3(mm) hereto, during
the past five year period, no current or former officer or director or, to the
knowledge of the Company, no current ten percent (10%) or greater stockholder of
the Company or any of its Subsidiaries has been the subject of:

 

(i)                a petition under bankruptcy laws or any other insolvency or
moratorium law or the appointment by a court of a receiver, fiscal agent or
similar officer for such Person, or any partnership in which such person was a
general partner at or within two years before the filing of such petition or
such appointment, or any corporation or business association of which such
person was an executive officer at or within two years before the time of the
filing of such petition or such appointment;

 

(ii)               a conviction in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations that do not relate to
driving while intoxicated or driving under the influence);

 

(iii)             any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining any such person from, or otherwise limiting, the following
activities:

 

(1)    Acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage transaction
merchant, any other person regulated by the United States Commodity Futures
Trading Commission or an associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment company, bank, savings
and loan association or insurance company, or engaging in or continuing any
conduct or practice in connection with such activity;

 

(2)    Engaging in any particular type of business practice; or

 

-21-

 

 

(3)    Engaging in any activity in connection with the purchase or sale of any
security or commodity or in connection with any violation of securities laws or
commodities laws;

 

(iv)             any order, judgment or decree, not subsequently reversed,
suspended or vacated, of any authority barring, suspending or otherwise limiting
for more than sixty (60) days the right of any such person to engage in any
activity described in the preceding sub paragraph, or to be associated with
persons engaged in any such activity;

 

(v)               a finding by a court of competent jurisdiction in a civil
action or by the SEC or other authority to have violated any securities law,
regulation or decree and the judgment in such civil action or finding by the SEC
or any other authority has not been subsequently reversed, suspended or vacated;
or

 

(vi)             a finding by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have violated any
federal commodities law, and the judgment in such civil action or finding has
not been subsequently reversed, suspended or vacated.

 

(nn)             Stock Option Plans. Each stock option granted by the Company
was granted (i) in accordance with the terms of the applicable stock option plan
of the Company and (ii) with an exercise price at least equal to the fair market
value of the Common Stock on the date such stock option would be considered
granted under GAAP and applicable law. No stock option granted under the
Company's stock option plan has been backdated. The Company has not knowingly
granted, and there is no and has been no policy or practice of the Company to
knowingly grant, stock options prior to, or otherwise knowingly coordinate the
grant of stock options with, the release or other public announcement of
material information regarding the Company or its Subsidiaries or their
financial results or prospects.

 

(oo)             No Disagreements with Accountants and Lawyers. There are no
material disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers
formerly or presently employed by the Company and the Company is current with
respect to any fees owed to its accountants and lawyers which could affect the
Company's ability to perform any of its obligations under any of the Transaction
Documents. In addition, on or prior to the date hereof, the Company had
discussions with its accountants about its financial statements previously filed
with the SEC. Based on those discussions, the Company has no reason to believe
that it will need to restate any such financial statements or any part thereof.

 

(pp)             No Additional Agreements. The Company does not have any
agreement or understanding with the Buyer with respect to the transactions
contemplated by the Transaction Documents other than as specified in the
Transaction Documents.

 

(qq)             Registration Rights. No Person has any right to cause the
Company or any Subsidiary to effect the registration under the 1933 Act of any
securities of the Company or any Subsidiary.

 

-22-

 

 

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

 

(ss)             Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided the Buyer or its agents or counsel with
any information that constitutes or could reasonably be expected to constitute
material, non-public information concerning the Company or any of its
Subsidiaries, other than the existence of the transactions contemplated by this
Agreement and the other Transaction Documents. The Company understands and
confirms that the Buyer will rely on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the Buyer
regarding the Company and its Subsidiaries, their businesses and the
transactions contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Company or any of its Subsidiaries is true and
correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
All of the written information furnished after the date hereof by or on behalf
of the Company or any of its Subsidiaries to the Buyer pursuant to or in
connection with this Agreement and the other Transaction Documents, taken as a
whole, will be true and correct in all material respects as of the date on which
such information is so provided and will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. The press releases disseminated by the Company during the
twelve (12) months preceding the date of this Agreement, taken as a whole, are
true and correct in all material respects. No event or circumstance has occurred
or information exists with respect to the Company or any of its Subsidiaries or
its or their business, properties, liabilities, prospects, operations (including
results thereof) or conditions (financial or otherwise), which, under applicable
law, rule or regulation, requires public disclosure at or before the date hereof
or announcement by the Company but which has not been so publicly disclosed. All
financial projections and forecasts that have been prepared by or on behalf of
the Company or any of its Subsidiaries and made available to the Buyer have been
prepared in good faith based upon reasonable assumptions and represented, at the
time each such financial projection or forecast was delivered to the Buyer, the
Company’s best estimate of future financial performance (it being recognized
that such financial projections or forecasts are not to be viewed as facts and
that the actual results during the period or periods covered by any such
financial projections or forecasts may differ from the projected or forecasted
results). The Company acknowledges and agrees that the Buyer has not made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 2.

 

(tt)              Accountants. BDO USA, LLP (“BDO”), whose report dated February
27, 2020 relating to the financial statements of the Company is filed with the
SEC as part of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2019 filed with the Commission and incorporated by reference into
the Registration Statement and the Prospectus, are and, during the periods
covered by their report, were an independent registered public accounting firm
within the meaning of the 1933 Act and the Public Company Accounting Oversight
Board (United States).

 

-23-

 

 

(uu)            Listing and Maintenance Requirements. The Common Stock is
registered pursuant to Section 12(b) of the 1934 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 1934 Act nor has
the Company received any notification that the SEC is contemplating terminating
such registration. The Company is not in violation of any of the rules,
regulations or requirements of the Principal Market and has no knowledge of any
facts or circumstances that could reasonably lead to delisting or suspension of
the Common Stock by the Principal Market in the foreseeable future. Except as
disclosed in the SEC Documents, during the two years prior to the date hereof,
(i) the Common Stock has been listed or designated for quotation on the
Principal Market, (ii) trading in the Common Stock has not been suspended by the
SEC or the Principal Market and (iii) the Company has received no communication,
written or oral, from the SEC or the Principal Market regarding the suspension
or delisting of the Common Stock from the Principal Market. The Common Stock is
currently eligible for electronic transfer through the Depository Trust Company
or another established clearing corporation and the Company is current in
payment of the fees to the Depository Trust Company (or such other established
clearing corporation) in connection with such electronic transfer.

 

(vv)            Public Float Calculation. As of the close of trading on the
Principal Market on March 27, 2020, the aggregate market value of the
outstanding voting and non-voting common equity (as defined in Rule 405) of the
Company held by persons other than affiliates of the Company (pursuant to Rule
144, those that directly, or indirectly through one or more intermediaries,
control, or are controlled by, or are under common control with, the Company)
(the “Non-Affiliate Shares”), was approximately $22,215,410 (calculated by
multiplying (x) the price at which the common equity of the Company was last
sold on the Principal Market on February 12, 2020 by (y) the number of
Non-Affiliate Shares outstanding on March 27, 2020).

 

(ww)           No Disqualification Events. With respect to the Series J
Securities to be offered, issued and sold hereunder and under the Series J
Warrant, as applicable, in reliance on Rule 506(b) of Regulation D, none of the
Company, any of its predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the offering hereunder,
any beneficial owner of 20% or more of the Company’s outstanding voting equity
securities, calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the 1933 Act) connected with the Company in
any capacity at the time of sale (each, an “Issuer Covered Person”) is subject
to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to
(viii) of Regulation D (a “Disqualification Event”), except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3) of Regulation D. The
Company has exercised reasonable care to determine whether any Issuer Covered
Person is subject to a Disqualification Event. The Company has complied, to the
extent applicable, with its disclosure obligations under Rule 506(e) of
Regulation D, and has furnished to the Buyer a copy of any disclosures provided
thereunder.

 

4.COVENANTS.

 

(a)               Reasonable Best Efforts. The Buyer shall use its reasonable
best efforts to timely satisfy each of the covenants hereunder and conditions to
be satisfied by it as provided in Section 6 of this Agreement. The Company shall
use its reasonable best efforts to timely satisfy each of the covenants
hereunder and conditions to be satisfied by it as provided in Section 7 of this
Agreement.

 

-24-

 

 

(b)               Form D and Blue Sky. The Company agrees to file with the SEC a
Form D with respect to the Series J Securities as required under Regulation D
and to provide a copy thereof to the Buyer promptly after such filing. The
Company shall, on or before the Closing Date, take such action as the Company
shall reasonably determine is necessary in order to obtain an exemption for, or
to, qualify the Securities for sale to the Buyer at the Closing pursuant to this
Agreement under applicable securities or “Blue Sky” laws of the states of the
United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Buyer on or prior to the
Closing Date. The Company shall make any filings and reports relating to the
offer and sale of the Securities required under applicable securities or “Blue
Sky” laws of the states of the United States following the Closing Date.

 

(c)               Reporting Status. Until the earlier of (i) the date on which
the Buyer shall have sold all of the Securities and (ii) none of the Warrants
remain outstanding (the “Reporting Period”), the Company shall timely file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would no longer require or otherwise permit such termination. At any time during
the Reporting Period, if the Company (i)  shall fail for any reason to satisfy
the current public information requirement under Rule 144(c) or (ii) has ever
been an issuer described in Rule 144(i)(1)(i) or becomes an issuer in the
future, and the Company shall fail to satisfy any condition set forth in Rule
144(i)(2) (a “Public Information Failure”) then, in addition to the Buyer’s
other available remedies, the Company shall pay to the Buyer, in cash, as
partial liquidated damages and not as a penalty, by reason of any such delay in
or reduction of its ability to sell the Warrant Shares, an amount in cash equal
to two percent (2.0%) of the aggregate Exercise Price of the Buyer’s Warrants on
the day of a Public Information Failure and on every thirtieth (30th) day
(prorated for periods totaling less than thirty days) thereafter until the
earlier of (a) the date such Public Information Failure is cured and (b) such
time that such public information is no longer required for the Buyer to
transfer the Warrant Shares pursuant to Rule 144. The payments to which the
Buyer shall be entitled pursuant to this Section 4(c) are referred to herein as
“Public Information Failure Payments.” Public Information Failure Payments shall
be paid on the earlier of (i) the last day of the calendar month during which
such Public Information Failure Payments are incurred and (ii) the third (3rd)
Business Day after the event or failure giving rise to the Public Information
Failure Payments is cured. In the event the Company fails to make Public
Information Failure Payments in a timely manner, such Public Information Failure
Payments shall bear interest at the rate of 1.5% per month (prorated for partial
months) until paid in full. Nothing herein shall limit the Buyer’s right to
pursue actual damages for the Public Information Failure, and the Buyer shall
have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief.

