Exhibit 10.20

 

Execution Version

 

 

SECURITIES PURCHASE AGREEMENT

 

SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of June 22, 2017, by
and among Proteon Therapeutics, Inc., a Delaware corporation, with headquarters
located at 200 West Street, Waltham, MA 02451 (the “Company”), and the investors
listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and
collectively, the “Buyers”).

 

WHEREAS:

 

A.       The Buyers, severally, and not jointly, wish to purchase from the
Company, and the Company wishes to sell to the Buyers, upon the terms and
conditions stated in this Agreement, an aggregate of 22,000 shares (the
“Preferred Shares”) of a newly created series of preferred stock, with a stated
value of $1,000 per share, designated Series A Convertible Preferred Stock,
which shall be convertible into shares of the Company’s common stock, par value
$0.001 per share (the “Common Stock”; the shares of Common Stock issuable upon
conversion of the Preferred Shares being referred to as the “Conversion
Shares”), in accordance with the terms of the Company’s Certificate of
Designation of Preferences, Rights and Limitations of Series A Convertible
Preferred Stock, in the form attached hereto as Exhibit A (as the same may be
amended, restated, modified or supplemented and in effect from time to time, the
“Certificate of Designation”);

 

B.       Contemporaneously with the execution and delivery of this Agreement, as
a condition and inducement to the Buyers’ willingness to enter into this
Agreement, the Company and certain stockholders of the Company are executing and
delivering (i) a Voting Agreement, substantially in the form attached hereto as
Exhibit B (each such Voting Agreement, without amendment, supplement or other
modification following the execution and delivery thereof on the date of this
Agreement, a “Voting Agreement” and, collectively, the “Voting Agreements”) and
(ii) that certain Fifth Amended and Restated Investors’ Rights Agreement, dated
as of the date hereof (the “Fifth IRA”), the effectiveness of which will be
contingent upon the occurrence of the Closing (as defined below);

 

C.       Contemporaneously with the Closing, the parties hereto will execute and
deliver a Registration Rights Agreement, substantially in the form attached as
Exhibit C (as the same may be amended, restated, modified or supplemented and in
effect from time to time, the “Registration Rights Agreement”), pursuant to
which the Company will agree to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the “Securities Act”), and applicable state securities laws;

 

D.       Prior to the Closing, the Company will file the Certificate of
Designation with the Secretary of State of the State of Delaware; and

 

E. The Board of Directors of the Company (the “Company Board”) has (i)
determined that it is in the best interests of the Company and its stockholders,
and declared it advisable, to enter into this Agreement, and approved the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, including the issuance of the Preferred
Shares hereunder and the Conversion Shares issuable upon conversion thereof
(such matters referred to in this clause (i) as the “Proposal”); and (ii)
resolved to recommend the approval and adoption of the Proposal by the
stockholders of the Company (the “Company Board Recommendation”).

 

 

NOW THEREFORE, the Company and the Buyers hereby agree as follows:

 

1.                  PURCHASE AND SALE OF PREFERRED SHARES.

 

a.                Purchase of Preferred Shares. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below on the Closing
Date (as defined in Section 1(c)), and subject to Section 1(b) hereof, the
Company shall issue and sell to each Buyer, and each Buyer severally agrees to
purchase from the Company, the number of Preferred Shares set forth opposite
such Buyer’s name in the third column on the Schedule of Buyers (the “Closing”).
The purchase price (the “Purchase Price”) for each Preferred Share at the
Closing shall be equal to $1,000 (representing an aggregate Purchase Price of
Twenty-Two Million Dollars ($22,000,000) for the aggregate 22,000 Preferred
Shares to be purchased at the Closing). The aggregate Purchase Price payable by
each Buyer for the number of Preferred Shares to be purchased by such Buyer
pursuant to this Agreement is set forth opposite to such Buyer’s name on the
Schedule of Buyers under the heading “Purchase Price.”

 

b.               Additional Right to Purchase Preferred Shares. Notwithstanding
anything set forth in Section 1(a) to the contrary, and subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below
on the Closing Date, in the event that the minimum gross proceeds to be received
by the Company from the sale of the Preferred Shares to all Buyers at the
Closing shall be less than Twenty-Two Million Dollars ($22,000,000), whether as
a result of the breach of any Buyer of its obligations hereunder or otherwise,
each of the Buyers that is purchasing at the Closing the number of Preferred
Shares that such Buyer has agreed to purchase from the Company pursuant to
Section 1(a) shall also have the right, but not the obligation, by delivering
written notice to the Company, to purchase from the Company at the Closing, at
the Purchase Price per Preferred Share in accordance with Section 1(a), such
Buyer’s pro rata share (based upon the total number of Preferred Shares which
such Buyers have agreed to purchase from the Company at Closing, subject to the
terms and conditions hereof) of up to such number of additional Preferred Shares
(the “Undersubscribed Preferred Shares”) such that the aggregate gross proceeds
to be received by the Company from the sale of the Preferred Shares to all
Buyers at the Closing shall be Twenty-Two Million Dollars ($22,000,000);
provided, that if any such Buyer that has the right to purchase Undersubscribed
Preferred Shares at the Closing does not elect to purchase its entire pro rata
portion of the Undersubscribed Preferred Shares, each of the remaining Buyers
that fully exercised their option to purchase such Undersubscribed Preferred
Shares shall have an additional option (but not an obligation) to purchase the
remaining Undersubscribed Preferred Shares on the same terms as above until the
aggregate gross proceeds to be received by the Company from the sale of the
Preferred Shares to all Buyers at the Closing equals Twenty-Two Million Dollars
($22,000,000). To the extent that any such Buyer or Buyers exercise its or their
respective rights to purchase Preferred Shares pursuant to this Section 1(b),
then the Schedule of Buyers shall be updated to give effect to any such
exercise. For the avoidance of doubt, nothing in this Section 1(b) shall relieve
any defaulting Buyer from liability for its default.

 

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c.                The Closing Date. The date and time of the Closing (the
“Closing Date”) shall be 10:00 a.m., New York City time, on the first Business
Day following the satisfaction (or waiver) of all of the conditions to the
Closing set forth in Sections 6 and 7 (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the satisfaction or
waiver of those conditions at the Closing), or at such later or earlier date as
is mutually agreed to in writing by the Company and the Buyers. The Closing
shall occur on the Closing Date at the offices of Katten Muchin Rosenman LLP,
525 West Monroe Street, Chicago, Illinois 60661-3693 or at such other place as
the Company and the Buyers may collectively designate in writing. For purposes
of this Agreement, “Business Day” means any day other than Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law to remain closed. All actions to be taken and all documents to
be executed and delivered by all parties at the Closing shall be deemed to have
been taken and executed simultaneously, and no actions shall be deemed to have
been taken nor documents executed or delivered until all have been taken,
executed and delivered.

 

d.               Form of Payment. On the Closing Date, (i) each Buyer shall pay
the applicable Purchase Price to the Company for the Preferred Shares to be
issued and sold to such Buyer on the Closing Date, by wire transfer of
immediately available funds in accordance with the Company’s written wire
instructions, less any amount withheld pursuant to Section 5(g), and (ii) the
Company shall deliver to each Buyer, a stock certificate (or stock certificates
representing such numbers of Preferred Shares as such Buyer shall request) (the
“Preferred Stock Certificates”) representing (in the aggregate) the number of
Preferred Shares that such Buyer is purchasing on the Closing Date, in each case
duly executed on behalf of the Company and registered in the name of such Buyer
or its designee(s) on the books and records of the Company.

 

2.                  BUYER’S REPRESENTATIONS AND WARRANTIES.

 

Each Buyer represents and warrants, severally and not jointly, as of the date of
this Agreement and as of the Closing Date, with respect to only itself, that:

 

a.                Investment Purpose. Such Buyer (i) is acquiring the Preferred
Shares purchased by such Buyer hereunder, (ii) is not party to any agreement for
distribution of any of such Preferred Shares and (iii) upon any conversion of
such Preferred Shares, will acquire the Conversion Shares then issuable (the
Preferred Shares and the Conversion Shares being collectively referred to herein
as the “Securities”) for its own account, not as nominee or agent, and not with
a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered under, or exempted
from, the registration requirements of the Securities Act; provided, however,
that by making the representations herein, such Buyer does not agree to hold any
of the Securities for any minimum or other specific term and reserves the right
to assign, transfer or otherwise dispose of any of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the Securities Act.

 

b.               Accredited Investor Status; Sophistication; Not a Broker or
Dealer. Such Buyer is an “accredited investor” as that term is defined in
Rule 501(a) of Regulation D as promulgated by the United States Securities and
Exchange Commission (the “SEC”) under the Securities Act (“Regulation D”). Such
Buyer acknowledges that it can bear the economic risk and complete loss of its
investment in the Preferred Shares and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment contemplated hereby. Such Buyer is not a broker or
dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934
Act, as amended (the “Exchange Act”), and is not affiliated with any registered
broker-dealer.

 

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c.                Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of the United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions. Such Buyer did not learn
of the investment in the Preferred Shares as a result of any general
solicitation or general advertising. Such Buyer understands that the Preferred
Shares are treated as “restricted securities” under the U.S. federal securities
laws inasmuch as the Preferred Shares are not being acquired from the Company in
a transaction involving a public offering, and that under such laws and
applicable regulations, the Preferred Shares may be resold without registration
under the Securities Act only in certain limited circumstances.

 

d.               Information. Such Buyer and its advisors, if any, have been
furnished with materials relating to the business, finances and operations of
the Company and materials relating to the offer and sale of the Securities that
have been requested by such Buyer. Such Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and have conducted
and completed their own independent due diligence. Such Buyer understands that
nothing in this Agreement or any other materials presented by the Company to
such Buyer in connection with the purchase and sale of the Preferred Shares
constitutes legal, tax or investment advice. Such Buyer has consulted such
legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of the Preferred
Shares. Neither such Buyer’s inquiries, nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer’s (i) right to rely on
the Company’s representations and warranties contained in Section 3 below or
elsewhere herein or in any of the other Transaction Documents, or (ii) rights
and remedies hereunder or under any of the other Transaction Documents
(including indemnification pursuant to Section 9 hereof).

 

e.                No Governmental Review. Such 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.

 

f.                Legends. Such Buyer understands that until such time as the
resale of the Preferred Shares has been registered under the Securities Act or
the Preferred Shares otherwise may be sold pursuant to Rule 144 promulgated
under the Securities Act (or a successor rule thereto) (“Rule 144”) or an
exemption from registration under the Securities Act without any restriction as
to the number of securities as of a particular date that can then be immediately
sold, the Preferred Shares may bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of the
certificates representing such securities) (the “Securities Act Legend”):

 

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, INCLUDING
PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OR PURSUANT TO A PRIVATE SALE
EFFECTED UNDER SECTION 4(a)(7) OF THE SECURITIES ACT OR APPLICABLE FORMAL OR
INFORMAL SEC INTERPRETATION OR GUIDANCE, SUCH AS A SO-CALLED “4[(a)](1) AND A
HALF SALE.” 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.

 

g.               Existence; Authorization; Enforcement; Validity. To the extent
such Buyer is a corporation, partnership, limited liability company or other
entity, (i) such Buyer is a validly existing corporation, partnership, limited
liability company or other entity, (ii) such Buyer has the requisite corporate,
partnership, limited liability or other organizational power and authority to
execute and deliver this Agreement, the Registration Rights Agreement and the
other agreements entered into by such Buyer in connection with the transactions
contemplated hereby and thereby as of the Closing, to perform its obligations
hereunder and thereunder and to purchase the Securities pursuant to this
Agreement and (iii) the execution and delivery by such Buyer of this Agreement,
the Registration Rights Agreement and the other agreements entered into by such
Buyer in connection with the transactions contemplated hereby and thereby as of
the Closing, and the consummation by such Buyer of the transactions contemplated
thereby and thereby, including the purchase of Securities pursuant to this
Agreement, have been duly authorized by all necessary corporate, partnership
limited liability or other action on the part of such Buyer, and no further
consent or authorization is required by such Buyer. To the extent such Buyer is
an individual, such Buyer has the legal capacity to execute and deliver this
Agreement, the Registration Rights Agreement and the other agreements entered
into by such Buyer in connection with the transactions contemplated hereby and
thereby as of the Closing, to perform its obligations hereunder and thereunder
and to purchase the Securities pursuant to this Agreement. This Agreement has
been duly and validly authorized (as applicable), executed and delivered on
behalf of such Buyer and is a valid and binding agreement of such Buyer,
enforceable against such Buyer in accordance with its terms, except as may be
limited by bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors’ rights generally and general principles of equity. The
Registration Rights Agreement and the other agreements entered into by such
Buyer in connection with the transactions contemplated hereby and thereby as of
the Closing will have been duly and validly authorized (as applicable), executed
and delivered on behalf of such Buyer as of the Closing, and will be valid and
binding agreements of such Buyer enforceable against such Buyer in accordance
with their respective terms, except as may be limited by bankruptcy, insolvency,
fraudulent conveyance or similar laws affecting creditors’ rights generally and
general principles of equity.

 

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h.               No Conflicts. The execution and delivery by such Buyer of this
Agreement, the Registration Rights Agreement and the other agreements entered
into by such Buyer in connection with the transactions contemplated hereby and
thereby as of the Closing, the performance by such Buyer of its obligations
hereunder and thereunder and the consummation by such Buyer of the transactions
contemplated hereby and thereby (including the purchase of the Securities) will
not (i) result in a violation of the certificate of incorporation, bylaws or
other organizational documents of such Buyer, if applicable; (ii) conflict with,
or constitute a material breach or material default (or an event which, with the
giving of notice or lapse of time or both, constitutes or would constitute a
material breach or material default) under, or give to others any material right
of termination, amendment, acceleration or cancellation of, or other material
remedy with respect to, any agreement, indenture or instrument to which such
Buyer is a party; or (iii) result in a material violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to such Buyer, in the case of either of the
foregoing clauses (ii) or (iii), except as would not have a material adverse
effect on such Buyer’s ability to purchase the number of Preferred Shares set
forth opposite such Buyer’s name on the Schedule of Buyers at the Closing.
Except for the filing of a Schedule 13G or Schedule 13D (or any amendment
thereto) and any filings required pursuant to Section 16 of the Exchange Act
(including any such filings with respect to, or otherwise relating to, the
Preferred Director (as defined below)), such Buyer is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under, or
otherwise consummate any of the transactions contemplated by, this Agreement,
the Registration Rights Agreement or any of the other agreements entered into by
such Buyer in connection with the transactions contemplated hereby and thereby
as of the Closing in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations that such Buyer is or has been
required to obtain as described in the preceding sentence have been obtained or
effected on or prior to the date of this Agreement or shall be obtained or
effected prior to the applicable due date thereafter, as provided by applicable
law, this Agreement or otherwise.

 

i.                 Absence of Litigation. There is no action, suit or
proceeding, or, to the knowledge of such Buyer, any inquiry or investigation
before or by any court, public board or other Governmental Authority (as defined
in Section 3(i) below) pending or, to such Buyer’s knowledge, threatened against
such Buyer which challenges or seeks to enjoin, alter or materially delay the
consummation of the transactions contemplated by this Agreement, the
Registration Rights Agreement or any of the other agreements entered into by
such Buyer in connection with the transactions contemplated hereby and thereby
as of the Closing.

 

j.                 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement, the Registration Rights Agreement
or any of the other agreements entered into by such Buyer in connection with the
transactions contemplated hereby and thereby as of the Closing based upon
arrangements made by or on behalf of such Buyer or any affiliate of such Buyer.

 

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k.               Availability of Funds. Such Buyer has, or will have at the
Closing, cash available that is sufficient to pay the applicable Purchase Price
and all other amounts payable pursuant to this Agreement or otherwise necessary
to enable such Buyer to consummate the transactions contemplated hereby.

 

l.                 Short Sales. Such Buyer has not, nor has any person acting on
behalf of or pursuant to any understanding with such Buyer, directly or
indirectly executed any purchases or sales of any securities of the Company,
including all “Short Sales” (as such term is defined in Rule 200 of Regulation
SHO under the Exchange Act), during the period commencing (i) in the case of
Deerfield Private Design Fund IV, L.P. and its Affiliates, on May 5, 2017 and
(ii) in case of each other Buyer and its Affiliates, as of the time that such
Buyer was first contacted by the Company or any other person regarding the
transactions contemplated hereby, and ending immediately prior to the execution
and delivery of this Agreement.

 

3.                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and warrants, as of the date of this Agreement and as of
the Closing Date to each of the Buyers that:

 

a.                Organization and Qualification. Set forth in Exhibit 21.1 to
the Company’s most recently filed annual report on Form 10-K is a true and
correct list of the entities in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest, together with their
respective jurisdictions of organization and the percentage of the outstanding
capital stock or other equity interests of each such entity that is held by the
Company or any of the Subsidiaries. Other than with respect to the entities
listed in Exhibit 21.1 to the Company’s most recently filed annual report on
Form 10-K, the Company does not directly or indirectly own any security or
beneficial ownership interest, in any other Person (including through joint
venture or partnership agreements) or have any interest in any other Person.
Each of the Company and the Subsidiaries is a corporation, limited liability
company, partnership or other entity and is duly organized or formed and validly
existing in good standing under the laws of the jurisdiction in which it is
incorporated or otherwise organized and has the requisite corporate,
partnership, limited liability company or other organizational power and
authority to own its properties, and to carry on its business as now being
conducted. The Company is duly qualified 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 the Company makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing would not
be reasonably expected to have a Material Adverse Effect. For purposes of this
Agreement, “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization or a government or any department or agency thereof or any other
legal entity. As used in this Agreement, “Material Adverse Effect” means any
material adverse effect on (i) the business, properties, assets, operations,
results of operations, condition (financial or otherwise) or prospects of the
Company and the Subsidiaries, taken as a whole, or on the transactions
contemplated hereby or by the other Transaction Documents (including the
legality, validity or enforceability thereof), but excluding any effect that
results directly from: (A) changes in general economic or political conditions
or the securities market in general (whether as a result of acts of terrorism,
war (whether or not declared), armed conflicts or otherwise), (B) changes in or
affecting the industries in which the Company or the Subsidiaries operate, in
the case of either of the foregoing clauses (A) or (B), solely to the extent
such changes do not disproportionately affect the Company and the Subsidiaries,
taken as a whole, in any material respect, (C) the public announcement of this
Agreement or the actions or omissions by the Company taken as expressly required
by this Agreement or the other Transaction Documents or with the prior written
consent of the Requisite Buyers (as defined in Section 8(a) hereof) in
contemplation of the transactions contemplated by this Agreement and the other
Transaction Documents, or (D) any public disclosures required to be made and
actually made by the Company with respect to the Company having less than twelve
months of cash to fund operations, or (ii) the authority or ability of the
Company to consummate the transactions contemplated hereby or by the other
Transaction Documents, or to perform its obligations hereunder or under the
other Transaction Documents (including the issuance of the Preferred Shares), in
a timely manner. Except as set forth in Schedule 3(a), the Company holds all
right, title and interest in and to 100% of the capital stock, equity or similar
interests of each of the Subsidiaries, in each case, free and clear of any Liens
(as defined below) (other than Liens arising pursuant to applicable securities
laws), including any restriction on the use, voting, transfer, receipt of income
or other exercise of any attributes of free and clear ownership by a current
holder, and no such Subsidiary owns capital stock or holds an equity or similar
interest in any other Person. For purposes of this Agreement, “Lien” means, with
respect to any asset, any mortgage, lien, pledge, hypothecation, charge,
security interest, encumbrance or adverse claim of any kind or any restrictive
covenant, condition, restriction or exception of any kind that has the practical
effect of creating a mortgage, lien, pledge, hypothecation, charge, security
interest, encumbrance or adverse claim of any kind; and “Subsidiary” means any
entity that the Company controls, directly or indirectly, by owning a majority
of such entity’s voting stock or other equity interests.

 

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b.               Authorization; Enforcement; Validity.

 

(i)                 The Company has the requisite corporate power and authority
to enter into and perform its obligations under each of this Agreement, the
Certificate of Designation, the Registration Rights Agreement, the Voting
Agreements and each of the other agreements to which it is a party or by which
it is bound and which is entered into by the parties hereto in connection with
the transactions contemplated hereby and thereby (collectively, the “Transaction
Documents”), and to issue the Securities in accordance with the terms hereof and
of the other Transaction Documents. The execution and delivery of the
Transaction Documents by the Company, and the consummation by the Company of the
transactions contemplated hereby and thereby, including the issuance of the
Preferred Shares and the reservation for issuance and the issuance of the
Conversion Shares issuable upon conversion thereof, have been duly authorized by
the Company Board and no further consent or authorization is required by the
Company, the Company Board or the Company’s stockholders, except for the
Stockholder Approval (which is required solely to satisfy the applicable
requirements of The NASDAQ Stock Market). Without limiting the foregoing, the
Company Board has (A) determined that it is in the best interests of the Company
and its stockholders, and declared it advisable, to enter into this Agreement
and approved the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including the issuance of
the Preferred Shares hereunder and the Conversion Shares issuable upon
conversion thereof, and (B) resolved to recommend the approval and adoption of
the Proposal by the stockholders of the Company. The only votes of the Company’s
stockholders required to approve and adopt this Agreement and the Certificate of
Designation and the transactions contemplated hereby and thereby are, in the
case of the Proposal, the affirmative vote of the holders of a majority of the
shares present at the meeting in person or by proxy and entitled to vote on the
Proposal (the receipt of sufficient votes required to approve the Proposal is
referred to herein as the “Stockholder Approval”).

 

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(ii)               This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as may be
limited by bankruptcy, insolvency, fraudulent conveyance or similar laws
affecting creditors’ rights generally and general principles of equity. As of
the Closing, the Certificate of Designation, the Registration Rights Agreement,
the Voting Agreements and the other Transaction Documents dated after the date
of this Agreement and on or prior to the Closing Date shall have been duly
executed and delivered by the Company and shall constitute the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except as may be limited by bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting creditors’ rights generally and general
principles of equity. Prior to the Closing Date, the Certificate of Designation
will have been filed with the Secretary of State of the State of Delaware and
will be in full force and effect, enforceable against the Company in accordance
with its terms.

 

c.                Capitalization. The authorized capital stock of the Company
consists of (i) 100,000,000 shares of Common Stock, of which as of the date of
this Agreement 17,574,371 shares are issued and outstanding, 3,850,716 shares
are reserved for issuance pursuant to the Company’s stock option, restricted
stock and stock purchase plans, including 2,783,541 shares issuable pursuant to
outstanding awards under such plans (including any awards granted or to be
granted immediately following the annual meeting of the Company’s stockholders
on June 20, 2017), and no shares are issuable or reserved for issuance pursuant
to other securities issued or to be issued (other than the Preferred Shares and
other than pursuant to the Company’s stock option, restricted stock and stock
purchase plans) exercisable or exchangeable for, or convertible into, shares of
Common Stock, and (ii) 10,000,000 shares of undesignated preferred stock, $0.001
par value, of which 22,000 shares will be designated as of the Closing Date as
Series A Convertible Preferred Stock, and as of the date of this Agreement no
shares of preferred stock are issued and outstanding. All of such outstanding or
issuable shares have been, or upon issuance will be, validly issued and are, or
upon issuance will be, fully paid and nonassessable. Except as set forth above
in this Section 3(c) or as otherwise disclosed in Schedule 3(c), (A) no shares
of the capital stock of the Company are subject to preemptive rights or any
other similar rights or any Liens suffered or permitted by the Company (other
than Liens arising pursuant to applicable securities laws); (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 exchangeable or exercisable for, any shares of capital stock
of the Company or any of the Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of the Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of the Subsidiaries, or options, warrants or scrip for 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 of capital stock of the Company or any of the Subsidiaries; (C) there are
no agreements or arrangements under which the Company or any of the Subsidiaries
is obligated to register the sale of any of their securities under the
Securities Act (except the Registration Rights Agreement and that certain Fourth
Amended and Restated Investors’ Rights Agreement, dated as of May 13, 2014, by
and among the Company and the investors party thereto, or, as of the Closing
Date, the Fifth IRA); (D) there are no outstanding securities or instruments of
the Company or any of the Subsidiaries that contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of the Subsidiaries is or may become
bound to redeem a security of the Company and no other stockholder or similar
agreement to which the Company or any of the Subsidiaries is a party; (E) there
are no securities or instruments containing anti-dilution or similar provisions
that will or may be triggered by the issuance of the Securities; and (F) the
Company does not have any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement. The Company has furnished to each
Buyer or the Company has filed as exhibits to the 2017 SEC Documents (as
hereinafter defined) true and correct copies of the Company’s Sixth Amended and
Restated Certificate of Incorporation, as amended and as in effect on the date
this representation is made (the “Certificate of Incorporation”), and the
Company’s Amended and Restated By-laws, as amended and as in effect on the date
this representation is made (the “Bylaws”), and all documents and instruments
containing the terms of all securities convertible into, or exercisable or
exchangeable for, Common Stock, and the material rights of the holders thereof
in respect thereto.

 

9 

 

d.               Issuance of Securities. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms hereof, (i) will be
validly issued, fully paid and non-assessable and not subject to preemptive
rights, rights of first refusal or similar rights of any Person, and will be
free from all taxes and Liens with respect to the issuance thereof (other than
Liens arising pursuant to applicable securities laws or the Transaction
Documents) and (ii) the holders thereof will be entitled to the rights set forth
in the Certificate of Designation. At the Closing, the Company will have
sufficient shares of Common Stock (subject to adjustment pursuant to the
Company’s covenant set forth in Section 5(e)) duly authorized and reserved for
issuance upon conversion of the Preferred Shares. Upon conversion in accordance
with the Certificate of Designation, the Conversion Shares will be validly
issued, fully paid and nonassessable and not subject to preemptive rights,
rights of first refusal or similar rights of any Person, and will be free from
all taxes and Liens with respect to the issue thereof (other than Liens arising
pursuant to applicable securities laws or the Transaction Documents), with the
holders being entitled to all rights accorded to a holder of Common Stock. The
issuance by the Company of the Securities is exempt from registration under the
Securities Act and applicable state securities laws.

 

e.                No Conflicts.

 

(i)                 The execution and delivery of the Transaction Documents by
the Company and, to the extent applicable, the Subsidiaries, the performance by
such parties of their obligations thereunder and the consummation by such
parties of the transactions contemplated hereby and thereby (including the
issuance of the Preferred Shares and the reservation for issuance and issuance
of the Conversion Shares) will not (A) result in a violation of the Certificate
of Incorporation or the Bylaws; (B) conflict with, or constitute a material
breach or material default (or an event which, with the giving of notice or
lapse of time or both, constitutes or would constitute a material breach or
material default) under, or give to others any material right of termination,
amendment, acceleration or cancellation of, or other material remedy with
respect to, any agreement, indenture or instrument to which the Company or any
of the Subsidiaries is a party; or (C) result in a material violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations) applicable to the Company or any of the
Subsidiaries or by which any property or asset of the Company or any of the
Subsidiaries is bound or affected. Except for the filings and listings
contemplated by the Registration Rights Agreement, the filings with the SEC to
be made pursuant to Section 4 hereof, and the filing of current reports on Form
8-K with the SEC as contemplated by Section 5(h) hereof, the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under, or otherwise consummate any of the transactions contemplated
by, this Agreement or any of the other Transaction Documents in accordance with
the terms hereof or thereof. All consents, authorizations, orders, filings and
registrations that the Company is or has been required to obtain as described in
the preceding sentence have been obtained or effected on or prior to the date of
this Agreement or shall be obtained or effected prior to the applicable due date
thereafter, as provided by applicable law, this Agreement or otherwise.

 

10 

 

(ii)               The Company has not violated any term of the Certificate of
Incorporation or the Bylaws. Neither the Company nor any of the Subsidiaries has
violated any term of, and has not been in default under (or with the giving of
notice or lapse of time or both would have been in violation of or default
under), any contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or any of the Subsidiaries, which violation or default would reasonably
be expected to have a Material Adverse Effect. The business of the Company and
the Subsidiaries has not been conducted in violation of any law, ordinance or
regulation of any governmental entity, which violation would reasonably be
expected to have a Material Adverse Effect.

 

f.                SEC Documents; Financial Statements; Sarbanes-Oxley.

 

(i)                 Since December 31, 2015, the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Exchange Act (all of the
foregoing filed prior to the date this representation is made (including all
exhibits included therein, financial statements and schedules thereto, documents
incorporated by reference therein and any amendments, restatements or
supplements thereto, but excluding any disclosures in such documents referred to
in the “Risk Factors” or “Cautionary Note Forward-Looking Statements” sections
thereof or any other disclosures in such documents which are forward looking or
predictive in nature) being hereinafter referred to as the “SEC Documents,” and
any SEC Documents filed on or after January 1, 2017 and no less than five (5)
days prior to the date of this Agreement being referred to as the “2017 SEC
Documents”). The Company has made available to the Buyers or their respective
representatives, or filed and made publicly available on the SEC’s Electronic
Data Gathering, Analysis, and Retrieval system (or successor thereto) (“EDGAR”)
no less than five (5) days prior to the date this representation is made, true
and complete copies of the SEC Documents. Each of the SEC Documents was filed
with the SEC within the time frames prescribed by the SEC for the filing of such
SEC Documents such that each filing was timely filed with the SEC. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents. 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 light of
the circumstances under which they were made, not misleading. Since the filing
of the SEC Documents, to the Company’s Knowledge, no event has occurred that
would require an amendment or supplement to any of the SEC Documents and as to
which such an amendment has not been filed and made publicly available on the
SEC’s EDGAR system no less than five (5) days prior to the date this
representation is made. The Company has not received any written comments from
the SEC staff that have not been resolved to the satisfaction of the SEC staff.

 

11 

 

(ii)               As of their respective dates, the consolidated financial
statements of the Company and the Subsidiaries included in the SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles (“GAAP”), consistently applied,
during the periods involved (except in the case of unaudited interim statements,
to the extent they may exclude footnotes) and fairly present in all material
respects the consolidated financial position of the Company and the Subsidiaries
as of the dates thereof and the consolidated results of their operations, cash
flows and changes in stockholders equity for the periods then ended (subject, in
the case of unaudited quarterly financial statements for periods subsequent to
December 31, 2015, to normal year-end audit adjustments and lack of footnote
disclosures). None of the Company, the Subsidiaries and their respective
officers, directors and Affiliates or, to the Company’s Knowledge, any
stockholder of the Company has provided any other information to the Buyers,
including information referred to in Section 2(d), that contains any untrue
statement of a material fact or, with respect to written information, omits to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they are or were made, not
misleading. The Company is not required to file and will not be required to file
any agreement, note, lease, mortgage, deed or other instrument entered into
prior to the date this representation is made and to which the Company or any of
the Subsidiaries is a party or by which the Company or any of the Subsidiaries
is bound that has not been previously filed as an exhibit (including by way of
incorporation by reference) to the Company’s reports filed or made with the SEC
under the Exchange Act. The accounting firm that expressed its opinion with
respect to the consolidated financial statements included in the Company’s most
recently filed annual report on Form 10-K, and reviewed the consolidated
financial statements included in the Company’s most recently filed quarterly
report on Form 10-Q, was independent of the Company pursuant to the standards
set forth in Rule 2-01 of Regulation S-X promulgated by the SEC and as required
by the applicable rules and guidance from the Public Company Accounting
Oversight Board, and such firm was otherwise qualified to render such opinion
under applicable law and the rules and regulations of the SEC. There is no
transaction, arrangement or other relationship between the Company and an
unconsolidated or other off-balance-sheet entity that is required to be
disclosed by the Company in its reports pursuant to the Exchange Act that has
not been so disclosed in the SEC Documents. “Affiliate” for purposes hereof
means, with respect to any Person, another Person that, (x) is a director,
officer, manager, managing member, general partner or five percent or greater
owner of equity interests in such Person, or (y) directly or indirectly, (1) has
a common ownership with that Person, (2) controls that Person, (3) is controlled
by that Person or (4) shares common control with that Person. “Control” or
“controls” for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another Person.

