Exhibit 10.50

 

 

 

STOCK PURCHASE AGREEMENT

 

BY AND BETWEEN

 

Celgene CORPORATION

 

AND

 

ALLIQUA, INC.

 

NOVEMBER 14, 2013

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

    PAGE       ARTICLE 1  DEFINITIONS 1       ARTICLE 2  PURCHASE AND SALE 5    
  2.1 Closing 5 2.2 Adjustments in Share Numbers and Prices 6 2.3 Reserve Shares
6 2.4 Concurrent Issuances 6 2.5 Closing Deliveries 6       ARTICLE
3  REPRESENTATIONS AND WARRANTIES 6       3.1 Representations and Warranties of
the Company 6 3.2 Representations and Warranties of the Investor 13      
ARTICLE 4  OTHER AGREEMENTS OF THE PARTIES 15       4.1 Filing of Reports 15 4.2
Board Representation and Observer Rights 15 4.3 Right Of First Offer 16 4.4
Listing of Shares 16 4.5 Use of Proceeds 16 4.6 Lock-Up 17 4.7 Public Statements
17 4.8 Additional Financing 17       ARTICLE 5  CONDITIONS 17       5.1
Conditions Precedent to the Obligations of the Investor 17 5.2 Conditions
Precedent to the Obligations of the Company 18       ARTICLE 6  REGISTRATION
RIGHTS 19       6.1 Piggy-Back Registration Rights 19 6.2 Registration Expenses
20       ARTICLE 7  INDEMNIFICATION 20     7.1 Indemnification by the Company 20
7.2 Indemnification by Investor 21 7.3 Conduct of Indemnification Proceedings 21
      ARTICLE 8  GENERAL PROVISIONS 23     8.1 Termination 23 8.2 Fees and
Expenses 23 8.3 Entire Agreement 23 8.4 Notices 24 8.5 Amendments; Waivers 24
8.6 Construction 24

 

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8.7 Successors and Assigns 24 8.8 No Third-Party Beneficiaries 25 8.9 Governing
Law; Venue; Waiver of Jury Trial 25 8.10 Survival 25 8.11 Execution 25 8.12
Severability 25 8.13 Replacement of Certificates 26 8.14 Remedies 26

 

Exhibit A: Form of Warrants Exhibit B: Opinion of Company Counsel

  

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STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of November 14, 2013,
by and between Alliqua, Inc., a Florida corporation (the “Company”), and Celgene
Corporation, a Delaware corporation (“Investor”).

 

PREAMBLE

 

A.           Contemporaneously with the execution and delivery of this
Agreement, the Company and Anthrogenesis Corporation, a Delaware corporation
doing business as Celgene Cellular Therapeutics (“CCT”), are entering into that
certain License, Marketing and Development Agreement, dated as of the date
hereof (the “License Agreement”), and that certain Supply Agreement, dated as of
the date hereof, relating to, among other things, the development and
commercialization by the Company of certain CCT products; and

 

B.           The Investor wishes to purchase, and the Company wishes to sell,
upon the terms and conditions stated in this Agreement, (a) that aggregate
number of shares of the common stock, par value $0.001 per share, of the Company
(the “Common Stock”), which is the nearest number of whole shares of Common
Stock determined by dividing (x) $6,000,000 by (y) $0.082; which aggregate
amount of shares shall collectively be referred to herein as the “Common
Shares”, and (b) five year warrants to purchase 36,585,366 shares of Common
Stock at an exercise price of $0.13 per share (the “Initial Warrants”) in the
form attached hereto as Exhibit A.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company and the
Investor agree as follows:

 

ARTICLE 1
DEFINITIONS

 

In addition to the terms defined elsewhere in this Agreement, the following
terms have the meanings indicated:

 

“Affiliate” means, with respect to a Person, any Person that controls, is
controlled by or is under common control with such first Person. For purposes of
this definition only, “control” means (a) to possess, directly or indirectly,
the power to direct the management or policies of a Person, whether through
ownership of voting securities, by contract relating to voting rights or
corporate governance or otherwise, or (b) to own, directly or indirectly, fifty
percent (50%) or more of the outstanding securities or other ownership interest
of such Person. For the purposes of this Agreement, neither Party shall be
considered an Affiliate of the other, and the Affiliates of each Party shall not
be considered Affiliates of the other Party or of any of such other Party’s
Affiliates.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Business Day” means any day (other than a Saturday, Sunday or a legal holiday)
on which banks are open for general business in New York, New York.

 

 

 

 

“Board” has the meaning set forth in Section 4.2.

 

“Additional Warrants” has the meaning set forth in Section 4.8.

 

“Agreement” has the meaning set forth in the Preamble.

 

“CCT” has the meaning set forth in the Preamble.

 

“Closing” means the closing of the purchase and sale of the Common Shares
pursuant to Section 2.1.

 

“Closing Date” means the date and time of the Closing which, subject to the
satisfaction or waiver of the conditions set forth in Article 5, shall take
place at 9:00 a.m. EST on the date that is five (5) Business Days following the
date hereof, or on such other date and time as is mutually agreed to by the
Company and the Investor.

 

“Company” has the meaning set forth in the Preamble.

 

“Company Counsel” means Lowenstein Sandler LLP, counsel to the Company.

 

“Common Shares” has the meaning set forth in the Preamble.

 

“Common Stock” has the meaning set forth in the Preamble.

 

“Competitor” means any Person that, during the Term of the License Agreement,
Commercializes or Develops a Competing Product. For purposes of this definition,
the terms “Commercializes”, “Competing Product”, Develops”, and “Term” shall
have the meanings ascribed to such terms in the License Agreement.

 

“Convertible Securities” means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for Common Stock.

 

“Disclosure Materials” has the meaning set forth in Section 3.1(g).

 

“Equity Securities” means any all shares of Common Stock and any securities of
the Company convertible into, or exchangeable or exercisable for, such shares,
and options, warrants or other rights to acquire such shares.

 

“Equity Financing” has the meaning set forth in Section 4.8.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Excluded Securities” means Equity Securities issued in connection with: (a) a
grant to any existing or prospective consultants, employees, officers or
directors pursuant to any stock option, employee stock purchase or similar
equity-based plans or other compensation agreements; (b) the conversion or
exchange of any securities of the Company into shares of Common Stock, or the
exercise of any options, warrants or other rights to acquire such shares; (c)
any acquisition by the Company of the stock, assets, properties or business of
any Person; (d) any merger, consolidation or other business combination
involving the Company; (e) a bona fide firm commitment underwritten public
offering; (f) any stock split, stock dividend or any similar recapitalization,
or (g) up to an aggregate of $6,000,000 of Common Stock issued to Persons other
than the Investor and its Affiliates within 30 days of the date hereof, on terms
and conditions no less favorable to the Company than those offered to the
Investor hereunder.

 

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“First Commercial Sale” means the First Commercial Sale of ECMs. For purposes of
this definition, the terms “First Commercial Sale”, and “ECMs”, shall have the
meanings ascribed to such terms in the License Agreement.

 

“GAAP” has the meaning set forth in Section 3.1(g).

 

“Indemnified Party” has the meaning set forth in Section 7.3.

 

“Indemnifying Party” has the meaning set forth in Section 7.3.

 

“Initial Warrants” has the meaning set forth in the Preamble.

 

“Intellectual Property Rights” has the meaning set forth in Section 3.1(q).

 

“Investor” has the meaning set forth in the Preamble.

 

“Investor Director” has the meaning set forth in Section 4.2.

 

“Investor Observer” has the meaning set forth in Section 4.2.

 

“knowledge” of the Company means with respect to any statement made to the
knowledge of the Company, that the statement is based upon the actual knowledge,
after reasonable due inquiry, of any executive officer of the Company as of the
date of this Agreement.

 

“License Agreement” has the meaning set forth in the Preamble.

 

“Lien” means any lien, charge, claim, security interest, encumbrance, right of
first refusal or other restriction.

 

“Losses” means any and all losses, claims, damages, liabilities, settlement
costs and expenses, including, without limitation, reasonable attorneys’ fees.

 

“Material Adverse Effect” means (i) a material adverse effect on the results of
operations, assets, business or financial condition of the Company and the
Subsidiaries taken as a whole on a consolidated basis or (ii) material and
adverse effect on the legality, validity or enforceability of this Agreement,
provided, that none of the following alone shall be deemed, in and of itself, to
constitute a Material Adverse Effect: (x) a change in the market price or
trading volume of the Common Stock, (y) changes in general economic conditions
or changes affecting the industry in which the Company operates generally (as
opposed to Company-specific changes) so long as such changes do not have a
disproportionate effect on the Company and the Subsidiaries taken as a whole or
(z) effects resulting from or relating to the announcement or disclosure of the
sale of the Common Shares or other transactions contemplated by, or being taken
in connection with, this Agreement.

