Exhibit 10.1

 

PROPHASE LABS, INC.

 

COMMON STOCK

 

SALES AGREEMENT

 

September 23, 2020

 

A.G.P./Alliance Global Partners

590 Madison Avenue

New York, NY 10022

 

Ladies and Gentlemen:

 

ProPhase Labs, Inc., a Delaware corporation (the “Company”), confirms its
agreement (this “Agreement”) with A.G.P./Alliance Global Partners, as follows:

 

1.       Issuance and Sale of Shares. The Company agrees that, from time to time
during the term of this Agreement, on the terms and subject to the conditions
set forth herein, it may issue and sell to or through A.G.P./Alliance Global
Partners, acting as agent and/or principal (the “Sales Agent”), shares of the
Company’s common stock, par value $0.0005 per share (the “Common Stock”),
subject to the limitations set forth in Section 3(b) hereof. The issuance and
sale of shares of Common Stock to or through the Sales Agent will be effected
pursuant to the Registration Statement (as defined below) filed by the Company
and which was declared effective under the Securities Act (as defined below) by
the U.S. Securities and Exchange Commission (the “Commission”).

 

The Company has filed, in accordance with the provisions of the Securities Act
of 1933, as amended, and the rules and regulations thereunder (collectively, the
“Securities Act”), with the Commission, not earlier than three years prior to
the date hereof, a shelf registration statement on Form S-3 (File No.
333-225875), including a base prospectus, relating to certain securities,
including the Common Stock, to be issued from time to time by the Company, and
which incorporates by reference documents that the Company has filed or will
file in accordance with the provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder (collectively, the
“Exchange Act”). The Company has prepared a prospectus supplement to the base
prospectus included as part of such registration statement specifically relating
to the offering of Common Stock pursuant to this Agreement (the “ATM
Prospectus”). As soon as practicable following the date of filing of the ATM
Prospectus, the Company will furnish to the Sales Agent, for use by the Sales
Agent, copies of the ATM Prospectus. The Company may file one or more additional
registration statements from time to time that will contain a base prospectus
and related prospectus or prospectus supplement (which shall be an ATM
Prospectus) with respect to the Placement Shares (as defined below). Except
where the context otherwise requires, each such registration statement, as
amended, when it became effective, including all documents filed as part thereof
or incorporated by reference therein, and including any information contained in
a Prospectus (as defined below) subsequently filed with the Commission pursuant
to Rule 424(b) under the Securities Act or deemed to be a part of such
registration statement pursuant to Rule 430B or 462(b) of the Securities Act, is
herein called the “Registration Statement.” The base prospectus, including all
documents incorporated therein by reference (to the extent such information has
not been superseded or modified in accordance with Rule 412 under the Securities
Act (as qualified by Rule 430B(g) of the Securities Act)), and the ATM
Prospectus, including all documents incorporated therein by reference (to the
extent such information has not been superseded or modified in accordance with
Rule 412 under the Securities Act (as qualified by Rule 430B(g) of the
Securities Act)), each of which is included in the Registration Statement, as it
or they may be supplemented by any additional prospectus supplement, in the form
in which such prospectus and/or ATM Prospectus have most recently been filed by
the Company with the Commission pursuant to Rule 424(b) under the Securities
Act, together with any “issuer free writing prospectus” (“Issuer Free Writing
Prospectus”), as defined in Rule 433 of the Securities Act (“Rule 433”),
relating to the Placement Shares that (i) is required to be filed with the
Commission by the Company or (ii) is exempt from filing pursuant to Rule
433(d)(5)(i), in each case in the form filed or required to be filed with the
Commission or, if not required to be filed, in the form retained in the
Company’s records pursuant to Rule 433(g), is herein called the “Prospectus.”
Any reference herein to the Registration Statement, the Prospectus or any
amendment or supplement thereto shall be deemed to refer to and include the
documents incorporated by reference therein, and any reference herein to the
terms “amend,” “amendment” or “supplement” with respect to the Registration
Statement or the Prospectus shall be deemed to refer to and include the filing
after the execution hereof of any document with the Commission deemed to be
incorporated by reference therein. For purposes of this Agreement, all
references to the Registration Statement, the Prospectus or to any amendment or
supplement thereto shall be deemed to include any copy filed with the Commission
pursuant to either the Electronic Data Gathering Analysis and Retrieval System,
or if applicable, the Interactive Data Electronic Applications (collectively
“EDGAR”).

 

 

 

 

2.       Placements. Each time that the Company wishes to issue and sell shares
of Common Stock through the Sales Agent, as agent, hereunder (each, a
“Placement”), it will notify the Sales Agent by email notice (or other method
mutually agreed to in writing by the parties) (a “Placement Notice”) containing
the parameters in accordance with which it desires the Common Stock to be sold,
which shall at a minimum include the number of shares of Common Stock to be
issued (the “Placement Shares”), the time period during which sales are
requested to be made, any limitation on the number of shares of Common Stock
that may be sold in any one Trading Day (as defined in Section 3) and any
minimum price below which sales may not be made, a form of which containing such
minimum sales parameters necessary is attached hereto as Schedule 1. The
Placement Notice shall originate from any of the individuals from the Company
set forth on Schedule 2 (with a copy to each of the other individuals from the
Company listed on such schedule), and shall be addressed to each of the
individuals from the Sales Agent set forth on Schedule 2, as such Schedule 2 may
be amended from time to time. The Placement Notice shall be effective upon
receipt by the Sales Agent unless and until (i) in accordance with the notice
requirements set forth in Section 4, the Sales Agent declines to accept the
terms contained therein for any reason, in its sole discretion, (ii) the entire
amount of the Placement Shares have been sold, (iii) in accordance with the
notice requirements set forth in Section 4, the Company suspends or terminates
the Placement Notice, (iv) the Company issues a subsequent Placement Notice with
parameters superseding those on the earlier dated Placement Notice, or (v) the
Agreement has been terminated under the provisions of Section 11. The amount of
any discount, commission or other compensation to be paid by the Company to the
Sales Agent in connection with the sale of the Placement Shares through the
Sales Agent, as agent, shall be as set forth in Schedule 3. It is expressly
acknowledged and agreed that neither the Company nor the Sales Agent will have
any obligation whatsoever with respect to a Placement or any Placement Shares
unless and until the Company delivers a Placement Notice to the Sales Agent and
the Sales Agent does not decline such Placement Notice pursuant to the terms set
forth above, and then only upon the terms specified therein and herein. In the
event of a conflict between the terms of this Agreement and the terms of a
Placement Notice, the terms of the Placement Notice will control.

 

3.       Sale of Placement Shares by the Sales Agent.

 

(a)       Subject to the terms and conditions herein set forth, upon the
Company’s issuance of a Placement Notice, and unless the sale of the Placement
Shares described therein has been declined, suspended, or otherwise terminated
in accordance with the terms of this Agreement, the Sales Agent, as agent for
the Company, will use its commercially reasonable efforts consistent with its
normal trading and sales practices and applicable state and federal laws, rules
and regulations and the rules of The Nasdaq Capital Market (the “Exchange”), for
the period specified in the Placement Notice, to sell such Placement Shares up
to the amount specified by the Company in, and otherwise in accordance with the
terms of such Placement Notice. If acting as agent hereunder, the Sales Agent
will provide written confirmation to the Company (including by email
correspondence to each of the individuals of the Company set forth on Schedule
2, if receipt of such correspondence is actually acknowledged by any of the
individuals to whom the notice is sent, other than via auto-reply) no later than
the opening of the Trading Day (as defined below) immediately following the
Trading Day on which it has made sales of Placement Shares hereunder setting
forth the number of Placement Shares sold on such day, the compensation payable
by the Company to the Sales Agent pursuant to Section 2 with respect to such
sales, and the Net Proceeds (as defined below) payable to the Company, with an
itemization of the deductions made by the Sales Agent (as set forth in Section
5(a)) from the gross proceeds that it receives from such sales. Subject to the
terms of the Placement Notice, the Sales Agent may sell Placement Shares by any
method permitted by law deemed to be an “at the market” offering as defined in
Rule 415 under the Securities Act, including without limitation sales made
directly on the Exchange, on any other existing trading market for the Common
Stock or to or through a market maker (other than the Toronto Stock Exchange or
any other exchange or trading market in Canada). Subject to the terms of a
Placement Notice, the Sales Agent may also sell Placement Shares by any other
method permitted by law and as permitted by the Exchange, including, but not
limited to, in negotiated transactions with the Company’s prior written consent.
The Company acknowledges and agrees that (i) there can be no assurance that the
Sales Agent will be successful in selling Placement Shares, (ii) the Sales Agent
will incur no liability or obligation to the Company or any other person or
entity if it does not sell Placement Shares for any reason other than a failure
by the Sales Agent to use its commercially reasonable efforts consistent with
its normal trading and sales practices and applicable law and regulations to
sell such Placement Shares as required under this Agreement and (iii) the Sales
Agent shall be under no obligation to purchase Placement Shares on a principal
basis pursuant to this Agreement, except as otherwise agreed by the Sales Agent
and the Company in writing and expressly set forth in a Placement Notice. For
the purposes hereof, “Trading Day” means any day on which the Company’s Common
Stock is purchased and sold on the principal market on which the Common Stock is
listed or quoted.

 

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(b)       Under no circumstances shall the Company cause or request the offer or
sale of any Placement Shares if, after giving effect to the sale of such
Placement Shares, the aggregate number or gross sales proceeds of Placement
Shares sold pursuant to this Agreement would exceed the lesser of: (i) the
number or dollar amount of shares of Common Stock registered pursuant to the
Registration Statement pursuant to which the offering hereunder is being made,
(ii) the number of authorized but unissued and unreserved shares of Common
Stock, (iii) the number or dollar amount of shares of Common Stock permitted to
be offered and sold by the Company under Form S-3 (including General Instruction
I.B.6. of Form S-3, if and for so long as applicable), (iv) the number or dollar
amount of shares of Common Stock authorized from time to time to be issued and
sold under this Agreement by the Company’s board of directors, a duly authorized
committee thereof or a duly authorized executive committee, and notified to the
Sales Agent in writing, or (v) the number or dollar amount of shares of Common
Stock for which the Company has filed the ATM Prospectus or other prospectus
supplement specifically relating to the offering of the Placement Shares
pursuant to this Agreement. Under no circumstances shall the Company cause or
request the offer or sale of any Placement Shares pursuant to this Agreement at
a price lower than the minimum price authorized from time to time by the
Company’s board of directors, a duly authorized committee thereof or a duly
authorized executive committee, and notified to the Sales Agent in writing.
Notwithstanding anything to the contrary contained herein, the parties hereto
acknowledge and agree that compliance with the limitations set forth in this
Section 3(b) on the number or dollar amount of Placement Shares that may be
issued and sold under this Agreement from time to time shall be the sole
responsibility of the Company, and that the Sales Agent shall have no obligation
in connection with such compliance.

 

(c)       During the term of this Agreement, neither the Sales Agent nor any of
its affiliates or subsidiaries shall engage in (i) any short sale of any
security of the Company or (ii) any sale of any security of the Company that the
Sales Agent does not own or any sale that is consummated by the delivery of a
security of the Company borrowed by, or for the account of, the Sales Agent.
During the term of this Agreement and notwithstanding anything to the contrary
herein, the Sales Agent agrees that in no event will the Sales Agent or its
affiliates engage in any market making, bidding, stabilization or other trading
activity with regard to the Common Stock or related derivative securities if
such activity would be prohibited under Regulation M or other anti-manipulation
rules under the Exchange Act.

 

4.       Suspension of Sales.

 

(a)       The Company or the Sales Agent may, upon notice to the other party in
writing (including by email correspondence to each of the individuals of the
other party set forth on Schedule 2, if receipt of such correspondence is
actually acknowledged by any of the individuals to whom the notice is sent,
other than via auto-reply) or by telephone (confirmed immediately by verifiable
facsimile transmission or email correspondence to each of the individuals of the
other party set forth on Schedule 2), suspend any sale of Placement Shares for a
period of time (a “Suspension Period”); provided, however, that such suspension
shall not affect or impair either party’s obligations with respect to any
Placement Shares sold hereunder prior to the receipt of such notice. Each of the
parties agrees that no such notice under this Section 4 shall be effective
against the other unless it is made to one of the individuals named on Schedule
2 hereto, as such schedule may be amended from time to time. During a Suspension
Period, the Company shall not issue any Placement Notices and the Sales Agent
shall not sell any Placement Shares hereunder. The party that issued a
suspension notice shall notify the other party in writing of the Trading Day on
which the Suspension Period shall expire not later than twenty-four (24) hours
prior to such Trading Day.

 

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(b)       Notwithstanding any other provision of this Agreement, during any
period in which the Company is in possession of material non-public information,
the Company and the Sales Agent agree that (i) no sale of Placement Shares will
take place, (ii) the Company shall not request the sale of any Placement Shares,
and (iii) the Sales Agent shall not be obligated to sell or offer to sell any
Placement Shares.