 

(d)               Use of Proceeds. The Company will use the proceeds from the
sale of the Securities as described in the Prospectus Supplement, but not,
directly or indirectly, for (i) except as set forth on Schedule 4(d), the
satisfaction of any indebtedness of the Company or any of its Subsidiaries, (ii)
the redemption or repurchase of any securities of the Company or any of its
Subsidiaries, or (iii) the settlement of any outstanding litigation.

 

-25-

 

 

(e)                Financial Information. The Company agrees to send the
following to the Buyer during the Reporting Period (i) unless the following are
filed with the SEC through EDGAR and are available to the public through the
EDGAR system, within one (1) Business Day after the filing thereof with the SEC,
a copy of its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q,
any interim reports or any consolidated balance sheets, income statements,
stockholders’ equity statements and/or cash flow statements for any period other
than annual, any Current Reports on Form 8-K and any registration statements
(other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii)
unless the following are either filed with the SEC through EDGAR or are
otherwise widely disseminated via a recognized news release service (such as PR
Newswire), on the same day as the release thereof, facsimile copies of all press
releases issued by the Company or any of its Subsidiaries and (iii) unless the
following are filed with the SEC through EDGAR, copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.

 

(f)                 Listing. The Company shall promptly secure the listing or
designation for quotation (as the case may be) of all of the Underlying
Securities (as defined below) upon each national securities exchange and
automated quotation system, if any, upon which the Common Stock is then listed
or designated for quotation (as the case may be) (subject to official notice of
issuance) and shall maintain such listing or designation for quotation (as the
case may be) of all Underlying Securities on such national securities exchange
or automated quotation system. The Company shall maintain the Common Stock’s
listing or authorization for quotation (as the case may be) on the Principal
Market, The New York Stock Exchange, the NYSE American, The Nasdaq Global Market
or The Nasdaq Global Select Market (each, an “Eligible Market”). Neither the
Company nor any of its Subsidiaries shall take any action which could be
reasonably expected to result in the delisting or suspension of the Common Stock
(including, without limitation, the Underlying Securities) on an Eligible
Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(f). “Underlying Securities”
means the (i) the Common Shares, (ii) the Series I Warrant Shares issuable upon
exercise of the Series I Warrant, (iii) the Series J Warrant Shares issuable
upon exercise of the Series J Warrant and (iv) any capital stock of the Company
issued or issuable with respect to the Common Shares, the Series I Warrant, the
Series J Warrant, the Series I Warrant Shares or the Series J Warrant Shares,
including, without limitation, (1) as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise and (2)
shares of capital stock of the Company into which the shares of Common Stock are
converted or exchanged and shares of capital stock of a Successor Entity (as
defined in the Warrants) into which the shares of Common Stock are converted or
exchanged, in each case, without regard to any limitations on exercise of the
Warrants.

 

(g)               Fees. The Company shall reimburse the Buyer for all reasonable
costs and expenses incurred by it or its affiliates in connection with the
transactions contemplated by the Transaction Documents (including, without
limitation, as applicable, all reasonable legal fees and disbursements of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel to the Buyer, any other
reasonable fees and expenses in connection with the structuring, documentation,
negotiation and closing of the transactions contemplated by the Transaction
Documents and due diligence and regulatory filings in connection therewith), in
an aggregate amount of $[_____], which aggregate amount, less any portion
thereof previously paid by the Company to the Buyer, shall be withheld by the
Buyer from the Purchase Price at the Closing or paid by the Company on demand by
the Buyer if the Buyer terminates its obligations under this Agreement in
accordance with Section 8 (as the case may be). The Company shall be responsible
for the payment of any placement agent’s fees, financial advisory fees, transfer
agent fees, DTC fees or broker’s commissions (other than for Persons engaged by
the Investor) relating to or arising out of the transactions contemplated by the
Transaction Documents. The Company shall pay, and hold the Buyer harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorneys’ fees and out-of- pocket expenses) arising in connection
with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own
expenses in connection with the sale of the Securities to the Buyer.

 

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(h)               Pledge of Securities. Notwithstanding anything to the contrary
contained in this Agreement, the Company acknowledges and agrees that the
Securities may be pledged by an Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document. The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by the Buyer.

 

(i)                 Prohibition of Short Sales and Hedging Transactions. During
the term of this Agreement, the Buyer and its agents, representatives and
affiliates shall not in any manner whatsoever enter into or effect, directly or
indirectly, any (i) “short sale” (as such term is defined in Rule 200 of
Regulation SHO of the 1934 Act) of the Common Stock or (ii) hedging transaction,
which establishes a net short position with respect to the Common Stock.

 

(j)                 Disclosure of Transactions and Other Material Information.

 

(i)                 Disclosure of Transaction. The Company shall, on or before
9:00 a.m., New York time, on the first (1st) Business Day after the date of this
Agreement, (i) issue a press release (the “Press Release”) reasonably acceptable
to the Buyer disclosing all the material terms of the transactions contemplated
by the Transaction Documents, (ii) file with the SEC a Current Report on Form
8-K reasonably acceptable to the Buyer describing all the material terms of the
transactions contemplated by the Transaction Documents in the form required by
the 1934 Act and attaching all the material Transaction Documents (including,
without limitation, this Agreement (and all schedules to this Agreement), the
form of the Series I Warrant and the form of the Series J Warrant) (including
all attachments, the “8-K Filing”), and (iii) file with the SEC the Prospectus
Supplement pursuant to Rule 424(b) under the 1933 Act specifically relating to
the transactions contemplated by, and describing the material terms and
conditions of, the Transaction Documents, containing information previously
omitted at the time of effectiveness of the Registration Statement in reliance
on Rule 430B under the Securities Act, and disclosing all information relating
to the transactions contemplated hereby required to be disclosed in the
Registration Statement and the Prospectus as of the date of the Prospectus
Supplement, including, without limitation, information required to be disclosed
in the section captioned “Plan of Distribution” in the Prospectus. The Company
shall permit the Buyer to review and comment upon the Press Release, the Current
Report and the Prospectus Supplement within a reasonable time prior to their
filing with the SEC, the Company shall give reasonable consideration to all such
comments, and the Company shall not issue the Press Release or file the Current
Report or the Prospectus Supplement with the SEC in a form to which the Buyer
reasonably objects. The Buyer shall furnish to the Company such information
regarding itself, the Securities beneficially owned by it and the intended
method of distribution thereof, including any arrangement between the Buyer and
any other Person relating to the sale or distribution of the Securities, as
shall be reasonably requested by the Company in connection with the preparation
and issuance of the Press Release and the preparation and filing of the Current
Report and the Prospectus Supplement, and shall otherwise cooperate with the
Company as reasonably requested by the Company in connection with the
preparation and issuance of the Press Release and the preparation and filing of
the Current Report and the Prospectus Supplement with the SEC. From and after
the issuance of the Press Release, the Company shall have disclosed all
material, non- public information (if any) provided to any of the Buyer by the
Company or any of its Subsidiaries or any of their respective officers,
directors, employees or agents in connection with the transactions contemplated
by the Transaction Documents. In addition, effective upon the issuance of the
Press Release, the Company acknowledges and agrees that any and all
confidentiality or similar obligations under any agreement, whether written or
oral, between the Company, any of its Subsidiaries or any of their respective
officers, directors, affiliates, employees or agents, on the one hand, and any
of the Buyer or any of their affiliates, on the other hand, shall terminate.

 

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(ii)               Limitations on Disclosure. The Company shall not, and the
Company shall cause each of its Subsidiaries and each of its and their
respective officers, directors, employees and agents not to, provide the Buyer
with any material, non-public information regarding the Company or any of its
Subsidiaries from and after the issuance of the Press Release without the
express prior written consent of the Buyer (which may be granted or withheld in
the Buyer’s sole discretion). To the extent that the Company delivers any
material, non-public information to the Buyer without the Buyer's consent, the
Company hereby covenants and agrees that the Buyer shall not have any duty of
confidentiality with respect to, or a duty not to trade on the basis of, such
material, non-public information. Subject to the foregoing, neither the Company
nor any of its Subsidiaries shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, the Company shall be entitled, without the prior approval of the Buyer,
to issue any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) the Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Without the prior written consent of
the Buyer (which may be granted or withheld in the Buyer’s sole discretion), the
Company shall not (and shall cause each of its Subsidiaries and affiliates to
not) disclose the name of the Buyer in any filing, announcement, release or
otherwise. Notwithstanding anything contained in this Agreement to the contrary
and without implication that the contrary would otherwise be true, the Company
expressly acknowledges and agrees that the Buyer shall not have (unless
expressly agreed to by the Buyer after the date hereof in a written definitive
and binding agreement executed by the Company and the Buyer) any duty of
confidentiality with respect to, or a duty not to trade on the basis of, any
material, non-public information regarding the Company or any of its
Subsidiaries.