 

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“Material Permits” has the meaning set forth in Section 3.1(r).

 

“New Securities” has the meaning set forth in Section 4.3.

 

“Options” means any outstanding rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.

 

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

 

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, a partial proceeding, such as a deposition),
whether commenced or threatened in writing.

 

“Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.

 

“Purchase Price” means the aggregate purchase price to be paid by the Investor
for the Common Shares determined by multiplying (i) the number of shares of
Common Stock comprising the Common Shares by (ii) $0.082.

 

“Registrable Securities” means the Common Shares and the Warrant Shares (but
with respect to the Warrant Shares issuable under the Additional Warrant, from
and after the issuance of the Additional Warrant), together with any securities
issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing.

 

“Registration Statement” means any registration statement filed under
Article VI, including (in each case) the Prospectus, amendments and supplements
to such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.

 

“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424,
respectively, promulgated by the SEC pursuant to the Securities Act, as such
Rules may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such Rule.

 

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

 

“SEC Reports” has the meaning set forth in Section 3.1(g).

 

“Securities Act” means the Securities Act of 1933, as amended.

 

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“Shares” means shares of the Company’s Common Stock.

 

“Short Sales” means all “short sales” as defined in Rule 200 promulgated under
Regulation SHO under the Exchange Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, swaps, derivatives and
similar arrangements.

 

“Subsidiary” means any entity in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest.

 

“Supply Agreement” has the meaning set forth in the Preamble.

 

“Trading Day” means (i) a day on which the Common Stock is traded on a Trading
Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not
listed or quoted on a Trading Market (other than the OTC Bulletin Board), a day
on which the Common Stock is traded in the over-the-counter market, as reported
by the OTC Bulletin Board, or (iii) if the Common Stock is not listed or quoted
on any Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the Pink Sheets LLC (or any similar
organization or agency succeeding to its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

 

“Trading Market” means whichever of the New York Stock Exchange, the NYSE/Amex,
the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital
Market or OTC Bulletin Board on which the Common Stock is listed or quoted for
trading on the date in question.

 

“Transaction” has the meaning set forth in Section 3.2(h).

 

“Transaction Documents” means this Agreement, the License Agreement, the Supply
Agreement, the Warrants and the schedules and exhibits referred to herein.

 

“Transfer Agent” means Action Stock Transfer Corporation, or any successor
transfer agent for the Company.

 

“Warrant Shares” has the meaning set forth in Section 2.3.

 

“Warrants” has the meaning set forth in Section 4.8.

 

ARTICLE 2
PURCHASE AND SALE

 

2.1           Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to the Investor, and
the Investor shall purchase from the Company, (a) the Common Shares at a
purchase price of $0.082 per Common Share, and (b) the Initial Warrants. The
date and time of the Closing shall be 11:00 a.m., New York City Time, on the
Closing Date. The Closing shall take place at the offices of Company Counsel.

 

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

 

2.3         Reserve Shares. The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, a number of shares of Common Stock equal to
the number of shares of Common Stock issuable upon the exercise of the Warrants
(the “Warrant Shares”).

 

2.4         Concurrent Issuances. The Company shall not, within 30 calendar days
of the execution of this Agreement, issue any New Securities to any person at a
lower per share purchase price than the per share price to be paid by the
Investor pursuant to this Agreement, or on other terms and conditions more
favorable to such person than the terms and conditions applicable to the
Investor pursuant to this Agreement.

 

2.5         Closing Deliveries.

 

(a)          At the Closing, the Company shall deliver or cause to be delivered
to the Investor the following:

 

(i)          a copy of the Company’s irrevocable instructions to the Transfer
Agent instructing the Transfer Agent to promptly deliver one or more stock
certificates, free and clear of all restrictive and other legends (except for a
customary legend to the effect that the Common Shares have not been registered
under the Securities Act), evidencing the Common Shares, registered in the name
of the Investor;

 

(ii)         a legal opinion of Company Counsel, in the form of Exhibit B,
executed by such counsel and delivered to the Investor.

 

(b)          At the Closing, the Investor shall deliver or cause to be delivered
to the Company the Purchase Price in United States dollars by wire transfer to
an account designated in writing to the Investor by the Company for such
purpose.

 

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

 

3.1         Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor that, except as set forth in the SEC
Reports or in the Schedules delivered concurrently herewith:

 

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(a)          Organization and Qualification. The Company is an entity duly
organized, validly existing and in good standing under the laws of the State of
Florida, with the requisite legal authority to own and use its properties and
assets and to carry on its business as currently conducted. Each Subsidiary is
an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or formation. Neither the Company nor
any Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, formation, bylaws or other
organizational or charter documents. The Company and each Subsidiary is duly
qualified to do business and is in good standing as a foreign corporation or
other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

 

(b)          Subsidiaries. The Company owns or controls, directly or indirectly,
all of the capital stock or comparable equity interests of each Subsidiary free
and clear of any Lien, and all issued and outstanding shares of capital stock or
comparable equity interest of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights; and the Company
has no Subsidiaries other than the following corporations, partnerships, limited
liability partnerships, limited liability companies, associations or other
entities: (i) AquaMed Technologies, Inc., a Delaware corporation, (ii) Alliqua
Biomedical, Inc. a Delaware corporation, and (iii) Hepalife Biosystems, Inc. a
Nevada corporation.

 

(c)          Authorization; Enforcement. The Company has the requisite corporate
authority to enter into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents to which it is a party and
otherwise to carry out its obligations hereunder and thereunder including the
issuance and sale of the Common Shares and Warrants. The execution and delivery
by the Company of this Agreement and each of the other Transaction Documents to
which it is party and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Company and no further consent or action is required by the
Company, its Board of Directors or its stockholders. Each of the Transaction
Documents to which to Company is party to has been duly executed by the Company
and is the valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.

 

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(d)          No Conflicts. The execution, delivery and performance by the
Company of this Agreement and the other Transaction Documents it is party to and
the consummation by the Company of the transactions contemplated hereby and
thereby do not, and will not, (i) conflict with or violate any provision of the
Company’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) in any material respect, conflict
with, 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 rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company debt or otherwise) or other understanding to which the
Company is a party or by which any property or asset of the Company is bound, or
affected, or (iii) in any material respect, result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company is subject (including,
assuming the accuracy of the representations and warranties of the Investor set
forth in Section 3.2 hereof, federal and state securities laws and regulations
and the rules and regulations of any self-regulatory organization to which the
Company or its securities are subject, including all applicable Trading
Markets), or by which any property or asset of the Company is bound or affected,
except in the case of clauses (ii) and (iii) such as would not, individually or
in the aggregate, have a Material Adverse Effect. Neither the Company nor any
Subsidiary is as of the date hereof, nor after giving effect to the transactions
contemplated hereby to occur at the Closing, will be Insolvent (as defined
below). For purposes of this Section 3.1(d), “Insolvent” means, with respect to
the Company or any Subsidiary (i) the present fair saleable value of such
Person’s assets is less than the amount required to pay such Person’s debts and
liabilities, (ii) such Person is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured, (iii) such Person intends to incur or believes that it
will incur debts that would be beyond its ability to pay as such debts mature or
(iv) such Person has unreasonably small capital with which to conduct the
business in which it is engaged, as such business is now conducted and is
proposed to be conducted.

 

(e)          The Common Shares. The Common Shares are duly authorized and, when
issued and paid for in accordance with this Agreement, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens (other than
restrictions on transfer set forth in this Agreement or imposed by applicable
securities laws) and will not be subject to preemptive or similar rights of
stockholders (other than those imposed by the Investor). When the Warrant Shares
are issued in accordance with the terms of the Warrants, such shares will be
duly authorized, validly issued, fully paid and nonassessable, free and clear of
all Liens (other than restrictions on transfer set forth in this Agreement or
imposed by applicable securities laws) and will not be subject to preemptive or
similar rights of stockholders (other than those imposed by the Investor).

