Ohr Pharmaceutical 8-K [ohr-8k_040814.htm]

Exhibit 10.40

PLACEMENT AGENCY AGREEMENT

April 8, 2014

Chardan Capital Markets, LLC

17 State Street, Suite 1600

New York, NY 10004

 

Brean Capital, LLC

1345 Avenues of the Americas, 29th Floor

New York, NY 10105

 

Ladies and Gentlemen:

Introduction. Subject to the terms and conditions herein (this “Agreement”), Ohr
Pharmaceutical Inc., a Delaware corporation (the “Company”), hereby agrees to
sell up to an aggregate of $18,000,000 of securities of the Company (the
“Securities”) directly to various investors (each, an “Investor” and,
collectively, the “Investors”) through Chardan Capital Markets, LLC, as lead
placement agent (the “Lead Agent”) and Brean Capital, LLC,, as co-lead placement
Agent (the “Co-Agent” and together with the Lead Agent, the “Placement Agents”.
The Lead Placement Agent may retain other brokers or dealers to act as
sub-agents or selected-dealers on its behalf in connection with the Offering (as
defined below).

The Company hereby confirms its agreement with the Placement Agent as follows:

Section 1.                 Agreement to Act as Placement Agent.

(a)                On the basis of the representations, warranties and
agreements of the Company herein contained, and subject to all the terms and
conditions of this Agreement, the Lead Agent shall be the exclusive lead
placement agent and the Co-Agent the exclusive co-placement agent in connection
with the offering and sale by the Company of the Securities pursuant to the
Company's registration statement on Form S-3 (File No. 333-193434) (the
“Registration Statement”), with the terms of such offering (the “Offering”) to
be subject to market conditions and negotiations between the Company, the
Placement Agents and the prospective Investors. The Placement Agent will act on
a reasonable best efforts basis and the Company agrees and acknowledges that
there is no guarantee of the successful placement of the Securities, or any
portion thereof, in the prospective Offering. Under no circumstances will the
Placement Agents or any of their respective “Affiliates” (as defined below) be
obligated to underwrite or purchase any of the Securities for their own accounts
or otherwise provide any financing. The Placement Agents shall act solely as the
Company’s agents and not as principal. The Placement Agents shall have no
authority to bind the Company with respect to any prospective offer to purchase
Securities and the Company shall have the sole right to accept offers to
purchase Securities and may reject any such offer, in whole or in part. Subject
to the terms and conditions hereof, payment of the purchase price for, and
delivery of, the Securities shall be made at one or more closings (each a
“Closing” and the date on which the Closing occurs, a “Closing Date”). As
compensation for services rendered, on the Closing Date, the Company shall pay
to the Placement Agents the aggregate fees and expenses set forth below:

(i)                 A cash fee equal to 6% of the gross proceeds received by the
Company from the sale of the Securities at the closing of the Offering (the
“Closing”) to be split 60% to the Lead Agent and 40% to the Co-Agent.

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(ii)               The Company also agrees to reimburse Placement Agents’
reasonable fees and expenses, including reasonable legal fees and expenses (with
supporting invoices/receipts). Such reimbursement shall be payable immediately
upon the Closing of the Offering.

(b)               The term of the Placement Agents’ exclusive engagement will be
until the completion of the Offering (the “Exclusive Term”); provided, however,
that a party hereto may terminate this Agreement at any time upon 14 days
written notice to the other parties. Notwithstanding anything to the contrary
contained herein, the provisions concerning confidentiality, indemnification and
contribution contained herein and the Company’s obligations contained in the
indemnification provisions will survive any expiration or termination of this
Agreement, and the Company’s obligation to pay fees actually earned and payable
and to reimburse expenses actually incurred and reimbursable pursuant to Section
1 hereof and which are permitted to be reimbursed under FINRA Rule
5110(f)(2)(D), will survive any expiration or termination of this Agreement.
Nothing in this Agreement shall be construed to limit the ability of either
Placement Agent or its respective Affiliates to pursue, investigate, analyze,
invest in, or engage in investment banking, financial advisory or any other
business relationship with Persons (as defined below) other than the Company. As
used herein (i) “Persons” means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind and (ii) “Affiliate” means any Person that,
directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person as such terms are used in
and construed under Rule 405 under the Securities Act of 1933, as amended (the
“Securities Act”).

Section 2.                 Representations, Warranties and Covenants of the
Company. Except as set forth in the disclosure schedules delivered concurrently
herewith (“Disclosure Schedule”), which Disclosure Schedules shall be deemed a
part hereof and shall qualify any representation or otherwise made herein or in
the Incorporated Documents (as defined below), the Company hereby represents,
warrants and covenants to each Placement Agent as of the date hereof, and as of
the Closing Date, as follows:

(a)                Issuance of the Securities; Registration. The Securities are
duly authorized and, when issued and paid for, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by the
Company. The Company has prepared and filed the Registration Statement in
conformity with the requirements of the Securities Act, which became effective
on January 31, 2014 (the “Effective Date”), including the prospectus therein
(the “Prospectus”, and such amendments and supplements (“Prospectus Supplement”
and the Registration Statement, the Prospectus and the Prospectus Supplement,
the “Incorporated Documents”) thereto as may have been required to the date of
this Agreement. The Registration Statement is effective under the Securities Act
and no stop order preventing or suspending the effectiveness of the Registration
Statement or suspending or preventing the use of the Prospectus has been issued
by the Commission and no proceedings for that purpose have been instituted or,
to the knowledge of the Company, are threatened by the Commission. The Company,
if required by the rules and regulations of the Commission, shall file the
Prospectus with the Commission pursuant to Rule 424(b). At the time the
Registration Statement and any amendments thereto became effective, at the date
of this Agreement and at the Closing Date, the Registration Statement and any
amendments thereto conformed and will conform in all material respects to the
requirements of the Securities Act and did not and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; and
the Prospectus and any amendments or supplements thereto, at time the Prospectus
or any amendment or supplement thereto was issued and at the Closing Date,
conformed and will conform in all material respects to the requirements of the
Securities Act and did not and will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

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(b)               Offering Materials. Neither the Company nor any of its
directors and officers has distributed and none of them will distribute, prior
to the Closing Date, any offering material in connection with the offering and
sale of the Securities other than the Prospectus, the Prospectus Supplement, the
Registration Statement, copies of the documents incorporated by reference
therein and any other materials permitted by the Securities Act.

(c)                Subsidiaries. The Company has no subsidiaries that it
controls.

(d)               Organization and Qualification. The Company is duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. The
Company is not in violation or default of any of the provisions of its
certificate of incorporation or bylaws. The Company is duly qualified to conduct
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, would not have or
reasonably be expected to result in: (i) a material adverse effect on the
legality, validity or enforceability of this Agreement or any other agreement
entered into between the Company and the Investors, (ii) a material adverse
effect on the results of operations, assets, business, prospects or condition
(financial or otherwise) of the Company, or (iii) a material adverse effect on
the Company’s ability to perform in any material respect on a timely basis its
obligations under this Agreement or the transactions contemplated under the
Prospectus Supplement (any of (i), (ii) or (iii), a “Material Adverse Effect”)
and no action, claim, suit, investigation or proceeding (including, without
limitation, an informal investigation or partial proceeding, such as a
deposition), whether commenced or threatened (“Proceeding”) has been instituted
in any such jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification. The Company has
commenced the process of qualifying to do business in New York.

(e)                Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the Prospectus Supplement and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of each of this Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby and under the Prospectus Supplement
have been duly authorized by all necessary action on the part of the Company and
no further action is required by the Company, the Company’s Board of Directors
(the “Board of Directors”) or the Company’s stockholders in connection therewith
other than in connection with the Required Approvals (as defined below). This
Agreement has been duly executed by the Company and, when delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

(f)                No Conflicts. The execution, delivery and performance by the
Company of this Agreement and the transactions contemplated pursuant to the
Prospectus Supplement, the issuance and sale of the Securities and the
consummation by it of the transactions contemplated hereby and thereby to which
it is a party do not and will not (i) conflict with or violate any provision of
the Company’s certificate of incorporation or bylaws, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any Lien upon any of
the properties or assets of the Company, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit

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facility, debt or other instrument (evidencing a Company debt or otherwise) or
other understanding to which the Company is a party or by which any property or
asset of the Company is bound or affected, or (iii) subject to the Required
Approvals, conflict with or result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company is bound or affected; except in the case of each of clauses (ii) and
(iii), such as would not have or reasonably be expected to result in a Material
Adverse Effect.

(g)                Filings, Consents and Approvals. To the Company’s knowledge,
the Company is not required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any court
or other federal, state, local or other governmental authority or other Person
in connection with the execution, delivery and performance by the Company of
this Agreement and the transactions contemplated pursuant to the Prospectus
Supplement, other than: (i) the filing with the Commission of the Prospectus
Supplement, (ii) the filing with the Commission of a registration statement
under Rule 462(b) covering up to $3,000,000 of additional Securities (the
“462(b) Registration Statement”), (iii) such filings as are required to be made
under the rules of the Financial Industry Regulatory Authority (“FINRA”) or
applicable state securities or blue sky laws (collectively, the “Required
Approvals”), and (iv) any consent, waiver, authorization, order, notice,
registration or filing the failure of which to make or obtain would not
reasonably be expected to result in a Material Adverse Effect.

(h)               Capitalization. The capitalization of the Company is as set
forth in the Incorporated Documents. Other than as set forth in the Prospectus
Supplement, the Company has not issued any capital stock since its most recently
filed periodic report under the Exchange Act, other than pursuant to the
exercise of employee stock options under the Company’s stock option plans, the
issuance of shares of Common Stock to employees pursuant to the Company’s
employee stock purchase plans and pursuant to the conversion and/or exercise of
securities of the Company which would entitle the holder thereof to acquire at
any time any Common Stock, including, without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock (“Common Stock Equivalents”) outstanding
as of the date of the most recently filed periodic report under the Exchange
Act. No Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by this Agreement and the transactions contemplated pursuant to the
Prospectus Supplement. Except as disclosed in the SEC Reports (as hereafter
defined), there are no outstanding options, warrants, scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exercisable or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company is or may become bound to issue additional shares of Common Stock or
Common Stock Equivalents. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Investors) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or reset
price under any of such securities. All of the outstanding shares of capital
stock of the Company are validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities. No further approval or
authorization of any stockholder, the Board of Directors or others is required
for the issuance and sale of the Securities. There are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Company’s capital stock to which the Company is a party or, to the knowledge of
the Company, between or among any of the Company’s stockholders.

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(i)                 SEC Reports; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by the Company under the Securities Act and the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof
(or such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, together with the Prospectus and
the Prospectus Supplement, being collectively referred to herein as the “SEC
Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act, as applicable, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved (“GAAP”), except as may be otherwise specified in
such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

(j)                 Material Changes; Undisclosed Events, Liabilities or
Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a subsequent SEC
Report filed prior to the date hereof, (i) there has been no event, occurrence
or development that has had or that would reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company’s financial
statements pursuant to GAAP or disclosed in filings made with the Commission,
(iii) the Company has not altered its method of accounting, (iv) the Company has
not declared or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to
existing Company stock option plans. The Company does not have pending before
the Commission any request for confidential treatment of information. Except for
the issuance of the Securities contemplated by the Prospectus Supplement or
disclosed in the Prospectus Supplement, no event, liability, fact, circumstance,
occurrence or development has occurred or exists or is reasonably expected to
occur or exist with respect to the Company or its business, prospects,
properties, operations, assets or financial condition that would be required to
be disclosed by the Company under applicable securities laws at the time this
representation is made or deemed made that has not been publicly disclosed at
least 1 Trading Day prior to the date that this representation is made.

(k)               Litigation. Except as disclosed in the SEC Reports, there is
no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, or any of its properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an “Action”) which (i) adversely
affects or challenges the legality, validity or enforceability of any of this
Agreement and the transactions contemplated pursuant to the Prospectus
Supplement or the Securities or (ii) would, if there were an unfavorable
decision, have or reasonably be expected to result in a Material Adverse Effect.
Neither the Company, nor to the knowledge of the Company any director or officer
thereof, is or has been the subject of any Action involving a claim of violation
of or liability under

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federal or state securities laws or a claim of breach of fiduciary duty. There
has not been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company or to
the knowledge of the Company any current or former director or officer of the
Company. The Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the Company under the
Exchange Act or the Securities Act.

(l)                 Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which would reasonably be expected to result in a Material Adverse
Effect. None of the Company’s employees is a member of a union that relates to
such employee’s relationship with the Company, and the Company is not a party to
a collective bargaining agreement, and the Company believes that its
relationships with its employees are good. No executive officer, to the
knowledge of the Company, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement or non-competition agreement, or any other
contract or agreement or any restrictive covenant in favor of any third party,
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 is in compliance with all U.S. 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, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.

(m)             Compliance. Except in each case as would not have or reasonably
be expected to result in a Material Adverse Effect, the Company: (i) is not in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company under), nor has the Company received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is not in violation of any judgment, decree or
order of any court, arbitrator or governmental body or (iii) has not or has been
in violation of any statute, rule, ordinance or regulation of any governmental
authority, including without limitation all foreign, federal, state and local
laws relating to taxes, environmental protection, occupational health and
safety, product quality and safety and employment and labor matters.