 

5.       Settlement.

 

(a)       Settlement of Placement Shares. Unless otherwise specified in the
applicable Placement Notice, settlement for sales of Placement Shares will occur
on the second (2nd) Trading Day (or such earlier day as is industry practice for
regular-way trading) following the respective Point of Sale (as defined below)
(each, a “Settlement Date”). The amount of proceeds to be delivered to the
Company on a Settlement Date against receipt of the Placement Shares sold (the
“Net Proceeds”) will be equal to the aggregate sales price received by the Sales
Agent at which such Placement Shares were sold, after deduction for (i) the
Sales Agent’s discount, commission or other compensation for such sales payable
by the Company pursuant to Section 2 hereof, and (ii) any transaction fees
imposed by any clearing organization or any governmental or self-regulatory
organization in respect of such sales.

 

(b)       Delivery of Placement Shares. On or before each Settlement Date, the
Company will, or will cause its transfer agent to, electronically transfer the
Placement Shares being sold by crediting the Sales Agent’s or its designee’s
account (provided the Sales Agent shall have given the Company written notice of
such designee prior to the Settlement Date) at The Depository Trust Company
through its Deposit and Withdrawal at Custodian System or by such other means of
delivery as may be mutually agreed upon by the parties hereto which in all cases
shall result in the issuance of freely tradable, transferable, registered shares
in good deliverable form. On each Settlement Date, the Sales Agent will deliver
the related Net Proceeds in same day funds to an account designated by the
Company on, or prior to, the Settlement Date. The Company agrees that if the
Company, or its transfer agent (if applicable), defaults in its obligation to
deliver duly authorized Placement Shares on a Settlement Date, through no fault
of the Sales Agent, the Company agrees that in addition to and in no way
limiting the rights and obligations set forth in Section 9(a) (Indemnification
and Contribution), the Company will (i) hold the Sales Agent, its directors,
officers, members, partners, employees and agents of the Sales Agent, each
broker dealer affiliate of the Sales Agent, and each person, if any, who (A)
controls the Sales Agent within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act or (B) is controlled by or is under common
control with the Sales Agent (each, a “Sales Agent Affiliate”), and the Sales
Agent’s clearing organization, harmless against any loss, claim, damage, or
actual, reasonable and documented expense (including actual, reasonable and
documented legal fees and expenses), as incurred, arising out of or in
connection with such default by the Company or its transfer agent (if
applicable) and (ii) pay to the Sales Agent any commission, discount, or other
compensation to which it would otherwise have been entitled absent such default.

 

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6.       Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with, the Sales Agent that as of the date hereof and
each Applicable Time (as defined in Section 21(a)), unless such representation,
warranty or agreement specifies a different time or times:

 

(a)       Compliance with Registration Requirements. The Registration Statement
and any Rule 462(b) Registration Statement have been declared effective by the
Commission under the Securities Act. The Company has complied, to the
Commission’s satisfaction, with all requests of the Commission for additional or
supplemental information related to the Registration Statement and the
Prospectus. No stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement is in effect and no
proceedings for such purpose have been instituted or are pending or, to the
knowledge of the Company, are contemplated or threatened by the Commission. The
Registration Statement and, assuming no act or omission on the part of the Sales
Agent that would make statements therein untrue, the offer and sale of the
Placement Shares as contemplated hereby meet the requirements of Rule 415 under
the Securities Act and comply in all material respects with said Rule. In the
section entitled “Plan of Distribution” in the ATM Prospectus, the Company has
named A.G.P./Alliance Global Partners as an agent that the Company has engaged
in connection with the transactions contemplated by this Agreement. The Company
was not and is not an “ineligible issuer” as defined in Rule 405 under the
Securities Act.

 

(b)       No Misstatement or Omission. The Registration Statement and any
post-effective amendment thereto, at the time it became or becomes effective,
complied or will comply in all material respects with the Securities Act. The
Prospectus, and any amendment or supplement thereto, on the date of such
Prospectus or amendment or supplement, complied or will comply in all material
respects with the Securities Act. The Registration Statement and any
post-effective amendment thereto, at the time it became or becomes effective,
did not and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading. The Prospectus, as amended or supplemented,
as of its date, did not and, as of each Point of Sale and each Settlement Date,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement or any post-effective amendment thereto, or the Prospectus, or any
amendments or supplements thereto, made in reliance upon and in conformity with
information relating to the Sales Agent furnished to the Company in writing by
the Sales Agent expressly for use therein. The parties acknowledge and agree
that such information relating to the Sales Agent furnished to the Company by or
on behalf of the Sales Agent consists solely of the following disclosure
contained in the section of the ATM Prospectus titled “Plan of Distribution”:
the contents of the ninth paragraph (collectively, the “Sales Agent
Information”). “Point of Sale” means, for a Placement, the time at which an
acquiror of Placement Shares entered into a contract, binding upon such
acquiror, to acquire such Placement Shares.

 

(c)       Offering Materials Furnished to the Sales Agent. Copies of the
Registration Statement, the Prospectus, and all amendments or supplements
thereto and all documents incorporated by reference therein that were filed with
the Commission on or prior to the date of this Agreement, have been delivered,
or are publicly available through EDGAR, to the Sales Agent. Each Prospectus
delivered to the Sales Agent for use in connection with the sale of the
Placement Shares pursuant to this Agreement will be identical to the version of
such Prospectus filed with the Commission via EDGAR, except to the extent
permitted by Regulation S-T.

 

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(d)       Distribution of Offering Material By the Company. The Company has not
distributed and will not distribute, prior to the completion of the Sales
Agent’s distribution of the Placement Shares, any offering material in
connection with the offering and sale of the Placement Shares other than the
Prospectus or the Registration Statement.

 

(e)       The Sales Agreement. This Agreement has been duly authorized, executed
and delivered by the Company, and constitutes a valid, legal, and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as rights to indemnity hereunder may be limited by federal or
state securities laws and except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally, and subject to general principles of equity. The
Company has full corporate power and authority to enter into this Agreement and
to authorize, issue and sell the Placement Shares as contemplated by this
Agreement. This Agreement conforms in all material respects to the descriptions
thereof in the Registration Statement and the Prospectus.

 

(f)       Authorization of the Placement Shares. The Placement Shares, when
issued and paid for as contemplated herein, will be validly issued, fully paid
and nonassessable, will be issued in compliance with all applicable securities
laws, and will be free of preemptive, registration or similar rights, and will
conform to the description of the Common Stock contained in the Registration
Statement and the Prospectus.

 

(g)       No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived. No person has the right to act as an underwriter or as a financial
advisor to the Company in connection with the offer and sale of the Placement
Shares hereunder, whether as a result of the filing or effectiveness of the
Registration Statement, the filing of the ATM Prospectus or the sale of the
Placement Shares as contemplated hereby or otherwise.

 

(h)       No Material Adverse Change. Except as otherwise disclosed in the
Prospectus, subsequent to the respective dates as of which information is given
in the Prospectus: (i) there has been no material adverse change in the
business, properties, prospects, operations, condition (financial or otherwise)
or results of operations of the Company or any of the Subsidiaries (as defined
below) (any such change is called a “Material Adverse Change”), or any
development involving a prospective material adverse change, which, individually
or in the aggregate, has had or would reasonably be expected to result in a
Material Adverse Change; (ii) neither the Company nor any of the Subsidiaries
has incurred any material liability or obligation, indirect, direct or
contingent, not in the ordinary course of business nor entered into any material
transaction or agreement not in the ordinary course of business; (iii) there has
been no dividend or distribution of any kind declared, paid or made by the
Company; (iv) no officer or director of the Company has resigned from any
position with the Company; and (v) there has not been any Material Adverse
Change in the Company’s long-term or short-term debt.

 

(i)       Independent Accountants. To the knowledge of the Company, Eisner Amper
LLP, whose report is filed with the Commission and included or incorporated by
reference in the Registration Statement and the Prospectus, is an independent
registered public accounting firm as required by the Securities Act and the
Public Company Accounting Oversight Board. Except as may otherwise be disclosed
in the Registration Statement and the Prospectus, Eisner Amper LLP has not,
during the periods covered by the financial statements included or incorporated
by reference in the Registration Statement and the Prospectus, provided to the
Company any non-audit services, as such term is used in Section 10A(g) of the
Exchange Act.

 

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(j)       Financial Statements. The financial statements, including the notes
thereto and supporting schedules included or incorporated by reference in the
Registration Statement and the Prospectus, fairly present in all material
respects the financial position and the results of operations of the Company at
the dates and for the periods to which they apply; and such financial statements
have been prepared in conformity with U.S. generally accepted accounting
principles (“GAAP”), consistently applied throughout the periods involved
(provided that unaudited interim financial statements are subject to year-end
audit adjustments that are not expected to be material in the aggregate and do
not contain all footnotes required by GAAP); and the supporting schedules
included in the Registration Statement and the Prospectus present fairly the
information required to be stated therein. Except as included or incorporated by
reference therein, no historical or pro forma financial statements are required
to be included or incorporated by reference in the Registration Statement or the
Prospectus under the Securities Act. The pro forma and pro forma as adjusted
financial information and the related notes, if any, included or incorporated by
reference in the Registration Statement and the Prospectus have been properly
compiled and prepared in accordance with the applicable requirements of the
Securities Act and present fairly the information shown therein, and the
assumptions used in the preparation thereof are reasonable and the adjustments
used therein are appropriate to give effect to the transactions and
circumstances referred to therein. All disclosures contained in the Registration
Statement or the Prospectus regarding “non-GAAP financial measures” (as such
term is defined by the rules and regulations of the Commission), if any, comply
in all material respects with Regulation G of the Exchange Act and Item 10 of
Regulation S-K of the Securities Act, to the extent applicable. Each of the
Registration Statement and the Prospectus discloses all material off-balance
sheet transactions, arrangements, obligations (including contingent
obligations), and other relationships of the Company with unconsolidated
entities or other persons that may have a material current or future effect on
the Company’s financial condition, changes in financial condition, results of
operations, liquidity, capital expenditures, capital resources, or significant
components of revenues or expenses.

 

(k)       Forward-Looking Statements. No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) contained in the Registration Statement or the Prospectus has been made or
reaffirmed by the Company without a reasonable basis or has been disclosed by
the Company other than in good faith.

 

(l)       Statistical and Marketing-Related Data. The statistical and
market-related data included in each of the Registration Statement and the
Prospectus are based on or derived from sources that the Company reasonably and
in good faith believes are reliable and accurate or represent the Company’s good
faith estimates that are made on the basis of data derived from such sources.

 

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

 

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(n)       Incorporation and Good Standing of the Company. The Company is a
corporation duly incorporated and validly existing under the laws of the State
of Delaware. The Company has requisite corporate power to carry on its business
as described in the Prospectus. The Company is duly qualified to transact
business and is in good standing in all jurisdictions in which the conduct of
its business requires such qualification; except where the failure to be so
qualified or to be in good standing would not result in a Material Adverse
Change. The Company has no subsidiaries and does not own or control, directly or
indirectly, any corporation, association or other entity, in either case other
than the subsidiaries listed in Schedule 4 (collectively, the “Subsidiaries,”
and each, a “Subsidiary”).

 

(o)       Capital Stock Matters. All issued and outstanding securities of the
Company issued prior to the transactions contemplated by this Agreement have
been duly authorized and validly issued and are fully paid and non-assessable;
the holders thereof have no rights of rescission with respect thereto, and are
not subject to personal liability by reason of being such holders; and none of
such securities were issued in violation of the preemptive rights of any holders
of any security of the Company or similar contractual rights granted by the
Company. The authorized shares of Common Stock conform in all material respects
to all statements relating thereto contained in the Registration Statement and
the Prospectus. The offers and sales of the outstanding shares of Common Stock
were at all relevant times either registered under the Securities Act and the
applicable state securities or “blue sky” laws or, based in part on the
representations and warranties of the purchasers of such shares, exempt from
such registration requirements. The description of the Company’s stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted thereunder, as described in the Registration Statement and the
Prospectus, accurately and fairly present, in all material respects, the
information required to be shown with respect to such plans, arrangements,
options and rights.