 

(f)          Capitalization. The aggregate number of shares and type of all
authorized, issued and outstanding classes of capital stock, Options and other
securities of the Company (whether or not presently convertible into or
exercisable or exchangeable for shares of capital stock of the Company) is set
forth on Schedule 3.1(f)(i). Schedule 3.1(f)(ii) sets forth the aggregate number
of shares and type of all authorized, issued and outstanding classes of capital
stock, Options and other securities of the Company (whether or not presently
convertible into or exercisable or exchangeable for shares of capital stock of
the Company) after taking into account the consummation of the transactions
contemplated to occur on the Closing. All outstanding shares of capital stock
are duly authorized, validly issued, fully paid and nonassessable and have been
issued in compliance in all material respects with all applicable securities
laws. Except as set forth on Schedule 3.1(f), the Company does not have
outstanding any Options, script rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, nor has it entered into any
agreement giving any Person any right to subscribe for or acquire, any shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. Except for customary adjustments as a result of stock dividends,
stock splits, combinations of shares, reorganizations, recapitalizations,
reclassifications or other similar events, there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) and the issuance and sale of the
Common Shares will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Investor) and will not result in
a right of any holder of securities to adjust the exercise, conversion, exchange
or reset price under such securities.

 

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(g)          SEC Reports; Financial Statements. The Company (i) has filed all
reports required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the 12 months preceding the date hereof on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension, and
(ii) has filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof. Such reports required to be filed by the Company
under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
together with the exhibits thereto and the documents incorporated by reference
therein, being collectively referred to herein as the “SEC Reports” and,
together with this Agreement and the Schedules to this Agreement, the
“Disclosure Materials”. As of their respective dates (or, if amended or
superseded by a filing prior to the Closing Date, then on the date of such
filing), the SEC Reports filed by the Company complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the SEC promulgated thereunder, and none of the SEC Reports,
when filed (or, if amended or superseded by a filing prior to the date hereof,
then on the date of such filing) by the Company, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the SEC with respect thereto as in effect at the time of filing (or, if
amended or superseded by a filing prior to the Closing Date, then on the date of
such filing). Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified
in such financial statements, the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP or may be
condensed or summary statements, and fairly present in all material respects the
consolidated financial position of the Company and the Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
year-end audit adjustments. All material agreements to which the Company or any
Subsidiary is a party or to which the property or assets of the Company or any
Subsidiary are subject are included as part of or identified in the SEC Reports,
to the extent such agreements are required to be included or identified pursuant
to the rules and regulations of the SEC.

 

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(h)          Material Changes; Undisclosed Events, Liabilities or Developments;
Solvency. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in the SEC Reports or
as set forth in Schedule 3.1(h), (i) there has been no event, occurrence or
development that, individually or in the aggregate, has had or would reasonably
be expected to result in a Material Adverse Effect, (ii) neither the Company nor
any Subsidiary has incurred any material liabilities other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company’s financial statements pursuant to GAAP or required to be
disclosed in filings made with the SEC, (iii) the Company has not altered
materially its method of accounting or changed its auditors, (iv) the Company
has not declared or made any dividend or distribution of cash or other property
to its stockholders, in their capacities as such, or purchased, redeemed or made
any agreements to purchase or redeem any shares of its capital stock (other than
in connection with repurchases of unvested stock issued to employees of the
Company), and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company stock-based
plans. Neither the Company nor any Subsidiary has taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so.

 

(i)          Absence of Litigation. There is no action, suit, claim, or
Proceeding, or, to the Company’s knowledge, inquiry or investigation, before or
by any court, public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary that would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 

(j)          Compliance. Except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect, (i)  neither the
Company nor any Subsidiary is in default under or in violation of (and no event
has occurred that has not been waived that, with notice or lapse of time or
both, would result in a default by the Company or any Subsidiary under), nor has
the Company or any Subsidiary received written notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) neither the Company nor any Subsidiary is in
violation of any order of any court, arbitrator or governmental body, and
(iii) neither the Company nor any Subsidiary is or has been in violation of any
statute, rule or regulation of any governmental authority. The Company has not
taken, in violation of applicable Law, any action designed to or that would have
reasonably expected to cause or result in stabilization or manipulation of the
price of the Common Stock to facilitate the sale of the Common Shares.

 

(k)          Placement Agent’s Fees. The Company shall be responsible for the
payment of any placement agent’s fees, financial advisory fees, or brokers’
commission (other than for persons engaged by the Investor or its Affiliates)
relating to or arising out of the issuance of the Common Shares to the Investor
pursuant to this Agreement. The Company shall pay, and hold the Investor
harmless against, any liability, loss or expense (including, without limitation,
reasonable attorney’s fees and out-of-pocket expenses) arising in connection
with any such claim for fees arising out of the issuance of the Common Shares
pursuant to this Agreement.

 

-10-

 

 

(l)          Private Placement; Investment Company; U.S. Real Property Holding
Corporation. Neither the Company nor any of its Affiliates nor, any Person
acting on the Company’s behalf has, directly or indirectly, at any time within
the past six months, made any offer or sale of any security or solicitation of
any offer to buy any security under circumstances that would (i) eliminate the
availability of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale by the Company of the
Common Shares as contemplated hereby or (ii) cause the offering of the Common
Shares pursuant hereto to be integrated with prior offerings by the Company for
purposes of any applicable law, regulation or stockholder approval provisions,
including, without limitation, under the rules and regulations of any Trading
Market. Assuming the accuracy of the representations and warranties of the
Investor set forth in Section 3.2, no registration under the Securities Act is
required for the offer and sale of the Common Shares by the Company to the
Investor as contemplated hereby. The Company is not required to be registered
as, and is not an Affiliate of, an “investment company” within the meaning of
the Investment Company Act of 1940, as amended. The Company is not required to
be registered as a United States real property holding corporation within the
meaning of the Foreign Investment in Real Property Tax Act of 1980.

 

(m)          Registration Rights. The Company has not granted or agreed to grant
to any Person any rights (including “piggy-back” registration rights) to have
any securities of the Company registered with the SEC or any other governmental
authority that have not expired or been satisfied or waived.

 

(n)          Application of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, including under the Florida
Business Corporation Act, to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company’s charter
documents or the laws of its state of incorporation that is or could become
applicable to the Investor or its Affiliates as a result of the Investor and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the
Company’s issuance of the Common Shares to the Investor and the Investor’s
ownership thereof.

 

(o)          Disclosure. All written disclosure provided by the Company to the
Investor regarding the Company, its business and the transactions contemplated
hereby are true and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. To the Company’s knowledge, no event
or circumstance has occurred or information exists with respect to the Company
or any Subsidiary or their respective business, properties, operations or
financial condition, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company or their but which has not been
so publicly announced or disclosed.

 

(p)          Transactions With Affiliates and Employees. Except as set forth on
Schedule 3.1(p), none of the officers, directors or employees of the Company is
presently a party to any transaction with the Company that would be required to
be reported on Form 10-K by Item 13 thereof pursuant to Regulation S-K Item
404(a) (other than for ordinary course services as employees, officers or
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
officer, director or employee or, to the Company’s knowledge, any corporation,
partnership, trust or other entity in which any such officer, director, or
employee has a substantial interest or is an officer, director, trustee or
partner.

 

-11-

 

 

(q)          Patents and Trademarks. The Company and each Subsidiary owns, or
possesses adequate rights or licenses to use, all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights
(“Intellectual Property Rights”) necessary to conduct their respective
businesses as now conducted. The Company does not have any knowledge of any
infringement by the Company or any Subsidiary of Intellectual Property Rights of
others and there is no claim, action or proceeding being made or brought, or to
the knowledge of the Company, being threatened, against the Company or any
Subsidiary regarding its Intellectual Property Rights.

 

(r)          Regulatory Permits. The Company and each Subsidiary possesses all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as presently conducted and described in the SEC Reports
(“Material Permits”), except where the failure to possess such permits would
not, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect, and neither the Company nor any Subsidiary has received
any written notice of proceedings relating to the revocation or modification of
any Material Permit.

 

(s)          Employee Relations. Neither the Company nor any Subsidiary is a
party to any collective bargaining agreement or employs any member of a union.
The Company believes that its relations with its employees is as disclosed in
the SEC Reports. During the period covered by the SEC Reports, no executive
officer or key employee of the Company or any Subsidiary has notified the
Company or any Subsidiary that such officer or key employee intends to leave the
Company or a Subsidiary, as applicable, or otherwise terminate such officer’s or
key employee’s employment with the Company or a Subsidiary, as applicable. To
the knowledge of the Company, no executive officer or key employee of the
Company or any Subsidiary is in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer or key
employee does not subject the Company or any Subsidiary to any liability with
respect to any of the foregoing matters.

 

(t)          Labor Matters. The Company and each Subsidiary is in compliance in
all material respects with all federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.

 

-12-

 

 

(u)          Listing and Maintenance Requirements. The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to terminate the registration of the Common
Stock under the Exchange Act nor has the Company received any notification that
the SEC is contemplating terminating such registration. The Company is in
compliance with applicable OTCQB trading qualification requirements. There are
no proceedings pending or, to the Company’s knowledge, threatened against the
Company relating to the Common Stock’s continued qualification for trading on
the OTCQB market.

 

3.2         Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company as follows:

 

(a)          Organization; Authority. The Investor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by this Agreement and otherwise to
carry out its obligations hereunder. The purchase by the Investor of the Common
Shares and Warrants hereunder has been duly authorized by all necessary
corporate action on the part of the Investor. This Agreement has been duly
executed and delivered by the Investor and constitutes the valid and binding
obligation of the Investor, enforceable against it in accordance with its terms,
except (i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, and (ii) as limited by
laws relating to the availability of specific performance, injunctive relief or
other equitable remedies.

 

(b)          No Public Sale or Distribution. The Investor is acquiring the
Common Shares and Warrants for its own account and not with a view towards, or
for resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered under the Securities Act or under an exemption from
such registration and in compliance with applicable federal and state securities
laws, and the Investor does not have a present arrangement to effect any
distribution of the Common Shares or Warrants to or through any person or
entity; provided, however, that by making the representations herein, such
Investor does not agree to hold any of the Common Shares or Warrant Shares for
any minimum or other specific term and reserves the right to dispose of the
Common Shares or Warrant Shares at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act.

 

(c)          Investor Status. At the time the Investor was offered the Common
Shares and Warrants, it was, and at the date hereof it is an “accredited
investor” as defined in Rule 501(a) under the Securities Act or a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such
Investor is not a registered broker dealer registered under Section 15(a) of the
Exchange Act, or a member of the Financial Industry Regulatory Authority, Inc.
or an entity engaged in the business of being a broker dealer.

 

(d)          Experience of Such Investor. The Investor, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Common Shares and Warrants, and has
so evaluated the merits and risks of such investment. The Investor understands
that it must bear the economic risk of this investment in the Common Shares
indefinitely, and is able to bear such risk and is able to afford a complete
loss of such investment.

 

-13-

 

 

(e)          Access to Information. The Investor acknowledges that it has
reviewed the Disclosure Materials and has been afforded: (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Common Shares and Warrants and the merits and risks of investing
in the Common Shares and Warrants; (ii) access to information (other than
material non-public information) about the Company and its financial condition,
results of operations, business, properties, management and prospects sufficient
to enable it to evaluate its investment; and (iii) the opportunity to obtain
such additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of the Investor or its representatives
or counsel shall modify, amend or affect the Investor’s right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company’s
representations and warranties contained in the Transaction Documents.

 

(f)          No Conflicts. The execution, delivery and performance by the
Investor of this Agreement and the consummation by the Investor of the
transactions contemplated hereby will not (i) result in a violation of the
organizational documents of the Investor or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Investor is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws) applicable to the Investor, except in the case of clauses (ii) and (iii)
above, for such that are not material and do not otherwise affect the ability of
the Investor to consummate the transactions contemplated hereby.

 

(g)          Restricted Securities. The Investor understands that the Common
Shares are characterized as “restricted securities” under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act only in certain limited circumstances. The Investor further
understands that the certificates evidencing the Common Shares, Warrants and
Warrant Shares purchased by it will contain the following legend:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.

 

-14-

 

 

(h)          Prohibited Transactions. The Investor has not, directly or
indirectly, and no Person acting on behalf of or pursuant to any understanding
with the Investor has, engaged in any purchases or sales in the securities,
including derivatives, of the Company (including, without limitation, any Short
Sales (a “Transaction”) involving any of the Company’s securities) since the
time that the Investor was first contacted by the Company or any other Person
regarding an investment in the Company. The Investor covenants that neither it
nor any Person acting on its behalf or pursuant to any understanding with the
Investor will engage, directly or indirectly, in any Transactions in the
securities of the Company (including Short Sales) prior to the time the
transactions contemplated by this Agreement are publicly disclosed.

 

ARTICLE 4
OTHER AGREEMENTS OF THE PARTIES

 

4.1         Filing of Reports. Until the date that the Investor (or any
transferee that is an Affiliate of the Investor) ceases to own any Common Shares
or Warrant Shares, the Company covenants to use its commercially reasonable
efforts to (a) timely file (or obtain extensions in respect thereof and file
within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Securities Act and the Exchange
Act, (b) comply with the requirements of Rule 144(c) under the Securities Act
with respect to current public information about the Company, and (c) furnish to
the Investor promptly upon request therefor (i) a written statement by the
Company as to its compliance with the requirements of Rule 144(c) under the
Securities Act, and the reporting requirements under the Securities Act and the
Exchange Act, and (ii) such reports and documents of the Company as the Investor
may reasonably request to avail itself (or its Affiliates) of any similar rule
or regulation of the SEC allowing it (or its Affiliates) to sell any such
securities without registration.

 

4.2         Board Representation and Observer Rights.

 

(a)          For so long as the Investor or any of its Affiliates holds at least
fifty percent (50%) of the Common Shares purchased under this Agreement, upon
the request of the Investor at any time, and from time to time, the Company
shall use its reasonable best efforts to cause its board of directors (the
“Board”) to (i) increase the current Board by one member and elect to such newly
created vacancy an individual designated by the Investor (the “Investor
Director”) that is not a Competitor of, or employed or Affiliated with a
Competitor of the Company, and (ii) remove, upon direction from the Investor for
any reason or no reason, any person who is an Investor Director, and appoint
each successor to the Investor Director as the Investor designates; provided,
that, such successor is not a Competitor of, or employed or Affiliated with a
Competitor of the Company.

 

-15-

 

 

(b)          For so long as the Investor or any of its Affiliates holds at least
twenty-five percent (25%) of the Common Shares purchased under this Agreement,
and during any and all periods in which no Investor Director shall be serving on
the Board, upon the request of the Investor at any time, and from time to time,
the Company shall use its reasonable best efforts to permit one individual
designated by the Investor as a non-participating observer (the “Investor
Observer”) to be present at all in-person and telephonic meetings of the Board
and all committees thereof; provided, that, (y) the Investor Observer executes a
confidentiality agreement acceptable to the Company agreeing to hold in
confidence and trust all information that the Investor Observer receives or is
provided access to; and (z) the Company reserves the right to exclude the
Investor Observer from access to any material or meeting or portion thereof if
the Board determines in good faith after consulting with legal counsel that such
exclusion is reasonably necessary to preserve the attorney client privilege or
the Board determines in good faith that such exclusion is necessary to avoid a
conflict of interest between the Company and the Investor Observer. Except as
provided in the proviso to the immediately preceding sentence, the Company shall
provide the Investor Observer with the same notice with respect to meetings of
the Board and all committees thereof as provided to the members of the Board and
shall provide the Investor Observer any and all other information that is
provided to the members of the Board, whether in connection with any meeting of
the Board or committee thereof or otherwise.

 

(c)          The Investor Director and Investor Observer shall have access to
the Company’s books and records and to participate in discussions with the
Company’s management upon reasonable advance notice and during normal business
hours. The Company shall reimburse the Investor Director or Investor Observer,
as the case may be, for his or her reasonable out-of-pocket expenses (including
travel, lodging and meal expenses) incurred in connection with the attendance of
meetings of the Board or any committee thereof. Notwithstanding anything to the
contrary contained herein, for purposes of this Section 4.2, any individual who
is an employee of the Investor or any direct or indirect subsidiary thereof,
shall not be considered a Competitor of the Company or employed or Affiliated
with a Competitor of the Company.

 

4.3         Right Of First Offer. For so long as the Investor or any of its
Affiliates holds at least twenty-five percent (25%) of the Common Shares
purchased under this Agreement, if the Company proposes to issue any new Equity
Securities (other than Excluded Securities) (the “New Securities”) and the
Company is required to first offer such New Securities for purchase by any other
stockholder of the Company, the Company shall, subject to applicable securities
laws, also be required to first offer such New Securities, to the extent
applicable, to the Investor on no less favorable terms as such New Securities
are required to be offered to such other stockholder of the Company.

 

4.4         Listing of Shares. Promptly following the date hereof, the Company
shall take all necessary action to cause the Common Shares to be qualified for
trading on the OTCQB. If the Company applies to have its Common Stock or other
securities traded on any other principal stock exchange or market, it shall
include in such application the Common Shares and will take such other action as
is necessary to cause such Common Shares to be so listed.

 

4.5         Use of Proceeds. The Company will use the net proceeds from the sale
of the Common Shares and Warrants to meet its obligations under the License
Agreement and for other working capital and general corporate purposes.

 

-16-

 

 

4.6         Lock-Up. During the six (6) month period following the Closing, the
Investor shall not, without the consent of the Company, issue, sell, offer or
agree to sell, grant any option for the sale of, pledge, enter into any swap,
derivative transaction or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of any of the Common
Shares or Warrant Shares (whether any such transaction is to be settled by
delivery of Common Shares or Warrant Shares, other securities, cash or other
consideration) or otherwise dispose (or publicly announce the undersigned’s
intention to do any of the foregoing) of, directly or indirectly, any Common
Shares or Warrant Shares. Notwithstanding anything in this Agreement to the
contrary, subject to the requirements of Section 8.7 (including the obligation
to be bound by this Section 4.6), the Investor shall not be restricted from
transferring any of the Warrants, Common Shares or Warrant Shares to any
Affiliate of the Investor.

 

4.7         Public Statements. Except as required by applicable law or
regulation, neither party hereto shall issue any press release or other public
announcement concerning the existence of or terms of this Agreement or the
Transaction Documents without the prior written consent of the other Party,
which consent shall not be unreasonably withheld. Each Party agrees to provide
to the other Party a copy of any proposed press release or other public
announcement as soon as reasonably practicable under the circumstances prior to
the proposed date of dissemination thereof. The party proposing such press
release or other public announcement shall consider in good faith any changes to
such proposed press release or public announcement that are requested by the
other party.

 

4.8         Additional Financing. If at any time, and from time to time,
following the date on which the First Commercial Sale occurs and on or prior to
June 30, 2015, the Company proposes to issue and sell securities of the Company
with the principal purpose of raising capital (“Equity Financing”), to the
extent so requested by the Company, the Investor shall purchase up to $4,000,000
of shares of Common Stock, at a price per share equal to the volume weighted
average price of the Common Stock for the five trading day period immediately
preceding the date such Equity Financing is publicly announced; provided, that
(a) purchasers other than the Investor and its Affiliates purchase an aggregate
of no less than $4,000,000 of shares of Common Stock in the Equity Financing, at
the same per share purchase price paid by, and on other terms and conditions no
more favorable to such persons than the terms and conditions applicable to the
Investor in such Equity Financing, and (b) concurrently with the consummation of
the Equity Financing the Company issues and sells to the Investor five year
warrants (the “Additional Warrants” and together with the Initial Warrants, the
“Warrants”) to purchase the nearest number of whole shares of Common Stock equal
to 50% of the shares of Common Stock purchased by the Investor in the Equity
Financing at an exercise price per share equal to 135% of the price per share
paid in the Equity Financing. The Additional Warrants shall be in the form
attached hereto as Exhibit A. The Investor shall execute and deliver to the
Company all transaction documents reasonably requested by the Company and
entered into by other purchasers participating in such Equity Financing. The
Company shall not grant to any other purchaser in connection with such Equity
Financing any right not granted to the Investor.

 

ARTICLE 5
CONDITIONS

 

5.1         Conditions Precedent to the Obligations of the Investor. The
obligation of the Investor to purchase the Common Shares and Warrants at the
Closing is subject to the satisfaction or waiver by the Investor, at or before
the Closing, of each of the following conditions:

 

(a)          Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing as though made on and as
of such date (except for representations and warranties that speak as of a
specific date, which shall be true and correct as of such specific date);

 

-17-

 

 

(b)          Performance. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by it at or prior to the Closing;

 

(c)          Officer’s Certificate. The Investor shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer of the
Company, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in Section 5.1(a) and (b);

 

(d)          No Suspensions of Trading in Common Stock. Trading in the Common
Stock shall not have been suspended by the SEC or any other applicable authority
at any time since the date of execution of this Agreement;

 

(e)          Absence of Litigation. No action, suit or proceeding by or before
any court or any governmental body or authority, against the Company or
pertaining to the transactions contemplated by this Agreement or their
consummation, shall have been instituted on or before the Closing Date, which
action, suit or proceeding would, if determined adversely, have a Material
Adverse Effect; and

 

(f)          No Injunction. No preliminary or permanent injunction or other
order issued by a court of competent jurisdiction which prevents the
consummation of the transactions contemplated by any of the Transaction
Documents shall have been issued and remain in effect, provided, however, that
the parties shall use their respective commercially reasonable efforts to have
any such order or injunction lifted.

 

5.2         Conditions Precedent to the Obligations of the Company. The
obligation of the Company to sell the Common Shares and Warrants at the Closing
is subject to the satisfaction or waiver by the Company, at or before the
Closing, of each of the following conditions:

 

(a)          Representations and Warranties. The representations and warranties
of the Investor contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made on
and as of such date (except for representations and warranties that speak as of
a specific date, which shall be true and correct as of such specific date);

 

(b)          Performance. The Investor shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Investor at or prior to the Closing;

 

(c)          Officer’s Certificate. The Company shall have received a
certificate of an officer of the Investor, dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in Section 5.2(a), and
(b); and

 

-18-

 

 

(d)          No Injunction. No preliminary or permanent injunction or other
order issued by a court of competent jurisdiction which prevents the
consummation of the transactions contemplated hereby shall have been issued and
remain in effect, provided, however, that the parties shall use their respective
commercially reasonable efforts to have any such order or injunction lifted.

 

ARTICLE 6
REGISTRATION RIGHTS

 

6.1         Piggy-Back Registration Rights. If at any time the Company shall
determine to prepare and file with the SEC a registration statement relating to
an offering for its own account or the account of others under the Securities
Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with stock option
or other employee benefit plans, then the Company shall send to the Investor,
provided it owns Registrable Securities and is not then eligible to sell all of
its Registrable Securities under Rule 144 in a three-month period, written
notice of such determination and if, within ten (10) days after receipt of such
notice, the Investor shall so request in writing, the Company shall include in
such registration statement all or any part of such Registrable Securities the
Investor requests to be registered. The Investor shall comply with any request
to furnish the Company a completed selling stockholder questionnaire in
customary form and acknowledges that it shall not be entitled to the inclusion
of its Registrable Securities unless it has returned such questionnaire to the
Company. Notwithstanding the foregoing, in the event that, in connection with
any underwritten public offering, the managing underwriter(s) thereof shall
impose a limitation on the number of shares of Common Stock which may be
included in the Registration Statement because, in such underwriter(s)’
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registrable
Securities with respect to which the Investor has requested inclusion hereunder
as the underwriter shall permit; provided, however, that (i) the Company shall
not exclude any Registrable Securities unless the Company has first excluded all
outstanding securities, the holders of which are not contractually entitled to
inclusion of such securities in such Registration Statement or are not
contractually entitled to pro rata inclusion with the Registrable Securities and
(ii) after giving effect to the immediately preceding proviso, any such
exclusion of Registrable Securities shall be made pro rata among the Investor
and the holders of other securities having the contractual right to inclusion of
their securities in such Registration Statement, in proportion to the number of
Registrable Securities or other securities, as applicable, sought to be included
by the Investor and such other holders. Notwithstanding the foregoing sentence,
in the case of an underwritten offering by the Company for its own account, no
securities proposed to be included by the Company in such underwritten offering
shall be cutback and, after taking into account all of the securities proposed
to be included by the Company in such underwritten offering, the remaining
securities shall be allocated among the Registrable Securities and the other
securities requested to be included therein in accordance with the proviso of
the immediately preceding sentence. If an offering in connection with which the
Investor is entitled to registration under this Section 6.1 is an underwritten
offering, then the Investor shall, unless otherwise agreed by the Company, offer
and sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering and shall enter into an underwriting agreement in a form
and substance reasonably satisfactory to the Company and the underwriter or
underwriters.

 

-19-

 

 

6.2           Registration Expenses. The Company shall pay all fees and expenses
incurred by the Company incident to the performance of or compliance with
Article VI of this Agreement by the Company, including without limitation
(a) all registration and filing fees and expenses related to filings with the
SEC, any Trading Market and in connection with applicable state securities or
Blue Sky laws, (b) printing expenses (including without limitation expenses of
printing certificates for Registrable Securities), (c) messenger, telephone and
delivery expenses, (d) fees and disbursements of counsel for the Company, (e)
fees and expenses of all other Persons retained by the Company in connection
with the consummation of the transactions contemplated by this Agreement and
(f) all listing fees to be paid by the Company to the Trading Market. The
Company shall also pay the reasonable legal fees of the Investor incurred in
connection with its legal review of the Registration Statement in an amount not
to exceed $10,000 in the aggregate.

 

ARTICLE 7
INDEMNIFICATION

 

7.1           Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless the Investor, its
officers, directors, partners, members, agents and employees, each Person who
controls the Investor (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors, partners, members,
agents and employees of each such controlling Person, to the fullest extent
permitted by applicable law, from and against any and all Losses, as incurred,
arising out of or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement or any other
agreement, certificate, instrument or document delivered in connection with the
consummation of the transactions hereby (which, for the avoidance of doubt,
shall not include the License Agreement or the Supply Agreement or any
agreements, certificates, instruments or documents ancillary thereto), (ii) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement or any other agreement, certificate, instrument or document delivered
in connection with the consummation of the transactions contemplated hereby
(which, for the avoidance of doubt, shall not include the License Agreement or
the Supply Agreement or any agreements, certificates, instruments or documents
ancillary thereto), (iii) any cause of action, suit or claim brought or made
against such Indemnified Party (as defined in Section 7.3(a) below) by a third
party (including for these purposes a derivative action brought on behalf of the
Company), arising out of or resulting from (x) the execution, delivery,
performance or enforcement of this Agreement or any other agreement,
certificate, instrument or document delivered in connection with the
consummation of the transactions contemplated hereby (which, for the avoidance
of doubt, shall not include the License Agreement or the Supply Agreement or any
agreements, certificates, instruments or documents ancillary thereto), or
(y) the status of Indemnified Party as a holder of Common Stock (unless, and
only to the extent that, such action, suit or claim is based, including in part,
upon a breach of the Investor’s representations, warranties or covenants in this
Agreement or any other agreement, certificate, instrument or document delivered
in connection with the consummation of the transactions contemplated hereby
(which, for the avoidance of doubt, shall not include the License Agreement or
the Supply Agreement or any agreements, certificates, instruments or documents
ancillary thereto), or any conduct by the Investor that constitutes fraud, gross
negligence or willful misconduct), or (iv) any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectus or any form of Company prospectus or in any amendment or supplement
thereto or in any Company preliminary prospectus, or arising out of or relating
to any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (A) such untrue statements, alleged untrue
statements, omissions or alleged omissions are based solely upon information
regarding the Investor furnished in writing to the Company by the Investor for
use therein, or to the extent that such information relates to the Investor or
the Investor’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved by the Investor in writing expressly for use in
the Registration Statement, or (B) with respect to any prospectus, if the untrue
statement or omission of material fact contained in such prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
if such corrected prospectus was timely made available by the Company to the
Investor, and the Investor seeking indemnity hereunder was advised in writing
not to use the incorrect prospectus prior to the use giving rise to Losses.

 

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7.2         Indemnification by Investor. The Investor shall indemnify and hold
harmless the Company and its directors, officers, agents and employees to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising out of or
relating to any omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, but only to the extent that such untrue
statements or omissions are based solely upon information regarding the Investor
furnished to the Company by the Investor in writing expressly for use therein,
or to the extent that such information relates to the Investor or the Investor’s
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by the Investor expressly for use in the
Registration Statement, such Prospectus or such form of prospectus or in any
amendment or supplement thereto. In no event shall the liability of the Investor
hereunder be greater in amount than the dollar amount of the net proceeds
received by the Investor upon the sale of the Registrable Securities giving rise
to such indemnification obligation.

 

7.3         Conduct of Indemnification Proceedings.

 

(a)          If any Proceeding shall be brought or asserted against any Person
entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party
shall promptly notify the Person from whom indemnity is sought (the
“Indemnifying Party”) in writing, and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.

 

-21-

 

 

(b)          An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(iii) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and the reasonable fees and expenses of
separate counsel shall be at the expense of the Indemnifying Party). It shall be
understood, however, that the Indemnifying Party shall not, in connection with
any one such Proceeding (including separate Proceedings that have been or will
be consolidated before a single judge) be liable for the fees and expenses of
more than one separate firm of attorneys at any time for all Indemnified
Parties, which firm shall be appointed by a majority of the Indemnified Parties.
The Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.

 

(c)          All reasonable fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within 20 Trading Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).

 

-22-

 

 

(d)          If a claim for indemnification under Section 7.1 or 7.2 is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Article 7, any reasonable attorneys’ or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.

 

The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 7.3(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7.3(d), the Investor shall not be
required to contribute, in the aggregate, any amount in excess of the amount by
which the net proceeds actually received by such Investor from the sale of the
Registrable Securities subject to the Proceeding exceed the amount of any
damages that the Investor has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.

 

The indemnity and contribution agreements contained in this Article 7 are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

 

ARTICLE 8
GENERAL PROVISIONS

 

8.1           Termination. This Agreement may be terminated by the Company or
the Investor, by written notice to the other party, if the Closing has not been
consummated by November 29, 2013; provided that no such termination will affect
the right of any party to sue for any breach by the other party (or parties)
occurring prior to such termination.

 

8.2           Fees and Expenses. Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied
in connection with the sale and issuance of the Common Shares.

 

8.3           Entire Agreement. This Agreement, together with the Exhibits and
Schedules hereto, contains the entire understanding of the parties with respect
to the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Investor such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under this Agreement.

 

-23-

 

 

8.4           Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile or email at the
facsimile number or email address specified in this Section  prior to 6:30 p.m.
(New York City time) on a Trading Day, (b) the next Trading Day after the date
of transmission, if such notice or communication is delivered via facsimile or
email at the facsimile number or email address specified in this Section on a
day that is not a Trading Day or later than 6:30 p.m. (New York City time) on
any Trading Day, (c) the Trading Day following the date of deposit with a
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The addresses, facsimile
numbers and email addresses for such notices and communications are those set
forth on the signature pages hereof, or such other address or facsimile number
as may be designated in writing hereafter, in the same manner, by any such
Person.

 

8.5           Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and the Investor or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right.

 

8.6           Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

 

8.7           Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investor, which consent may be withheld
by the Investor in its sole discretion. The Investor may assign its rights under
this Agreement to any Person to whom the Investor assigns or transfers any
Common Shares, provided (i) the Investor agrees in writing with the transferee
or assignee to assign such rights, and a copy of such agreement is furnished to
the Company after such assignment, (ii) the Company is furnished with written
notice of (x) the name and address of such transferee or assignee and (y) the
Registrable Securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (iv)
such transferee agrees in writing to be bound, with respect to the transferred
Common Shares, by the provisions hereof that apply to the “Investor” and such
transferee is not a Competitor of, or Affiliated with a Competitor of, the
Company and (v) such transfer shall have been made in accordance with the
applicable requirements of this Agreement and with all laws applicable thereto.

 

-24-

 

 

8.8           No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Indemnified Party is an intended third
party beneficiary of Section 7.1 or Section 7.2, as applicable, and (in each
case) may enforce the provisions of such Section directly against the parties
with obligations thereunder.

 

8.9           Governing Law; Venue; Waiver of Jury Trial. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. THE COMPANY AND THE INVESTOR HEREBY IRREVOCABLY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF
NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY
THE COMPANY OR THE INVESTOR HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE
COMPANY OR THE INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, OR THAT 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 VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND THE INVESTOR HEREBY WAIVE ALL RIGHTS TO A
TRIAL BY JURY.

 

8.10         Survival. The representations and warranties, agreements and
covenants contained herein shall survive the Closing.

 

8.11         Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission or email attachment, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile
or email-attached signature page were an original thereof.

 

8.12         Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

 

-25-

 

 

8.13         Replacement of Certificates. If any certificate or instrument
evidencing any Common Shares is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and substitution for and
upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and the execution
by the holder thereof of a customary lost certificate affidavit of that fact and
an agreement to indemnify and hold harmless the Company for any losses in
connection therewith.

 

8.14         Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investor and the Company will be entitled to seek specific performance under
this Agreement. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agree to waive in any action for
specific performance of any such obligation (other than in connection with any
action for a temporary restraining order) the defense that a remedy at law would
be adequate.

 

[SIGNATURE PAGES TO FOLLOW]

 

-26-

 

 

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

 

  Alliqua, INC.         By: /s/ David Johnson     Name:  David Johnson    
Title: Chief Executive Officer

 

  Address for Notice:       2150 Cabot Boulevard West   Langhorne, PA  19047  
Attn: Chief Executive Officer   Facsimile No.:  (215) 702-8535   Telephone No.:
(215) 702-8535       With a copy (which shall not constitute notice) to:      
Lowenstein Sandler LLP   65 Livingston Avenue   Roseland, NJ  07068   Attn:
Michael Lerner, Esq.   Facsimile No.: (973) 597-6395   Telephone No.: (973)
597-6394

 

 

 

 

  Celgene CORPORATION         By: /s/ Perry Karsen   Name: Perry Karsen   Title:
Executive Vice President

 

  Address for Notice:       86 Morris Avenue   Summit, New Jersey 07901  
Attention: General Counsel   Facsimile: (908) 673-2771   Telephone: (908)
673-9757       with copies (which shall not constitute notice) to:

 

  Proskauer Rose LLP   Eleven Times Square   New York, New York 10036  
Attention: Robert A. Cantone, Esq.   Facsimile: (212) 969-2900   Telephone:
(212) 969-3235

  

 

 

 

Exhibit A

 

FORM OF WARRANT

 

NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.

 

ALLIQUA, INC.

 

WARRANT

 

Warrant No. [    ]   Dated: [                    ]

 

Alliqua, Inc., a Florida corporation (the “Company”), hereby certifies that, for
value received, Celgene Corporation, a Delaware corporation or its registered
assigns (the “Holder”), is entitled to purchase from the Company up to a total
of [                ]1 shares of common stock, $0.001 par value per share (the
“Common Stock”) of the Company (each such share, a “Warrant Share” and all such
shares, the “Warrant Shares”) at an exercise price equal to $[        ]2 per
share (as adjusted from time to time as provided in Section 8, the “Exercise
Price”), at any time and on or after [                    ] (the “Initial
Exercise Date”) and through and including the date that is five (5) years from
the Initial Exercise Date, or if such day is not a Business Day (as defined in
the Purchase Agreement, as defined below), on the next preceding Business Day
(the “Expiration Date”), and subject to the following terms and conditions. This
Warrant (this “Warrant”) is issued pursuant to that certain
[                    ], dated as of [                    ], by and among the
Company and the Holder (the “Purchase Agreement”).

 

1. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of record of this Warrant as
the absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent actual notice to
the contrary.

 

 

1 For the Initial Warrants, 50% of the Common Shares issued to the Investor at
the Closing. For the Additional Warrants, 50% of the shares issued to Investor
and its Affiliates in the Equity Financing.

 

2 For the Initial Warrants, $0.13 per share. For the Additional Warrants, 135%
of the price per share paid by Investor and its Affiliates in the Equity
Financing.

 

 

 

  

2. Registration of Transfers. The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Company at its address specified herein. Upon any such registration of transfer,
a new warrant to purchase Common Stock, in substantially the Form of this
Warrant (any such new warrant, a “New Warrant”), evidencing the portion of this
Warrant so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant by
the transferee thereof shall be deemed the acceptance by such transferee of all
of the rights and obligations of a holder of a Warrant.

 

3. Exercise and Duration of Warrant.

 

(a) This Warrant shall be exercisable by the registered Holder at any time and
from time to time on or after the Initial Exercise Date and prior to 5:30 p.m.,
New York City time on the Expiration Date at which time the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.

 

(b) The Holder may exercise this Warrant by delivering to the Company (i) an
exercise notice, in the Form attached hereto (the “Exercise Notice”),
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares as to which this Warrant is being exercised,
and the date such items are delivered to the Company (as determined in
accordance with the notice provisions hereof) is an “Exercise Date.” The Holder
shall not be required to deliver the original Warrant in order to effect an
exercise hereunder; provided, however, that in the event that this Warrant is
exercised in full or for the remaining unexercised portion hereof, the Holder
shall deliver this Warrant to the Company for cancellation within a reasonable
time after such exercise. In the event of a partial exercise of this Warrant,
execution and delivery of the Exercise Notice shall have the same effect as
cancellation of the original Warrant and issuance of a New Warrant evidencing
the right to purchase the remaining number of Warrant Shares.

 

4. Delivery of Warrant Shares.

 

(a) Upon exercise of this Warrant, the Company shall promptly following the
Exercise Date (but in no event later than three Trading Days after the Exercise
Date) credit such aggregate number of Warrant Shares to which the Holder is
entitled to receive pursuant to such exercise of this Warrant to the Holder’s or
its designee’s balance account with The Depository Trust Company (“DTC”) through
its Deposit Withdrawal Agent Commission system, or if the Company’s transfer
agent for the Common Stock (the “Transfer Agent”) is not participating in the
Fast Automated Securities Transfer Program or if the certificates are required
to bear a legend regarding restriction on transferability, issue and dispatch by
overnight courier to the address as specified in the Exercise Notice, a
certificate, registered in the Company’s share register in the name of the
Holder or its designee, for the number of Warrant Shares to which the Holder is
entitled to receive pursuant to such exercise of this Warrant. The Holder, or
any Person so designated by the Holder to receive Warrant Shares, shall be
deemed to have become the holder of record of such Warrant Shares as of the
Exercise Date, irrespective of the date such Warrant Shares are credited to the
Holder’s DTC account or the date of delivery of the certificates evidencing such
Warrant Shares, as the case may be. For purposes of this Warrant, “Person” shall
mean an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind and “Trading Day” means a day on which the Common Stock is traded on
the principal securities exchange or securities market on which the Common Stock
is then traded.

 

 

 

 

(b) This Warrant is exercisable, either in its entirety or, from time to time,
for a portion of the number of Warrant Shares. Upon surrender of this Warrant
following one or more partial exercises, the Company shall issue or cause to be
issued, at its expense, a New Warrant evidencing the right to purchase the
remaining number of Warrant Shares.

 

5. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares
of Common Stock upon exercise of this Warrant shall be made without charge to
the Holder for any issue or transfer tax, withholding tax, transfer agent fee or
other incidental tax or expense in respect of the issuance of such certificates,
all of which taxes and expenses shall be paid by the Company; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any certificates for
Warrant Shares or Warrants in a name other than that of the Holder. The Holder
shall be responsible for all other tax liability that may arise as a result of
holding or transferring this Warrant or receiving Warrant Shares upon exercise
hereof.

 

6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable bond or indemnity, if requested. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Company may
prescribe.

 

7. Reservation of Warrant Shares. The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of persons other than the Holder (after giving
effect to the adjustments of Section 8, if any). The Company covenants that all
Warrant Shares so issuable and deliverable shall, upon issuance and the payment
of the applicable Exercise Price in accordance with the terms hereof, be duly
and validly authorized, issued and fully paid and nonassessable. The Company
will take all such action as may be necessary to assure that such shares of
Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any securities exchange
or automated quotation system upon which the Common Stock may be listed.

 

 

 

 

8. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable
upon exercise of this Warrant are subject to adjustment from time to time as set
forth in this Section 8.

 

(a) Stock Dividends, Subdivisions or Combinations. If the Company, at any time
while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock
or otherwise makes a distribution on any class of capital stock that is payable
in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, or (iii) combines outstanding shares of Common
Stock into a smaller number of shares, then in each such case the Exercise Price
shall be adjusted by multiplying the Exercise Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding immediately
before such event and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event. Simultaneously with any
adjustment to the Exercise Price pursuant to this subsection (a), the number of
Warrant Shares that may be purchased upon exercise of this Warrant shall be
adjusted proportionately, so that after such adjustment the aggregate Exercise
Price payable hereunder for the increased or decreased number of Warrant Shares,
as the case may be, shall be the same as the aggregate Exercise Price in effect
immediately prior to such adjustment to the Exercise Price and the number of
Warrant Shares.

 

(b) Adjustments Upon Reorganization, Reclassification, Consolidation or Merger.
In the event of any (i) capital reorganization of the Company,
(ii) reclassification of the Common Stock of the Company (other than as a result
of a stock dividend or subdivision, split-up or combination of shares),
(iii) consolidation or merger of the Company with or into another Person,
(iv) sale of all or substantially all of the Company’s assets to another Person
or (v) other similar transaction (other than a transaction covered by
Section 8(a)), in each case which entitles the holders of Common Stock to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock, this Warrant shall,
immediately after such reorganization, reclassification, consolidation, merger,
sale or similar transaction, remain outstanding and shall thereafter be
exercisable for the kind and number of shares of stock or other securities or
assets of the Company or of the successor Person resulting from such transaction
to which the Holder would have been entitled upon such reorganization,
reclassification, consolidation, merger, sale or similar transaction if the
Holder had exercised this Warrant in full immediately prior to the time of such
transaction and acquired the applicable number of Warrant Shares then issuable
hereunder as a result of such exercise; and, in such case, appropriate
adjustments (in form and substance reasonably satisfactory to the Holder) shall
be made with respect to the Holder’s rights hereunder to insure that the
provisions of this Section 8 shall thereafter be applicable, as nearly as
possible, to this Warrant in relation to any shares of stock, securities or
assets thereafter acquirable upon exercise of this Warrant. The provisions of
this Section 8(c) shall similarly apply to all successive reorganizations,
reclassifications, consolidations, mergers, sales or similar transactions. The
Company shall not effect any such reorganization, reclassification,
consolidation, merger, sale or similar transaction unless, prior to the
consummation thereof, the successor Person (if other than Company) resulting
therefrom, shall assume, by written instrument substantially similar in Form and
substance to this Warrant and satisfactory to the Holder, the obligation to
deliver to the Holder such shares of stock, securities or assets which, in
accordance with the foregoing provisions, the Holder shall be entitled to
receive upon exercise of this Warrant. Notwithstanding anything to the contrary
contained herein, with respect to any corporate event or transaction
contemplated by this Section 8(b), the Holder shall have the right to elect
prior to the consummation of such event or transaction, to exercise this Warrant
in accordance with Section 3(b) instead of giving effect to the provisions of
this Section 8(c) with respect to this Warrant.

 

 

 

 

(c) [Reserved]

 

(d) Calculations. All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as applicable.

 

(e) Certificate as to Adjustment. As promptly as reasonably practicable
following any adjustment of the Exercise Price, but in no event later than five
(5) Business Days thereafter, the Company shall furnish to the Holder a
certificate of an executive officer of the Company setting forth in reasonable
detail such adjustment and the facts upon which it is based and certifying the
calculation thereof. No later than five (5) Business Days following the receipt
by Company of a written request by the Holder, the Company shall furnish the
Holder a certificate of an executive officer certifying the Exercise Price then
in effect and the number of Warrant Shares or the amount, if any, of other
shares of stock, securities or assets then issuable upon exercise of the
Warrant.

 

(f) Notice of Corporate Events. If (i) the Company shall declare a dividend (or
any other distribution in whatever form) on the Common Stock, (ii) the Company
shall declare a special nonrecurring cash dividend on or a redemption of the
Common Stock applicable to all holders thereof, (iii) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class or of any
rights, (iv) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock, any consolidation
or merger to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property,
or (v) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in each case, the
Company shall cause to be mailed to the Holder at its last address as it shall
appear upon the Warrant Register of the Company, at least 20 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. The Holder shall remain entitled to exercise this Warrant during
the period commencing on the date of such notice to the effective date of the
event triggering such notice except as may otherwise be expressly set forth
herein.

 

 

 

 

9. Purchase Rights. In addition to any adjustments pursuant to Section 8 above,
if at any time prior to the Expiration Date the Company grants, issues or sells
(y) any securities directly or indirectly exchangeable for or convertible into
Common Stock or (z) any rights to purchase stock, warrants, securities or other
property, in the case of clauses (y) and (z), pro rata to all of the record
holders of any class of shares of Common Stock (the “Purchase Rights”), then the
Holder will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which the Holder could have acquired if
the Holder had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights.

 

10. Fractional Shares. The Company shall not be required to issue or cause to be
issued fractional Warrant Shares on the exercise of this Warrant. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable upon exercise of this Warrant, the number of Warrant Shares to be
issued will be rounded up to the nearest whole share.

 

11. Notices. Any and all notices or other communications or deliveries hereunder
(including without limitation any Exercise Notice) shall be in writing and shall
be deemed given and effective on the earliest of (a) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in the Purchase Agreement prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in the Purchase Agreement on a day that is not a Trading Day or
later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading
Day following the date of mailing, if sent by nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices or communications shall be as
set forth in the Purchase Agreement.

 

12. Warrant Agent. The Company shall serve as warrant agent under this Warrant.
Upon 30 days’ notice to the Holder, the Company may appoint a new warrant agent.
Any corporation into which the Company or any new warrant agent may be merged or
any corporation resulting from any consolidation to which the Company or any new
warrant agent shall be a party or any corporation to which the Company or any
new warrant agent transfers substantially all of its corporate trust or
stockholder services business shall be a successor warrant agent under this
Warrant without any further act. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed (by first class
mail, postage prepaid) to the Holder at the Holder’s last address as shown on
the Warrant Register.

 

13. Miscellaneous

 

(a) Subject to compliance with applicable securities laws and Section 4.6 of the
Purchase Agreement, this Warrant may be assigned by the Holder. This Warrant
shall be binding on and inure to the benefit of the parties hereto and their
respective successors and assigns. Subject to the preceding sentence, nothing in
this Warrant shall be construed to give to any Person other than the Company and
the Holder any legal or equitable right, remedy or cause of action under this
Warrant. This Warrant may be amended only in writing signed by the Company and
the Holder and their successors and assigns.

 

 

 

 

(b) The Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder against impairment. Without limiting the generality of
the foregoing, the Company (i) will not increase the par value of any Warrant
Shares above the amount payable therefor on such exercise, (ii) will take all
such action as may be reasonably necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares on the exercise of this Warrant, and (iii) will not close its stockholder
books or records in any manner which interferes with the timely exercise of this
Warrant.

 

(c) ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND
INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EACH OF THE COMPANY AND,
BY ACCEPTING THIS WARRANT, THE HOLDER HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF
NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR
IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF THIS WARRANT), AND HEREBY
IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING,
ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH
COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH OF THE COMPANY
AND, BY ACCEPTING THIS WARRANT, THE HOLDER HEREBY IRREVOCABLY WAIVES PERSONAL
SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING
CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS
IN ANY MANNER PERMITTED BY LAW. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL
BY JURY.

 

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

 

(e) In case any one or more of the provisions of this Warrant shall be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

 

 

 

 

(f) The remedies provided in this Warrant shall be cumulative and in addition to
all other remedies available under this Warrant, at law or in equity (including
a decree of specific performance and/or other injunctive relief), and nothing
herein shall limit the right of the Holder to pursue actual damages for any
failure by the Company to comply with the terms of this Warrant. The Company
acknowledges that a breach by it of its obligations hereunder may cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the holder of this Warrant shall be entitled, in
addition to all other available remedies, to seek an injunction restraining any
breach.

 

(g) No provision hereof, in the absence of any affirmative action by the Holder
to exercise this Warrant to purchase Warrant Shares, and no enumeration herein
of the rights or privileges of the Holder, shall give rise to any liability of
the Holder for the purchase price of any Warrant Shares or as a stockholder of
the Company, whether such liability is asserted by the Company or by creditors
of the Company. Prior to the exercise of this Warrant, the Holder shall not have
or exercise any rights as a stockholder of the Company by virtue of its
ownership of this Warrant.

 

SIGNATURE PAGE FOLLOWS

 

 

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its authorized officer as of the date first indicated above.

 

ALLIQUA, INC.     By:  

 

    Name:     Title:

 

 

 

 

FORM OF EXERCISE NOTICE

 

(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)

 

To Alliqua, Inc.:

 

The undersigned is the Holder of Warrant No.      (the “Warrant”) issued by
Alliqua, Inc., a Florida corporation (the “Company”). Capitalized terms used
herein and not otherwise defined have the respective meanings set forth in the
Warrant.

 

1. The Warrant is currently exercisable to purchase a total of                 
Warrant Shares.

 

2. The undersigned Holder hereby exercises its right to purchase
                 Warrant Shares pursuant to the Warrant.

 

3. The holder shall pay the sum of $         to the Company in accordance with
the terms of the Warrant.

 

4. Pursuant to this exercise, the Company shall deliver to the holder
                 Warrant Shares in accordance with the terms of the Warrant.

 

5. Following this exercise, the Warrant shall be exercisable to purchase a total
of                  Warrant Shares.

                  Dated:  

 

      Name of Holder:                       (Print)  

 

                      By:  

 

            Name:                 Title:    

        ACKNOWLEDGED AND AGREED TO this      day of                     , 20    
  ALLIQUA, INC.         By:  

 

      Name:       Title:  

 

 

 

 

FORM OF ASSIGNMENT

 

[To be completed and signed only upon transfer of Warrant]

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
                                         the right represented by the within
Warrant to purchase                  shares of Common Stock of Alliqua, Inc. to
which the within Warrant relates and appoints                             
attorney to transfer said right on the books of Alliqua, Inc. with full power of
substitution in the premises. 

      Dated:   ,

 

 

 

 

Address of Transferee  

 

 

 

 

In the presence of:

 

 

 

 

Exhibit B

 

OPINION OF COMPANY COUNSEL

 

1.     The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Florida.

 

2.     The authorized capital stock of the Company consists of [_______] shares
of Common Stock, $.001 par value, and [_________] shares of Preferred Stock, par
value $.[__] per share.

 

3.     The Company has all necessary corporate power and authority to execute
and deliver the Agreement, to perform its obligations thereunder and to
consummate the transactions contemplated thereby.

 

4.     The Company has all necessary power and authority to issue and deliver
the Common Shares; the Common Shares have been duly authorized, and, when duly
issued and delivered to the Investor, will be duly and validly issued, fully
paid and nonassessable and will be issued in compliance with federal and state
securities laws.

 

5.     Assuming the accuracy of the representations and warranties of the
Investor contained in the Agreement and the compliance of such parties with the
agreements set forth herein and therein, it is not necessary, in connection with
the issuance and sale of the Common Shares, in the manner contemplated by the
Agreement, to register the Securities under the Securities Act.