 

12 

 

(iii)             The Company is in all material respects in compliance with
applicable provisions of the Sarbanes-Oxley Act of 2002, as amended, and the
rules and regulations thereunder (collectively, “Sarbanes-Oxley”).

 

(iv)             Since December 31, 2016, except as set forth on Schedule 3(f),
neither the Company nor any of the Subsidiaries nor, to the Company’s Knowledge,
any director, officer or employee, of the Company or any of the Subsidiaries,
has received or otherwise obtained any material complaint, allegation, assertion
or claim, whether written or oral, regarding the accounting or auditing
practices, procedures, methodologies or methods of the Company or any of the
Subsidiaries or its internal accounting controls, including any complaint,
allegation, assertion or claim that the Company or any of the Subsidiaries has
engaged in questionable accounting or auditing practices. No attorney
representing the Company or any of the Subsidiaries, whether or not employed by
the Company or any of the Subsidiaries, has reported evidence of a material
violation of securities laws, breach of fiduciary duty or similar violation by
the Company or any of the Subsidiaries or any of their respective officers,
directors, employees or agents to the Company Board or any committee thereof or
to any director or officer of the Company pursuant to Section 307 of
Sarbanes-Oxley, and the SEC’s rules and regulations promulgated thereunder.
Since December 31, 2016, there have been no internal or SEC investigations
regarding accounting or revenue recognition discussed with, reviewed by or
initiated at the direction of the chief executive officer, principal financial
officer, the Company Board or any committee thereof. The Company is not, and
never has been, a “shell company” (as defined in Rule 12b-2 under the Exchange
Act). The Company is eligible to register the Conversion Shares for resale by
the holders thereof on a registration statement on Form S-3 under the Securities
Act.

 

(v)               As used in this Agreement, the “Company’s Knowledge” and
similar language means, unless otherwise specified, the actual knowledge of any
“officer” (as such term is defined in Rule 16a-1 under the Exchange Act) of the
Company and the knowledge any such Person would be expected to have after
reasonable due diligence inquiry.

 

g.               Internal Accounting Controls; Disclosure Controls and
Procedures. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance 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 liability is permitted
only in accordance with management’s general or specific authorization and
(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 differences. The Company has timely filed and made
publicly available on the SEC’s EDGAR system no less than five (5) days prior to
the date this representation is made, and all certifications and statements
required by (A) Rule 13a-14 or Rule 15d-14 under the Exchange Act and (B)
Section 906 of Sarbanes Oxley with respect to any SEC Documents. The Company
maintains disclosure controls and procedures required by Rule 13a-15 or
Rule 15d-15 under the Exchange Act; such controls and procedures are effective
to ensure that the information required to be disclosed by the Company in the
reports that it files with or submits to the SEC (X) is recorded, processed,
summarized and reported accurately within the time periods specified in the
SEC’s rules and forms and (Y) is accumulated and communicated to the Company’s
management, including its principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required disclosure.
The Company maintains internal control over financial reporting required by
Rule 13a-15 or Rule 15d-15 under the Exchange Act; such internal control over
financial reporting is effective to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP, and the Company is not aware of
any material weaknesses.

 

13 

 

h.               Absence of Certain Changes. Except as disclosed in any 2017 SEC
Documents, since December 31, 2016, there has been no Material Adverse Effect
and no circumstances exist that could reasonably be expected to be, cause or
have a Material Adverse Effect. The Company has not taken any steps, and the
Company currently does not expect to take any steps, to seek protection pursuant
to any bankruptcy law nor, to the Company’s Knowledge, do any creditors of the
Company intend to initiate involuntary bankruptcy proceedings nor, to the
Company’s Knowledge, is there any fact that would reasonably lead a creditor to
do so. The Company is as of the date this representation is made, and after
giving effect to the transactions contemplated hereby will be, Solvent. For
purposes of this Section 3(h), “Solvent” means, with respect to any Person as of
any date of determination, that, as of such date, (i) the value of the assets of
such Person (both at fair value and present fair saleable value) is greater than
the total amount of liabilities (including contingent and unliquidated
liabilities) of such Person, (ii) such Person is able to pay all liabilities of
such Person as such liabilities mature and (iii) such Person does not have
unreasonably small capital in relation to such Person’s business as contemplated
as of the date of this Agreement. In computing the amount of contingent or
unliquidated liabilities at any time, such liabilities shall be computed at the
amount that, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability. Except as disclosed in Schedule 3(h), since December 31,
2016, the Company has not sold any assets outside of the ordinary course of
business or declared, paid or made any dividends or other distributions to its
stockholders.

 

i.                 Absence of Litigation. Except as set forth on Schedule 3(i)
or in the 2017 SEC Documents, (i) there is no, nor since December 31, 2015 has
there been any, action, suit or proceeding, or, to the Company’s Knowledge, any
inquiry or investigation before or by any court, public board or other
Governmental Authority pending or, to the Company’s Knowledge, threatened
against or affecting the Company, the Common Stock or any of the Subsidiaries,
any Employee Benefit Plan (as defined below), or any of the Company’s or the
Subsidiaries’ officers or directors in their capacities as such, and (ii) to the
Company’s Knowledge, none of the directors or officers of the Company has been
involved (as a plaintiff, defendant, witness or otherwise) in securities-related
litigation during the past five years that is required to be disclosed in the
SEC Documents by the Company pursuant to the requirements of the Exchange Act
and the rules and regulations of the SEC promulgated thereunder applicable to
the Company. None of the foregoing matters described in Schedule 3(i) or in the
2017 SEC Documents has had or, if determined adversely to the Company or any
Subsidiary, would reasonably expect to have, a Material Adverse Effect. For
purposes of this Agreement, “Governmental Authority” means any nation,
sovereign, government, quasi-governmental agency, governmental department,
ministry, cabinet, commission, board, bureau, agency, court, tribunal,
regulatory authority, instrumentality, judicial, legislative, fiscal or
administrative or public body or entity, whether domestic or foreign, federal,
state, local or other political subdivision thereof, having jurisdiction over
the matter or matters and Person or Persons in question or having the authority
to exercise executive, legislative, taxing, judicial, regulatory or
administrative functions of or pertaining to government, including any central
bank, securities exchange, regulatory body, arbitrator, public sector entity,
supra-national entity and any self-regulatory organization.

 

14 

 

j.                 Acknowledgment Regarding Buyer’s Purchase of Securities. The
Company acknowledges and agrees that each of the Buyers is acting solely in the
capacity of an arm’s length purchaser with respect to the Company in connection
with the Transaction Documents and the transactions contemplated hereby and
thereby. The Company further acknowledges that each Buyer is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby, and any advice given by any of the Buyers or any of their
respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to such Buyer’s purchase of the Securities. The Company further
represents to each 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.

 

k.               General Solicitation. Neither the Company, nor any of its
affiliates, nor any Person acting on its or their behalf, has engaged or will
engage in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offer or sale of the Securities.

 

l.                 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made, or will make, any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering and issuance of the Securities to be integrated with prior offerings by
the Company (i) for purposes of the Securities Act and which would require the
registration of any such securities under the Securities Act, or (ii) for
purposes of any applicable stockholder approval provisions of any stock exchange
on which the Common Stock may be listed.

 

m.             Acknowledgment Regarding Buyers’ Trading Activity; Dilutive
Effect. Except as otherwise expressly provided in this Agreement or any of the
other Transaction Documents, the Company understands and acknowledges that none
of the Buyers or holders of the Securities has been asked to agree, nor has any
Buyer agreed, to desist from purchasing or selling, long and/or short,
securities of the Company, or “derivative” securities based on securities issued
by the Company or to hold the Securities for any specified term; and no Buyer or
holder of Securities shall be deemed to have any affiliation with or control
over any arm’s length counterparty in any “derivative” transaction. The Company
further understands and acknowledges that (i) one or more Buyers or holders of
Securities may engage in hedging and/or trading activities at various times
during the period that the Securities are outstanding, and (ii) such hedging
and/or trading activities, if any, can reduce the value of the securities of the
Company held by the existing holders of securities of the Company, both at and
after the time the hedging and/or trading activities are being conducted. The
Company acknowledges that any such hedging and/or trading activities conducted
in accordance with applicable securities laws do not constitute a breach of this
Agreement or any of the other Transaction Documents or affect the rights of any
Buyer or holder of Securities under this Agreement or any other Transaction
Document; provided, that, subject to the Company’s compliance with Section 5(h)
hereof, each Buyer hereby covenants that neither it nor any affiliates acting on
its behalf or pursuant to any understanding with it will execute any Short Sales
during the period from the date hereof until the earlier of such time as
(A) after the transactions contemplated by this Agreement are first publicly
announced or (B) this Agreement is terminated in full. The Company acknowledges
that the issuance of any Conversion Shares upon conversion of the Preferred
Shares may result in dilution of the outstanding shares of Common Stock, which
dilution may be substantial under certain market conditions. The Company further
acknowledges that its obligations under the this Agreement and the other
Transaction Documents, including its obligation to issue the Conversion Shares
upon conversion of the Preferred Shares, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction, regardless of
the effect of any such dilution or any claim the Company may have against any of
the Buyers and regardless of the dilutive effect that such issuance may have on
the ownership of the other stockholders of the Company.

 

15 

 

n.               Employee Relations. Neither the Company nor any of the
Subsidiaries is involved in any labor union dispute nor, to the Company’s
Knowledge, is any such dispute threatened. None of the employees of the Company
and the Subsidiaries is a member of a union that relates to such employee’s
relationship with the Company or any of the Subsidiaries, neither the Company
nor any of the Subsidiaries is a party to a collective bargaining agreement,
and, to the Company’s Knowledge, there are no material impairments to the
relations of the Company and the Subsidiaries with their respective employees.
No “executive officer” (as defined in Rule 3b-7 under the Exchange Act) of the
Company, nor any other Person whose termination would be required to be
disclosed pursuant to Item 5.02 of Form 8-K, has notified the Company that such
Person intends to leave the Company or otherwise terminate such Person’s
employment with the Company. No such executive officer, to the Company’s
Knowledge, 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 does not subject the Company to any liability with respect to any of the
foregoing matters. The Company and the Subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations relating to employment
and employment practices, terms and conditions of employment and wages and
hours, except where the failure to be in compliance would not and would not be
reasonably expected to result, individually or in the aggregate, in a Material
Adverse Effect.

 

16 

 

o.               Employee Benefits. (i) No “prohibited transaction” as defined
under Section 406 of ERISA (as defined below) or Section 4975 of the Internal
Revenue Code of 1986, as amended (the “Code”), that is not exempt under ERISA
Section 408 or Section 4975 of the Code, under any applicable regulations and
published interpretations thereunder or under any applicable prohibited
transaction, individual or class exemption issued by the Department of Labor,
has occurred with respect to any Employee Benefit Plan (as defined below), (ii)
neither the Company nor any ERISA Affiliate maintains, sponsors, participates
in, contributes to or has or could reasonably be expected to have any liability
for, and at no time within the last seven (7) years has the Company or any ERISA
Affiliate maintained, sponsored, participated in, contributed to or had any
liability or obligation in respect of any Employee Benefit Plan subject to
Section 302 of ERISA, Title IV of ERISA, or Section 412 of the Code, any
“multiemployer plan” as defined in Section 3(37) of ERISA, any multiple employer
plan” (within the meaning of Section 413(c) of the Code), or any “multiple
employer welfare arrangement” (within the meaning of Section 3(40) of ERISA),
(iii) no Employee Benefit Plan represents any current or future liability for
retiree health, life insurance, or other retiree welfare benefits, except as
coverage may be required by the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended, or similar state law with the full cost of such coverage
being borne by the employees or beneficiaries covered thereby, (iv) each
Employee Benefit Plan is and has been operated in all material respects in
compliance with its terms and all applicable laws, including but not limited to
ERISA and the Code, (v) no event has occurred (including a “reportable event” as
such term is defined in Section 4043 of ERISA) and no condition exists that
would subject the Company or any ERISA Affiliate to any tax, fine, lien, penalty
or liability imposed by ERISA, the Code or other applicable law, except for any
such tax, fine, lien, penalty or liability that would not, individually or in
the aggregate, have a Material Adverse Effect, (vi) the Company does not
maintain and could not reasonably be expected to have any liability for any
Foreign Benefit Plan, (vii) the Company does not have any obligations under any
collective bargaining agreement, (viii) neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will, either alone or in combination with another event, (A) entitle the
Company’s or any of its Subsidiaries’ current or former employees, officers,
directors, independent contractors or consultants to severance pay or any other
payment or form of compensation or benefit upon termination of services or any
increase in severance pay or other payments or form of compensation or benefit
upon termination of service, (B) accelerate the time of payment or vesting or
increase the amount of compensation due to any such current or former employee,
officer, director, independent contractor or consultant, (C) directly or
indirectly cause the Company or any of its Subsidiaries to transfer or set aside
any assets to fund any benefits under any Employee Benefit Plan, (D) otherwise
give rise to any liability under any Employee Benefit Plan, or (E) limit or
restrict the right to merge, materially amend, terminate or transfer the assets
of any Employee Benefit Plan, (ix) no Employee Benefit Plan or any other
agreement, program, policy or other arrangement by or to which the Company or
any of its Subsidiaries or any ERISA Affiliate is bound or is otherwise liable,
by its terms or in effect, could reasonably be expected to require any payment
or transfer of money, property or other consideration on account of or in
connection with the transactions contemplated by this Agreement or any
subsequent termination of employment which payment could constitute an “excess
parachute payment” within the meaning of Section 280G of the Code, (x) all
contributions and premium payments (including all employer contributions and
employee salary reduction contributions) that are due have been made within the
time periods prescribed by ERISA and the Code to each Employee Benefit Plan, and
all contributions and premium payments for any period that are not yet due have
been made to each Employee Benefit Plan or accrued in accordance with past
custom and practice and U.S. GAAP, (xi) all individuals working for the Company
or any ERISA Affiliate are properly classified as employees or independent
contractors and (xii) there are no actions, suits, investigations or claims
pending or, to the Company’s Knowledge, threatened with respect to any Employee
Benefit Plan, or the assets thereof (other than routine claims for benefits),
and, to the Company’s Knowledge, there are no facts which could reasonably give
rise to any material liability, action, suit, investigation, or claim against
any Employee Benefit Plan, any fiduciary or plan administrator or other person
dealing with any Employee Benefit Plan or the assets thereof, including the
Company and its Subsidiaries.  As used in this Agreement, “Employee Benefit
Plan” means any “employee benefit plan” within the meaning of Section 3(3) of
ERISA, and all stock purchase, stock option, stock-based severance, employment,
change-in-control, medical, disability, fringe benefit, bonus, incentive,
deferred compensation, employee loan and all other benefit or compensation
plans, agreements, programs, policies or other arrangements, whether or not
subject to ERISA, under which (1) any current or former employee, director or
independent contractor of the Company or any of the Subsidiaries has any present
or future right to benefits and which are contributed to, sponsored by or
maintained by the Company or any of the Subsidiaries or (2) the Company or any
of the Subsidiaries has had, has, or could reasonably be expected to have any
present or future obligation; “ERISA” means the Employee Retirement Income
Security Act of 1974, as amended; “ERISA Affiliate” means any member of the
Company’s controlled group as defined in Code Section 414 (b), (c), (m) or (o)
or any person treated as a single employer with Company or its Subsidiaries
under ERISA; and “Foreign Benefit Plan” means any Employee Benefit Plan mandated
by a government other than the United States of America or that is subject to
the laws or a jurisdiction outside of the United States.

 

17 

 

p.               Intellectual Property Rights. To the Company’s Knowledge, each
of the Company and its Subsidiaries owns, or has the right to use pursuant to a
valid and enforceable written license, free and clear of any Liens, all
Intellectual Property (as defined below) that is necessary for the conduct of
its business as currently conducted (the “IP”). All owned IP that is registered
with or issued by a Governmental Authority is currently in the name of the
Company or one of its Subsidiaries and, to the Company’s Knowledge, such
registrations are valid and enforceable. Other than ex parte examinations in the
ordinary course of patent prosecution, there is no pending or, to the Company’s
Knowledge, threatened action, suit, other proceeding or claim by any Person
challenging or contesting the validity, ownership, or enforceability of any IP,
the use thereof by the Company or its Subsidiaries, or other rights of the
Company or its Subsidiaries in or to any IP, and none of the Company or any of
its Subsidiaries has received any written notice regarding any such action,
suit, other proceeding or claim. To the Company’s Knowledge, the conduct of the
business of the Company has not, and none of the Company or any of the
Subsidiaries has, infringed, misappropriated or otherwise violated, or is
infringing, misappropriating or otherwise violating, any Intellectual Property
of any Person. There is no pending or, to the Company’s Knowledge, threatened
action, suit, other proceeding or claim by any Person alleging that the Company
or any of the Subsidiaries is infringing, misappropriating or violating, or
otherwise using without authorization, any Intellectual Property of any Person,
and none of the Company or any of the Subsidiaries has received any written
notice regarding, any such action, suit, other proceeding or claim. None of the
Company or any of the Subsidiaries is a party to or bound by any options,
licenses or other agreements, written or oral, granting any right, title or
interest in or to any IP or otherwise relating to any IP, other than licenses
for computer software acquired in the ordinary course of business and other than
as set forth in the 2017 SEC Documents. The term “Intellectual Property” as used
herein means all (i) trademarks, service marks, trade dress, slogans, logos,
trade names, corporate names, Internet domain names, and any other indicia of
source, together with all goodwill associated with each of the foregoing, (ii)
copyrights (whether or not registered or published) and works of authorship,
(iii) registrations and applications for registration for any of the foregoing,
(iv) patents (including all reissuances, divisionals, provisionals,
continuations and continuations-in-part, re-examinations, renewals,
substitutions and extensions thereof), patent applications, patent disclosures
and inventions (whether or not patentable or reduced to practice), (v) computer
software (including but not limited to source code and object code), data,
databases, and documentation thereof, (vi) trade secrets and other confidential
information, know-how, protocols, processes, methodologies, techniques,
strategies, and processes, (vii) other intellectual property and all rights
associated with any of the foregoing, including without limitation the right to
prosecute and recover monetary damages for any past, present and future
infringements and other violations thereof, and (viii) copies and tangible
embodiments of the foregoing (in whatever form and medium).

 

18 

 

q.               Environmental Laws. Each of the Company and the Subsidiaries
(i) has complied with all Environmental Laws, (ii) has received all permits,
licenses or other approvals required of it under applicable Environmental Laws
to conduct its business, (iii) has complied with all terms and conditions of any
such permit, license or approval, except where such non-compliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals, or noncompliance with any permit, license or approval would not be
reasonably expected to result, individually or in the aggregate, in a Material
Adverse Effect. To the Company’s Knowledge, there are no events, conditions, or
circumstances reasonably likely to result in liability of the Company or any of
the Subsidiaries pursuant to Environmental Laws that would or would reasonably
be expected to result in a Material Adverse Effect. None of the Company or the
Subsidiaries has received any notice of any noncompliance with any Environmental
Laws or the terms and conditions of any permit, license or approval required
under applicable Environmental Laws to conduct the Company’s and the
Subsidiaries’ respective businesses. The term “Environmental Laws” means all
U.S. federal, state and local or foreign laws relating to any matter arising out
of or relating to public health and safety, or pollution or protection of the
environment (including ambient air, surface water, groundwater, land surface or
subsurface strata) or workplace, including any of the foregoing relating to the
presence, use, production, generation, handling, transport, treatment, storage,
disposal, distribution, discharge, emission, release, threatened release,
control or cleanup of any Hazardous Materials, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §9601
et seq., as amended, the Resource Conservation and Recovery Act of 1976, as
amended, 42 U.S.C. §6901, et seq., the Clean Air Act, 42 U.S.C. §7401, et seq.,
as amended, the Federal Water Pollution Control Act, 33 U.S.C. §1251, et seq.,
as amended, the Oil Pollution Act of 1990, 33 U.S.C. §2701, et seq., and the
Toxic Substances Control Act, 15 U.S.C. §2601, et seq.; “Hazardous Materials”
means any hazardous, toxic or dangerous substance, materials and wastes,
including hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including materials which include hazardous constituents), sewage,
sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including any that are
or become classified as hazardous or toxic under any Environmental Law).

 

19 

 

r.                 Personal Property. Except as described on Schedule 3(r) or in
the 2017 SEC Documents, the Company and the Subsidiaries have good and valid
title to all personal property owned by them that is material to the business of
the Company and the Subsidiaries as presently conducted, in each case free and
clear of all Liens, other than Liens that do not materially interfere with the
present value of such property.

 

s.                Real Property. None of the Company or any of the Subsidiaries
owns any real property. All of the Real Property Leases (as defined below) are
valid and in full force and effect and, to the Company’s Knowledge, are
enforceable against all parties thereto, except as may be limited by bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors’ rights
generally and general principles of equity. Neither the Company nor any of the
Subsidiaries nor, to the Company’s Knowledge, any other party thereto is in
default in any material respect under any of the Real Property Leases, and, to
the Company’s Knowledge, no event has occurred which with the giving of notice
or the passage of time or both could constitute a material default under, or
otherwise give any party the right to terminate, any of such Real Property
Leases, or could adversely affect the Company’s or any of the Subsidiaries’
interest in and title to the Real Property subject to any of such Real Property
Leases. No Real Property Lease is subject to termination, modification or
acceleration as a result of the transactions contemplated hereby or by the other
Transaction Documents. For purposes hereof, “Real Property Lease” means each
lease and other agreement with respect to which the Company or the Subsidiaries
is a party or otherwise bound or affected with respect to the Real Property,
except easements, rights of way, access agreements, surface damage agreements,
surface use agreements or similar agreements that pertain to Real Property that
is contained wholly within the boundaries of any leased Real Property; and “Real
Property” means all the real property, facilities and fixtures that are leased
or, in the case of fixtures, otherwise owned or possessed by the Company or the
Subsidiaries.

 

t.                 Insurance. The Company and each of the 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 the
Subsidiaries are engaged. Neither the Company nor any of the Subsidiaries have
been refused any insurance coverage sought or applied for, and, to the Company’s
Knowledge, the Company and the Subsidiaries will be able to renew their 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 be reasonably expected to have a Material Adverse Effect.

 

u.               Regulatory Permits and Other Regulatory Matters.

 

(i)                 Permits. The Company and the Subsidiaries possess all
certificates, authorizations, approvals, licenses and permits issued by the
appropriate U.S. federal or state or foreign regulatory authorities necessary to
conduct their business as presently conducted (“Permits”), including all Permits
required by the United States Food and Drug Administration, including any
successor thereto (the “FDA”), or any other Regulatory Agency, and none of the
Company or any of the Subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such Permit. To the Company’s
Knowledge, there are no facts or circumstances that could reasonably lead to the
Company or any Subsidiary not being able to obtain necessary Permits as and when
necessary to enable the Company and the Subsidiaries to conduct their respective
businesses. For purposes of this Agreement, “Regulatory Agency” means any U.S.
federal, state or local regulatory agency, department, bureau or other
governmental authority in the United States, the European Union or any other
jurisdiction, as applicable, including the FDA and the European Medicines
Agency, in each case that is responsible for registrations necessary for, or
otherwise governs, the manufacture, handling, use, storage, import, transport,
distribution or sale of any pharmaceutical product. The term “Regulatory Agency”
shall further include any institutional review board, ethics committee, data
monitoring committee or other committee or Person with defined authority to
oversee the manufacture, handling, use, storage, import, transport, distribution
or sale of any pharmaceutical product.

 

20 

 

(ii)               Studies and Other Preclinical and Clinical Tests. The
studies, tests and preclinical and clinical trials conducted by or on behalf of
the Company or any of the Subsidiaries were, and if still pending are, being
conducted in all material respects in accordance with experimental protocols,
procedures and controls pursuant to accepted professional and scientific
standards; the descriptions of the results of such studies, tests and trials
contained in the SEC Documents are accurate and complete in all material
respects; and neither the Company nor any of the Subsidiaries has received any
notices or correspondence from the FDA, any other Regulatory Agency or any
foreign, state or local governmental body exercising comparable authority or any
institutional review board or comparable authority requiring the termination,
suspension or material modification of any studies, tests or preclinical or
clinical trials conducted by or on behalf of the Company or any of the
Subsidiaries.

 

(iii)             Debarment or Conviction. None of the Company or the
Subsidiaries or, to the Company’s Knowledge, any of their respective Affiliates,
subcontractors or employees (A) has been debarred, (B) is subject to debarment
or (C) is the subject of a conviction, in each case pursuant to Section 335a of
the United States Federal Food, Drug and Cosmetic Act, as amended.

 

(iv)             Other Regulatory Matters. 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 the Subsidiaries, and none of the
Company or any of the Subsidiaries has received any notice, warning letter or
other communication from any Regulatory Agency, which (A) imposes a clinical
hold on any clinical investigation by the Company or any of the Subsidiaries,
(B) enters or proposes to enter into a consent decree of permanent injunction
with the Company or any of the Subsidiaries, or (C) otherwise alleges any
violation of any laws, rules or regulations by the Company or any of the
Subsidiaries. The respective properties, business and operations of the Company
and the Subsidiaries have been and are being conducted in all material respects
in accordance with all applicable laws, rules and regulations of applicable
Regulatory Agencies, including the FDA. The Company has not been informed by any
Regulatory Agency that it will prohibit the marketing, sale, license or use in
the United States or any other jurisdiction of any product proposed to be
developed, produced or marketed by the Company nor has any Regulatory Agency
expressed any concern as to approving or clearing for marketing any product
being developed or proposed to be developed by the Company or any Subsidiary.

 

21 

 

v.               Listing. The Company is not in material violation of any of the
rules, regulations or requirements of the Principal Market, and, to the
Company’s Knowledge, there are no facts or circumstances that could reasonably
lead to suspension or termination of trading of the Common Stock on the
Principal Market. Since October 22, 2014, (i) the Common Stock has been listed
or designated for quotation, as applicable, on the Principal Market,
(ii) trading in the Common Stock has not been suspended or deregistered 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 termination of trading of the Common Stock on the Principal
Market. For purposes of this Agreement, “Principal Market” means the NASDAQ
Global Market; however, if the Common Stock becomes listed on another National
Exchange after the date of this Agreement, then from and after such date, the
“Principal Market” shall mean such National Exchange; and “National Exchange”
means any of the NYSE MKT, The New York Stock Exchange, the NASDAQ Global
Market, the NASDAQ Global Select Market or the NASDAQ Capital Market (or a
successor to any of the foregoing). The Common Stock is eligible for clearing
through The Depository Trust Company (the “DTC”), through its Deposit/Withdrawal
At Custodian (DWAC) system, and the Company is eligible and participating in the
Direct Registration System (DRS) of DTC with respect to the Common Stock. The
transfer agent for the Common Stock is a participant in DTC’s Fast Automated
Securities Transfer Program. The Common Stock is not, and has not been at any
time prior to the Closing Date, subject to any DTC “chill,” “freeze” or similar
restriction with respect to any DTC services, including the clearing of shares
of Common Stock through DTC.

 

w.             Tax Matters. Each of the Company and the Subsidiaries (i) has
timely filed all foreign, federal and state income, franchise and all other
material Tax Returns required by any jurisdiction to which it is subject,
(ii) has timely paid all Taxes shown as being due and payable on its Tax
Returns, and all other Taxes (if any) that are material in amount and required
to be paid, except those for which the Company has made reserves in the
consolidated financial statements of the Company and the Subsidiaries that are
adequate in accordance with GAAP, and (iii) has established in the consolidated
financial statements of the Company and the Subsidiaries reserves that are
adequate in accordance with GAAP for the payment of all material Tax liabilities
and deferred Taxes as of the date this representation is made. There are no
unpaid Taxes in any material amount claimed in writing to be due by the taxing
authority of any jurisdiction. Each of the Company and the Subsidiaries has
timely withheld and paid all material Taxes (including sales Taxes) required to
have been withheld and paid in connection with any amounts paid or owing to any
employee, independent contractor, creditor, stockholder or third party. Neither
the Company nor any of the Subsidiaries is or has been a U.S. real property
holding corporation (as defined in Treasury Regulation Section 1.897-2(b) under
the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of
the Code. No deficiency for any income, franchise or other material amount of
Tax relating to the Company or any of the Subsidiaries has been asserted or
assessed by any taxing authority in writing. None of the Company or any of the
Subsidiaries has entered into a “listed transaction” that has given rise to a
disclosure obligation under Section 6011 of the Code and the Treasury
Regulations promulgated thereunder. For purposes hereof, “Taxes” means all
taxes, charges, fees, levies or other like assessments, including United States
federal, state, local, foreign and other net income, gross income, gross
receipts, social security, estimated, sales, use, ad valorem, franchise,
profits, net worth, alternative or add-on minimum, capital gains, license,
withholding, payroll, employment, unemployment, social security, excise,
property, transfer taxes and any and all other taxes, assessments, fees or other
governmental charges, whether computed on a separate, consolidated, unitary,
combined or any other basis together with any interest and any penalties,
additions to tax, estimated taxes or additional amounts with respect thereto,
and including any liability for taxes as a result of being a member of a
consolidated, combined, unitary or affiliated group or any other obligation to
indemnify or otherwise succeed to the tax liability of any other Person; and
“Tax Returns” means all returns, declarations, reports, statements, schedules,
notices, forms or other documents or information required to be filed in respect
of the determination, assessment, collection or payment of any Tax or in
connection with the administration, implementation or enforcement of any legal
requirement relating to any Tax.

 

22 

 

x.               Application of Takeover Protections. The Company and the
Company Board have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the Certificate of Incorporation or the
laws of the State of Delaware that is or could become applicable to the Buyers
as a result of the transactions contemplated by this Agreement, including the
Company’s issuance of the Securities and the Buyers’ ownership of the
Securities.

 

y.               Rights Agreement. As of the date of this Agreement, the Company
has not adopted a stockholders rights plan (or “poison pill”) or similar
arrangement relating to accumulations of beneficial ownership of Common Stock or
a change in control of the Company (any such plan or arrangement, a “Rights
Plan”), and after the date of this Agreement, the Company will not have adopted
any Rights Plan that in any way interferes with, or otherwise adversely affects,
any Buyer’s (or other holder’s) exercise in full of its rights under the
Certificate of Designation or ownership of all of the Conversion Shares issuable
upon conversion of the Preferred Shares.

 

z.                Foreign Corrupt Practices and Certain Other Federal
Regulations.

 

(i)                 Neither the Company nor any of the Subsidiaries, nor to the
Company’s Knowledge, any director, officer, agent, employee or other Person
acting on behalf of the Company or any of the Subsidiaries has, in the course of
its actions for, or on behalf of, the Company or any of the Subsidiaries, used
any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.

 

(ii)               The Company and each Subsidiary is in compliance in all
material respects with all U.S. economic sanctions laws, all executive orders
and implementing regulations (“Sanctions”) as administered by the U.S. Treasury
Department’s Office of Foreign Assets Control and the U.S. State Department.
None of the Company or any of the Subsidiaries (A) is a Person on the list of
the Specially Designated Nationals and Blocked Persons (the “SDN List”), (B) is
a person who is otherwise the target of U.S. economic sanctions laws such that a
U.S. person cannot deal or otherwise engage in business transactions with such
person, (C) is a Person organized or resident in a country or territory subject
to comprehensive Sanctions (a “Sanctioned Country”), or (D) is owned or
controlled by (including by virtue of such Person being a director or owning
voting shares or interests), or acts, directly or indirectly, for or on behalf
of, any Person on the SDN List or a government of a Sanctioned Country such that
the entry into, or performance under, this Agreement or any other Transaction
Documents would be prohibited by applicable U.S. law.