 

(p)       Non-Contravention of Existing Instruments; No Further Authorizations
or Approvals Required. The Company’s execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby or by the
Registration Statement and the Prospectus (including the issuance and sale of
the Placement Shares and the use of the proceeds from the sale of the Placement
Shares as described in the Prospectus under the caption “Use of Proceeds”) will
not (A) result in a material violation of any existing applicable law, rule,
regulation, judgment, order or decree of any Governmental Entity as of the date
hereof, (B) conflict with, result in any violation or breach of, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) (a
“Default Acceleration Event”) of, any agreement, lease, credit facility, debt,
note, bond, mortgage, indenture or other instrument (“Contract”) or obligation
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, except to the extent that such conflict, default, or Default
Acceleration Event is not reasonably likely to result in a Material Adverse
Change, or (C) result in a breach or violation of any of the terms and
provisions of, or constitute a default under, the Company’s certificate of
incorporation (as the same may be amended or restated from time to time) or
bylaws (as the same may be amended or restated from time to time). The Company
is not in violation, breach or default under its certificate of incorporation
(as the same may be amended or restated from time to time) or bylaws (as the
same may be amended or restated from time to time). None of the Company, the
Subsidiaries, nor, to the Company’s knowledge, any other party is in violation,
breach or default of any Contract that has resulted in or could reasonably be
expected to result in a Material Adverse Change. Each approval, consent, order,
authorization, designation, declaration or filing by or with any regulatory,
administrative or other governmental body necessary in connection with the
execution and delivery by the Company of this Agreement and the performance of
the Company of the transactions herein contemplated has been obtained or made
and is in full force and effect, except filings with the Commission required
under the Securities Act or the Exchange Act, or filings with the Exchange
pursuant to the rules and regulations of the Exchange, in each case that are
contemplated by this Agreement to be made after the date of this Agreement, and
such additional steps as may be necessary to qualify the Common Stock for sale
by the Sales Agent under state securities or Blue Sky laws.

 

 8 

   

 

(q)       No Material Actions or Proceedings. There is no material action, suit,
proceeding, inquiry, arbitration, investigation, litigation or governmental
proceeding pending or, to the Company’s knowledge, threatened against, or
involving the Company, any Subsidiary or, to the Company’s knowledge, any
executive officer or director, which has not been disclosed in the Registration
Statement and the Prospectus which is required to be disclosed.

 

(r)       Labor Disputes. No labor dispute with the employees of the Company or
any Subsidiary exists or, to the knowledge of the Company, is imminent. The
Company is not aware that any key employee or significant group of employees of
the Company or any Subsidiary plans to terminate employment with the Company.

 

(s)       Compliance with Certain Applicable Laws. The Company and the
Subsidiaries: (A) are and at all times have been in compliance with all
statutes, rules, or regulations applicable to the ownership, testing,
development, manufacture, packaging, processing, use, distribution, marketing,
labeling, promotion, sale, offer for sale, storage, import, export or disposal
of any product manufactured or distributed by the Company (“Applicable Laws”),
except as could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Change; (B) have not received any warning letter,
untitled letter or other correspondence or notice from any governmental
authority alleging or asserting noncompliance with any Applicable Laws or any
licenses, certificates, approvals, clearances, authorizations, permits and
supplements or amendments thereto required by any such Applicable Laws
(“Authorizations”); (C) possesses all material Authorizations and such
Authorizations are valid and in full force and effect and are not in material
violation of any term of any such Authorizations; (D) have not received notice
of any claim, action, suit, proceeding, hearing, enforcement, investigation,
arbitration or other action from any governmental authority or third party
alleging that any product operation or activity is in violation of any
Applicable Laws or Authorizations and have no knowledge that any such
governmental authority or third party is considering any such claim, litigation,
arbitration, action, suit, investigation or proceeding, except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Change; (E) have not received notice that any governmental authority has
taken, is taking or intends to take action to limit, suspend, modify or revoke
any Authorizations and have no knowledge that any such governmental authority is
considering such action, except as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Change; and (F) have filed,
obtained, maintained or submitted all material reports, documents, forms,
notices, applications, records, claims, submissions and supplements or
amendments as required by any Applicable Laws or Authorizations and that all
such reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments were complete and correct on the date
filed (or were corrected or supplemented by a subsequent submission).

 

 9 

   

 

(t)       Tax Law Compliance. The Company has filed all returns (as hereinafter
defined) required to be filed with taxing authorities prior to the date hereof
and each Applicable Time or has duly obtained extensions of time for the filing
thereof. The Company has paid all taxes (as hereinafter defined) shown as due on
such returns that were filed and has paid all taxes imposed on or assessed
against the Company. The provisions for taxes payable, if any, shown on the
financial statements filed with or as part of or incorporated by reference in
the Registration Statement are sufficient for all accrued and unpaid taxes,
whether or not disputed, and for all periods to and including the dates of such
consolidated financial statements. Other than as disclosed in the Registration
Statement and the Prospectus, (i) no material issues have been raised (and are
currently pending) by any taxing authority in connection with any of the returns
or taxes asserted as due from the Company or any Subsidiary, and (ii) no waivers
of statutes of limitation with respect to the returns or collection of taxes
have been given by or requested from the Company or any Subsidiary. There are no
tax liens against the assets, properties or business of the Company or any
Subsidiary. The term “taxes” means all federal, state, local, foreign and other
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments or charges of any
kind whatever, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto. The term “returns” means all returns,
declarations, reports, statements and other documents required to be filed in
respect to taxes.

 

(u)       Company Not an “Investment Company”. The Company is not, and will not
be, either after receipt of payment for the Placement Shares or after the
application of the proceeds therefrom as described under “Use of Proceeds” in
the Registration Statement or the Prospectus, required to register as an
“investment company” under the Investment Company Act of 1940, as amended (the
“Investment Company Act”).

 

(v)       Insurance. The Company carries or is entitled to the benefits of
insurance with reputable insurers, in such amounts and covering such risks which
the Company believes are adequate, and all such insurance is in full force and
effect. The Company has no reason to believe that it will not be able (i) to
renew its existing insurance coverage as and when such policies expire or (ii)
to obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change.

 

(w)       No Price Stabilization or Manipulation. The Company has not taken,
directly or indirectly (without giving any effect to the activities of the Sales
Agent), any action designed to or that might cause or result in stabilization or
manipulation of the price of the Common Stock or of any “reference security” (as
defined in Rule 100 of Regulation M under the Exchange Act (“Regulation M”))
with respect to the Common Stock, whether to facilitate the sale or resale of
the Placement Shares or otherwise, and has taken no action which would directly
or indirectly violate Regulation M.

 

 10 

   

 

(x)       Related Party Transactions. There are no business relationships or
related party transactions involving the Company or any other person required to
be described in the Registration Statement and the Prospectus that have not been
described as required pursuant to the Securities Act or the Exchange Act.

 

(y)       Exchange Act Compliance. The documents incorporated or deemed to be
incorporated by reference in the Registration Statement, the Prospectus or any
amendment or supplement thereto, at the time they were or hereafter are filed
with the Commission under the Exchange Act, complied and will comply in all
material respects with the requirements of the Exchange Act, and, when read
together with the other information in the Prospectus, at each Point of Sale and
each Settlement Date, will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

 

(z)       Conformity of Issuer Free Writing Prospectus. Each Issuer Free Writing
Prospectus conformed or will conform in all material respects to the
requirements of the Securities Act on the date of first use, and the Company has
complied or will comply with any filing requirements applicable to such Issuer
Free Writing Prospectus pursuant to the Securities Act. Each Issuer Free Writing
Prospectus, as of its issue date and each Point of Sale and Settlement Date, did
not, does not and will not include any information that conflicted, conflicts or
will conflict with the information contained in the Registration Statement or
the Prospectus, including any document incorporated by reference therein that
has not been superseded or modified. The Company has not made any offer relating
to the Placement Shares that would constitute an Issuer Free Writing Prospectus
without the prior written consent of the Sales Agent. The Company has retained
in accordance with the Securities Act all Issuer Free Writing Prospectuses that
were not required to be filed pursuant to the Securities Act.

 

(aa) Compliance with Environmental Laws. To the knowledge of the Company, the
Company and the Subsidiaries are in compliance with all foreign, federal, state
and local rules, laws and regulations relating to the use, treatment, storage
and disposal of hazardous or toxic substances or waste and protection of health
and safety or the environment which are applicable to its business
(“Environmental Laws”), except where the failure to comply would not, singularly
or in the aggregate, result in a Material Adverse Change. There has been no
storage, generation, transportation, handling, treatment, disposal, discharge,
emission, or other release of any kind of toxic or other wastes or other
hazardous substances by, due to, or caused by the Company or any Subsidiary (or,
to the Company’s knowledge, any other entity for whose acts or omissions the
Company is or may otherwise be liable) upon any of the property now or
previously owned or leased by the Company, or upon any other property, in
violation of any law, statute, ordinance, rule, regulation, order, judgment,
decree or permit or which would, under any law, statute, ordinance, rule
(including rule of common law), regulation, order, judgment, decree or permit,
give rise to any liability, except for any violation or liability which would
not have, singularly or in the aggregate with all such violations and
liabilities, a Material Adverse Change; and there has been no disposal,
discharge, emission or other release of any kind onto such property or into the
environment surrounding such property of any toxic or other wastes or other
hazardous substances with respect to which the Company has knowledge, except for
any such disposal, discharge, emission, or other release of any kind which would
not have, singularly or in the aggregate with all such discharges and other
releases, a Material Adverse Change.

 

 11 

   

 

(bb) Intellectual Property. The Company, together with the Subsidiaries, owns or
possesses or has valid rights to use all patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service mark
registrations, copyrights, licenses, inventions, trade secrets and similar
rights (“Intellectual Property Rights”) necessary for the conduct of the
business of the Company as currently carried on and as described in the
Registration Statement and the Prospectus, except as would not be reasonably
likely to result in a Material Adverse Change. To the knowledge of the Company,
no action or use by the Company necessary for the conduct of its business as
currently carried on and as described in the Registration Statement and the
Prospectus will involve or give rise to any infringement of, or license or
similar fees for, any Intellectual Property Rights of others, except where such
action, use, license or fee is not reasonably likely to result in a Material
Adverse Change. Neither the Company nor any Subsidiary has received any notice
alleging any such infringement, fee or conflict with asserted Intellectual
Property Rights of others. Except as would not reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Change (A) to the
knowledge of the Company, there is no infringement, misappropriation or
violation by third parties of any of the Intellectual Property Rights owned by
the Company or any Subsidiary; (B) there is no pending or, to the knowledge of
the Company, threatened action, suit, proceeding or claim by others challenging
the rights of the Company or any Subsidiary in or to any such Intellectual
Property Rights, and the Company is unaware of any facts which would form a
reasonable basis for any such claim, that would, individually or in the
aggregate, together with any other claims in this Section 6(bb), reasonably be
expected to result in a Material Adverse Change; (C) the Intellectual Property
Rights owned by the Company or any Subsidiary and, to the knowledge of the
Company, the Intellectual Property Rights licensed to the Company or any
Subsidiary have not been adjudged by a court of competent jurisdiction invalid
or unenforceable, in whole or in part, and there is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or claim by others
challenging the validity or scope of any such Intellectual Property Rights, and
the Company is unaware of any facts which would form a reasonable basis for any
such claim that would, individually or in the aggregate, together with any other
claims in this Section 6(bb), reasonably be expected to result in a Material
Adverse Change; (D) there is no pending or, to the Company’s knowledge,
threatened action, suit, proceeding or claim by others that the Company or any
Subsidiary infringes, misappropriates or otherwise violates any Intellectual
Property Rights or other proprietary rights of others, the Company has not
received any written notice of such claim and the Company is unaware of any
other facts which would form a reasonable basis for any such claim that would,
individually or in the aggregate, together with any other claims in this Section
6(bb), reasonably be expected to result in a Material Adverse Change; and (E) to
the Company’s knowledge, no employee of the Company or any Subsidiary is in or
has ever been in violation in any material respect of any term of any employment
contract, patent disclosure agreement, invention assignment agreement,
non-competition agreement, non-solicitation agreement, nondisclosure agreement
or any restrictive covenant to or with a former employer where the basis of such
violation relates to such employee’s employment with the Company or such
Subsidiary, or actions undertaken by the employee while employed with the
Company and could reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Change. To the Company’s knowledge, all
material technical information developed by and belonging to the Company or any
Subsidiary which has not been patented has been kept confidential. Neither the
Company nor any Subsidiary is a party to or bound by any options, licenses or
agreements with respect to the Intellectual Property Rights of any other person
or entity that are required to be set forth in the Registration Statement and
the Prospectus and are not described therein. The Registration Statement and the
Prospectus contain in all material respects the same description of the matters
set forth in the preceding sentence. None of the technology employed by the
Company or any Subsidiary has been obtained or is being used by the Company or
any Subsidiary in violation of any contractual obligation binding on the Company
or any Subsidiary or, to the Company’s knowledge, any of its officers, directors
or employees, or otherwise in violation of the rights of any persons.

 

 12 

   

 

(cc) Brokers. The Company is not a party to any contract, agreement or
understanding with any person (other than as contemplated by this Agreement)
that would give rise to a valid claim against the Company or the Sales Agent for
a brokerage commission, finder’s fee or like payment in connection with the
offering and sale of the Placement Shares by the Sales Agent under this
Agreement.

 

(dd) No Outstanding Loans or Other Indebtedness. There are no outstanding loans,
advances (except normal advances for business expenses in the ordinary course of
business) or guarantees or indebtedness by the Company or any Subsidiary to or
for the benefit of any of the officers or directors of the Company, or any of
their respective family members, except as disclosed in the Registration
Statement and the Prospectus.

 

(ee) No Reliance. The Company has not relied upon the Sales Agent or legal
counsel for the Sales Agent for any legal, tax or accounting advice in
connection with the offering and sale of the Placement Shares.

 

(ff) Broker-Dealer Status. Neither the Company nor any of its related entities
(i) is required to register as a “broker” or “dealer” in accordance with the
provisions of the Exchange Act or (ii) directly or indirectly through one or
more intermediaries, controls or is a “person associated with a member” or
“associated person of a member” (within the meaning of Article I of the NASD
Manual administered by FINRA). To the Company’s knowledge, there are no
affiliations or associations between any member of FINRA and any of the
Company’s officers, directors or 5% or greater security holders, except as set
forth in the Registration Statement.

 

(gg) Public Float Calculation. At the time the Registration Statement and any
Rule 462(b) Registration Statement was or will be filed with the Commission, at
the time the Registration Statement and any Rule 462(b) Registration Statement
was or will be declared effective by the Commission, and at the time the
Company’s most recent Annual Report on Form 10-K was filed with the Commission,
the Company met or will meet the then applicable requirements for the use of
Form S-3 under the Securities Act, including, but not limited to, General
Instruction I.B.6. of Form S-3, if and for so long as applicable.

 

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(hh) FINRA Matters. All of the information provided to the Sales Agent or to
counsel for the Sales Agent by the Company, its counsel, its officers and
directors and, to the Company’s knowledge, the holders of any securities (debt
or equity) or options to acquire any securities of the Company in connection
with the offering of the Placement Shares is true, complete, correct and
compliant with FINRA’s rules in all material respects and any letters, filings
or other supplemental information provided to FINRA pursuant to FINRA Rules or
NASD Conduct Rules is true, complete and correct in all material respects.
Except as disclosed in the Registration Statement and the Prospectus, there is
no (i) officer or director of the Company, (ii) beneficial owner of 5% or more
of any class of the Company’s securities or (iii) beneficial owner of the
Company’s unregistered equity securities that were acquired during the 180-day
period immediately preceding the date of this Agreement that is an affiliate or
associated person of a FINRA member participating in the offer, issuance and
sale of the Placement Shares as contemplated by this Agreement and the
Registration Statement and the Prospectus (as determined in accordance with the
rules and regulations of FINRA).

 

(ii) Compliance with Orders. None of the Company or any Subsidiary is in
violation in any material respect of any judgment, decree, or order of any
court, arbitrator or other governmental authority.

 

(jj) Sarbanes-Oxley Act. The Company is in material compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 and the rules and
regulations promulgated in connection therewith (the “Sarbanes-Oxley Act”) that
are effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the Commission thereunder that are effective as of
the date hereof and as of the date hereof.

 

(kk) Internal Controls; Disclosure Controls And Procedures. Except as set forth
in the Registration Statement and the Prospectus, the Company maintains systems
of “internal control over financial reporting” (as defined under Rules 13a-15
and 15d-15 under the Exchange Act) that comply with the requirements of the
Exchange Act and have been designed by, or under the supervision of, the
Company’s principal executive and principal financial officer, or persons
performing similar functions, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP, including, but not limited to,
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (iii) access to assets is permitted only in accordance
with management’s general or specific authorization; (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences; and
(v) the interactive data in eXtensible Business Reporting Language included or
incorporated by reference in the Registration Statement and the Prospectus
fairly present the information called for in all material respects and are
prepared in accordance with the Commission’s rules and guidelines applicable
thereto. Except as described in the Registration Statement and the Prospectus,
since the date of the latest audited financial statements included in the
Registration Statement and the Prospectus, there has been 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 has established and maintains
disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under
the Exchange Act) and such controls and procedures are effective in ensuring
that material information relating to the Company is made known to the principal
executive officer and the principal financial officer and such controls and
procedures are effective to perform the functions for which they were
established. The Company has utilized such controls and procedures in preparing
and evaluating the disclosures in the Registration Statement and the Prospectus.

 

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(ll) ERISA. The Company and any “employee benefit plan” (as defined under the
Employee Retirement Income Security Act of 1974, as amended, and the regulations
and published interpretations thereunder (collectively, “ERISA”)) established or
maintained by the Company or its “ERISA Affiliates” (as defined below) are in
compliance in all material respects with ERISA. “ERISA Affiliate” means, with
respect to the Company, any member of any group of organizations described in
Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended,
and the regulations and published interpretations thereunder (the “Code”) of
which the Company is a member. No “reportable event” (as defined under ERISA)
has occurred or is reasonably expected to occur with respect to any “employee
benefit plan” established or maintained by the Company or any of its ERISA
Affiliates. No “employee benefit plan” established or maintained by the Company
or any of its ERISA Affiliates, if such “employee benefit plan” were terminated,
would have any “amount of unfunded benefit liabilities” (as defined under
ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or
reasonably expects to incur any material liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any “employee benefit plan”
or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit
plan” established or maintained by the Company or any of its ERISA Affiliates
that is intended to be qualified under Section 401(a) of the Code is so
qualified and, to the knowledge of the Company, nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualification.

 

(mm) Contracts and Agreements. The agreements and documents described in the
Registration Statement and the Prospectus conform in all material respects to
the descriptions thereof contained therein and there are no agreements or other
documents required by the Securities Act to be described in the Registration
Statement and the Prospectus or to be filed with the Commission as exhibits to
the Registration Statement, that have not been so described or filed. Each
agreement or other instrument (however characterized or described) to which the
Company or Subsidiary is a party or by which it is or may be bound or affected
and that is referred to in the Registration Statement and the Prospectus or is
material to the Company’s business, has been duly authorized and validly
executed by the Company, is in full force and effect in all material respects
and is enforceable against the Company and, to the Company’s knowledge, the
other parties thereto, in accordance with its terms, except (x) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors’ rights generally, (y) as enforceability of any
indemnification or contribution provision may be limited under the federal and
state securities laws, and (z) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. None of such agreements or instruments has been assigned by the
Company, and neither the Company nor, to the Company’s knowledge, any other
party is in default thereunder and, to the Company’s knowledge, no event has
occurred that, with the lapse of time or the giving of notice, or both, would
constitute a default thereunder. To the best of the Company’s knowledge, the
performance by the Company or Subsidiary of the material provisions of such
agreements or instruments will not result in a material violation of any
existing applicable law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having jurisdiction over the
Company or any of its assets or businesses (each, a “Governmental Entity”),
including, without limitation, those relating to environmental laws and
regulations.

 

 15 

   

 

(nn) Title to Properties. Except as set forth in the Registration Statement and
the Prospectus, the Company, together with the Subsidiaries, has good and
marketable title in fee simple to, or has valid rights to lease or otherwise
use, all items of real or personal property which are material to the business
of the Company, in each case free and clear of all liens, encumbrances, security
interests, claims and defects that do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company; and all of the
leases and subleases material to the business of the Company, and under which
the Company or any Subsidiary holds properties described in the Registration
Statement and the Prospectus, are in full force and effect, and the Company has
not received any notice of any claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any Subsidiary under any of the
leases or subleases mentioned above, or affecting or questioning the rights of
the Company to the continued possession of the leased or subleased premises
under any such lease or sublease, that would result in a Material Adverse
Change.

 

(oo) No Unlawful Contributions or Other Payments. No payments or inducements
have been made or given, directly or indirectly, to any federal or local
official or candidate for, any federal or state office in the United States or
foreign offices by the Company, any Subsidiary or any of its officers or
directors, or, to the knowledge of the Company, by any of its employees or
agents or any other person in connection with any opportunity, contract, permit,
certificate, consent, order, approval, waiver or other authorization relating to
the business of the Company, except for such payments or inducements as were
lawful under applicable laws, rules and regulations. Neither the Company, any
Subsidiary nor, to the knowledge of the Company, any director, officer, agent,
employee or other person associated with or acting on behalf of the Company, (i)
has used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expense relating to political activity; (ii) made any direct
or indirect unlawful payment to any government official or employee from
corporate funds; or (iii) made any bribe, unlawful rebate, payoff, influence
payment, kickback or other unlawful payment in connection with the business of
the Company.

 

(pp) Foreign Corrupt Practices Act. None of the Company or, to the knowledge of
the Company, any director, officer, agent, employee, affiliate or other person
acting on behalf of the Company, is aware of or 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 (collectively, the “FCPA”), including, without limitation, making use
of the mails or any means or instrumentality of interstate commerce corruptly in
furtherance of an offer, payment, promise to pay or authorization of the payment
of any money, or other property, gift, promise to give, or authorization of the
giving of anything of value to any “foreign official” (as such term is defined
in the FCPA) or any foreign political party or official thereof or any candidate
for foreign political office, in contravention of the FCPA. The Company has
conducted its business in compliance with the FCPA and has instituted and
maintains policies and procedures designed to ensure, and which are reasonably
expected to continue to ensure, continued compliance therewith.

 

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(qq) Money Laundering Laws. The operations of the Company and the Subsidiaries
are and have been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes of
all jurisdictions, the rules and regulations thereunder and any related or
similar rules, regulations or guidelines, issued, administered or enforced by
any governmental agency (collectively, the “Money Laundering Laws”) and no
action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any Subsidiary with
respect to the Money Laundering Laws is pending or, to the knowledge of the
Company, threatened.

 

(rr) OFAC. None of the Company, any Subsidiary or, to the knowledge of the
Company, any director, officer, agent, employee, affiliate or person acting on
behalf of the Company is currently subject to any U.S. sanctions administered by
the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”);
and the Company will not directly or indirectly use the proceeds of the
offering, or lend, contribute or otherwise make available such proceeds to any
subsidiary, joint venture partner or other person or entity, for the purpose of
financing the activities of any person currently subject to any U.S. sanctions
administered by OFAC.

 

(ss) Exchange Listing. The Common Stock is registered pursuant to Section 12(b)
of the Exchange Act and is currently listed on the Exchange under the trading
symbol “PRPH”. Except as disclosed in the Registration Statement and the
Prospectus, there is no action pending by the Company or any Subsidiary or, to
the Company’s knowledge, the Exchange to delist the Common Stock from the
Exchange, nor has the Company received any notification that the Exchange is
contemplating terminating such listing. The Company has no intention to delist
the Common Stock from the Exchange or to deregister the Common Stock under the
Exchange Act, in either case, at any time during the period commencing on the
date of this Agreement through and including the 90th calendar day after the
termination of this Agreement. The has submitted a Listing of Additional Shares
Notification Form with the Exchange for the Placement Shares. The issuance and
sale of the Placement Shares under this Agreement does not contravene the rules
and regulations of the Exchange.

 

(tt) Margin Rules. The Company owns no “margin securities” as that term is
defined in Regulation U of the Board of Governors of the Federal Reserve System
(the “Federal Reserve Board”), and none of the proceeds from the issuance, sale
and delivery of the Placement Shares as contemplated by this Agreement and as
described in the Registration Statement and the Prospectus will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the shares of Common Stock to be considered a
“purpose credit” within the meanings of Regulation T, U or X of the Federal
Reserve Board.

 

(uu) Underwriter Agreements. Other than this Agreement, the Company is not a
party to any agreement with an agent or underwriter for any other
“at-the-market” or continuous equity transaction.

 

 17 

   

 

(vv) Board of Directors. The qualifications of the persons serving as board
members of the Company and the overall composition of the Company’s Board of
Directors comply with the applicable requirements of the Exchange Act and the
Sarbanes-Oxley Act and the listing rules of the Exchange applicable to the
Company. At least one member of the Audit Committee of the Board of Directors of
the Company qualifies as an “audit committee financial expert,” as such term is
defined under Regulation S-K and the listing rules of the Exchange. In addition,
at least a majority of the persons serving on the Board of Directors of the
Company qualify as “independent,” as defined under the listing rules of the
Exchange.

 

(ww) No Integration. Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause the offer and sale of the Placement Shares
hereunder to be integrated with prior offerings by the Company for purposes of
the Securities Act that would require the registration of any such securities
under the Securities Act.

 

(xx) No Material Defaults. The Company has not defaulted on any installment on
indebtedness for borrowed money or on any rental on one or more long-term
leases, which defaults, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Change. The Company has not filed a
report pursuant to Section 13(a) or 15(d) of the Exchange Act since the filing
of its last Annual Report on Form 10-K, indicating that it (i) has failed to pay
any dividend or sinking fund installment on preferred stock or (ii) has
defaulted on any installment on indebtedness for borrowed money or on any rental
on one or more long-term leases, which defaults, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Change.

 

(yy) Books and Records. The minute books of the Company have been made available
to the Sales Agent and counsel for the Sales Agent, and such books (i) contain a
substantially complete summary of all meetings and material actions of the board
of directors (including each board committee) and stockholders of the Company
(or analogous governing bodies and interest holders, as applicable) since the
time of its respective incorporation or organization through the date of the
latest meeting and action, and (ii) accurately in all material respects reflect
all transactions referred to in such minutes.

 

(zz) Continued Business. No supplier, customer, distributor or sales agent of
the Company has notified the Company that it intends to discontinue or decrease
the rate of business done with the Company, except where such discontinuation or
decrease has not resulted in and could not reasonably be expected to result in a
Material Adverse Change.

 

(aaa) Contracts Affecting Capital. There are no transactions, arrangements or
other relationships between and/or among the Company, any of its affiliates (as
such term is defined in Rule 405 under the Securities Act) and any
unconsolidated entity, including, but not limited to, any structured finance,
special purpose or limited purpose entity that could reasonably be expected to
materially affect the Company’s liquidity or the availability of or requirements
for its capital resources required to be described or incorporated by reference
in the Registration Statement and the Prospectus which have not been described
or incorporated by reference as required.

 

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(bbb) Regulations. The disclosures in the Registration Statement and the
Prospectus concerning the effects of federal, state, local and all foreign
regulation on the Company’s business in the past and as currently contemplated
are correct in all material respects and no other such regulations are required
to be disclosed in the Registration Statement and the Prospectus which are not
so disclosed.

 

(ccc) Information Technology. The Company’s information technology assets and
equipment, computers, systems, networks, hardware, software, websites,
applications, and databases (collectively, “IT Systems”) are adequate for, and
operate and perform in all material respects as required in connection with the
operation of the business of the Company as currently conducted, and to the
knowledge of the Company are free and clear of all material bugs, errors,
defects, Trojan horses, time bombs, malware and other corruptants. The Company
has implemented and maintains commercially reasonable controls, policies,
procedures, and safeguards to maintain and protect its material confidential
information and the integrity, continuous operation, redundancy and security of
all IT Systems and data (including all personal, personally identifiable,
sensitive, confidential or regulated data (“Personal Data”)) used in connection
with its business, and there have been no breaches, violations, outages or
unauthorized uses of or accesses to same, except for those that have been
remedied without material cost or liability or the duty to notify any other
person, nor any incidents under internal review or investigations relating to
the same. The Company is presently in material compliance with all applicable
laws or statutes and all judgments, orders, rules and regulations of any court
or arbitrator or governmental or regulatory authority, internal policies and
contractual obligations relating to the privacy and security of IT Systems and
Personal Data and to the protection of such IT Systems and Personal Data from
unauthorized use, access, misappropriation or modification. The Company has
taken all necessary actions to comply with the European Union General Data
Protection Regulation and all other applicable laws and regulations with respect
to Personal Data that have been announced as of the date hereof as becoming
effective within 12 months after the date hereof, and for which any
non-compliance with same would be reasonably likely to create a material
liability.

 

(ddd) Confidentiality and Non-Competition. To the Company’s knowledge, no
director, officer, key employee or consultant of the Company is subject to any
confidentiality, non-disclosure, non-competition agreement or non-solicitation
agreement with any employer or prior employer that could reasonably be expected
to materially affect his or her ability to be and act in his or her respective
capacity of the Company or be expected to result in a Material Adverse Change.

 

Any certificate signed by an officer of the Company and delivered to the Sales
Agent or to counsel for the Sales Agent pursuant to or in connection with this
Agreement shall be deemed to be a representation and warranty by the Company to
the Sales Agent as to the matters set forth therein.

 

The Company acknowledges that the Sales Agent and, for purposes of the opinions
to be delivered pursuant to Section 7 hereof, counsel to the Company and counsel
to the Sales Agent, will rely upon the accuracy and truthfulness of the
foregoing representations and hereby consents to such reliance.

 

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7.       Covenants of the Company. The Company covenants and agrees with the
Sales Agent that:

 

(a)       Registration Statement Amendments. After the date of this Agreement
and during any period in which a Prospectus relating to any Placement Shares is
required to be delivered by the Sales Agent under the Securities Act (including
in circumstances where such requirement may be satisfied pursuant to Rule 153 or
Rule 172 under the Securities Act), (i) the Company will notify the Sales Agent
promptly of the time when any subsequent amendment to the Registration
Statement, other than documents incorporated by reference, has been filed with
the Commission and/or has become effective or any subsequent supplement to the
Prospectus has been filed and of any request by the Commission for any amendment
or supplement to the Registration Statement or Prospectus or for additional
information; (ii) the Company will prepare and file with the Commission,
promptly upon the Sales Agent’s reasonable request, any amendments or
supplements to the Registration Statement or Prospectus that, in the Sales
Agent’s reasonable opinion, may be necessary or advisable in connection with the
distribution of the Placement Shares by the Sales Agent (provided, however, that
the failure of the Sales Agent to make such request shall not relieve the
Company of any obligation or liability hereunder, or affect the Sales Agent’s
right to rely on the representations and warranties made by the Company in this
Agreement, and provided, further, that the only remedy the Sales Agent shall
have with respect to the failure to make such filing shall be to cease making
sales under this Agreement until such amendment or supplement is filed); (iii)
the Company will not file any amendment or supplement to the Registration
Statement or Prospectus, other than documents incorporated by reference,
relating to the Placement Shares or a security convertible into the Placement
Shares unless a copy thereof has been submitted to the Sales Agent within a
reasonable period of time before the filing and the Sales Agent has not
reasonably objected thereto (provided, however, that the failure of the Sales
Agent to make such objection shall not relieve the Company of any obligation or
liability hereunder, or affect the Sales Agent’s right to rely on the
representations and warranties made by the Company in this Agreement, and
provided, further, that the only remedy the Sales Agent shall have with respect
to the failure by the Company to obtain such consent shall be to cease making
sales under this Agreement); (iv) the Company will furnish to the Sales Agent at
the time of filing thereof a copy of any document that upon filing is deemed to
be incorporated by reference into the Registration Statement or Prospectus,
except for those documents available via EDGAR; and (v) the Company will cause
each amendment or supplement to the Prospectus, other than documents
incorporated by reference, to be filed with the Commission as required pursuant
to the applicable paragraph of Rule 424(b) of the Securities Act (without
reliance on Rule 424(b)(8) of the Securities Act) or, in the case of any
documents incorporated by reference, to be filed with the Commission as required
pursuant to the Exchange Act, within the time period prescribed.

 

(b)       Notice of Commission Stop Orders. The Company will advise the Sales
Agent, promptly after it receives notice or obtains knowledge thereof, of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or any notice objecting to, or other order preventing or
suspending the use of, the Prospectus, of the suspension of the qualification of
the Placement Shares for offering or sale in any jurisdiction, or of the
initiation of any proceeding for any such purpose or any examination pursuant to
Section 8(e) of the Securities Act, or if the Company becomes the subject of a
proceeding under Section 8A of the Securities Act in connection with the
offering of the Placement Shares; and it will promptly use its commercially
reasonable efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such a stop order should be issued. Until such time as any stop
order is lifted, the Sales Agent shall cease making offers and sales under this
Agreement.

 

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(c)       Delivery of Prospectus; Subsequent Changes. During any period in which
a Prospectus relating to the Placement Shares is required to be delivered by the
Sales Agent under the Securities Act with respect to a pending sale of the
Placement Shares (including in circumstances where such requirement may be
satisfied pursuant to Rule 153 or Rule 172 under the Securities Act), the
Company will comply with all requirements imposed upon it by the Securities Act,
as from time to time in force, and to file on or before their respective due
dates all reports and any definitive proxy or information statements required to
be filed by the Company with the Commission pursuant to Sections 13(a), 13(c),
14, 15(d) or any other provision of or under the Exchange Act. If during such
period any event occurs as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances then existing, not misleading, or if during such period it is
necessary to amend or supplement the Registration Statement or Prospectus to
comply with the Securities Act, the Company will promptly notify the Sales Agent
to suspend the offering of Placement Shares during such period and the Company
will promptly amend or supplement the Registration Statement or Prospectus (at
the expense of the Company) so as to correct such statement or omission or
effect such compliance; provided, however, that the Company may delay any such
amendment or supplement if, in the reasonable judgment of the Company, it is in
the best interests of the Company to do so.

 

(d)       Listing of Placement Shares. During any period in which the Prospectus
relating to the Placement Shares is required to be delivered by the Sales Agent
under the Securities Act with respect to a pending sale of the Placement Shares
(including in circumstances where such requirement may be satisfied pursuant to
Rule 153 or Rule 172 under the Securities Act), the Company will use its
commercially reasonable efforts to cause the Placement Shares to be listed on
the Exchange and to qualify the Placement Shares for sale under the securities
laws of such jurisdictions as the Sales Agent reasonably designates and to
continue such qualifications in effect so long as required for the distribution
of the Placement Shares; provided, however, that the Company shall not be
required in connection therewith to qualify as a foreign corporation or dealer
in securities or file a general consent to service of process in any
jurisdiction.

 

(e)       Delivery of Registration Statement and Prospectus. The Company will
furnish to the Sales Agent and its counsel (at the expense of the Company)
copies of the Registration Statement, the Prospectus (including all documents
incorporated by reference therein) and all amendments and supplements to the
Registration Statement or Prospectus that are filed with the Commission during
any period in which a Prospectus relating to the Placement Shares is required to
be delivered under the Securities Act (including all documents filed with the
Commission during such period that are deemed to be incorporated by reference
therein), in each case as soon as reasonably practicable and in such quantities
as the Sales Agent may from time to time reasonably request and, at the Sales
Agent’s request, will also furnish copies of the Prospectus to each exchange or
market on which sales of the Placement Shares may be made; provided, however,
that the Company shall not be required to furnish any document (other than the
Prospectus) to the Sales Agent to the extent such document is available on
EDGAR.

 

 21 

   

 

(f)       Earnings Statement. The Company will make generally available to its
security holders as soon as practicable, but in any event not later than 15
months after the end of the Company’s current fiscal quarter, an earnings
statement of the Company (which need not be audited) covering a 12-month period
that complies with Section 11(a) and Rule 158 of the Securities Act. The terms
“earnings statement” and “make generally available to its security holders”
shall have the meanings set forth in Rule 158 under the Securities Act.

 

(g)       Expenses. The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is terminated in accordance with the
provisions of Section 11 hereunder, will pay the following expenses all incident
to the performance of its obligations hereunder, including, but not limited to,
expenses relating to (i) the preparation, printing and filing of the
Registration Statement and each amendment and supplement thereto, of each
Prospectus and of each amendment and supplement thereto, (ii) the preparation,
issuance and delivery of the Placement Shares, including any stock or other
transfer taxes and any stamp or other duties payable upon the sale, issuance or
delivery of the Placement Shares to the Sales Agent, (iii) the fees and
disbursements of the counsel, accountants and other advisors to the Company in
connection with the transactions contemplated by this Agreement; (iv) the
qualification of the Placement Shares under securities laws in accordance with
the provisions of Section 7(d) of this Agreement, including filing fees
(provided, however, that any fees or disbursements of counsel for the Sales
Agent in connection therewith shall be paid by the Sales Agent except as set
forth in (ix) below), (v) the printing and delivery to the Sales Agent of copies
of the Prospectus and any amendments or supplements thereto, and of this
Agreement, (vi) the fees and expenses incurred in connection with the listing or
qualification of the Placement Shares for trading on the Exchange, (vii) the
fees and expenses of the transfer agent or registrar for the Common Stock;
(viii) filing fees and expenses, if any, of the Commission and the FINRA
Corporate Financing Department (provided, however, that any fees or
disbursements of counsel for the Sales Agent in connection therewith shall be
paid by the Sales Agent except as set forth in (ix) below) and (ix) the Company
shall reimburse the Sales Agent for its reasonable and documented out-of-pocket
expenses (including but not limited to the reasonable and documented fees and
expenses of counsel to the Sales Agent) in an amount not to exceed $35,000,
provided further that the Company shall reimburse the Sales Agent for its
reasonable and documented out-of-pocket expenses (including but not limited to
the reasonable and documented fees and expenses of counsel to the Sales Agent)
on an annual basis in an amount not to exceed $5,000.

 

(h)       Use of Proceeds. The Company will use the Net Proceeds as described in
the Prospectus in the section entitled “Use of Proceeds.”

 

(i)       Notice of Other Sales. The Company (I) shall provide the Sales Agent
notice as promptly as reasonably possible before it offers to sell, contracts to
sell, sells, grants any option to sell or otherwise disposes of any shares of
Common Stock (other than Placement Shares offered pursuant to the provisions of
this Agreement) or securities convertible into or exchangeable for Common Stock,
or warrants or any rights to purchase or acquire Common Stock, during the period
beginning on the fifth (5th) Trading Day immediately prior to the date on which
any Placement Notice is delivered to the Sales Agent hereunder and ending on the
2nd Trading Day immediately following the final Settlement Date with respect to
Placement Shares sold pursuant to such Placement Notice (or, if the Placement
Notice has been terminated or suspended prior to the sale of all Placement
Shares covered by a Placement Notice, the 2nd Trading Day immediately following
the date of such suspension or termination), and (II) will not directly or
indirectly in any other “at-the-market” or continuous equity transaction offer
to sell, sell, contract to sell, grant any option to sell or otherwise dispose
of any shares of Common Stock (other than the Placement Shares offered pursuant
to this Agreement) or securities convertible into or exchangeable for shares of
Common Stock, warrants or any rights to purchase or acquire, shares of Common
Stock prior to the termination of this Agreement without the Sales Agent’s prior
written consent; provided, however, that such notice requirements or
restrictions, as the case may be, will not be required in connection with the
Company’s issuance or sale of (i) shares of Common Stock, options to purchase
shares of Common Stock, other equity awards or shares of Common Stock issuable
upon the exercise of options or other equity awards, pursuant to any employee or
director stock option or benefits plan, stock ownership plan or dividend
reinvestment plan of the Company whether now in effect or hereafter implemented,
(ii) shares of Common Stock issuable upon exchange, conversion or redemption of
securities or the exercise of warrants, options or other rights in effect or
outstanding and disclosed in filings by the Company available on EDGAR or
otherwise in writing (including by email correspondence) to the Sales Agent and
(iii) shares of Common Stock or securities convertible into or exchangeable for
shares of Common Stock as consideration for mergers, acquisitions, sale or
purchase of assets or other business combinations or strategic alliances
occurring after the date of this Agreement which are not issued for capital
raising purposes. Notwithstanding the foregoing, the Company shall provide the
Sales Agent notice at least two (2) Trading Days prior to pursuing any private
or public offerings of equity and/or other securities (including debt
securities) in one or more transactions.

 

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(j)       Change of Circumstances. The Company will, at any time during a fiscal
quarter in which the Company intends to tender a Placement Notice or sell
Placement Shares, advise the Sales Agent promptly after it shall have received
notice or obtained knowledge thereof, of any information or fact that would
alter or affect in any material respect any opinion, certificate, letter or
other document provided to the Sales Agent pursuant to this Agreement.

 

(k)       Due Diligence Cooperation. The Company will cooperate with any
reasonable due diligence review conducted by the Sales Agent or its agents in
connection with the transactions contemplated hereby, including, without
limitation, providing information and making available documents and senior
corporate officers, during regular business hours and at the Company’s principal
offices, as the Sales Agent may reasonably request.

 

(l)       Required Filings Relating to Placement of Placement Shares. The
Company shall set forth in each Annual Report on Form 10-K and Quarterly Report
on Form 10-Q filed by the Company with the Commission in respect of any quarter
in which sales of Placement Shares were made by or through the Sales Agent under
this Agreement, with regard to the relevant period, the amount of Placement
Shares sold to or through the Sales Agent, the Net Proceeds to the Company and
the compensation payable by the Company to the Sales Agent with respect to such
sales of Placement Shares. To the extent that the filing of a prospectus
supplement with the Commission with respect to any sales of Placement Shares
becomes required under Rule 424(b) under the Securities Act, the Company agrees
that, on or before such dates as the Securities Act shall require, the Company
will (i) file a prospectus supplement with the Commission under the applicable
paragraph of Rule 424(b) under the Securities Act, which prospectus supplement
will set forth, with regard to the relevant period, the amount of Placement
Shares sold to or through the Sales Agent, the Net Proceeds to the Company and
the compensation payable by the Company to the Sales Agent with respect to such
Placement Shares, and (ii) deliver such number of copies of each such prospectus
supplement to each exchange or market on which such sales were effected as may
be required by the rules or regulations of such exchange or market. The Company
shall afford the Sales Agent and its counsel with a reasonable opportunity to
review and comment upon, shall consult with the Sales Agent and its counsel on
the form and substance of, any such prospectus supplement, and shall give due
consideration to all such comments from the Sales Agent or its counsel on, any
such filing prior to the issuance and filing thereof.

 

 23 

   

 

(m)       Representation Dates; Certificate. On or prior to the date the first
Placement Notice is given hereunder and each time the Company (i) files the
Prospectus relating to the Placement Shares or amends or supplements the
Registration Statement or the Prospectus relating to the Placement Shares (other
than (A) a prospectus supplement filed in accordance with Section 7(l) of this
Agreement or (B) a supplement or amendment that relates to an offering of
securities other than the Placement Shares) by means of a post-effective
amendment, sticker, or supplement but not by means of incorporation of
document(s) by reference to the Registration Statement or the Prospectus
relating to the Placement Shares; (ii) files an annual report on Form 10-K under
the Exchange Act (including any Form 10-K/A containing amended financial
information or a material amendment to the previously filed Form 10-K); (iii)
files a quarterly report on Form 10-Q under the Exchange Act; or (iv) files a
current report on Form 8-K containing amended financial information (other than
an earnings release, to “furnish” information pursuant to Items 2.02 or 7.01 of
Form 8-K) under the Exchange Act (each date of filing of one or more of the
documents referred to in clauses (i) through (iv) shall be a “Representation
Date”), the Company shall furnish the Sales Agent within three (3) Trading Days
after each Representation Date with a certificate, in the form attached hereto
as Exhibit 7(m). The requirement to provide a certificate under this Section
7(m) shall be waived for any Representation Date occurring at a time at which no
Placement Notice is pending, which waiver shall continue until the earlier to
occur of the date the Company delivers a Placement Notice hereunder (which for
such calendar quarter shall be considered a Representation Date) and the next
occurring Representation Date; provided, however, that such waiver shall not
apply for any Representation Date on which the Company files its annual report
on Form 10-K. Notwithstanding the foregoing, if the Company subsequently decides
to sell Placement Shares following a Representation Date when the Company relied
on such waiver and did not provide the Sales Agent with a certificate under this
Section 7(m), then before the Company delivers the Placement Notice or the Sales
Agent sells any Placement Shares, the Company shall provide the Sales Agent with
a certificate, in the form attached hereto as Exhibit 7(m), dated the date of
the Placement Notice.

 

(n)       Legal Opinion. On or prior to the date the first Placement Notice is
given hereunder, the Company shall cause to be furnished to the Sales Agent the
written opinion and negative assurance of Reed Smith, LLP, as counsel to the
Company, or other counsel reasonably satisfactory to the Sales Agent (“Company
Counsel”), in each case substantially in the forms previously agreed between the
Company and the Sales Agent. Thereafter, within three (3) Trading Days after
each Representation Date with respect to which the Company is obligated to
deliver a certificate pursuant to Section 7(m) for which no waiver is applicable
pursuant to Section 7(m), and not more than once per calendar quarter, the
Company shall cause to be furnished to the Sales Agent the written opinion and
negative assurance of the Company Counsel substantially in the form previously
agreed between the Company and the Sales Agent, modified, as necessary, to
relate to the Registration Statement and the Prospectus as then amended or
supplemented; provided, however, that if the Company Counsel has previously
furnished to the Sales Agent such written opinion and negative assurance of such
counsel substantially in the form previously agreed between the Company and the
Sales Agent, then the Company Counsel may, in respect of any future
Representation Date, furnish the Sales Agent with a letter signed by such
counsel (each, a “Reliance Letter”) in lieu of such opinion and negative
assurance of such counsel to the effect that the Sales Agent may rely on the
prior opinion and negative assurance of such counsel delivered pursuant to this
Section 7(n) to the same extent as if it were dated the date of such Reliance
Letter (except that statements in such prior opinion and negative assurance
shall be deemed to relate to the Registration Statement and the Prospectus as
amended or supplemented to the date of such Reliance Letter).

 

 24 

   

 

(o)       Comfort Letter. On or prior to the date the first Placement Notice is
given hereunder and within three (3) Trading Days after each subsequent
Representation Date with respect to which the Company is obligated to deliver a
certificate pursuant to Section 7(m) for which no waiver is applicable pursuant
to Section 7(m), other than a Representation Date under Section 7(m)(iii) or
Section 7(m)(iv), the Company shall cause its independent accountants to furnish
the Sales Agent letters (the “Comfort Letters”), dated the date that the Comfort
Letter is delivered, in form and substance satisfactory to the Sales Agent, (i)
confirming that such accounting firm is an independent registered public
accounting firm within the meaning of the Securities Act, the Exchange Act and
the rules and regulations of the PCAOB and is in compliance with the applicable
requirements relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, (ii) stating, as of such date, the conclusions
and findings of such firm with respect to the financial information and other
matters ordinarily covered by accountants’ “comfort letters” to the Sales Agent
in connection with registered public offerings (the first such letter, the
“Initial Comfort Letter”) and (iii) updating the Initial Comfort Letter with any
information that would have been included in the Initial Comfort Letter had it
been given on such date and modified as necessary to relate to the Registration
Statement and the Prospectus, as amended and supplemented to the date of such
letter.

 

(p)       Market Activities. The Company will not, directly or indirectly, (i)
take any action designed to cause or result in, or that constitutes or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Common Stock or (ii) sell, bid for, or purchase shares of Common Stock in
violation of Regulation M, or pay anyone any compensation for soliciting
purchases of the Placement Shares other than the Sales Agent.

 

(q)       Insurance. The Company shall maintain insurance in such amounts and
covering such risks as is reasonable and customary for the business in which it
is engaged.

 

(r)       Investment Company Act. The Company will conduct its affairs in such a
manner so as to reasonably ensure that it is not and, after giving effect to the
offering and sale of the Placement Shares and the application of proceeds
therefrom as described in the Prospectus, will not be, an “investment company”
within the meaning of such term under the Investment Company Act.

 

(s)       Securities Act and Exchange Act. The Company will use its reasonable
best efforts to comply with all requirements imposed upon it by the Securities
Act and the Exchange Act as from time to time in force, so far as necessary to
permit the continuance of sales of, or dealings in, the Placement Shares as
contemplated by the provisions hereof and the Prospectus.

 

 25 

   

 

(t)       No Offer to Sell. Other than the Prospectus and an Issuer Free Writing
Prospectus approved in advance by the Company and the Sales Agent in its
capacity as principal or agent hereunder, neither the Sales Agent nor the
Company (including its agents and representatives, other than the Sales Agent in
its capacity as such) will make, use, prepare, authorize, approve or refer to
any written communication (as defined in Rule 405 under the Securities Act),
required to be filed with the Commission that constitutes an offer to sell or
solicitation of an offer to buy Placement Shares hereunder.

 

(u)       Sarbanes-Oxley Act. The Company will use its reasonable best efforts
to comply with all effective applicable provisions of the Sarbanes-Oxley Act.

 

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

 

8.       Conditions to the Sales Agent’s Obligations. The obligations of the
Sales Agent hereunder with respect to a Placement will be subject to the
continuing accuracy and completeness of the representations and warranties made
by the Company herein, to the due performance by the Company of its obligations
hereunder, to the completion by the Sales Agent of a due diligence review
satisfactory to the Sales Agent in its reasonable judgment, and to the
continuing satisfaction (or waiver by the Sales Agent in its sole discretion) of
the following additional conditions:

 

(a)       Registration Statement Effective. The Registration Statement shall be
effective and shall be available for the sale of all Placement Shares
contemplated to be issued by any Placement Notice.

 

(b)       Securities Act Filings Made. The Company shall have filed with the
Commission the ATM Prospectus pursuant to Rule 424(b) under the Securities Act
not later than the Commission’s close of business on the second Business Day
following the date of this Agreement. All other filings with the Commission
required by Rule 424(b) or Rule 433 under the Securities Act to have been filed
prior to the issuance of any Placement Notice hereunder shall have been made
within the applicable time period prescribed for such filing by Rule 424(b)
(without reliance on Rule 424(b)(8) of the Securities Act) or Rule 433, as
applicable.

 

(c)       No Material Notices. None of the following events shall have occurred
and be continuing: (i) receipt by the Company of any request for additional
information from the Commission or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement, the
response to which would require any post-effective amendments or supplements to
the Registration Statement or the Prospectus; (ii) the issuance by the
Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Placement Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the occurrence of any event that makes any material statement made
in the Registration Statement or the Prospectus or any material document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in the Registration
Statement, related Prospectus or such documents so that, in the case of the
Registration Statement, it will not contain any materially untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and, that in the case
of the Prospectus, it will not contain any materially untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.

 

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(d)       No Misstatement or Material Omission. The Sales Agent shall not have
advised the Company that the Registration Statement or Prospectus, or any
amendment or supplement thereto, contains an untrue statement of fact that in
the Sales Agent’s reasonable opinion is material, or omits to state a fact that
in the Sales Agent’s reasonable opinion is material and is required to be stated
therein or is necessary to make the statements therein not misleading.

 

(e)       Material Changes. Except as contemplated in the Prospectus, or
disclosed in the Company’s reports filed with the Commission, there shall not
have been any material adverse change in the authorized capital stock of the
Company or any Material Adverse Change or any development that could reasonably
be expected to result in a Material Adverse Change, or any downgrading in or
withdrawal of the rating assigned to any of the Company’s securities (other than
asset backed securities) by any rating organization or a public announcement by
any rating organization that it has under surveillance or review its rating of
any of the Company’s securities (other than asset backed securities), the effect
of which, in the case of any such action by a rating organization described
above, in the reasonable judgment of the Sales Agent (without relieving the
Company of any obligation or liability it may otherwise have), is so material as
to make it impracticable or inadvisable to proceed with the offering of the
Placement Shares on the terms and in the manner contemplated by this Agreement
and the Prospectus.

 

(f)       Representation Certificate. The Sales Agent shall have received the
certificate required to be delivered pursuant to Section 7(m) on or before the
date on which delivery of such certificate is required pursuant to Section 7(m).

 

(g)       Legal Opinions. The Sales Agent shall have received the opinion and
negative assurance of the Company Counsel required to be delivered pursuant
Section 7(n) on or before the date on which such delivery of such opinion and
negative assurance is required pursuant to Section 7(n).

 

(h)       Comfort Letter. The Sales Agent shall have received the Comfort Letter
required to be delivered pursuant Section 7(o) on or before the date on which
such delivery of such Comfort Letter is required pursuant to Section 7(o).

 

(i)       Officer’s Certificate. On or prior to the date the first Placement
Notice is given hereunder, the Sales Agent shall have received a certificate,
signed on behalf of the Company by its President and Chief Executive Officer,
certifying as to (i) the certificate of incorporation of the Company (as the
same may be amended or restated from time to time), (ii) the bylaws of the
Company (as the same may be amended or restated from time to time), (iii) the
resolutions of the Board of Directors of the Company (or a committee thereof)
authorizing the execution, delivery and performance of this Agreement and the
issuance of the Placement Shares and (iv) the incumbency of the officers duly
authorized to execute this Agreement and the other documents contemplated by
this Agreement.

 

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(j)       No Suspension. Trading in the Common Stock shall not have been
suspended on the Exchange and the Common Stock shall not have been delisted from
the Exchange nor shall any proceedings been instituted for such purpose.

 

(k)       Other Materials. On each date on which the Company is required to
deliver a certificate pursuant to Section 7(m), the Company shall have furnished
to the Sales Agent such appropriate further opinions, certificates, letters and
documents as the Sales Agent may have reasonably requested. All such opinions,
certificates, letters and other documents shall have been in compliance with the
provisions hereof. The Company will furnish the Sales Agent with such conformed
copies of such opinions, certificates, letters and other documents as the Sales
Agent shall have reasonably requested.

 

(l)       Approval for Listing. The Placement Shares shall have been approved
for listing on the Exchange, subject only to notice of issuance.

 

(m)       No Termination Event. There shall not have occurred any event that
would permit the Sales Agent to terminate this Agreement pursuant to Section
11(a).

 

(n)       FINRA. The Sales Agent shall have received a letter from the Corporate
Financing Department of FINRA confirming that such department has determined to
raise no objection with respect to the fairness or reasonableness of the terms
and arrangements related to the sale of the Placement Shares pursuant to this
Agreement.

 

9.       Indemnification and Contribution.

 

(a)       Company Indemnification. The Company agrees to indemnify and hold
harmless the Sales Agent, the directors, officers, members, partners, employees
and agents of the Sales Agent, each broker dealer affiliate of the Sales Agent,
and each the Sales Agent Affiliate, if any, from and against any and all losses,
claims, liabilities, expenses and damages (including, but not limited to, any
and all actual, reasonable and documented investigative, legal and other
expenses incurred in connection with, and any and all amounts paid in settlement
(in accordance with Section 9(c)) of, any action, suit or proceeding between any
of the indemnified parties and any indemnifying parties or between any
indemnified party and any third party, or otherwise, or any claim asserted), as
and when incurred, to which the Sales Agent, or any such person, may become
subject under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, liabilities, expenses or damages arise out of or are based, directly or
indirectly, on (x) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus or any
amendment or supplement thereto or in any Issuer Free Writing Prospectus or in
any application or other document executed by or on behalf of the Company or
based on written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify the Common Stock under the securities laws
thereof or filed with the Commission, (y) the omission or alleged omission to
state in any such document a material fact required to be stated in it or
necessary to make the statements in it not misleading or (z) any breach by any
of the indemnifying parties of any of their respective representations,
warranties and agreements contained in this Agreement; provided, however, that
this indemnity agreement shall not apply to the extent that such loss, claim,
liability, expense or damage arises from the sale of the Placement Shares
pursuant to this Agreement and is caused directly by an untrue statement or
omission made in reliance upon and in strict conformity with the Sales Agent’s
Information. This indemnity agreement will be in addition to any liability that
the Company might otherwise have.

 

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(b)       The Sales Agent Indemnification. The Sales Agent agrees to indemnify
and hold harmless the Company and its directors and each officer of the Company
that signed the Registration Statement, and each person, if any, who (i)
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act or (ii) is controlled by or is under common
control with the Company (each, a “Company Affiliate”) from and against any and
all losses, claims, liabilities, expenses and damages (including, but not
limited to, any and all actual, reasonable and documented investigative, legal
and other expenses incurred in connection with, and any and all amounts paid in
settlement (in accordance with Section 9(c)) of, any action, suit or proceeding
between any of the indemnified parties and any indemnifying parties or between
any indemnified party and any third party, or otherwise, or any claim asserted),
as and when incurred, to which any such Company Affiliate, may become subject
under the Securities Act, the Exchange Act or other federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based, directly or
indirectly, on (x) any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus or any
amendment or supplement thereto, or (y) the omission or alleged omission to
state in any such document a material fact required to be stated in it or
necessary to make the statements in it not misleading; provided, however, that
this indemnity agreement shall apply only to the extent that such loss, claim,
liability, expense or damage is caused directly by an untrue statement or
omission made in reliance upon and in strict conformity with the Sales Agent’s
Information.

 

(c)       Procedure. Any party that proposes to assert the right to be
indemnified under this Section 9 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Section 9, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party
will not relieve the indemnifying party from (i) any liability that it might
have to any indemnified party otherwise than under this Section 9 and (ii) any
liability that it may have to any indemnified party under the foregoing
provision of this Section 9 unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the indemnifying
party. If any such action is brought against any indemnified party and it
notifies the indemnifying party of its commencement, the indemnifying party will
be entitled to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving notice of the
commencement of the action from the indemnified party, jointly with any other
indemnifying party similarly notified, to assume the defense of the action, with
counsel reasonably satisfactory to the indemnified party, and after notice from
the indemnifying party to the indemnified party of its election to assume the
defense, the indemnifying party will not be liable to the indemnified party for
any legal or other expenses except as provided below and except for the
reasonable costs of investigation subsequently incurred by the indemnified party
in connection with the defense. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (3) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party or
parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred. An indemnifying party will
not, in any event, be liable for any settlement of any action or claim effected
without its written consent. No indemnifying party shall, without the prior
written consent of each indemnified party, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding relating to the matters contemplated by this Section 9 (whether or
not any indemnified party is a party thereto), unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising or that may arise out of such claim, action or
proceeding.

 

 29 

   

 

(d)       Contribution. In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 9 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Sales Agent, the
Company and the Sales Agent will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company from persons other than the
Sales Agent, such as persons who control the Company within the meaning of the
Securities Act, officers of the Company who signed the Registration Statement
and directors of the Company, who also may be liable for contribution) to which
the Company and the Sales Agent may be subject in such proportion as shall be
appropriate to reflect the relative benefits received by the Company on the one
hand and the Sales Agent on the other. The relative benefits received by the
Company on the one hand and the Sales Agent on the other hand shall be deemed to
be in the same proportion as the total Net Proceeds from the sale of the
Placement Shares (before deducting expenses) received by the Company bear to the
total compensation received by the Sales Agent from the sale of Placement Shares
on behalf of the Company. If, but only if, the allocation provided by the
foregoing sentence is not permitted by applicable law, the allocation of
contribution shall be made in such proportion as is appropriate to reflect not
only the relative benefits referred to in the foregoing sentence but also the
relative fault of the Company, on the one hand, and the Sales Agent, on the
other, with respect to the statements or omission that resulted in such loss,
claim, liability, expense or damage, or action in respect thereof, as well as
any other relevant equitable considerations with respect to such offering. Such
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Sales Agent, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Sales Agent agree that it would not be just and
equitable if contributions pursuant to this Section 9(d) were to be determined
by pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, liability,
expense, or damage, or action in respect thereof, referred to above in this
Section 9(d) shall be deemed to include, for the purpose of this Section 9(d),
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim to the
extent consistent with Section 9(c) hereof. Notwithstanding the foregoing
provisions of this Section 9(d), the Sales Agent shall not be required to
contribute any amount in excess of the commissions received by it under this
Agreement and no person found guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 9(d), any person who controls a party to this Agreement
within the meaning of the Securities Act will have the same rights to
contribution as that party (and any officers, directors, members, partners,
employees or agents of the Sales Agent and each broker dealer affiliate of the
Sales Agent will have the same rights to contribution as the Sales Agent), and
each officer of the Company who signed the Registration Statement and each
director of the Company will have the same rights to contribution as the
Company, subject in each case to the provisions hereof. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 9(d), will notify any such party or parties from whom
contribution may be sought, but the omission to so notify will not relieve that
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 9(d) except to the extent that the
failure to so notify such other party materially prejudiced the substantive
rights or defenses of the party from whom contribution is sought. Except for a
settlement entered into pursuant to the last sentence of Section 9(c) hereof, no
party will be liable for contribution with respect to any action or claim
settled without its written consent if such consent is required pursuant to
Section 9(c) hereof.

 

10.       Representations and Agreements to Survive Delivery. The indemnity and
contribution agreements contained in Section 9 of this Agreement and all
representations and warranties of the Company herein or in certificates
delivered pursuant hereto shall survive, as of their respective dates,
regardless of (i) any investigation made by or on behalf of the Sales Agent, any
controlling person of the Sales Agent, or the Company (or any of their
respective officers, directors, members or controlling persons), (ii) delivery
and acceptance of the Placement Shares and payment therefor or (iii) any
termination of this Agreement.

 

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11.       Termination.

 

(a)       The Sales Agent shall have the right by giving notice as hereinafter
specified at any time to terminate this Agreement if (i) any Material Adverse
Change, or any development that could reasonably be expected to result in a
Material Adverse Change has occurred that, in the reasonable judgment of the
Sales Agent, may materially impair the ability of the Sales Agent to sell the
Placement Shares hereunder, provided, however, that for purposes of this
subclause 11(a)(i), Material Adverse Change shall not include any event, action,
state or condition or financial occurrence related directly or indirectly to the
COVID-19 pandemic (whether now known or unknown or whether foreseeable or
unforeseeable in the future), (ii) the Company shall have failed, refused or
been unable to perform any agreement on its part to be performed hereunder;
provided, however, in the case of any failure of the Company to deliver (or
cause another person to deliver) any certification, opinion, or letter required
under Sections 7(m), 7(n), 7(o) or 7(p), the Sales Agent’s right to terminate
shall not arise unless such failure to deliver (or cause to be delivered)
continues for more than thirty (30) days from the date such delivery was
required, (iii) any other condition of the Sales Agent’s obligations hereunder
is not fulfilled, or (iv) any suspension or limitation of trading in the
Placement Shares or in securities generally on the Exchange shall have occurred
(including automatic halt in trading pursuant to market-decline triggers, other
than those in which solely program trading is temporarily halted), or a major
disruption of securities settlements or clearing services in the United States
shall have occurred, or minimum prices for trading have been fixed on the
Exchange. Any such termination shall be without liability of any party to any
other party except that the provisions of Section 7(g) (Expenses), Section 9
(Indemnification and Contribution), Section 10 (Representations and Agreements
to Survive Delivery), Section 11(f), Section 16 (Applicable Law; Consent to
Jurisdiction) and Section 17 (Waiver of Jury Trial) hereof shall remain in full
force and effect notwithstanding such termination. If the Sales Agent elects to
terminate this Agreement as provided in this Section 11(a), the Sales Agent
shall provide the required notice as specified in Section 12 (Notices).

 

(b)       The Company shall have the right, by giving three (3) Trading Days’
notice as hereinafter specified in Section 12, to terminate this Agreement in
its sole discretion at any time after the date of this Agreement. Any such
termination shall be without liability of any party to any other party except
that the provisions of Section 7(g), Section 9, Section 10, Section 11(f),
Section 16 and Section 17 hereof shall remain in full force and effect
notwithstanding such termination.

 

(c)       The Sales Agent shall have the right, by giving three (3) Trading
Days’ notice as hereinafter specified in Section 12, to terminate this Agreement
in its sole discretion at any time after the date of this Agreement. Any such
termination shall be without liability of any party to any other party except
that the provisions of Section 7(g), Section 9, Section 10, Section 11(f),
Section 16 and Section 17 hereof shall remain in full force and effect
notwithstanding such termination.

 

(d)       Unless earlier terminated pursuant to this Section 11, this Agreement
shall automatically terminate upon the issuance and sale of all of the Placement
Shares to or through the Sales Agent on the terms and subject to the conditions
set forth herein; provided that the provisions of Section 7(g), Section 9,
Section 10, Section 11(f), Section 16 and Section 17 hereof shall remain in full
force and effect notwithstanding such termination.

 

(e)       This Agreement shall remain in full force and effect unless terminated
pursuant to Sections 11(a), (b), (c) or (d) above or otherwise by mutual
agreement of the parties; provided, however, that any such termination by mutual
agreement shall in all cases be deemed to provide that Section 7(g), Section 9,
Section 10, Section 11(f), Section 16 and Section 17 shall remain in full force
and effect.

 

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(f)       Any termination of this Agreement shall be effective on the date
specified in such notice of termination; provided, however, that such
termination shall not be effective until the close of business on the date of
receipt of such notice by the Sales Agent or the Company, as the case may be. If
such termination shall occur prior to the Settlement Date for any sale of
Placement Shares, such termination shall not become effective until the close of
business on such Settlement Date and such Placement Shares shall settle in
accordance with the provisions of this Agreement.

 

12.       Notices. All notices or other communications required or permitted to
be given by any party to any other party pursuant to the terms of this Agreement
shall be in writing, unless otherwise specified, and if sent to the Sales Agent,
shall be delivered to:

 

A.G.P./Alliance Global Partners

590 Madison Avenue

New York, NY 10022

Attention: Tom Higgins

Email: atm@allianceg.com

 

with a copy (which shall not constitute notice) to:

 

McGuireWoods LLP

1251 Avenue of the Americas, 20th Floor

New York, New York 10020
Attention: Stephen E. Older, Esq. and David S. Wolpa, Esq.

Facsimile: (212) 715-2307 and (704) 444-8720

Email:   solder@mcguirewoods.com and dwolpa@mcguirewoods.com

 

and if to the Company, shall be delivered to:

 

ProPhase Labs, Inc.

621 N. Shady Retreat Road

Doylestown, PA

Attention: Ted Karkus, CEO

Facsimile: (215) 345-5920

Email: 

 

with a copy (which shall not constitute notice) to:

 

Reed Smith, LLP

599 Lexington Avenue, 22nd Floor

New York, New York 10022

Attention: Herbert F. Kozlov, Esq. and Wendy Grasso, Esq.

Facsimile: (212) 521-5450

Email:   hkozlov@reedsmith.com and wgrasso@reedsmith.com

 

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Each party may change such address for notices by sending to the other party to
this Agreement written notice of a new address for such purpose. Each such
notice or other communication shall be deemed given (i) when delivered
personally or by verifiable facsimile transmission (with an original to follow)
on or before 4:30 p.m., New York City time, on a Business Day or, if such day is
not a Business Day, on the next succeeding Business Day, (ii) on the next
Business Day after timely delivery to a nationally-recognized overnight courier
and (iii) on the Business Day actually received if deposited in the U.S. mail
(certified or registered mail, return receipt requested, postage prepaid). For
purposes of this Agreement, “Business Day” shall mean any day on which the
Exchange and commercial banks in the City of New York are open for business.

 

An electronic communication (“Electronic Notice”) shall be deemed written notice
for purposes of this Section 12 if sent to the electronic mail address specified
by the receiving party under separate cover. Electronic Notice shall be deemed
received at the time the party sending Electronic Notice receives confirmation
of receipt by the receiving party (other than pursuant to auto-reply). Any party
receiving Electronic Notice may request and shall be entitled to receive the
notice on paper, in a nonelectronic form (“Nonelectronic Notice”) which shall be
sent to the requesting party within ten (10) days of receipt of the written
request for Nonelectronic Notice.

 

13.       Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the Company and the Sales Agent and their respective
successors and permitted assigns and, as to Sections 5(b) and 9, the other
indemnified parties specified therein. References to any of the parties
contained in this Agreement shall be deemed to include the successors and
permitted assigns of such party. Nothing in this Agreement, express or implied,
is intended to confer upon any other person any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. Neither party may assign its rights or obligations under this
Agreement without the prior written consent of the other party; provided,
however, that the Sales Agent may assign its rights and obligations hereunder to
an affiliate of the Sales Agent without obtaining the Company’s consent.

 

14.       Adjustments for Share Splits. The parties acknowledge and agree that
all share-related numbers contained in this Agreement shall be adjusted to take
into account any share split, reverse share split, share dividend or similar
event effected with respect to the Common Stock.

 

15.       Entire Agreement; Amendment; Severability. This Agreement (including
all schedules and exhibits attached hereto and Placement Notices issued pursuant
hereto) and any other writing entered into by the parties relating to this
Agreement constitutes the entire agreement and supersedes all other prior and
contemporaneous agreements and undertakings, both written and oral, among the
parties hereto with regard to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended except pursuant to a written instrument
executed by the Company and the Sales Agent. In the event that any one or more
of the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable as written by a court of
competent jurisdiction, then such provision shall be given full force and effect
to the fullest possible extent that it is valid, legal and enforceable, and the
remainder of the terms and provisions herein shall be construed as if such
invalid, illegal or unenforceable term or provision was not contained herein,
but only to the extent that giving effect to such provision and the remainder of
the terms and provisions hereof shall be in accordance with the intent of the
parties as reflected in this Agreement.

 

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16.       Applicable Law; Consent to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York, without regard to the principles of conflicts of laws. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the state and
federal courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection with any transaction
contemplated hereby, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof (certified or registered mail, return
receipt requested) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.

 

17.       Waiver of Jury Trial. The Company and the Sales Agent each hereby
irrevocably waives any right it may have to a trial by jury in respect of any
claim based upon or arising out of this Agreement or any transaction
contemplated hereby.

 

18.       Absence of Fiduciary Relationship. The Company acknowledges and agrees
that:

 

(a)       the Sales Agent is acting solely as agent in connection with the sale
of the Placement Shares contemplated by this Agreement and the process leading
to such transactions, and no fiduciary or advisory relationship between the
Company or any of its respective affiliates, stockholders (or other equity
holders), creditors or employees or any other party, on the one hand, and the
Sales Agent, on the other hand, has been or will be created in respect of any of
the transactions contemplated by this Agreement, irrespective of whether the
Sales Agent has advised or is advising the Company on other matters, and the
Sales Agent has no obligation to the Company with respect to the transactions
contemplated by this Agreement, except the obligations expressly set forth in
this Agreement;

 

(b)       the Company is capable of evaluating and understanding and understands
and accepts the terms, risks and conditions of the transactions contemplated by
this Agreement;

 

(c)       the Sales Agent has not provided any legal, accounting, regulatory or
tax advice with respect to the transactions contemplated by this Agreement, and
the Company has consulted its own legal, accounting, regulatory and tax advisors
to the extent it has deemed appropriate;

 

(d)       the Company has been advised and is aware that the Sales Agent and its
affiliates are engaged in a broad range of transactions which may involve
interests that differ from those of the Company and that the Sales Agent has no
obligation to disclose such interests and transactions to the Company by virtue
of any fiduciary, advisory or agency relationship; and

 

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(e)       the Company waives, to the fullest extent permitted by law, any claims
it may have against the Sales Agent, for breach of fiduciary duty or alleged
breach of fiduciary duty and agrees that the Sales Agent shall have no liability
(whether direct or indirect, in contract, tort or otherwise) to the Company in
respect of such a fiduciary claim or to any person asserting a fiduciary duty
claim on behalf of or in right of the Company, including stockholders, partners,
employees or creditors of the Company.

 

19.       Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of an executed
Agreement by one party to the other may be made by facsimile transmission.

 

20.       Effect of Headings; Knowledge of the Company. The section and Exhibit
headings herein are for convenience only and shall not affect the construction
hereof. All references in this Agreement to the “knowledge of the Company” or
the “Company’s knowledge” or similar qualifiers shall mean the actual knowledge
of the directors and officers of the Company, after due inquiry.

 

21.       Definitions. As used in this Agreement, the following term has the
meaning set forth below:

 

(a)       “Applicable Time” means the date of this Agreement, each
Representation Date, each date on which a Placement Notice is given, each Point
of Sale, and each Settlement Date.

 

[Remainder of Page Intentionally Blank]

 

 35 

   

 

If the foregoing correctly sets forth the understanding between the Company and
the Sales Agent, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement between the
Company and the Sales Agent.

 

  Very truly yours,       PROPHASE LABS, INC.       By: /s/ Ted Karkus   Name:
Ted Karkus   Title: President and Chief Executive Officer       ACCEPTED as of
the date first-above written:       A.G.P./ALLIANCE GLOBAL PARTNERS       By:
/s/ Tom Higgins   Name: Tom Higgins   Title: Managing Director

 

[Signature Page to Sales Agreement]

 

 

 

 

SCHEDULE 1

 

 

 

Form of Placement Notice

 

 

 

From: ProPhase Labs, Inc.

 

To: A.G.P./Alliance Global Partners

 

Attention: [●]

 

Subject: Placement Notice

 

Date: [●], 202[●]

 

Ladies and Gentlemen:

 

Pursuant to the terms and subject to the conditions contained in the Sales
Agreement (the “Sales Agreement”) between ProPhase Labs, Inc., a Delaware
corporation (the “Company”), and A.G.P./Alliance Global Partners (the “Sales
Agent”), dated [●], 2020, the Company hereby requests that the Sales Agent sell
up to [●] shares of the Company’s common stock, par value $0.0005 per share (the
“Placement Shares”), at a minimum market price of $[●] per share, during the
time period beginning [month, day, time] and ending [month, day, time] [and with
no more than [●] Placement Shares sold in any one Trading Day].

 

[The Company may include such other sale parameters as it deems appropriate.]

 

Capitalized terms used and not defined herein shall have the respective meanings
assigned to them in the Sales Agreement.

 

 

 

 

SCHEDULE 2

 

Notice Parties

 

ProPhase Labs, Inc.

 

Ted Karkus

 

Monica Brady

 

The Sales Agent

 

Tom Higgins

 

With copies to:

 

atm@allianceg.com

 

 

 

 

SCHEDULE 3

 

Compensation

 

The Company shall pay to the Sales Agent in cash, upon each sale of Placement
Shares through the Sales Agent pursuant to this Agreement, an amount equal to
3.00% of the aggregate gross proceeds from each sale of Placement Shares.*

 

 

 

* The foregoing rate of compensation shall not apply when the Sales Agent
purchases Placement Shares on a principal basis, in which case the Company may
sell the Placement Shares to the Sales Agent as principal at a price to be
mutually agreed upon by the Company and the Sales Agent at the relevant Point of
Sale pursuant to the applicable Placement Notice (it being hereby acknowledged
and agreed that the Sales Agent shall be under no obligation to purchase
Placement Shares on a principal basis pursuant to the Sales Agreement, except as
otherwise agreed by the Sales Agent and the Company in writing and expressly set
forth in a Placement Notice).

 

 

 

 

SCHEDULE 4

 

Subsidiaries

 

 

Pharmaloz Manufacturing Inc.

 

ProPhase Digital Media, Inc.

 

Quigley Pharma Inc.

 

TK Supplements, Inc.

 

 

 

 

Exhibit 7(m)

 

OFFICER CERTIFICATE

 

The undersigned, the duly qualified and appointed _____________________ of
ProPhase Labs, Inc. a Delaware corporation (the “Company”), does hereby certify
in such capacity and on behalf of the Company, pursuant to Section 7(m) of the
Sales Agreement, dated [●] (the “Sales Agreement”), between the Company and
A.G.P./Alliance Global Partners, that:

 

(i)the representations and warranties of the Company in Section 6 of the Sales
Agreement (A) to the extent such representations and warranties are subject to
qualifications and exceptions contained therein relating to materiality or
Material Adverse Change, are true and correct on and as of the date hereof with
the same force and effect as if expressly made on and as of the date hereof,
except for those representations and warranties that speak solely as of a
specific date and which were true and correct as of such date, and (B) to the
extent such representations and warranties are not subject to any qualifications
or exceptions, are true and correct in all material respects as of the date
hereof as if made on and as of the date hereof with the same force and effect as
if expressly made on and as of the date hereof except for those representations
and warranties that speak solely as of a specific date and which were true and
correct as of such date; and;     (ii)the Company has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
pursuant to the Sales Agreement at or prior to the date hereof;     (iii)as of
the date hereof, (i) the Registration Statement does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, (ii) the Prospectus does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (iii) no event has occurred as a
result of which it is necessary to amend or supplement the Registration
Statement or the Prospectus in order to make the statements therein not untrue
or misleading for clauses (i) and (ii) above, respectively, to be true and
correct;     (iv)there has been no Material Adverse Change since the date as of
which information is given in the Prospectus, as amended or supplemented;    
(v)the Company does not possess any material non-public information; and    
(vi)the aggregate offering price of the Placement Shares that may be issued and
sold pursuant to the Sales Agreement and the maximum number or amount of
Placement Shares that may be sold pursuant to the Sales Agreement have been duly
authorized by the Company’s board of directors or a duly authorized committee
thereof.

 

 

 

 

Terms used herein and not defined herein have the meanings ascribed to them in
the Sales Agreement.

 

Dated:     By:                 Name:               Title: