Exhibit 10.1

 

Execution Version

 

THE SYMBOL “[***]” DENOTES PLACES WHERE CERTAIN IDENTIFIED INFORMATION HAS BEEN
EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH (i) NOT MATERIAL, AND (ii) WOULD
LIKELY CAUSE COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into
as of August 27, 2020 by and among Entasis Therapeutics Holdings Inc., a
Delaware corporation (the “Company”), and the Investors identified on Exhibit A
attached hereto (each an “Investor” and collectively the “Investors”).

 

Recitals

 

A.          The Company and each Investor is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”),
and/or Rule 506 of Regulation D (“Regulation D”) as promulgated by the United
States Securities and Exchange Commission (the “SEC”) under the 1933 Act;

 

B.          The Investors (on a several and not a joint basis) wish to purchase
from the Company, and the Company wishes to sell and issue to the Investors,
upon the terms and subject to the conditions stated in this Agreement,
(i) shares (the “Shares”) of the Company’s Common Stock, par value $0.001 per
share (the “Common Stock”), (ii) warrants to purchase shares of Common Stock in
the form attached hereto as Exhibit B-1 (each, a “Common Warrant” and
collectively, the “Common Warrants”) and (iii) in lieu of Shares, pre-funded
warrants to purchase shares of Common Stock in the form attached hereto as
Exhibit B-2 (each, a “Pre-Funded Common Warrant” and collectively, the
“Pre-Funded Common Warrants” and, together with the Common Warrants, the
“Warrants”); and

 

C.          Contemporaneously with the sale of the Shares and Warrants, the
parties hereto will execute and deliver a Registration Rights Agreement, in the
form attached hereto as Exhibit C (the “Registration Rights Agreement”),
pursuant to which the Company will agree to provide certain registration rights
in respect of the Shares and Common Warrant Shares (as defined below) under the
1933 Act, and the rules and regulations promulgated thereunder, and applicable
state securities laws.

 

In consideration of the mutual promises made herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

1.          Definitions. For the purposes of this Agreement, the following terms
shall have the meanings set forth below:

 

“Affiliate” means, with respect to any Person, any other Person which directly
or indirectly through one or more intermediaries Controls, is controlled by, or
is under common Control with, such Person; provided, that for purposes of this
Agreement, neither Purchaser nor any of their respective Affiliates shall be
deemed to be an Affiliate of the Company or any of its Subsidiaries.

 

 

 

 

“Business Day” means a day, other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business.

 

“Closing” has the meaning set forth in Section 3.1.

 

“Closing Date” has the meaning set forth in Section 3.1.

 

“Closing Securities” means the Shares and the Warrants.

 

“Common Warrants” has the meaning set forth in the Recitals.

 

“Common Warrant Shares” means the Shares of Common Stock Issuable upon exercise
of the Common Warrants.

 

“Company’s Knowledge” means the actual knowledge of the executive officers (as
defined in Rule 405 under the 1933 Act) of the Company.

 

“Control” (including the terms “controlling”, “controlled by” or “under common
control with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

 

“Disclosure Schedules” has the meaning set forth in Section 4.

 

“Environmental Laws” has the meaning set forth in Section 4.16.

 

“FDA” has the meaning set forth in Section 4.27.

 

“GAAP” has the meaning set forth in Section 4.18.

 

“Intellectual Property” means all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, trade secrets,
licenses, domain names, information and proprietary rights and processes.

 

“Investor Questionnaire” has the meaning set forth in Section 3.1.

 

“Material Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, financial condition or business of the
Company and its Subsidiaries taken as a whole, (ii) the legality or
enforceability of any of the Transaction Documents or (iii) the ability of the
Company to perform its obligations under the Transaction Documents.

 

“Material Contract” means any contract, instrument or other agreement to which
the Company is a party or by which it is bound which is material to the business
of the Company, including those that have been filed as an exhibit to the SEC
Filings pursuant to Item 601(b)(10) of Regulation S-K.

 

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“Nasdaq” means The Nasdaq Global Market.

 

“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.

 

“Placement Agents” means Cantor Fitzgerald & Co. and A.G.P. / Alliance Global
Partner.

 

“Pre-Funded Common Warrants” has the meaning set forth in the Recitals.

 

“Pre-Funded Common Warrant Shares” means the shares of Common Stock issuable
upon exercise of the Pre-Funded Common Warrants.

 

“Press Release” has the meaning set forth in Section 9.7.

 

“Registration Rights Agreement” has the meaning set forth in the Recitals.

 

“Rule 144” has the meaning set forth in Section 7.5.

 

“SEC Filings” has the meaning set forth in Section 4.

 

“Securities” means the Shares, the Warrants and the Warrant Shares.

 

“Selling Stockholder Questionnaire” has the meaning set forth in Section 3.1.

 

“Shares” has the meaning set forth in the Recitals.

 

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO
under the 1934 Act (but shall not be deemed to include the location and/or
reservation of borrowable shares of Common Stock).

 

“Subscription Amount” means, as to an Investor, the aggregate amount to be paid
for the Closing Securities purchased hereunder as specified opposite such
Investor’s name on Exhibit A attached hereto, under the column entitled
“Aggregate Purchase Price of Closing Securities,” in U.S. Dollars and in
immediately available funds.

 

“Subsidiaries” has the meaning set forth in Section 4.1.

 

“Trading Day” means a day on which Nasdaq is open for trading.

 

“Transfer Agent” has the meaning set forth in Section 7.5.

 

“Transaction Documents” means this Agreement, the Warrants and the Registration
Rights Agreement.

 

“Warrants” has the meaning set forth in the Recitals.

 

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“Warrant Shares” means the shares of Common Stock issuable upon exercise of the
Warrants.

 

“1933 Act” has the meaning set forth in the Recitals.

 

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

 

2.          Purchase and Sale of the Shares and Warrants. On the Closing Date,
upon the terms and subject to the conditions set forth herein, the Company will
issue and sell, and the Investors will purchase, severally and not jointly,
(i) the number of Shares set forth opposite the name of such Investor under the
heading “Number of Shares to be Purchased” on Exhibit A attached hereto, at a
price per Share equal to $2.675, (ii) the number of Common Warrants set forth
opposite the name of such Investor under the heading “Number of Common Warrants
to be Purchased” on Exhibit A attached hereto, each with an exercise price equal
to $2.675 per Common Warrant Share (subject to adjustment as provided therein)
and (iii) in lieu of Shares, the number of Pre-Funded Common Warrants set forth
opposite the name of such Investor under the heading “Number of Pre-Funded
Common Warrants to be Purchased” on Exhibit A attached hereto, each with an
exercise price of $0.001 per Pre-Funded Common Warrant Share (subject to
adjustment as provided herein) and at a purchase price of $2.675 per Pre-Funded
Common Warrant.

 

3.Closing.

 

3.1.          The closing of the purchase and sale of the Closing Securities
(which Closing Securities are set forth in the Schedule of Investors) pursuant
to this Agreement (the “Closing”) shall be held on the second Business Day after
satisfaction or waiver of the conditions set forth in Section 6.1 and
Section 6.2 (other than those conditions that by their terms are to be satisfied
at the Closing, but subject to the satisfaction or waiver of those conditions)
via the remote electronic exchange of documents and signatures, or on such other
date and place as may be agreed to by the Company and the Investors (the
“Closing Date”). At or prior to the Closing, each Investor and the Company shall
execute any related agreements or other documents required to be executed
hereunder, dated on or before the Closing Date, including, with respect to any
Investor who has not already executed such form, the Investor Questionnaire and
the Selling Stockholder Notice and Questionnaire in the forms attached hereto as
Appendix I and Appendix II (the “Investor Questionnaire” and the “Selling
Stockholder Questionnaire,” respectively).

 

3.2.          On the Closing Date, each Investor shall deliver or cause to be
delivered to the Company the Subscription Amount via wire transfer (less any
amounts owed to such Investor pursuant to Section 9.5) of immediately available
funds pursuant to the wire instructions delivered to such Investor by the
Company at least two (2) Business Days prior to the Closing Date.

 

3.3.          At or before the Closing, the Company shall deliver or cause to be
delivered to each Investor (i) the number of Shares, registered in the name of
the Investor in book entry form (or, at an Investor’s request, reflected by a
physical stock certificate), in the amount set forth opposite the name of such
Investor under the heading “Number of Shares to be Purchased” on Exhibit A
attached hereto, (ii) the number of Common Warrants set forth opposite the name
of such Investor under the heading “Number of Common Warrants to be Purchased”
on Exhibit A attached hereto, registered in the name of the Investor and
(iii) the number of Pre-Funded Common Warrants set forth opposite the name of
such Investor under the heading “Number of Pre-Funded Common Warrants to be
Purchase” on Exhibit A attached hereto, registered in the name of such Investor.

 

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4.          Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors that, except as set forth in the
schedules delivered herewith (collectively, the “Disclosure Schedules”), if any,
and except as otherwise described in the Company’s filings pursuant to the 1934
Act made prior to the date hereof (collectively, the “SEC Filings”) (but
excluding any forward-looking disclosures set forth in any “risk factors”
section, any disclosures in any “forward-looking statements” section and any
other disclosures included therein to the extent they are predictive or
forward-looking in nature), which qualify these representations and warranties
in their entirety, as of the date hereof:

 

4.1.          Organization, Good Standing and Qualification. The Company is an
entity 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 or lease and use its properties and assets, to execute and deliver the
Transaction Documents, to carry out the provisions of the Transaction Documents,
to issue and sell the Closing Securities and to carry on its business as
presently conducted and as proposed to be conducted as described in the SEC
Filings. Each of the Company’s Subsidiaries required to be disclosed pursuant to
Item 601(b)(21) of Regulation S-K in an exhibit to its annual report on
Form 10-K filed with the SEC for the year ended December 31, 2019 (the
“Subsidiaries”) is an entity duly incorporated or otherwise organized, validly
existing and in good standing (to the extent such concept exists in the relevant
jurisdiction) under the laws of the jurisdiction of its incorporation or
organization, as applicable, and has all requisite power and authority to carry
on its business to own and use its properties. Neither the Company nor any of
its Subsidiaries is in violation or default of any of the provisions of its
respective articles of association, charter, certificate of incorporation,
bylaws, limited partnership agreement or other organizational or constitutive
documents. Each of the Company and its Subsidiaries is duly qualified to do
business as a foreign entity and is in good standing (to the extent such concept
exists in the relevant jurisdiction) in each jurisdiction in which the conduct
of its business or its ownership or leasing of property makes such qualification
necessary, except to the extent any failure to so qualify has not had and would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.