 

23 

 

(iii)             The Company and each Subsidiary is in compliance in all
material respects with all laws related to terrorism or money laundering
including: (A) all applicable requirements of the Currency and Foreign
Transactions Reporting Act of 1970 (31 U.S.C. 5311 et. seq. (the Bank Secrecy
Act)), as amended by Title III of the Patriot Act, (B) the Trading with the
Enemy Act, (C) that certain Executive Order No. 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)) or any
other enabling legislation, executive order or regulations issued pursuant or
relating thereto, and (D) other applicable federal or state laws relating to
“know your customer” or anti-money laundering rules and regulations. No action,
suit or other proceeding by or before any court or Governmental Authority with
respect to compliance with such anti-money laundering laws is pending or, to the
Company’s Knowledge, threatened.

 

aa.            No Other Agreements. The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.

 

bb.           Investment Company. None of the Company, any Person controlling
the Company or any of the Company’s Subsidiaries is, or upon the Closing will
be, an “investment company,” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as amended,
or otherwise registered or required to be registered, or subject to the
restrictions imposed, by the Investment Company Act of 1940, as amended.

 

cc.            No Disqualification Events. None of the Company, any of its
predecessors, any director, executive officer, other officer of the Company
participating in the offering contemplated hereby, any beneficial owner (as that
term is defined in Rule 13d-3 under the Exchange Act) of 20% or more of the
Company’s outstanding voting equity securities, calculated on the basis of
voting power, any “promoter” (as that term is defined in Rule 405 under the
Securities Act) connected with the Company in any capacity at the time of the
Closing, any placement agent or dealer participating in the offering of the
Securities and any of such agents’ or dealer’s directors, executive officers,
other officers participating in the offering of the Securities (each, a “Covered
Person”) is subject to any of the “Bad Actor” disqualifications described in
Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification
Event”). The Company has exercised reasonable care to determine (i) the identity
of each person that is a Covered Person; and (ii) whether any Covered Person is
subject to a Disqualification Event. The Company has complied in all material
respects, to the extent applicable, with its disclosure obligations under Rule
506(e). With respect to each Covered Person, the Company has established
procedures reasonably designed to ensure that the Company receives notice from
each such Covered Person of (x) any Disqualification Event relating to that
Covered Person, and (y) any event that would, with the passage of time, become a
Disqualification Event relating to that Covered Person; in each case occurring
up to and including the Closing Date. The Company is not for any other reason
disqualified from reliance upon Rule 506 of Regulation D for purposes of the
offer and sale of the Securities.

 

24 

 

dd.          Manipulation of Prices; Securities.

 

(i)                 None of the Company or the Subsidiaries, or, to the
Company’s Knowledge, any of their respective officers, directors or Affiliates
and no one acting on any such Person’s behalf has, (A) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company or any Subsidiary to
facilitate the sale or resale of any of the Securities, (B) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
Securities, or (C) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company or any
Subsidiary.

 

(ii)               Since December 31, 2016, to the Company’s Knowledge, no
officer, director or Affiliate of the Company or any of the Subsidiaries, any
Affiliate of any of the foregoing, or anyone acting on their behalf, has sold,
bid, purchased or traded in the Common Stock or any other security of the
Company other than pursuant to, and in accordance with, the Company’s equity
incentive and employee stock purchase plans as in effect on the date of this
Agreement and other than as reported on any Form 4 or Form 5 under Section 16 of
the Exchange Act. For purposes of the foregoing representations and warranties
under this Section 3(dd), the term “Affiliate” shall mean any Person (other than
the Company) that is the beneficial owner of at least ten percent (10%) of the
issued and outstanding shares of Common Stock of the Company or any of the
Subsidiaries.

 

ee.            Disclosure. The Company understands and confirms that each of the
Buyers will rely on the foregoing representations in effecting transactions in
securities of the Company. Taken as a whole with the 2017 SEC Documents and the
Schedules to this Agreement, all disclosure provided to the Buyers regarding the
Company, its business and the transactions contemplated hereby pursuant to the
representations and warranties of the Company set forth in this Section 3 is
true and correct and such representations and warranties do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made in such representations and warranties, in
the light of the circumstances under which they were made, not misleading.

 

ff.             Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement and the other Transaction Documents
based upon arrangements made by or on behalf of the Company or any affiliate of
the Company.

 

25 

 

4.                  PRE-CLOSING COVENANTS.

 

a.                   Stockholders Meeting. The Company shall take all action
necessary to duly call, give notice of, convene and hold a meeting of its
stockholders (the “Company Stockholders Meeting”) for the purpose of obtaining
the Stockholder Approval as promptly as reasonably practicable. The Company
shall use its reasonable best efforts to obtain the Stockholder Approval at the
Company Stockholders Meeting. At the Company Stockholders Meeting, the Company
may also seek and obtain stockholder approval for a proposal to approve an
amendment to the Company’s 2014 Equity Incentive Plan for purposes of taking
into account the number of Conversion Shares issuable upon conversion of the
Preferred Shares outstanding for purposes of implementing the “evergreen”
features of the Company’s 2014 Equity Incentive Plan.

 

b.                  Proxy Statement.

 

(i)                 In connection with the Company Stockholders Meeting, the
Company will (A) as promptly as reasonably practicable, but in no event later
than 25 days, after the date of this Agreement prepare and file with the SEC a
proxy statement (as it may be amended or supplemented from time to time, the
“Proxy Statement”) related to the consideration of the Proposal at the Company
Stockholders Meeting, (B) respond as promptly as reasonably practicable to any
comments received from the SEC with respect to the Proxy Statement on or after
the date of this Agreement and provide copies of such comments to Buyers
promptly upon receipt and provide copies of proposed responses to Buyers a
reasonable time prior to filing to allow Buyers the opportunity to provide
meaningful comment, (C) as promptly as reasonably practicable prepare and file
any other amendments or supplements necessary to be filed in response to any SEC
comments or as otherwise required by applicable law, (D) mail to its
stockholders as promptly as reasonably practicable the Proxy Statement and all
other customary proxy or other materials for meetings such as the Company
Stockholders Meeting, (E) to the extent required by applicable law, as promptly
as reasonably practicable prepare, file and distribute to the Company’s
stockholders any supplement or amendment to the Proxy Statement if any event
shall occur which requires such action at any time prior to the Company
Stockholders Meeting, and (F) otherwise comply with all requirements of law
applicable to the Company Stockholders Meeting. Each Buyer shall cooperate with
the Company in connection with the preparation of the Proxy Statement and any
amendments or supplements thereto, including promptly furnishing the Company,
upon request, with any and all information as may be required to be set forth in
the Proxy Statement with respect to such Buyer under applicable law. The Company
will provide Buyers a reasonable opportunity to review and comment promptly upon
the Proxy Statement and any amendments or supplements thereto, and shall give
reasonable consideration to any such comments proposed (it being understood that
the Company shall have the final authority and discretion with respect to
whether and to what extent to incorporate or address any such comments
proposed), prior to mailing the Proxy Statement and any such amendments or
supplements thereto to the Company’s stockholders. Subject to Section 4(d)(i),
the Proxy Statement shall include the Company Board Recommendation.

 

(ii)               If, at any time prior to the Company Stockholders Meeting,
any information relating to the Company or any Buyers or any of their respective
Affiliates should be discovered by the Company or any Buyers which should be set
forth in an amendment or supplement to the Proxy Statement so that the Proxy
Statement shall not contain any untrue statement of a material fact or omit to
state any 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
are made, not misleading, the party that discovers such information shall
promptly notify the other parties and, to the extent required by applicable law,
the Company shall disseminate an appropriate amendment thereof or supplement
thereto describing such information to the Company’s stockholders.

 

26 

 

(iii)             The Company represents, warrants, covenants and agrees that
(A) none of the information included or incorporated by reference in the Proxy
Statement or any other document filed with the SEC in connection with the
transactions contemplated by this Agreement or the other Transaction Documents
(all such other documents, the “Other Filings”), in any such case, at the date
it is first filed with the SEC, at the date it is first mailed to the Company’s
stockholders, at the time of the Company Stockholders Meeting or at the time of
any amendment or supplement thereof, contained or shall contain, as applicable,
any untrue statement of a material fact or omitted or shall omit, as applicable,
to state any 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 are made, not misleading, except that no representation, warranty or
covenant is made by the Company with respect to statements made or incorporated
by reference therein in reliance on, and conformity with, information supplied
in writing by or on behalf of any Buyer in connection with the preparation of
the Proxy Statement or the Other Filings expressly for inclusion therein, and
(B) the Proxy Statement and the Other Filings that are filed by the Company
shall comply as to form in all material respects with the requirements of the
Exchange Act and shall comply with the applicable requirements of The NASDAQ
Stock Market.

 

(iv)             Each Buyer, severally and not jointly, represents, warrants,
covenants and agrees that none of the information supplied in writing by or on
behalf of such Buyer expressly for inclusion in the Proxy Statement or the Other
Filings will, in any such case, at the date it is first filed with the SEC, at
the date it is first mailed to the Company’s stockholders, at the time of the
Company Stockholders Meeting or at the time of any amendment or supplement
thereof, contain any untrue statement of a material fact or omit to state any
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 are made,
not misleading.

 

c.                   Voting Agreements. The Company shall enforce the
obligations of each of the stockholders of the Company party to a Voting
Agreement, including through the exercise of proxies provided thereunder, to the
extent necessary or appropriate to cause each such stockholder to (i) appear at
the Company Stockholders Meeting or otherwise cause the shares of Common Stock
outstanding and beneficially owned by such stockholder to be counted as present
thereat for purposes of calculating a quorum, and (ii) vote, or cause to be
voted, all of the shares of Common Stock outstanding and beneficially owned by
such stockholder in favor of the Proposal at the Company Stockholders Meeting.

 

d.                  Conduct of Business of the Company. Except (x) as expressly
required or expressly contemplated by this Agreement or as set forth on Schedule
4(d) or (y) as consented to by the Requisite Buyers, from the date of this
Agreement until the Closing Date, the Company will conduct its operations only
in the ordinary course of business as it exists on the date of this Agreement
and consistent with past practices. Without limiting the generality of the
foregoing, except as expressly contemplated by this Agreement or as set forth on
Schedule 4(d), from the date of this Agreement until the Closing Date, the
Company shall not, and shall cause each of the Subsidiaries not to, take any of
the following actions:

 

27 

 

(i)                 directly or indirectly, withdraw, change, amend, modify or
qualify, or resolve, propose or agree to withdraw, change, amend, modify or
qualify (whether publicly or otherwise), in a manner adverse to any Buyer, or
otherwise take any action, fail to take any action or make any statement or
proposal inconsistent with, the Company Board Recommendation; provided, that the
Company Board may withdraw, change, amend, modify or qualify the Company Board
Recommendation if it determines in good faith after receiving advice from
outside counsel on the matter that, as the result of a material development or
change in circumstances that occurs or arises after the date of this Agreement
that was not known or reasonably foreseeable to the Company as of the date of
this Agreement, a failure to take such action would constitute a breach by the
Company Board of its fiduciary obligations under applicable law;

 

(ii)               propose or adopt any changes to the Certificate of
Incorporation or the Bylaws;

 

(iii)             make, declare, set aside, or pay any dividend or distribution
on any shares of capital stock of the Company;

 

(iv)             (A) adjust, split, combine or reclassify or otherwise amend the
terms of any capital stock of the Company, (B) repurchase, redeem, purchase,
acquire, encumber, pledge, dispose of or otherwise transfer, directly or
indirectly, any shares of capital stock of the Company or any securities or
other rights convertible or exchangeable into or exercisable for any such shares
of capital stock of the Company or such securities or other rights, or offer to
do the same, other than (I) as permitted under clause (C) of this Section
4(d)(iv) and (II) repurchases of shares of capital stock of the Company owned or
held by employees, consultants, directors or advisors in connection with the
termination of their service to the Company at a price no greater than the
lesser of fair market value and the purchase price paid for such shares of
capital stock of the Company by the holder thereof, (C) issue, grant, deliver or
sell any shares of capital stock of the Company or any securities or other
rights convertible or exchangeable into or exercisable for any such shares in
the Company or such securities or rights (which term, for purposes of this
Agreement, will be deemed to include share appreciation rights, “phantom stock”
or other commitments that provide any right to receive value or benefits similar
to such shares, securities or other rights), other than (I) pursuant to, and in
accordance with, the Company’s equity incentive and employee stock purchase
plans as in effect on the date of this Agreement, and (II) pursuant to the
exercise of any options to purchase Common Stock granted pursuant to, and in
accordance with, any such plan, in accordance with the applicable award
agreement, (D) enter into any agreement, understanding or arrangement with
respect to the sale, voting, pledge, encumbrance, disposition, acquisition,
transfer, registration or repurchase of any shares of capital stock of the
Company or such securities or other rights, other than any agreement,
understanding or arrangement in connection with (I) any repurchases of shares of
capital stock of the Company that are permitted under clause (B) above in this
Section 4(d)(iv) and (II) the issuance, grant, delivery, sale, disposition or
transfer of shares of capital stock and other securities of the Company that are
permitted under clause (C) of this Section 4(d)(iv), or (E) register for sale,
resale or other transfer any shares of capital stock of the Company under the
Securities Act on behalf of the Company or any other Person, except pursuant to
the exercise of registration rights by any Person pursuant to the Fifth IRA;
provided, that each of the Buyers that is party to the Fifth IRA hereby
covenants and agrees that, from the date of this Agreement until the earlier of
the effectiveness of the initial registration statement to be prepared and filed
by the Company with the SEC pursuant to the Registration Rights Agreement and
the termination of this Agreement pursuant to, and in accordance with, Section 8
hereof, such Buyer will not exercise or participate in any registration rights
provided for under the Fifth IRA;

 

28 

 

(v)               merge or consolidate the Company or any of the Subsidiaries
with any Person, or consummate any other Fundamental Transaction (as defined
below), or sell, lease or otherwise dispose of any assets or securities of the
Company or any of the Subsidiaries, including by merger, consolidation, asset
sale, other business combination or other Fundamental Transaction (including
formation of a joint venture) or by property transfer (or initiate, solicit or
encourage (including by way of providing information) the submission of any
inquiries, proposals or offers or any other efforts or attempts that constitute,
or may reasonably be expected to lead to, any of the foregoing); provided, that,
notwithstanding Section 4(e) hereof (but provided that the Company has complied
with clause (i) of Section 4(e)), the foregoing provisions of this clause (v)
shall not be applicable (1) if the Company receives an unsolicited inquiry,
proposal or offer from a third party to purchase all of the capital stock of the
Company (by merger, tender offer or otherwise) (each, a “Takeover Transaction”),
and (2) if and to the extent that the Company Board, in good faith and after
receiving advice of outside counsel on the matter, determines that failure of
the Company Board to cause the Company to pursue any such unsolicited inquiry,
proposal or offer would reasonably be expected to constitute a breach by the
Company Board of its fiduciary obligations under applicable law; provided,
further, however, that, notwithstanding the foregoing proviso, in no event shall
the Company consummate any such Takeover Transaction unless and until (A) the
Closing shall have occurred, or (B) this Agreement will have terminated pursuant
to, and in accordance with, Section 8 hereof (and, for the avoidance of doubt,
the parties acknowledge and agree that, if the Closing occurs, the provisions of
Section 8(b) of the Certificate of Designation shall apply to such Takeover
Transaction);

 

(vi)             adopt a plan of complete or partial liquidation or resolutions
providing for a complete or partial liquidation, dissolution, restructuring,
recapitalization or other reorganization of the Company or any of the
Subsidiaries; and

 

(vii)           agree or commit to do any of the foregoing.

 

The term “Fundamental Transaction” shall mean the occurrence of any of the
following transactions: (A) the Company, directly or indirectly, in one or more
related transactions, effects any merger or consolidation of the Company with or
into another Person, (B) the Company, directly or indirectly, in one transaction
or a series of related transactions, effects any sale of all or substantially
all of its assets (including, for the avoidance of doubt, all or substantially
all of the assets of the Company and its Subsidiaries in the aggregate), and
distributes the proceeds therefrom to the holders of capital stock of the
Company, (C) any tender offer or exchange offer (whether by the Company or
another Person) approved by the Company Board is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash and/or other property or (D) the Company, directly or
indirectly, in one transaction or a series of related transactions, effects any
reclassification of the Common Stock or any compulsory share exchange (other
than as a result of a any stock split, stock combination, reclassification,
stock dividend, recapitalization or other similar transaction of such character
that shares of Common Stock shall be changed into or become exchangeable for a
larger or small number of shares) pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash and/or other
property.

 

29 

 

e.                   No Solicitation of Transactions. From and after the date of
this Agreement until the earlier of the Closing or the termination of this
Agreement pursuant to, and in accordance with, Section 8 hereof, the Company
will not, and will cause the Subsidiaries and its and their respective officers,
directors, agents and other representatives to not, directly or indirectly, (i)
solicit, initiate, or encourage any Acquisition Proposals, (ii) engage in
negotiations or discussions concerning, or provide any non-public information to
any Person in connection with, any Acquisition Proposal, (iii) agree to or
approve any Acquisition Proposal or (iv) enter into any agreement regarding an
Acquisition Proposal; provided, that the two provisos in Section 4(d)(v) shall
apply to the foregoing clauses (ii) through (iv), mutatis mutandis. As used
herein, the term “Acquisition Proposal” shall mean any proposal relating to a
possible (1) merger, consolidation, other Fundamental Transaction or similar
transaction involving the Company or the Subsidiaries, (2) sale, lease or other
disposition, directly or indirectly, by merger, consolidation, share exchange or
otherwise, of any material portion of the assets of the Company and the
Subsidiaries, (3) issuance, sale or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase or securities convertible into, such
securities) representing 10% or more of the votes attached to the outstanding
securities of the Company, (4) liquidation, dissolution, or other similar type
of transaction with respect to the Company and the Subsidiaries or (5)
transaction which is similar in form, substance or purpose to any of the
foregoing transactions; provided, however, that the term “Acquisition Proposal”
shall not include the transactions contemplated hereby and by the other
Transaction Documents. The Company will, and will cause the Subsidiaries and
their respective representatives to, immediately cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing.

 

5.                  OTHER COVENANTS.

 

a.                Reasonable Best Efforts. Each party shall use its reasonable
best efforts to timely satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.

 

b.               Form D and Blue Sky. To the extent required by applicable law,
the Company agrees to timely file a Form D with respect to the Securities as
required under Regulation D and to provide a copy thereof to each 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 Buyers at the
Closing occurring on the Closing Date pursuant to this Agreement under
applicable securities or “Blue Sky” laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Date. The Company shall make all 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.

 

30 

 

c.                Reporting Status. From the date of this Agreement until the
later of (i) the first date on which no Preferred Shares remain outstanding, and
(ii) the first date on which Buyers no longer own any Securities (the period
ending on such later date, the “Reporting Period”), the Company shall timely
(without giving effect to any extensions pursuant to Rule 12b-25 under the
Exchange Act) file all reports required to be filed with the SEC pursuant to the
Exchange Act, and the Company shall not terminate the registration of the Common
Stock under the Exchange Act or otherwise terminate its status as an issuer
required to file reports under the Exchange Act, even if the securities laws
would otherwise permit any such termination. Each of such reports shall comply
in all material respects with the applicable requirements of the Exchange Act
and shall not contain any untrue statement of a material fact or omit 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. The Company hereby agrees that, during the Reporting
Period, the Company shall send to each Buyer copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the Company’s making available or giving such
notices and other information to the stockholders.

 

d.               Use of Proceeds. The Company will use the proceeds from the
sale of the Securities to complete the Company’s ongoing Phase III clinical
trial, to further develop and obtain regulatory approval for the Company’s
product and for working capital and general corporate purposes.

 

e.                Reservation of Shares. 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 number of shares of Common Stock needed to
provide for issuance of the Conversion Shares upon conversion of all outstanding
Preferred Shares (without regard to any limitations or restrictions on
conversion thereof).

 

f.                Listing. The Company shall use its reasonable best efforts to
cause the Common Stock to remain listed on the Principal Market during the
Reporting Period. The Company shall use its reasonable best efforts to secure
the listing of all of the Registrable Securities (as defined in the Registration
Rights Agreement) on the Principal Market and maintain such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents. None of the Company or any of the Subsidiaries shall take
any action that would reasonably be expected to result in the delisting or
suspension of the Common Stock from the Principal Market. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 5(f). At all times during the Reporting Period, (i) the Common Stock
shall be eligible for clearing through DTC, through its Deposit/Withdrawal At
Custodian (DWAC) system, (ii) the Company shall be eligible and participating in
the Direct Registration System (DRS) of DTC with respect to the Common Stock,
and (iii) the Company shall use its reasonable best efforts to cause the Common
Stock to not at any time be subject to any DTC “chill,” “freeze” or similar
restriction with respect to any DTC services, including the clearing of shares
of Common Stock through DTC or, in the event the Common Stock becomes subject to
any DTC “chill,” “freeze” or similar restriction with respect to any DTC
services, the Company shall use its reasonable best efforts to cause any such
“chill,” “freeze” or similar restriction to be removed at the earliest possible
time.

 

31 

 

g.               Expenses. The Company shall pay to each Buyer that is
affiliated with Deerfield Management Company, L.P. a reimbursement amount, up to
an aggregate of $100,000 (the “Aggregate Expense Cap”) for all such Buyers,
equal to such Buyer’s reasonable out-of-pocket legal, due diligence and other
expenses, including fees and expenses of attorneys, investigative and other
consultants and travel costs and all other expenses, relating to negotiating and
preparing the Transaction Documents and consummating the transactions
contemplated hereby and thereby, including such Buyers’ review and commentary
with respect to the initial registration statement to be prepared and filed by
the Company with the SEC pursuant to the Registration Rights Agreement (but not,
for the avoidance of doubt, any post-effective amendments or supplements
thereto); provided, that each such Buyer shall provide the Company with
reasonable documentation evidencing such expenses prior to the Company’s payment
of such reimbursement amounts. The amount payable to any Buyer pursuant to the
preceding sentence may be withheld as an off-set by such Buyer from its Purchase
Price to be paid by it at the Closing. Additionally, at the Closing, the Company
shall pay all of its own legal, due diligence and other expenses, including fees
and expenses of attorneys, investigative and other consultants and travel costs
and all other expenses, relating to negotiating and preparing the Transaction
Documents and consummating the transactions contemplated hereby and thereby. In
addition to the fee and reimbursement obligations of the Company set forth above
in this Section 5(g), and not in limitation thereof, following the Closing, the
Company shall promptly reimburse each Buyer and each holder of Securities for
all of the respective reasonable out-of-pocket fees, costs and expenses
(including attorneys’ fees and fees, costs and expenses of accountants, advisors
and consultants and any costs of settlement) incurred thereby in connection with
any amendment, modification or waiver of any of the Transaction Documents and/or
the enforcement of such Person’s rights and remedies under any of the
Transaction Documents (including collecting any payments due from the Company
hereunder or thereunder); provided, that each such Buyer shall provide the
Company with reasonable documentation evidencing such expenses prior to the
Company’s payment of such reimbursement amounts.

 

h.               Disclosure of Transactions and Other Material Information. At
or prior to 8:00 a.m. (New York City time) on the second (2nd) Business Day
following the execution and delivery of this Agreement, the Company shall file a
Form 8-K with the SEC describing the terms of the transactions contemplated by
the Transaction Documents, identifying the Buyers and including as exhibits to
such Form 8-K this Agreement (including the schedules and exhibits hereto), the
Certificate of Designation, the form of Registration Rights Agreement and the
form of Voting Agreement (such Form 8-K, the “Announcing Form 8-K”). Not later
than 8:00 a.m. (New York City time) on the second (2nd) Business Day following
the Closing Date, the Company shall file a Form 8-K with the SEC describing the
terms of the transactions consummated pursuant to this Agreement on the Closing
Date (such Form 8-K, the “Closing Form 8-K”). Neither the Company nor any Buyer
shall issue any press releases or any other public statements with respect to
the transactions contemplated hereby or disclosing the name of any Buyer;
provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with
respect to such transactions (i) in substantial conformity with the Announcing
Form 8-K or the Closing Form 8-K, and in each case contemporaneously therewith
and (ii) as is required by applicable law and regulations (provided that each
Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).

 

32 

 

i.                 Material Non-Public Information. Each Buyer shall have the
right, but not the obligation, to deliver a written notice (a “MNPI Stop
Notice”) to the Company requesting that none of the Company or any of its
Affiliates, Subsidiaries, agents, advisors, attorneys or other representatives
shall provide any material non-public information regarding the Company or any
of its Subsidiaries and Affiliates to such Buyer. Following the Company’s
receipt of any such MNPI Stop Notice from a Buyer and until such time as such
Buyer elects to again receive material non-public information by delivering a
written notice to that effect to the Company (a “MNPI Initiation Notice;” and
the period beginning with a Buyer’s delivery of an MNPI Stop Notice and ending
on the Company’s receipt of a MNPI Initiation Notice from such Buyer is referred
to as a “MNPI Restriction Period”), except to the extent otherwise required to
be included in any communication to such Buyer pursuant to the Transaction
Documents and except for notices or documents under or in connection with any of
the Transaction Documents, including notices, information or documents with
respect to the exercise, amendment, modification, termination or waiver of any
rights or obligations under any of the Transaction Documents, the Company shall
not, and shall cause each of its Affiliates or Subsidiaries, agents, advisors,
attorneys and other representatives not to, provide to such Buyer any material
non-public information. Notwithstanding anything to the contrary herein, during
an MNPI Restriction Period with respect to any Buyer, in the event that the
Company believes that a notice or communication to any such Buyer contains
material non-public information relating to the Company or any of its Affiliates
or Subsidiaries, the Company shall so indicate to such Buyer contemporaneously
with delivery of such notice or communication; and in the absence of any such
indication, such Buyer shall be allowed to presume that all matters relating to
such notice or communication do not constitute material non-public information
relating to the Company or any of its Affiliates or Subsidiaries. During an MNPI
Restriction Period, unless the Company has in good faith determined that the
matters relating to such notice do not constitute material non-public
information relating to the Company or any of its Affiliates or Subsidiaries,
the Company shall contemporaneously with delivery of such notice or
communication publicly disclose such material non-public information. In the
event of a breach of the covenants set forth in this Section 5(i) by the Company
or any of its Affiliates or Subsidiaries, agents, advisors, attorneys or other
representatives, in addition to, and without limiting, any other remedy provided
herein or in the other Transaction Documents, and notwithstanding anything to
the contrary contained herein, a Buyer shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise,
of material non-public information disclosed to such Buyer in violation of this
Section 5(i) without the prior approval of any of the Company or any of its
Affiliates or Subsidiaries, agents, advisors, attorneys or representatives;
provided that, in the event of a breach of this Section 5(i) by the Company,
such Buyer shall first provide the Company with an opportunity to make immediate
public disclosure of such information in lieu of such Buyer making public
disclosure of such information in accordance with this Section 5(i). No such
Buyer shall have any liability to the Company or any of its Affiliates or
Subsidiaries, officers, directors, employees, stockholders, agents, advisors,
attorneys or other representatives for any such disclosure made in accordance
with this Section 5(i). For the avoidance of doubt, the Company’s providing to
the Preferred Director (as defined below) (due to such Preferred Director’s
service on the Company Board) of information that may constitute material,
nonpublic information relating to the Company or the Subsidiaries, and any such
Preferred Director’s providing of such information to its Affiliates, including
any Buyer that is an Affiliate of such Preferred Director, shall not be deemed
to be a breach of this Section 5(i).

 

33 

 

j.                    Patriot Act, Investor Secrecy Act and Office of Foreign
Assets Control. As required by federal law and each Buyer’s policies and
practices, each Buyer may need to obtain, verify and record certain customer
identification information and documentation in connection with opening or
maintaining accounts, or establishing or continuing to provide services, and,
from the date of this Agreement until the end of the Reporting Period, the
Company agrees to, and shall cause each of the Subsidiaries to, provide such
information to each Buyer.

 

k.               Regulation M. Neither the Company, nor the Subsidiaries nor any
of the respective controlled Affiliates of the foregoing shall take any action
prohibited by Regulation M under the Exchange Act.

 

l.                 Taxes. The Company shall be responsible for any liability
with respect to any transfer, stamp, documentary, intangible, recording or
similar non-income Taxes that may be payable in connection with the execution,
delivery and performance of this Agreement and the other Transaction Documents,
including any such Taxes with respect to the issuance or transfer of the
Preferred Shares or the Conversion Shares. Notwithstanding any provision herein
to the contrary, the Company shall (i) be entitled to deduct and withhold from
any payments (which shall include, for purposes of this Section 5(l), Conversion
Shares issued upon conversion of the Preferred Shares to the extent attributable
to declared but unpaid dividends, if any) made to a holder of any Securities,
such amounts that the Company may be required to withhold under applicable U.S.
federal withholding Tax requirements (including without limitation under
Sections 1471 through 1474 of the Code) and (ii) not be responsible for or
liable for any Taxes imposed on, or measured by, net income (however
denominated), franchise Taxes, and branch profits Taxes, in each case,  imposed
as a result of a payee (or  beneficial owner of a payment) being organized under
the laws of, or having its principal office in, the jurisdiction imposing such
Tax (or any political subdivision thereof). The Company shall provide the
applicable payee with five (5) Business Days’ advance notice of any such
required withholding and shall reasonably cooperate with such Buyer to mitigate
or reduce such withholding. Any amounts withheld pursuant to clause (i) above
shall be treated for purposes hereof as if paid to the relevant payee.

 

m.             Further Instruments and Acts. From the date of this Agreement
until the end of the Reporting Period, upon request of any Buyer or holder of
Securities, the Company will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purposes of this Agreement and the other Transaction Documents.

 

34 

 

6.                  CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL. The
obligation of the Company to issue and sell the Preferred Shares to each 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 each Buyer with prior written notice thereof:

 

a.                The Stockholder Approval shall have been obtained

 

b.               Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.

 

c.                Such Buyer shall have delivered to the Company the applicable
Purchase Price (less any amount withheld pursuant to Section 5(g)) for the
Preferred Shares being purchased by such Buyer at the Closing by wire transfer
of immediately available funds pursuant to the wire instructions provided by the
Company.

 

d.               (i) The representations and warranties of such Buyer, other
than the representations and warranties of such Buyer set forth in Sections
2(g), 2(h) and 2(j), shall be true and correct in all material respects (without
giving effect to any limitation as to “materiality” set forth therein) as of the
date of this Agreement (except for any of such representations and warranties
that speak as of a specific date, which shall be true and correct in all
material respects (without giving effect to any limitation as to “materiality”
set forth therein) as of such date), (ii) the representations and warranties of
such Buyer set forth in Sections 2(g), 2(h) and 2(j) shall be true and correct
as of the date of this Agreement and as of the Closing Date as though made at
that time (except for any of such representations and warranties that speak as
of a specific date, which shall be true and correct as of such date), (iii) the
representations and warranties of such Buyer, other than the representations and
warranties of such Buyer set forth in Sections 2(g), 2(h) and 2(j), shall be
true and correct as of the Closing Date as though made at that time (except for
any of such representations and warranties that speak as of a specific date,
which shall be true and correct as of such date), except in the case of this
clause (iii) where the failure of such representations and warranties to be so
true and correct (without giving effect to any limitation as to “materiality”
set forth therein), individually or in the aggregate, has not had, and would not
reasonably be expected to have, a material adverse effect on such Buyer’s
ability or obligation to purchase the number of Preferred Shares set forth
opposite such Buyer’s name on the Schedule of Buyers at the Closing, and (iv)
such Buyer shall have in all material respects performed, satisfied and complied
with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Buyer at or prior
to the Closing Date.