(n)               Regulatory Permits. The Company possesses all certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct its business as described in
the SEC Reports, except where the failure to possess such permits would not
reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and the Company has not received any notice of proceedings relating
to the revocation or modification of any Material Permit.

(o)               Title to Assets. The Company does not own any real property.
The Company has good and marketable title in all personal property owned by it
that is material to the business of the Company, in each case free and clear of
all Liens, except for Liens as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company and Liens for the payment of federal, state
or other taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by the Company is
held by it under valid, subsisting and enforceable leases with which the Company
is in compliance.

(p)               Patents and Trademarks. The Company has, or has rights to use,
or can acquire on commercially reasonable terms, all patents, patent
applications, trademarks, trademark applications,

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service marks, trade names, trade secrets, inventions, copyrights, licenses and
other intellectual property rights and similar rights necessary or material for
use in connection with its business as described in the SEC Reports and which
the failure to so have would have a Material Adverse Effect (collectively, the
“Intellectual Property Rights”). None of, and the Company has not received a
notice (written or otherwise) that any of, the Intellectual Property Rights has
expired, terminated or been abandoned, or is expected to expire or terminate or
be abandoned, within two (2) years from the date of this Agreement. The Company
has not received, since the date of the latest audited financial statements
included within the SEC Reports, a notice (written or otherwise) of a claim or
otherwise has any knowledge that the Intellectual Property Rights violate or
infringe upon the rights of any Person, except as would not have a Material
Adverse Effect. To the knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights. The Company has taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties, except where failure to do so would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

(q)               Insurance. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company is engaged,
including, but not limited to, directors and officers insurance coverage. The
Company does not have any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.

(r)                 Transactions With Affiliates and Employees. Except as set
forth in the SEC Reports, none of the officers or directors of the Company and,
to the knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company (other than for services
as employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner, in
each case in excess of $120,000 other than for (i) payment of salary or
consulting fees for services rendered, (ii) reimbursement for expenses incurred
on behalf of the Company and (iii) other employee benefits, including stock
option agreements under any stock option plan of the Company.

(s)                Sarbanes-Oxley; Internal Accounting Controls. The Company is
in compliance in all material respects with any and all applicable requirements
of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and
any and all applicable rules and regulations promulgated by the Commission
thereunder that are effective as of the date hereof and as of the Closing Date.
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 accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules and forms. The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the Exchange Act (such date,

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the “Evaluation Date”). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no changes in the Company’s internal control over financial reporting
(as such term is defined in the Exchange Act) that has materially affected, or
is reasonably likely to materially affect, the Company’s internal control over
financial reporting.

(t)                 Certain Fees. Except as set forth in the Prospectus
Supplement or as contemplated by this Agreement, no brokerage or finder’s fees
or commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by this Agreement and the
transactions contemplated pursuant to the Prospectus Supplement. The Investors
shall have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by this
Agreement and the transactions contemplated pursuant to the Prospectus
Supplement. The Company recently paid $50,000 in expenses to an investment bank
for an unrelated transaction.

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

(v)               Registration Rights. No Person has any right to cause the
Company to effect the registration under the Securities Act of any securities of
the Company.

(w)              Listing and Maintenance Requirements. The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common Stock under the
Exchange Act nor has the Company received any notification that the Commission
is contemplating terminating such registration. Except as disclosed in the SEC
Reports, the Company has not, in the 12 months preceding the date hereof,
received notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Company is, and
has no reason to believe that it will not in the foreseeable future continue to
be, in compliance with all such listing and maintenance requirements.

(x)               Application of Takeover Protections. The Company and the Board
of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s certificate of incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Investors as a result of the Investors and the
Company fulfilling their obligations or exercising their rights under this
Agreement and the transactions contemplated pursuant to the Prospectus
Supplement, including without limitation as a result of the Company’s issuance
of the Securities and the Investors’ ownership of the Securities.

(y)               Disclosure. Except with respect to the material terms and
conditions of the transactions contemplated by this Agreement and the
transactions contemplated pursuant to the Prospectus Supplement, the Company
confirms that neither it nor any other Person acting on its behalf has provided
any of the Investors or their agents or counsel with any information that it
believes constitutes or might constitute material, non-public information which
is not otherwise disclosed in the

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Prospectus Supplement. The Company understands and confirms that the Investors
will rely on the foregoing representation in effecting transactions in
securities of the Company. All of the disclosure furnished by or on behalf of
the Company to the Investors regarding the Company, its business and the
transactions contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The press releases disseminated by the Company during the
twelve months preceding the date of this Agreement taken as a whole do 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 light of the circumstances under which they were made and when made,
not misleading.

(z)                No Integrated Offering. Neither the Company nor any Person
acting on its behalf has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, under circumstances
that would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of any applicable shareholder approval
provisions of any Trading Market on which any of the securities of the Company
are listed or designated.

(aa)            Solvency. Based on the consolidated financial condition of the
Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder, (i) the fair
saleable value of the Company’s assets exceeds the amount that will be required
to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) except
as disclosed in the SEC Reports, the Company’s assets do not constitute
unreasonably small capital to carry on its business as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof, and (iii) the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its liabilities when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to be payable on
or in respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the Closing Date. The SEC Reports sets forth as of the date
hereof all outstanding secured and unsecured Indebtedness of the Company, or for
which the Company has commitments. For the purposes of this Agreement,
“Indebtedness” means (x) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than trade accounts payable incurred in the ordinary
course of business), (y) all guaranties, endorsements and other contingent
obligations in respect of indebtedness of others, whether or not the same are or
should be reflected in the Company’s balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and (z)
the present value of any lease payments in excess of $50,000 due under leases
required to be capitalized in accordance with GAAP. The Company is not in
default with respect to any Indebtedness.

(bb)           Tax Status. Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company (i) has made or filed all United States federal and state
income and all foreign income and franchise tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations
and (iii) has set aside on its books provision reasonably adequate for the
payment of all material taxes for periods subsequent to the periods to which
such returns, reports or

9

 

declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and to the knowledge of the
Company there is no basis for any such claim.

(cc)            Foreign Corrupt Practices. Neither the Company, nor to the
knowledge of the Company, any agent or other person acting on behalf of the
Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.

(dd)           Accountants. The Company’s accounting firm is set forth in the
Incorporated Documents. To the knowledge and belief of the Company, such
accounting firm (i) is a registered public accounting firm as required by the
Exchange Act and (ii) shall express its opinion with respect to the financial
statements to be included in the Company’s Annual Report for the year ending
September 30, 2014.