 

4.2.          Authorization. The Company has the requisite corporate power and
authority and has taken all requisite corporate action necessary for, and no
further action on the part of the Company, its officers, directors and
stockholders is necessary for, (i) the authorization, execution and delivery of
the Transaction Documents, (ii) the authorization of the performance of all
obligations of the Company hereunder or thereunder, and (iii) the authorization,
issuance (or reservation for issuance) and delivery of the Closing Securities.
The Company’s execution and delivery of each of the Transaction Documents and
the consummation by it of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary board and stockholder action.
Each of the Transaction Documents has been duly executed and delivered by the
Company and, assuming due authorization, execution and delivery by the
Investors, constitutes valid and binding obligations of the Company enforceable
in accordance with their terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors’ rights, (b) general principles of equity
that restrict the availability of equitable remedies and (c) to the extent that
the enforceability of indemnification provisions may be limited by applicable
laws.

 

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4.3.          Capitalization. Schedule 4.3 sets forth as of the date hereof
(i) the authorized capital stock of the Company; (ii) the number of shares of
capital stock issued and outstanding; (iii) the number of shares of capital
stock issuable pursuant to the Company’s stock plans; and (iv) the number of
shares of capital stock issuable and reserved for issuance pursuant to
securities (other than the Closing Securities, Warrant Shares and any other
shares of Common Stock being issued by the Company pursuant to this Agreement)
exercisable for, or convertible into or exchangeable for any shares of capital
stock of the Company. All of the issued and outstanding shares of the Company’s
capital stock have been duly authorized and validly issued and are fully paid,
nonassessable and none of such shares were issued in violation of any
pre-emptive rights and such shares were issued in compliance in all material
respects with applicable state and federal securities law and any rights of
third parties. Except as described on Schedule 4.3, no Person is entitled to
pre-emptive or similar statutory or contractual rights with respect to the
issuance by the Company of any securities of the Company. Except as described on
Schedule 4.3, there are no outstanding warrants, options, convertible securities
or other rights, agreements or arrangements of any character under which the
Company is or may be obligated to issue any equity securities of any kind and
except as contemplated by this Agreement. Except as described on Schedule 4.3
and except for the Registration Rights Agreement, there are no voting
agreements, buy-sell agreements, option or right of first purchase agreements or
other agreements of any kind among the Company and any of the security holders
of the Company relating to the securities of the Company held by them. Except as
described on Schedule 4.3 and except as provided in the Registration Rights
Agreement, no Person has the right to require the Company to register any
securities of the Company under the 1933 Act, whether on a demand basis or in
connection with the registration of securities of the Company for its own
account or for the account of any other Person. The issuance and sale of the
Closing Securities hereunder will not obligate the Company to issue shares of
Common Stock or other securities to any other Person (other than the Investors)
and will not result in the adjustment of the exercise, conversion, exchange or
reset price of any outstanding security.

 

4.4.          Valid Issuance. The Shares have been duly and validly authorized
and, when issued and paid for pursuant to this Agreement, will be validly
issued, fully paid and nonassessable, and shall be free and clear of all
encumbrances and restrictions (other than those waived or created by the
Investors), except for restrictions on transfer set forth in the Transaction
Documents or imposed by applicable securities laws. The Warrants have been duly
and validly authorized and, when issued and paid for pursuant to this Agreement,
will be validly issued. The Warrant Shares have been duly and validly authorized
and reserved for issuance and, upon exercise of the Warrants in accordance with
their terms, including the payment of any exercise price therefor, will be
validly issued, fully paid and nonassessable and will be free and clear of all
encumbrances and restrictions (other than those created by the Investors),
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws. Assuming the accuracy of the
representations and warranties of the Investors in this Agreement, the Closing
Securities will be issued in compliance with all applicable federal and state
securities laws.

 

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4.5.          Consents. The execution, delivery and performance by the Company
of the Transaction Documents and the offer, issuance and sale of the Closing
Securities require no consent of, action by or in respect of, or filing with,
any Person, governmental body, agency, or official other than filings that have
been made pursuant to applicable state securities laws and post-sale filings
pursuant to applicable state and federal securities laws and the rules and
regulations of the Nasdaq Stock Market (“Nasdaq”), which the Company shall file
within the applicable time periods, and other than the registration statement
required to be filed by the Registration Rights Agreement, except as have
already been made, obtained or waived or where the failure to obtain any such
approval, authorization, consent, order or filing would not impair the ability
of the Company to issue and sell the Shares or to consummate the transactions
contemplated by this Agreement.

 

4.6.          Delivery of SEC Filings. True and complete copies of the SEC
Filings have been made available by the Company to the Investors through the
Electronic Data Gathering, Analysis, and Retrieval system (the “EDGAR System”)
(other than any information for which the Company has received confidential
treatment from the SEC).

 

4.7.          No Material Adverse Change. Since June 30, 2020, except as
specifically set forth in a subsequent SEC Filing, there has not been:

 

(i)          any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the financial statements
included in the Company’s Quarterly Report on Form 10-Q for the three months
ended June 30, 2020, except for changes in the ordinary course of business which
have not had and would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect;

 

(ii)         any declaration or payment by the Company of any dividend, or any
authorization or payment by the Company of any distribution, on any of the
capital stock of the Company, or any redemption or repurchase by the Company of
any securities of the Company;

 

(iii)        any material damage, destruction or loss, whether or not covered by
insurance, to any assets or properties of the Company;

 

(iv)        any waiver, not in the ordinary course of business, by the Company
of a material right or of a material debt owed to it;

 

(v)         any satisfaction or discharge of a material lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business;

 

(vi)        any change or amendment to the Company’s Amended and Restated
Certificate of Incorporation or Amended and Restated Bylaws, or termination of
or material amendment to any contract of the Company that the Company is
required to file with the SEC pursuant to Item 601(b)(10) of Regulation S-K;

 

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(vii)       any material labor difficulties or, to the Company’s Knowledge,
labor union organizing activities with respect to employees of the Company;

 

(viii)      any material transaction entered into by the Company other than in
the ordinary course of business;

 

(ix)         the loss of the services of any executive officer (as defined in
Rule 405 under the 1933 Act) of the Company; or

 

(x)          any other event or condition that, to the Company’s Knowledge,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect.

 

4.8.          SEC Filings. The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by the Company under 1933
Act and the 1934 Act, including pursuant to Section 13(a) or 15(d) thereof, for
the one year preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material). At the time of filing
thereof, such SEC Filings complied as to form in all material respects with the
requirements of the 1933 Act or 1934 Act, as applicable, and, as of their
respective dates, did 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 made therein, in the light of the circumstances
under which they were made, not misleading.

 

4.9.          No Conflict, Breach, Violation or Default. The execution, delivery
and performance of the Transaction Documents by the Company and the issuance and
sale of the Closing Securities in accordance with the provisions thereof will
not (i) conflict with or result in a breach or violation of (a) any of the terms
and provisions of, or constitute a default under, the Company’s Amended and
Restated Certificate of Incorporation or Amended and Restated Bylaws, both as in
effect on the date hereof (true and complete copies of which have been made
available to the Investors through the EDGAR system), or (b) assuming the
accuracy of the representations and warranties in Section 5, any applicable
statute, rule, regulation or order of any governmental agency or body or any
court, domestic or foreign, having jurisdiction over the Company or its
Subsidiaries, or any of their assets or properties, 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, encumbrance
or other adverse claim upon any of the properties or assets of the Company or
its Subsidiaries or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any contract or agreement to which the Company is a party, except, in the case
of clauses (i)(b) and (ii) only, for such conflicts, breaches, violations and
defaults as have not and would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.

 

4.10.        Compliance.  The Company is not (i) 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) in violation of any judgment, decree or order of any court,
arbitrator or governmental body or (iii) 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, except in each case as would not have
or reasonably be expected to result in, individually or in the aggregate, a
Material Adverse Effect.

 

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4.11.        Tax Matters. The Company and its Subsidiaries have filed all
material tax returns (subject to permitted exceptions) required to have been
filed by the Company or its Subsidiaries with all appropriate governmental
agencies and have paid all material taxes shown thereon or otherwise owed by
them, other than those being contested in good faith and for which adequate
reserves have been provided. The Company has made adequate charges, accruals and
reserves in the applicable financial statements referred to in Section 4.18
below in respect of all federal, state and foreign income and franchise taxes
for all periods as to which the tax liability of the Company or its Subsidiaries
has not been finally determined, except to the extent of any inadequacy that
would not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect. There are no material tax liens or claims pending or,
to the Company’s Knowledge, threatened against the Company or any of its
Subsidiaries or any of their respective assets or property.

 

4.12.        Title to Properties. The Company and its Subsidiaries have good and
marketable title to all real properties and all other tangible properties and
assets owned by them, in each case free from liens, encumbrances and defects,
except such as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect; and the Company and its
Subsidiaries hold any leased real or personal property under valid, subsisting
and enforceable leases with which the Company and its Subsidiaries are in
compliance and with no exceptions, except such as would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect
and except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, receivership, moratorium, fraudulent convenience or
other similar laws relating to creditor’s rights generally and (ii) general
principles of equity and the discretion of the court before which any proceeding
therefor may be brought.