 

e.                No final and nonappealable order, judgment, injunction, award,
decree or writ handed down, adopted or imposed by, any court of competent
jurisdiction or Governmental Authority restraining, enjoining or otherwise
prohibiting the consummation of the Closing shall be in effect, and no statute,
rule or regulation shall have been enacted, entered, promulgated or enforced by
any Governmental Authority that prohibits or makes illegal the consummation of
the purchase and sale of the Preferred Shares pursuant to this Agreement.

 

35 

 

f.                The minimum gross proceeds received by the Company from the
sale of the Preferred Shares to all Buyers at the Closing shall be no less than
$18,000,000.

 

7.                  CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE. The
obligation of each Buyer hereunder to purchase the Preferred Shares from the
Company 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 each Buyer’s sole benefit and may be waived only by such Buyer at any time
in its sole discretion by providing the Company with prior written notice
thereof:

 

a.                The Stockholder Approval shall have been obtained.

 

b.               The Company shall have executed each of the Transaction
Documents to which it is a party and delivered the same to such Buyer.

 

c.                The Certificate of Designation shall have been filed with the
Secretary of State of the State of Delaware, and a copy thereof certified by
such Secretary of State shall have been delivered to such Buyer.

 

d.               (i) The representations and warranties of the Company and the
Subsidiaries, other than the representations and warranties of the Company and
the Subsidiaries set forth in Sections 3(a), 3(b) 3(c), 3(d), 3(e), 3(j), 3(k),
3(l), 3(m), 3(v), 3(x), 3(y), 3(bb), 3(cc), 3(dd) and 3(ff) (the “Fundamental
Representations”), shall be true and correct in all material respects (without
giving effect to any limitation as to “materiality” set forth therein other than
any limitation as to “Material Adverse Effect”) as of the date of this Agreement
(except for any of such representations and warranties that speak as of a
specific date, which shall be true and correct in all material respects (without
giving effect to any limitation as to “materiality” set forth therein other than
any limitation as to “Material Adverse Effect”) as of such date), (ii) the
Fundamental Representations shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made at that time (except for any
of such representations and warranties that speak as of a specific date, which
shall be true and correct as of such date), (iii) the representations and
warranties of the Company and the Subsidiaries, other than the Fundamental
Representations, shall be true and correct as of the Closing Date as though made
at that time (except for any of such representations and warranties that speak
as of a specific date, which shall be true and correct as of such date), except
in the case of this clause (iii) where the failure of such representations and
warranties to be so true and correct (without giving effect to any limitation as
to “materiality” or “Material Adverse Effect” set forth therein), individually
or in the aggregate, has not had, and would not reasonably be expected to have,
a Material Adverse Effect, and (iv) the Company and the Subsidiaries shall have
in all material respects performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company and the Subsidiaries at or prior to
the Closing Date. Such Buyer shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect.

 

e.                Such Buyer shall have received the opinion of Morgan, Lewis &
Bockius LLP, dated as of the Closing Date, in a form reasonably acceptable to
the Requisite Buyers.

 

36 

 

f.                The Company shall have executed and delivered to such Buyer’s
counsel the Preferred Stock Certificates (in such denominations as such Buyer
shall request) for the Preferred Shares being purchased by such Buyer at the
Closing, and such Preferred Stock Certificates shall be held by such counsel in
escrow until the Closing is consummated.

 

g.               The Company Board shall have adopted, and not rescinded or
otherwise amended or modified, resolutions consistent with Section 3(b) and in a
form reasonably acceptable to the Requisite Buyers (the “Resolutions”).

 

h.               The Company and the Company Board shall have taken all actions
necessary or appropriate such that the Person designated, pursuant to the
Certificate of Designation, by the holders of the Preferred Shares to serve as a
director on the Company Board (the person designated to serve on the Company
Board by the holders of the Preferred Shares referred to as the “Preferred
Director”) shall become, effective immediately following the Closing, a director
serving on the Company Board.

 

i.                 The Bylaws shall have been amended, in a manner acceptable to
the Requisite Buyers, to facilitate the service of the Preferred Director as a
director on the Company Board effective immediately following the Closing.

 

j.                 As of the Closing Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Preferred Shares, at least 22,122,775 shares of Common
Stock (such number to be adjusted for any Stock Event (as defined in the
Certificate of Designation) involving the Common Stock that is effective at any
time after the date of this Agreement).

 

k.               The Company shall have delivered to such Buyer a certificate
evidencing the incorporation or organization and good standing of the Company
and each domestic Subsidiary in such entity’s state or other jurisdiction of
incorporation or organization issued by the Secretary of State (or other
applicable authority) of such state or jurisdiction of incorporation or
organization as of a date within three (3) days of the Closing Date.

 

l.                 The Company shall have delivered to such Buyer a secretary’s
certificate, dated as of the Closing Date, certifying as to (A) the Resolutions,
(B) the Certificate of Incorporation, certified as of a date within three (3)
days of the Closing Date by the Secretary of State of the State of Delaware, and
(C) the Bylaws.

 

m.             The Company shall have delivered to such Buyer a letter from the
Company’s transfer agent certifying the number of shares of Common Stock
outstanding as of a date within two (2) Business Days of the Closing Date.

 

n.               No final and nonappealable order, judgment, injunction, award,
decree or writ handed down, adopted or imposed by, any court of competent
jurisdiction or Governmental Authority restraining, enjoining or otherwise
prohibiting the consummation of the Closing shall be in effect, and no statute,
rule or regulation shall have been enacted, entered, promulgated or enforced by
any Governmental Authority that prohibits or makes illegal the consummation of
the purchase and sale of the Preferred Shares pursuant to this Agreement.

 

37 

 

o.               No suit, action or proceeding by any (i) third party or (ii)
Governmental Authority with respect to the transactions contemplated hereby
shall be pending or threatened in writing, and no order shall have been entered
in any such suit, action or proceeding that would have the effect of (A) making
any of the transactions contemplated by this Agreement or the other Transaction
Documents illegal, (B) otherwise preventing the consummation of such
transactions or (C) imposing limitations on such transactions and/or the ability
of any party hereto to perform its obligations hereunder or under any
Transaction Document, except, in the case of clause (i) above, as would not
reasonably be expected to have, a Material Adverse Effect.

 

p.               The minimum gross proceeds received by the Company from the
sale of the Preferred Shares to all Buyers at the Closing shall be no less than
an amount equal to (i) $18,000,000, minus (ii) the Purchase Price to be paid by
such Buyer as set forth on the Schedule of Buyers.

 

8.                  TERMINATION.

 

a.                   Termination by Mutual Consent. This Agreement may be
terminated, whether before or after satisfaction of the condition set forth in
Sections 6(a) and 7(a), at any time prior to the Closing, by mutual written
consent of the Requisite Buyers and the Company. For purposes of this Agreement,
“Requisite Buyers” means Buyers that purchased at least 77% of the aggregate
number of Preferred Shares on the Closing Date, or if prior to the Closing,
Buyers listed on the Schedule of Buyers as being obligated to purchase at least
77% of the aggregate number of Preferred Shares.

 

b.                  Termination by Either the Requisite Buyers or the Company.
This Agreement may be terminated by either the Requisite Buyers or the Company
at any time prior to the Closing:

 

(i)                 whether before or after satisfaction of the conditions set
forth in Sections 6(a) and 7(a), if the Closing has not occurred by October 31,
2017 (the “Outside Date”); provided, that (A) the right to terminate this
Agreement under this clause will not be available to any party to this Agreement
whose breach of, or failure to fulfill any of its obligations under, this
Agreement has been a cause of, or resulted in, the failure to consummate the
Closing by such date, unless such breach or failure is not intentional, not
curable and not waived, in which case such party may terminate this Agreement
under this clause, and (B) the right to terminate this Agreement under this
clause will not be available to the Company unless the Company Stockholders
Meeting has been duly convened and a vote of the Company’s stockholders has been
held with respect to the Proposal;

 

(ii)               if the Proposal has been submitted to the stockholders of the
Company for adoption at a duly convened Company Stockholders Meeting and the
Stockholder Approval shall not have been obtained at such Company Stockholders
Meeting (including any adjournment or postponement thereof); or

 

(iii)             whether before or after satisfaction of the conditions set
forth in Sections 6(a) and 7(a), if any law or Governmental Authority prohibits
consummation of the Closing or if any order, judgment, injunction, award, decree
or writ handed down, adopted or imposed by, any court of competent jurisdiction
or Governmental Authority restrains, enjoins or otherwise prohibits consummation
of the Closing, and such order, judgment, injunction, award, decree or writ has
become final and nonappealable.

 

38 

 

c.                   Termination by the Requisite Buyers. This Agreement may be
terminated by the Requisite Buyers at any time prior to the Closing:

 

(i)                 if the Company materially breaches its obligations under
Sections 4(a), 4(b), 4(c), 4(d) or 4(e), or the Company Board or any committee
thereof shall resolve to do any of the foregoing; or

 

(ii)       provided that no Buyer who is a party to such termination action is
in material breach of its respective obligations under this Agreement, if a
breach or failure of any representation, warranty or covenant of the Company
contained in this Agreement shall have occurred and shall not have been cured
within 10 Business Days after a Buyer’s written notice asserting such breach or
failure from the Company, and (A) which breach would reasonably be expected to
give rise to the failure of a condition set forth in Section 7, and (B) as a
result of such breach, such condition would not reasonably be expected to be
satisfied prior to the Outside Date.

 

d.                  Termination by the Company. Provided that the Company is not
in material breach of its obligations under this Agreement, this Agreement may
be terminated by the Company at any time prior to the Closing if a breach or
failure of any representation, warranty or covenant of the Buyers contained in
this Agreement shall have occurred and shall not have been cured within 10
Business Days after the Company’s written notice asserting such breach or
failure from Buyers, and (A) which breach would reasonably be expected to give
rise to the failure of a condition set forth in Section 6 and (B) as a result of
such breach, such condition would not reasonably be expected to be satisfied
prior to the Outside Date.

 

e.                   Notice of Termination. Any party that exercises its right
to terminate this Agreement pursuant to any of the foregoing provisions of this
Section 8 shall give written notice of termination to the other parties to this
Agreement, which notice shall specify the provision of this Section 8 pursuant
to which such party is terminating this Agreement and, except in the case of any
termination pursuant to Section 8(a) hereof, shall provide sufficient details to
explain why this Agreement can be terminated pursuant to such provision of this
Section 8.

 

f.                   Effect of Termination. If this Agreement is terminated
pursuant to this Section 8, it will become void and of no further force and
effect, with no liability on the part of any party to this Agreement (or any of
their respective former, current, or future general or limited partners,
shareholders, managers, members, directors, officers, Affiliates or agents),
except that (i) the provisions of Section 5(g) will survive any termination of
this Agreement and the Company shall remain obligated to reimburse each Buyer
affiliated with Deerfield Management Company, L.P. for the expenses described
therein (except in the case of a termination pursuant to Section 8(a) or Section
8(d)), and (ii) the provisions of this Section 8(f), Section 9 and Section 10
will survive termination of this Agreement; provided, however, that nothing
herein shall relieve any party hereto from liabilities for damages incurred or
suffered by any other party hereto as a result of any breach by such party of
any of its representations, warranties, covenants or other agreements set forth
in this Agreement.

 

39 

 

g.                  Extension; Waiver. At any time, whether prior to, on or
after the Closing, the Requisite Buyers, on the one hand, and the Company, on
the other hand, may, as applicable (i) extend the time for the performance of
any of the obligations of the other party or parties, as applicable, (ii) waive
any inaccuracies in the representations and warranties of the other party or
parties, as applicable, contained in this Agreement or in any Transaction
Document, or (iii) unless prohibited by applicable law, waive compliance with
any of the covenants or conditions contained in this Agreement. Any agreement on
the part of a party to any extension or waiver will be valid only if set forth
in an instrument in writing signed by such party. The failure of any party to
assert any of its rights under this Agreement or otherwise will not constitute a
waiver of such rights.

 

9.                  INDEMNIFICATION.

 

a.                Company Indemnification Obligation. In consideration of each
Buyer’s execution and delivery of the Transaction Documents and acquiring the
Securities thereunder and in addition to all of the Company’s and the
Subsidiaries’ other obligations under the Transaction Documents, the Company
shall defend, protect, indemnify and hold harmless each Buyer and each other
holder of the Securities entitled to rights hereunder and all of their
stockholders, partners, officers, directors, members, managers, employees and
direct or indirect investors and any of the foregoing Persons’ agents or other
representatives (including 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 Indemnitees are a party to the action for
which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified Liabilities”), incurred by any
Indemnitees 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 or any of the Subsidiaries in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, or (ii) any
breach of any covenant, agreement or obligation of the Company or any of the
Subsidiaries contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby. 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 that is permissible under applicable law.

 

b.               Indemnification Procedures. Each Indemnitee shall (i) give
prompt written notice to the Company of any claim with respect to which it seeks
indemnification or contribution pursuant to this Agreement (provided, however,
that the failure of the Indemnitee to promptly deliver such notice shall not
relieve the Company of any liability, except to the extent that the Company is
actually prejudiced in its ability to defend such claim) and (ii) permit the
Company to assume the defense of such claim with counsel selected by the Company
and reasonably satisfactory to the Indemnitee; provided, however, that any
Indemnitee entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of the Indemnitee unless
(A) the Company has agreed in writing to pay such fees and expenses, (B) the
Company shall have failed to assume the defense of such claim within five (5)
days of delivery of the written notice of the Indemnitee with respect to such
claim or failed to employ counsel selected by the Company and reasonably
satisfactory to the Indemnitee, or (C) in the reasonable judgment of the
Indemnitee, based upon advice of its counsel, a conflict of interest may exist
between the Indemnitee and the Company with respect to such claims (in which
case, if the Indemnitee notifies the Company in writing that it elects to employ
separate counsel at the expense of the Company, the Company shall not have the
right to assume the defense of such claim on behalf of the Indemnitee). If the
Company assumes the defense of the claim, it shall not be subject to any
liability for any settlement or compromise made by the Indemnitee without its
consent (but such consent shall not be unreasonably withheld, conditioned or
delayed). In connection with any settlement negotiated by the Company, the
Company shall not, and no Indemnitee shall be required by the Company to, (I)
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the Indemnitee of a release
from all liability in respect to such claim or litigation, (II) enter into any
settlement that attributes by its terms any liability, culpability or fault to
the Indemnitee, or (III) consent to the entry of any judgment that does not
include as a term thereof a full dismissal of the litigation or proceeding with
prejudice. In addition, without the consent of the Indemnitee, the Company shall
not consent to entry of any judgment or enter into any settlement which provides
for any obligation or restriction on the part of the Indemnitee other than the
payment of money damages which are to be paid in full by the Company. If the
Company fails or elects not to assume the defense of a claim pursuant to clause
(B) above, or is not entitled to assume or continue the defense of such claim
pursuant to clause (C) above, the Indemnitee shall have the right without
prejudice to its right of indemnification hereunder to, in its discretion
exercised in good faith and upon advice of counsel, to contest, defend and
litigate such claim and may settle such claim, either before or after the
initiation of litigation, at such time and upon such terms as the Indemnitee
deems fair and reasonable; provided that, at least five (5) days prior to any
settlement, written notice of such Indemnitee’s intention to settle is given to
the Company.

 

40 

 

10.              GOVERNING LAW; MISCELLANEOUS.

 

a.                Governing Law; Venue; Jurisdiction; Service of Process; Waiver
of Jury Trial. All questions concerning the construction, validity, enforcement
and interpretation of this Agreement and, unless otherwise expressly stated
therein, the other Transaction Documents shall be governed by and construed and
enforced in accordance with the laws of the State of New York applicable to
contracts made and to be performed in such State. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and, unless otherwise expressly
stated therein, the other Transaction Documents (whether brought against a party
hereto or its respective Affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York, Borough of Manhattan. Each party 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 under the other Transaction Documents
or in connection herewith or with the other Transaction Documents or with any
transaction contemplated hereby or discussed herein, 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, or that
such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. 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 via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law. THE PARTIES HERETO, TO THE EXTENT PERMITTED BY LAW,
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING ARISING OUT
OF, IN CONNECTION WITH OR RELATING TO, THIS AGREEMENT, THE OTHER TRANSACTION
DOCUMENTS AND ANY TRANSACTION CONTEMPLATED HEREBY AND THEREBY. THIS WAIVER
APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE. EACH PARTY HERETO (A) CERTIFIES THAT NO OTHER PARTY AND NO AGENT,
REPRESENTATIVE OR OTHER PERSON AFFILIATED WITH OR RELATED TO ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10(A).

 

41 

 

b.               Counterparts; Execution. 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 each other party. A facsimile, PDF or other
reproduction of this Agreement may be executed by one or more parties hereto,
and an executed copy of this Agreement may be delivered by one or more parties
hereto by facsimile, e-mail or other electronic transmission device pursuant to
which the signature of or on behalf of such party can be seen, and such
execution and delivery shall be considered valid, binding and effective for all
purposes. The parties hereto hereby agree that no party shall raise the
execution of facsimile, PDF or other reproduction of this Agreement, or the fact
that any signature or document was transmitted or communicated by facsimile,
e-mail or other electronic transmission device, as a defense to the formation of
this Agreement.

 

c.                Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.

 

d.               Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.

 

e.                Entire Agreement; Amendments; Waivers. This Agreement
supersedes all other prior oral or written agreements among each Buyer, the
Company and the Subsidiaries, their affiliates and Persons acting on their
behalf with respect to the matters discussed herein, and this Agreement and the
instruments referenced herein contain the entire understanding of the parties
hereto with respect to the matters covered herein and therein. No provision of
this Agreement may be waived, modified, supplemented or amended other than by an
instrument in writing signed by the Company and the Requisite Buyers; provided,
that no such waiver, modification, supplement or amendment shall be binding on
any Buyer without the written consent of such Buyer (i) to the extent that such
waiver, modification, supplement or amendment changes (A) the Purchase Price to
be paid by such Buyer hereunder, (B) the number of Preferred Shares to be
purchased by such Buyer hereunder or (C) the number of Conversion Shares
issuable upon conversion of such Preferred Shares by such Buyer and (ii) unless
such modification, supplement, amendment or waiver applies to all Buyers in the
same fashion. Any such waiver, modification, supplement or amendment effected in
accordance with this Section 10(e) shall be binding upon all holders of the
Preferred Shares. No failure or delay on the part of a party in either
exercising or enforcing any right under this Agreement shall operate as a waiver
of, or impair, any such right. No single or partial exercise or enforcement of
any such right shall preclude any other or further exercise or enforcement
thereof or the exercise or enforcement of any other right. No waiver of any such
right shall be deemed a waiver of any other right. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification or
supplement of any provision of any of the Transaction Documents unless the same
consideration also is offered to all of the parties hereto or to the other
Transaction Documents or holders of the Preferred Shares, as the case may be.
For clarification purposes, this provision constitutes a separate right granted
to each Buyer and is not intended for the Company to treat the Buyers as a class
and shall not be construed in any way as the Buyers acting in concert or
otherwise as a group with respect to the purchase, disposition or voting of
securities or otherwise.

 

42 

 

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
(except notice may not be delivered to the Company via facsimile) or e-mail
(provided confirmation of transmission is mechanically or electronically
generated and, in the case of an email, a read receipt is received, and in each
case kept on file by the sending party); or (iii) upon receipt, when delivered
by a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:

 

If to the Company:

 

Proteon Therapeutics, Inc.

200 West Street

Waltham, MA 02451

E-mail: SeriesA@Proteontx.com

Attention: President and CEO

 

With copy to:

 

Morgan, Lewis & Bockius LLP

One Federal Street

Boston, Massachusetts 02110-1726

Facsimile: (617) 341-7701

43 

 

E-mail: julio.vega@morganlewis.com

Attention: Julio E. Vega, Esq.

 

If to a Buyer, to it at the address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer’s representatives as set forth on
the Schedule of Buyers, or, in the case of a Buyer or any other party named
above, at such other 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 at least 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 containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or deposit with a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

 

g.               Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, including any purchasers of the Securities. The Company
shall not assign this Agreement or any rights or obligations hereunder,
including by merger or consolidation, prior to the Closing or, after the
Closing, without the prior written consent of the Requisite Buyers. A Buyer may
assign some or all of its rights hereunder without the consent of the Company in
connection with a sale or other transfer of Securities or, prior to the Closing,
to an Affiliate of such Buyer. Notwithstanding anything to the contrary
contained in the Transaction Documents, the Buyers shall be entitled to pledge
the Securities in connection with a bona fide margin account or other loan or
financing arrangement secured by the Securities.

 

h.               No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and, to the extent provided in Section 9, each Indemnitee, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
Person.

 

i.                 Survival. Unless this Agreement is terminated under
Section 8, the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4 and 5 and this Section 10, and the indemnification provisions set
forth in Section 9, shall survive the Closing. Each Buyer shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.

 

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 the 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.               No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties thereto express their
mutual intent, and no rules of strict construction will be applied against any
party.

 

44 

 

l.                 Remedies. The parties hereto agree that (i) irreparable harm
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached,
and (ii) money damages or other legal remedies would not be an adequate remedy
for any such harm. Each Buyer and each holder of the Securities shall have all
rights and remedies set forth in the Transaction Documents and all rights and
remedies that such Buyers and holders have been granted at any time under any
other agreement or contract and all of the rights that such Buyers and 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 or proving actual damages), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.

 

m.             Independent Nature of Buyers. The obligations of each Buyer
hereunder are several and not joint with the obligations of any other Buyer, and
no Buyer shall be responsible in any way for the performance of the obligations
of any other Buyer hereunder. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder. The decision of
each Buyer to purchase the Securities pursuant to this Agreement has been made
by such Buyer independently of any other Buyer and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or any of the Subsidiaries
which may have been made or given by any other Buyer or by any agent or employee
of any other Buyer, and no Buyer or any of its agents or employees shall have
any liability to any other Buyer (or any other Person or entity) relating to or
arising from any such information, materials, statements or opinions. Each Buyer
is represented by its own legal representative and is not relying upon the legal
representative of any other Buyer. Nothing contained herein, and no action taken
by any Buyer pursuant hereto or thereto (including a Buyer’s purchase of
Preferred Shares at the Closing at the same time as any other Buyer or Buyers),
shall be deemed to constitute the Buyers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Buyers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated hereby. Each Buyer shall be
entitled to independently protect and enforce its rights, including the rights
arising out of this Agreement and the other Transaction Documents, and it shall
not be necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.

 

45 

 

n.               Interpretative Matters. Unless the context otherwise requires,
(i) all references to Sections, Schedules or Exhibits are to Sections, Schedules
or Exhibits contained in or attached to this Agreement, (ii) each accounting
term not otherwise defined in this Agreement has the meaning assigned to it in
accordance with GAAP, (iii) words in the singular or plural include the singular
and plural and pronouns stated in either the masculine, the feminine or neuter
gender shall include the masculine, feminine and neuter, (iv) the use of the
word “including” in this Agreement shall be by way of example rather than
limitation, (v) the word “or” shall not be exclusive and (vi) any event, the
scheduled occurrence of which would fall on a day that is not a Business Day,
shall be deferred until the next succeeding Business Day. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant to this Agreement or any of the other
Transaction Documents in connection with the transactions contemplated hereby or
thereby shall be deemed to be representations and warranties by the Company, as
if made by the Company pursuant to Section 3 hereof, as of the date of such
certificate or instrument (including for purposes of Section 7 hereof).

 

* * * * * *

 

46 

 

IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.

 

COMPANY:

 

PROTEON THERAPEUTICS, INC.

 

By: /s/ Timothy Noyes   Name: Timothy Noyes   Title: President and Chief
Executive Officer  

 

 

 

 

 

Signature Page to Securities Purchase Agreement

 

BUYER:

 

ABINGWORTH BIOVENTURES VI, LP

 

By:Abingworth LLP   its Manager          By:/s/ James Abell   Name:James Abell 
Title: Partner 

 

 

 

 

 

Signature Page to Securities Purchase Agreement

 

BUYER:

 

BLACKWELL PARTNERS LLC – SERIES A

By: RA Capital Management, LLC, its Investment Manager

 

 

 

 

By: /s/ Nicholas McGrath   Name: Nicholas McGrath   Title: Authorized Signatory
 

 

 

 

 

 

Signature Page to Securities Purchase Agreement

 

BUYER:

 

DEERFIELD PRIVATE DESIGN FUND IV, L.P.

By: Deerfield Mgmt IV, L.P., its General Partner

By: J.E. Flynn Capital IV, LLC, its General Partner

 

 

 

By: /s/ David Clark   Name: David Clark   Title: Authorized Signatory  

 

 

 

 

 

Signature Page to Securities Purchase Agreement

 

BUYER:

 

FAIRMOUNT HEALTHCARE FUND L.P.

 

 

 

By: /s/ Tomas Kiselak   Name: Tomas Kiselak   Title: Managing Member  

 

 

 

 

 

Signature Page to Securities Purchase Agreement

 

BUYER:

 

INTERSOUTH PARTNERS VI, L.P.

 

By: Intersouth Associates VI, LLC     its General Partner               By: /s/
Mitch Mumma   Name: Mitch Mumma   Title: Managing Member  

 

 

 

 

 

 

Signature Page to Securities Purchase Agreement

 

BUYER:

 

PERCEPTIVE LIFE SCIENCES MASTER FUND LTD

 

 

 

By: /s/ James Mannix   Name: James Mannix   Title: Chief Operating Officer  

 

 

 

 

 

Signature Page to Securities Purchase Agreement

 

BUYER:

 

PHARMSTANDARD INTERNATIONAL S.A.

 

 

 

By: /s/ Eriks Martinovskis   Name: Eriks Martinovskis   Title: Director  

 

 

 

 

 

Signature Page to Securities Purchase Agreement

 

BUYER:

 

RA CAPITAL HEALTHCARE FUND, L.P.

 

By: RA Capital Management, LLC     its General Partner               By: /s/
Nicholas McGrath   Name: Nicholas McGrath   Title: Authorized Signatory  

 

 

 

 

 

Signature Page to Securities Purchase Agreement

 

BUYER:

 

SKYLINE VENTURE PARTNERS QUALIFIED PURCHASER FUND IV, LP

 

By: Skyline Venture Management IV, LLC,     its General Partner              
By: /s/ John G. Freund   Name: John G. Freund   Title: Managing Director  

 

 

 

 

 

Signature Page to Securities Purchase Agreement

 

BUYER:

 

TVM LIFE SCIENCE VENTURES VI GMBH & CO. KG

 

 

 

By: /s/ Josef Moosholzer   Name: Josef Moosholzer   Title: Authorized Officer  

 

 

 

By: /s/ Stefan Fischer   Name: Stefan Fischer   Title: Authorized Officer  

 

 

 

 

 

Signature Page to Securities Purchase Agreement

 

BUYER:

 

TVM LIFE SCIENCE VENTURES VI LP

 

By: its General Partner TVM Life Science     Ventures VI (Cayman) Ltd.          
          By: /s/ Josef Moosholzer   Name: Josef Moosholzer   Title: Authorized
Officer  

 

 

 

By: /s/ Stefan Fischer   Name: Stefan Fischer   Title: Authorized Officer  

 

 

 

 

 

Signature Page to Securities Purchase Agreement

 

SCHEDULE OF BUYERS

 

 

Buyer’s Name

 

Buyer Address

and Facsimile Number

 

Number of Preferred
Shares

Purchase Price Number of Conversion Shares, as of the Closing Date

 

Buyer’s Legal Representative’s

Address and Facsimile Number

 

 

 

 

 

 

   

 

 

Abingworth Bioventures VI, LP

38 Jermyn Street

London SW1Y 6DN

United Kingdom

Facsimile: +44 207 5341539

Email: legal@abingworth.com

Attention: John Heard

2,526 $2,526,000 2,538,949

Foley Hoag LLP

Seaport West

155 Seaport Boulevard

Boston, Massachusetts 02210-2600

Facsimile: 617 832 7000

E-mail: dpierson@foleyhoag.com

Attention: David R. Pierson

Blackwell Partners LLC – Series A

280 S. Mangum Street, Suite 210

Durham, NC 27701

Facsimile: 919-668-9926

Email: blackwell@dumac.duke.edu

Attention: Jannine Lall

66 $66,000 66,338

Latham & Watkins LLP

885 Third Avenue

New York, NY 10022-4834

Facsimile: 212-751-4864

Email: eric.rice@lw.com

Attention: Eric Rice

Deerfield Private Design Fund IV, L.P.

780 Third Avenue, 37th Floor

New York, NY 10017

Facsimile: (646) 536-5662

Email: dclark@deerfield.com

Attention: David J. Clark, Esq.

16,000 $16,000,000 16,082,018

Katten Muchin Rosenman LLP

575 Madison Avenue

New York, NY 10022

Facsimile: (212) 940-8776

E-mail: mark.fisher@kattenlaw.com

mark.wood@kattenlaw.com

Attention: Mark I. Fisher, Esq.

Mark D. Wood, Esq.

Fairmount Healthcare Fund, L.P.

2001 Market Street

Suite 2500

Philadelphia, PA 19103

Facsimile: 267-543-6103

Email: tkiselak@fairmountfunds.com

Attention: Tomas Kiselak

340 $340,000 341,743

Foley Hoag LLP

Seaport West

155 Seaport Boulevard

Boston, Massachusetts 02210-2600

Facsimile: 617 832 7000

E-mail: dpierson@foleyhoag.com

Attention: David R. Pierson

Intersouth Partners VI, L.P.

4711 Hope Valley Road, Suite 4F-632

Durham, NC 27707

Facsimile: 919-493-6649

Email: DJD@Intersouth.com

Attention: Dennis Dougherty

400 $400,000 402,050

Foley Hoag LLP

Seaport West

155 Seaport Boulevard

Boston, Massachusetts 02210-2600

Facsimile: 617 832 7000

E-mail: dpierson@foleyhoag.com

Attention: David R. Pierson

 

 

 

Perceptive Life Sciences Master Fund LTD

51 Astor place, 10th floor

New York, NY 10003

Facsimile: 646 205 5301

Email: Mannix@perceptivelife.com

Attention: James Mannix

340 $340,000 341,743   Pharmstandard International S.A.

10A Rue Henri Schnadt

Luxembourg L-2530

Facsimile: +352 24840134

Email: info@pharmstd.lu

eriks.martinovskis@pharmstd.lu

Attention: Eriks Martinovskis

500 $500,000 502,563

Foley Hoag LLP

Seaport West

155 Seaport Boulevard

Boston, Massachusetts 02210-2600

Facsimile: 617 832 7000

E-mail: dpierson@foleyhoag.com

Attention: David R. Pierson

RA Capital Healthcare Fund, L.P.

c/o RA Capital Management, LLC

20 Park Plaza, Suite 1200

Boston, MA 02116

Facsimile: 617-778-2510

Email: nmcgrath@racap.com

Attention: Nicholas McGrath

274 $274,000 275,405

Latham & Watkins LLP

885 Third Avenue

New York, NY 10022-4834

Facsimile: 212-751-4864

Email: eric.rice@lw.com

Attention: Eric Rice

Skyline Venture Partners Qualified Purchaser Fund IV, LP

525 University Ave., Suite 1350

Palo Alto, CA 94301

Facsimile: 650-329-1090

Email: John@SkylineVentures.com

Attention: John G. Freund

1,054 $1,054,000 1,059,403

Foley Hoag LLP

Seaport West

155 Seaport Boulevard

Boston, Massachusetts 02210-2600

Facsimile: 617 832 7000

E-mail: dpierson@foleyhoag.com

Attention: David R. Pierson

TVM Life Science Ventures VI GmbH & Co. KG

Ottostrasse 4 / Lenbachpalais

80333 Munich

Germany

Facsimile: +49 (89) 998 992 55

Email: fischer@tvm-capital.com

Attention: Stefan Fischer

372 $372,000 373,907

Foley Hoag LLP

Seaport West

155 Seaport Boulevard

Boston, Massachusetts 02210-2600

Facsimile: 617 832 7000

E-mail: dpierson@foleyhoag.com

Attention: David R. Pierson

TVM Life Science Ventures VI LP

75 Arlington Street, Suite 500

Boston, MA 02116

Facsimile: +49 (89) 998 992 55

Email: fischer@tvm-capital.com

Attention: Stefan Fischer

128 $128,000 128,656

Foley Hoag LLP

Seaport West

155 Seaport Boulevard

Boston, Massachusetts 02210-2600

Facsimile: 617 832 7000

E-mail: dpierson@foleyhoag.com

Attention: David R. Pierson

 

 

 

 

DISCLOSURE SCHEDULE

 

to

 

SECURITIES PURCHASE AGREEMENT

 

JUNE 22, 2017

 

This Disclosure Schedule is being delivered in connection with the Securities
Purchase Agreement, dated as of the date hereof (the “Securities Purchase
Agreement”), by and among Proteon Therapeutics, Inc., a Delaware corporation,
with headquarters located at 200 West Street, Waltham, MA 02451 (the “Company”),
and the investors listed on the Schedule of Buyers attached thereto
(individually, a “Buyer” and collectively, the “Buyers”). Capitalized terms not
defined herein shall have the meaning ascribed to such terms in the Securities
Purchase Agreement.