(ee)            Regulation M Compliance.  The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation
for soliciting purchases of, any of the Securities, or (iii) paid or agreed to
pay to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company’s Placement Agents in connection with the
placement of the Securities.

(ff)             Office of Foreign Assets Control. Neither the Company nor, to
the Company's knowledge, any director, officer, agent, employee or affiliate of
the Company is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

(gg)            U.S. Real Property Holding Corporation. The Company is not and
has never been a U.S. real property holding corporation within the meaning of
Section 897 of the Internal Revenue Code of 1986, as amended, and the Company
shall so certify upon Investor’s request.

(hh)           Bank Holding Company Act. The Company is not subject to the Bank
Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the
Board of Governors of the Federal Reserve System (the “Federal Reserve”). The
Company does not own or control, directly or indirectly, five percent (5%) or
more of the outstanding shares of any class of voting securities or twenty-five
percent or more of the total equity of a bank or any entity that is subject to
the BHCA and to regulation by the Federal Reserve. The Company does not exercise
a controlling influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal Reserve.

(ii)               Money Laundering. The operations of the Company are and have
been conducted at all times in compliance in all material respects with
applicable financial record-keeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended, applicable money
laundering statutes and applicable rules and regulations thereunder
(collectively, the “Money Laundering Laws”), and no action, suit or proceeding
by or before any court or governmental

10

 

agency, authority or body or any arbitrator involving the Company with respect
to the Money Laundering Laws is pending or, to the knowledge of the Company,
threatened.

(jj)               Certificates. Any certificate signed by an officer of the
Company and delivered to the Placement Agents or to counsel for the Placement
Agents shall be deemed to be a representation and warranty by the Company to the
Placement Agents as to the matters set forth therein.

(kk)           Reliance. The Company acknowledges that the Placement Agents will
rely upon the accuracy and truthfulness of the foregoing representations and
warranties and hereby consents to such reliance.

(ll)               FINRA Affiliations. Except as disclosed in the SEC Reports,
to the knowledge of the Company, there are no affiliations with any FINRA member
firm among the Company’s officers, directors or any five percent (5%) or greater
stockholder of the Company.

Section 3.                 Delivery and Payment. The Closing shall occur at the
offices of the Ellenoff Grossman & Schole LLP (“Placement Agent Counsel”) or at
such other place as shall be agreed upon by the Placement Agents and the
Company. Subject to the terms and conditions hereof, at the Closing payment of
the purchase price for the Securities sold on the Closing Date shall be made by
Federal Funds wire transfer, against delivery of such Securities, and such
Securities shall be registered in such name or names and shall be in such
denominations, as the Placement Agents may request at least one business day
before the time of purchase (as defined below).

Deliveries of the documents with respect to the purchase of the Securities, if
any, shall be made at the offices of Placement Agent Counsel. All actions taken
at a Closing shall be deemed to have occurred simultaneously.

Section 4.                 Covenants and Agreements of the Company. The Company
further covenants and agrees with the Placement Agents as follows:

(a)                Registration Statement Matters. The Company will advise the
Placement Agents promptly after it receives notice thereof of the time when any
amendment to the Registration Statement has been filed or becomes effective or
any supplement to any Prospectus Supplement or any amended Prospectus Supplement
has been filed and will furnish the Placement Agents with copies thereof. The
Company will file promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission pursuant to
Section 13(a), 14 or 15(d) of the Exchange Act subsequent to the date of any
Prospectus Supplement and for so long as the delivery of a prospectus is
required in connection with the Offering. The Company will advise the Placement
Agents, promptly after it receives notice thereof (i) of any request by the
Commission to amend the Registration Statement or to amend or supplement any
Prospectus Supplement or for additional information, and (ii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment thereto or any order
directed at any Incorporated Document, if any, or any amendment or supplement
thereto or any order preventing or suspending the use of the Prospectus or any
Prospectus Supplement or any amendment or supplement thereto or any
post-effective amendment to the Registration Statement, of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, of the
institution or threatened institution of any proceeding for any such purpose, or
of any request by the Commission for the amending or supplementing of the
Registration Statement or a Prospectus Supplement or for additional information.
The Company shall use its reasonable efforts to prevent the issuance of any such
stop order or prevention or suspension of such use.  If the Commission shall
enter any such stop order or order or notice of prevention or suspension at any
time, the Company will use its reasonable efforts to obtain the lifting of such
order at the earliest possible moment, or will file

11

 

a new registration statement and use its reasonable efforts to have such new
registration statement declared effective as soon as practicable.  Additionally,
the Company agrees that it shall comply with the provisions of Rules 424(b),
430A, 430B and 430C, as applicable, under the Securities Act, including with
respect to the timely filing of documents thereunder, and will use its
reasonable efforts to confirm that any filings made by the Company under such
Rule 424(b) are received in a timely manner by the Commission.

(b)               Blue Sky Compliance. The Company will cooperate with the
Placement Agents and the Investors in endeavoring to qualify the Securities for
sale under the securities laws of such jurisdictions (United States and foreign)
as the Placement Agents and the Investors may reasonably request and will make
such applications, file such documents, and furnish such information as may be
reasonably required for that purpose, provided the Company shall not be required
to qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction where it is not now so qualified or required to file
such a consent, and provided further that the Company shall not be required to
produce any new disclosure document other than a Prospectus Supplement. The
Company will, from time to time, prepare and file such statements, reports and
other documents as are or may be required to continue such qualifications in
effect for so long a period as the Placement Agents may reasonably request for
distribution of the Securities. The Company will advise the Placement Agents
promptly of the suspension of the qualification or registration of (or any such
exemption relating to) the Securities for offering, sale or trading in any
jurisdiction or any initiation or threat of any proceeding for any such purpose,
and in the event of the issuance of any order suspending such qualification,
registration or exemption, the Company shall use its reasonable efforts to
obtain the withdrawal thereof at the earliest possible moment.