 

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(iii)            Other Confidential Information. Disclosure Failures; Disclosure
Delay Payments. In addition to other remedies set forth in this Section 4(j),
and without limiting anything set forth in any other Transaction Document, at
any time after the Closing Date if the Company, any of its Subsidiaries, or any
of their respective officers, directors, employees or agents, provides the Buyer
with material non-public information relating to the Company or any of its
Subsidiaries (each, the “Confidential Information”), the Company shall, on or
prior to the applicable Required Disclosure Date (as defined below), publicly
disclose such Confidential Information on a Current Report on Form 8-K or
otherwise (each, a “Disclosure”). From and after such Disclosure, the Company
shall have disclosed all Confidential Information provided to the Buyer by the
Company or any of its Subsidiaries or any of their respective officers,
directors, employees or agents in connection with the transactions contemplated
by the Transaction Documents. In addition, effective upon such Disclosure, the
Company acknowledges and agrees that any and all confidentiality or similar
obligations under any agreement, whether written or oral, between the Company,
any of its Subsidiaries or any of their respective officers, directors,
affiliates, employees or agents, on the one hand, and any of the Buyer or any of
its affiliates, on the other hand, shall terminate. In the event that the
Company fails to effect such Disclosure on or prior to the Required Disclosure
Date and the Buyer shall have possessed Confidential Information for at least
ten (10) consecutive Trading Days (as defined in the Warrants) (each, a
“Disclosure Failure”), then, as partial relief for the damages to the Buyer by
reason of any such delay in, or reduction of, its ability to buy or sell shares
of Common Stock after such Required Disclosure Date (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Company
shall pay to the Buyer an amount in cash equal to the greater of (I) two percent
(2%) of the Purchase Price and (II) the applicable Disclosure Restitution
Amount, on each of the following dates (each, a “Disclosure Delay Payment
Date”): (i) on the date of such Disclosure Failure and (ii) on every thirty (30)
day anniversary such Disclosure Failure until the earlier of (x) the date such
Disclosure Failure is cured and (y) such time as all such non-public information
provided to the Buyer shall cease to be Confidential Information (as evidenced
by a certificate, duly executed by an authorized officer of the Company to the
foregoing effect) (such earlier date, as applicable, a “Disclosure Cure Date”).
Following the initial Disclosure Delay Payment for any particular Disclosure
Failure, without limiting the foregoing, if a Disclosure Cure Date occurs prior
to any thirty (30) day anniversary of such Disclosure Failure, then such
Disclosure Delay Payment (prorated for such partial month) shall be made on the
third (3rd) Business Day after such Disclosure Cure Date. The payments to which
an Investor shall be entitled pursuant to this Section 4(j)(iii) are referred to
herein as “Disclosure Delay Payments.” In the event the Company fails to make
Disclosure Delay Payments in a timely manner in accordance with the foregoing,
such Disclosure Delay Payments shall bear interest at the rate of two percent
(2%) per month (prorated for partial months) until paid in full.

 

(iv)             For the purpose of this Agreement the following definitions
shall apply:

 

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(1)                  “Disclosure Failure Market Price” means, as of any
Disclosure Delay Payment Date, the price computed as the quotient of (I) the sum
of the five (5)   highest VWAPs (as defined in the Warrants) of the Common Stock
during the applicable Disclosure Restitution Period (as defined below), divided
by (II) five (5) (such period, the “Disclosure Failure Measuring Period”). All
such determinations to be appropriately adjusted for any share dividend, share
split, share combination, reclassification or similar transaction that
proportionately decreases or increases the Common Stock during such Disclosure
Failure Measuring Period.

 

(2)    “Disclosure Restitution Amount” means, as of any Disclosure Delay Payment
Date, the product of (x) difference of (I) the Disclosure Failure Market Price
less (II) the lowest purchase price, per share of Common Stock, of any Common
Stock issued or issuable to the Buyer pursuant to this Agreement or either of
the Warrants, multiplied by (y) 10% of the aggregate daily dollar trading volume
(as reported on Bloomberg (as defined in the Warrants)) of the Common Stock on
the Principal Market for each Trading Day either (1) with respect to the initial
Disclosure Delay Payment Date, during the period commencing on the applicable
Required Disclosure Date through and including the Trading Day immediately prior
to the initial Disclosure Delay Payment Date or (2) with respect to each other
Disclosure Delay Payment Date, during the period commencing the immediately
preceding Disclosure Delay Payment Date through and including the Trading Day
immediately prior to such applicable Disclosure Delay Payment Date (such
applicable period, the “Disclosure Restitution Period”).

 

(3)    “Required Disclosure Date” means (x) if the Buyer authorized the delivery
of such Confidential Information, either (I) if the Company and the Buyer have
mutually agreed upon a date (as evidenced by an e-mail or other writing) of
Disclosure of such Confidential Information, such agreed upon date or (II)
otherwise, the seventh (7th) calendar day after the date the Buyer first
received any Confidential Information or (y) if the Buyer did not authorize the
delivery of such Confidential Information, the first (1st) Business Day after
the Buyer’s receipt of such Confidential Information.

 

(k)               Additional Issuance of Securities. So long as the Buyer
beneficially owns any Securities, the Company will not, without the prior
written consent of the Buyer (which may be granted or withheld in the Buyer’s
sole discretion), issue any other securities that would cause a breach or
default under any of the Warrants. The Company agrees that for the period
commencing on the date hereof and ending on the date immediately following the
60th calendar day after the Closing Date (the “Restricted Period”), neither the
Company nor any of its Subsidiaries shall directly or indirectly:

 

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(i)                 file a registration statement under the 1933 Act relating to
securities that are not the Underlying Securities (other than (A) a registration
statement on Form S-8, (B) a new shelf registration statement on Form S-3 filed
with the SEC prior to the third anniversary of the effective date of the
Registration Statement as the successor registration statement to the
Registration Statement covering Common Stock, including the Series C Warrant
Shares, and certain other securities of the company (but not with respect to any
Subsequent Financing during the Restricted Period, other than the issuance of
Series I Warrant Shares upon exercise of the Series I Warrants)), or (C) such
supplements or amendments to registration statements that are outstanding and
have been declared effective by the SEC as of the date hereof solely to the
extent necessary to keep such registration statements effective and available
and not with respect to any Subsequent Financing;

 

(ii)               amend or modify (whether by an amendment, waiver, exchange of
securities, or otherwise) any of the Company’s warrants to purchase Common Stock
that are outstanding as of the date hereof; or

 

(iii)            issue, offer, sell, grant any option or right to purchase, or
otherwise dispose of (or announce any issuance, offer, sale, grant of any option
or right to purchase or other disposition of) any equity security or any
equity-linked or related security (including, without limitation, any “equity
security” (as that term is defined under Rule 405 promulgated under the 1933
Act)), any Convertible Securities (as defined below), any debt, any preferred
stock or any purchase rights or any combination of units thereof (any such
issuance, offer, sale, grant, disposition or announcement (whether occurring
during the Restricted Period or at any time thereafter) is referred to as a
“Subsequent Placement”). Notwithstanding the foregoing, this Section 4(j)(iii)
shall not apply in respect of the issuance of (A) shares of Common Stock or
standard options to purchase Common Stock to directors, officers or employees of
the Company in their capacity as such pursuant to an Approved Stock Plan (as
defined below), provided that the exercise price of any such options is not
lowered, none of such options are amended to increase the number of shares
issuable thereunder and none of the terms or conditions of any such options are
otherwise materially changed in any manner that adversely affects any of the
Buyer; (B) shares of Common Stock issued upon the conversion or exercise of
Convertible Securities (other than standard options to purchase Common Stock
issued pursuant to an Approved Stock Plan that are covered by clause (A) above)
issued prior to the date hereof, provided that the conversion, exercise or other
method of issuance (as the case may be) of any such Convertible Security is made
solely pursuant to the conversion, exercise or other method of issuance (as the
case may be) provisions of such Convertible Security that were in effect on the
date immediately prior to the date of this Agreement, the conversion, exercise
or issuance price of any such Convertible Securities (other than standard
options to purchase Common Stock issued pursuant to an Approved Stock Plan that
are covered by clause (A) above) is not lowered, none of such Convertible
Securities (other than standard options to purchase Common Stock issued pursuant
to an Approved Stock Plan that are covered by clause (A) above) are amended to
increase the number of shares issuable thereunder and none of the terms or
conditions of any such Convertible Securities (other than standard options to
purchase Common Stock issued pursuant to an Approved Stock Plan that are covered
by clause (A) above) are otherwise materially changed in any manner that
adversely affects the Buyer; (C) the Common Shares, the Warrants and the Warrant
Shares (each of the foregoing in clauses (A) through (C), collectively the
“Excluded Securities”). “Approved Stock Plan” means any employee benefit plan
which has been approved by the board of directors of the Company prior to or
subsequent to the date hereof pursuant to which shares of Common Stock and
standard options to purchase Common Stock may be issued to any employee, officer
or director for services provided to the Company in their capacity as such.
“Convertible Securities” means any capital stock or other security of the
Company or any of its Subsidiaries that is at any time and under any
circumstances directly or indirectly convertible into, exercisable or
exchangeable for, or which otherwise entitles the holder thereof to acquire, any
capital stock or other security of the Company (including, without limitation,
Common Stock) or any of its Subsidiaries.

 

-31-

 

 

(l)                 Reservation of Shares. So long as any portion of any of the
Warrants remains outstanding, the Company shall take all action necessary to at
all times have authorized, and reserved for the purpose of issuance, no less
than 100% of the sum of the maximum number of Warrant Shares issuable upon
exercise in full of the Warrants (without regard to any limitations on the
exercise of the Warrants set forth therein) (collectively, the “Required Reserve
Amount”); provided that at no time shall the number of shares of Common Stock
reserved pursuant to this Section 4(l) be reduced other than proportionally in
connection with any exercise of the Warrants. If at any time the number of
shares of Common Stock authorized and reserved for issuance is not sufficient to
meet the Required Reserve Amount, the Company will promptly take all corporate
action necessary to authorize and reserve a sufficient number of shares,
including, without limitation, calling a special meeting of stockholders to
authorize additional shares to meet the Company's obligations pursuant to the
Transaction Documents, in the case of an insufficient number of authorized
shares, obtain stockholder approval of an increase in such authorized number of
shares, and voting the management shares of the Company in favor of an increase
in the authorized shares of the Company to ensure that the number of authorized
shares is sufficient to meet the Required Reserve Amount.

 

(m)             Conduct of Business. The business of the Company and its
Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except where such violations would not
reasonably be expected to result, either individually or in the aggregate, in a
Material Adverse Effect.