 

This Disclosure Schedule contains the “Schedules” referred to in the
representations and warranties of the Company contained in Section 3 the
Securities Purchase Agreement. The section numbers or subsection numbers used in
this Disclosure Schedule correspond to the section or subsection numbers
contained in the Securities Purchase Agreement. Headings in this Disclosure
Schedule are inserted for convenience only and shall not create any
representation regarding the completeness or accuracy. Any matter disclosed in
any section of this Disclosure Schedule will be considered disclosed for other
sections of the Disclosure Schedule to the extent the applicability of such
disclosure to such other section is reasonably apparent.

 

The disclosure of any information in this Disclosure Schedule does not
constitute an acknowledgement that such information is material, or that such
item would have a Material Adverse Effect, nor does such information establish a
standard of materiality, nor is it an admission of any obligation or liability
to any third party. No party shall use the inclusion of any information in this
Disclosure Schedule in any dispute or controversy between the parties as to
whether any obligation, item or matter not included in this Disclosure Schedule
is or is not material for purposes of the Securities Purchase Agreement. In no
event shall the listing of information in this Disclosure Schedule be deemed or
interpreted to broaden or otherwise amplify the representations and warranties,
obligations, covenants or agreements of the Company contained in the Securities
Purchase Agreement.

 

The information provided in this Disclosure Schedule is being provided solely
for the purpose of making the disclosures to the Buyers under the Securities
Purchase Agreement. In disclosing this information, the Company expressly does
not waive any attorney-client privilege associated with such information or any
protection afforded by the work product doctrine with respect to any of the
matters disclosed or discussed herein.

 

 

 

Schedule 3(a)

 

Organization and Qualification

 

None.

 

 

 

 

Schedule 3(c)

 

Capitalization

 

None.

 

 

 

3 

 

Schedule 3(f)

 

SEC Documents; Financial Statements; Sarbanes-Oxley

 

None.

 

 

 

4 

 

Schedule 3(h)

 

Absence of Certain Changes

 

None.

 

 

 

 

 

5 

 

Schedule 3(i)

 

Absence of Litigation

 

None.

 

6 

 

Schedule 3(r)

 

Personal Property

 

None.

 

 

7 

 

Schedule 4(d)

 

Conduct of Business of the Company

 

None.

 

 

 

 

8 

 

EXHIBIT A

 

CERTIFICATE OF DESIGNATION

 

 

(see attached)

 

 

9 

 

Proteon Therapeutics, Inc.

 

Certificate of Designation of Preferences,
Rights and Limitations
of
Series A Convertible Preferred Stock

 

Pursuant to Section 151(G) of the
Delaware General Corporation Law

 

Proteon Therapeutics, Inc., a Delaware corporation (the “Corporation”), in
accordance with the provisions of Section 103 of the Delaware General
Corporation Law (the “DGCL”), does hereby certify that, in accordance with
Section 151 of the DGCL, the following resolution was duly adopted by the Board
of Directors of the Corporation as of [●], 2017:

 

Resolved, that the Board of Directors of the Corporation, pursuant to authority
expressly vested in it by the provisions of the Certificate of Incorporation of
the Corporation, hereby authorizes the issuance of a series of Preferred Stock
designated as the Series A Convertible Preferred Stock, par value $0.001 per
share, of the Corporation, with a stated value of $1,000 per share, and hereby
fixes the designation, number of shares, powers, preferences, rights,
qualifications, limitations and restrictions thereof (in addition to any
provisions set forth in the Certificate of Incorporation of the Corporation
which are applicable to the Preferred Stock of all classes and series) as
follows:

 

Series A Convertible Preferred Stock

 

Section 1.                Definitions. For the purposes hereof, the following
terms shall have the following meanings:

 

“9.985% Cap” shall have the meaning set forth in Section 7(g).

 

“Affiliate” means any Person (as hereinafter defined) that, directly or
indirectly through one or more intermediaries, controls or is controlled by or
is under common control with such Person, as such terms are used in and
construed under Rule 144 under the Securities Act (“Rule 144”). With respect to
a Holder, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Holder will be deemed
to be an Affiliate of such Holder. As used in this definition of “Affiliate,”
the term “control” means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities or partnership or other ownership
interest, by contract, or otherwise.

 

“Attribution Parties” means, with respect to any Holder, collectively, any of
such Holder’s Affiliates, any Persons acting as a “group” together with such
Holder with respect to the Common Stock for purposes of Section 13(d) of the
Exchange Act, and any other Persons whose beneficial ownership of the Common
Stock would be aggregated with such Holder’s for purposes of Section 13(d) of
the Exchange Act.

 

 10

 

“Board of Directors” means the Board of Directors of the Corporation.

 

“Business Day” means any day except Saturday, Sunday, any day which shall be a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 

“Buy-In Shares” shall have the meaning set forth in Section 7(f)(i).

 

“Bylaws” means the Amended and Restated By-laws of the Corporation, as they may
be amended, restated modified or supplemented and in effect from time to time.

 

“Certificate” means this Certificate of Designation of Preferences, Rights and
Limitations of Series A Convertible Preferred Stock.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the Corporation’s common stock, par value $0.001 per share,
and stock of any other class of securities into which such securities may
hereafter be reclassified or changed.

 

“Conversion Date” shall have the meaning set forth in Section 7(a).

 

“Conversion Notice” shall have the meaning set forth in Section 7(d)(i).

 

“Conversion Price” shall mean, on a per share basis, as of any Conversion Date
or other date of determination, $0.9949, subject to adjustment as provided
herein.

 

“Conversion Rate” shall have the meaning set forth in Section 7(c).

 

“Conversion Shares” shall have the meaning set forth in Section 7(b).

 

“Converting Holder” shall have the meaning set forth in Section 7(d)(i).

 

“Corporation” shall have the meaning set forth in the preamble.

 

“DGCL” shall have the meaning set forth in the preamble.

 

“Distribution” shall have the meaning set forth in Section 3.

 

“DTC” shall have the meaning set forth in Section 7(d)(ii).

 

“DWAC” shall have the meaning set forth in Section 7(d)(ii).

 

“Effective Date” means [●], 2017.

 

 11

 

“Excess Shares” shall have the meaning set forth in Section 7(g).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Fundamental Transaction” shall have the meaning set forth in Section 8(b)(i).

 

“Holder” shall mean each holder of record of shares of Series A Preferred Stock.

 

“HSR Act” shall have the meaning set forth in Section 7(h).

 

“Junior Securities” shall have the meaning set forth in Section 6(a).

 

“National Exchange” means each of the following, together with any successor
thereto: the NYSE MKT, The New York Stock Exchange, the NASDAQ Global Market,
the NASDAQ Global Select Market and the NASDAQ Capital Market.

 

“Parity Securities” shall have the meaning set forth in Section 6(a).

 

“Person” shall mean an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization or a
government or any department or agency thereof or any other legal entity.

 

“Preference Termination Date” means the first date on or following the one-year
anniversary of the date of the Corporation’s receipt of written approval from
the U.S. Food and Drug Administration (the “FDA”) of its Biologics License
Application for the Corporation’s product vonapanitase on which (a) the Volume
Weighted Average Price per share of Common Stock for each of the Trading Days
during any twenty (20) consecutive Trading Day period ending on or after such
one-year anniversary is greater than 200% of the Conversion Price, and (b) the
Chief Executive Officer of the Corporation has delivered written notice (the
“Preference Termination Notice”) to the Holders of the Series A Preferred Stock
certifying as to the satisfaction of the conditions set forth above in this
definition; provided that the Corporation shall have (i) publicly disclosed (by
a widely disseminated press release or filing of a current report on Form 8-K
with the Commission) its receipt of such written approval from the FDA as
promptly as reasonably practicable following the receipt thereof, and (ii)
substantially contemporaneously with the Corporation’s delivery of the
Preference Termination Notice, publicly disclosed (by a widely disseminated
press release or filing of a current report on Form 8-K with the Commission) the
occurrence of the Preference Termination Date.

 

“Principal Market” means the NASDAQ Global Market; however, if the Common Stock
becomes listed on another National Exchange after the Effective Date, then, from
and after such date, the “Principal Market” shall mean such National Exchange.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated
as of [●], 2017, by and among the Corporation and the investors party thereto,
as the same may be amended, restated, modified or supplemented and in effect
from time to time.

 

 12

 

“Registration Statement Effective Date” shall have the meaning set forth in
Section 7(d)(iv).

 

“Requisite Holders” means, as of any date, the Holders of at least 77% of the
then-outstanding shares of Series A Preferred Stock.

 

“Securities” means, collectively, the shares of Series A Preferred Stock and the
Conversion Shares.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Securities Purchase Agreement” means that certain Securities Purchase
Agreement, dated as of June 22, 2017, between the Corporation and the investors
party thereto.

 

“Senior Securities” shall have the meaning set forth in Section 6(a).

 

“Series A Liquidation Preference” means, with respect to each share of Series A
Preferred Stock, an amount equal to $0.001.

 

“Series A Preferred Director” has the meaning set forth in Section 4(b).

 

“Series A Preferred Stock” has the meaning set forth in Section 2(a).

 

“Series A Preferred Stock Register” has the meaning set forth in Section 2(b).

 

“Share Delivery Date” shall have the meaning set forth in Section 7(d)(ii).

 

“Stated Value” shall mean $1,000.

 

“Stock Event” means any stock split, stock combination, reclassification, stock
dividend, recapitalization or other similar transaction of such character that
shares of Common Stock shall be changed into or become exchangeable for a larger
or small number of shares.

 

“Taxes” means all taxes, charges, fees, levies or other like assessments,
including United States federal, state, local, foreign and other net income,
gross income, gross receipts, social security, estimated, sales, use, ad
valorem, franchise, profits, net worth, alternative or add-on minimum, capital
gains, license, withholding, payroll, employment, unemployment, social security,
excise, property, transfer taxes and any and all other taxes, assessments, fees
or other governmental charges, whether computed on a separate, consolidated,
unitary, combined or any other basis together with any interest and any
penalties, additions to tax, estimated taxes or additional amounts with respect
thereto, and including any liability for taxes as a result of being a member of
a consolidated, combined, unitary or affiliated group or any other obligation to
indemnify or otherwise succeed to the tax liability of any other Person.

 

 13

 

“Trading Day” means any day on which the Common Stock is traded on the Principal
Market; provided that “Trading Day” shall not include any day on which the
Common Stock is scheduled to trade, or actually trades, on the Principal Market
for less than 4.5 hours.

 

“Transfer Agent” shall have the meaning set forth in Section 7(d)(ii).

 

“Volume Weighted Average Price” means, for any security as of any date, the U.S.
dollar volume-weighted average price for such security on its Principal Market
during the period beginning at 9:30 a.m., New York City time (or such other time
as the Principal Market publicly announces is the official open of trading), and
ending at 4:00 p.m., New York City time (or such other time as the Principal
Market publicly announces is the official close of trading), as reported by
Bloomberg Markets (or any successor thereto) “Bloomberg”) through its “Volume at
Price” functions, or, if the foregoing does not apply, the dollar
volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at
9:30 a.m., New York City time (or such other time as such over-the-counter
market publicly announces is the official open of trading), and ending at
4:00 p.m., New York City time (or such other time as such over-the-counter
market publicly announces is the official close of trading), as reported by
Bloomberg, or, if no dollar volume-weighted average price is reported for such
security by Bloomberg for such hours, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such
security as reported by OTC Markets Group, Inc. (or any successor thereto). If
the Volume Weighted Average Price cannot be calculated for such security on such
date on any of the foregoing bases, the Volume Weighted Average Price of such
security on such date shall be the fair market value as mutually determined by
the Corporation and the Holders of a majority of the outstanding shares of
Series A Preferred Stock as to which the determination is being made. If the
Principal Market is located in a country other than the United States, the
Volume Weighted Average Price shall be calculated in U.S. dollars using the spot
rate for the purchase of the applicable foreign currency at the close of
business on the immediately preceding Business Day in New York, New York
published in the Wall Street Journal. All such determinations shall be
appropriately adjusted for any Stock Event during any period during which the
Volume Weighted Average Price is being determined. Volume Weighted Average Price
will be determined without regard to after-hours trading or any other trading
outside of the regular trading hours.

 

“Unrestricted Conditions” shall have the meaning set forth in Section 7(d)(iv).

 

Section 2.                Designation, Amount and Par Value; Assignment.

 

(a)                The series of preferred stock designated by this Certificate
shall be designated as the Corporation’s Series A Convertible Preferred Stock
(the “Series A Preferred Stock”), and the number of shares so designated shall
be 22,000 (which shall not be subject to increase without the written consent of
the Requisite Holders ) and shall be designated from the 10,000,000 shares of
Preferred Stock authorized to be issued by the Certificate of Incorporation.
Each share of Series A Preferred Stock shall have a par value of $0.001 per
share.

 

 14

 

(b)               The Corporation shall register, or cause to be registered,
shares of the Series A Preferred Stock, upon records to be maintained by the
Corporation (or the Corporation’s designated transfer agent for the Series A
Preferred Stock) for that purpose (the “Series A Preferred Stock Register”), in
the respective names of the Holders thereof from time to time. The Corporation
may deem and treat the registered Holder of shares of Series A Preferred Stock
as the absolute owner thereof for the purpose of any conversion thereof and for
all other purposes. The Corporation shall register, or cause to be registered,
the transfer of any shares of Series A Preferred Stock in the Series A Preferred
Stock Register, upon surrender of the certificates evidencing such shares to be
transferred, duly endorsed by the Holder thereof (or accompanied by stock powers
or other instruments of transfer duly completed and executed by the Holder
thereof), to the Corporation at its address specified herein. Upon any such
registration or transfer, a new certificate evidencing the shares of Series A
Preferred Stock so transferred shall be issued to the transferee or transferees
and a new certificate evidencing the remaining portion of the shares not so
transferred, if any, shall be issued to the transferring Holder, in each case,
within three Business Days. The shares of Series A Preferred Stock and the
rights evidenced hereby and thereby shall inure to the benefit of and be binding
upon the successors and assigns of the Holder. The provisions of this
Certificate are intended to be for the benefit of all Holders from time to time
and shall be enforceable by any such Holder.

 

(c)                Neither the shares of Series A Preferred Stock nor the
Conversion Shares may be pledged, transferred, sold or assigned except pursuant
to an effective registration statement or an exemption to the registration
requirements of the Securities Act and applicable state laws, including Section
4(a)(7) of the Securities Act, Rule 144 or a so-called “4[(a)](1) and a half”
transaction. For avoidance of doubt, in the event a holder notifies the
Corporation that such sale or transfer is pursuant to an exemption to the
registration requirements of the Securities Act other than pursuant to Rule 144,
the parties agree that a legal opinion from outside counsel for such holder
delivered to counsel for the Corporation substantially in the form attached
hereto as Exhibit A shall be the only requirement that such holder needs to
satisfy to establish the availability of such an exemption from registration
under the Securities Act to effectuate such transaction. Additionally,
notwithstanding anything to the contrary contained herein, no shares of Series A
Preferred Stock may be sold, transferred or assigned if a Conversion Notice has
been delivered to the Corporation with respect to such shares and such
Conversion Notice has not been voided or withdrawn by the applicable Holder.

 

Section 3.                Dividends. If the Corporation shall declare or make
any dividend or other distribution of assets (or rights to acquire assets) to
holders of Common Stock by way of return of capital or otherwise (including any
dividend or other distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement or other similar transaction) (a “Distribution”) at any time after
the Effective Date, then, in each such case, each Holder of Series A Preferred
Stock on the applicable record date with respect to such Distribution (or, if
there is no record date for such Distribution, each Holder of Series A Preferred
Stock immediately prior to the effective date of such Distribution) shall be
entitled to receive such Distribution, and the Corporation shall make such
Distribution to such Holder, exactly as if such Holder had converted such
Holder’s shares of Series A Preferred Stock in full (and, as a result, had held
all of the Conversion Shares that such Holder would have received upon such
conversion, without regard to any limitations or restrictions on conversion)
immediately prior to the record date for such Distribution, or if there is no
record date therefor, immediately prior to the effective date of such
Distribution (but without the Holder’s actually having to so convert such
Holder’s shares of Series A Preferred Stock). For the avoidance of doubt,
payments under the preceding sentence shall be made concurrently with the
Distribution to the holders of Common Stock.

 

 15

 

Section 4.                Voting Rights; Board of Directors.

 

(a)                Except as otherwise provided herein (including with respect
to the matters set forth in Section 5 hereof) or as otherwise required by the
DGCL, the Series A Preferred Stock shall have no voting rights. The Corporation
shall not, however, as long as any shares of Series A Preferred Stock are
outstanding, either directly or indirectly (whether by amendment, corporate
action, by contract, by merger or otherwise), without the written consent of the
Requisite Holders, and any such act or transaction entered into without such
consent shall be null and void ab initio, and of no force or effect: (i) alter
or amend this Certificate or adversely alter or change, directly or indirectly,
the powers, preferences or rights given to the Series A Preferred Stock in this
Certificate, (ii) enter into, or become party or subject to, any agreement that
would adversely affect the rights or powers of, or any restrictions provided for
the benefit of, the Series A Preferred Stock in this Certificate (for clarity,
it being understood and agreed that nothing contained herein shall restrict the
Corporation’s entry into any loan agreement, credit facility, instrument of
indebtedness or similar agreement, whether before or after the Preference
Termination Date, that does not adversely affect the rights or powers of, or any
restrictions provided for the benefit of, the Series A Preferred Stock in this
Certificate), (iii) amend, modify or repeal any provision of the Certificate of
Incorporation of the Corporation or the Bylaws in a manner that would adversely
affect or otherwise impair the rights or priority of the Holders pursuant to
this Certificate relative to the holders of Common Stock or the holders of any
other class of capital stock of the Corporation, (iv) increase the number of
authorized shares of Series A Preferred Stock, (v) declare, pay or set aside any
dividends, whether in cash or property, or make any other distribution, in which
the Holders do not receive, concurrently with such dividend or distribution, the
dividends or distributions to which the Holders are entitled pursuant to Section
3, (vi) consummate or consent to any Fundamental Transaction if such Fundamental
Transaction will not be effected in compliance with Section 8(b); or (vii) enter
into any agreement with respect to any of the foregoing. In respect of all
matters for which the Holders have the right to vote, each share of Series A
Preferred Stock shall be entitled to one vote on such matters.

 

(b)               Prior to the Preference Termination Date, the Holders of
Series A Preferred Stock, voting as a separate class, shall, by the written
consent of the Holders of a majority of the outstanding shares of Series A
Preferred Stock, be entitled to elect one (1) member of the Board of Directors
(the person so elected, the “Series A Preferred Director”). The Series A
Preferred Director’s initial term of office shall expire as of the first annual
meeting of the Corporation’s stockholders following the Effective Date. The
Series A Preferred Director shall hold office until the following year’s annual
meeting of the Corporation’s stockholders and until his or her successor is duly
elected or qualified by the written consent of the Holders of a majority of the
outstanding shares of Series A Preferred Stock or until his or her earlier
death, incapacity, resignation or removal. Such Series A Preferred Director may
be removed from office, with or without cause, upon the written consent of the
Holders of a majority of the outstanding shares of Series A Preferred Stock, and
the Holders of a majority of the outstanding shares of Series A Preferred Stock
shall have the power to fill, by written consent, any vacancy caused by the
resignation, death or removal of such Series A Preferred Director. For purposes
of clarity, the Series A Preferred Director shall not be classified with the
remaining members of the Board of Directors. Each Holder shall be entitled to
notice of any stockholders’ meeting in accordance with the Bylaws.

 

 16

 

(c)                The Series A Preferred Director shall be entitled to the same
compensation, the same indemnification and the same director and officer
insurance in connection with such Series A Preferred Director’s service as a
director as all other non-employee members of the Board of Directors, and the
Series A Preferred Director shall be entitled to reimbursement for documented,
reasonable out-of-pocket expenses incurred in attending meetings of the Board of
Directors and any committees thereof, to the same extent as all other
non-employee members of the Board of Directors. In addition, the Series A
Preferred Director shall be entitled to the same information regarding the
Corporation and its subsidiaries in connection with the Series A Preferred
Director’s service as a director as all other members of the Board of Directors.
The Corporation agrees that any indemnification arrangements described in this
Section 4(c) will be the primary source of indemnification and advancement of
expenses in connection with the matters covered thereby.

 

Section 5.                Protective Provisions Prior to Preference Termination
Date. Prior to the Preference Termination Date, the Corporation shall not,
either directly or indirectly (whether by amendment, corporate action, by
contract, by merger or otherwise), without the written consent of the Requisite
Holders, and any such act or transaction entered into without such consent shall
be null and void ab initio, and of no force or effect:

 

(a)                (i) create, authorize or designate (by reclassification,
merger or otherwise), issue or obligate itself to issue, any Senior Securities
or Parity Securities (including any security convertible into or exchangeable
for any Senior Securities or Parity Securities) or (ii) enter into any agreement
with respect to the foregoing; or

 

(b)               declare, pay or set aside any dividends, whether in cash or
property, or make any other distribution, in respect of, or redeem any, Junior
Securities.

 

Section 6.                Rank; Liquidation.

 

(a)                The Series A Preferred Stock shall rank (i) senior to all of
the Common Stock; (ii) senior to any class or series of capital stock of the
Corporation hereafter created specifically ranking by its terms junior to any
Series A Preferred Stock (“Junior Securities”); (iii) on parity with any class
or series of capital stock of the Corporation created specifically ranking by
its terms on parity with the Series A Preferred Stock (“Parity Securities”); and
(iv) junior to any class or series of capital stock of the Corporation hereafter
created specifically ranking by its terms senior to any Series A Preferred Stock
(“Senior Securities”), in each case, as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntarily
or involuntarily.

 

 17

 

(b)               Subject to any superior liquidation rights of the holders of
any Senior Securities of the Corporation, upon the liquidation, dissolution or
winding up of the Corporation (other than in connection with a Fundamental
Transaction), whether voluntary or involuntary, each Holder shall be entitled to
receive for each share of Series A Preferred Stock, in preference to any
distributions of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock and Junior Securities and pari passu with any
distribution to the holders of Parity Securities, an amount equal to the Series
A Liquidation Preference, plus an amount equal to any dividends declared but
unpaid thereon, before any payments shall be made or any assets distributed to
holders of any class of Common Stock or Junior Securities, and thereafter, the
Holders of the shares of Series A Preferred Stock shall share ratably in any
distributions and payments of any remaining assets of the Corporation, on an as
converted basis (without giving effect to any limitations on conversion set
forth in this Certificate), with the holders of Common Stock and with the
holders of shares of any other class or series of capital stock of the
Corporation entitled to share in such remaining assets of the Corporation on an
as converted to Common Stock basis.

 

Section 7.                Conversion.

 

(a)                Conversion Right. Each Holder shall have the right, at such
Holder’s option, to convert the shares of Series A Preferred Stock held by such
Holder into shares of Common Stock on any date (such date, the “Conversion
Date”) subject to and upon the terms, conditions and limitations set forth in
this Section 7.

 

(b)               Conversion at Option of the Holder. Each Holder shall be
entitled to convert some or all of its shares of Series A Preferred Stock into
fully paid and nonassessable shares of Common Stock (“Conversion Shares”)
subject to, and in accordance with, this Section 7 at the Conversion Rate. The
Corporation shall not issue any fraction of a share of Common Stock upon any
conversion. If the issuance would result in the issuance of a fraction of a
share, then the Corporation shall round such fraction of a share up or down to
the nearest whole share (with 0.5 rounded up). Whether or not fractional shares
would be issuable upon such conversion shall be determined on the basis of the
total number of shares of Series A Preferred Stock the Holder is at the time
converting into Common Stock and the aggregate number of shares of Common Stock
issuable upon such conversion.

 

(c)                Conversion Rate. The number of Conversion Shares issuable
upon conversion of each share of Series A Preferred Stock being converted
pursuant to this Section 7 shall be determined according to the following
formula (the “Conversion Rate”):

 

 18

 

Stated Value
Conversion Price

 

(d)               Mechanics of Conversion. The conversion of Series A Preferred
Stock shall be conducted in the following manner:

 

(i)                 Holder’s Delivery Requirements. To convert shares of
Series A Preferred Stock into Conversion Shares pursuant to this Section 7 on
any date, a Holder seeking to effect such conversion (a “Converting Holder”)
shall (A) transmit by facsimile or electronic mail (or otherwise deliver), for
receipt on or prior to 5:00 p.m. New York City time on such date, a copy of an
executed conversion notice in the form attached hereto as Annex A (the
“Conversion Notice”) to the Corporation (Attention: President and CEO, Email:
SeriesA@Proteontx.com), which Conversion Notice may specify that such conversion
is conditioned upon consummation of a Fundamental Transaction or any other
transaction (such Fundamental Transaction or other transaction, a “Conversion
Triggering Transaction”), and (B) if required pursuant to clause (iii) below,
surrender to a common carrier for delivery to the Corporation, no later than
three (3) Business Days after the Conversion Date, the original stock
certificates representing the shares of Series A Preferred Stock being converted
(or an indemnification undertaking in customary form with respect to such shares
in the case of the loss, theft or destruction of any stock certificate
representing such shares) (or, if the conversion is conditioned upon the
consummation of a Conversion Triggering Transaction, on the date of (and
immediately prior to) the consummation of such Conversion Triggering
Transaction). For purposes of determining the maximum number of Conversion
Shares that the Corporation may issue to a Holder pursuant to this Section 7
upon conversion of shares of Series A Preferred Stock on a particular Conversion
Date, such Holder’s delivery of a Conversion Notice with respect to such
conversion shall constitute a representation by such Holder (on which the
Corporation shall rely) that, upon the issuance of the Conversion Shares to be
issued to it on such Conversion Date, the shares of Common Stock beneficially
owned by such Holder and its Attribution Parties (including shares held by any
“group” of which such Holder is a member) will not exceed the 9.985% Cap, as
determined in accordance with Section 7(g).

 

(ii)               Corporation’s Response. Upon receipt or deemed receipt by the
Corporation of a copy of a Conversion Notice, the Corporation (A) shall as
promptly as possible send, via email, a confirmation of receipt of such
Conversion Notice to the Converting Holder and the Corporation’s designated
transfer agent (the “Transfer Agent”), which confirmation (i) shall be sent to
the Converting Holder at the email address specified by the Converting Holder
pursuant to such Conversion Notice and to the Transfer Agent at the email
address previously specified by the Transfer Agent for this purpose and (ii)
shall include an instruction to the Transfer Agent to process such Conversion
Notice in accordance with the terms herein, and (B) on or before the third (3rd)
Business Day following the date of receipt or deemed receipt by the Corporation
of such Conversion Notice (or, if earlier, the end of the standard settlement
period for U.S. broker-dealer securities transactions, or, if the conversion is
conditioned upon the consummation of a Conversion Triggering Transaction,
immediately prior to the consummation of such Conversion Triggering Transaction)
(the “Share Delivery Date”), (x) credit, or cause to be credited, such aggregate
number of Conversion Shares to which the Converting Holder shall be entitled to
the Converting Holder’s or its designee’s balance account with The Depository
Trust Company (“DTC”) through its Deposit/Withdrawal at Custodian (“DWAC”)
system, or (y) if none of the Unrestricted Conditions is then satisfied,
deliver, or cause to be delivered, a stock certificate to the address designated
by the Converting Holder, in each case, for the number of Conversion Shares to
which the Converting Holder shall be entitled. If the number of shares of
Series A Preferred Stock represented by any stock certificate surrendered by the
Converting Holder is greater than the number of shares of Series A Preferred
Stock being converted, then the Corporation shall, as soon as practicable and in
no event later than three (3) Business Days after receipt of such stock
certificates and at its own expense, issue and deliver to the Converting Holder
a new certificate representing shares of the Series A Preferred Stock not so
converted.

 

 19

 

(iii)             Book-Entry. Notwithstanding anything to the contrary set forth
herein, upon conversion of shares of Series A Preferred Stock in accordance with
the terms hereof, no Holder shall be required to physically surrender the
certificate representing the shares of Series A Preferred Stock, if any, to the
Corporation unless the full number of shares of Series A Preferred Stock
represented by the certificate are being converted. Each Holder and the
Corporation shall maintain records showing the number of shares of Series A
Preferred Stock so converted and the dates of such conversions or shall use such
other method, reasonably satisfactory to such Holder and the Corporation, so as
not to require physical surrender of the certificate representing the shares of
Series A Preferred Stock, if any, upon each such conversion. In the event of any
dispute or discrepancy, such records of the Corporation shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if shares of Series A Preferred Stock represented by a certificate are converted
as aforesaid, such Holder may not transfer the certificate representing the
shares of Series A Preferred Stock unless such Holder first physically
surrenders the certificate representing the shares of Series A Preferred Stock
to the Corporation, whereupon the Corporation will forthwith issue and deliver
upon the order of such Holder a new certificate of like tenor, registered as
such Holder may request, representing in the aggregate the remaining number of
shares of Series A Preferred Stock represented by such certificate. Each Holder
and any assignee, by acceptance of a certificate, acknowledge and agree that, by
reason of the provisions of this paragraph, following conversion of any shares
of Series A Preferred Stock, the number of shares of Series A Preferred Stock
represented by any such certificate may be less than the number of shares of
Series A Preferred Stock stated of the face thereof.

 

 20

 

(iv)             Restrictive Legends. Until such time as shares of Series A
Preferred Stock or Conversion Shares have been registered under the Securities
Act as contemplated by the Registration Rights Agreement or otherwise may be
sold pursuant to Rule 144 or an exemption from registration under the Securities
Act without any restriction as to the number of securities as of a particular
date that can then be immediately sold, such Securities may bear the Securities
Act Legend (as defined in Securities Purchase Agreement). The certificates (or
electronic book entries, if applicable) evidencing any Securities shall not
contain or be subject to any legend restricting the transfer thereof (including
the Securities Act Legend) or be subject to any stop-transfer instructions:
(A) while a registration statement (including a Registration Statement (as such
term is defined in the Registration Rights Agreement)) covering the sale or
resale of such Security is effective under the Securities Act, (B) if the holder
of Securities provides the Corporation customary seller and, as applicable,
broker paperwork or other reasonable assurances to the effect that such
Securities have been or are being sold pursuant to Rule 144, (C) if such
Securities are eligible for sale under Rule 144(b)(1) and the Holder thereof is
not, and has not been during the preceding three months, an Affiliate of the
Corporation (subject to the Holder’s delivery to the Corporation of a customary
non-affiliate representation letter), or (D) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission)
(collectively, the “Unrestricted Conditions”). Promptly following the
Registration Statement Effective Date or such other time as any of the
Unrestricted Conditions have been satisfied, the Corporation shall cause its
counsel to issue a legal opinion or other instruction to the Transfer Agent (if
required by the Transfer Agent) to effect the issuance of the applicable shares
of Series A Preferred Stock or Conversion Shares without a restrictive legend
or, in the case of shares of Series A Preferred Stock or Conversion Shares that
have previously been issued, the removal of the legend thereunder. If any of the
Unrestricted Conditions are met with respect to any shares of Series A Preferred
Stock or Conversion Shares at the time of issuance of such Security, then such
Security shall be issued free of all legends.  The Corporation agrees that,
following the Registration Statement Effective Date in the case of Conversion
Shares, or at such time as any of the other Unrestricted Conditions are met or
such legend is otherwise no longer required under this Section 7(d)(iv), it
will, no later than three (3) Trading Days (or if earlier, the number of Trading
Days comprising the standard settlement period for U.S. broker-dealer securities
transactions) following the delivery by the holder thereof to the Corporation or
the Transfer Agent of any certificate representing shares of Series A Preferred
Stock or Conversion Shares, as applicable, issued with a restrictive legend,
deliver or cause to be delivered to such holder a certificate (or electronic
transfer) representing such Securities that is free from all restrictive and
other legends.  For purposes hereof, “Registration Statement Effective Date”
shall mean the date that the first Registration Statement that the Corporation
is required to file pursuant to the Registration Rights Agreement has been
declared effective by the Commission. Notwithstanding the foregoing, the
certificates (or electronic book entries, if applicable) evidencing any Series A
Preferred Stock shall at all times (whether before or after that satisfaction of
any Unrestricted Condition or the Registration Statement Effective Date) bear a
legend indicating that no shares of Series A Preferred Stock may be sold,
transferred or assigned if a Conversion Notice has been delivered to the
Corporation with respect to such shares and such Conversion Notice has not been
voided or withdrawn.

 

(e)                Record Holder. The Person or Persons entitled to receive the
Conversion Shares issuable upon a conversion of Series A Preferred Stock shall
be treated for all purposes as the legal and record holder or holders of such
Conversion Shares upon delivery by a Converting Holder of the Conversion Notice.

 

 21

 

(f)                Corporation’s Failure to Timely Convert.

 

(i)                 Cash Damages. If by the Share Delivery Date, the Corporation
shall fail to issue and deliver a certificate to a Converting Holder for, or
credit such Converting Holder’s or its designee’s balance account with DTC with,
the number of Conversion Shares to which such Converting Holder is entitled
pursuant to this Section 7 (provided any Unrestricted Condition is satisfied,
free of any restrictive legend), then, such Converting Holder shall reasonably
promptly provide written notice to the Corporation that such Converting Holder
was not issued the number of Conversion Shares to which such Converting Holder
is entitled pursuant to this Section 7, and, in addition to all other available
remedies that such Converting Holder may pursue hereunder, the Corporation shall
pay additional damages to such Converting Holder for each day after the date
such written notice is delivered that such conversion is not timely effected in
an amount equal to one percent (1%) of the product of (I) the number of
Conversion Shares not issued to the Converting Holder or its designee on or
prior to the Share Delivery Date and to which the Series A Holder is entitled
and (II) the Volume Weighted Average Price of the Common Stock on the Share
Delivery Date. Alternatively, in lieu of the foregoing damages, if applicable,
at the written election of the applicable Converting Holder made in such
Converting Holder’s sole discretion, if, on or after the applicable Share
Delivery Date, such Converting Holder purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by
such Converting Holder of Conversion Shares that such Converting Holder
anticipated receiving from the Corporation (such purchased shares, “Buy-In
Shares”), the Corporation shall be obligated to promptly pay to such Series A
Holder (in addition to all other available remedies that the Series A Holder may
otherwise have), 105% of the amount by which (A) such Converting Holder’s total
purchase price (including brokerage commissions, if any) for such Buy-In Shares
exceeds (B) the net proceeds received by such Converting Holder from the sale of
the number of shares equal to up to the number of Conversion Shares such
Converting Holder was entitled to receive but had not received on the Share
Delivery Date. If the Corporation fails to pay the additional damages set forth
in this Section 7(f)(i) within five (5) Business Days of the date incurred, then
the Converting Holder entitled to such payments shall have the right at any
time, so long as the Corporation continues to fail to make such payments, to
require the Corporation, upon written notice, to immediately issue, in lieu of
such cash damages, the number of shares of Common Stock equal to the quotient of
(X) the aggregate amount of the damages payments described herein divided by
(Y) the Conversion Price.

 

(ii)               Void Conversion Notice. If for any reason a Converting Holder
has not received all of the Conversion Shares prior to the tenth (10th) Business
Day after the Share Delivery Date with respect to a conversion of Series A
Preferred Stock, then such Converting Holder, upon written notice to the
Corporation, may void its conversion with respect to, and retain or have
returned, as the case may be, any shares of Series A Preferred Stock that have
not been converted pursuant to such Converting Holder’s Conversion Notice;
provided, that the voiding of such Converting Holder’s Conversion Notice shall
not affect the Corporation’s obligations to make any payments that have accrued
prior to the date of such notice pursuant to Section 7(f)(i) or otherwise.

 

 22

 

(iii)             Obligation Absolute. Subject to Section 7(g) and Section 7(h)
hereof and subject to a Holder’s right to void a conversion pursuant to Section
7(f)(ii) above, the Corporation’s obligation to issue and deliver the Conversion
Shares upon conversion of Series A Preferred Stock in accordance with the terms
hereof are absolute and unconditional, irrespective of any action or inaction by
a Holder to enforce the same, any waiver or consent with respect to any
provision hereof, the recovery of any judgment against any Person or any action
to enforce the same, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by such Holder or any other Person
of any obligation to the Corporation or any violation or alleged violation of
law by such Holder or any other person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Corporation to
such Holder in connection with the issuance of such Conversion Shares. Subject
to Section 7(g) and Section 7(h) hereof and subject to a Holder’s right to void
a conversion pursuant to Section 7(f)(ii) above, in the event a Holder shall
elect to convert any or all of its Series A Preferred Stock, the Corporation may
not refuse conversion based on any claim that such Holder or anyone associated
or affiliated with such Holder has been engaged in any violation of law,
agreement or for any other reason, unless an injunction from a court, on notice
to Holder, restraining and/or enjoining conversion of all or part of the Series
A Preferred Stock of such Holder shall have been sought and obtained, and the
Corporation posts a surety bond for the benefit of such Holder in the amount of
125% of the value of the Conversion Shares into which would be converted the
Series A Preferred Stock which is subject to the injunction, which bond shall
remain in effect until the completion of arbitration/litigation of the
underlying dispute and the proceeds of which shall be payable to such Holder to
the extent it obtains judgment.

 

(g)               Limitations on Share Issuances. Notwithstanding anything
herein to the contrary, the Corporation shall not issue to any Holder, and no
Holder may acquire, a number of shares of Common Stock hereunder (pursuant to
this Section 7(g) or otherwise) to the extent that, upon such issuance, the
aggregate number of shares of Common Stock then beneficially owned by such
Holder together with any Attribution Parties (including shares held by any
“group” of which such Holder is a member) would exceed 9.985% of the total
number of shares of Common Stock then issued and outstanding (the “9.985% Cap”).
For purposes of the foregoing sentence, the aggregate number of shares of Common
Stock beneficially owned by such Holder and its Attribution Parties shall
include the number of shares of Common Stock held by the Holder and all of its
Attribution Parties plus the number of shares of Common Stock issuable upon
conversion of such shares of Series A Preferred Stock with respect to which the
determination of such sentence is being made, but shall exclude shares of Common
Stock which would be issuable upon (i) conversion of the remaining, unconverted
portion of the shares of Series A Preferred Stock beneficially owned by such
Holder or any of its Attribution Parties and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Corporation
beneficially owned by such Holder or any of its Attribution Parties subject to a
limitation on conversion or exercise analogous to the limitation contained in
this Section 7(g). For purposes hereof, “group” has the meaning set forth in
Section 13(d) of the Exchange Act and applicable regulations of the Commission,
and the percentage held by each Holder shall be determined in a manner
consistent with the provisions of Section 13(d) of the Exchange Act.

 

 23

 

For purposes of the 9.985% Cap, in determining the number of outstanding shares
of Common Stock, a Holder may rely on the number of outstanding shares as
reflected in (1) the Corporation’s most recent quarterly report on Form 10-Q or
annual report on Form 10-K, as the case may be, (2) a more recent public
announcement by the Corporation or (3) any other notice by the Corporation or
the transfer agent for the Common Stock setting forth the number of shares
outstanding. Upon written request of any Holder at any time, the Corporation
shall, within one (1) Business Day, confirm orally and in writing to such Holder
the number of shares of Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Corporation by such Holder and
its Attribution Parties since the date as of which the number of outstanding
shares of Common Stock was reported.

 

In the event that the issuance of shares of Common Stock to any Holder upon the
conversion of any of such Holder’s shares of Series A Preferred Stock results in
such Holder and its Attribution Parties being deemed to beneficially own, in the
aggregate, a number of shares of Common Stock that exceeds the 9.985% Cap, the
issuance of that number of shares so issued in excess of the 9.985% Cap (the
“Excess Shares”), and the conversion of shares of Series A Preferred Stock
resulting in such issuance, shall be deemed null and void and shall be cancelled
ab initio, such Holder shall not have the power to vote or to transfer the
Excess Shares, and the shares of Series A Preferred Stock as to which the
conversion was voided shall remain outstanding and continue to be held by such
Holder. As soon as reasonably practicable after such issuance and conversion
have been deemed null and void, the Corporation shall return to such Holder
certificates representing the number of shares of Series A Preferred Stock
corresponding to the voided issuance and conversion (to the extent such shares
of Series A Preferred Stock were surrendered to the Corporation).

 

For purposes of clarity, the shares of Common Stock underlying any Holder’s
shares of Series A Preferred Stock in excess of the 9.985% Cap shall not be
deemed to be beneficially owned by such Holder for any purpose, including for
purposes of Section 13(d) or Rule 16a-1(a)(1) of the Exchange Act. The
provisions of this Section 7(g) shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 7(g) to the
extent necessary to correct this paragraph or any portion of this paragraph
which may be defective or inconsistent with the intended beneficial ownership
limitation contained in this Section 7(g) or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The
limitation contained in this Section 7(g) may not be waived and shall apply to
any successor Holder of shares of Series A Preferred Stock.

 

(h)               HSR Act. If any Holder determines that, in connection with a
conversion of the shares of Series A Preferred Stock pursuant to this Section 7,
such Holder is required to file Premerger Notification Reporting with a
Governmental Authority (as such term is defined in the Securities Purchase
Agreement) under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as
amended, and the related rules and regulations promulgated thereunder (the “HSR
Act”), the Corporation agrees to (i) cooperate with such Holder in order for
such Holder to prepare and make such submission and any responses to inquiries
of the applicable Governmental Authority; (ii) prepare and make any submission
required to be filed by the Corporation under the HSR Act in connection with
such Holder’s submission and respond to inquiries of the applicable Governmental
Authority; and (iii) reimburse such Holder for the cost of the required filing
fee for such Holder’s submission under the HSR Act. In any such case, the
Corporation shall have no obligation to issue or deliver such Conversion Shares
until the applicable waiting period under the HSR Act with respect to such
issuance has expired.

 

 24

 

(i)                 Taxes. The Corporation shall be responsible for any
liability with respect to any transfer, stamp, documentary, intangible,
recording or similar non-income Taxes that may be payable in connection with the
execution, delivery and performance of this Certificate, including any such
Taxes with respect to the issuance or transfer of shares of Series A Preferred
Stock or the Conversion Shares. Notwithstanding any provision herein to the
contrary, the Corporation shall (A) be entitled to deduct and withhold from any
payments (which shall include, for purposes of this Section 7(i), Conversion
Shares issued upon conversion of Series A Preferred Stock to the extent
attributable to declared but unpaid dividends, if any) made to a holder of any
Securities, such amounts that the Corporation may be required to withhold under
applicable U.S. federal withholding Tax requirements (including without
limitation under Sections 1471 through 1474 of the Internal Revenue Code of
1986, as amended) and (B) not be responsible for or liable for any Taxes imposed
on, or measured by, net income (however denominated), franchise Taxes, and
branch profits Taxes, in each case,  imposed as a result of a payee (or
 beneficial owner of a payment) being organized under the laws of, or having its
principal office in, the jurisdiction imposing such Tax (or any political
subdivision thereof). The Corporation shall provide the applicable payee with
five (5) Business Days’ advance notice of any such required withholding and
shall reasonably cooperate with such holder to mitigate or reduce such
withholding.  Any amounts withheld pursuant to clause (A) above shall be treated
for purposes hereof as if paid to the relevant payee.

 

Section 8.                Certain Adjustments; Calculations; Notices.

 

(a)                Stock Dividends and Stock Splits. If the Corporation shall at
any time effect a Stock Event, then, upon the effective date of such Stock
Event, the Conversion Price shall be, in the case of an increase in the number
of shares of Common Stock, proportionally decreased and, in the case of a
decrease in the number of shares of Common Stock, proportionally increased. The
Corporation shall give each Holder the same notice it provides to holders of
Common Stock of any transaction described in this Section 8(a).

 

 25

 

(b)               Fundamental Transaction.

 

(i)                 The term “Fundamental Transaction” shall mean the occurrence
of any of the following at any time while any shares of Series A Preferred Stock
are outstanding: (A) the Corporation, directly or indirectly, in one or more
related transactions, effects any merger or consolidation of the Corporation
with or into another Person, (B) the Corporation, directly or indirectly, in one
transaction or a series of related transactions, effects any sale of all or
substantially all of its assets (including, for the avoidance of doubt, all or
substantially all of the assets of the Corporation and its subsidiaries in the
aggregate), and distributes the proceeds therefrom to the holders of capital
stock of the Corporation, (C) any tender offer or exchange offer (whether by the
Corporation or another Person) approved by the Board of Directors is completed
pursuant to which holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash and/or other property or (D) the
Corporation, directly or indirectly, in one transaction or a series of related
transactions, effects any reclassification of the Common Stock or any compulsory
share exchange (other than as a result of a Stock Event covered by Section 8(a)
above) pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash and/or other property. Upon or following
the occurrence of any Fundamental Transaction, each share of Series A Preferred
Stock outstanding shall thereafter be convertible (or, to the extent a
Conversion Notice contingent upon consummation of such Fundamental Transaction
has been previously delivered (and has not been voided or otherwise withdrawn)
with respect to such share, shall automatically convert) into the kind and
amount of securities, cash and/or other property which a Holder of the number of
shares of Common Stock of the Corporation issuable upon conversion of one share
of Series A Preferred Stock immediately prior to such Fundamental Transaction
would have been entitled to receive pursuant to such Fundamental Transaction
(without regard to any limitation on the conversion of Series A Preferred Stock
(including the 9.985% Cap)); provided, that, if such Fundamental Transaction
occurs prior to the Preference Termination Date, then, if the value of the
aggregate of such securities, cash and/or other property to which the Holder of
one share of Series A Preferred Stock would be entitled upon conversion thereof
would be less than the Stated Value, then each outstanding share of Series A
Preferred Stock shall instead thereafter be convertible (or, to the extent a
Conversion Notice contingent upon consummation of such Fundamental Transaction
has been previously delivered (and has not been voided or otherwise withdrawn)
with respect to such share, shall automatically convert) into such kind of
securities, cash and/or other property (in the same proportions as would be
applicable but for this proviso) with an aggregate value equal to the Stated
Value. The Corporation shall make an appropriate adjustment to the Conversion
Price following a Fundamental Transaction based on a determination in accordance
with Section 8(b)(ii) of the amount and relative value of the securities, cash
and/or other property issuable in respect of one share of Common Stock in such
Fundamental Transaction. If holders of Common Stock are given any choice as to
the securities, cash and/or other property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the
securities, cash and/or other property it receives upon any conversion of the
Series A Preferred Stock following such Fundamental Transaction. The Corporation
shall cause any successor entity (as well as its parent) in a Fundamental
Transaction in which the Corporation is not the survivor to assume in writing
all of the obligations of the Corporation under this Certificate in accordance
with the provisions of this Section 8(b) pursuant to written agreements in form
and substance approved by the Requisite Holders prior to such Fundamental
Transaction.

 

 26

 

(ii)               For purposes of determining the value of any securities
and/or other property to which a holder of shares of Common Stock would be
entitled pursuant to a Fundamental Transaction: (A) the value of any such
security that is traded on a National Exchange at the effective time of the
Fundamental Transaction shall be equal to the Volume Weighted Average Price per
share of such securities for the five (5) Trading Days immediately prior to such
effective time; and (B) the value of any other property (including a security
that is not traded on a National Exchange at the effective time of the
Fundamental Transaction) shall be equal to the fair market value thereof as
determined by the mutual agreement of the Corporation and the Requisite Holders.

 

(c)                Certain Events. If any event occurs of the type contemplated
by the provisions of Section 8(a) or Section 8(b) but not expressly provided for
by such provisions, then the Board of Directors will make an appropriate
adjustment in the Conversion Price so as to protect the rights of the Holders;
provided, however, that no such adjustment will increase the Conversion Price as
otherwise determined pursuant to this Section 8.

 

(d)               Calculations. All calculations under this Section 8 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 8, the number of shares of Common Stock deemed to
be issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding any treasury shares of the Corporation) issued
and outstanding.

 

(e)                Adjustment Notices.

 

(i)                 Promptly following, but in no event later than one (1)
Business Day after, any adjustment of the Conversion Price pursuant to Section
8(a), the Corporation will give written notice thereof to each Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.

 

(ii)               The Corporation will give written notice to each Holder at
least ten (10) days prior to the date on which the Corporation closes its books
or takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock, or (C) for determining rights to vote with respect to any
Fundamental Transaction or winding-up, dissolution or liquidation of the
Corporation; provided, however, that in no event shall such notice be provided
to any Holder prior to such information being made known to the public.

 

(iii)             The Corporation will give written notice to each Holder at
least ten (10) days prior to the date on which any Fundamental Transaction,
dissolution or liquidation will take place, and in no event shall such notice be
provided to any Holder prior to such information being made known to the public.

 

Section 9.                Dispute Resolution. In the case of a dispute between
the Corporation and any Holder (i) as to the value of any asset or other
property pursuant to Section 6, in connection with any liquidation, dissolution
or winding up of the Corporation, or Section 8(b), in connection with any
Fundamental Transaction, or (ii) as to the determination of any adjustment to
the Conversion Price following a Fundamental Transaction pursuant to Section
8(b), the Corporation shall promptly (and in any event within two (2) Business
Days of notice of any such dispute from such Holder) submit via facsimile the
disputed value of such asset or other property, or the disputed determination of
such adjustment to the Conversion Price, as applicable, to an independent,
reputable investment banking firm agreed to by the Corporation and the Requisite
Holders. The Corporation shall direct the investment bank to determine the value
of such asset or other property, or the adjustment to the Conversion Price, as
applicable, and notify the Corporation and such Holder of the results no later
than two (2) Business Days from the time the investment bank receives the
disputed value or disputed determination, as applicable. Such investment bank’s
determination of the value of any such asset or other property, or of the
adjustment to the Conversion Price, as applicable, shall be binding upon all
parties absent manifest error.

 

 27

 

Section 10.            Reservation of Shares. The Corporation shall, so long as
any of the shares of Series A Preferred Stock are outstanding, reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the shares of Series A Preferred Stock,
such number of shares of Common Stock as shall, from time to time, be sufficient
to effect the conversion of all of the shares of Series A Preferred Stock then
outstanding (without regard to any limitations on conversions (including the
9.985% Cap)). The number of shares of Common Stock reserved for conversions of
the shares of Series A Preferred Stock shall be allocated pro rata among the
Holders based on the number of shares of Series A Preferred Stock held by each
Holder. In the event a Holder shall sell or otherwise transfer any of such
Holder’s shares of Series A Preferred Stock, each transferee shall be allocated
a pro rata portion of the number of reserved shares of Common Stock reserved for
such transferor. Any shares of Common Stock reserved and which remain allocated
to any Person which does not hold any shares of Series A Preferred Stock shall
be allocated to the remaining Holders, pro rata based on the number of shares of
Series A Preferred Stock then held by each such Holder.

 

Section 11.            Miscellaneous.

 

(a)                Notices. Any and all notices or other communications or
deliveries to be provided by the Holders hereunder including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by electronic mail to SeriesA@Proteontx.com, or sent by a nationally recognized
overnight courier service, addressed to the Corporation, at its principal place
of business, to the attention of the President and Chief Executive Officer of
the Corporation, with a copy to the Legal Department, or such other electronic
mail address or address as the Corporation may specify for such purposes by
notice to the Holders delivered in accordance with this Section 11(a). Any and
all notices or other communications or deliveries to be provided by the
Corporation hereunder shall be in writing and delivered personally, by confirmed
electronic mail or facsimile, or sent by a nationally recognized overnight
courier service addressed to each Holder at the electronic mail address,
facsimile number or address of such Holder appearing on the books of the
Corporation, or if no such facsimile number or address appears on the books of
the Corporation, at the principal place of business of such Holder. Except as
otherwise expressly provided herein, any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of
(i) the time and date of transmission, if such notice or communication is
delivered via electronic mail at the e-mail address specified in this Section
11(a) prior to 4:00 p.m. (New York City time) on any date, (ii) the date
immediately following the date of transmission, if such notice or communication
is delivered via email at the email address specified in this Section 11(a)
between 4:00 p.m. and 11:59 p.m. (New York City time) on any date, (iii) the
second Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given.

 

 28

 

(b)               Absolute Obligation. Except as expressly provided herein, no
provision of this Certificate shall alter or impair the obligation of the
Corporation, which is absolute and unconditional, to pay liquidated damages on
the shares of Series A Preferred Stock at the time, place, and rate, and in the
coin or currency, herein prescribed.

 

(c)                Lost or Mutilated Series A Preferred Stock Certificate. If a
Holder’s Series A Preferred Stock certificate shall be mutilated, lost, stolen
or destroyed, the Corporation shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated certificate, or in lieu of
or in substitution for a lost, stolen or destroyed certificate, a new
certificate for the shares of Series A Preferred Stock so mutilated, lost,
stolen or destroyed, but only upon receipt of evidence of such loss, theft or
destruction of such certificate, and of the ownership thereof reasonably
satisfactory to the Corporation and, in each case, customary and reasonable
indemnity, if requested. Applicants for a new certificate under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Corporation
may prescribe.

 

(d)               Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Certificate shall be cumulative
and in addition to all other remedies available under this Certificate, at law
or in equity (including a decree of specific performance and/or other injunctive
relief), no remedy contained herein shall be deemed a waiver of compliance with
the provisions giving rise to such remedy and nothing herein shall limit a
Holder’s right to pursue actual damages for any failure by the Corporation to
comply with the terms of this Certificate. The Corporation covenants to each
Holder that there shall be no characterization concerning this instrument other
than as expressly described herein. Amounts set forth or provided for herein
with respect to payments, conversion and the like (and the computation thereof)
shall be the amounts to be received by the holder thereof and shall not, except
as expressly provided herein, be subject to any other obligation of the
Corporation (or the performance thereof). The Corporation acknowledges that a
breach by it of its obligations hereunder may cause irreparable harm to the
Holders by vitiating the intent and purpose of the transactions contemplated by
this Certificate and that the remedy at law for any such breach may be
inadequate. The Corporation therefore agrees that, in the event of any such
breach or threatened breach by the Corporation of the provisions of this
Certificate, the Holders shall be entitled, in addition to all other available
remedies, to an injunctive order and/or injunction restraining any breach and
requiring immediate compliance, without the necessity of showing economic loss
and without any bond or other security being required.

 

 29

 

(e)                Waiver. Any waiver by the Corporation or a Holder of a breach
of any provision of this Certificate shall not operate as or be construed to be
a waiver of any other breach of such provision or of any breach of any other
provision of this Certificate or a waiver by any other Holders. The failure of
the Corporation or a Holder to insist upon strict adherence to any term of this
Certificate on one or more occasions shall not be considered a waiver or deprive
that party (or any other Holder) of the right thereafter to insist upon strict
adherence to that term or any other term of this Certificate. Any waiver by the
Corporation or a Holder must be in writing.

 

(f)                Severability. If any provision of this Certificate is
invalid, illegal or unenforceable, the balance of this Certificate shall remain
in effect, and if any provision is inapplicable to any Person or circumstance,
it shall nevertheless remain applicable to all other Persons and circumstances.
If it shall be found that any interest or other amount deemed interest due
hereunder violates the applicable law governing usury, the applicable rate of
interest due hereunder shall automatically be lowered to equal the maximum rate
of interest permitted under applicable law. Notwithstanding any provision in
this Certificate to the contrary, any provision contained herein (other than
Section 7(c) which cannot be waived by the Holders) and any right of the Holders
of Series A Preferred Stock granted hereunder may be waived as to all shares of
Series A Preferred Stock (and the Holders thereof) upon the written consent of
the Requisite Holders, unless a higher percentage is required by the DGCL, in
which case the written consent of the holders of not less than such higher
percentage shall be required.

 

(g)               Next Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day.

 

(h)               Headings. The headings contained herein are for convenience
only, do not constitute a part of this Certificate and shall not be deemed to
limit or affect any of the provisions hereof.

 

(i)                 Status of Converted Series A Preferred Stock. If any shares
of Series A Preferred Stock shall be converted or reacquired by the Corporation,
such shares of Series A Preferred Stock shall resume the status of authorized
but unissued shares of preferred stock and shall no longer be designated as
Series A Preferred Stock.

 

(j)                 Benefit of Holders. The provisions of this Certificate are
intended to be for the benefit of all Holders from time to time and shall be
enforceable by any such Holder.

 

*********************

 

 30

 

Resolved, Further, that the Chairperson, the president or any vice-president,
and the secretary or any assistant secretary, of the Corporation be, and they
hereby are, authorized and directed to prepare and file a Certificate of
Designation of Preferences, Rights and Limitations in accordance with the
foregoing resolution and the provisions of Delaware law.

 

In Witness Whereof, the undersigned has executed this Certificate of Designation
this ____ day of _____________, 2017.

 

  Name:   Title:  

 

 31

 

Annex A

 

Conversion Notice

 

(To be executed by the Registered Holder in order to convert shares of Series A
Preferred Stock)

 

Reference is made to the Certificate of Designation of Preferences, Rights and
Limitations of Series A Convertible Preferred Stock (the “Certificate of
Designation”). In accordance with and pursuant to the Certificate of
Designation, the undersigned hereby elects to convert the number of shares of
Series A Convertible Preferred Stock, par value $0.001 per share and with a
stated value of $1,000 per share (the “Series A Preferred Stock”), of Proteon
Therapeutics, Inc., a Delaware corporation (the “Corporation”), indicated below
into shares of common stock, par value $0.001 per share (the “Common Stock”), of
the Corporation, by tendering the stock certificate(s) representing the shares
of Series A Preferred Stock specified below as of the date specified below..

 

Date of Conversion:  

 

Number of shares of Series A Preferred Stock to be converted:  

 

Stock certificate no(s). of shares of Series A Preferred Stock to be converted:
 

 

This Conversion is conditioned upon the consummation of the following Conversion
Triggering Transaction: 1

 

Please confirm the following information:

 

Conversion Price:  

 

Number of shares of Common Stock to be issued:  

 

Please issue the shares of Common Stock in accordance with the terms of the
Certificate of Designation as follows:

 

☐  Deposit/Withdrawal At Custodian (“DWAC”) system; or

☐  Physical Certificate

 

Issue to:  

 

Address (for delivery of physical certificate):  

 

E-mail:  

 

DTC Participant Number and Name (if through DWAC):  

 

________________________

1 No such condition applies if left blank.

32 

 

Account Number (if through DWAC): ___________________________________

 

 

 

 

 

 

 

33 

 

Acknowledgment

 

The Corporation hereby acknowledges this Conversion Notice and hereby directs
_____________________ to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated _____________
___, 20___ from the Corporation and acknowledged and agreed to by
_____________________.

 

  Proteon Therapeutics, Inc.         By:     Name:     Title:  

 

 

 

 

 

 

 

 

EXHIBIT A

 

FORM OF OPINION

 

 

 

______, 20__

 

[___________]

 

Re: [ ] (the “Company”)

 

Dear [______]:

 

[___________] (“[__________]”) intends to transfer _______ [shares of Series A
Convertible Preferred Stock] [Conversion Shares] (the “Securities”) of the
Company to __________ (“________”) without registration under the Securities Act
of 1933, as amended (the “Securities Act”). In connection therewith, we have
examined and relied upon the truth of representations contained in an Investor
Representation Letter attached hereto and have examined such other documents and
issues of law as we have deemed relevant.

 

Based on and subject to the foregoing, we are of the opinion that the transfer
of the Securities by _______ to ______ may be effected without registration
under the Securities Act, provided, however, that the Securities to be
transferred to _______ contain a legend restricting its transferability pursuant
to the Securities Act and that transfer of the Securities is subject to a stop
order.

 

The foregoing opinion is furnished only to ____________ and may not be used,
circulated, quoted or otherwise referred to or relied upon by you for any
purposes other than the purpose for which furnished or by any other person for
any purpose, without our prior written consent.

 

Very truly yours,

 

 

 

 

 

 

-35-

 

EXHIBIT B

 

VOTING AGREEMENT

 

 

(see attached)

 

 

-36-

 

VOTING AGREEMENT

 

THIS VOTING AGREEMENT is made as of June 22, 2017 (the “Agreement”), by and
among Proteon Therapeutics, Inc., a Delaware corporation (the “Company”),
and _____ (the “Stockholder”). Capitalized terms used in this Agreement without
definition shall have the respective meanings ascribed to such terms in the
Purchase Agreement (as defined below).

 

W I T N E S S E T H

 

WHEREAS, contemporaneously with the execution and delivery of this Agreement,
the Company is entering into (a) a Securities Purchase Agreement, dated as of
the date hereof (as such agreement may hereafter be amended from time to time,
the “Purchase Agreement”), with certain investors (the “Buyers”) that provides
for, upon the terms and subject to the conditions set forth therein, the sale by
the Company to the Buyers of shares of the Company’s Series A Convertible
Preferred Stock, par value $0.001 (the “Preferred Stock”), and (b) Voting
Agreements, dated as of the date hereof (together with this Agreement, each a
“Voting Agreement” and, collectively, the “Voting Agreements”), with certain of
the Company’s other stockholders, which Voting Agreements contain substantially
the same terms as those contained herein; and

 

WHEREAS, pursuant to the Purchase Agreement, the Company has agreed to call a
meeting of its stockholders for the purpose of seeking approval of the Company’s
stockholders for (a) the sale and issuance by the Company of an aggregate of
22,000 shares of Preferred Stock (the “Preferred Shares”) to the Buyers pursuant
to, and in accordance with, the terms of the Purchase Agreement and (b) the
issuance of shares of the Company’s common stock, par value $0.001 per share
(the “Common Stock”), upon conversion of such Preferred Stock in accordance with
the terms of the Certificate of Designation, which approval is required to
satisfy the applicable requirements of The NASDAQ Stock Market (the “Proposal”);

 

WHEREAS, as of the date hereof, the Stockholder beneficially owns the number of
shares of Common Stock set forth opposite the Stockholder’s name on Schedule I
hereto (all such shares so beneficially owned and which may hereafter be
acquired by such Stockholder prior to the termination of this Agreement, whether
upon the exercise of options, conversion of convertible securities, exercise of
warrants or by means of purchase, dividend, distribution or otherwise, being
referred to herein as the “Shares”); and

 

WHEREAS, in order to induce the Company and the Buyers to enter into the
Purchase Agreement, the Stockholder is willing to enter into this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, the
Company and the Stockholder hereby agree as follows:

 

-37-

 

ARTICLE I.

 

TRANSFER AND VOTING OF SHARES; AND

OTHER COVENANTS OF THE STOCKHOLDER

 

SECTION 1.1. Voting of Shares. From the date hereof until termination of this
Agreement pursuant to Section 3.1 hereof (the “Term”), at any meeting of the
stockholders of the Company, however called and at any adjournment or
postponement thereof, and in any action by written consent of the stockholders
of the Company, in either case at or pursuant to which the Proposal is to be
considered and voted on by the stockholders of the Company, the Stockholder
shall (a) appear at such meeting or otherwise cause the Shares to be counted as
present thereat for purposes of establishing a quorum and (b) vote (or cause to
be voted) the Shares (i) in favor of the Proposal and such other matters as may
be necessary or advisable to consummate the transactions contemplated by the
Purchase Agreement (the “Transactions”) and (ii) against the approval or
adoption of any proposal made in opposition to, or in competition with, the
Proposal or the Transactions, and against any other action that is intended, or
could reasonably be expected, to otherwise materially impede, interfere with,
delay, postpone, discourage or adversely affect the consummation of the
Transactions. If the Stockholder is the beneficial owner, but not the record
holder, of any of the Shares, the Stockholder agrees to cause the record holder
and any nominees to vote all of such Shares in accordance with this Section 1.1,
including by executing such documentation as shall be requested by the record
holder or any such nominee for purposes of giving voting instructions thereto.

 

SECTION 1.2. Grant of Irrevocable Proxy.

 

(a)                The Stockholder hereby irrevocably and unconditionally (to
the fullest extent permitted by law) grants to, and appoints, the Company and
each of its executive officers and any of them, in their capacities as officers
of the Company (the “Grantees”), as the Stockholder’s proxy and attorney-in-fact
(with full power of substitution and re-substitution), for and in the name,
place and stead of the Stockholder, to vote the Shares, to instruct nominees or
record holders to vote the Shares, or to grant a consent or approval or dissent
or disapproval in respect of the Shares, in each case in accordance with Section
1.1 hereof and, in the discretion of the Grantees, with respect to any proposed
adjournments or postponements of any meeting of stockholders of the Company at
which any of the matters described in Section 1.1 hereof are to be considered.

 

(b)               The Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 1.2 is given in connection with the execution of the
Purchase Agreement and the proposed issuance of the Preferred Shares as
contemplated thereby, and that such irrevocable proxy is given to secure the
performance of the duties of the Stockholder under this Agreement. The
Stockholder hereby further affirms that the irrevocable proxy is coupled with an
interest and may under no circumstances be revoked, except as otherwise set
forth herein. The Stockholder hereby ratifies and confirms all that the Grantees
may lawfully do or cause to be done by virtue hereof. The irrevocable proxy set
forth in this Section 1.2 is executed and intended to be irrevocable in
accordance with the provisions of Section 212 of the Delaware General
Corporation Law. Notwithstanding this Section 1.2, the proxy granted by the
Stockholder shall be revoked upon termination of this Agreement in accordance
with its terms.

 

-38-

 

(c)                The Grantees may not exercise this irrevocable proxy on any
other matter except as provided above.

 

SECTION 1.3. No Inconsistent Arrangements. Except as contemplated by this
Agreement, from the date hereof until the record date for the Company
Stockholders Meeting, the Stockholder will not (a) directly or indirectly, sell,
transfer, assign, pledge, hypothecate, tender, encumber or otherwise dispose of
in any manner any of the Shares, or consent or agree to do any of the foregoing,
(b) directly or indirectly, limit its right to vote in any manner any of the
Shares (other than as set forth in this Agreement), including without limitation
by the grant of any proxy, power of attorney or other authorization in or with
respect to the Shares (other than any such proxy, power of attorney or other
authorization consistent with, and for purposes of complying with, the
provisions of Section 1.1 hereof), by depositing the Shares into a voting trust,
or by entering into a voting agreement, or consent or agree to do any of the
foregoing or (c) take any action which would have the effect of preventing or
disabling the Stockholder from performing its obligations under this Agreement.
Notwithstanding the foregoing, the Stockholder may sell or transfer any or all
of the Shares to any Person in a private transaction at any time on or prior to
the record date for the Company Stockholders Meeting, provided that the
transferee of such Shares executes and delivers to the Company a Voting
Agreement with respect to such transferred Shares containing substantially the
same terms as this Agreement. For purposes of this Section 1.3, the term “sell”
or “transfer” or any derivatives thereof shall include, but not be limited to,
(A) a sale, transfer or disposition of record or beneficial ownership, or both
and (B) a short sale with respect to the Shares or substantially identical
property, entering into or acquiring an offsetting derivative contract with
respect to the Shares or substantially identical property, entering into or
acquiring a futures or forward contract to deliver the Shares or substantially
identical property or entering into any transaction that has the same effect as
any of the foregoing.

 

SECTION 1.4. Stop Transfer. The Company shall issue stop-transfer instructions
to the transfer agent for the Shares instructing the transfer agent not to
register any transfer of Shares during the Term except in compliance with the
terms of this Agreement.

 

SECTION 1.5. Additional Shares. The Stockholder hereby agrees that, while this
Agreement is in effect, the Stockholder shall promptly notify the Company of any
new Shares acquired (whether upon the exercise of options, conversion of
convertible securities, exercise of warrants or by means of purchase, dividend,
distribution or otherwise) by such Stockholder after the date hereof.

 

SECTION 1.6. Disclosure. The Stockholder hereby authorizes the Company to
publish and disclose in any announcement or disclosure required by the United
States Securities and Exchange Commission (the “SEC”), including in any proxy
statement filed with the SEC in connection with any meeting of stockholders of
the Company at which the Proposal is to be considered and all documents and
schedules filed with the SEC in connection with the foregoing, the Stockholder’s
identity and ownership of the Shares and the nature of the Stockholder’s
commitments, arrangements and understandings under this Agreement.

 

ARTICLE II.

 

-39-

 

REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER

 

The Stockholder hereby represents and warrants to the Company as of the date
hereof and as of the date of any stockholder meeting at which the Proposal is
considered, including any adjournment or postponement thereof (or the date of
the taking of any action by written consent with respect to the Proposal) as
follows:

 

SECTION 2.1. Due Authorization, etc. The Stockholder has all requisite power and
authority to execute, deliver and perform this Agreement and to take the actions
contemplated hereby (including the granting of the irrevocable proxy pursuant to
Section 1.2 hereof), all of which have been duly authorized by all action
necessary on the part of the Stockholder. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of the Stockholder. This Agreement has been duly executed and delivered by
or on behalf of the Stockholder and constitutes a legal, valid and binding
obligation of the Stockholder, enforceable against the Stockholder in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding for such remedy may be brought.

 

SECTION 2.2. No Violation. Neither the execution and delivery of this Agreement
nor the performance of this Agreement by the Stockholder will (a) require the
Stockholder to file or register with, or obtain any material permit,
authorization, consent or approval of, any governmental agency, authority,
administrative or regulatory body, court or other tribunal, foreign or domestic,
or any other entity, or (b) violate, or cause a breach of or default under, or
conflict with any contract, agreement or understanding, any statute or law, or
any judgment, decree, order, regulation or rule of any governmental agency,
authority, administrative or regulatory body, court or other tribunal, foreign
or domestic, or any other entity or any arbitration award binding upon the
Stockholder, except for such violations, breaches, defaults or conflicts which
would not, individually or in the aggregate, be reasonably likely to impair or
have an adverse effect on the Stockholder’s ability to satisfy its obligations
under this Agreement or render inaccurate any of the other representations made
by the Stockholder in this Agreement. No proceedings are pending which, if
adversely determined, will have an adverse effect on the Stockholder’s ability
to vote any of the Shares.

 

SECTION 2.3. Ownership of Shares. The Stockholder has good and marketable title
to, and is the sole legal and beneficial owner (determined in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, as amended, the “Exchange
Act”) of the Shares set forth opposite its name on Schedule I hereto, in each
case free and clear of all liabilities, claims, liens, options, security
interests, proxies, voting trusts, voting agreements, charges, participations
and encumbrances of any kind or character whatsoever, except as may be imposed
by federal, state or foreign securities laws and this Agreement. The Stockholder
has not previously assigned or sold any of the Shares to any third party. On the
date hereof, the Shares set forth opposite the Stockholder’s name on Schedule I
hereto constitute all of the Shares owned of record or beneficially by the
Stockholder. The Stockholder has sole voting power and sole power of disposition
with respect to the Shares with no restrictions on its voting rights or rights
of disposition pertaining thereto.

 

-40-

 

SECTION 2.4. Voting Authority. The Stockholder has full legal power, authority
and right to vote all of the Shares owned of record and/or beneficially by the
Stockholder in favor of the Proposal and the approval and authorization of the
Transactions without the consent or approval of, or any other action on the part
of, any other Person. Without limiting the generality of the foregoing, the
Stockholder has not entered into any voting agreement (other than this
Agreement) with any Person with respect to any of the Shares, granted any Person
any proxy (revocable or irrevocable) or power of attorney with respect to any of
the Shares, deposited any of the Shares in a voting trust or entered into any
arrangement or agreement with any Person limiting or affecting Stockholder’s
legal power, authority or right to vote the Shares on any matter. For purpose
hereof, “Person” means any individual, corporation, limited or general
partnership, limited liability company, limited liability partnership, trust,
association, joint venture, governmental entity or any other entity or group (as
such term is defined in Section 13(d)(3) of the Exchange Act).

 

SECTION 2.5. Reliance by the Company. The Stockholder understands and
acknowledges that the Company is entering into the Purchase Agreement in
reliance upon the Stockholder’s execution and delivery of this Agreement and the
representations and warranties of the Stockholder contained herein.

 

 

 

ARTICLE III.

 

MISCELLANEOUS

 

SECTION 3.1. Termination. This Agreement shall terminate and be of no further
force and effect upon the earliest of (i) immediately following a meeting of the
Company’s stockholders at which the Proposal is voted upon and approved by the
Company’s stockholders, which meeting is duly called and held for such purpose
and at which a quorum was present and acting throughout, and (ii) the
termination of the Purchase Agreement at any time prior to the consummation of
the Closing contemplated under the Purchase Agreement. No such termination of
this Agreement shall relieve any party hereto from any liability for any breach
of this Agreement prior to such termination.

 

SECTION 3.2. Further Assurances. From time to time at the request of the Company
and without further consideration, the Stockholder will execute and deliver to
the Company such documents and take such action as the Company may reasonably
deem to be necessary or desirable to carry out the provisions hereof.

 

SECTION 3.3. No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, or any custom or practice of the parties
at variance with the terms hereof shall not constitute a waiver by such party of
its right to exercise any such or other right, power or remedy or to demand such
compliance.

 

SECTION 3.4. Specific Performance. The Stockholder acknowledges that the Company
will be irreparably harmed and that there will be no adequate remedy at law for
a violation of any of the covenants or agreements of the Stockholder that are
contained in this Agreement. It is accordingly agreed that, in addition to any
other remedies which may be available to the Company upon the breach by the
Stockholder of such covenants and agreements, the Company will have the right
without the posting of a bond or other security to obtain injunctive relief to
restrain any breach or threatened breach of such covenants or agreements or
otherwise to obtain specific performance of any of such covenants or agreements.
Accordingly, should the Company institute an action or proceeding seeking
specific enforcement of the provisions hereof, the Stockholder hereby waives the
claim or defense that the Company has an adequate remedy at law and hereby
agrees not to assert in any such action or proceeding the claim or defense that
such a remedy at law exists.

 

-41-

 

SECTION 3.5. Notice. 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: (a) upon receipt, when
delivered personally; (b) upon receipt, when sent by facsimile (except notice
may not be delivered to the Company via facsimile) or e-mail (provided
confirmation of transmission is mechanically or electronically generated and, in
the case of an email, a read receipt is received, and in each case kept on file
by the sending party); or (c) upon receipt, when delivered by a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:

 

(i)       if to the Company, to:

 

Proteon Therapeutics, Inc.

200 West Street

Waltham, Massachusetts 02451

Attention: Chief Executive Officer

Email: SeriesA@Proteontx.com

with a copy to:

 

Morgan, Lewis & Bockius LLP

One Federal Street

Boston, Massachusetts 02110-1726

Attn: Julio E. Vega, Esq.

Fax No.: (617) 341-7701

Email: julio.vega@morganlewis.com

 

(ii)       if to the Stockholder, as set forth in Schedule I hereto

 

 

 

SECTION 3.6. Capacity. Notwithstanding anything in this Agreement to the
contrary, the Stockholder makes no agreement or understanding herein in any
capacity other than in the Stockholder’s capacity as a record holder and
beneficial owner of the Shares.

 

-42-

 

SECTION 3.7. Expenses. Each of the parties hereto will pay its own expenses
incurred in connection with this Agreement.

 

SECTION 3.8. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

 

SECTION 3.9. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
obligations hereunder are fulfilled to the maximum extent possible.

 

SECTION 3.10. Entire Agreement. This Agreement constitutes the entire agreement
and supersedes any and all other prior agreements and undertakings, both written
and oral, among the parties, or any of them, with respect to the subject matter
hereof.

 

SECTION 3.11. Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, administrators and permitted assigns of
the parties hereto. No assignment or delegation by any party to this Agreement
of any obligations of such party under this Agreement shall operate to relieve
or release such party from such obligations or from any liability hereunder for
failure of such obligations to be performed in accordance with their respective
terms.

 

SECTION 3.12. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Agreement will be governed by and construed and enforced in accordance with the
laws of the State of Delaware, without regard to its principles of conflicts of
laws. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in Delaware for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of this
Agreement), 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 improper
or is an inconvenient venue for such proceeding. 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 via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any other manner permitted by law. EACH OF THE PARTIES
HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH
RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER.

 

-43-

 

SECTION 3.13. Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of the Company and the Stockholder. If
any material amendment or waiver is proposed to be made with respect to any
other Voting Agreement, the Company hereby covenants and agrees that the
Stockholder shall be afforded the opportunity to enter into or receive (as
applicable) a comparable amendment or waiver with respect to this Agreement.

 

SECTION 3.14. Remedies Not Exclusive. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity will be cumulative and not alternative, and the exercise of any thereof
by any party will not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.

 

SECTION 3.15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile or “.pdf” signature were the original thereof.

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

-44-

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above.

 

 

  PROTEON THERAPEUTICS, INC.         By:     Name: Timothy Noyes   Title:
President and Chief Executive Officer

 

 

 

 

 

Signature Page to Voting Agreement

 

  NAME OF STOCKHOLDER                

 

 

            By:       Name:     Title:

 

 

 

 

 

 

Signature Page to Voting Agreement

 

Schedule I

 

Name of Stockholder  

Number of Shares

Beneficially Owned

                 

 

 

 

 

 

Telephone No.:

 

Facsimile No.:

 

Email Address:

 

 

 

 

 

 

 

 

EXHIBIT C

 

REGISTRATION RIGHTS AGREEMENT

 

 

(see attached)

 

 

48 

 

REGISTRATION RIGHTS AGREEMENT

 

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of [____], 2017, by
and among Proteon Therapeutics, Inc., a Delaware corporation (the “Company”),
and the undersigned investors (each individually, an “Original Investor” and
together, the “Original Investors”).

 

WHEREAS:

 

A. In connection with the Securities Purchase Agreement, dated as of June 22,
2017, by and among the parties hereto (the “Securities Purchase Agreement”), the
Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Original Investors shares of Preferred Stock
(as defined below) in the amounts described in the Securities Purchase
Agreement, which shares of Preferred Stock will be convertible, upon the terms
and conditions and subject to the limitations set forth in the Certificate of
Designation (as defined below), into shares of the Company’s common stock,
$0.001 par value per share (the “Common Stock”); and

 

B. To induce the Original Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
“Securities Act”), and applicable state securities laws.

 

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

 

1. DEFINITIONS.

 

a. As used in this Agreement, the following terms shall have the following
meanings:

 

(i) “Additional Filing Deadline” means, with respect to any additional
Registration Statement(s) that may be required pursuant to Section 2(a)(ii), the
20th calendar day following the date on which the Company first knows, or
reasonably should have known, that such additional Registration Statement is
required under such Section 2(a)(ii) (which 20th calendar day may be subject to
extension pursuant to, and in accordance with, the provisions of Section 3(q)
hereof). If the Additional Filing Deadline falls on a Saturday, Sunday or other
date that the SEC is closed for business, the Additional Filing Deadline shall
be extended to the next day on which the SEC is open for business.

 

(ii) “Additional Registration Deadline” means, with respect to any additional
Registration Statement(s) required pursuant to Section 2(a)(ii), the 45th
calendar day following the date on which the Company first knows, or reasonably
should have known, that such additional Registration Statement is required under
such Section 2(a)(ii) (or the 60th calendar day following such date in the event
such additional Registration Statement is reviewed by the SEC), in either case,
such calendar day may be subject to extension pursuant to, and in accordance
with, the provisions of Section 3(q) hereof. If the Additional Registration
Deadline falls on a Saturday, Sunday or other date that the SEC is closed for
business, the Additional Registration Deadline shall be extended to the next day
on which the SEC is open for business.

 

49 

 

(iii) “Certificate of Designation” means the Certificate of Designation of
Preferences, Rights and Limitations of Series A Convertible Preferred Stock.

 

(iv) “Exchange Act” means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder, and any
successor statute.

 

(v) “Filing Deadline” means, (i) with respect to the Registration Statement
required pursuant to Section 2(a)(i), the date that is twenty (20) calendar days
following the date hereof, and (ii) with respect to each additional Registration
Statement required pursuant to Section 2(a)(ii), the Additional Filing Deadline
applicable to such additional Registration Statement. If the Filing Deadline
falls on a Saturday, Sunday or other date that the SEC is closed for business,
the Filing Deadline shall be extended to the next day on which the SEC is open
for business.

 

(vi) “FINRA” means the Financial Industry Regulatory Authority (or successor
thereto).

 

(vii) “Investor” means any Original Investor and any transferee or assignee who
agrees to become bound by the provisions of this Agreement in accordance with
Section 10 hereof.

 

(viii) “Person” means and includes any natural person, partnership, joint
venture, corporation, trust, limited liability company, limited company, joint
stock company, unincorporated organization, government entity or any political
subdivision or agency thereof, or any other entity.

 

(ix) “Preferred Stock” means the Company’s Series A Convertible Preferred Stock,
as designated by the Certificate of Designation.

 

(x) “Prospectus” means (i) any prospectus (preliminary or final) included in any
Registration Statement, as may be amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement and by all other
amendments and supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference in such prospectus, and
(ii) any “free writing prospectus” as defined in Rule 405 under the Securities
Act relating to any offering of Registrable Securities pursuant to a
Registration Statement.

 

(xi) “Register,” “Registered,” and “Registration” refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415, and the declaration
or ordering of effectiveness of such Registration Statement by the SEC.

 

(xii) “Registrable Securities,” for a given Registration, means (a) any shares
of Common Stock (the “Conversion Shares”) issued or issuable upon conversion of
any shares of Preferred Stock pursuant to the Certificate of Designation
(without giving effect to any limitations on conversion or issuance set forth in
the Certificate of Designation), and (b) any securities issued or issuable upon
any stock split, dividend or other distribution, recapitalization or similar
event with respect to any of the foregoing; provided, however, that any
Registrable Securities shall cease to be Registrable Securities (and the Company
shall not be required to maintain the effectiveness of any, or file another,
Registration Statement hereunder with respect thereto) when (x) a Registration
Statement with respect to the sale of such Registrable Securities has become
effective under the Securities Act and such Registrable Securities have been
disposed of in accordance with such Registration Statement, (y) such Registrable
Securities are sold in accordance with Rule 144 promulgated under the Securities
Act or any successor rule (“Rule 144”), or (z) all of such Registrable
Securities may be immediately sold to the public by the Investor holding such
Registrable Securities without registration or restriction (including, without
limitation, as to volume by each holder thereof), and without compliance with
any “current public information” requirement, pursuant to Rule 144, as set forth
in a written legal opinion letter from outside counsel to the Company to such
effect, addressed, delivered and acceptable to the Company’s transfer agent and
the affected Investor holding such Registrable Securities, provided that the
Company complies with its obligations under Section 7(d)(iv) under the
Certificate of Designation with respect to any such securities.

 

50 

 

(xiii) “Registration Deadline” shall mean, (i) with respect to the Registration
Statement required pursuant to Section 2(a)(i), the date that is sixty (60)
calendar days after the applicable Filing Deadline (or the 75th calendar day
following the applicable Filing Deadline in the event such Registration
Statement is reviewed by the SEC), and, (ii) with respect to any additional
Registration Statement required pursuant to Section 2(a)(ii), the Additional
Registration Deadline. If the Registration Deadline falls on a Saturday, Sunday
or other date that the SEC is closed for business, the Registration Deadline
shall be extended to the next day on which the SEC is open for business.

 

(xiv) “Registration Statement(s)” means any registration statement(s) of the
Company filed under the Securities Act that covers the resale of any of the
Registrable Securities pursuant to the provisions of this Agreement, all
amendments and supplements to such Registration Statement, including
post-effective amendments, and all exhibits to, and all material incorporated by
reference in, such Registration Statement.

 

(xv) “Requisite Investors” means those Investors that are the holders of at
least 77% of the aggregate number of (i) Registrable Securities then outstanding
and (ii) Registrable Securities directly or indirectly issuable upon the
exercise, conversion or exchange of shares of Preferred Stock or other
securities held by all Investors, without giving effect to any limitations on
exercise, conversion, exchange or issuance of shares of Preferred Stock or other
securities.

 

(xvi) “Rule 415” means Rule 415 under the Securities Act or any successor rule
providing for the offering of securities on a continuous basis.

 

(xvii) “SEC” means the United States Securities and Exchange Commission.

 

2. REGISTRATION.

 

51 

 

a. MANDATORY REGISTRATION. (i) Following the date hereof, the Company shall
prepare, and, on or prior to the applicable Filing Deadline, file with the SEC a
Registration Statement (the “Mandatory Registration Statement”) on Form S-3 (or,
if Form S-3 is not then available, on such form of Registration Statement as is
then available to effect a registration of the Registrable Securities) covering
the resale of the Registrable Securities, which Registration Statement, to the
extent allowable under the Securities Act and the rules and regulations
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable with respect to the Registrable Securities included
in such Registration Statement to prevent dilution resulting from stock splits,
stock dividends, stock issuances or similar transactions. The number of shares
of Common Stock initially included in such Registration Statement shall be no
less than the aggregate number of Conversion Shares that are then issuable upon
conversion of the shares of Preferred Stock then outstanding pursuant to the
Certificate of Designation, without regard to any limitations on conversion or
issuance set forth in the Certificate of Designation. Such Registration
Statement (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided to (and shall be
subject to the approval, which shall not be unreasonably withheld or delayed,
of) the Investors and their counsel prior to its filing or other submission.

 

(ii) If for any reason, despite the Company’s use of its reasonable best efforts
to include all of the Registrable Securities in the Registration Statement filed
pursuant to Section 2(a)(i) above, and its compliance with the terms of Section
3(r) hereof, the Company is not permitted (including, without limitation, by the
SEC) to include all of the Registrable Securities in, or for any other reason
any Registrable Securities are not then included in, such Registration Statement
or any additional Registration Statement filed pursuant to the provisions set
forth below in this Section 2(a)(ii), then the Company shall reduce the number
of Registrable Securities included in such Registration Statement filed pursuant
to Section 2(a)(i) above or in any such additional Registration Statement filed
pursuant to this Section 2(a)(ii), as the case may be, on behalf of the
Investors in whole or in part (in case of an exclusion as to a portion of such
Registrable Securities that the Company is not permitted to include in such
Registration Statement or such additional Registration Statement, as the case
may be, such portion shall be allocated pro rata among such Investors in
proportion to the respective numbers of such Registrable Securities that
otherwise would be registered by or on behalf of each such Investor over the
total amount of such Registrable Securities that otherwise would be registered
by or on behalf of all Investors). Any Registrable Securities that are not
included in the Registration Statement filed pursuant to Section 2(a)(i) above
or any additional Registration Statement filed pursuant to the provisions set
forth below in this Section 2(a)(ii), as the case may be, in accordance with the
foregoing provisions of this Section 2(a)(ii) are referred to in this Agreement
as the “Excluded Securities.” In the event that there are Excluded Securities in
connection with the Registration Statement filed pursuant to Section 2(a)(i)
above or any additional Registration Statement filed pursuant to the provisions
set forth below in this Section 2(a)(ii), as the case may be, then (A) the
Company shall give the Investors prompt notice of the number of Excluded
Securities, and (B) as soon as the Company first knows that any Excluded
Securities are now permitted (including, without limitation, by the SEC) and/or
otherwise able to be included in an additional Registration Statement filed
pursuant to this Section 2(a)(ii), the Company shall prepare and file with the
SEC, as soon as practicable but in no event later than the applicable Additional
Filing Deadline, such additional Registration Statement covering the resale of
such Excluded Securities not already covered by an existing and effective
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415. Such additional Registration Statement shall be on Form S-3 (or, if
Form S-3 is not then available, on such form of Registration Statement as is
then available to effect a registration of such Excluded Securities). It is
agreed and understood that the Company shall, from time to time, be obligated
pursuant to, and in accordance with, this Section 2(a)(ii) to file one or more
additional Registration Statements to register any Excluded Securities that are
not registered for resale pursuant to a pre-existing Registration Statement
filed pursuant to this Agreement.

 

52 

 

(iii) The Company shall not, without the consent of the Requisite Investors,
include in any Registration Statement filed pursuant to this Section 2(a) or
Section 3(b) any securities other than Registrable Securities.

 

b. PIGGY-BACK REGISTRATIONS. If, at any time prior to the expiration of the
Registration Period (as hereinafter defined), the Company shall determine (i) to
file with the SEC a registration statement under the Securities Act relating to
an offering for its own account or for the account of any other holder of its
equity securities (other than securities being registered on Form S-4 or Form
S-8 or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans and other than a Registration Statement filed pursuant to Section 2 of
this Agreement), and/or (ii) otherwise to effect an underwritten offering of any
securities of the Company of a type included in a then effective Registration
Statement, then, subject to the limitations and provisions set forth below in
this Section 2(b), Company shall send to each Investor written notice of such
determination and, if within fifteen (15) days after the effective date of such
notice, the Investor shall so request in writing, the Company shall include in
such Registration Statement and/or include in such underwritten offering, as
applicable, all or any part of such Investor’s Registrable Securities that the
Investor requests to be registered and/or included in the underwritten offering,
as applicable, except that if, in connection with any underwritten offering for
the account of the Company, the managing underwriter(s) thereof shall impose a
limitation on the number of Registrable Securities which may be included in such
offering because, in such underwriter(s)’ judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such underwritten offering only such
limited portion of the Registrable Securities with respect to which the Investor
has requested inclusion hereunder as the underwriter(s) shall permit;

 

provided, however, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities to be sold for
the accounts of any holders of the Company’s equity securities which are not
entitled by contract to inclusion of such securities in an underwritten
offering; and

 

provided, further, however, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the contractual right to include
such securities in such underwritten offering other than holders of securities
entitled to inclusion of their securities in such underwritten offering by
reason of demand registration rights. No right to registration of Registrable
Securities under this Section 2(b) shall be construed to limit any registration
required under Section 2(a) or Section 3(b) hereof. If an Investor’s Registrable
Securities are included in an underwritten offering pursuant to this Section
2(b), then such Investor shall, unless otherwise agreed by the Company, offer
and sell such Registrable Securities in such underwritten offering using the
same underwriter or underwriters and on the same terms and conditions as other
shares of Common Stock included in such underwritten offering. Without limiting
the generality of the foregoing sentence, each Investor whose Registrable
Securities are included in an underwritten offering pursuant to this Section
2(b) shall execute and deliver the same underwriting agreement executed and
delivered by the underwriter or underwriters in connection with such
underwritten offering and the other holders of Common Stock participating in
such underwritten offering. Notwithstanding anything to the contrary set forth
herein, the rights of the Investors pursuant to this Section 2(b) shall only be
available in the case of an underwritten offering or in the event the Company
fails to timely file, obtain effectiveness or maintain effectiveness of any
Registration Statement to be filed pursuant to Section 2(a) or Section 3(b) in
accordance with the terms of this Agreement.

 

53 

 

3. OBLIGATIONS OF THE COMPANY. In connection with any registration of the
Registrable Securities hereunder, the Company shall have the following
obligations:

 

a. Subject to Section 3(q), the Company shall prepare promptly, and file with
the SEC as soon as practicable after such registration obligation arises
hereunder (but in no event later than the applicable Filing Deadline), a
Registration Statement with respect to the number of Registrable Securities
provided in Section 2(a), as applicable, and thereafter use its reasonable best
efforts to cause each such Registration Statement relating to Registrable
Securities to become effective as soon as possible after such filing, but in any
event no later than the Registration Deadline, and shall thereafter keep the
Registration Statement current and effective pursuant to Rule 415 at all times
until such date as is the earlier of (i) the date on which all of the
Registrable Securities included in such Registration Statement have been sold,
and (ii) the date on which no Investor holds any Registrable Securities (the
“Registration Period”), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein), except for
information provided in writing by an Investor pursuant to Section 4(a), shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the statements therein
not misleading. In the event that Form S-3 is not available for the registration
of the resale of any Registrable Securities hereunder (but, for the avoidance of
doubt, without in any way affecting the Company’s obligation to register the
resale of the Registrable Securities on such other form as is available, as
provided in Section 2(a)), (i) subject to Section 3(q), the Company shall
undertake to file, within twenty (20) days of such time (which 20th day may be
subject to extension pursuant to, and in accordance with, the provisions of
Section 3(q) hereof and, if such 20th day falls on a Saturday, Sunday or other
date that the SEC is closed for business, such 20th day shall be extended to the
next day on which the SEC is open for business) as such form is available for
such registration, a post-effective amendment to the Registration Statement then
in effect, or otherwise file a Registration Statement on Form S-3, registering
such Registrable Securities on Form S-3; provided that the Company shall
maintain the effectiveness of the Registration Statement then in effect until
such time as a Registration Statement (or post-effective amendment) on Form S-3
covering such Registrable Securities has been declared effective by the SEC, and
(ii) the Company shall provide that any Registration Statement on Form S-1 filed
hereunder shall incorporate documents by reference (including by way of forward
incorporation by reference) to the maximum extent possible.

 

54 

 

b. Subject to Section 3(q), the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to each
Registration Statement filed pursuant to Section 2(a) and the prospectus used in
connection with such Registration Statement as may be necessary to keep such
Registration Statement current and effective at all times during the
Registration Period, and, during the Registration Period, shall comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such Registration Statement until such time as
all of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
such Registration Statement. In the event that, on any Trading Day (as defined
below) (the “Registration Trigger Date”), the number of shares available under a
Registration Statement filed pursuant to Section 2(a) or this Section 3(b) is
insufficient to cover all of the Registrable Securities, then, subject to
Section 3(q), the Company shall, as soon as practicable, but in any event within
twenty-five (25) days after the Registration Trigger Date (which 25th day may be
subject to extension pursuant to, and in accordance with, the provisions of
Section 3(q) hereof and, if such 25th day falls on a Saturday, Sunday or other
date that the SEC is closed for business, such 25th day shall be extended to the
next day on which the SEC is open for business), amend such Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover the total number of
Registrable Securities issued or issuable upon conversion of the shares of
Preferred Stock outstanding pursuant to the Certificate of Designation (without
giving effect to any limitations on conversion or issuance contained in the
Certificate of Designation), plus the number of shares of Common Stock otherwise
beneficially owned by the Investors that remain Registrable Securities, in each
case as of the second Trading Day immediately preceding the date of the filing
of such amendment or new Registration Statement with the SEC. The Company shall
use its reasonable best efforts to cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof, but, in any event, (x) within sixty (60) days of the Registration
Trigger Date (or the 75th calendar day following the Registration Trigger Date
in the event such amendment and/or new Registration Statement is reviewed by the
SEC), in either case, such 60th calendar day or such 75th calendar day, as the
case may be, may be subject to extension pursuant to, and in accordance with,
the provisions of Section 3(q) hereof and, if any such calendar day falls on a
Saturday, Sunday or other date that the SEC is closed for business, such
calendar day shall be extended to the next day on which the SEC is open for
business, or (y) as promptly as practicable in the event the Company is required
to increase its authorized shares. “Trading Day” shall mean any day on which the
Common Stock is traded for any period on the NASDAQ Global Market (the
“NasdaqGM”) or, if not the NasdaqGM, the principal securities exchange or other
securities market on which the Common Stock is then being traded. For purposes
of the foregoing provision, the number of shares available under a Registration
Statement shall be deemed “insufficient to cover all Registrable Securities”
specified above if as of any date of determination (A) the number of shares of
Common Stock equal to the sum of (x) the total number of Conversion Shares
issued or issuable as of such date of determination upon conversion of the
shares of Preferred Stock then outstanding pursuant to the Certificate of
Designation, plus (y) the number of shares of Common Stock otherwise
beneficially owned by the Investors that remain Registrable Securities as of
such date of determination is greater than (B) the number of shares of Common
Stock available for resale under such Registration Statement. The foregoing
calculations shall be made without regard to any limitations on conversion or
issuance of the Preferred Stock pursuant to the Certificate of Designation.

 

55 

 

c. The Company shall furnish to each Investor and its legal counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC or
received by the Company, one copy of each Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of a Registration Statement referred to
in Section 2(a), each letter written by or on behalf of the Company to the SEC
or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion of any thereof which contains information for which the Company
has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as an Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor. The Company will promptly notify each of the Investors
by electronic mail of the effectiveness of each Registration Statement or any
post-effective amendment. Subject to Section 3(q), the Company will promptly
respond to any and all comments received from the SEC, with a view towards
causing each Registration Statement or any amendment thereto to be declared
effective by the SEC as soon as practicable and, as soon as practicable, but in
no event later than three (3) business days, following the resolution or
clearance of all SEC comments or, if applicable, following notification by the
SEC that any such Registration Statement or any amendment thereto will not be
subject to review, shall file a request for acceleration of effectiveness of
such Registration Statement to a time and date not later than two (2) business
days after the submission of such request. No later than the first business day
after such Registration Statement becomes effective, the Company will file with
the SEC the final prospectus included therein pursuant to Rule 424 (or successor
thereto) under the Securities Act.

 

d. The Company shall use its reasonable best efforts to (i) register and
qualify, in any jurisdiction where registration and/or qualification is
required, the Registrable Securities covered by the Registration Statements
under such other securities or “blue sky” laws of such jurisdictions in the
United States as the Investors shall reasonably request, (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be reasonably
necessary to maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be reasonably necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all other actions reasonably necessary or advisable to
qualify the Registrable Securities for sale in such jurisdictions.
Notwithstanding the foregoing, the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or subject the Company to any material tax in any such jurisdiction where it is
not then so subject.

 

e. As promptly as practicable after becoming aware of such event, the Company
shall notify each Investor that holds Registrable Securities of the happening of
any event, of which the Company has knowledge, as a result of which the
prospectus included in any Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and, subject to Section 3(q), promptly prepare a supplement or
amendment to any Registration Statement to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to
each Investor as such Investor may reasonably request.

 

56 

 

f. The Company shall use its reasonable best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of any Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify each Investor that holds
Registrable Securities (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.

 

g. The Company shall permit a single firm of counsel designated by the Investors
(“Legal Counsel”) to review such Registration Statement and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof), a reasonable period of time prior to their filing with the SEC (not
less than five (5) business days but not more than eight (8) business days) and
not file any documents in a form to which Legal Counsel reasonably objects and
will not request acceleration of such Registration Statement without prior
notice to Legal Counsel.

 

h. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company pursuant to this
Agreement unless (i) disclosure of such information is necessary to comply with
federal or state securities laws, (ii) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this or any other agreement. The
Company agrees that it shall, upon learning that disclosure of such information
concerning any Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to such
Investor prior to making such disclosure, and allow such Investor, at its
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.

 

i. The Company shall use its reasonable best efforts to cause all the
Registrable Securities covered by each Registration Statement to be listed on
each securities exchange on which securities of the same class or series issued
by the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, and, to arrange
for at least two market makers to register with FINRA as such with respect to
such Registrable Securities.

 

j. The Company shall provide a transfer agent and registrar, which may be a
single entity, for the Registrable Securities not later than the effective date
of the initial Registration Statement.

 

k. The Company shall cooperate with each Investor that holds Registrable
Securities being offered and the managing underwriter or underwriters with
respect to an applicable Registration Statement, if any, to facilitate the
timely (i) preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be offered pursuant to such
Registration Statement, and enable such certificates to be registered in such
names and in such denominations or amounts, as the case may be, or (ii)
crediting of the Registrable Securities to be offered pursuant to a Registration
Statement to the applicable account (or accounts) with The Depository Trust
Company through its Deposit/Withdrawal At Custodian (DWAC) system, in any such
case as such Investor or the managing underwriter or underwriters, if any, may
reasonably request. Within three (3) business days after a Registration
Statement which includes Registrable Securities becomes effective, the Company
shall deliver, and shall cause legal counsel selected by the Company to deliver,
to the transfer agent for the Registrable Securities (with copies to each
Investor) an appropriate instruction and an opinion of such counsel in the form
required by the transfer agent in order to issue the Registrable Securities free
of restrictive legends.

 

57 

 

l. At the request of an Investor, the Company shall prepare and file with the
SEC, subject to Section 3(q), such amendments (including post-effective
amendments) and supplements to a Registration Statement and any prospectus used
in connection with the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement.

 

m. The Company shall not, and shall not agree to, allow the holders of any
securities of the Company to include any of their securities (other than
Registrable Securities) in any Registration Statement filed pursuant to Section
2(a) hereof or any amendment or supplement thereto under Section 3(b) hereof
without the consent of the Requisite Investors. In addition, the Company shall
not include any securities for its own account or the account of others in any
Registration Statement filed pursuant to Section 2(a) hereof or any amendment or
supplement thereto filed pursuant to Section 3(b) hereof without the consent of
the Requisite Investors.

 

n. The Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of the Registrable Securities pursuant
to a Registration Statement.

 

o. The Company shall comply with all applicable laws related to a Registration
Statement and offering and sale of securities and all applicable rules and
regulations of governmental authorities in connection therewith (including the
Securities Act and the Exchange Act and the rules and regulations promulgated by
the SEC).

 

p. If required by the FINRA Corporate Financing Department, the Company shall
promptly effect a filing with FINRA pursuant to FINRA Rule 5110 (or successor
thereto) with respect to the public offering contemplated by resales of
securities under the Registration Statement (an “Issuer Filing”), and pay the
filing fee required by such Issuer Filing. The Company shall use its reasonable
best efforts to pursue the Issuer Filing until FINRA issues a letter confirming
that it does not object to the terms of the offering contemplated by the
Registration Statement.

 

58 

 

q. Notwithstanding anything to the contrary in this Agreement, in the event that
the Company reasonably determines that (1) the filing of a Registration
Statement pursuant to Section 2 hereof (other than the Mandatory Registration
Statement) on or prior to the Filing Deadline applicable to such Registration
Statement, (2) the filing of the Prospectus that relates to such Registration
Statement (other than the Mandatory Registration Statement) pursuant to Rule
424, (3) the Company’s efforts pursuant to Section 2 hereof to cause a
Registration Statement (other than the Mandatory Registration Statement)
previously filed pursuant to Section 2 of this Agreement to be declared
effective under the Securities Act no later than the Registration Deadline
applicable to such Registration Statement (including, without limitation, by
filing any pre-effective amendment to such Registration Statement), or (4) the
filing, delivery or distribution of any supplement or amendment, including a
post-effective amendment, to a Registration Statement previously filed pursuant
to Section 2 of this Agreement or of any supplement to the Prospectus related to
such Registration Statement or of any document incorporated or deemed to be
incorporated by reference in such Registration Statement or Prospectus, would
require or result in the disclosure of material non-public information
concerning the Company the disclosure of which at the time is not, in the good
faith opinion of the Board of Directors of the Company and its counsel, in the
best interest of the Company and not, in the opinion of counsel to the Company,
otherwise required, the Company may delay any or all of the actions referred to
in the foregoing clauses (1)-(4) that would require or result in the disclosure
of such material non-public information (a “Grace Period”); provided, that the
Company shall (i) promptly notify the Investors in writing of the existence of
material non-public information giving rise to a Grace Period (provided that in
each notice the Company shall not disclose the content of such material
non-public information to any Investor unless otherwise requested in writing by
such Investor and such Investor agrees in writing to maintain the
confidentiality of such material non-public information) and the date on which
the Grace Period will begin, and (ii) promptly notify the Investors in writing
of the date on which the Grace Period ends as soon as such date may be
determined,; and, provided, further, that (A) no Grace Period shall exceed
forty-five (45) consecutive days, (B) during any three hundred sixty five (365)
day period, such Grace Periods shall not exceed an aggregate of seventy-five
(75) days and (C) the first day of any Grace Period must be at least ten (10)
business days after the last day of any prior Grace Period (each Grace Period
that satisfies all of the requirements of this Section 3(q) being referred to as
an “Allowable Grace Period”). For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the date the Investors
receive the notice referred to in the foregoing clause (i) of this Section 3(q)
and shall end on and include the later of the date the Investors receive the
notice referred to in the foregoing clause (ii) of this Section 3(q) and the
date referred to in such notice. The provisions of Section 3(e) hereof shall not
be applicable during the period of any Allowable Grace Period, Failure Payments
(as defined in Section 5) shall not accrue on any day during an Allowable Grace
Period, and the unavailability of a Registration Statement for resales of the
Registrable Securities on any day during an Allowable Grace Period shall not
constitute a “Registration Failure” (as defined in Section 5). In the event that
an Allowable Grace Period is in effect on any date on which any Registration
Statement (other than the Mandatory Registration Statement) pursuant to Section
2 hereof may be filed or declared effective, then the Filing Deadline and/or the
Registration Deadline, as the case may be, applicable to such Registration
Statement shall be automatically extended only until the first Business Day
following the expiration of such Allowable Grace Period. Upon expiration of the
Grace Period, the Company shall again be bound by the first sentence of Section
3(e) with respect to the information giving rise thereto unless such material
non-public information is no longer applicable.

 

59 

 

r. If at any time the SEC advises the Company in writing that the offering of
some or all of the Registrable Securities in a Registration Statement is not
eligible to be made on a delayed or continuous basis under the provisions of
Rule 415 under the Securities Act, the Company shall use its reasonable best
efforts to persuade the SEC that the offering contemplated by a Registration
Statement is a bona fide secondary offering and not an offering “by or on behalf
of the issuer” as defined in Rule 415 and that none of the Investors is an
“underwriter.” The Investors shall have the right to participate or have their
respective counsel participate in any meetings or discussions with the SEC
regarding the SEC’s position and to comment or have their respective counsel
comment on any written submission made to the SEC with respect thereto. No such
written submission shall be made to the SEC to which any Investor’s counsel
reasonably objects.

 

4. OBLIGATIONS OF THE INVESTOR. In connection with the registration of the
Registrable Securities, each Investor shall have the following obligations:

 

a. It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Agreement with respect to the
Registrable Securities of an Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it
as shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request. At least five (5) business days prior to
the first anticipated filing date of a Registration Statement, the Company shall
notify each Investor of the information the Company requires from such Investor.
Any such information shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein, or necessary to
make the statements therein not misleading.

 

b. Each Investor, by such Investor’s acceptance of the Registrable Securities,
agrees to cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of a Registration Statement
hereunder, unless such Investor has notified the Company in writing of such
Investor’s election to exclude all of the Investor’s Registrable Securities from
such Registration Statement.

 

c. In the event of an underwritten offering pursuant to Section 2(b) in which
any Registrable Securities of any Investor are to be included, such Investor
agrees to enter into and perform the Investor’s obligations under an
underwriting agreement, in usual and customary form, including customary
indemnification and contribution obligations (as applicable to selling security
holders generally), with the managing underwriter of such offering and take such
other actions as are reasonably required in order to expedite or facilitate the
disposition of such Investor’s Registrable Securities.

 

d. Each Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e) or 3(f), such
Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(e) or 3(f).

 

60 

 

5. Registration Failure.

a. In the event of a Registration Failure, the Investors shall be entitled to
payments as set forth below. For purpose hereof, “Registration Failure” means
that (a) the Company fails to file with the SEC on or before the applicable
Filing Deadline any Registration Statement required to be filed pursuant to
Section 2(a) hereof, (b) the Company fails to use its reasonable best efforts to
obtain effectiveness with the SEC of any Registration Statement that is required
to be filed pursuant to Section 2(a) hereof, prior to the applicable
Registration Deadline, and if such Registration Statement does not become
effective prior to the applicable Registration Deadline, as soon as possible
thereafter, or fails to use its reasonable best efforts to keep such
Registration Statement current and effective as required in Section 3 hereof,
(c) the Company fails to file any additional Registration Statement required to
be filed pursuant to Section 2(a)(ii) hereof on or before the applicable
Additional Filing Deadline or fails to use its reasonable best efforts to cause
such new Registration Statement to become effective on or before the applicable
Additional Registration Deadline, and if such effectiveness does not occur
within such period, as soon as possible thereafter, (d) the Company fails to
file any amendment to any Registration Statement, or any additional Registration
Statement required to be filed pursuant to Section 3(b) hereof within the number
of calendar days required under Section 3(b) hereof following the applicable
Registration Trigger Date, or fails to use its reasonable best efforts to cause
such amendment and/or new Registration Statement to become effective within the
number of calendar days required under Section 3(b) hereof following the
applicable Registration Trigger Date, and, if such effectiveness does not occur
within such period, as soon as possible thereafter, or (e) any Registration
Statement required to be filed hereunder, after its initial effectiveness and
during the Registration Period, lapses in effect or, other than on a day during
an Allowable Grace Period, sales of all of the Registrable Securities cannot
otherwise be made thereunder (whether by reason of the Company’s failure to
amend or supplement the prospectus included therein in accordance herewith, the
Company’s failure to file and, use reasonable best efforts to obtain
effectiveness with the SEC of an additional Registration Statement or amended
Registration Statement required pursuant to Sections 2(a)(ii) or 3(b) hereof, as
applicable).

 

b. Upon any Registration Failure, in addition to all other available remedies
that the Investors may pursue hereunder, under the Certificate of Designation
and/or the Securities Purchase Agreement, the Company shall pay additional
damages (the “Failure Payment”) to the Investors holding Registrable Securities
included, or to be included, as applicable, in a Registration Statement for each
30-day period (prorated for any partial period) after the date of such
Registration Failure until such Registration Failure is cured in an amount in
cash equal to one and one-half percent (1.5%) of the product of (i) the sum of
(x) the aggregate number of Conversion Shares that are then issued and issuable
upon conversion of the Preferred Stock that constitute Registrable Securities
and are included, or to be included, as applicable, in such Registration
Statement, as of the date such Registration Failure occurs (without regard to
any limitations on conversion or issuance set forth in the Certificate of
Designation), plus (y) all other shares of Common Stock that constitute
Registrable Securities and are included, or to be included, as applicable, in
such Registration Statement, as of the date such Registration Failure occurs,
multiplied by (ii) the Volume Weighted Average Price (as defined in the
Certificate of Designation) of the Common Stock as of the date of calculation
for such Failure Payment. Such payments shall accrue until the earlier of (x)
such time as the Registration Failure has been cured and (y) the date on which
all of the Registrable Securities may be disposed of for the Investor’s own
account without restriction under Rule 144 (including, without limitation,
volume restrictions and without the need for the availability of current public
information under Rule 144). Each Investor shall be entitled to its pro rata
portion of any such Failure Payment based upon the number of Registrable
Securities held by such Investor included, or to be included, as applicable,
relative to the total number of Registrable Securities included, or to be
included, as applicable, in the Registration Statement giving rise to such
Failure Payment. Notwithstanding anything express or implied to the contrary in
the foregoing provisions of this Section 5, elsewhere in this Agreement or in
the Securities Purchase Agreement and/or the Certificate of Designation, (1) no
Failure Payment shall accrue or be payable with respect to any period after the
expiration of the applicable Registration Period, (2) no Registration Failure
shall be deemed to occur or have occurred by virtue of the exclusion, in
accordance with the provisions of Section 2(a)(ii), of any Excluded Securities
from any Registration Statement filed or required to be filed pursuant to
Section 2(a), and (3) no Failure Payment shall accrue or be payable with respect
to any period that a Registration Statement is unavailable for resales of
Registrable Securities solely due to a breach by an Investor that holds any such
Registrable Securities of its obligations under Section 4 hereof.

 

61 

 

6. EXPENSES OF REGISTRATION. All reasonable expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, and
the fees and disbursements of counsel for the Company shall be borne by the
Company. The Company shall also reimburse the Investors for the reasonable fees
and disbursements of Legal Counsel in the aggregate amount up to $25,000 per
registration in connection with registrations pursuant to Section 2 or 3 of this
Agreement, other than the Mandatory Registration Statement (but not, for the
avoidance of doubt, any post-effective amendments or supplements thereto).

 

7. INDEMNIFICATION. In the event any Registrable Securities are included in a
Registration Statement under this Agreement:

 

a. The Company will indemnify, hold harmless and defend (i) each Investor, and
(ii) the directors, officers, partners, managers, members, employees, agents of
each Investor, and each Person who controls any Investor within the meaning of
the Securities Act or the Exchange Act, if any (each, an “Indemnified Person”),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, “Claims”) to which any of them may become subject insofar as such
Claims arise out of or are based upon: (A) any untrue statement or alleged
untrue statement of a material fact in any Registration Statement, or any
amendment as supplement thereto, or any filing made under state securities laws
as required hereby, or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading; (B) any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus, or any amendment or supplement
thereto, or the omission or alleged omission to state therein any material fact
necessary to make the statements made therein, in the light of the circumstances
under which the statements therein were made, not misleading; or (C) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any other law, including any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (A) through (C) being,
collectively, “Violations”). The Company shall reimburse the Indemnified Person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees and other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 7(a) shall not apply to a Claim arising out of or
based upon a Violation to the extent that such Violation occurs (x) in reliance
upon and in conformity with information furnished in writing to the Company by
any Indemnified Person expressly for use in connection with the preparation of
such Registration Statement or any such amendment thereof or supplement thereto,
or (y) as a result of the use by such Investor of an outdated or defective
Prospectus after the Company has validly notified such Investor in writing
pursuant to Section 3(e) that the Prospectus is outdated or defective; provided
that, for the avoidance of doubt, no Investor shall be deemed to have used an
outdated or defective Prospectus from and after the time that a corrected or
updated Prospectus has been filed with the SEC. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by any of the Investors pursuant to Section 10. The indemnity and
contribution agreements of the Company contained in this Section 7(a) and
Section 8 below, respectively, are in addition to any liability that the Company
may have to the Indemnified Persons, and are not in diminution or limitation of
the indemnification provisions, under the Securities Purchase Agreement or any
underwriting agreement entered into by the Company with any underwriter in
connection with any underwritten offering of Registrable Securities.

 

62 

 

b. Promptly after receipt by an Indemnified Person under this Section 7 of
notice of the commencement of any action (including any governmental action),
such Indemnified Person shall, if a Claim in respect thereof is to be made
against the Company under this Section 7, 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
Indemnified Person, as the case may be;

 

provided, however, that an Indemnified Person shall have the right to retain its
own counsel with the reasonable fees and expenses to be paid by the Company, if,
in the reasonable opinion of counsel for such Indemnified Person, the
representation by such counsel of the Indemnified Person and the Company would
be inappropriate due to actual or potential differing interests between such
Indemnified Person and the Company. In the event that the foregoing proviso is
applicable, the Company shall pay for only one separate legal counsel for the
Indemnified Persons, and such legal counsel shall be selected by the Investors.
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 Indemnified Person under this Section 7, except to the extent
that the Company is actually prejudiced in its ability to defend such action,
and shall not relieve the Company of any liability to the Indemnified Person
otherwise than pursuant to this Section 7. Provided that, and so long as, the
Company has assumed control of the defense of any Claim in respect of which
indemnification or contribution may be or has been sought hereunder, the Company
shall not be liable with respect to any such Claim if the applicable Indemnified
Person consents to entry of any judgment or enters into any settlement or other
compromise with respect to such Claim without the Company’s prior written
consent, which consent shall not be unreasonably withheld, conditioned or
delayed. The Company shall not, without the prior written consent of the
Indemnified Persons, consent to entry of any judgment or enter into any
settlement or other compromise with respect to any Claim in respect of which
indemnification or contribution may be or has been sought hereunder (whether or
not any such Indemnified Party is an actual or potential party to such action or
claim) which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to the Indemnified Persons of a full release from all
liability with respect to such Claim or which includes any admission as to fault
or culpability on the part of any Indemnified Person. The indemnification
required by this Section 7 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as any expense, loss,
damage or liability is incurred.

 

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c. Each Investor will indemnify, hold harmless and defend (i) the Company, and
(ii) the directors, officers, partners, managers, members, employees, or agents
of the Company, if any, and each Person who controls the Company within the
meaning of the Securities Act or the Exchange Act, if any (each, a “Company
Indemnified Person”), against any Claims to which any of them may become subject
insofar as such Claims arise out of or are based upon any Violation which occurs
due to the inclusion by the Company in a Registration Statement, or any
amendment as supplement thereto, or any filing made under state securities laws
as required hereby of information about such Investor, where such information
was furnished in writing to the Company by such Investor expressly for the
purpose of inclusion in such Registration Statement, or any amendment as
supplement thereto, or any filing made under state securities laws as required
hereby. Notwithstanding anything herein to the contrary, the indemnity agreement
contained in this Section 7(c) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
the Investors, which consent shall not be unreasonably withheld or delayed; and
provided, further, however, that an Investor shall be liable under this
Section 7(c) for only that amount of a Claim as does not exceed the net amount
of proceeds received by such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement.

 

d. Promptly after receipt by a Company Indemnified Person under this Section 7
of notice of the commencement of any action (including any governmental action),
such Company Indemnified Person shall, if a Claim in respect thereof is to be
made against any Investor under this Section 7, deliver to such Investor a
written notice of the commencement thereof, and such Investor shall have the
right to participate in the defense thereof.

 

8. CONTRIBUTION. If for any reason the indemnification provided for in Section
7(a) or 7(c) (as applicable) is unavailable to an Indemnified Person or Company
Indemnified Person (as applicable) or insufficient to hold it harmless, other
than as expressly specified therein, then the indemnifying party shall
contribute to the amount paid or payable by the Indemnified Person or Company
Indemnified Person (as applicable) as a result of the Claim in such proportion
as is appropriate to reflect the relative fault of the Indemnified Person or
Company Indemnified Person (as applicable) and the indemnifying party (provided
that the relative fault of any Company Indemnified Person shall be deemed to
include the fault of all other Company Indemnified Persons), as well as any
other relevant equitable considerations. No Person guilty of fraudulent
misrepresentation within the meaning of Section 11(f) of the Securities Act
shall be entitled to contribution from any Person not guilty of such fraudulent
misrepresentation. In no event shall the contribution obligation of an Investor
be greater in amount than the net amount of proceeds received by such Investor
as a result of the sale of Registrable Securities giving rise to such
contribution obligation pursuant to the applicable Registration Statement (net
of the aggregate amount of any damages or other amounts such Investor has
otherwise been required to pay (pursuant to Section 7(c) or otherwise) by reason
of such Investor’s untrue or alleged untrue statement or omission or alleged
omission).

 

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9. REPORTS UNDER THE 1934 ACT. With a view to making available to the Investors
the benefits of Rule 144 or any other similar rule or regulation of the SEC that
may at any time permit the Investors to sell securities of the Company to the
public without registration, the Company agrees to:

 

a. make and keep public information available, as those terms are understood and
defined in Rule 144;

 

b. file with the SEC in a timely manner all reports and other documents required
of the Company under the Exchange Act so long as the Company remains subject to
such requirements and the filing of such reports and other documents is required
for the applicable provisions of Rule 144; and

 

c. so long as any of the Investors owns Registrable Securities, promptly upon
request, furnish to such Investor (i) a written statement by the Company that it
has complied with the reporting requirements of the Exchange Act as required for
applicable provisions of Rule 144, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested to
permit such Investor to sell such Registrable Securities pursuant to Rule 144
without registration.

 

10. ASSIGNMENT OF REGISTRATION RIGHTS. The rights under this Agreement shall be
automatically assignable by each Investor to any transferee of all or any
portion of the Registrable Securities if: (i) such Investor agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, and (iii) the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions contained herein as applicable to the Investors. In the event that an
Investor transfers all or any portion of its Registrable Securities pursuant to
this Section 10, the Company shall have up to ten (10) days to file any
amendments or supplements necessary to keep a Registration Statement current and
effective pursuant to Rule 415, and the commencement date of any Registration
Failure caused thereby will be extended by ten (10) days.

 

11. AMENDMENT OF REGISTRATION RIGHTS. The provisions of this Agreement may be
modified, supplemented or amended, and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with written consent of the Company and the Requisite
Investors; provided, that no such waiver, modification, supplement or amendment
shall be binding on any Investor without the written consent of such Investor
unless such modification, supplement, amendment or waiver applies to all
Investors in the same fashion. Any amendment or waiver effected in accordance
with this Section 11 shall be binding upon each of the Investors and the
Company.

 

65 

 

12. MISCELLANEOUS.

 

a. A Person is deemed to hold, and be a holder of, shares of Common Stock or
other Registrable Securities whenever such Person owns of record or beneficially
through a “street name” holder such shares of Common Stock or other Registrable
Securities (or shares of Preferred Stock or other securities upon exercise,
conversion or exchange of which such Registrable Securities are directly or
indirectly issuable, without giving effect to any limitations on exercise,
conversion, exchange or issuance of shares of Preferred Stock or other
securities), and solely for purposes hereof, Registrable Securities shall be
deemed outstanding to the extent they are directly or indirectly issuable upon
exercise, conversion or exchange (as applicable) of shares of Preferred Stock or
other outstanding securities, without giving effect to any limits on exercise,
conversion, exchange or issuance of Preferred Stock or other securities. If the
Company receives conflicting instructions, notices or elections from two or more
Persons with respect to the same Registrable Securities, the Company shall act
upon the basis of instructions, notice or election received from the registered
owner of such Registrable Securities (or shares of Preferred Stock or other
securities upon exercise, conversion or exchange of which such Registrable
Securities are directly or indirectly issuable).

 

b. 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 (except notice may not be delivered to
the Company via facsimile) or e-mail (provided confirmation of transmission is
mechanically or electronically generated and, in the case of an email, a read
receipt is received, and in each case kept on file by the sending party); or
(iii) upon receipt, when delivered by a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:

 

If to the Company:

Proteon Therapeutics, Inc.

200 West Street

Waltham, MA 02451

E-mail: SeriesA@Proteontx.com

Attention: Chief Executive Officer

 

With copy to:

Morgan, Lewis & Bockius LLP

One Federal Street

Boston, Massachusetts 02110-1726

Facsimile: (617) 341-7701

66 

 

E-mail: julio.vega@morganlewis.com

Attention: Julio E. Vega, Esq.

 

If to an Investor, to it at the address and facsimile number set forth on the
Schedule of Buyers to the Securities Purchase Agreement, with copies to such
Investor’s representatives as set forth on the Schedule of Buyers, or, in the
case of an Investor or the Company, at such other address and/or facsimile
number (in the case of such Investor) and/or to the attention of such other
officer or authorized representative as the recipient party has specified by
written notice given to each other party at least five (5) days prior to the
effectiveness of such change.

 

c. Failure of any party to exercise any right or remedy under this Agreement or
otherwise, or delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.

 

d. Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement (whether brought
against a party hereto or its respective affiliates, directors, officers,
shareholders, employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York, borough of Manhattan. Each
party 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 with any
transaction contemplated hereby or discussed herein, 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 improper or is an inconvenient venue for such
proceeding. 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 via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law. The parties hereby waive all rights to a trial by jury.
If any party shall commence an action or proceeding to enforce any provision of
this Agreement, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.

 

e. This Agreement, the Certificate of Designation and the Securities Purchase
Agreement (including all schedules and exhibits thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof.
This Agreement, the Certificate of Designation and the Securities Purchase
Agreement (including all schedules and exhibits thereto) supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof; provided, that nothing contained herein shall be deemed
to supersede that certain Fifth Amended and Restated Investors’ Rights
Agreement, dated as of June 22, 2017 (the “Fifth IRA”), by and among the Company
and the Company’s stockholders party thereto, which Fifth IRA shall continue in
full force and effect.

 

67 

 

f. Subject to the requirements of Section 10 hereof, this Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties hereto, and the provisions of Sections 7 and 8 hereof shall inure to the
benefit of, and be enforceable by, each Indemnified Person and Company
Indemnified Person (as applicable).

 

g. The headings in this Agreement are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.

 

h. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
agreement. This Agreement, once executed by a party, may be delivered to the
other parties hereto by electronic transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

 

i. 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 the other parties 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.

 

j. The Company acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Investors by vitiating the intent and purpose
of the transactions contemplated hereby. Accordingly, the Company acknowledges
that the remedy at law for breach of its obligations hereunder will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of any of the provisions hereunder, that the Investors shall be
entitled, in addition to all other available remedies in law or in equity, to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof, without
the necessity of showing economic loss and without any bond or other security
being required.

 

k. 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.

 

l. In the event that any provision of this Agreement is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.

 

m. In the event an Investor shall sell or otherwise transfer any of such
holder’s Registrable Securities, then, subject to Section 10 hereof, each
transferee shall be allocated a pro rata portion of the number of Registrable
Securities included in a Registration Statement for such transferor.

 

n. There shall be no oral modifications or amendments to this Agreement. This
Agreement may be modified or amended only in writing.

 

o. The Company shall not grant any Person any registration rights with respect
to shares of Common Stock or any other securities of the Company other than
registration rights that will not adversely affect the rights of the Investors
hereunder (including by limiting in any way the number of Registrable Securities
that could be included in any Registration Statement pursuant to Rule 415,
except to the extent otherwise provided in Section 2(b) hereof) and shall not
otherwise enter into any agreement that is inconsistent with the rights granted
to the Investors hereunder.

 

68 

 

p. The obligations of each Investor hereunder are several and not joint with the
obligations of any other Investor, and no provision of this Agreement is
intended to confer any obligations on any Investor vis-à-vis any other Investor.
Nothing contained herein, and no action taken by any Investor pursuant hereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated herein.

 

q. Unless the context otherwise requires, (i) all references to Sections,
Schedules or Exhibits are to Sections, Schedules or Exhibits contained in or
attached to this Agreement, (ii) words in the singular or plural include the
singular and plural, and pronouns stated in either the masculine, the feminine
or neuter gender shall include the masculine, feminine and neuter, and (ii) the
use of the word “including” in this Agreement shall be by way of example rather
than limitation.

 

 

 

[Remainder of page left intentionally blank]

 

[Signature page follows]

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IN WITNESS WHEREOF, the undersigned Investors and the Company have caused this
Registration Rights Agreement to be duly executed as of the date first written
above.

 

  COMPANY:       PROTEON THERAPEUTICS, INC., a Delaware corporation         By:
    Name:     Title:  

 

 

 

 

 

 

 

  INVESTORS:                 By:     Name:     Title:  

 

 

 

 

 

 

 

 

 

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