(c)                Amendments and Supplements to a Prospectus Supplement and
Other Matters. The Company will comply with the Securities Act and the Exchange
Act, and the rules and regulations of the Commission thereunder, so as to permit
the completion of the distribution of the Securities as contemplated in this
Agreement, the Incorporated Documents and any Prospectus Supplement. If during
the period in which a prospectus is required by law to be delivered in
connection with the distribution of Securities contemplated by the Incorporated
Documents or any Prospectus Supplement (the “Prospectus Delivery Period”), any
event shall occur as a result of which, in the judgment of the Company or in the
opinion of the Placement Agents or counsel for the Placement Agents, it becomes
necessary to amend or supplement the Incorporated Documents or any Prospectus
Supplement in order to make the statements therein, in the light of the
circumstances under which they were made, as the case may be, not misleading, or
if it is necessary at any time to amend or supplement the Incorporated Documents
or any Prospectus Supplement or to file under the Exchange Act any Incorporated
Document to comply with any law, the Company will promptly prepare and file with
the Commission, and furnish at its own expense to the Placement Agents and to
dealers, an appropriate amendment to the Registration Statement or supplement to
the Registration Statement, the Incorporated Documents or any Prospectus
Supplement that is necessary in order to make the statements in the Incorporated
Documents and any Prospectus Supplement as so amended or supplemented, in the
light of the circumstances under which they were made, as the case may be, not
misleading, or so that the Registration Statement, the Incorporated Documents or
any Prospectus Supplement, as so amended or supplemented, will comply with law.
Before amending the Registration Statement or supplementing the Incorporated
Documents or any Prospectus Supplement in connection with the Offering, the
Company will furnish the Placement Agents with a copy of such proposed amendment
or supplement and, before filing any such amendment or supplement will
incorporate reasonable suggestions by the Placement Agents.

(d)               Copies of any Amendments and Supplements to a Prospectus
Supplement. The Company will furnish the Placement Agents, without charge,
during the period beginning on the date hereof and ending on the Closing Date of
the Offering, as many copies of the Incorporated Documents

12

 

and any Prospectus Supplement and any amendments and supplements thereto
(including any Incorporated Documents, if any) as the Placement Agents may
reasonably request.

(e)                Free Writing Prospectus. The Company covenants that it will
not, unless it obtains the prior written consent of the Lead Agent, make any
offer relating to the Securities that would constitute a Company Free Writing
Prospectus or that would otherwise constitute a “free writing prospectus” (as
defined in Rule 405 of the Securities Act) required to be filed by the Company
with the Commission or retained by the Company under Rule 433 of the Securities
Act. In the event that the Lead Agent expressly consents in writing to any such
free writing prospectus (a “Permitted Free Writing Prospectus”), the Company
covenants that it shall (i) treat each Permitted Free Writing Prospectus as a
Company Free Writing Prospectus, and (ii) comply with the requirements of Rule
164 and 433 of the Securities Act applicable to such Permitted Free Writing
Prospectus, including in respect of timely filing with the Commission, legending
and record keeping.

(f)                Transfer Agent. The Company will maintain, at its expense, a
registrar and transfer agent for the Common Stock.

(g)                Earnings Statement. As soon as practicable and in accordance
with applicable requirements under the Securities Act, but in any event not
later than 18 months after the last Closing Date, the Company will make
generally available to its security holders and to the Placement Agents an
earnings statement, covering a period of at least 12 consecutive months
beginning after the Closing Date, that satisfies the provisions of Section 11(a)
and Rule 158 under the Securities Act.

(h)               Periodic Reporting Obligations. During the Prospectus Delivery
Period, the Company will duly file, on a timely basis, with the Commission and
the Trading Market all reports and documents required to be filed under the
Exchange Act within the time periods and in the manner required by the Exchange
Act.

(i)                 Additional Documents. The Company will enter into any
subscription, purchase or other customary agreements as the Placement Agents or
the Investors deem necessary or appropriate to consummate the Offering, all of
which will be in form and substance reasonably acceptable to the Placement
Agents and the Investors. The Company agrees that the Placement Agents may rely
upon, and each is a third party beneficiary of, the representations and
warranties, and applicable covenants, set forth in any such purchase,
subscription or other agreement with Investors in the Offering.

(j)                 No Manipulation of Price.  The Company will not take,
directly or indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the stabilization or
manipulation of the price of any securities of the Company.

(k)               Acknowledgment. The Company acknowledges that any advice given
by the Placement Agents to the Company is solely for the benefit and use of the
Board of Directors of the Company and, except as required by applicable law,
regulation or legal process, may not be used, reproduced, disseminated, quoted
or referred to, without the each Placement Agent's prior written consent.

(l)                 Market Standstill. Absent prior written consent from the
Placement Agents, from the date hereof until the 90th day following the Closing
Date, the Company shall not sell or issue and Common Stock or Common Stock
Equivalents other than with respect to the issuance of (a) shares of Common
Stock or options to employees, consultants, officers or directors of the Company
pursuant to any stock or option plan duly adopted for such purpose, by a
majority of the non-employee members of the Board of Directors or a majority of
the members of a committee of non-employee directors

13

 

established for such purpose, (b) the Securities sold to the Investors, or (c)
securities upon the exercise or exchange of or conversion of any Securities
issued to the Investors and/or other securities exercisable or exchangeable for
or convertible into shares of Common Stock issued and outstanding on the date of
this Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities or to decrease
the exercise price, exchange price or conversion price of such securities.

Section 5.                 Conditions of the Obligations of the Placement
Agents. The obligations of the Placement Agents hereunder shall be subject to
the accuracy of the representations and warranties on the part of the Company
set forth in Section 2 hereof, in each case as of the date hereof and as of the
Closing Date as though then made, to the timely performance by each of the
Company of its covenants and other obligations hereunder on and as of such
dates, and to each of the following additional conditions:

(a)                Accountants’ Comfort Letter. On the date hereof, the
Placement Agents shall have received, and the Company shall have caused to be
delivered to the Placement Agents, a letter from MaloneBailey, LLP, (the
independent registered public accounting firm of the Company), addressed to the
Placement Agents, dated as of the date hereof, in form and substance
satisfactory to the Placement Agents. The letter shall not disclose any change
in the condition (financial or other), earnings, operations, business or
prospects of the Company from that set forth in the Incorporated Documents or
the applicable Prospectus Supplement, which, in the Lead Agent's sole judgment,
is material and adverse and that makes it, in the Placement Agents’ sole
judgment, impracticable or inadvisable to proceed with the Offering of the
Securities as contemplated by such Prospectus Supplement.

(b)               Compliance with Registration Requirements; No Stop Order; No
Objection from the FINRA. Each Prospectus Supplement (in accordance with Rule
424(b)) and “free writing prospectus” (as defined in Rule 405 of the Securities
Act), if any, shall have been duly filed with the Commission, as appropriate; no
stop order suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; no order preventing or
suspending the use of any Prospectus Supplement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; no order having the effect of ceasing or suspending the distribution
of the Securities or any other securities of the Company shall have been issued
by any securities commission, securities regulatory authority or stock exchange
and no proceedings for that purpose shall have been instituted or shall be
pending or, to the knowledge of the Company, contemplated by any securities
commission, securities regulatory authority or stock exchange; all requests for
additional information on the part of the Commission shall have been complied
with; and the FINRA shall have raised no objection to the fairness and
reasonableness of the placement terms and arrangements.