 

(n)               Variable Securities. From the date hereof until the earlier of
(i) such time as the Buyer no longer holds any of the Warrants and (ii) one (1)
year from the date hereof, the Company and each Subsidiary shall be prohibited
from effecting or entering into an agreement to effect any Subsequent Placement
involving a Variable Rate Transaction. “Variable Rate Transaction” means a
transaction in which the Company (A) issues or sells any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (1) at a
conversion price, exercise price or exchange rate or other price that is based
upon and/or varies with the trading prices of or quotations for the shares of
Common Stock at any time after the initial issuance of such debt or equity
securities, or (2) with a conversion, exercise or exchange price that is subject
to being reset at some future date after the initial issuance of such debt or
equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock or (B) enters into any agreement (including, without
limitation, an “equity line of credit” or an “at-the-market offering” (as
defined in Rule 415(a)(4) under the 1933 Act)) with any Person other than the
Buyer whereby the Company or any Subsidiary may sell securities at a future
determined price. Notwithstanding the foregoing, beginning on the Trading Day
immediately following the last day of the Restricted Period (and in no event
during the Restricted Period), the Company may sell shares of Common Stock
pursuant to a written equity distribution or sales agreement between the Company
and one or more registered broker-dealers providing for an “at- the-market
offering” (as defined in Rule 415(a)(4) under the 1933 Act) by the Company
exclusively through such registered broker-dealer(s) acting primarily as
agent(s) of the Company, provided that the per share sales price is equal to or
greater than $3.275 per share (as adjusted for stock splits, reverse stock
splits, stock dividends and similar events). The Buyer shall be entitled to
obtain injunctive relief against the Company and its Subsidiaries to preclude
any such issuance, which remedy shall be in addition to any right to collect
damages.

 

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(o)               Participation Right. From the date hereof until the date that
is the twelve (12) month anniversary of the Closing Date, neither the Company
nor any of its Subsidiaries shall, directly or indirectly, effect or enter into
any agreement to effect any Subsequent Placement for cash consideration (a
“Subsequent Financing”), unless the Company shall have first complied with this
Section 4(o).

 

(i)                 Between 4:00 p.m. and 7:00 p.m., New York time, on the
Business Day immediately preceding the Business Day of a proposed or intended
Subsequent Financing (each, a “Subsequent Financing Date”), the Company shall
deliver to the Buyer a written notice of its intention to effect a Subsequent
Financing (each, a “Pre-Notice”) (the Company shall use best efforts to ensure
that the Buyer has received and acknowledged receipt of the Pre-Notice within
such time period), which Pre-Notice shall not contain any information
(including, without limitation, material, non-public information) other than:
(x)   a statement that the Company proposes or intends to effect a Subsequent
Placement (without disclosing the specific terms or conditions of the proposed
Subsequent Financing or the securities to be offered and sold therein, (y) a
representation that such statement (described in clause (x) above) does not
constitute material, non-public information regarding the Company, its business
or its securities and (z) a statement informing the Buyer that it is entitled to
receive a Subsequent Financing Notice (as defined below) containing material,
non-public information with respect to such Subsequent Placement upon its timely
written request in accordance with this Section 4(o).

 

(ii)              If the Buyer consents to receive material, non-public
information with respect to such Subsequent Placement, the Buyer shall deliver a
written request therefor to the Company, not later than 9:00 p.m., New York
time, on the Business Day on which the Buyer properly received such Pre-Notice
from the Company, and upon such written request by the Buyer delivered to the
Company prior to such time, and only upon such written request by the Buyer, the
Company shall promptly thereafter, but not later than two (2) hours after such
written request by the Buyer was properly delivered to the Company, deliver to
the Buyer a written notice of the proposed Subsequent Financing (a “Subsequent
Financing Notice”), which shall (A) describe in reasonable detail the proposed
terms and conditions of such Subsequent Financing, including, without
limitation, the proposed terms of the securities to be offered and sold in such
Subsequent Financing (the “Offered Securities”), the total amount of proceeds
intended to be raised and the Person or Persons through or with whom such
Subsequent Financing is proposed to be effected, (B) include, as an attachment
thereto, a term sheet or similar document setting forth the material terms and
conditions of such Subsequent Financing, including, without limitation, the
material terms of the Offered Securities, and (C) offer to issue and sell to the
Buyer, upon the terms and subject to the conditions of the Subsequent Financing
set forth in the Subsequent Financing Notice, 50% of the Offered Securities (the
“Participation Maximum”) at the same price per Offered Security to be paid by
each other Person participating in such Subsequent Financing.

 

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(iii)             In the event that the Buyer elects to participate in such
Subsequent Financing for all or any part of the Participation Maximum, the Buyer
must deliver a written notice to the Company prior to the later of (i) 11:00
a.m., New York time, on the Business Day on which such proposed or intended
Subsequent Financing shall occur and (ii)  two (2) hours after the time that the
applicable Subsequent Financing Notice is received by the Buyer (the “Notice
Termination Time”), setting forth: (A) a statement that the Buyer elects to
participate in such Subsequent Financing, (B) the amount of Offered Securities,
which shall not exceed the Participation Maximum, that the Buyer elects to
purchase in such Subsequent Financing, and (C) a representation that the Buyer
has sufficient funds available to purchase such Offered Securities in such
Subsequent Financing on the terms and subject to the conditions set forth in the
applicable Subsequent Financing Notice received by the Buyer (the “Notice of
Acceptance”). If the Company does not receive a Notice of Acceptance from the
Buyer prior to the applicable Notice Termination Time, the Buyer shall be deemed
to have elected not to participate in the Subsequent Financing on the terms set
forth in the applicable Subsequent Financing Notice received by the Buyer.

 

(iv)             Notwithstanding the foregoing, if the Company desires to
change, modify or amend any of the terms or conditions of a Subsequent
Financing, or the Offered Securities to be sold therein, set forth in a
Subsequent Financing Notice delivered to the Buyer hereunder, the Company shall
promptly, but not later than 10:00 p.m., New York time, on the Business Day
immediately preceding the Business Day on which such Subsequent Financing is
intended to occur, deliver to the Buyer a new written Subsequent Financing
Notice describing in reasonable detail the terms and conditions of such
Subsequent Financing and Offered Securities, as amended, and the Buyer will
again have the right to participate in such Subsequent Financing upon the terms
and conditions, as amended, set forth in such new Subsequent Financing Notice,
provided the Buyer delivers to the Company a Notice of Acceptance providing the
information described in the penultimate sentence of Section 4(o)(iii) above,
prior to the Notice Termination Time with respect to such new Subsequent
Financing Notice, which shall be the later of (I) 11:00 a.m., New York time, on
the Business Day on which such proposed Subsequent Financing providing for such
amended terms and conditions as set forth in the new Subsequent Financing Notice
delivered to the Buyer hereunder is intended to occur and (II) two (2) hours
after the time that such new Subsequent Financing Notice was received by the
Buyer. If by the Notice Termination Time, the Buyer has delivered to the Company
a Notice of Acceptance in which it has elected to purchase in such Subsequent
Financing an aggregate amount of Offered Securities that is greater than the
Participation Maximum, the Buyer shall be deemed to have elected to participate
for the applicable Participation Maximum in the Subsequent Financing on the
terms set forth in the applicable Subsequent Financing Notice received by the
Buyer.

 

-34- 

 

 

(v)              If by the Notice Termination Time, the Buyer has elected to
purchase in such Subsequent Financing an aggregate amount of Offered Securities
that is equal to or less than the Participation Maximum, as reflected in an
Acceptance Notice delivered by the Buyer to the Company prior to the Termination
Time, or the Buyer has not elected to participate in such Subsequent Financing,
then the Company may (A) offer, issue and sell all or any part of such Offered
Securities as to which a Notice of Acceptance has not been given by the Buyer,
including any Offered Securities the Buyer did not elect to purchase pursuant to
a Notice of Acceptance as part of the Participation Maximum (all such Offered
Securities that are not designated in a Notice of Acceptance as Offered
Securities to be purchased by the Buyer in such Subsequent Financing, the “Other
Securities”), pursuant to a definitive agreement(s) (the “Subsequent Financing
Agreement”), but only to the offerees described in the Subsequent Financing
Notice and only upon terms and conditions (including, without limitation, unit
prices and interest rates) that are not more favorable to the acquiring Person
or Persons or less favorable to the Company than those set forth in the most
recent Subsequent Financing Notice received by the Buyer and (B) to publicly
announce (x) the execution of such Subsequent Financing Agreement, and (y)
either (I) the consummation of the transactions contemplated by such Subsequent
Financing Agreement or (II) the termination of such Subsequent Financing
Agreement, which shall be filed with the SEC on a Current Report on Form 8-K
with such Subsequent Financing Agreement and any documents contemplated therein
filed as exhibits thereto. If a definitive agreement containing the terms and
conditions of such Subsequent Financing as set forth in the Subsequent Financing
Notice delivered to the Buyer is not entered into by the Company for any reason
within five (5) Business Days after the date the initial Subsequent Financing
Notice for such Subsequent Financing was first delivered to the Buyer hereunder,
the Company shall promptly, but not later than 10:00 p.m., New York time, on the
Business Day immediately preceding the Business Day on which such Subsequent
Financing is intended to occur, deliver to the Buyer a new written Subsequent
Financing Notice describing in reasonable detail the terms and conditions of
such Subsequent Financing and Offered Securities, as amended, and the Buyer will
again have the right to participate in such Subsequent Financing upon the terms
and conditions, as amended, set forth in such new Subsequent Financing Notice,
provided the Buyer delivers to the Company a Notice of Acceptance providing the
information described in the penultimate sentence of Section 4(o)(iii) above,
prior to the Notice Termination Time with respect to such new Subsequent
Financing Notice, which shall be the time period described in Section 4(o)(iv)
above.