 

4.13.        Certificates, Authorities and Permits. The Company and its
Subsidiaries possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by them, except where failure to so possess would not reasonably be
expected to, individually or in the aggregate, result in a Material Adverse
Effect. The Company and its Subsidiaries have not received any notice of
proceedings relating to the revocation or modification of any such certificate,
authority or permit that, if determined adversely to the Company or its
Subsidiaries, would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect.

 

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4.14.        Labor Matters.

 

(a)          Neither the Company nor its Subsidiaries are parties to or bound by
any collective bargaining agreements or other agreements with labor
organizations.

 

(b)          No labor dispute before the National Labor Relations Board with the
employees of the Company or any of its Subsidiaries, or with the employees of
any principal supplier, manufacturer, customer or contractor of the Company,
exists or, to the Company’s Knowledge, is threatened or imminent that would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.

 

(c)          There are no claims pending against the Company before the Equal
Employment Opportunity Commission or any other administrative body or in any
court asserting any violation of Title VII of the Civil Rights Act of 1964, the
Age Discrimination Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other federal,
state or local law, statute or ordinance barring discrimination of employment
that would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.

 

4.15.        Intellectual Property. The Company and its Subsidiaries own,
possess, license or have other rights to use, the patents and patent
applications, copyrights, trademarks, service marks, trade names, service names
and trade secrets as necessary or material for use in connection with its
businesses as described in the SEC Filings (collectively, the “Intellectual
Property Rights”), and to the Company’s Knowledge, there are no material liens,
security interests or encumbrances that have been filed against any of these
Intellectual Property Rights. No actions, suits, proceedings or claims are
pending, or to the Company’s Knowledge, asserted or threatened against the
Company or its Subsidiaries alleging infringement of a patent or other
intellectual property right of others. To the Company’s Knowledge, there is no
existing infringement by another Person of any of the Intellectual Property
Rights that would materially affect the use thereof by the Company. To the
Company’s Knowledge, the Company is not liable for infringement with respect to
any of the Company’s product candidates. To the Company’s Knowledge, the
development, manufacture, sale, and any currently proposed use of any of the
products, proposed products or processes of the Company referred to in the SEC
Reports, in the current or proposed conduct of the business of the Company, do
not currently, and will not upon commercialization, to the Company’s Knowledge,
infringe any right or valid patent claim of any third party. To the Company’s
Knowledge, there are no ownership rights of third parties to any Intellectual
Property Rights in any field of use that is exclusively licensed to the Company,
other than any licensor to the Company of such Intellectual Property Rights. To
the Company’s Knowledge, no action, suit, claim or other proceeding, except for
routine patent and trademark prosecution proceedings in patent offices
throughout the world, is pending or threatened challenging the validity,
enforceability, scope, registration, ownership or use of any of the Intellectual
Property Rights. To the Company’s Knowledge, no action, suit, claim or other
proceeding is pending or threatened, challenging the Company’s rights in or to
any Intellectual Property Rights.  The Company and its Subsidiaries have
security procedures to protect the secrecy, confidentiality and value of their
Intellectual Property Rights. To the Company’s Knowledge, no employee is in or
has been in violation in any material respect of any term of any employment
contract, invention assignment agreement, non-competition agreement,  or
nondisclosure agreement with a former employer, executed prior to such
employee’s employment where the basis of such violation relates to such
employee’s employment and such violation occurred while employed and while the
contract was valid and in effect. All material licenses or other material
agreements under which the Company is granted rights to Intellectual Property
are, to the Company’s Knowledge, in full force and effect and, to the Company’s
Knowledge, there is no material default by any other party thereto. To the
Company’s Knowledge, the licensors under material licenses and other material
agreements had all requisite power and authority to grant the rights to the
Intellectual Property purported to be granted thereby. To the Company’s
Knowledge, the consummation of the transactions contemplated hereby and by the
other Transaction Documents will not result in the alteration, loss, impairment
of or restriction on the Company’s or any of its Subsidiaries’ ownership or
right to use any Intellectual Property that is material to the conduct of the
Company’s business as now conducted.

 

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4.16.        Environmental Matters. Except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, neither the
Company nor any of its Subsidiaries is in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of hazardous or
toxic substances or relating to the protection or restoration of the environment
or human exposure to hazardous or toxic substances (collectively, “Environmental
Laws”), has released any hazardous substances regulated by Environmental Law on
to any real property that it owns or operates, or has received any written
notice or claim that it is liable for any off-site disposal or contamination
pursuant to any Environmental Laws; and to the Company’s Knowledge, there is no
pending or threatened investigation that would reasonably be expected to lead to
such a claim.

 

4.17.        Legal Proceedings. There are no legal, governmental or regulatory
investigations, actions, suits or proceedings, to the Company’s Knowledge,
pending to which the Company or any of its Subsidiaries is or may reasonably be
expected to become a party or to which any property of the Company is or may
reasonably be expected to become the subject that, individually or in the
aggregate, if determined adversely to the Company or its Subsidiaries, would
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any of its Subsidiaries, nor, to the Company’s Knowledge, any director or
officer thereof (in their respective capacities as such), is or has been the
subject of any action involving a judicially filed claim of violation of or
liability under federal or state securities laws or a judicially filed claim of
breach of fiduciary duty. There has not been, and to the Company’s Knowledge,
there is not pending, any investigation by the SEC involving the Company or any
current or former director or officer of the Company (in their respective
capacities as such). The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any of its Subsidiaries under the 1933 Act or the 1934 Act.

 

4.18.        Financial Statements. The financial statements included in each SEC
Filing comply in all material respects with applicable accounting requirements
and the rules and regulations of the SEC with respect thereto as in effect at
the time of filing (or to the extent corrected by a subsequent restatement) and
present fairly, in all material respects, the financial position of the Company
as of the dates shown and its results of operations and cash flows for the
periods shown, subject in the case of unaudited financial statements to normal,
immaterial year-end audit adjustments, and such financial statements have been
prepared in conformity with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (“GAAP”)
(except as may be disclosed therein or in the notes thereto, and except that the
unaudited financial statements may not contain all footnotes required by GAAP,
and, in the case of quarterly financial statements, as permitted by Form 10-Q
under the 1934 Act).

 

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4.19.        Insurance Coverage. The Company and each of the Subsidiaries
maintain insurance covering their respective properties, operations, personnel
and businesses as the Company reasonably deems adequate; the Company reasonably
believes such insurance insures against such losses and risks in accordance with
customary industry practice to protect the Company and the Subsidiaries and
their respective businesses and which is commercially reasonable for the current
conduct of their respective businesses; to the Company’s Knowledge, all such
insurance is fully in force on the date hereof.

 

4.20.        Compliance with Nasdaq Continued Listing Requirements. The Company
is in compliance with applicable Nasdaq continued listing requirements. There
are no proceedings pending or, to the Company’s Knowledge, threatened against
the Company relating to the continued listing of the Common Stock on Nasdaq and
the Company has not received any notice of, nor to the Company’s Knowledge is
there any reasonable basis for, the delisting of the Common Stock from Nasdaq.

 

4.21.        Brokers and Finders. Other than the Placement Agents, no Person
will have, as a result of the transactions contemplated by the Transaction
Documents, any valid right, interest or claim against or upon the Company or an
Investor for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the
Company.

 

4.22.        No Directed Selling Efforts or General Solicitation. Neither the
Company nor any of its Subsidiaries nor any Person acting on their behalf has
conducted any general solicitation or general advertising (as those terms are
used in Regulation D) in connection with the offer or sale of any of the Closing
Securities.

 

4.23.        No Integrated Offering. Neither the Company nor any of its
Subsidiaries nor any Person acting on their behalf has, directly or indirectly,
made any offers or sales of any Company security or solicited any offers to buy
any Company security, under circumstances that would adversely affect reliance
by the Company on Section 4(a)(2) for the exemption from registration for the
transactions contemplated hereby or would require registration of the Closing
Securities under the 1933 Act.

 

4.24.        Questionable Payments. Neither the Company nor any of its
Subsidiaries nor, to the Company’s Knowledge, any of the current or former
directors, officers, employees, agents or other Persons acting on behalf of the
Company or its Subsidiaries, has taken any action, directly or indirectly, that
would result in a violation by such persons of the Foreign Corrupt Practices Act
of 1977, as amended, and the rules and regulations thereunder, or the OECD
Convention on Bribery of Foreign Public Officials in International Business
Transactions.

 

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4.25.        Internal Controls. The Company has established and maintains
disclosure controls and procedures (as defined in Rules 13a-15(c) and
15d-15(e) of the 1934 Act) for the Company and designed such disclosure controls
and procedures to ensure that material information relating to the Company and
required to be disclosed by the Company in the reports that it files or submits
under the 1934 Act is made known to the certifying officers by others within the
Company. 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, and (iii) access to assets or incurrence of liabilities is
permitted only in accordance with management’s general or specific
authorization. The Company’s certifying officers have evaluated the
effectiveness of the Company’s controls and procedures as of the end of the
period covered by the most recently filed periodic report under the 1934 Act
(such date, the “Evaluation Date”). The Company presented in its most recently
filed periodic report under the 1934 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 end of the Company’s
most recent audited fiscal year, to the Company’s Knowledge, there have been no
significant deficiencies or material weaknesses detected in the Company’s
internal control over financial reporting (whether or not remediated) and no
change in the Company’s internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting. The Company is not aware of any
change in its internal control over financial reporting that has occurred during
its most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial
reporting. The Company maintains a standard system of accounting established and
administered in accordance with GAAP and the applicable requirements of the 1934
Act.

 

4.26.        Investment Company. The Company is not required to be registered
as, and immediately following the Closing will not be required to register as,
an “investment company” within the meaning of the Investment Company Act of
1940, as amended.

 

4.27.        Tests and Preclinical and Clinical Trials. The studies, tests and
preclinical and clinical trials conducted by or, to the Company’s Knowledge, on
behalf of the Company were and, if still pending, are being, conducted in all
material respects in accordance with the protocols submitted to the U.S. Food
and Drug Administration (the “FDA”) or any foreign governmental body exercising
comparable authority, procedures and controls pursuant to, where applicable,
good clinical practice, informed consent and all applicable laws, regulations
and requirements. The Company has filed with the FDA or other appropriate
governmental entity all material required notices, and annual or other reports,
including notices of adverse experiences and reports of serious and unexpected
adverse experiences, related to the use of its product candidates in clinical
trials. The descriptions of the studies, tests and preclinical and clinical
trials conducted by or, to the Company’s Knowledge, on behalf of the Company,
contained in the SEC Filings are accurate and complete in all material respects;
the Company is not aware of any other studies, tests or preclinical and clinical
trials, the results of which call into question the results described in the SEC
Filings; and the Company has not received any notices or correspondence from the
FDA, any foreign, state or local governmental body exercising comparable
authority or any Institutional Review Board requiring the termination,
suspension, material modification or clinical hold of any studies, tests or
preclinical or clinical trials conducted by or on behalf of the Company. The
properties, business and operations of the Company have been and are being
conducted in all material respects in accordance with all applicable laws,
rules and regulations of the FDA and any other governmental entity. The Company
has not been informed by the FDA or any other governmental entity that the FDA
or any other governmental entity will prohibit the testing, distribution,
marketing, sale, license or use of any product proposed to be developed,
produced, tested, distributed or marketed by the Company. Neither the Company
nor, to the Company’s Knowledge, any of its officers or employees has committed
any act, made any statement or failed to make any statement that would
reasonably be expected to provide a basis for the FDA to invoke its policy with
respect to “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal
Gratuities” set forth in 56 Fed. Reg. 46191 (Sept. 10, 1991) and any amendments
thereto. Neither the Company nor, to the Company’s Knowledge, any officer or
employee of the Company has been convicted of any crime or engaged in any
conduct that has resulted in or would reasonably be expected to result in
(i) debarment under 21 U.S.C. Section 335a or any similar state law or
(ii) exclusion under 42 U.S.C. Section 1320a-7 or any similar state law or
regulation.

 

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4.28.        Manipulation of Price.  The Company has not taken, and, to the
Company’s Knowledge, no Person acting on its behalf has 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.

 

4.29.        Bad Actor Disqualification. None of the Company, any predecessor or
affiliated issuer of the Company nor, to the Company’s Knowledge, any director
or executive officer of the Company or any promoter connected with the Company
in any capacity, is subject to any of the “bad actor” disqualifications within
the meaning of Rule 506(d) under the 1933 Act, except for a disqualification
event covered by Rule 506(d)(2) or (d)(3).

 

4.30.        Foreign Corrupt Practices.  Neither the Company nor its
Subsidiaries has, and to the Company’s Knowledge, no agent or other person
acting on behalf of the Company or its Subsidiaries 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 its Subsidiaries (or made by any person acting on behalf of the
Company or its Subsidiaries 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.

 

4.31.        Transactions with Affiliates.  No transaction with the Company
required to be disclosed in the SEC Filings pursuant to Item 404 of Regulation
S-K exists as of the date hereof that has not so been disclosed.

 

4.32.        Health Care Laws.  The Company has operated and currently is in
compliance in all material respects with all applicable Health Care Laws
(defined herein), including, without limitation, the rules and regulations of
the FDA, the U.S. Department of Health and Human Services Office of Inspector
General, the Centers for Medicare & Medicaid Services, the Office for Civil
Rights, the Department of Justice or any other governmental agency or body
having jurisdiction over the Company or any of its properties, and has not
engaged in activities which are, as applicable, cause for false claims
liability, civil penalties, or mandatory or permissive exclusion from Medicare,
Medicaid, or any other state or federal health care program. For purposes of
this Agreement, “Health Care Laws” shall mean the federal Anti-kickback Statute
(42 U.S.C. § 1320a-7b(b)), the Physician Payment Sunshine Act (42 U.S.C. §
1320a-7h), the civil False Claims Act (31 U.S.C. §§ 3729 et seq.), the criminal
False Claims Act (42 U.S.C. § 1320a-7b(a)), all criminal laws relating to health
care fraud and abuse, including but not limited to 18 U.S.C. Sections 286 and
287, and the health care fraud criminal provisions under the Health Insurance
Portability and Accountability Act of 1996 (42 U.S.C. § 1320d et seq.)
(“HIPAA”), the exclusion laws (42 U.S.C. § 1320a-7), the civil monetary
penalties law (42 U.S.C. § 1320a-7a), HIPAA, as amended by the Health
Information Technology for Economic and Clinical Health Act (42 U.S.C. §§ 17921
et seq.), the patient privacy, data security and breach notification provisions
under HIPAA, the Federal Food, Drug, and Cosmetic Act (21 U.S.C. §§ 301 et
seq.), Medicare (Title XVIII of the Social Security Act), Medicaid (Title XIX of
the Social Security Act), the regulations promulgated pursuant to such laws, and
any other similar local, state or federal law and regulations. The Company has
not received any FDA Form 483, notice of adverse finding, warning letter,
untitled letter or other correspondence, communication or notice from the FDA or
any other governmental or regulatory authority alleging or asserting
noncompliance with any Health Care Laws applicable to the Company. The Company
is not a party to nor has any ongoing reporting obligations pursuant to any
corporate integrity agreements, deferred prosecution agreements, monitoring
agreements, consent decrees, settlement orders, plans of correction or similar
agreements with or imposed by any governmental or regulatory authority. Neither
the Company nor any of its employees, officers, directors or, to the Company’s
Knowledge, consultants has been excluded, suspended or debarred from
participation in any U.S. state or federal health care program or human clinical
research or, to the Company’s Knowledge, is subject to a governmental inquiry,
investigation, proceeding, or other similar action that could reasonably be
expected to result in debarment, suspension, or exclusion.

 

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4.33.        Stock Option Plans.  Each stock option granted by the Company under
the Company’s stock option plans was granted in accordance with the terms of the
applicable Company stock option plan. No stock option granted under the
Company’s stock option plans has been backdated.

 

4.34.        Off Balance Sheet Arrangements.  There is no transaction,
arrangement, or other relationship between the Company and an unconsolidated or
other off balance sheet entity that would have or reasonably be expected to
result in, individually or in the aggregate, a Material Adverse Effect.

 

4.35.        Acknowledgment Regarding Investors’ Purchase of Closing
Securities.  The Company acknowledges and agrees that each of the Investors is
acting solely in the capacity of an arm’s length investor with respect to the
Transaction Documents and the transactions contemplated hereby and thereby. The
Company further acknowledges that no Investor is 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 thereby and any advice
given by any Investor or any of their respective representatives or agents in
connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to the Investors’ purchase of the Closing
Securities. The Company further represents to each Investor that the Company’s
decision to enter into this Agreement and the other Transaction Documents has
been based solely on the independent evaluation of the transactions contemplated
hereby by the Company and its representatives.

 

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4.36.        Use of Form S-3.  The Company meets the registration and
transaction requirements for use of Form S-3 (including pursuant to General
Instruction I.B.6 of Form S-3, as applicable) for the registration of the Shares
and the Common Warrant Shares for resale by the Investors.

 

4.37.        Takeover Protections; Rights Agreements.  The Company and the Board
of Directors of the Company 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 charter documents or the laws of its
state of incorporation that is or could reasonably be expected to become
applicable to any of the Investors as a result of the Investors and the Company
fulfilling their obligations or exercising their rights under the Transaction
Documents, including, without limitation, the Company’s issuance of the Closing
Securities and the Investors’ ownership of the Closing Securities.

 

4.38.        Disclosure. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company confirms that neither it nor, to the Company’s Knowledge, any other
Person acting on its behalf has provided any of the Investors with any
information that it believes constitutes material, non-public information that
will not otherwise be disclosed in the SEC Filings on or prior to the Closing
Date. The Company understands and confirms that the Investors will rely on the
foregoing representation in effecting transactions in securities of the Company.

 

5.          Representations and Warranties of the Investors. Each of the
Investors hereby, severally and not jointly, represents and warrants to the
Company that:

 

5.1.          Organization and Existence. Unless such Investor is an individual,
such Investor is a validly existing corporation, limited partnership or limited
liability company and has all requisite corporate, partnership or limited
liability company power and authority to enter into and consummate the
transactions contemplated by the Transaction Documents and to carry out its
obligations hereunder and thereunder, and to invest in the Securities pursuant
to this Agreement.

 

5.2.          Authorization. The execution, delivery and performance by such
Investor of the Transaction Documents to which such Investor is a party have
been duly authorized and each has been duly executed and when delivered will
constitute the valid and legally binding obligation of such Investor,
enforceable against such Investor in accordance with their respective 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.

 

5.3.          Purchase Entirely for Own Account. The Securities to be received
by such Investor hereunder will be acquired for such Investor’s own account, not
as nominee or agent, and not with a view to the resale or distribution of any
part thereof in violation of the 1933 Act, and such Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same in violation of the 1933 Act without prejudice, however, to such
Investor’s right at all times to sell or otherwise dispose of all or any part of
such Securities in compliance with applicable federal and state securities laws.
Nothing contained herein shall be deemed a representation or warranty by any
Investor to hold the Securities for any period of time. Such Investor is not a
broker-dealer registered with the SEC under the 1934 Act or an entity engaged in
a business that would require it to be so registered.

 

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5.4.          Investment Experience. Such Investor acknowledges that it can bear
the economic risk and complete loss of its investment in the Securities 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.

 

5.5.          Disclosure of Information. Such Investor has had an opportunity to
receive, review and understand all information related to the Company requested
by it and to ask questions of and receive answers from the Company regarding the
Company, its business and the terms and conditions of the offering of the
Securities, and has conducted and completed its own independent due diligence.
Such Investor acknowledges receipt of copies of the SEC Filings. Based on the
information such Investor has deemed appropriate, and without reliance upon any
Placement Agent, it has independently made its own analysis and decision to
enter into the Transaction Documents. Such Investor is relying exclusively on
its own sources of information, investment analysis and due diligence (including
professional advice it deems appropriate) with respect to the execution,
delivery and performance of the Transaction Documents, the Securities and the
business, condition (financial and otherwise), management, operations,
properties and prospects of the Company, including but not limited to all
business, legal, regulatory, accounting, credit and tax matters. Neither such
inquiries nor any other due diligence investigation conducted by such Investor
shall modify, limit or otherwise affect such Investor’s right to rely on the
Company’s representations and warranties contained in this Agreement.

 

5.6.          Restricted Securities. Such Investor understands that the
Securities are characterized as “restricted securities” under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances.

 

5.7.          Legends. It is understood that, except as provided below,
certificates evidencing the Securities may bear the following or any similar
legend:

 

(i)“The securities represented hereby have not been registered with the
Securities and Exchange Commission or the securities commission of any state in
reliance upon an exemption from registration under the Securities Act of 1933,
as amended, and, accordingly, may not be transferred unless (i) such securities
have been registered for sale pursuant to the Securities Act of 1933, as
amended, (ii) such securities may be sold pursuant to Rule 144 UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, or (iii) the Company has received an opinion
of counsel reasonably satisfactory to it that such transfer may lawfully be made
without registration under the Securities Act of 1933, as amended. These
securities are subject to transfer and other restrictions set forth in a
SECURITIES Purchase Agreement, dated August 27, 2020, copies of which are on
file with the Company. 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.”

 

 17 

 

 

(ii)If required by the authorities of any state in connection with the issuance
of sale of the Securities, the legend required by such state authority.

 

5.8.          Accredited Investor. At the time such Investor was offered the
Closing Securities, it was and, as of the date hereof, such Investor is an
“accredited investor” within the meaning of Rule 501 under the 1933 Act and has
executed and delivered to the Company its Investor Questionnaire, which such
Investor represents and warrants is true, correct and complete. Such Investor is
a sophisticated institutional investor with sufficient knowledge, sophistication
and experience in business, including transactions involving private placements
in public equity, to properly evaluate the risks and merits of its purchase of
the Securities. Such Investor has determined based on its own independent review
and such professional advice as it deems appropriate that its purchase of the
Securities and participation in the transactions contemplated by the Transaction
Documents (i) have been duly authorized and approved by all necessary action and
(ii) do not and will not violate or constitute a default under such Investor’s
charter, bylaws or other constituent document, if applicable, under any law,
rule, regulation, agreement or other obligation by which such Investor is bound.

 

5.9.          Placement Agents. Such Investor hereby acknowledges and agrees
that it has independently evaluated the merits of its decision to purchase the
Securities, and that (i) no disclosure or offering document has been prepared by
the Placement Agents in connection with the offer and sale of the Securities,
(ii) each Placement Agent is acting solely as placement agent in connection with
the execution, delivery and performance of the Transaction Documents and is not
acting as an underwriter or in any other capacity and is not and shall not be
construed as a fiduciary for such Investor, the Company or any other person or
entity in connection with the execution, delivery and performance of the
Transaction Documents, (iii) the Placement Agents and each of their respective
directors, officers, employees, representatives and controlling persons have
made no independent investigation with respect to the Company or the Securities
or the accuracy, completeness or adequacy of any information supplied to such
Investor or by the Company, (iv) the Placement Agents have not made and will not
make any representation or warranty, whether express or implied, of any kind or
character and have not provided any advice or recommendation in connection with
the execution, delivery and performance of the Transaction Documents, and
(v) the Placement Agents will not have any responsibility with respect to
(a) any representations, warranties or agreements made by any person or entity
under or in connection with the execution, delivery and performance of the
Transaction Documents, or the execution, legality, validity or enforceability
(with respect to any person) thereof, or (b) the business, affairs, financial
condition, operations, properties or prospects of, or any other matter
concerning the Company. On behalf of itself and its affiliates, such Investor
hereby (a) acknowledges that the Placement Agents shall have no liability or
obligation to the Investors or their affiliates in respect of the Transaction
Documents or the transactions contemplated thereby, (b) waives any claims that
it otherwise might assert against the Placement Agents in respect of the
transactions contemplated by the Transaction Documents, and (c) releases the
Placement Agents in respect of any losses, claims, damages, obligations,
penalties, judgments, awards, liabilities, costs, expenses or disbursements
related to the Transaction Documents or the transactions contemplated thereby.

 

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5.10.         No General Solicitation. Such Investor did not learn of the
investment in the Securities as a result of any general solicitation or general
advertising.

 

5.11.         Brokers and Finders. No Person will have, as a result of the
transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of such Investor.

 

5.12.         Short Sales and Confidentiality Prior to the Date Hereof.  Other
than consummating the transactions contemplated hereunder, such Investor has
not, nor has any Person acting on behalf of or pursuant to any understanding
with such Investor, directly or indirectly executed any purchases or sales,
including Short Sales, of the securities of the Company during the period
commencing as of the time that such Investor was first contacted by the Company,
the Placement Agents or any other Person regarding the transactions contemplated
hereby and ending immediately prior to the date hereof.  Notwithstanding the
foregoing, in the case of an Investor that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Investor’s
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Investor’s assets, the representation set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.  Such
Investor, its Affiliates and, to the knowledge of such Investor, authorized
representatives and advisors of such Investor who are aware of the transactions
contemplated hereby, maintained the confidentiality of all disclosures made to
it in connection with this transaction (including the existence and terms of
this transaction). Notwithstanding the foregoing, for avoidance of doubt,
nothing contained herein shall constitute a representation or warranty, or
preclude any actions, with respect to the identification of the availability of,
or securing of, available shares to borrow in order to effect Short Sales or
similar transactions in the future.

 

5.13.         No Government Recommendation or Approval. Such Investor
understands that no United States federal or state agency, or similar agency of
any other country, has reviewed, approved, passed upon, or made any
recommendation or endorsement of the Company or the purchase of the Securities.

 

5.14.         No Intent to Effect a Change of Control; Ownership. Such Investor
has no present intent to effect a “change of control” of the Company as such
term is understood under the rules promulgated pursuant to Section 13(d) of the
1934 Act and under the rules of Nasdaq, it being understood that by virtue of
its current equity ownership as set forth in the Selling Stockholder
Questionnaire, Innoviva, Inc. may be deemed to control the Company. Except as
set forth in its Selling Stockholder Questionnaire, as of the date hereof,
neither the Investor nor any of its Affiliates is the owner of record or the
beneficial owner of shares of Common Stock or securities convertible into or
exchangeable for Common Stock.

 

 19 

 

 

5.15.         No Conflicts. The execution, delivery and performance by such
Investor of the Transaction Documents and the consummation by such Investor of
the transactions contemplated hereby and thereby will not (i) result in a
violation of the organizational documents of such Investor or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Investor is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws) applicable to such Investor, except in the case of
clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations
which would not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on the ability of such Investor to perform its
obligations hereunder.

 

5.16.         No Rule 506 Disqualifying Activities. Such Investor has not taken
any of the actions set forth in, and is not subject to, the disqualification
provisions of Rule 506(d)(1) of the 1933 Act.

 

5.17.         Residency. Such Investor is a resident of or an entity organized
under the jurisdiction specified below its address on the Schedule of Investors.

 

5.18.         ERISA. If Investor is (1) an employee benefit plan subject to
Title I of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), (2) a plan or account subject to Section 4975 of the Internal Revenue
Code of 1986 (the “Code”) or (3) an entity deemed to hold “plan assets” of any
such plan or account, Investor hereby represents and warrants, solely for
purposes of assisting the Placement Agents in relying on the exception from
fiduciary status under U.S. Department of Labor Regulations set forth in
Section 29 CFR 2510.3-21(c)(1), that a fiduciary acting on its behalf is causing
the Investor to enter into this Agreement and the transactions contemplated
hereby and that such fiduciary:

 

(i)              is an entity specified in Section 29 CFR
2510.3-21(c)(1)(i)(A)-(E);

 

(ii)             is independent (for purposes of Section 29 CFR 2510.3-21(c)(1))
of the Placement Agents;

 

(iii)            is capable of evaluating investment risks independently, both
in general and with regard to particular transactions and investment strategies,
including the Investor’s transactions hereunder;

 

(iv)            has been advised that, with respect to the Placement Agents,
neither the Placement Agents nor any of their respective Affiliates has
undertaken or will undertake to provide impartial investment advice, or has
given or will give advice in a fiduciary capacity, in connection with the
Investor’s transactions contemplated hereby;

 

 20 

 

 

(v)            is a “fiduciary” under Section 3(21)(a) of ERISA or
Section 4975(e)(3) of the Code, or both, as applicable, with respect to, and is
responsible for exercising independent judgment in evaluating, the Investor’s
transactions contemplated hereby; and

 

(vi)          understands and acknowledges that no fees, compensation
arrangements or financial interests provided for in connection with the
transactions contemplated hereby is a fee or other compensation for the
provision of investment advice, and that neither the Placement Agents nor any of
their respective Affiliates, nor any of their respective directors, officers,
members, partners, employees, principals or agents, has received or will receive
a fee or other compensation from Investor or such fiduciary for the provision of
investment advice in connection with the Investor’s transactions contemplated
hereby.

 

The Company acknowledges and agrees that the representations contained in this
Section 5 shall not modify, amend or affect such Investor’s right to rely on the
Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transactions contemplated hereby.

 

6.            Conditions to Closing.

 

6.1.            Conditions to the Investors’ Obligations. The obligation of each
Investor to purchase Closing Securities at the Closing is subject to the
fulfillment to such Investor’s satisfaction, on or prior to the Closing Date, of
the following conditions, any of which may be waived by such Investor (as to
itself only):

 

(i)              The representations and warranties made by the Company in
Section 4 hereof shall be true and correct in all material respects (except for
those representations and warranties which are qualified as to materiality or by
Material Adverse Effect, in which case such representations and warranties shall
be true and correct in all respects) as of the date hereof and on the Closing
Date, except to the extent any such representation or warranty expressly speaks
as of an earlier date, in which case such representation or warranty shall be
true and correct as of such earlier date. The Company shall have performed in
all material respects all obligations and covenants herein required to be
performed by it on or prior to the Closing Date.

 

(ii)            The Company shall have obtained any and all consents, permits,
approvals, registrations and waivers necessary for consummation of the purchase
and sale of the Closing Securities and the consummation of the other
transactions contemplated by the Transaction Documents, including the waiver of
any applicable registration rights that could affect the rights of the Investors
under the Registration Rights Agreement, all of which shall be in full force and
effect.

 

(iii)           The Company shall have executed and delivered the Registration
Rights Agreement.

 

(iv)          The Company shall have filed with Nasdaq a Notification Form:
Listing of Additional Shares for the listing of the Shares and the Warrant
Shares, a copy of which shall have been provided to the Investors.

 

 21 

 

 

(v)           No judgment, writ, order, injunction, award or decree of or by any
court, or judge, justice or magistrate, including any bankruptcy court or judge,
or any order of or by any governmental authority, shall have been issued, and no
action or proceeding shall have been instituted by any governmental authority,
enjoining or preventing (or seeking to enjoin or prevent) the consummation of
the transactions contemplated hereby or in the other Transaction Documents and
no law shall have been enacted or made effective that makes illegal or otherwise
prohibits the consummation of the transactions contemplated hereby.

 

(vi)          The Investors shall have received an opinion from Covington &
Burling LLP, the Company’s counsel, dated as of the Closing Date, in a customary
form reasonably acceptable to the Investors.

 

(vii)         No stop order or suspension of trading shall have been imposed by
Nasdaq, the SEC or any other governmental or regulatory body with respect to
public trading in the Common Stock.

 

(viii)        A certificate of the Secretary of the Company (the “Secretary’s
Certificate”), dated as of the Closing Date, (a) certifying the resolutions
adopted by the Board of Directors of the Company or a duly authorized committee
thereof approving the transactions contemplated by this Agreement and the other
Transaction Documents and the issuance of the Closing Securities, and
(b) certifying the current versions of the Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws of the Company.

 

(ix)          A Lock-Up Agreement, substantially in the form of Exhibit D hereto
(the “Lock-Up Agreement”) executed by each executive officer and director of the
Company, and each such Lock-Up Agreement shall be in full force and effect on
the Closing Date.

 

(x)            Since the date of this Agreement, there shall not have occurred a
Material Adverse Effect.

 

6.2.           Conditions to Obligations of the Company. The Company’s
obligation to sell and issue Closing Securities at the Closing is subject to the
fulfillment to the satisfaction of the Company on or prior to the Closing Date
of the following conditions, any of which may be waived by the Company:

 

(i)            The representations and warranties made by the Investors in
Section 5 hereof shall be true and correct in all material respects (except for
those representations and warranties which are qualified as to materiality, in
which case such representations and warranties shall be true and correct in all
respects) when made, and shall be true and correct in all material respects
(except for those representations and warranties which are qualified as to
materiality, in which case such representations and warranties shall be true and
correct in all respects) on the Closing Date with the same force and effect as
if they had been made on and as of said date.

 

(ii)            The Investors shall have performed in all material respects all
obligations and covenants herein required to be performed by them on or prior to
the Closing Date.

 

 22 

 

 

(iii)           Each Investor shall have executed and delivered the Registration
Rights Agreement, and if required, an Investor Questionnaire and a Selling
Stockholder Questionnaire.

 

(iv)          Any Investor purchasing Closing Securities at the Closing shall
have paid in full its Subscription Amount to the Company.

 

6.3.          Termination of Obligations to Effect Closing; Effects.

 

(i)            The obligations of the Company, on the one hand, and the
Investors, on the other hand, to effect the Closing shall terminate as follows:

 

(a)            Upon the mutual written consent of the Company and an Investor
(but only with respect to such Investor);

 

(b)            By the Company if any of the conditions set forth in Section 6.2
shall have become incapable of fulfillment, and shall not have been waived by
the Company; or

 

(c)            By an Investor (with respect to itself only) if any of the
conditions set forth in Section 6.1 shall have become incapable of fulfillment,
and shall not have been waived by the Investor;

 

provided, however, that, except in the case of clause (a) above, the party
seeking to terminate its obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Transaction Documents if such breach
has resulted in the circumstances giving rise to such party’s seeking to
terminate its obligation to effect the Closing.

 

(ii)            In the event of a termination pursuant to this Section 6.3,
written notice thereof shall be given to the other Investors by the Company and
the other Investors shall have the right to terminate their obligations to
effect the Closing upon written notice to the Company and the other Investors.
Nothing in this Section 6.3 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions of this
Agreement or the other Transaction Documents or to impair the right of any party
to compel specific performance by any other party of its obligations under this
Agreement or the other Transaction Documents.

 

(iii)            Upon termination of this Agreement pursuant to this
Section 6.3, this Agreement shall forthwith become void (in the case of a
termination with respect to only one Investor, only with respect to such
Investor) and there shall be no further obligations or liabilities on the part
of the Company and such Investor(s); provided, that, this Section 4, Section 9.4
through Section 9.10 and Section 9.10 shall survive the termination of this
Agreement; provided further that nothing set forth in this Agreement shall
relieve any party from liability for any breach of this Agreement occurring
prior to such termination.

 

7.            Covenants and Agreements of the Company.

 

7.1.            Information. From the date hereof until the Closing, the Company
will make reasonably available to the Investors’ representatives, consultants
and their respective counsels for inspection, such information and documents as
the Investor reasonably requests, and will make available at reasonable times
and to a reasonable extent officers and employees of the Company to discuss the
business and affairs of the Company; provided, however, that in no event shall
the Company be required to disclose material nonpublic information to the
Investors, or to advisors to or representatives of the Investors.

 

 23 

 

 

7.2.            Nasdaq Listing. The Company will use commercially reasonable
efforts to continue the listing and trading of its Common Stock on Nasdaq and,
in accordance, therewith, will use commercially reasonable efforts to comply in
all respects with the Company’s reporting, filing and other obligations under
the bylaws or rules of such market or exchange, as applicable. The provisions of
this Section 7.2 shall terminate and be of no further force and effect on the
date on which the Company’s obligations under the Registration Rights Agreement
to register or maintain the effectiveness of any registration covering the
Registrable Securities (as such term is defined in the Registration Rights
Agreement) shall terminate.

 

7.3.            Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Closing Securities 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
Transaction Documents, including, without limitation, its obligation to issue
the Closing Securities pursuant to this Agreement, 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 Investor and regardless of the dilutive effect that
such issuance may have on the ownership of the other stockholders of the
Company.

 

7.4.            Form D. 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,
promptly upon request of an Investor.

 

7.5.            Removal of Legends. In connection with any sale or disposition
of the Shares or the Warrant Shares by an Investor pursuant to Rule 144 under
the 1933 Act (“Rule 144”) or pursuant to any other exemption under the 1933 Act
such that the purchaser acquires freely tradable shares and upon compliance by
the Investor with the requirements of this Agreement, if requested by the
Investor, the Company shall cause the transfer agent for the Common Stock (the
“Transfer Agent”) to timely remove any restrictive legends related to such
Shares or Warrant Shares, as applicable, and make a new, unlegended entry or
certificate, as the case may be, for such Shares or Warrant Shares sold or
disposed of without restrictive legends, provided that the Company has received
customary representations and other documentation reasonably acceptable to the
Company in connection therewith. Subject to receipt by the Company of customary
representations and other documentation reasonably acceptable to the Company in
connection therewith, upon the earliest of such time as the Shares or Warrant
Shares, as applicable, (i) have been sold or transferred pursuant to an
effective registration statement, (ii)  have been sold pursuant to Rule 144, or
(iii) are eligible for resale under Rule 144(b)(1) or any successor provision,
the Company shall (A) deliver to the Transfer Agent irrevocable instructions
that the Transfer Agent shall make a new, unlegended entry (or issue a new,
unlegended certificate) for such Shares or Warrant Shares, and (B) cause its
counsel to deliver to the Transfer Agent one or more opinions to the effect that
the removal of such legends in such circumstances may be effected under the 1933
Act. The Company shall be responsible for the fees of its Transfer Agent and all
DTC fees associated with such issuance. The Company acknowledges that a breach
by it of its obligations under this Section 7.5 may cause irreparable harm to an
Investor. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 7.5 may be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions
of this Section 7.5, that an Investor shall be entitled, in addition to all
other available remedies, to an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.

 

 24 

 

 

7.6.           Reservation of Common Stock. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance from and after the Closing Date, the number of shares of Common Stock
issuable upon exercise of the Warrants issued at the Closing (without taking
into account any limitations on exercise of the Warrants set forth therein).

 

7.7.           Fees. The Company shall be responsible for the payment of any
placement agent fees, financial advisory fees, or broker’s commissions (other
than for Persons engaged by any Investor) relating to or arising out of the
transactions contemplated hereby, including, without limitation, any fees or
commissions payable to the Placement Agents.

 

7.8.           Subsequent Equity Sales. From the date hereof until the later of
(i) the date that is 75 days after the date of this Agreement and (ii) the date
that is 30 trading days after the date that a registration statement covering
the resale of the Shares and the Warrant Shares is declared effective by the SEC
(the “Lock-Up Period”), neither the Company nor any Subsidiary shall issue,
enter into any agreement to issue or announce the issuance or proposed issuance
of any shares of Common Stock or securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right, option, warrant
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, except, in each case, for (i) issuances of Common Stock upon the
conversion of convertible securities, including preferred stock, the exercise of
options or warrants and the vesting of restricted stock outstanding on the date
hereof, in each case, as included or described in the SEC Filings, (ii) the
issuance of shares of Common Stock or stock options pursuant to employee benefit
or equity incentive plans described in the SEC Filings, and (iii) the issuance
of up to 5% of the outstanding Common Stock (measured as of the date hereof) in
connection with (A) the acquisition or license of the securities, business,
property, technologies or other assets of another person or entity, including
pursuant to an employee benefit plan assumed by the Company or its subsidiaries
in connection with such acquisition or (B) joint ventures, commercial
relationships or other strategic transactions, and in the case of each of
clauses (A) and (B), the filing of a registration statement with respect
thereto.

 

 25 

 

 

7.9.           Short Sales and Confidentiality After the Date Hereof. Each
Investor 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 (i) after the
transactions contemplated by this Agreement are first publicly announced or
(ii) this Agreement is terminated in full. Except as otherwise required by law,
each Investor covenants that until such time as the transactions contemplated by
this Agreement are publicly disclosed by the Company, such Investor will
maintain the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this transaction). Each
Investor understands and acknowledges that the SEC currently takes the position
that coverage of short sales of shares of the Common Stock “against the box”
prior to effectiveness of a resale registration statement with securities
included in such registration statement would be a violation of Section 5 of the
1933 Act, as set forth in Item 239.10 of the 1933 Act Rules Compliance and
Disclosure Interpretations compiled by the Office of Chief Counsel, Division of
Corporation Finance.

 

7.10.         Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof and prior to
the Closing, each reference in any Transaction Document to a number of shares or
a price per share shall be deemed to be amended to appropriately and fully
account for such event.

 

8.            Survival and Indemnification.

 

8.1.           Survival. Subject to applicable statutes of limitations, the
representations, warranties, covenants, and agreements contained in this
Agreement shall survive the Closing for a period of two (2) years after the date
hereof and thereafter shall have no further force and effect.

 

8.2.           Indemnification by the Company. The Company agrees to indemnify
and hold harmless each of the Investors, the officers, directors, partners,
members, and employees of each Investor, each Affiliate of any such Investor
(within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act)
and the officers, directors, partners, members and employees of each such
Affiliate (each, an “Indemnified Party”), against any losses, claims, damages,
liabilities or expenses (“Losses”), joint or several, to which such Indemnified
Party may become subject, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as contemplated below) arise out of
or are based in whole or in part on the inaccuracy in the representations and
warranties of the Company contained in this Agreement or the failure of the
Company to perform its obligations hereunder, and will reimburse each
Indemnified Party for legal and other expenses reasonably incurred as such
expenses are reasonably incurred by such Indemnified Party in connection with
investigating, defending, settling, compromising or paying such loss, claim,
damage, liability, expense or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon (i) the failure of such
Indemnified Party to comply with the covenants and agreements contained herein,
or (ii) the inaccuracy of any representations made by such Indemnified Party
herein.

 

 26 

 

 

8.3.            Indemnification Procedure. Promptly after any Indemnified Party
has received notice of any indemnifiable claim hereunder, or the commencement of
any action, suit or proceeding by a third Person, which the Indemnified Party
believes in good faith is an indemnifiable claim under this Agreement, the
Indemnified Party shall give the indemnitor hereunder (the “Indemnifying Party”)
written notice of such claim or the commencement of such action, suit or
proceeding, but failure to so notify the Indemnifying Party will not relieve the
Indemnifying Party from any liability it may have to such Indemnified Party
hereunder except to the extent that the Indemnifying Party is materially
prejudiced by such failure. Such notice shall state the nature and the basis of
such claim to the extent then known. The Indemnifying Party shall have the right
to defend and settle, at its own expense and by its own counsel who shall be
reasonably acceptable to the Indemnified Party, any such matter as long as the
Indemnifying Party acknowledges that the Indemnifying Party is responsible for
indemnifying the Indemnified Party with respect to such matter and pursues the
same diligently and in good faith and so long as (i) such matter does not
involve criminal liability and (ii) equitable relief is not sought against the
Indemnified Party. If the Indemnifying Party undertakes to defend or settle, it
shall promptly notify the Indemnified Party of its intention to do so, and the
Indemnified Party shall cooperate with the Indemnifying Party and its counsel in
all commercially reasonable respects in the defense thereof and the settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records and other information reasonably
requested by the Indemnifying Party and in the Indemnified Party’s possession or
control. Such cooperation of the Indemnified Party shall be at the cost of the
Indemnifying Party. After the Indemnifying Party has notified the Indemnified
Party of its intention to undertake to defend or settle any such asserted
liability, and for so long as the Indemnifying Party diligently pursues such
defense, the Indemnifying Party shall not be liable for any additional legal
expenses incurred by the Indemnified Party in connection with any defense or
settlement of such asserted liability; provided, however, that the Indemnified
Party shall be entitled (i) at its expense, to participate in the defense of
such asserted liability and the negotiations of the settlement thereof and
(ii) if (a) the Indemnifying Party has failed to assume the defense or employ
counsel reasonably acceptable to the Indemnified Party or (b) if counsel to the
Indemnified Party shall have concluded that there may be reasonable defenses
available to the Indemnified Party that are different from or in addition to
those available to the Indemnifying Party or if the interests of the Indemnified
Party reasonably may be deemed to conflict with the interests of the
Indemnifying Party, then the Indemnified Party shall have the right to select a
separate counsel and to assume such legal defense and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
Indemnifying Party as incurred. Notwithstanding any other provision of this
Agreement, the Indemnifying Party shall not settle any indemnified claim without
the consent of the Indemnified Party, unless the settlement thereof imposes no
liability or obligation on, and includes a complete release from liability of,
and does not include any admission of wrongdoing or malfeasance by, the
Indemnified Party.

 

8.4.            Gross-Up. For the avoidance of doubt, the amount of any Losses
subject to indemnification pursuant to this Section 8 paid to an Indemnified
Party shall include a gross-up to take into account such Indemnified Party’s and
its Affiliates’ equity ownership in the Company such that, after payment of the
grossed-up amount, such Indemnified Party will not have suffered any Losses.

 

8.5.           Treatment. All amounts paid pursuant to this Section 8 shall, to
the extent permitted by applicable law, be treated as adjustments to the
purchase price for all tax purposes.

 

 27 

 

 

9.            Miscellaneous.

 

9.1.            Successors and Assigns. This Agreement may not be assigned by a
party hereto without the prior written consent of the Company or the Investors,
as applicable; provided, however, that an Investor may assign its rights and
delegate its duties hereunder in whole or in part to an Affiliate without the
prior written consent of the Company or the other Investors, provided such
assignee agrees in writing to be bound by the provisions hereof that apply to
Investors. The provisions of this Agreement shall inure to the benefit of and be
binding upon the respective permitted successors and assigns of the parties.
Without limiting the generality of the foregoing, in the event that the Company
is a party to a merger, consolidation, share exchange or similar business
combination transaction in which the Common Stock is converted into the equity
securities of another Person, from and after the effective time of such
transaction, such Person shall, by virtue of such transaction, be deemed to have
assumed the obligations of the Company hereunder, the term “Company” shall be
deemed to refer to such Person and the term “Securities” shall be deemed to
refer to the securities received by the Investors in connection with such
transaction. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
permitted successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

 

9.2.            Counterparts; Faxes; E-mail. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement may
also be executed via facsimile or e-mail, which shall be deemed an original.

 

9.3.            Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

 

9.4.            Notices. All notices and other communications under this
Agreement must be in writing and are deemed duly delivered when (i) delivered,
if delivered personally or by nationally recognized overnight courier service
(costs prepaid), (ii) sent by email with confirmation of receipt by the
recipient or (iii) received or rejected by the addressee, if sent by United
States of America certified or registered mail, return receipt requested; in
each case to the following addresses or facsimile numbers and marked to the
attention of the individual (by name or title) designated below (or to such
other address, facsimile number or individual as a party may designate by notice
to the other parties):

 

If to the Company:

 

Entasis Therapeutics Holdings Inc.

35 Gatehouse Drive

Waltham, MA 02451

Attention: Elizabeth Keiley
Telephone: (781) 870-0120
E-mail: betzy.keiley@entasistx.com

 

 28 

 

 

With a copy (which will not constitute notice) to:

 

Covington & Burling LLP

The New York Times Building

620 Eighth Avenue

New York, New York 10018

Attention: Brian K. Rosenzweig and Jack S. Bodner

Telephone: (212) 841-1108

Facsimile: (646) 441-9108

E-mail: brosenzweig@cov.com

 

If to the Investors:

 

to the addresses set forth on the signature pages hereto.

 

9.5.           Expenses. The parties hereto shall pay their own costs and
expenses in connection herewith regardless of whether the transactions
contemplated hereby are consummated; it being understood that each of the
Company and each Investor has relied on the advice of its own respective
counsel. The Company shall pay any Transfer Agent fees, stamp taxes and other
taxes and duties levied in connection with the sale and issuance of the Closing
Securities to the Investors. Notwithstanding the foregoing or anything to the
contrary contained herein, upon the earlier of the Closing and the valid
termination of this Agreement (other than due to a breach by the Investor
seeking reimbursement), the Company shall promptly reimburse each Investor for
all reasonable and documented fees and expenses of such Investor and its
Affiliates and representatives (including the fees and expenses of counsel)
incurred prior to, on or after the date hereof in connection with the
examination, review, due diligence investigation, documentation, negotiation,
closing and funding of the transactions contemplated by this Agreement.
Notwithstanding anything to the contrary herein, this Section 9.5 shall survive
the termination of this Agreement.

 

9.6.           Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and (i) prior to the Closing, each of
the Investors and (ii) following the Closing, the Required Investors.
Notwithstanding the foregoing, Sections 4, 5 and 9.10 of this Agreement may not
be amended, terminated or waived in a manner that is material and adverse to the
Placement Agents without the written consent of the Placement Agents. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon (a) prior to Closing, each Investor and (b) following the Closing, each
holder of any Securities purchased under this Agreement at the time outstanding,
and in each case, each future holder of all such Securities and the Company.

 

9.7.           Publicity. Except as set forth below, no public release or
announcement concerning the transactions contemplated hereby shall be issued by
the Company or the Investors without the prior written consent of the Company
(in the case of a release or announcement by the Investors) or the Investors (in
the case of a release or announcement by the Company), except as such release or
announcement may be required by law or the applicable rules or regulations of
any securities exchange or securities market, in which case the Company or the
Investors, as the case may be, shall allow the Investors or the Company, as
applicable, to the extent reasonably practicable in the circumstances,
reasonable time to comment on such release or announcement in advance of such
issuance. By 9:00 A.M. (New York City time) on the Closing Date, the Company
shall issue a press release in a form reasonably acceptable to the Investors
disclosing all material terms of transactions contemplated by this Agreement
(the “Press Release”). No later than 5:30 p.m. (New York City time) on the
fourth Business Day following the date of this Agreement, the Company will file
a Current Report on Form 8-K (the “8-K”) attaching the press release described
in the foregoing sentence as well as copies of the Transaction Documents. The
Company shall provide the 8-K to the Investors at least two (2) Business Days
prior to the date of filing and shall consider in good faith any comments to the
8-K proposed by the Investors.

 

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9.8            Provision Respecting Legal Representation. Each Investor hereby
agrees, on its own behalf and on behalf of its directors, members, partners,
officers, employees and affiliates, that Covington & Burling LLP (“Covington”)
has served as counsel to the Company (and not such Investor or any of its
directors, members, partners, officers, employees or affiliates) in connection
with the negotiation, preparation, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby. By purchasing
Securities pursuant to this Agreement, such Investor irrevocably waives any
conflict of interest arising from such representation of the Company, even
though the interests of such Investor may be directly adverse to the Company and
even though Covington may be handling ongoing unrelated matters for such
Investor. Such Investor also hereby agrees that, following consummation of the
transactions contemplated hereby, Covington (or any successor) may serve as
counsel to the Company in connection with any amendment, modification, waiver or
consent under or in respect of this Agreement, and such Investor hereby
irrevocably consents thereto and irrevocably waives any conflict of interest
arising therefrom, and such Investor shall cause its affiliates to irrevocably
consent to waive any conflict of interest arising from such representation, even
though the interests of the Investor may be directly adverse to the Company, and
even though Covington may be handling ongoing unrelated matters for such
Investor.

 

9.9.           Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provision hereof prohibited or
unenforceable in any respect.

 

9.10.         No Third-Party Beneficiaries. The Placement Agents shall be
third-party beneficiaries of Section 4, Section 5 and this Section 9.10 hereof
and are entitled to the rights and benefits thereunder and may enforce the
provisions thereof as if they were parties thereto. This Agreement is intended
for the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person, except as otherwise set forth in Section 8 and
this Section 9.10.

 

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9.11.         Entire Agreement. This Agreement, including the signature pages,
Exhibits and the Disclosure Schedules, the other Transaction Documents and any
oral or written agreement between the Company and any Investor regarding
confidentiality matters that was entered into in connection with the
transactions contemplated hereby constitute the entire agreement among the
parties hereof with respect to the subject matter hereof and thereof and
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof and thereof.

 

9.12.         Further Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.

 

9.13.         Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof (other than Sections 5-1401 and 5-1402 of the General Obligations Law).
Each of the parties hereto irrevocably submits to the exclusive jurisdiction of
the courts of the State of New York located in New York County and the United
States District Court for the Southern District of New York for the purpose of
any suit, action, proceeding or judgment relating to or arising out of this
Agreement and the transactions contemplated hereby. Service of process in
connection with any such suit, action or proceeding may be served on each party
hereto anywhere in the world by the same methods as are specified for the giving
of notices under this Agreement. Each of the parties hereto irrevocably consents
to the jurisdiction of any such court in any such suit, action or proceeding and
to the laying of venue in such court. Each party hereto irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
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.

 

9.14.         Specific Performance. It is understood and agreed by the parties
that irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions without the necessity of posting a bond
to prevent breaches of this Agreement or to enforce specifically the performance
of the terms and provisions hereof, in addition to any other remedy to which
they are entitled at law or in equity. Unless otherwise expressly stated in this
Agreement, no right or remedy described or provided in this Agreement is
intended to be exclusive or to preclude a Party from pursuing other rights and
remedies to the extent available under this Agreement, at law or in equity.

 

9.15.         Independent Nature of Investors’ Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Closing Securities pursuant to the Transaction Documents has been made
by such Investor independently of any other Investor. Nothing contained herein
or in any Transaction Document, and no action taken by any Investor pursuant
thereto, 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 by the
Transaction Documents. Each Investor acknowledges that no other Investor has
acted as agent for such Investor in connection with making its investment
hereunder and that no Investor will be acting as agent of such Investor in
connection with monitoring its investment in the Closing Securities or enforcing
its rights under the Transaction Documents. Each Investor shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Investor to be joined as an
additional party in any proceeding for such purpose.

 

 31 

 

 

9.16.         No Recourse. Notwithstanding anything that may be expressed or
implied in this Agreement, each party covenants, agrees and acknowledges that no
recourse under this Agreement or any documents or instruments delivered in
connection with this Agreement shall be had against any party’s Affiliates, or
any of such party’s or such party’s Affiliates’ former, current or future
director, officer, agent, employee, general or limited partner, member, manager
or stockholder (collectively “Related Parties”), in each case other than the
parties to this Agreement and each of their respective successors and permitted
assigns under this Agreement, whether by the enforcement of any assessment or by
any legal or equitable proceeding, or by virtue of any applicable Law, it being
expressly agreed and acknowledged that no personal liability whatsoever shall
attach to, be imposed on or otherwise be incurred by any of the Related Parties,
as such, for any obligation or liability of any party under this Agreement or
any documents or instruments delivered in connection herewith for any claim
based on, in respect of or by reason of such obligations or liabilities or their
creation; provided, however, that nothing in this Section 9.16 shall relieve or
otherwise limit the liability of any party hereto or any of their respective
successors or permitted assigns for any breach or violation of its obligations
under this Agreement or such other documents or instruments. For the avoidance
of doubt, none of the parties will have any recourse, be entitled to commence
any proceeding or make any claim under this Agreement or in connection with the
transactions contemplated hereby except against any of the parties or their
respective successors and permitted assigns, as applicable.

 

[remainder of page intentionally left blank]

 

 32 

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement or caused their
duly authorized officers to execute this Agreement as of the date first above
written.

 

 

COMPANY: ENTASIS THERAPEUTICS HOLDINGS INC.           By: /s/ Manoussos Perros,
Ph.D.     Name: Manoussos Perros, Ph.D.     Title: President and Chief Executive
Officer

 

 

 

 

[PURCHASER SIGNATURE PAGES TO ENTASIS THERAPEUTICS HOLDINGS INC. SECURITIES
PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

Name of Purchaser: Armistice Capital Master Fund Ltd.

 

Signature of Authorized Signatory of Purchaser:   /s/ Steve Boyd

Name of Authorized Signatory: Steve Boyd

Title of Authorized Signatory: CIO of Armistice Capital, LLC, the Investment
Manager

Email Address of Authorized Signatory: [***]

Facsimile Number of Authorized Signatory: [***]

Address for Notice to Purchaser: [***]

Address for Delivery of Warrants to Purchaser (if not the same as address for
notice):

Subscription Amount: ______

Shares: ______

Warrant Shares: ______Beneficial Ownership Blocker: x4.99% or ¨9.99% or ¨19.99%

Tax Identification Number: [***]

¨ Notwithstanding anything contained in this Agreement to the contrary, by
checking this box (i) the obligations of the above-signed to purchase the
securities set forth in this Agreement to be purchased from the Company by the
above-signed, and the obligations of the Company to sell such securities to the
above-signed, shall be unconditional and all conditions to Closing shall be
disregarded, (ii) the Closing shall occur by the second (2nd) Trading Day
following the date of this Agreement and (iii) any condition to Closing
contemplated by this Agreement (but prior to being disregarded by clause
(i) above) that required delivery by the Company or the above-signed of any
agreement, instrument, certificate or the like or purchase price (as applicable)
shall no longer be a condition and shall instead be an unconditional obligation
of the Company or the above-signed (as applicable) to deliver such agreement,
instrument, certificate or the like or purchase price (as applicable) to such
other party on the Closing Date.

 

[SIGNATURE PAGES CONTINUE]

 

 

 

 

INNOVIVA, INC.         By: /s/ Pavel Raifeld     Name: Pavel Raifeld     Title:
CEO

 

Investor Information   Entity Name: Innoviva, Inc. Contact Person: [***]
Address: [***] City: [***] State: [***] Zip Code: [***] Telephone: [***]
Facsimile: [***] Email: [***] With a copy, which shall not constitute notice to:
[***] Tax ID # or Social Security #: [***] Name in which Shares should be
issued: Innoviva, Inc.

 

[Signature Page to Securities Purchase Agreement]

 

 

 

 

Schedule 4.3

 

[***]

 

 

 

 

EXHIBIT A

 

Schedule of Investors

 

Investor Name   Number of
Shares
to be
Purchased     Aggregate
Purchase
Price of
Shares     Number of
Common
Warrants
to be
Purchased     Aggregate
Purchase
Price of
Common
Warrants     Number of
Pre-Funded
Common
Warrants
to the
Purchased     Aggregate
Purchase
Price of
Pre-Funded
Common
Warrants     Aggregate
Purchase
Price of
Closing
Securities   Innoviva, Inc.     4,672,897     $ 12,499,999.48       4,672,897  
    -       -       -     $ 12,499,999.48   Armistice Capital Master Fund Ltd.  
  3,510,981     $ 9,391,874.18       4,672,897       -       1,161,916     $
3,108,125.30     $ 12,499,999.48   Totals:     8,183,878     $ 21,891,873.66    
  9,345,794       -       1,161,916     $ 3,108,125.30     $ 24,999,998.96  

 

 

 

 

EXHIBIT B-1

 

Form of Warrant

 

 

 

 

EXHIBIT B-2

 

Form of Pre-Funded Warrant

 

 

 

 

EXHIBIT C

 

Form of Registration Rights Agreement

 

 

 

 

EXHIBIT D

 

Form of Lock-Up Agreement

 

 

 

 

APPENDIX I

 

Form of Investor Questionnaire

 

 

 

 

APPENDIX II

 

Form of Selling Stockholder Questionnaire