(c)                Corporate Proceedings. All corporate proceedings and other
legal matters in connection with this Agreement, the Registration Statement and
each Prospectus Supplement, and the registration, sale and delivery of the
Securities, shall have been completed or resolved in a manner reasonably
satisfactory to the Placement Agent's counsel, and such counsel shall have been
furnished with such papers and information as it may reasonably have requested
to enable such counsel to pass upon the matters referred to in this Section 5.

(d)               No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement and prior to the Closing Date, in the Placement
Agents’ sole judgment after consultation with the Company, there shall not have
occurred any Material Adverse Change.

(e)                Opinion of Counsel for the Company. The Placement Agents
shall have received on the Closing Date the favorable opinion of US legal
counsel to the Company, dated as of such Closing

14

 

Date, including, without limitation, a negative assurance letter, addressed to
the Placement Agents and in form and substance satisfactory to the Placement
Agents.

(f)                Officers’ Certificate. The Placement Agents shall have
received on the Closing Date a certificate of the Company, dated as of such
Closing Date, signed by the Chief Executive Officer and Chief Financial Officer
of the Company, to the effect that, and the Placement Agents shall be satisfied
that, the signers of such certificate have reviewed the Registration Statement,
the Incorporated Documents, any Prospectus Supplement, and this Agreement and to
the further effect that:

(i)                 The representations and warranties of the Company in this
Agreement are true and correct in all material respects (except for those
representations and warranties which are qualified by materiality, in which case
such representations and warranties shall be true and correct in all respects),
as if made on and as of such Closing Date, and the Company has complied with all
the agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date;

(ii)               No stop order suspending the effectiveness of the
Registration Statement or the use of the Prospectus or any Prospectus Supplement
has been issued and no proceedings for that purpose have been instituted or are
pending or, to the Company’s knowledge, threatened under the Securities Act; no
order having the effect of ceasing or suspending the distribution of the
Securities or any other securities of the Company has been issued by any
securities commission, securities regulatory authority or stock exchange in the
United States and no proceedings for that purpose have been instituted or are
pending or, to the knowledge of the Company, contemplated by any securities
commission, securities regulatory authority or stock exchange in the United
States;

(iii)             When the Registration Statement became effective, at the time
of sale, and at all times subsequent thereto up to the delivery of such
certificate, the Registration Statement and the Incorporated Documents, if any,
when such documents became effective or were filed with the Commission,
contained all material information required to be included therein by the
Securities Act and the Exchange Act and the applicable rules and regulations of
the Commission thereunder, as the case may be, and in all material respects
conformed to the requirements of the Securities Act and the Exchange Act and the
applicable rules and regulations of the Commission thereunder, as the case may
be, and the Registration Statement and the Incorporated Documents, if any, did
not and do not include 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, in the light of the circumstances under which they were
made, not misleading (provided, however, that the preceding representations and
warranties contained in this paragraph (iii) shall not apply to any statements
or omissions made in reliance upon and in conformity with information furnished
in writing to the Company by the applicable Placement Agent expressly for use
therein) and, since the effective date of the Registration Statement, there has
occurred no event required by the Securities Act and the rules and regulations
of the Commission thereunder to be set forth in the Incorporated Documents which
has not been so set forth; and

(iv)             Subsequent to the respective dates as of which information is
given in the Registration Statement, the Incorporated Documents and any
Prospectus Supplement, there has not been: (a) any Material Adverse Change; (b)
any transaction that is material to the Company, except transactions entered
into in the ordinary course of business; (c) any obligation, direct or
contingent, that is material to the Company, incurred by the

15

 

Company, except obligations incurred in the ordinary course of business; (d) any
material change in the capital stock (except changes thereto resulting from the
exercise of outstanding stock options or warrants) or outstanding indebtedness
of the Company; (e) any dividend or distribution of any kind declared, paid or
made on the capital stock of the Company; or (f) any loss or damage (whether or
not insured) to the property of the Company which has been sustained or will
have been sustained which has a Material Adverse Effect.

(g)                Bring-down Comfort Letter.  On the Closing Date,
the Placement Agents shall have received from MaloneBailey, LLP, or such other
independent registered public accounting firm of the Company, a letter dated as
of such Closing Date, in form and substance satisfactory to the Placement
Agents, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (a) of this Section 5, except that the
specified date referred to therein for the carrying out of procedures shall be
no more than three business days prior to such Closing Date.

(h)               Stock Exchange Listing. The Common Stock shall be registered
under the Exchange Act and shall be listed on the Trading Market, and the
Company shall not have taken any action designed to terminate, or likely to have
the effect of terminating, the registration of the Common Stock under the
Exchange Act or delisting or suspending from trading the Common Stock from the
Trading Market, nor shall the Company have received any information suggesting
that the Commission or the Trading Market is contemplating terminating such
registration or listing.

(i)                 Additional Documents. On or before the Closing Date, the
Placement Agents and counsel for the Placement Agent shall have received such
information and documents as they may reasonably require for the purposes of
enabling them to pass upon the issuance and sale of the Securities as
contemplated herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the conditions or
agreements, herein contained.

If any condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the Placement
Agents by notice to the Company at any time on or prior to a Closing Date, which
termination shall be without liability on the part of any party to any other
party, except that Section 6 (Payment of Expenses), Section 7 (Indemnification
and Contribution) and Section 8 (Representations and Indemnities to Survive
Delivery) shall at all times be effective and shall survive such termination.

Section 6.                 Payment of Expenses. The Company agrees to pay all
costs, fees and expenses incurred by the Company in connection with the
performance of its obligations hereunder and in connection with the transactions
contemplated hereby, including, without limitation: (i) all expenses incident to
the issuance, delivery and qualification of the Securities (including all
printing and engraving costs), including the cost of an escrow agent, if
required; (ii) all fees and expenses of the registrar and transfer agent of the
Common Stock; (iii) all necessary issue, transfer and other stamp taxes in
connection with the issuance and sale of the Securities; (iv) all fees and
expenses of the Company’s counsel, independent public or certified public
accountants and other advisors; (v) all costs and expenses incurred in
connection with the preparation, printing, filing, shipping and distribution of
the Registration Statement (including financial statements, exhibits, schedules,
consents and certificates of experts), the Prospectus and each Prospectus
Supplement, and all amendments and supplements thereto, and this Agreement; (vi)
all filing fees, reasonable attorneys’ fees and expenses incurred by the Company
or the Placement Agents in connection with qualifying or registering (or
obtaining exemptions from the qualification or registration of) all or any part
of the Securities for offer and sale under the state securities or blue sky laws
or the securities laws of any other country, and, if reasonably requested by the
Lead Agent, preparing and printing a “Blue Sky Survey,” an “International Blue
Sky Survey” or other memorandum, and any

16

 

supplements thereto, advising the Placement Agents of such qualifications,
registrations and exemptions; (vii) if applicable, the filing fees incident to
the review and approval by the FINRA of the Placement Agents’ participation in
the offering and distribution of the Securities; (viii) the fees and expenses
associated with including the Securities on the Trading Market; (ix) all costs
and expenses incident to the travel and accommodation of the Company’s and the
Placement Agents’ employees on the “roadshow,” if any; and (x) all other fees,
costs and expenses referred to in Part II of the Registration Statement.