 

(vi)              In the event the Company shall propose to sell less than all
the Refused Securities (any such sale to be in the manner and on the terms
specified in Section 4(o)(v) above), then the Buyer may, at its sole option and
in its sole discretion, reduce the number or amount of the Offered Securities
specified in its Notice of Acceptance to an amount that shall be not less than
the number or amount of the Offered Securities that the Buyer elected to
purchase pursuant to Section 4(o)(iii) above multiplied by a fraction, (A) the
numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Buyers pursuant to this Section 4(o) prior to
such reduction) and (B) the denominator of which shall be the original amount of
the Offered Securities. In the event that the Buyer so elects to reduce the
number or amount of Offered Securities specified in its Notice of Acceptance,
the Company may not issue, sell or exchange more than the reduced number or
amount of the Offered Securities unless and until such securities have again
been offered to the Buyer in accordance with Section 4(o)(i) and (ii) above.

 

-35- 

 

 

(vii)            Upon the closing of the issuance, sale or exchange of all or
less than all of the Refused Securities, the Buyer shall acquire from the
Company, and the Company shall issue to the Buyer, the number or amount of
Offered Securities specified in its Notice of Acceptance, as reduced pursuant to
Section 4(o)(vi) above if the Buyer has so elected, upon the terms and
conditions specified in the Subsequent Financing Agreement. The purchase by the
Buyer of any Offered Securities is subject in all cases to the preparation,
execution and delivery by the Company and the Buyer of a separate purchase
agreement relating to such Offered Securities reasonably satisfactory in form
and substance to the Buyer and its counsel. Any Offered Securities not acquired
by the Buyer or other Persons in accordance with this Section 4(o) may not be
issued, sold or exchanged until they are again offered to the Buyer under the
procedures specified in this Section 4(o).

 

(viii)           The Company and the Buyer agree that if the Buyer elects to
participate in the Subsequent Financing, neither the Subsequent Financing
Agreement with respect to such Subsequent Financing nor any other transaction
documents related thereto (collectively, the “Subsequent Financing Documents”)
shall include any term or provision whereby the Buyer shall be required to agree
to any restrictions on trading as to any securities of the Company or be
required to consent to any amendment to or termination of, or grant any waiver,
release or the like under or in connection with, any agreement previously
entered into with the Company or any instrument received from the Company.

 

(ix)              Notwithstanding anything to the contrary in this Section 4(o)
and unless otherwise agreed to by the Buyer, the Company shall either confirm in
writing to the Buyer that the transaction with respect to the Subsequent
Financing has been abandoned or shall publicly disclose its intention to issue
the Offered Securities, in either case, in such a manner such that the Buyer
will not be in possession of any material, non-public information, by the fifth
(5th) Business Day following delivery of the Subsequent Financing Notice. If by
such fifth (5th) Business Day, no public disclosure regarding a transaction with
respect to the Offered Securities has been made, and no notice regarding the
abandonment of such transaction has been received by the Buyer, such transaction
shall be deemed to have been abandoned and the Buyer shall not be in possession
of any material, non-public information with respect to the Company or any of
its Subsidiaries. Should the Company decide to pursue such transaction with
respect to the Offered Securities, the Company shall provide the Buyer with
another Subsequent Financing Notice and the Buyer will again have the right of
participation set forth in this Section 4(o).

 

(x)               The restrictions contained in this Section 4(o) shall not
apply in connection with the issuance of any Excluded Securities

 

(p)               Passive Foreign Investment Company. The Company shall conduct
its business, and shall cause its Subsidiaries to conduct their respective
businesses, in such a manner as will ensure that the Company will not be deemed
to constitute a passive foreign investment company within the meaning of Section
1297 of the Code.

 

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(q)               Corporate Existence. So long as the Buyer beneficially owns
any portion of any of the Warrants, the Company shall not be party to any
Fundamental Transaction (as defined in the Warrant) unless the Company is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Warrants.

 

(r)                Exercise Procedures. The form of Exercise Notice (as defined
in the Warrants) included in the Series I Warrants sets forth the totality of
the procedures required of the Buyer in order to exercise the Series I Warrants.
The form of Exercise Notice (as defined in the Warrants) included in the Series
J Warrants sets forth the totality of the procedures required of the Buyer in
order to exercise the Series J Warrants. No legal opinion or other information
or instructions shall be required of the Buyer to exercise any portion of any of
the Warrants. The Company shall honor exercises of the Warrants and shall
deliver the applicable number of Warrant Shares in accordance with the terms,
conditions and time periods set forth in the Warrants. Without limiting the
preceding sentences, no ink-original Exercise Notice shall be required, nor
shall any medallion guarantee (or other type of guarantee or notarization) of
any Exercise Notice form be required in order to exercise any portion of any of
the Warrants.

 

(s)                Regulation M. The Company will not take any action prohibited
by Regulation M under the 1934 Act, in connection with the distribution of the
Securities contemplated hereby.

 

(t)                 Passive Foreign Investment Company. The Company shall
conduct its business in such a manner as will ensure that the Company will not
be deemed to constitute a passive foreign investment company within the meaning
of Section 1297 of the Code.

 

(u)               General Solicitation. None of the Company, any of its
affiliates (as defined in Rule 501(b) under the 1933 Act) or any person acting
on behalf of the Company or such affiliate will solicit any offer to buy or
offer or sell the Series J Warrants or any Series J Warrant Shares by means of
any form of general solicitation or general advertising within the meaning of
Regulation D, including: (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar medium or
broadcast over television or radio; and (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.

 

(v)               Integration. None of the Company, its Subsidiaries, their
affiliates nor any Person acting on their behalf will take any action or steps
that would (i) require registration of the offer, issuance or sale of the Series
J Warrant or any of the Series J Warrant Shares under the 1933 Act, (ii) cause
the offer, issuance or sale of the Common Shares and the Series I Securities to
the Buyer hereunder pursuant to the Registration Statement to be integrated with
any other offering of securities of the Company (including, without limitation,
the offer, issuance or sale of the Series J Warrant or any of the Series J
Warrant Shares, any prior or other offering of securities of the Company or
otherwise), or (iii) cause the offer, issuance or sale of the Series J Warrant
or any of the Series J Warrant Shares to be integrated with any other offering
of securities of the Company (including, without limitation, the offer, issuance
or sale of the Common Shares and the Series I Securities to the Buyer hereunder
pursuant to the Registration Statement, any prior or other offering of
securities of the Company or otherwise).

 

(w)             Notice of Disqualification Events. The Company will notify the
Buyer in writing, prior to the Closing Date of (i) any Disqualification Event
relating to any Issuer Covered Person and (ii) any event that would, with the
passage of time, reasonably be expected to become a Disqualification Event
relating to any Issuer Covered Person, in each case of which it is aware.

 

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(x)               Closing Documents. On or prior to fourteen (14) calendar days
after the Closing Date, the Company agrees to deliver, or cause to be delivered,
to the Buyer and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. a complete
closing set of the executed Transaction Documents and any other document
required to be delivered to any party pursuant to Section 7 hereof or otherwise.

 

5.REGISTER; TRANSFER AGENT INSTRUCTIONS; LEGEND.

 

(a)               Register. The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to each holder of Securities), a register for the Common
Shares and the Warrants in which the Company shall record the name and address
of the Person in whose name the Common Shares and the Warrants have been issued
(including the name and address of each transferee), the number of Common Shares
held by such Person, the number of Series I Warrant Shares issuable upon
exercise of the Series I Warrant held by such Person, and the number of Series I
Warrant Shares issuable upon exercise of the Series I Warrant held by such
Person. The Company shall keep the register open and available at all times
during business hours for inspection of the Buyer or its legal representatives.

 

(b)               Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its Transfer Agent and any subsequent transfer agent
in a form acceptable to the Buyer (the “Irrevocable Transfer Agent
Instructions”) to issue certificates or credit shares to the applicable balance
accounts at DTC, registered in the name of the Buyer or its respective
nominee(s), for the Common Shares and the Warrant Shares in such amounts as
specified from time to time by the Buyer to the Company upon the exercise of the
Warrants (as the case may be). The Company represents and warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5(b) will be given by the Company to its Transfer Agent with
respect to the Securities, and that the Securities shall otherwise be freely
transferable on the books and records of the Company, as applicable, to the
extent provided in this Agreement and the other Transaction Documents. If the
Buyer effects a sale, assignment or transfer of the Common Shares or Series I
Warrant Shares, the Company shall permit the transfer and shall promptly
instruct its Transfer Agent to issue one or more certificates or credit shares
to the applicable balance accounts at DTC in such name and in such denominations
as specified by the Buyer to effect such sale, transfer or assignment. In the
event that such sale, assignment or transfer involves Series J Warrant Shares
sold, assigned or transferred pursuant to an effective registration statement or
in compliance with Rule 144 (assuming the transferor is not an affiliate of the
Company), the transfer agent shall issue such shares to the Buyer, assignee or
transferee (as the case may be) without any restrictive legend in accordance
with Section 5(c) below. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5(b) will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this Section 5(b), that
the Buyer shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required. The Company shall cause its counsel to
issue each legal opinion referred to in the Irrevocable Transfer Agent
Instructions to the Transfer Agent as follows: (i) at the Closing with respect
to the Common Shares, (ii) upon each exercise of the Warrants (unless such
issuance covered by a prior legal opinion previously delivered to the Transfer
Agent), and (iii) on each date a registration statement with respect to the
issuance or resale of any of the Series J Warrant Shares is declared effective
by the SEC. Any fees (with respect to the Transfer Agent, counsel to the Company
or otherwise) associated with the issuance of such opinions or the removal of
any legends on any of the Securities shall be borne by the Company.

 

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(c)               Legends. Certificates and any other instruments evidencing the
Common Shares, the Series I Warrants or the Series I Warrant Shares shall not
bear any restrictive or other legend. The Buyer understands that the Series J
Warrant and the Series J Warrant Shares are being issued pursuant to an
exemption from registration or qualification under the 1933 Act and applicable
state securities laws, and except as set forth below, the Series J Warrant and
the Series J Warrant Shares shall bear any legend as required by the “blue sky”
laws of any state and a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of such stock
certificates):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER
(IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE
TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

(d)               Removal of Legends

 

Certificates evidencing the Series J Warrant Shares shall not be required to
contain the legend set forth in Section 5(c) above or any other legend (i) while
a registration statement covering the resale of such Series J Warrant Shares is
effective under the 1933 Act, (ii) following any sale of such Series J Warrant
Shares pursuant to Rule 144 (assuming the transferor is not an affiliate of the
Company), (iii) if such Series J Warrant Shares are eligible to be sold,
assigned or transferred under Rule 144 (provided that the Buyer provides the
Company with reasonable assurances that such Series J Warrant Shares are
eligible for sale, assignment or transfer under Rule 144 which shall not include
an opinion of counsel), (iv) in connection with a sale, assignment or other
transfer (other than under Rule 144), provided that the Buyer provides the
Company with an opinion of counsel to the Buyer, in a generally acceptable form,
to the effect that such sale, assignment or transfer of the Series J Warrant
Shares may be made without registration under the applicable requirements of the
1933 Act or (v) if such legend is not required under applicable requirements of
the 1933 Act (including, without limitation, controlling judicial
interpretations and pronouncements issued by the SEC). If a legend is not
required pursuant to the foregoing, the Company shall no later than two (2)
Trading Days following the delivery by the Buyer to the Company or the transfer
agent (with notice to the Company) of a legended certificate representing such
Series J Warrant Shares (endorsed or with stock powers attached, signatures
guaranteed, and otherwise in form necessary to affect the reissuance and/or
transfer, if applicable), together with any other deliveries from the Buyer as
may be required above in this Section 5(c), as directed by the Buyer, either:
(A) provided that the Company’s transfer agent is participating in the DTC Fast
Automated Securities Transfer Program, credit the aggregate number of Series J
Warrant Shares to which the Buyer shall be entitled to the Buyer’s or its
designee’s balance account with DTC through its Deposit/Withdrawal at Custodian
system or (B) if the Company’s transfer agent is not participating in the DTC
Fast Automated Securities Transfer Program, issue and deliver (via reputable
overnight courier) to the Buyer, a certificate representing such Series J
Warrant Shares that is free from all restrictive and other legends, registered
in the name of the Buyer or its designee (the date by which such credit is so
required to be made to the balance account of the Buyer’s or the Buyer’s nominee
with DTC or such certificate is required to be delivered to the Buyer pursuant
to the foregoing is referred to herein as the “Required Delivery Date”).

 

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(e)               Buy-In. If the Company fails to so properly deliver such
unlegended certificates representing the aggregate number of Series J Warrant
Shares to which the Buyer shall be entitled, or so properly credit the aggregate
number of Series J Warrant Shares to which the Buyer shall be entitled to the
Buyer’s or its designee’s balance account with DTC through its
Deposit/Withdrawal at Custodian system, in each case by the Required Delivery
Date, then, in addition to all other remedies available to the Buyer, (i) the
Company shall, pay to the Buyer, in cash, as partial liquidated damages and not
as a penalty, for each $1,000 of Series J Warrant Shares (based on the VWAP of
the Common Stock on the date such Series J Warrant Shares are submitted to the
Transfer Agent) delivered for removal of the restrictive legend and subject to
Section 5(d), $10 per Trading Day (increasing to $20 per Trading Day five (5)
Trading Days after such damages have begun to accrue) for each Trading Day after
the Legend Removal Date until such certificate is delivered without a legend or
such credit to such balance account with DTC is made and (ii) if after the
Legend Removal Date the Buyer purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Buyer of all or any portion of the number of shares of Common Stock, or a sale
of a number of shares of Common Stock equal to all or any portion of the number
of shares of Common Stock, that the Buyer anticipated receiving from the Company
without any restrictive legend, then an amount equal to the excess of the
Buyer’s total purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so purchased
(including brokerage commissions and other out-of-pocket expenses, if any) (the
“Buy-In Price”) over the product of (A) such number of Series J Warrant Shares
that the Company was required to deliver to the Buyer by the Legend Removal Date
multiplied by (B) the lowest closing sale price of the Common Stock on any
Trading Day during the period commencing on the date of the delivery by the
Buyer to the Company of the applicable Series J Warrant Shares (as the case may
be) and ending on the date of such delivery and payment under this Section 5(e).

 

(f)                FAST Compliance. While any portion of any of the Warrants
remains outstanding, the Company shall maintain a transfer agent that
participates in the DTC Fast Automated Securities Transfer Program.

 

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6.CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

 

The obligation of the Company hereunder to issue and sell the Common Shares and
the Warrants to the Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion by providing the Buyer with prior
written notice thereof:

 

(a)               The Buyer shall have executed this Agreement and delivered the
same to the Company.

 

(b)               The Buyer shall have delivered to the Company the Purchase
Price for the Common Shares and the Warrants being purchased by the Buyer at the
Closing (less the amount withheld pursuant to Section 4(g)) by wire transfer of
immediately available funds in accordance with the Flow of Funds Letter.

 

(c)               The representations and warranties of the Buyer shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though originally made at that time (except for representations
and warranties that speak as of a specific date, which shall be true and correct
as of such specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Date.

 

7.CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE.

 

The obligation of the Buyer hereunder to purchase the Common Shares and the
Warrants at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Buyer’s sole benefit and may be waived by the Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:

 

(a)               The Company shall have duly executed and delivered to the
Buyer each of the Transaction Documents, and the Company shall have (A) caused
the Transfer Agent to credit 800,000 Common Shares to the Buyer’s or its
designee’s balance account with DTC through its Deposit/Withdrawal at Custodian
system, (B) deliver to the Buyer the Series I Warrant (initially for an
aggregate of up to 131,967 Series I Warrant Shares), duly executed on behalf of
the Company and registered in the name of the Buyer or its designee, and (C)
deliver to the Buyer the Series J Warrant (initially for an aggregate of up to
931,967 Series J Warrant Shares), duly executed on behalf of the Company and
registered in the name of the Buyer or its designee.

 

(b)               The Buyer shall have received the opinion of Sheppard, Mullin,
Richter and Hampton LLP, the Company’s counsel, dated as of the Closing Date, in
the form reasonably acceptable to the Buyer.

 

(c)               The Company shall have delivered to the Buyer a copy of the
Irrevocable Transfer Agent Instructions, in the form reasonably acceptable to
the Buyer, which instructions shall have been delivered to and acknowledged in
writing by the Company’s transfer agent.

 

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(d)               The Company shall have delivered to the Buyer a certificate
evidencing the formation and good standing of the Company and each of its
Subsidiaries in each such entity’s jurisdiction of formation issued by the
Secretary of State (or comparable office) of such jurisdiction of formation as
of a date within ten (10) days of the Closing Date.

 

(e)               The Company shall have delivered to the Buyer a certificate
evidencing the Company’s qualification as a foreign corporation and good
standing issued by the Secretary of State (or comparable office) of each
jurisdiction in which the Company conducts business and is required to so
qualify, as of a date within ten (10) days of the Closing Date.

 

(f)                The Company shall have delivered to the Buyer a certificate,
in the form acceptable to the Buyer, executed by the Secretary of the Company
and dated as of the Closing Date, as to (i) the resolutions consistent with
Section 3(b) as adopted by the Company’s board of directors in a form reasonably
acceptable to the Buyer, (ii) the Certificate of Incorporation of the Company
and

(iii) the Bylaws of the Company, each as in effect at the Closing.

 

(g)               Each and every representation and warranty of the Company
shall be true and correct as of the date when made and as of the Closing Date as
though originally made at that time (except for representations and warranties
that speak as of a specific date, which shall be true and correct as of such
specific date) and the Company shall have performed, satisfied and complied in
all respects with the covenants, agreements and conditions required to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date. The Buyer shall have received a certificate, duly executed by the Chief
Executive Officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by the Buyer
in the form acceptable to the Buyer.

 

(h)               The Company shall have delivered to the Buyer a letter from
the Transfer Agent certifying the number of shares of Common Stock outstanding
on the Closing Date immediately prior to the Closing.

 

(i)                 The Common Stock (A) shall be designated for quotation or
listed (as applicable) on the Principal Market and (B) shall not have been
suspended, as of the Closing Date, by the SEC or the Principal Market from
trading on the Principal Market nor shall suspension by the SEC or the Principal
Market have been threatened, as of the Closing Date, either (I) in writing by
the SEC or the Principal Market or (II) by falling below the minimum maintenance
requirements of the Principal Market.

 

(j)                 The Company shall have obtained all governmental, regulatory
or third party consents and approvals, if any, necessary for the sale of the
Securities, including without limitation, those required by the Principal
Market, if any.

 

(k)               No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or Governmental Entity of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents.

 

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(l)                 Since the date of execution of this Agreement, no event or
series of events shall have occurred that reasonably would have or result in a
Material Adverse Effect.

 

(m)             The Company shall have obtained approval of the Principal Market
to list or designate for quotation (as the case may be) the Common Shares and
the Warrant Shares.

 

(n)               The Buyer shall have received a letter on the letterhead of
the Company, duly executed by the Chief Executive Officer of the Company,
setting forth the wire transfer instructions of the Company (the “Flow of Funds
Letter”).

 

(o)               From the date hereof to the Closing Date, (i) trading in the
Common Stock shall not have been suspended by the SEC or the Principal Market
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing), and, (ii)
at any time prior to the Closing Date, trading in securities generally as
reported by Bloomberg L.P. shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by such service, or on the Principal Market, nor shall a banking moratorium have
been declared either by the United States or New York State authorities nor
shall there have occurred any material outbreak or escalation of hostilities or
other national or international calamity of such magnitude in its effect on, or
any material adverse change in, any financial market which, in each case, in the
reasonable judgment of the Buyer, makes it impracticable or inadvisable to
purchase the Securities at the Closing.

 

(p)               The Registration Statement shall be effective and available
for the issuance and sale to the Buyer hereunder of (i) 800,000 Common Shares,
(ii) the Series I Warrant and up to 131,967 Series I Warrant Shares issuable
upon exercise of the Series I Warrants and (iii) the Series J Warrant and up to
931,967 Series J Warrant Shares upon exercise of the Series J Warrant.

 

(q)               The Company shall have delivered to the Buyer the Prospectus
and the Prospectus Supplement (which may be delivered in accordance with Rule
172 under the 1933 Act).

 

(r)                The Company and its Subsidiaries shall have delivered to the
Buyer such other documents, instruments or certificates relating to the
transactions contemplated by this Agreement as the Buyer or its counsel may
reasonably request.

 

8.TERMINATION.

 

In the event that the Closing shall not have occurred within five (5) days of
the date hereof, then the Buyer shall have the right to terminate its
obligations under this Agreement at any time on or after the close of business
on such date without liability of the Buyer to the Company; provided, however,
the right to terminate this Agreement under this Section 8 shall not be
available to the Buyer if the failure of the transactions contemplated by this
Agreement to have been consummated by such date is the result of the Buyer’s
breach of this Agreement, provided further that no such termination shall affect
any obligation of the Company under this Agreement to reimburse the Buyer for
the expenses described in Section 4(g) above. Nothing contained in this Section
8 shall be deemed to release any party from any liability for any breach by such
party of the terms and provisions of this Agreement or the other Transaction
Documents or to impair the right of any party to compel specific performance by
any other party of its obligations under this Agreement or the other Transaction
Documents.

 

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9.MISCELLANEOUS.

 

(a)               Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York. The Company hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or under any of the other Transaction Documents or with any transaction
contemplated hereby or thereby, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. Nothing contained herein shall be deemed or operate to
preclude the Buyer from bringing suit or taking other legal action against the
Company in any other jurisdiction to collect on the Company’s obligations to the
Buyer or to enforce a judgment or other court ruling in favor of the Buyer. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY
OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS
AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY
OR THEREBY.

 

(b)               Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event that any signature is
delivered by facsimile transmission or by an e-mail which contains a portable
document format (.pdf) file of an executed signature page, such signature page
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
signature page were an original thereof.

 

(c)               Headings; Gender. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Unless the context clearly indicates
otherwise, each pronoun herein shall be deemed to include the masculine,
feminine, neuter, singular and plural forms thereof. The terms “including,”
“includes,” “include” and words of like import shall be construed broadly as if
followed by the words “without limitation.” The terms “herein,” “hereunder,”
“hereof” and words of like import refer to this entire Agreement instead of just
the provision in which they are found.

 

-44- 

 

 

(d)               Severability; Maximum Payment Amounts. If any provision of
this Agreement is prohibited by law or otherwise determined to be invalid or
unenforceable by a court of competent jurisdiction, the provision that would
otherwise be prohibited, invalid or unenforceable shall be deemed amended to
apply to the broadest extent that it would be valid and enforceable, and the
invalidity or unenforceability of such provision shall not affect the validity
of the remaining provisions of this Agreement so long as this Agreement as so
modified continues to express, without material change, the original intentions
of the parties as to the subject matter hereof and the prohibited nature,
invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties. The parties will endeavor in good faith negotiations
to replace the prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to that of the
prohibited, invalid or unenforceable provision(s). Notwithstanding anything to
the contrary contained in this Agreement or any other Transaction Document (and
without implication that the following is required or applicable), it is the
intention of the parties that in no event shall amounts and value paid by the
Company and/or any of its Subsidiaries (as the case may be), or payable to or
received by any of the Buyer, under the Transaction Documents (including without
limitation, any amounts that would be characterized as “interest” under
applicable law) exceed amounts permitted under any applicable law. Accordingly,
if any obligation to pay, payment made to the Buyer, or collection by the Buyer
pursuant the Transaction Documents is finally judicially determined to be
contrary to any such applicable law, such obligation to pay, payment or
collection shall be deemed to have been made by mutual mistake of the Buyer, the
Company and its Subsidiaries and such amount shall be deemed to have been
adjusted with retroactive effect to the maximum amount or rate of interest, as
the case may be, as would not be so prohibited by the applicable law. Such
adjustment shall be effected, to the extent necessary, by reducing or refunding,
at the option of the Buyer, the amount of interest or any other amounts which
would constitute unlawful amounts required to be paid or actually paid to the
Buyer under the Transaction Documents. For greater certainty, to the extent that
any interest, charges, fees, expenses or other amounts required to be paid to or
received by the Buyer under any of the Transaction Documents or related thereto
are held to be within the meaning of “interest” or another applicable term to
otherwise be violative of applicable law, such amounts shall be pro-rated over
the period of time to which they relate.

 

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(e)               Entire Agreement; Amendments. This Agreement, the other
Transaction Documents and the schedules and exhibits attached hereto and thereto
and the instruments referenced herein and therein supersede all other prior oral
or written agreements between the Buyer, the Company, its Subsidiaries, their
affiliates and Persons acting on their behalf, and this Agreement, the other
Transaction Documents, the schedules and exhibits attached hereto and thereto
and the instruments referenced herein and therein contain the entire
understanding of the parties solely with respect to the matters covered herein
and therein; provided, however, nothing contained in this Agreement or any other
Transaction Document shall (or shall be deemed to) (i) have any effect on any
provision of any other agreements the Buyer has entered into with, or any
instruments the Buyer has received from, the Company or any of its Subsidiaries
prior to the date hereof with respect to any prior investment made by the Buyer
in the Company or (ii) waive, alter, modify or amend in any respect any
obligations of the Company, or any rights of or benefits to the Buyer or any
other Person, in any other agreement entered into prior to the date hereof
between or among the Company and/or any of its Subsidiaries and the Buyer, or in
any instruments the Buyer received from the Company and/or any of its
Subsidiaries prior to the date hereof, and all such binding provisions contained
in all such other agreements and instruments shall continue in full force and
effect. Except as specifically set forth herein or therein, neither the Company
nor the Buyer makes any representation, warranty, covenant or undertaking with
respect to such matters. For clarification purposes, the Recitals are part of
this Agreement. Provisions of this Agreement may be amended only with the
written consent of the Company and the Buyer, and any amendment of any provision
of this Agreement made in conformity with the provisions of this Section 9(e)
shall be binding upon the Buyer and the Company. No waiver shall be effective
unless it is in writing and signed by an authorized representative of the
waiving party, and any waiver of any provision of this Agreement made in
conformity with the provisions of this Section 9(e) shall be binding on the
waiving party. The Company has not, directly or indirectly, made any agreements
with the Buyer relating to the terms or conditions of the transactions
contemplated by the Transaction Documents except as set forth in the Transaction
Documents. Without limiting the foregoing, the Company confirms that, except as
set forth in this Agreement, the Buyer has not made any commitment or promise or
has any other obligation to provide any financing to the Company, any Subsidiary
or otherwise. As a material inducement for the Buyer to enter into this
Agreement, the Company expressly acknowledges and agrees that (i) no due
diligence or other investigation or inquiry conducted by the Buyer, any of its
advisors or any of its representatives shall affect the Buyer’s right to rely
on, or shall modify or qualify in any manner or be an exception to any of, the
Company’s representations and warranties contained in this Agreement or any
other Transaction Document, (ii) nothing contained in the Registration
Statement, the Prospectus or the Prospectus Supplement shall affect the Buyer’s
right to rely on, or shall modify or qualify in any manner or be an exception to
any of, the Company’s representations and warranties contained in this Agreement
or any other Transaction Document and (iii) unless a provision of this Agreement
or any other Transaction Document is expressly preceded by the phrase “except as
disclosed in the SEC Documents,” nothing contained in any of the SEC Documents
shall affect the Buyer’s right to rely on, or shall modify or qualify in any
manner or be an exception to any of, the Company’s representations and
warranties contained in this Agreement or any other Transaction Document.

 

(f)                Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party) or electronic mail; or (iii)
one (1) Business Day after deposit with an overnight courier service with next
day delivery specified, in each case, properly addressed to the party to receive
the same. The addresses, facsimile numbers and e-mail addresses for such
communications shall be:

 

If to the Company:

 

Trovagene, Inc.

110 Flintkote Avenue

San Diego, CA 92121

Telephone: (858) 952-7570

Facsimile: (858) 952-7571

Attention: Chief Executive Officer

E-Mail: tadams@trovagene.com

 

-46- 

 

 

With a copy (for informational purposes only) to:

 

Sheppard, Mullin, Richter & Hampton LLP

30 Rockefeller Plaza, 39th Floor

New York, NY 10112

Telephone: (212) 653-8700

Facsimile: (212) 653-8701

Attention: Jeffrey J. Fessler, Esq.

E-Mail: jfessler@sheppardmullin.com

 

If to the Transfer Agent:

 

Philadelphia Stock Transfer, Inc.

2320 Haverford Rd., Suite 230

Ardmore, PA 19003

Telephone: (484) 416-3124

Facsimile: (484) 416-3597

Attention: Bob Winterle

E-Mail: bwinterle@philadelphiastocktransfer.com

 

If to the Buyer:

 

Lincoln Park Capital Fund, LLC

440 North Wells, Suite 410

Chicago, IL 60654

Telephone: (312) 822-9300

Facsimile: (312) 822-9301

Attention: Joshua Scheinfeld/Jonathan Cope

E-Mail: jscheinfeld@lpcfunds.com/jcope@lpcfunds.com

 

with a copy (for informational purposes only) to:

 

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

666 Third Avenue

New York, NY 10017

Telephone: (212) 692-6267

Facsimile: (212) 983-3115

Attention: Anthony J. Marsico, Esq.

Email: ajmarsico@mintz.com

 

or to such other address, e-mail address and/or facsimile number and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine or e-mail containing
the time, date, recipient facsimile number and, with respect to each facsimile
transmission, an image of the first page of such transmission or (C) provided by
an overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.

 

-47- 

 

 

(g)               Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns, including any subsequent purchasers of any of the Warrants (but
excluding any purchasers of Underlying Securities, unless pursuant to a written
assignment by the Buyer). The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the Buyer,
including, without limitation, by way of a Fundamental Transaction (as defined
in the Warrants) (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Warrants). The
Buyer may assign some or all of its rights hereunder in connection with any
transfer of any of its Securities without the consent of the Company, in which
event such assignee shall be deemed to be the Buyer hereunder with respect to
such assigned rights.

 

(h)               No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, other than the Indemnitees referred to in Section 9(k).

 

(i)                 Survival. The representations, warranties, agreements and
covenants shall survive the Closing.

 

(j)                 Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as any other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

(k)                 Indemnification.

 

(i)                 In consideration of the Buyer’s execution and delivery of
this Agreement and acquiring the Securities and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless the Buyer and each holder of any
Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities”), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in any of the Transaction
Documents, (ii) any breach of any covenant, agreement or obligation of the
Company contained in any of the Transaction Documents, (iii) any cause of
action, suit, proceeding or claim brought or made against such Indemnitee by a
third party (including for these purposes a derivative action brought on behalf
of the Company or any Subsidiary) or which otherwise involves such Indemnitee
that arises out of or results from (A) the execution, delivery, performance or
enforcement of any of the Transaction Documents, (B) any transaction financed or
to be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities, (C) the status of the Buyer or holder of the
Securities either as an investor in the Company pursuant to the transactions
contemplated by the Transaction Documents or as a party to this Agreement
(including, without limitation, as a party in interest or otherwise in any
action or proceeding for injunctive or other equitable relief), or (D) with
respect to any registration statement of the Company providing for the resale by
the Buyer of any Series J Warrant Shares issued and issuable upon exercise of
the Series J Warrants filed by the Company with the SEC, (1) any untrue or
alleged untrue statement of a material fact contained in such registration
statement, any prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
prospectus or supplement thereto, in light of the circumstances under which they
were made) not misleading, except to the extent, but only to the extent, that
such untrue statements or omissions are based solely upon information regarding
the Buyer furnished in writing to the Company by the Buyer expressly for use
therein or (2) any violation or alleged violation by the Company of the 1933
Act, the 1934 Act or any state securities law, or any rule or regulation
thereunder in connection therewith. To the extent that the foregoing undertaking
by the Company may be unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.

 

-48- 

 

 

(ii)               Promptly after receipt by an Indemnitee under this Section
9(k) of notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving an Indemnified Liability, such
Indemnitee shall, if a claim in respect thereof is to be made against the
Company under this Section 9(k), deliver to the Company a written notice of the
commencement thereof, and the Company shall have the right to participate in,
and, to the extent the Company so desires, to assume control of the defense
thereof with counsel mutually satisfactory to the Company and the Indemnitee;
provided, however, that an Indemnitee shall have the right to retain its own
counsel with the fees and expenses of such counsel to be paid by the Company if:
(A) the Company has agreed in writing to pay such fees and expenses; (B) the
Company shall have failed promptly to assume the defense of such Indemnified
Liability and to employ counsel reasonably satisfactory to such Indemnitee in
any such Indemnified Liability; or (C) the named parties to any such Indemnified
Liability (including any impleaded parties) include both such Indemnitee and the
Company, and such Indemnitee shall have been advised by counsel that a conflict
of interest is likely to exist if the same counsel were to represent such
Indemnitee and the Company (in which case, if such Indemnitee notifies the
Company in writing that it elects to employ separate counsel at the expense of
the Company, then the Company shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Company), provided
further, that in the case of clause (C) above the Company shall not be
responsible for the reasonable fees and expenses of more than one(1) separate
legal counsel for the Indemnitees. The Indemnitee shall reasonably cooperate
with the Company in connection with any negotiation or defense of any such
action or Indemnified Liability by the Company and shall furnish to the Company
all information reasonably available to the Indemnitee which relates to such
action or Indemnified Liability. The Company shall keep the Indemnitee
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. The Company shall not be liable
for any settlement of any action, claim or proceeding effected without its prior
written consent, provided, however, that the Company shall not unreasonably
withhold, delay or condition its consent. The Company shall not, without the
prior written consent of the Indemnitee, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnitee of a release from all liability in respect to such Indemnified
Liability or litigation, and such settlement shall not include any admission as
to fault on the part of the Indemnitee. Following indemnification as provided
for hereunder, the Company shall be subrogated to all rights of the Indemnitee
with respect to all third parties, firms or corporations relating to the matter
for which indemnification has been made. The failure to deliver written notice
to the Company within a reasonable time of the commencement of any such action
shall not relieve the Company of any liability to the Indemnitee under this
Section 9(k), except to the extent that the Company is materially and adversely
prejudiced in its ability to defend such action.

 

-49- 

 

 

(iii)            The indemnification required by this Section 9(k) shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, within ten (10) days after bills are received or
Indemnified Liabilities are incurred.

 

(iv)             The indemnity agreement contained herein shall be in addition
to (A) any cause of action or similar right of the Indemnitee against the
Company or others, and (B) any liabilities the Company may be subject to
pursuant to the law.

 

(l)                 Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party. No
specific representation or warranty shall limit the generality or applicability
of a more general representation or warranty. Each and every reference to share
prices, shares of Common Stock and any other numbers in this Agreement that
relate to the Common Stock shall be automatically adjusted for any stock splits,
stock dividends, stock combinations, recapitalizations or other similar
transactions that occur with respect to the Common Stock after the date of this
Agreement. It is expressly understood and agreed that for all purposes of this
Agreement, and without implication that the contrary would otherwise be true,
neither transactions nor purchases nor sales shall include the location and/or
reservation of borrowable shares of Common Stock.

 

(m)             Remedies. The Buyer and in the event of assignment by Buyer of
its rights and obligations hereunder, each holder of any Securities, shall have
all rights and remedies set forth in the Transaction Documents and all rights
and remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it or any Subsidiary fails to perform,
observe, or discharge any or all of its or such Subsidiary’s (as the case may
be) obligations under the Transaction Documents, any remedy at law would
inadequate relief to the Buyer. The Company therefore agrees that the Buyer
shall be entitled to specific performance and/or temporary, preliminary and
permanent injunctive or other equitable relief from any court of competent
jurisdiction in any such case without the necessity of proving actual damages
and without posting a bond or other security. The remedies provided in this
Agreement and the other Transaction Documents shall be cumulative and in
addition to all other remedies available under this Agreement and the other
Transaction Documents, at law or in equity (including a decree of specific
performance and/or other injunctive relief).

 

-50- 

 

 

(n)               Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever the Buyer exercises a right, election, demand or option
under a Transaction Document and the Company or any Subsidiary does not timely
perform its related obligations within the periods therein provided, then the
Buyer may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company or such Subsidiary (as the case may be), any
relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights; provided, however, that in the case of a rescission
of an exercise of the Series I Warrant or the Series J Warrant, the Buyer shall
be required to return any Series I Warrant Shares or Series J Warrant Shares,
respectively, subject to any such rescinded exercise notice concurrently with
the return to the Buyer of the aggregate exercise price paid to the Company for
such Series I Warrant Shares or Series J Warrant Shares, as applicable, and the
restoration of the Buyer’s right to acquire such Series I Warrant Shares or
Series J Warrant Shares pursuant to such Series I Warrant or Series J Warrant
(including, issuance of a replacement warrant certificate evidencing such
restored right), respectively.

 

(o)               Payment Set Aside; Currency. To the extent that the Company
makes a payment or payments to the Buyer hereunder or pursuant to any of the
other Transaction Documents or the Buyer enforce or exercise their rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without
limitation, any bankruptcy law, foreign, state or federal law, common law or
equitable cause of action), then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred. Unless otherwise expressly
indicated, all dollar amounts referred to in this Agreement and the other
Transaction Documents are in United States Dollars (“U.S. Dollars”), and all
amounts owing under this Agreement and all other Transaction Documents shall be
paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall
be converted into the U.S. Dollar equivalent amount in accordance with the
Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to
any amount of currency to be converted into U.S. Dollars pursuant to this
Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal
on the relevant date of calculation.

 

-51- 

 

 

(p)               Judgment Currency. If for the purpose of obtaining or
enforcing judgment against the Company in connection with this Agreement or any
other Transaction Document in any court in any jurisdiction it becomes necessary
to convert into any other currency (such other currency being hereinafter in
this Section 9(p) referred to as the “Judgment Currency”) an amount due in US
Dollars under this Agreement, the conversion shall be made at the Exchange Rate
prevailing on the Trading Day immediately preceding:

 

(1)                                the date actual payment of the amount due, in
the case of any proceeding in the courts of New York or in the courts of any
other jurisdiction that will give effect to such conversion being made on such
date: or

 

(2)                                the date on which the foreign court
determines, in the case of any proceeding in the courts of any other
jurisdiction (the date as of which such conversion is made pursuant to this
Section 9(p)(i)(1) being hereinafter referred to as the “Judgment Conversion
Date”).

 

(i)                 If in the case of any proceeding in the court of any
jurisdiction referred to in Section 9(p)(i)(1) above, there is a change in the
Exchange Rate prevailing between the Judgment Conversion Date and the date of
actual payment of the amount due, the applicable party shall pay such adjusted
amount as may be necessary to ensure that the amount paid in the Judgment
Currency, when converted at the Exchange Rate prevailing on the date of payment,
will produce the amount of US Dollars which could have been purchased with the
amount of Judgment Currency stipulated in the judgment or judicial order at the
Exchange Rate prevailing on the Judgment Conversion Date.

 

(ii)               Any amount due from the Company under this provision shall be
due as a separate debt and shall not be affected by judgment being obtained for
any other amounts due under or in respect of this Agreement or any other
Transaction Document.

 

(q)               Liquidated Damages. The Company’s obligations to pay any
partial liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not terminate
until all unpaid partial liquidated damages and other amounts have been paid
notwithstanding the fact that the instrument or security pursuant to which such
partial liquidated damages or other amounts are due and payable shall have been
canceled.

 

[signature pages follow]

 

-52- 

 

 

IN WITNESS WHEREOF, the Buyer and the Company have caused their respective
signature page to this Agreement to be duly executed as of the date first
written above.

 

  COMPANY:       TROVAGENE, INC.         By: /s/Thomas Adams     Name: Thomas
Adams     Title: CEO

 

-53- 

 

 

IN WITNESS WHEREOF, the Buyer and the Company have caused their respective
signature page to this Agreement to be duly executed as of the date first
written above.

 

  BUYER:       LINCOLN PARK CAPITAL FUND, LLC
BY: LINCOLN PARK CAPITAL, LLC
BY: ROCKLEDGE CAPITAL CORPORATION         By: /s/ Joshua Scheinfeld     Name:
Joshua Scheinfeld     Title: President

 

-54-