Section 7.                 Indemnification and Contribution.

(a)                The Company agrees to indemnify and hold harmless each
Placement Agent, its respective affiliates and each person controlling such
Placement Agent (within the meaning of Section 15 of the Securities Act), and
the directors, officers, agents and employees of such Placement Agent, its
affiliates and each such controlling person (each Placement Agent, and each such
entity or person. an “Indemnified Person”) from and against any losses, claims,
damages, judgments, assessments, costs and other liabilities (collectively, the
“Liabilities”), and shall reimburse each Indemnified Person for all fees and
expenses (including the reasonable fees and expenses of one counsel for all
Indemnified Persons, except as otherwise expressly provided herein)
(collectively, the “Expenses”) incurred by an Indemnified Person in
investigating, preparing, pursuing or defending any Actions, whether or not any
Indemnified Person is a party thereto, (i) caused by, or arising out of or in
connection with, any untrue statement or alleged untrue statement of a material
fact contained in any Incorporated Document or by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (other than untrue statements or alleged untrue statements in, or
omissions or alleged omissions from, information relating to an Indemnified
Person furnished in writing by or on behalf of such Indemnified Person expressly
for use in the Incorporated Documents) or (ii) otherwise arising out of or in
connection with advice or services rendered or to be rendered by any Indemnified
Person pursuant to this Agreement, the transactions contemplated thereby or any
Indemnified Person's actions or inactions in connection with any such advice,
services or transactions; provided, however, that, in the case of clause (ii)
only, the Company shall not be responsible for any Liabilities or Expenses of
any Indemnified Person that have resulted primarily from such Indemnified
Person's (x) gross negligence, bad faith or willful misconduct in connection
with any of the advice, actions, inactions or services referred to above or (y)
use of any offering materials or information concerning the Company in
connection with the offer or sale of the Securities in the Offering which were
not authorized for such use by the Company and which use constitutes negligence,
bad faith or willful misconduct. The Company also agrees to reimburse each
Indemnified Person for all Expenses as they are incurred in connection with
enforcing such Indemnified Person's rights under this Agreement, provided,
however, each of the Indemnified Persons shall agree at the time of receipt of
such reimbursement of such Expenses (which agreement shall be self-executing
through acceptance of such payment) to reimburse the Company promptly for all
such Expenses advanced by the Company in the event and to the extent that any
prior payment the Company made to an Indemnified Person is determined to have
been improper by reason of such Indemnified Person’s (x) gross negligence, bad
faith or willful misconduct in connection with any of the advice, actions,
inactions or services referred to above or (y) use of any offering materials or
information concerning the Company in connection with the offer or sale of the
Securities in the Offering which were not authorized for such use by the Company
and which use constitutes negligence, bad faith or willful misconduct.

(b)               Upon receipt by an Indemnified Person of actual notice of an
Action against such Indemnified Person with respect to which indemnity may be
sought under this Agreement, such Indemnified Person shall promptly notify the
Company in writing; provided that failure by any Indemnified Person so to notify
the Company shall not relieve the Company from any liability which the Company
may have on account of this indemnity or otherwise to such Indemnified Person,
except to the extent the Company shall have been prejudiced by such failure. The
Company shall, if requested by the

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Placement Agent, assume the defense of any such Action including the employment
of counsel reasonably satisfactory to the applicable Placement Agent, which
counsel may also be counsel to the Company. Any Indemnified Person shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Person unless: (i) the Company has failed promptly
to assume the defense and employ counsel or (ii) the named parties to any such
Action (including any impleaded parties) include such Indemnified Person and the
Company, and such Indemnified Person shall have been advised in the reasonable
opinion of counsel that there is an actual conflict of interest that prevents
the counsel selected by the Company from representing both the Company (or
another client of such counsel) and any Indemnified Person; provided that the
Company shall not in such event be responsible hereunder for the fees and
expenses of more than one firm of separate counsel for all Indemnified Persons
in connection with any Action or related Actions, in addition to any local
counsel. The Company shall not be liable for any settlement of any Action
effected without its written consent (which shall not be unreasonably withheld).
In addition, the Company shall not, without the prior written consent of the
applicable Placement Agent (which shall not be unreasonably withheld), settle,
compromise or consent to the entry of any judgment in or otherwise seek to
terminate any pending or threatened Action in respect of which indemnification
or contribution may be sought hereunder (whether or not such Indemnified Person
is a party thereto) unless such settlement, compromise, consent or termination
includes an unconditional release of each Indemnified Person from all
Liabilities arising out of such Action for which indemnification or contribution
may be sought hereunder. The indemnification required hereby shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as such expense, loss, damage or liability is incurred and is due
and payable, provided, however, each of the Indemnified Persons shall agree at
the time of receipt of such indemnification (which agreement shall be
self-executing through acceptance of such payment) to reimburse the Company
promptly for all such indemnification made by the Company in the event and to
the extent that any prior payment the Company made to an Indemnified Person is
determined to have been improper by reason of such Indemnified Person’s (x)
gross negligence, bad faith or willful misconduct in connection with any of the
advice, actions, inactions or services referred to above or (y) use of any
offering materials or information concerning the Company in connection with the
offer or sale of the Securities in the Offering which were not authorized for
such use by the Company and which use constitutes negligence, bad faith or
willful misconduct.

(c)                In the event that the foregoing indemnity is unavailable to
an Indemnified Person other than in accordance with this Agreement, the Company
shall contribute to the Liabilities and Expenses paid or payable by such
Indemnified Person in such proportion as is appropriate to reflect (i) the
relative benefits to the Company, on the one hand, and to the applicable
Placement Agent and any other Indemnified Person, on the other hand, of the
matters contemplated by this Agreement or (ii) if the allocation provided by the
immediately preceding clause is not permitted by applicable law, not only such
relative benefits but also the relative fault of the Company, on the one hand,
and the applicable Placement Agent and any other Indemnified Person, on the
other hand, in connection with the matters as to which such Liabilities or
Expenses relate, as well as any other relevant equitable considerations;
provided, however, that in no event will the aggregate contribution of all
Indemnified Persons to all Liabilities or Expenses in connection with any such
matters exceed the amount of the fee actually received by the applicable
Placement Agent pursuant to this Agreement. For purposes of this paragraph, the
relative benefits to the Company, on the one hand, and to the applicable
Placement Agent on the other hand, of the matters contemplated by this Agreement
shall be deemed to be in the same proportion as (a) the total value paid or
contemplated to be paid to or received or contemplated to be received by the
Company in the transaction or transactions that are within the scope of this
Agreement, whether or not any such transaction is consummated, bears to (b) the
fees paid to the applicable Placement Agent under this Agreement.
Notwithstanding the above, no person guilty of fraudulent misrepresentation
within the

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meaning of Section 11(f) of the Securities Act, as amended, shall be entitled to
contribution from a party who was not guilty of fraudulent misrepresentation.

(d)               The Company also agrees that no Indemnified Person shall have
any liability (whether direct or indirect, in contract or tort or otherwise) to
the Company for or in connection with advice or services rendered or to be
rendered by any Indemnified Person pursuant to this Agreement, the transactions
contemplated thereby or any Indemnified Person's actions or inactions in
connection with any such advice, services or transactions except for Liabilities
(and related Expenses) of the Company that have resulted primarily from such
Indemnified Person's gross negligence, bad faith or willful misconduct in
connection with any such advice, actions, inactions or services.

(e)                The reimbursement, indemnity and contribution obligations of
the Company set forth herein shall apply to any modification of this Agreement
and shall remain in full force and effect regardless of any termination of, or
the completion of any Indemnified Person's services under or in connection with,
this Agreement.

Section 8.                 Representations and Indemnities to Survive Delivery.
The respective indemnities, agreements, representations, warranties and other
statements of the Company or any person controlling the Company, of its
officers, and of each Placement Agent set forth in or made pursuant to this
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Placement Agents, the Company, or any of its or
their partners, officers or directors or any controlling person, as the case may
be, and will survive delivery of and payment for the Securities sold hereunder
and any termination of this Agreement. A successor to a Placement Agent, or to
the Company, its directors or officers or any person controlling the Company,
shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Agreement.

Section 9.                 Notices. All communications hereunder shall be in
writing and shall be mailed, hand delivered or telecopied and confirmed to the
parties hereto as follows:

If to the Placement Agents to the address set forth above.

 

Chardan Capital Markets

17 State Street, Suite 1600

New York, New York 10004

Attention: Kerry Propper

Facsimile: (646) 786-4043

 

Brean Capital, LLC

1345 Avenue of the Americas, 29th Floor

New York, New York 10105

Attention: Jeffrey Sacher

Facsimile: (212) 702-6649

 

With a copy to:

 

Ellenoff Grossman & Schole

1345 Avenue of the Americas

New York, New York 10105

Attention: Robert F. Charron

Facsimile: (212) 401-4741

 

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If to the Company:

 

Ohr Pharmaceutical, Inc.

800 Third Avenue, 11th Floor

New York, New York 10022

Attention: Chief Financial Officer

Facsimile: 212-644-0544

 

With a copy to:

 

Hahn & Hessen LLP

488 Madison Avenue

New York, New York 10022

Attention: James Kardon, Esq.

Facsimile: 212-478-7400

 

Any party hereto may change the address for receipt of communications by giving
written notice to the others.

Section 10.             Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto, and to the benefit of the employees,
officers and directors and controlling persons referred to in Section 7 hereof,
and to their respective successors, and personal representative, and no other
person will have any right or obligation hereunder.

Section 11.             Partial Unenforceability. The invalidity or
unenforceability of any section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.

Section 12.             Governing Law Provisions. This Agreement shall be deemed
to have been made and delivered in New York City and both this engagement letter
and the transactions contemplated hereby shall be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
laws of the State of New York, without regard to the conflict of laws principles
thereof. Each of the Placement Agents and the Company: (i) agrees that any legal
suit, action or proceeding arising out of or relating to this engagement letter
and/or the transactions contemplated hereby shall be instituted exclusively in
New York Supreme Court, County of New York, or in the United States District
Court for the Southern District of New York, (ii) waives any objection which it
may have or hereafter to the venue of any such suit, action or proceeding, and
(iii) irrevocably consents to the jurisdiction of the New York Supreme Court,
County of New York, and the United States District Court for the Southern
District of New York in any such suit, action or proceeding. Each of the
Placement Agents and the Company further agrees to accept and acknowledge
service of any and all process which may be served in any such suit, action or
proceeding in the New York Supreme Court, County of New York, or in the United
States District Court for the Southern District of New York and agrees that
service of process upon the Company mailed by certified mail to the Company’s
address shall be deemed in every respect effective service of process upon the
Company, in any such suit, action or proceeding, and service of process upon a
Placement Agent mailed by certified mail to such Placement Agent’s address shall
be deemed in every respect effective service process upon such Placement Agent,
in any such suit, action or proceeding. Notwithstanding any provision of this
engagement letter to the contrary, the Company agrees that neither Placement
Agent nor any of their respective affiliates, and the respective officers,
directors, employees, agents and representatives of each Placement Agent, its
affiliates and each other person, if any,

20

 

controlling such Placement Agent or any of its affiliates, shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to the
Company for or in connection with the engagement and transaction described
herein except for any such liability for losses, claims, damages or liabilities
incurred by us that are finally judicially determined to have resulted from the
bad faith or gross negligence of such individuals or entities. If either 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 attorney’s fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such action or proceeding.

Section 13.             General Provisions.

(a) This Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all contemporaneous oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may be executed in two or more counterparts, each one of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement may not be amended or
modified unless in writing by all of the parties hereto, and no condition herein
(express or implied) may be waived unless waived in writing by each party whom
the condition is meant to benefit. Section headings herein are for the
convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.

(b) The Company acknowledges that in connection with the offering of the
Securities: (i) the Placement Agents have acted at arms' length, are not agents
of, and owe no fiduciary duties to the Company or any other person, (ii) the
Placement Agents owe the Company only those duties and obligations set forth in
this Agreement and (iii) the Placement Agents may each have interests that
differ from those of the Company. The Company waives to the full extent
permitted by applicable law any claims it may have against the Placement Agents
arising from an alleged breach of fiduciary duty in connection with the offering
of the Securities

[The remainder of this page has been intentionally left blank.]

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If the foregoing is in accordance with your understanding of our agreement,
please sign below whereupon this instrument, along with all counterparts hereof,
shall become a binding agreement in accordance with its terms.

    Very truly yours,           Ohr Pharmaceutical Inc.           By: /s/    
Name:       Title:  

The foregoing Placement Agency Agreement is hereby confirmed and accepted as of
the date first above written.

 

Chardan Capital Markets, LLC         By:

/s/

  Name:   Title:  

 

Brean Capital, LLC         By:

/s/

  Name: Name:   Title: