Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of January 9,
2020, between SELLAS Life Sciences Group, Inc., a Delaware corporation (the
“Company”), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a “Purchaser” and collectively the
“Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to (i) an effective registration statement under the Securities Act of
1933, as amended (the “Securities Act”) as to the Shares and the Pre-Funded
Warrants, and (ii) an exemption from the registration requirements of Section 5
of the Securities Act contained in Section 4(a)(2) thereof and/or Regulation D
thereunder as to the Warrants, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described in this
Agreement.

 

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

 

ARTICLE I.
DEFINITIONS

 

1.1            Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:

 

“Acquiring Person” shall have the meaning ascribed to such term in Section 4.5.

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person as such terms are used in and construed under Rule 405 under the
Securities Act.

 

“Board of  Directors” means the board of directors of the Company.

 

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

 

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

 

“Closing Date” means the Trading Day on which all of the Transaction Documents
have been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the Securities, in each
case, have been satisfied or waived, but in no event later than the second (2nd)
Trading Day following the date hereof.

 

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“Closing Statement” means the Closing Statement in the form on Annex  A attached
hereto.

 

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

 

“Common Stock” means the common stock of the Company, par value $0.0001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

 

“Company Counsel” means Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
with offices located at 666 Third Avenue, New York, New York 10017.

 

“Disclosure Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.

 

“Disclosure Time” means, (i) if this Agreement is signed on a day that is not a
Trading Day or after 9:00 a.m. (New York City time) and before midnight (New
York City time) on any Trading Day, 9:01 a.m. (New York City time) on the
Trading Day immediately following the date hereof, unless otherwise instructed
as to an earlier time by the Placement Agent, and (ii) if this Agreement is
signed between midnight (New York City time) and 9:00 a.m. (New York City time)
on any Trading Day, no later than 9:01 a.m. (New York City time) on the date
hereof, unless otherwise instructed as to an earlier time by the Placement
Agent.

 

“EGS” means Ellenoff Grossman & Schole LLP, with offices located at 1345 Avenue
of the Americas, New York, New York 10105-0302.

 

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

 

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to
employees, officers or directors of the Company pursuant to any stock or option
plan duly adopted for such purpose, by a majority of the non-employee members of
the Board of Directors or a majority of the members of a committee of
non-employee directors established for such purpose for services rendered to the
Company, or pursuant to inducement grants, (b) securities upon the exercise or
exchange of or conversion of any Securities issued hereunder and/or other
securities exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise price, exchange price
or conversion price of such securities (other than in connection with stock
splits or combinations) or to extend the term of such securities, (c) securities
issued pursuant to acquisitions or strategic transactions approved by a majority
of the disinterested directors of the Company, provided that such securities are
issued as “restricted securities” (as defined in Rule 144) and carry no
registration rights that require or permit the filing of any registration
statement in connection therewith during the prohibition period in Section
4.12(a) herein, and provided that any such issuance shall only be to a Person
(or to the equityholders of a Person) which is, itself or through its
subsidiaries, an operating company or an owner of an asset in a business
synergistic with the business of the Company and shall provide to the Company
additional benefits in addition to the investment of funds, but shall not
include a transaction in which the Company is issuing securities primarily for
the purpose of raising capital or to an entity whose primary business is
investing in securities, (d) up to an aggregate of $250,000 of restricted
securities (and such securities shall not carry any registration rights) issued
to third party vendors in any three (3)-month period as payment for goods or
services, and (e) securities issued or issuable to the Purchasers and their
assigns pursuant to this Agreement, the Shares, the Pre-Funded Warrants, or the
Warrants and other Transaction Documents or upon exercise, conversion or
exchange of any such securities.

 

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“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

 

“FDA” shall have the meaning ascribed to such term in Section 3.1(k).

 

“FDCA” shall have the meaning ascribed to such term in Section 3.1(gg).

 

“GAAP” shall have the meaning ascribed to such term in Section 3.1(c).

 

“Indebtedness” shall have the meaning ascribed to such term in Section 3.1(aa).

 

“Intellectual Property” shall have the meaning ascribed to such term in Section
3.1(aa).

 

“Legend Removal Date” shall have the meaning ascribed to such term in Section
4.1(c).

 

“Lien” shall have the meaning assigned to such term in Section 3.1(h).

 

“Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(g).

 

“Per Share Purchase Price” equals $3.9825, subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Pharmaceutical Product” shall have the meaning ascribed to such term in Section
3.1(hh).

 

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“Placement Agent” means Maxim Group LLC.

 

“Pre-Funded Warrants” means, collectively, the Common Stock purchase warrants
delivered to the Purchasers at the Closing in accordance with Section 2.2(a)
hereof, which Pre-Funded Warrants shall be exercisable immediately after their
issuance, in the form of Exhibit B attached hereto.

 

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

 

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

 

“Prospectus” means the base prospectus filed for the Registration Statement.

 

“Prospectus Supplement” means the supplement to the Prospectus complying with
Rule 424(b) of the Securities Act that is filed with the Commission and
delivered by the Company to each Purchaser at the Closing.

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.8.

 

“Registration Statement” means the effective registration statement with
Commission File No. 333-233869 which registers the sale of the Shares to the
Purchasers.

 

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

 

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

 

“Securities” means the Shares, the Pre-Funded Warrants, the Pre-Funded Warrant
Shares, the Warrants, and the Warrant Shares.

 

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

 

“Shares” means the shares of Common Stock issued or issuable to each Purchaser
pursuant to this Agreement.

 

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

 

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“Subscription Amount” means, as to each Purchaser, the aggregate amount to be
paid for Shares, Pre-Funded Warrants, and Warrants purchased hereunder as
specified below such Purchaser’s name on the signature page of this Agreement
and next to the heading “Subscription Amount,” in United States dollars and in
immediately available funds.

 

“Subsidiary” means any subsidiary of the Company as set forth on Schedule
3.1(a), and shall, where applicable, also include any direct or indirect
subsidiary of the Company formed or acquired after the date hereof.

 

“Trading Day” means a day on which the principal Trading Market is open for
trading.

 

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange, OTCQB or OTCQX (or any successors to
any of the foregoing).

 

“Transaction Documents” means this Agreement, the Pre-Funded Warrants, the
Warrants, all exhibits and schedules thereto and hereto and any other documents
or agreements executed in connection with the transactions contemplated
hereunder.

 

“Transfer Agent” means Computershare Trust Company, N.A., the current transfer
agent of the Company, with a mailing address of 250 Royall Street, Canton, MA
02021 and a facsimile number of [_______________], and any successor transfer
agent of the Company.

 

“Variable Rate Transaction” shall have the meaning ascribed to such term in
Section 4.12(b).

 

“VWAP” means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on the Trading Market on which the
Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City
time)), (b)  if OTCQB or OTCQX is not a Trading Market, the volume weighted
average price of the Common Stock for such date (or the nearest preceding date)
on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or
quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then
reported in The Pink Open Market (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price per share of
the Common Stock so reported, or (d) in all other cases, the fair market value
of a share of Common Stock as determined by an independent appraiser selected in
good faith by the Purchasers of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.

 

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“Warrants” means, collectively, the Common Stock purchase warrants delivered to
the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which
Warrants shall be exercisable immediately after their issuance and have a term
of exercise equal to five and one half (5 ½) years from the exercise date of the
Warrant, in the form of Exhibit A attached hereto.

 

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

 

ARTICLE II.
PURCHASE AND SALE

 

2.1              Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company agrees to sell,
and the Purchasers, severally and not jointly, agree to purchase, up to an
aggregate of $6,522,538.50 of Shares, Pre-Funded Warrants, and Warrants. Each
Purchaser’s Subscription Amount as set forth on the signature page hereto
executed by such Purchaser shall be made available for “Delivery Versus Payment”
settlement with the Company or its designee. The Company shall deliver to each
Purchaser its respective Shares, Pre-Funded Warrant (if applicable), and a
Warrant as determined pursuant to Section 2.2(a), and the Company and each
Purchaser shall deliver the other items set forth in Section 2.2 deliverable at
the Closing. Upon satisfaction of the covenants and conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the offices of EGS or such
other location as the parties shall mutually agree. Unless otherwise directed by
the Placement Agent, settlement of the Shares shall occur via “Delivery Versus
Payment” (“DVP”) (i.e., on the Closing Date, the Company shall issue the Shares
registered in the Purchasers’ names and addresses and released by the Transfer
Agent directly to the account(s) at the Placement Agent identified by each
Purchaser; upon receipt of such Shares, the Placement Agent shall promptly
electronically deliver such Shares to the applicable Purchaser, and payment
therefor shall be made by the Placement Agent (or its clearing firm) by wire
transfer to the Company).

 

2.2              Deliveries.

 

(a)           On or prior to the Closing Date, the Company shall deliver or
cause to be delivered to each Purchaser the following:

 

(i)               this Agreement duly executed by the Company;

 

(ii)              a legal opinion of Company Counsel, substantially in the form
of Exhibit C attached hereto;

 

(iii)             a negative assurance letter from Company Counsel, in form and
substance reasonably acceptable to Placement Agent and Purchasers;

 

(iv)             a legal opinion of Saliwanchik, Lloyd & Eisenschenk,
intellectual property legal counsel to the Company, substantially in the form of
Exhibit D attached hereto;

 

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(v)             a legal opinion of Conyers Dill and Pearman Limited, special
counsel for the Company on issues of Bermuda law, substantially in the form of
Exhibit E attached hereto;

 

(vi)             a secretary’s certificate, in form and substance reasonably
acceptable to Placement Agent and Purchasers;

 

(vii)           an officer’s certificate, in form and substance reasonably
acceptable to Placement Agent and Purchasers;

 

(viii)           a VP financial certificate, in form and substance reasonably
acceptable to Placement Agent and Purchasers;

 

(ix)             a regulatory certificate from Barbara Wood, Executive Vice
President, General Counsel and Corporate Secretary of the Company, in form and
substance reasonably acceptable to Placement Agent and Purchasers;

 

(x)               a customary comfort letter from the Auditor (as defined
herein) addressed to Placement Agent and the Purchasers, in form and substance
satisfactory to Placement Agent and Purchasers, confirming that they are
independent public accountants within the meaning of the Securities Act and are
in compliance with the applicable requirements relating to the qualifications of
accountants under Rule 2-01 of Regulation S-X of the Commission, and stating the
conclusions and findings of said firm with respect to the financial information
and other matters;

 

(xi)            good standing certificates from the Company and each Subsidiary
from each respective state of incorporation or organization, and any state in
which the Company or any Subsidiary is authorized to do business;

 

(xii)            subject to the last sentence of Section 2.1, the Company shall
have provided each Purchaser with the Company’s wire instructions, on Company
letterhead and executed by the Chief Executive Officer or Chief Financial
Officer;

 

(xiii)           subject to the last sentence of Section 2.1, a copy of the
irrevocable instructions to the Transfer Agent instructing the Transfer Agent to
deliver on an expedited basis via The Depository Trust Company Deposit or
Withdrawal at Custodian system (“DWAC”) Shares equal to such Purchaser’s
Subscription Amount divided by the Per Share Purchase Price, registered in the
name of such Purchaser;

 

(xiv)          if applicable, a Pre-Funded Warrant registered in the name of
such Purchaser to purchase up to a number of shares of Common Stock set forth in
the Pre-Funded Warrants, with an exercise price equal to $0.01, subject to
adjustment therein;

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(xv)            a Warrant registered in the name of such Purchaser to purchase
up to a number of shares of Common Stock equal to 50% of such Purchaser’s
Shares, with an exercise price equal to $3.93, subject to adjustment therein;
and

 

(xvi)           the Prospectus and Prospectus Supplement (which may be delivered
in accordance with Rule 172 under the Securities Act).

 

(b)           On or prior to the Closing Date, each Purchaser shall deliver or
cause to be delivered to the Company, the following:

 

(i)               this Agreement duly executed by such Purchaser; and

 

(ii)              such Purchaser’s Subscription Amount, which shall be made
available for “Delivery Versus Payment” settlement with the Company or its
designee.

 

2.3              Closing Conditions.

 

(a)            The obligations of the Company hereunder in connection with the
Closing are subject to the following conditions being met:

 

(i)               the accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or Material Adverse
Effect, in all respects) on the Closing Date of the representations and
warranties of the Purchasers contained herein (unless as of a specific date
therein in which case they shall be accurate as of such date);

 

(ii)              all obligations, covenants and agreements of each Purchaser
required to be performed at or prior to the Closing Date shall have been
performed; and

 

(iii)             the delivery by each Purchaser of the items set forth in
Section 2.2(b) of this Agreement.

 

(b)           The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions being met:

 

(i)               the accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or Material Adverse
Effect, in all respects) when made and on the Closing Date of the
representations and warranties of the Company contained herein (unless as of a
specific date therein in which case they shall be accurate as of such date);

 

(ii)              all obligations, covenants and agreements of the Company
required to be performed at or prior to the Closing Date shall have been
performed;

 

(iii)             the delivery by the Company of the items set forth in Section
2.2(a) of this Agreement;

 

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(iv)             there shall have been no Material Adverse Effect with respect
to the Company since the date hereof; and

 

(v)               from the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission or the Company’s
principal Trading Market, and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg L.P. shall not have been suspended
or limited, or minimum prices shall not have been established on securities
whose trades are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States or New York
State authorities nor shall there have occurred any material outbreak or
escalation of hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment of such Purchaser, makes
it impracticable or inadvisable to purchase the Securities at the Closing.

 

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

 

3.1              Representations and Warranties of the Company. Except as set
forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a
part hereof and shall qualify any representation or otherwise made herein to the
extent of the disclosure contained in the corresponding section of the
Disclosure Schedules, the Company hereby makes the following representations and
warranties to each Purchaser:

 

(a)               The Registration Statement was initially declared effective by
the Commission on October 11, 2019, and is currently effective under the
Securities Act, and the rules and regulations promulgated; since the date of
effectiveness of the Registration Statement (as defined below), no additional or
supplemental information was requested by the Commission. No stop order of the
Commission preventing or suspending the use of the Base Prospectus (as defined
below), the Prospectus Supplement or the Prospectus, or the effectiveness of the
Registration Statement, has been issued, and no proceedings for such purpose
have been instituted or, to the Company's knowledge, are contemplated by the
Commission. Except where the context otherwise requires, "Base Prospectus," as
used herein, means the base prospectus filed as part of the Registration
Statement, together with any amendments or supplements thereto as of the date of
this Agreement. Any reference herein to the Registration Statement, the Base
Prospectus, the Prospectus Supplement or the Prospectus shall be deemed to refer
to and include the documents, if any, incorporated by reference, or deemed to be
incorporated by reference, therein pursuant to Item 12 of Form S-3 (the
"Incorporated Documents"), including, unless the context otherwise requires, the
documents, if any, filed as exhibits to such Incorporated Documents. For
purposes of this Agreement, all references to the Registration Statement, the
Rule 462(b) Registration Statement, the Base Prospectus, the Prospectus or any
amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR"). All references in this Agreement to
financial statements and schedules and other information which is "described,"
"contained," "included" or "stated" in the Registration Statement, the Base
Prospectus or the Prospectus (or other references of like import) shall be
deemed to mean and include all such financial statements and schedules and other
information which is incorporated by reference in or otherwise deemed by the
Rules and Regulations to be a part of or included in the Registration Statement,
the Base Prospectus or the Prospectus as the case may be. Any reference herein
to the terms "amend," "amendment" or "supplement" with respect to the
Registration Statement, any Base Prospectus, the Prospectus or the Prospectus
Supplement shall be deemed to refer to and include the filing of any document
under the Exchange Act on or after the initial effective date of the
Registration Statement, or the date of such Base Prospectus, the Prospectus or
the Prospectus Supplement, as the case may be, and incorporated or deemed to be
incorporated therein by reference pursuant to Item 12 of Form S-3.

 

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(b)               Prior to the execution of this Agreement, the Company has not,
directly or indirectly, offered or sold any Shares by means of any "prospectus"
(within the meaning of the Securities Act) or used any "prospectus" (within the
meaning of the Securities Act) in connection with the Offering, in each case
other than the Base Prospectus; the conditions set forth in one or more of
subclauses (i) through (iv), inclusive, of Rule 433(b)(1) under the Securities
Act are satisfied, and the Registration Statement relating to the Offering, as
initially filed with the Commission, includes a prospectus that, other than by
reason of Rule 433 or Rule 431 under the Securities Act, satisfies the
requirements of Section 10 of the Securities Act; neither the Company nor the
Placement Agent is disqualified, by reason of subsection (f) or (g) of Rule 164
under the Securities Act, from using, in connection with the Offering, "free
writing prospectuses" (as defined in Rule 405 under the Securities Act) pursuant
to Rules 164 and 433 under the Securities Act; the parties hereto agree and
understand that the content of any and all "road shows" (as defined in Rule 433
under the Securities Act) related to the Offering is solely the property of the
Company.

 

(c)               The financial statements, including the notes thereto, and the
supporting schedules incorporated by reference in the Registration Statement and
the Prospectus comply in all material respects with the requirements of the
Securities Act, the Exchange Act and the Rules and Regulations, and present
fairly the financial condition of the Company and its subsidiaries (as
identified in the Registration Statement and Prospectus, the “Subsidiaries”) and
financial position as of the dates indicated and the cash flows and results of
operations for the periods specified of the Company (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except as otherwise
stated in the Registration Statement and the Prospectus, said financial
statements have been prepared in conformity with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved. Any selected financial data and summary financial
information included in the documents in the Registration Statement and in the
Prospectus constitute or will constitute a fair summary of the information
purported to be summarized and have been compiled on a basis consistent with
that of the audited financial statements included in the Registration Statement
(subject (i) to such adjustments to accounting standards and practices as are
noted therein, and (ii) in the case of unaudited interim statements, to (A)
normal recurring adjustments, (B) the exclusion of financial statement
footnotes, and (C) the information being presented in a condensed or summary
manner). No other financial statements or supporting schedules are required to
be included or incorporated by reference in the Registration Statement or the
Prospectus. All disclosures, if any, contained in the Registration Statement or
the Prospectus or incorporated by reference therein regarding “non-GAAP
financial measures” (as such term is defined by the applicable rules and
regulations of the Commission) comply, in all material respects, with Regulation
G of the Exchange Act and Item 10 of Regulation S-K of the Securities Act to the
extent applicable. The other financial information included in the Registration
Statement and the Prospectus present fairly and accurately the information
included therein and have been prepared on a basis consistent with that of the
financial statements that are included in the Registration Statement and the
Prospectus and the books and records of the Company.

 

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(d)               The Company and each of its Subsidiaries has been duly
incorporated and validly exists as a corporation in good standing under the laws
of its jurisdiction of incorporation. The Company and each of its Subsidiaries
has all requisite corporate power and authority to own, lease and operate its
respective properties and carry on its business as it is currently being
conducted and as described in the Registration Statement and the Prospectus. The
Company and each of its Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the
character or location of its properties (owned, leased or licensed) or the
nature or conduct of its business makes such qualification necessary, except, in
each case, for those failures to be so qualified or in good standing which
(individually or in the aggregate) would not reasonably be expected to have a
Material Adverse Effect (as defined below).

 

(e)               All of the issued shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable,
have been issued in compliance in all material respects with all applicable
federal and state securities laws and none of those shares was issued in
violation of any preemptive rights, rights of first refusal or other similar
rights to the extent any such rights were not waived; the Securities have been
duly authorized and, when issued and delivered against payment therefor as
provided in this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of the Securities is not subject to any
preemptive rights, rights of first refusal or other similar rights that have not
heretofore been waived (with copies of such waivers provided or made available
to the Placement Agent). The Securities conform in all material respects to the
descriptions thereof contained in the Registration Statement and the Prospectus
under the heading "Description of Capital Stock."

 

(f)                Moss Adams LLP (the "Auditor"), whose reports relating to the
Company are incorporated by reference into the Registration Statement and the
Prospectus, is an independent registered public accounting firm as required by
the Securities Act, the Exchange Act and the Rules and Regulations and the
Public Company Accounting Oversight Board (the "PCAOB"). To the Company's
knowledge, the Auditor is not in violation of the auditor independence
requirements of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley") as such
requirements pertain to the Auditor's relationship with the Company. Except as
disclosed in the Registration Statement and the Prospectus, and except for any
such non-audit services that were pre-approved by the Audit Committee of the
Company's Board of Directors in accordance with Sections 10A(h) and (i) of the
Exchange Act, the Auditor has not, during the periods covered by the financial
statements included in the Registration Statement and the Prospectus, provided
to the Company any non-audit services, as such term is used in Section 10A(g) of
the Exchange Act.

 

11

 

 

(g)              Subsequent to the respective dates as of which information is
presented in the Registration Statement and the Prospectus, and except as
disclosed in the Registration Statement and the Prospectus: (i) the Company
(including its Subsidiaries) has not declared, paid or made any dividends or
other distributions of any kind on or in respect of its capital stock, and (ii)
there has been no material adverse change or, to the Company's knowledge, any
development which could reasonably be expected to result in a material adverse
change in the future, whether or not arising from transactions in the ordinary
course of business, in or affecting: (A) the business, condition (financial or
otherwise), results of operations, stockholders' equity, properties or prospects
of the Company or its Subsidiaries; (B) the long-term debt or capital stock of
the Company or its Subsidiaries; or (C) this offering or consummation of any of
the other transactions contemplated by the Transaction Documents, the
Registration Statement and the Prospectus (a "Material Adverse Effect"). Since
the date of the latest balance sheet included in the Registration Statement and
the Prospectus, the Company (including its Subsidiaries) has not incurred or
undertaken any liabilities or obligations, whether direct or indirect,
liquidated or contingent, matured or unmatured, or entered into any
transactions, including any acquisition or disposition of any business or asset,
which are material to the Company or its Subsidiaries, except (I) for
liabilities, obligations and transactions which are disclosed in the
Registration Statement and the Prospectus and (II) as would not be reasonably
expected (individually or in the aggregate) to result in a Material Adverse
Effect. There are no statutes, regulations, contracts (“Material Contracts”) or
documents that are required to be described in the Registration Statement and
the Prospectus or to be filed as exhibits to the Registration Statement by the
Securities Act that have not been so described or filed.

 

(h)              Neither the Company nor any of its Subsidiaries is: (i) in
violation of its certificate of incorporation or bylaws or other organizational
documents, (ii) in default under any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by which it
is bound or to which any of its property or assets is subject; and no event has
occurred which, with notice or lapse of time or both, would constitute a default
under or result in the creation or imposition of any lien, security interest,
charge or other encumbrance (a "Lien") upon any of its property or assets
pursuant to, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which it is a party or by which it is bound or to
which any of its property or assets is subject, or (iii) in violation in any
respect of any applicable law, rule, regulation, ordinance, directive, judgment,
decree or order of any judicial, regulatory or other legal or governmental
agency or body, foreign or domestic, except, in the case of subsections (ii) and
(iii) above, for such violations, defaults or Liens which (individually or in
the aggregate) would not reasonably be expected to have a Material Adverse
Effect.

 

(i)                 The Company has all requisite corporate power and authority
to execute and deliver this Agreement and all other agreements, documents,
certificates and instruments required to be delivered pursuant to this
Agreement. The Company's execution, delivery and performance under this
Agreement and each of the Transaction Documents have been duly authorized by all
necessary corporate action. This Agreement has been duly and validly executed
and delivered by the Company and constitutes the legal, valid and binding
obligation of the Company and is enforceable against the Company in accordance
with its terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (ii) as enforceability of any indemnification or contribution
provision may be limited under federal and state securities laws; and (iii) that
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to the equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.

 

12

 

 

(j)                The execution, delivery and performance of this Agreement and
all other agreements, documents, certificates and instruments required to be
delivered pursuant to this Agreement and the Transaction Documents do not and
will not: (i) conflict with, require consent under or result in a breach of any
of the terms and provisions of, or constitute a default (or an event which with
notice or lapse of time, or both, would constitute a default) under, or result
in the creation or imposition of any Lien upon any property or assets of the
Company or its Subsidiaries pursuant to, any indenture, mortgage, deed of trust,
loan agreement or other agreement, instrument, franchise, license or permit to
which the Company is a party or by which the Company or any of its properties,
operations or assets may be bound, (ii) violate or conflict with any provision
of the certificate of incorporation, bylaws or other organizational documents of
the Company, (iii) violate or conflict with any applicable law, rule,
regulation, ordinance, directive, judgment, decree or order of any judicial,
regulatory or other legal or governmental agency or body, domestic or foreign,
or (iv) trigger a reset or repricing of any outstanding securities of the
Company, except in the case of subsections (i) and (iii) for any default,
conflict, violation or Lien that would not reasonably be expected to result in a
Material Adverse Effect and except in the case of subsection (iv) for any
trigger for which the Company has received a waiver.

 

(k)                Except as disclosed in the Registration Statement and the
Prospectus, the Company and each of its Subsidiaries has all consents,
approvals, authorizations, orders, registrations, qualifications, licenses,
filings, grants, certificates and permits of, with and from all judicial,
regulatory and other legal or governmental agencies, self-regulatory agencies,
authorities and bodies and all third parties, foreign and domestic, including,
without limitation, the U.S. Food and Drug Administration ("FDA") or equivalent
in non-U.S. jurisdictions (collectively, the "Consents"), to own, lease and
operate its properties and conduct its business as it is now being conducted and
as disclosed in the Registration Statement and the Prospectus other than those
Consents the failure to possess or own would not reasonably be expected to
result in a Material Adverse Effect, and each such Consent is valid and in full
force and effect, except which (individually or in the aggregate), in each such
case, would not reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries has received notice of any
investigation or proceedings which results in or, if decided adversely to the
Company or such Subsidiary, could reasonably be expected to result in, the
revocation of, or imposition of a restriction on, any Consent, except such
restriction or revocation of such Consent which (individually or in the
aggregate) would not reasonably be expected to have a Material Adverse Effect.
No Consent contains any material restriction not adequately disclosed in the
Registration Statement and the Prospectus.

 

13

 

 

(l)                The Company and each of its Subsidiaries is in compliance
with all applicable laws, rules, regulations, ordinances, directives, judgments,
decrees and orders, foreign and domestic, except for any non-compliance the
consequences of which would not have a Material Adverse Effect.

 

(m)              Prior to the Closing Date, the Securities shall have been
approved for listing on the NASDAQ Capital Market, subject to official notice of
issuance (the "Exchange"), and the Company has taken no action designed to, or
likely to have the effect of, delisting the Shares, the Pre-Funded Warrant
Shares, or the Warrants Shares nor, except as disclosed in the Registration
Statement and the Prospectus, has the Company received any notification that the
Exchange is contemplating terminating such listing.

 

(n)               No consent of, with or from any judicial, regulatory or other
legal or governmental agency or body or any third party, foreign or domestic is
required for the execution, delivery and performance of this Agreement or
consummation of each of the Transaction Documents, including the issuance, sale
and delivery of the Securities to be issued, sold and delivered hereunder,
except (i) such as may have previously been obtained (with copies of such
consents provided to the Placement Agent), each of which is in full force and
effect as of the date hereof, (ii) the registration under the Securities Act of
the Securities, which has become effective and which remains in full force and
effect as of the date hereof, (iii) such consents as may be required under state
securities or blue sky laws or the bylaws and rules of the Exchange, and (iv) by
the Financial Industry Regulatory Authority, Inc. ("FINRA") in connection with
the purchase and distribution of the Securities by the Placement Agent.

 

(o)               Except as disclosed in the Registration Statement and the
Prospectus, there is no judicial, regulatory, arbitral or other legal or
governmental proceeding or other litigation or arbitration, domestic or foreign,
pending to which the Company or any of its Subsidiaries is a party or of which
any property, operations or assets of the Company or its Subsidiaries is the
subject which (i) individually or in the aggregate, if determined adversely to
the Company or applicable Subsidiary would reasonably be expected to have a
Material Adverse Effect, or (ii) is reasonably likely to materially and
adversely affect the consummation of the transactions contemplated in this
Agreement or the performance by the Company of its obligations hereunder. To the
Company's knowledge, no such proceeding, litigation or arbitration is threatened
or contemplated against the Company or its Subsidiaries.

 

(p)               The statistical, industry-related and market-related data
included in the Registration Statement and the Prospectus are based on or
derived from sources which the Company reasonably and in good faith believes are
reliable and accurate, and the Company has obtained the written consent to the
use of such data from such sources, to the extent required, except for such
failures to obtain written consent which (individually or in the aggregate)
would not reasonably be expected to have a Material Adverse Effect.

 

14

 

 

(q)               The Company has established and maintains disclosure controls
and procedures over financial reporting (as defined in Rules 13a-15 and 15d-15
under the Exchange Act) and such controls and procedures are designed to ensure
that information relating to the Company required to be disclosed in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the Company's management, including its principal executive and principal
financial officer, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure. The Company has utilized
such controls and procedures in preparing and evaluating the disclosures in the
Registration Statement and in the Prospectus.

 

(r)                Except as disclosed in the Registration Statement and the
Prospectus, neither the board of directors nor the audit committee has been
informed, nor is the Company aware, of: (i) any significant deficiencies or
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
Company's ability to record, process, summarize and report financial
information; or (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company's
internal control over financial reporting.

 

(s)                The Company has not taken, directly or indirectly, any action
which constitutes or is designed to cause or result in, or which could
reasonably be expected to constitute, cause or result in, the stabilization or
manipulation of the price of any security to facilitate the sale or resale of
the Securities.

 

(t)                Neither the Company nor any of its Affiliates (within the
meaning of the Securities Act) has, prior to the date hereof, made any offer or
sale of any securities which are required to be "integrated" pursuant to the
Securities Act or the Regulations with the offer and sale of the Warrants or
Warrant Shares pursuant to the Registration Statement. Except as disclosed in
the Registration Statement and the Prospectus or Forms 4 filed by Affiliates,
neither the Company nor any of its Affiliates has sold or issued any securities
during the six-month period preceding the date of the Prospectus, including but
not limited to any sales pursuant to Rule 144A, Regulation D or Regulation S
under the Securities Act, other than shares of Common Stock issued pursuant to
equity incentive plans, employee stock purchase plans, employee benefit plans,
qualified stock option plans or employee compensation plans or pursuant to
outstanding options, convertible notes, convertible preferred stock, rights or
warrants to purchase shares of Common Stock.

 

(u)               To the knowledge of the Company, the biographies of the
Company's officers and directors incorporated into the Registration Statement
are true and correct in all material respects and the Company has not become
aware of any information which would cause the information disclosed in the
questionnaires previously completed by the directors and officers of the Company
to become inaccurate and incorrect in any material respect.

 

(v)              To the knowledge of the Company, no director or officer of the
Company is subject to any non-competition agreement or non-solicitation
agreement with any employer or prior employer which could materially affect his
or her ability to be and act in his or her respective capacity of the Company.

 

15

 

 

  

(w)             The Company is not, and is not an Affiliate of, and, at all
times up to and including the consummation of the transactions contemplated by
the Transaction Documents, and immediately after receipt of payment for the
Securities, will not be, subject to registration as an "investment company"
under the Investment Company Act of 1940, as amended, and is not and will not be
an entity "controlled" by an "investment company" within the meaning of such
act.

 

(x)               No relationship, direct or indirect, exists between or among
any of the Company or, to the Company's knowledge, any Affiliate of the Company,
on the one hand, and any director, officer, stockholder, customer or supplier of
the Company or, to the Company's knowledge, any Affiliate of the Company, on the
other hand, which is required by the Securities Act or the Exchange Act to be
described in the Registration Statement or the Prospectus which is not so
described as required. There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or guarantees
of indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of their respective family members, except as
described in the Registration Statement and the Prospectus. The Company has not,
in violation of Sarbanes-Oxley, directly or indirectly extended or maintained
credit, arranged for the extension of credit, or renewed an extension of credit,
in the form of a personal loan to or for any director or executive officer of
the Company.

 

(y)               Except as disclosed in the Registration Statement and the
Prospectus, the Company is in compliance with the rules and regulations
promulgated by the Exchange or any other governmental or self-regulatory entity
or agency having jurisdiction over the Company, except for such failures to be
in compliance which (individually or in the aggregate) would not reasonably be
expected to have a Material Adverse Effect. Without limiting the generality of
the foregoing: (i) all members of the Company's board of directors who are
required to be "independent" (as that term is defined under the rules of the
Exchange), including, without limitation, all members of the audit committee of
the Company's board of directors, meet the qualifications of independence as set
forth under applicable laws, rules and regulations and (ii) the audit committee
of the Company's board of directors has at least one member who is an "audit
committee financial expert" (as that term is defined under applicable laws,
rules and regulations).

 

(z)               The Company and each of its Subsidiaries owns or leases all
such properties (other than intellectual property, which is covered below) as
are necessary to the conduct of its business as presently operated and as
described in the Registration Statement and the Prospectus. The Company and each
of its Subsidiaries has good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by it, in
each case free and clear of all Liens except such as are described in the
Registration Statement and the Prospectus or such as would not (individually or
in the aggregate) have a Material Adverse Effect. Any real property and
buildings held under lease or sublease by the Company or its Subsidiaries are
held by it under valid, subsisting and, to the Company's knowledge, enforceable
leases with such exceptions as are not material to, and do not materially
interfere with, the use made and proposed to be made of such property and
buildings by the Company or its Subsidiaries. Neither the Company nor its
Subsidiaries has received any written notice of any claim adverse to its
ownership of any real or material personal property or of any claim against the
continued possession of any real property, whether owned or held under lease or
sublease by the Company or its Subsidiaries, except for such claims that, if
successfully asserted against the Company or its Subsidiaries, would not
(individually or in the aggregate) reasonably be expected to have a Material
Adverse Effect.

 

16

 

 

(aa)            To the knowledge of the Company, the Company (including all of
its Subsidiaries): (i) owns, possesses or has the right to use all patents,
patent applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses, formulae,
customer lists and know-how and other intellectual property (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures, "Intellectual Property") necessary for the
conduct of its businesses as being conducted and as described in the
Registration Statement and the Prospectus, except as disclosed in the
Registration Statement or the Prospectus, and (ii) has no knowledge that the
conduct of its business conflicts or will conflict with the rights of others,
and it has not received any written notice of any claim of conflict with, any
right of others. To the Company's knowledge, there is no infringement by third
parties of any such Intellectual Property. There is no pending or, to the
Company's knowledge, threatened, action, suit, proceeding or claim by others
challenging the Company's rights in or to any such Intellectual Property, and
the Company is unaware of any facts which would form a reasonable basis for any
such claim; and there is no pending or, to the Company's knowledge, threatened,
action, suit, proceeding or claim by others that the Company infringes or
otherwise violates any patent, trademark, copyright, trade secret or other
proprietary rights of others, and the Company is unaware of any other fact which
would form a reasonable basis for any such claim, except as would not
(individually or in the aggregate) reasonably be expected to have a Material
Adverse Effect. Except as set forth in the Registration Statement and the
Prospectus, the Company has not received any claim for royalties or other
compensation from any person, including any employee of the Company who made
inventive contributions to Company's technology or products that are pending or
unsettled, and except as set forth in the Registration Statement and the
Prospectus the Company does not and will not have any obligation to pay
royalties or other compensation to any person on account of inventive
contributions, except as would not (individually or in the aggregate) reasonably
be expected to have a Material Adverse Effect.

 

(bb)           The agreements and documents described in the Registration
Statement and the Prospectus conform in all material respects to the
descriptions thereof contained therein and there are no agreements or other
documents required by the applicable provisions of the Securities Act to be
described in the Registration Statement or the Prospectus or to be filed with
the Commission as exhibits to the Registration Statement, that have not been so
described or filed. Each agreement or other instrument (however characterized or
described) to which the Company (or its Subsidiaries) is a party or by which its
property or business is or may be bound or affected and (i) that is referred to
in the Registration Statement or the Prospectus or attached as an exhibit
thereto, or (ii) is material to the Company's business, has been duly and
validly executed by the Company, is in full force and effect in all material
respects and is enforceable against the Company in accordance with its terms,
except (x) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (y) as
enforceability of any indemnification or contribution provision may be limited
under the foreign, federal and state securities laws, and (z) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought, and none of such agreements or
instruments has been assigned by the Company (including any Subsidiaries), and
except as described in the Registration Statement and the Prospectus, neither
the Company nor, to the Company's knowledge, any other party is in material
breach or default thereunder and, to the Company's knowledge, no event has
occurred that, with the lapse of time or the giving of notice, or both, would
constitute a breach or default thereunder, in any such case, which would result
in a Material Adverse Effect.

 

17

 

 

(cc)            The disclosures in the Registration Statement and the Prospectus
concerning the effects of foreign, federal, state and local regulation on the
Company's business as currently contemplated are correct in all material
respects.

 

(dd)           The Company has accurately prepared and filed all federal, state,
foreign and other tax returns that are required to be filed by it through the
date hereof, or has received timely extensions thereof, except where the failure
to so file would not (individually or in the aggregate) reasonably be expected
to have a Material Adverse Effect, and has paid or made provision for the
payment of all material taxes, assessments, governmental or other similar
charges, including without limitation, all sales and use taxes and all taxes
which the Company is obligated to withhold from amounts owing to employees,
creditors and third parties, with respect to the periods covered by such tax
returns, whether or not such amounts are shown as due on any tax return (except
as currently being contested in good faith and for which reserves required by
GAAP have been created in the financial statements of the Company) and except
for such taxes, assessments, governmental or other similar charges the
nonpayment of which would not (individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect. No deficiency assessment with
respect to a proposed adjustment of the Company's federal, state, local or
foreign taxes is pending or, to the Company's knowledge, threatened. The
accruals and reserves on the books and records of the Company in respect of tax
liabilities for any taxable period not finally determined are adequate to meet
any assessments and related liabilities for any such period and, since the date
of the Company's most recent audited financial statements, the Company has not
incurred any material liability for taxes other than in the ordinary course of
its business. There is no tax lien, whether imposed by any federal, state,
foreign or other taxing authority, outstanding against the assets, properties or
business of the Company.

 

(ee)            No labor disturbance or dispute by or with the employees of the
Company which, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect, currently exists or, to the Company's knowledge,
is threatened. The Company is in compliance in all material respects with the
labor and employment laws and collective bargaining agreements and extension
orders applicable to its employees.

  

18

 

 

(ff)              Except as would not be reasonably expected, individually or in
the aggregate, to have a Material Adverse Effect, the Company (and its
Subsidiaries) is in compliance with all material Environmental Laws (as
hereinafter defined), and, to the Company's knowledge, no future material
expenditures are or will be required in order to comply therewith. The Company
has not received any written notice or communication that relates to or alleges
any actual or potential violation or failure to comply with any Environmental
Laws that would, individually or in the aggregate, be reasonably expected to
have a Material Adverse Effect. As used herein, the term "Environmental Laws"
means all applicable laws and regulations, including any licensing, permits or
reporting requirements, and any action by a federal, state or local government
entity, pertaining to the protection of the environment, protection of public
health, protection of worker health and safety, or the handling of hazardous
materials, including without limitation, the Clean Air Act, 42 U.S.C. § 7401, et
seq., the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C. § 9601, et seq., the Federal Water Pollution Control Act, 33
U.S.C. § 1321, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. §
1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 690-1, et
seq., and the Toxic Substances Control Act, 15 U.S.C. § 2601, et seq.

  

(gg)           As to each product or product candidate subject to the
jurisdiction of the FDA under the Federal Food, Drug and Cosmetic Act, as
amended, and the regulations thereunder ("FDCA") and/or the jurisdiction of the
non-U.S. counterparts thereof that is currently being tested by the Company (or
any of its Subsidiaries) (each such product, a "Product"), such Product is being
tested by the Company (or any of its Subsidiaries) in compliance with all
applicable requirements under FDCA and/or and similar laws, rules and
regulations relating to registration, investigational use, premarket clearance,
licensure, or application approval, good manufacturing practices, good
laboratory practices, good clinical practices, product listing, quotas,
advertising, record keeping and filing of reports, except where the failure to
be in compliance would not have a Material Adverse Effect. Except as disclosed
in the Registration Statement and the Prospectus, the Company (or any of its
Subsidiaries) currently has no products that have been approved by the FDA or
any non-U.S. counterparts thereof to be manufactured, packaged, labeled,
distributed, sold and/or marketed. Except as disclosed in the Registration
Statement or the Prospectus, there is no pending, completed or, to the Company's
knowledge, threatened, action (including any lawsuit, arbitration, or legal or
administrative or regulatory proceeding, charge, complaint, or investigation)
against the Company (or any of its Subsidiaries) and the Company (or any of its
Subsidiaries) has not received any written notice, warning letter or other
communication from the FDA or any other governmental entity or any non-U.S.
counterparts thereof, in either case which (i) contests the premarket clearance,
licensure, registration or approval of, the uses of, the distribution of, the
manufacturing or packaging of, the testing of, the sale of, or the labeling and
promotion of any Product, (ii) imposes a clinical hold on any clinical
investigation by the Company (or any of its Subsidiaries), (iii) enters or
proposes to enter into a consent decree of permanent injunction with the Company
(or any of its Subsidiaries), or (iv) otherwise alleges any violation of any
laws, rules or regulations by the Company (or any of its Subsidiaries), and
which, either individually or in the aggregate, would have a Material Adverse
Effect. The properties, business and operations of the Company (or any of its
Subsidiaries) have been and are being conducted in all material respects in
accordance with all applicable laws, rules and regulations of the FDA and
non-U.S. counterparts thereof. Neither the Company nor any of its Subsidiaries
has been informed by the FDA or any non-U.S. counterparts thereof that such
agency will prohibit the marketing, sale, license or use of any Product nor has
the FDA or a non-U.S. counterpart thereof provided any written notice that could
reasonably be expected to preclude the approval or the clearing for marketing of
any Product.

 

19

 

 

(hh)           The clinical, pre-clinical and other studies and tests
("Studies") conducted by or on behalf of or sponsored by the Company (including
its Subsidiaries) that are described or referred to in the Registration
Statement and the Prospectus were and, if still pending, are, being conducted in
accordance with all applicable statutes, laws, rules and regulations (including,
without limitation, those administered by the FDA or by any foreign, federal,
state or local governmental or regulatory authority performing functions similar
to those performed by the FDA), as well as the protocols, procedures and
controls designed and approved for such Studies and with standard medical and
scientific research procedures, except where the failure to be so conducted
would not have a Material Adverse Effect. The descriptions of the results of
such Studies that are described or referred to in the Registration Statement and
the Prospectus are accurate and complete in all material respects and fairly
present the data derived from such Studies. Except as disclosed in the
Registration Statement and the Prospectus, neither the Company nor any of its
Subsidiaries has received any written notices or other correspondence from the
FDA or any other foreign, federal, state or local governmental or regulatory
authority performing functions similar to those performed by the FDA requiring
the termination or suspension of such Studies, other than ordinary course
communications with respect to modifications in connection with the design and
implementation of such Studies.

 

(ii)              Except as would not result in a Material Adverse Effect, the
Company (including its Subsidiaries) has not failed to file with the applicable
regulatory authorities (including the FDA or any foreign, federal, state or
local governmental or regulatory authority performing functions similar to those
performed by the FDA and having jurisdiction over the Company or its
Subsidiaries) any filing, declaration, listing, registration, report or
submission that is required to be so filed for the business operations of the
Company or its Subsidiaries as currently conducted. All such filings were in
material compliance with applicable laws when filed and no material deficiencies
have been asserted in writing by any applicable regulatory authority (including,
without limitation, the FDA or any foreign, federal, state or local governmental
or regulatory authority performing functions similar to those performed by the
FDA) with respect to any such filings, declarations, listings, registrations,
reports or submissions.

 

(jj)              The Registration Statement and the Prospectus identify each
employment, severance or other similar agreement, arrangement or policy and each
material arrangement providing for insurance coverage, benefits, bonuses, stock
options or other forms of incentive compensation, or post-retirement insurance,
compensation or benefits which: (i) is entered into, maintained or contributed
to, as the case may be, by the Company and (ii) covers any officer or director
or former officer or former director of the Company, in each case to the extent
required by the Rules and Regulations. These contracts, plans and arrangements
are referred to collectively in this Agreement as the "Benefit Arrangements."
Each Benefit Arrangement has been maintained in material compliance with its
terms and with requirements prescribed by any and all statutes, orders, rules
and regulations that are applicable to that Benefit Arrangement in each case
except where the failure to comply is not reasonably likely to have a Material
Adverse Effect.

 

20

 

 

(kk)           Except as set forth in the Registration Statement or the
Prospectus, the Company is not a party to or subject to any employment contract
or arrangement providing for annual future compensation, or the opportunity to
earn annual future compensation (whether through fixed salary, bonus,
commission, options or otherwise) of more than $120,000 to any executive officer
or director.

 

(ll)              The conditions for use of Form S-3 to register the Offering
under the Securities Act, as set forth in the General Instructions to such Form,
have been satisfied.

 

(mm)      Except as disclosed in the Registration Statement and the Prospectus,
neither the execution of this Agreement nor the consummation of the Offering,
constitutes a triggering event under any Benefit Arrangement or any other
employment contract, whether or not legally enforceable, which (either alone or
upon the occurrence of any additional or subsequent event) will or may result in
any payment (of severance pay or otherwise), acceleration, increase in vesting
or increase in benefits to any current or former participant, employee or
director of the Company other than an event that is not material to the
financial condition or business of the Company.

 

(nn)           Neither the Company, its Subsidiaries, nor, to the Company's
knowledge, any of the employees or agents of the Company or its Subsidiaries,
has at any time during the last three (3) years: (i) made any unlawful
contribution to any candidate for foreign office, or failed to disclose fully
any contribution in violation of law, or (ii) made any payment to any federal or
state governmental officer or official or other person charged with similar
public or quasi-public duties in the United States, other than payments that are
not prohibited by the laws of the United States or any jurisdiction thereof.

 

(oo)           The Company has not offered, or caused the Placement Agent to
offer, any Securities to any person or entity with the intention of unlawfully
influencing: (i) a supplier of the Company to alter the supplier's level or type
of business with the Company or (ii) a journalist or publication to write or
publish favorable information about the Company.

 

(pp)           The operations of the Company are and have been conducted at all
times in compliance in all material respects with applicable financial record
keeping and reporting requirements and money laundering statutes of the United
States and, to the Company's knowledge, all other applicable jurisdictions to
which the Company is subject, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or
enforced by any applicable governmental agency (collectively, the "Money
Laundering Laws"), and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
with respect to the Money Laundering Laws is pending or, to the Company's
knowledge, threatened.

 

(qq)           Neither the Company nor, to the Company's knowledge, any
director, officer, agent, employee or Affiliate of the Company is currently
subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department ("OFAC"); and the Company will not
directly or indirectly use the proceeds of the Offering, or lend, contribute or
otherwise make available such proceeds to any joint venture partner or other
person or entity, for the purpose of financing the activities of any person
currently subject to any U.S. sanctions administered by OFAC.

 

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(rr)              None of the Company, its directors or officers or, to the
Company's knowledge, any agent, employee, Affiliate or other person acting on
behalf of the Company has engaged in any activities sanctionable under the
Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, the
Iran Sanctions Act of 1996, the National Defense Authorization Act for Fiscal
Year 2012, the Iran Threat Reduction and Syria Human Rights Act of 2012 or any
Executive Order relating to any of the foregoing (collectively, and as each may
be amended from time to time, the "Iran Sanctions"); and the Company will not
directly or indirectly use the proceeds of the Offering, or lend, contribute or
otherwise make available such proceeds to any subsidiary, joint venture partner
or other person or entity, for the purpose of engaging in any activities
sanctionable under the Iran Sanctions.

 

(ss)             Except as described in the Registration Statement and the
Prospectus, there are no claims, payments, arrangements, agreements or
understandings relating to the payment of a finder's, consulting or origination
fee by the Company or any officer, director or stockholder of the Company (each,
an "Insider") with respect to the sale of the Securities hereunder or any other
arrangements, agreements or understandings of the Company or, to the Company's
knowledge, any of its stockholders that may affect the Placement Agent's
compensation, as determined by FINRA. Except as described in the Registration
Statement and the Prospectus and in connection with the Company’s underwritten
public offering on Form S-1 (File No. 333-231723), the Company has not made any
direct or indirect payments (in cash, securities or otherwise) to: (i) any
person, as a finder's fee, consulting fee or otherwise, in consideration of such
person raising capital for the Company or introducing to the Company persons who
raised or provided capital to the Company; (ii) to any FINRA member; or (iii) to
any person or entity that has any direct or indirect affiliation or association
with any FINRA member, within the 180 days prior to the Effective Date. Except
as described in the Prospectus, none of the Net Proceeds will be paid by the
Company to any participating FINRA member or its affiliates, except as
specifically authorized herein. No officer, director or, to the Company's
knowledge, any beneficial owner of 5% or more of the Company's securities
(whether debt or equity, registered or unregistered, regardless of the time
acquired or the source from which derived) (any such individual or entity, a
"Company Affiliate") has any direct or indirect affiliation or association with
any FINRA member (as determined in accordance with the rules and regulations of
FINRA); and no Company Affiliate is an owner of stock or other securities of any
member of FINRA (other than securities purchased on the open market); no Company
Affiliate has made a subordinated loan to any member of FINRA. Except as
disclosed in the Registration Statement and the Prospectus, the Company has not
issued any warrants or other securities or granted any options, directly or
indirectly, to anyone who is a potential underwriter in the Offering or a
related person (as defined by FINRA rules) of such an underwriter within the
180-day period prior to the initial filing date of the Registration Statement;
no person to whom securities of the Company have been privately issued within
the 180-day period prior to the initial filing date of the Registration
Statement has any relationship or affiliation or association with any member of
FINRA; and no FINRA member participating in the offering has a conflict of
interest with the Company. For this purpose, a "conflict of interest" has the
meaning ascribed to such term in FINRA Rule 5121(f)(5).

 

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(tt)              The Company has not distributed and will not distribute any
prospectus or other offering material in connection with the Offering other than
the Registration Statement and the Prospectus or other materials permitted by
the Securities Act to be distributed by the Company.

 

(uu)           No Person has any right to cause the Company or any Subsidiary to
effect the registration under the Securities Act of any securities of the
Company or any Subsidiary.

 

(vv)           Neither the Company nor any Person acting on behalf of the
Company has offered or sold any of the Warrant or Warrant Shares by any form of
general solicitation or general advertising. The Company has offered the
Warrants and Warrant Shares for sale only to the Purchasers and certain other
“accredited investors” within the meaning of Rule 501 under the Securities Act.

 

(ww)       With respect to the Warrant and Warrant Shares to be offered and sold
hereunder in reliance on Rule 506 under the Securities Act, none of the Company,
any of its predecessors, any affiliated issuer, any director, executive officer,
other officer of the Company participating in the offering hereunder, any
beneficial owner of 20% or more of the Company’s outstanding voting equity
securities, calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected with the Company
in any capacity at the time of sale (each, an “Issuer Covered Person”) is
subject to any of the “Bad Actor” disqualifications described in Rule
506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”),
except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The
Company has exercised reasonable care to determine whether any Issuer Covered
Person is subject to a Disqualification Event. The Company has complied, to the
extent applicable, with its disclosure obligations under Rule 506(e), and has
furnished to the Purchasers a copy of any disclosures provided thereunder.

 

(xx)           Other Covered Persons. Other than the Placement Agent, the
Company is not aware of any person (other than any Issuer Covered Person) that
has been or will be paid (directly or indirectly) remuneration for solicitation
of purchasers in connection with the sale of any Securities.

 

(yy)           The Company will notify the Purchasers in writing, prior to the
Closing Date of (i) any Disqualification Event relating to any Issuer Covered
Person and (ii) any event that would, with the passage of time, reasonably be
expected to become a Disqualification Event relating to any Issuer Covered
Person, in each case of which it is aware.

 

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3.2              Representations and Warranties of the Purchasers. Each
Purchaser, for itself and for no other Purchaser, hereby represents and warrants
as of the date hereof and as of the Closing Date to the Company as follows
(unless as of a specific date therein, in which case they shall be accurate as
of such date):

 

(a)               Organization; Authority. Such Purchaser is either an
individual or an entity duly incorporated or formed, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
formation with full right, corporate, partnership, limited liability company or
similar power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of the
Transaction Documents and performance by such Purchaser of the transactions
contemplated by the Transaction Documents have been duly authorized by all
necessary corporate, partnership, limited liability company or similar action,
as applicable, on the part of such Purchaser. Each Transaction Document to which
it is a party has been duly executed by such Purchaser, and when delivered by
such Purchaser in accordance with the terms hereof, will constitute the valid
and legally binding obligation of such Purchaser, 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, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

 

(b)               Understandings or Arrangements. Such Purchaser is acquiring
the Securities as principal for its own account and has no direct or indirect
arrangement or understandings with any other persons to distribute or regarding
the distribution of such Securities (this representation and warranty not
limiting such Purchaser’s right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal and
state securities laws). Such Purchaser is acquiring the Securities hereunder in
the ordinary course of its business. Such Purchaser understands that the
Warrants and the Warrant Shares are “restricted securities” and have not been
registered under the Securities Act or any applicable state securities law and
is acquiring such Securities as principal for his, her or its own account and
not with a view to or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state securities
law, has no present intention of distributing any of such Securities in
violation of the Securities Act or any applicable state securities law and has
no direct or indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities in violation of the
Securities Act or any applicable state securities law (this representation and
warranty not limiting such Purchaser’s right to sell such Securities pursuant to
a registration statement or otherwise in compliance with applicable federal and
state securities laws).

 

(c)               Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and as of the date hereof it is, and on each date on which
it exercises any Warrants, it will be either: (i) an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under
the Securities Act.

 

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(d)               Experience of Such Purchaser. Such Purchaser, 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 Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.

 

(e)               Access to Information. Such Purchaser acknowledges that it has
had the opportunity to review the Transaction Documents (including all exhibits
and schedules thereto) and the reports, schedules, forms, statements and other
documents required to be filed by the Company under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof 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 Securities and the merits and risks
of investing in the Securities; (ii) access to 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.  Such Purchaser
acknowledges and agrees that neither the Placement Agent nor any Affiliate of
the Placement Agent has provided such Purchaser with any information or advice
with respect to the Securities nor is such information or advice necessary or
desired.  Neither the Placement Agent nor any Affiliate has made or makes any
representation as to the Company or the quality of the Securities and the
Placement Agent and any Affiliate may have acquired non-public information with
respect to the Company which such Purchaser agrees need not be provided to it. 
In connection with the issuance of the Securities to such Purchaser, neither the
Placement Agent nor any of its Affiliates has acted as a financial advisor or
fiduciary to such Purchaser.

 

(f)                Certain Transactions and Confidentiality. Other than
consummating the transactions contemplated hereunder, such Purchaser has not,
nor has any Person acting on behalf of or pursuant to any understanding with
such Purchaser, directly or indirectly executed any purchases or sales,
including Short Sales, of the securities of the Company during the period
commencing as of the time that such Purchaser first received a term sheet
(written or oral) from the Company or any other Person representing the Company
setting forth the material pricing terms of the transactions contemplated
hereunder and ending immediately prior to the execution hereof. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment
vehicle whereby separate portfolio managers manage separate portions of such
Purchaser’s assets and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the representation set forth above shall only apply
with respect to the portion of assets managed by the portfolio manager that made
the investment decision to purchase the Securities covered by this Agreement.
Other than to other Persons party to this Agreement or to such Purchaser’s
representatives, including, without limitation, its officers, directors,
partners, legal and other advisors, employees, agents and Affiliates, such
Purchaser has maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms of this
transaction). Notwithstanding the foregoing, for the avoidance of doubt, nothing
contained herein shall constitute a representation or warranty, or preclude any
actions, with respect to locating or borrowing shares in order to effect Short
Sales or similar transactions in the future.

 

25

 

 

(g)               General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or, to the knowledge of such Purchaser, any other general solicitation or
general advertisement.

 

The Company acknowledges and agrees that the representations contained in this
Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on
the Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transactions contemplated hereby.
Notwithstanding the foregoing, for the avoidance of doubt, nothing contained
herein shall constitute a representation or warranty, or preclude any actions,
with respect to locating or borrowing shares in order to effect Short Sales or
similar transactions in the future.

 

ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES

 

4.1       Removal of Legends.

 

(a)         The Warrants and Warrant Shares may only be disposed of in
compliance with state and federal securities laws. In connection with any
transfer of Warrants or Warrant Shares other than pursuant to an effective
registration statement or Rule 144, to the Company or to an Affiliate of a
Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the
Company may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor and reasonably acceptable to the Company,
the form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Warrant under the Securities Act.

 

(b)         The Purchasers agree to the imprinting, so long as is required by
this Section 4.1, of a legend on any of the Warrants or Warrant Shares in the
following form:

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAS 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. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
“ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

 

26

 

 

The Company acknowledges and agrees that a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Warrants or Warrant Shares to
a financial institution that is an “accredited investor” as defined in Rule
501(a) under the Securities Act and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Warrants or Warrant
Shares to the pledgees or secured parties. Such a pledge or transfer would not
be subject to approval of the Company and no legal opinion of legal counsel of
the pledgee, secured party or pledgor shall be required in connection therewith.
Further, no notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Warrants and Warrant Shares may
reasonably request in connection with a pledge or transfer of the Warrants or
Warrant Shares.

 

(c)               Certificates evidencing the Warrant Shares shall not contain
any legend (including the legend set forth in Section 4.1(b) hereof): (i) while
a registration statement covering the resale of such security is effective under
the Securities Act, or (ii) following any sale of such Warrant Shares pursuant
to Rule 144 (assuming cashless exercise of the Warrants), or (iii) if such
Warrant Shares are eligible for sale under Rule 144 (assuming cashless exercise
of the Warrants), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company shall cause
its counsel to issue a legal opinion to the Transfer Agent or the Purchaser
promptly if required by the Transfer Agent to effect the removal of the legend
hereunder, or if requested by a Purchaser, respectively. If all or any portion
of a Warrant is exercised at a time when there is an effective registration
statement to cover the resale of the Warrant Shares, or if such Warrant Shares
may be sold under Rule 144 (assuming cashless exercise of the Warrants) or if
such legend is not otherwise required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission) then such Warrant Shares shall be issued free of
all legends. The Company agrees that following such time as such legend is no
longer required under this Section 4.1(c), the Company will, no later than the
earlier of (i) two (2) Trading Days and (ii) the number of Trading Days
comprising the Standard Settlement Period (as defined below) following the
delivery by a Purchaser to the Company or the Transfer Agent of a certificate
representing Warrant Shares, as applicable, issued with a restrictive legend
(such date, the “Legend Removal Date”), deliver or cause to be delivered to such
Purchaser a certificate representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to the Transfer Agent that enlarge the restrictions
on transfer set forth in this Section 4. Warrant Shares subject to legend
removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by
crediting the account of the Purchaser’s prime broker with the Depository Trust
Company System as directed by such Purchaser. As used herein, “Standard
Settlement Period” means the standard settlement period, expressed in a number
of Trading Days, on the Company’s primary Trading Market with respect to the
Common Stock as in effect on the date of delivery of a certificate representing
Warrant Shares issued with a restrictive legend.

 

27

 

 

(d)               In addition to such Purchaser’s other available remedies, the
Company shall pay to a Purchaser, in cash, (i) as partial liquidated damages and
not as a penalty, for each $1,000 of Warrant Shares (based on the VWAP of the
Common Stock on the date such Securities are submitted to the Transfer Agent)
delivered for removal of the restrictive legend and subject to Section 4.1(c),
$10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days
after such damages have begun to accrue) for each Trading Day after the Legend
Removal Date until such certificate is delivered without a legend and (ii) if
the Company fails to (a) issue and deliver (or cause to be delivered) to a
Purchaser by the Legend Removal Date a certificate representing the Securities
so delivered to the Company by such Purchaser that is free from all restrictive
and other legends and (b) if after the Legend Removal Date such Purchaser
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Purchaser of all or any portion of the
number of shares of Common Stock, or a sale of a number of shares of Common
Stock equal to all or any portion of the number of shares of Common Stock, that
such Purchaser anticipated receiving from the Company without any restrictive
legend, then an amount equal to the excess of such Purchaser’s total purchase
price (including brokerage commissions and other out-of-pocket expenses, if any)
for the shares of Common Stock so purchased (including brokerage commissions and
other out-of-pocket expenses, if any) (the “Buy-In Price”) over the product of
(A) such number of Warrant Shares that the Company was required to deliver to
such Purchaser by the Legend Removal Date multiplied by (B) the lowest closing
sale price of the Common Stock on any Trading Day during the period commencing
on the date of the delivery by such Purchaser to the Company of the applicable
Warrant Shares (as the case may be) and ending on the date of such delivery and
payment under this Section 4.1(d).

 

(e)               The Shares shall be issued free of legends.

 

4.2              Furnishing of Information.

 

(a)               Until the earliest of the time that (i) no Purchaser owns
Securities or (ii) the Warrants have expired, the Company covenants to 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 Exchange Act even if the Company is not then subject to
the reporting requirements of the Exchange Act, except in the event of a merger
or acquisition transaction approved by the Board of Directors that results in
the Company not being subject to such reporting requirements.

 

28

 

 

(b)               At any time during the period commencing from the six (6)
month anniversary of the date hereof and ending at such time that all of the
Warrant Shares (assuming cashless exercise) may be sold without the requirement
for the Company to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, if the Company (i) shall fail
for any reason to satisfy the current public information requirement under Rule
144(c) or (ii) has ever been an issuer described in Rule 144(i)(1)(i) or becomes
an issuer in the future, and the Company shall fail to satisfy any condition set
forth in Rule 144(i)(2) (a “Public Information Failure”) then, in addition to
such Purchaser’s other available remedies, the Company shall pay to a Purchaser,
in cash, as partial liquidated damages and not as a penalty, by reason of any
such delay in or reduction of its ability to sell the Warrant Shares, an amount
in cash equal to two percent (2.0%) of the aggregate Exercise Price of such
Purchaser’s Warrants on the day of a Public Information Failure and on every
thirtieth (30th) day (pro rated for periods totaling less than thirty days)
thereafter until the earlier of (a) the date such Public Information Failure is
cured and (b) such time that such public information is no longer required  for
the Purchasers to transfer the Warrant Shares pursuant to Rule 144.  The
payments to which a Purchaser shall be entitled pursuant to this Section 4.2(b)
are referred to herein as “Public Information Failure Payments.”  Public
Information Failure Payments shall be paid on the earlier of (i) the last day of
the calendar month during which such Public Information Failure Payments are
incurred and (ii) the third (3rd) Business Day after the event or failure giving
rise to the Public Information Failure Payments is cured.  In the event the
Company fails to make Public Information Failure Payments in a timely manner,
such Public Information Failure Payments shall bear interest at the rate of 1.5%
per month (prorated for partial months) until paid in full. Nothing herein shall
limit such Purchaser’s right to pursue actual damages for the Public Information
Failure, and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.

 

4.3              Integration. The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Warrants or Warrant Shares or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market such that it would require
shareholder approval prior to the closing of such other transaction unless
shareholder approval is obtained before the closing of such subsequent
transaction.

 

4.4              Securities Laws Disclosure; Publicity. The Company shall (a) by
the Disclosure Time, issue a press release disclosing the material terms of the
transactions contemplated hereby, and (b) file a Current Report on Form 8-K,
including the Transaction Documents as exhibits thereto, with the Commission
within the time required by the Exchange Act. From and after the issuance of
such press release, the Company represents to the Purchasers that it shall have
publicly disclosed all material, non-public information delivered to any of the
Purchasers by the Company or any of its Subsidiaries, or any of their respective
officers, directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. In addition, effective upon the
issuance of such press release, the Company acknowledges and agrees that any and
all confidentiality or similar obligations under any agreement, whether written
or oral, between the Company, any of its Subsidiaries or any of their respective
officers, directors, agents, employees or Affiliates on the one hand, and any of
the Purchasers or any of their Affiliates on the other hand, shall terminate.
The Company and each Purchaser shall consult with each other in issuing any
other press releases with respect to the transactions contemplated hereby, and
neither the Company nor any Purchaser shall issue any such press release nor
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of any Purchaser, or without the
prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld or delayed, except if
such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (a) as required by federal
securities law in connection with the filing of final Transaction Documents with
the Commission and (b) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under this clause (b).

 

29

 

 

4.5              Shareholder Rights Plan. No claim will be made or enforced by
the Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or similar anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities under the
Transaction Documents or under any other agreement between the Company and the
Purchasers.

 

4.6              Non-Public Information. Except with respect to the material
terms and conditions of the transactions contemplated by the Transaction
Documents, which shall be disclosed pursuant to Section 4.4, the Company
covenants and agrees that neither it, nor any other Person acting on its behalf
will provide any Purchaser or its agents or counsel with any information that
constitutes, or the Company reasonably believes constitutes, material non-public
information, unless prior thereto such Purchaser shall have consented to the
receipt of such information and agreed with the Company to keep such information
confidential. The Company understands and confirms that each Purchaser shall be
relying on the foregoing covenant in effecting transactions in securities of the
Company. To the extent that the Company delivers any material, non-public
information to a Purchaser without such Purchaser’s consent, the Company hereby
covenants and agrees that such Purchaser shall not have any duty of
confidentiality to the Company, any of its Subsidiaries, or any of their
respective officers, directors, agents, employees or Affiliates, or a duty to
the Company, any of its Subsidiaries or any of their respective officers,
directors, agents, employees or Affiliates not to trade on the basis of, such
material, non-public information, provided that the Purchaser shall remain
subject to applicable law. To the extent that any notice provided pursuant to
any Transaction Document constitutes, or contains, material, non-public
information regarding the Company or any Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report
on Form 8-K. The Company understands and confirms that each Purchaser shall be
relying on the foregoing covenant in effecting transactions in securities of the
Company.

 

4.7              Use of Proceeds. Except as set forth on Schedule 4.7 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and shall not use such proceeds: (a) for
the satisfaction of any portion of the Company’s debt (other than payment of
trade payables in the ordinary course of the Company’s business and prior
practices), (b) for the redemption of any Common Stock or Common Stock
Equivalents, (c) for the settlement of any outstanding litigation or (d) in
violation of FCPA or OFAC regulations.

 

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4.8              Indemnification of Purchasers. Subject to the provisions of
this Section 4.8, the Company will indemnify and hold each Purchaser and its
directors, officers, shareholders, members, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any material breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against the
Purchaser Parties in any capacity, or any of them or their respective
Affiliates, by any stockholder of the Company who is not an Affiliate of such
Purchaser Party, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is solely based upon a material breach
of such Purchaser Party’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings such Purchaser Party
may have with any such stockholder or any violations by such Purchaser Party of
state or federal securities laws or any conduct by such Purchaser Party which is
finally judicially determined to constitute fraud, gross negligence or willful
misconduct) or (c) in connection with any registration statement of the Company
providing for the resale by the Purchasers of the Warrant Shares issued and
issuable upon exercise of the Warrants, the Company will indemnify each
Purchaser Party, to the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys’ fees) and expenses, as incurred,
arising out of or relating to (i) any untrue or alleged untrue statement of a
material fact contained in such registration statement, any prospectus or any
form of prospectus or in any amendment or supplement thereto or in any
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 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 such untrue statements or
omissions are based solely upon information regarding such Purchaser Party
furnished in writing to the Company by such Purchaser Party expressly for use
therein, or (ii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act or any state securities law, or any rule or
regulation thereunder in connection therewith. If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant
to this Agreement, such Purchaser Party shall promptly notify the Company in
writing, and the Company shall have the right to assume the defense thereof with
counsel of its own choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Purchaser Party except to the extent
that (x) the employment thereof has been specifically authorized by the Company
in writing, (y) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (z) in such action there is, in the
reasonable opinion of counsel, a material conflict on any material issue between
the position of the Company and the position of such Purchaser Party, in which
case the Company shall be responsible for the reasonable fees and expenses of no
more than one such separate counsel. The Company will not be liable to any
Purchaser Party under this Agreement (1) for any settlement by a Purchaser Party
effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (2) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party’s
breach of any of the representations, warranties, covenants or agreements made
by such Purchaser Party in this Agreement or in the other Transaction Documents.
The indemnification required by this Section 4.8 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as and when bills are received or are incurred. The indemnity
agreements contained herein shall be in addition to any cause of action or
similar right of any Purchaser Party against the Company or others and any
liabilities the Company may be subject to pursuant to law.

 

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4.9              Reservation of Common Stock. As of the date hereof, the Company
has reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Pre-Funded Warrant Shares and Warrant Shares pursuant to any
exercise of the Pre-Funded Warrants and Warrants, respectively.

 

4.10          Listing of Common Stock. The Company hereby agrees to use best
efforts to maintain the listing or quotation of the Common Stock on the Trading
Market on which it is currently listed, and concurrently with the Closing, the
Company shall apply to list or quote all of the Shares, Pre-Funded Warrant
Shares, and Warrant Shares on such Trading Market and promptly secure the
listing of all of the Shares, Pre-Funded Warrant Shares, and Warrant Shares on
such Trading Market. The Company further agrees, if the Company applies to have
the Common Stock traded on any other Trading Market, it will then include in
such application all of the Shares, Pre-Funded Warrant Shares, and Warrant
Shares, and will take such other action as is necessary to cause all of the
Shares, Pre-Funded Warrant Shares, and Warrant Shares to be listed or quoted on
such other Trading Market as promptly as possible. The Company will then take
all action reasonably necessary to continue the listing and trading of its
Common Stock on a Trading Market and will comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of
the Trading Market. The Company agrees to maintain the eligibility of the Common
Stock for electronic transfer through the Depository Trust Company or another
established clearing corporation, including, without limitation, by timely
payment of fees to the Depository Trust Company or such other established
clearing corporation in connection with such electronic transfer.

 

4.11          Intentionally Omitted.

 

4.12          Subsequent Equity Sales.

 

(a)               From the date hereof until ninety (90) days after the Closing
Date, neither the Company nor any Subsidiary shall issue, enter into any
agreement to issue or announce the issuance or proposed issuance of any shares
of Common Stock or Common Stock Equivalents. Any Purchaser shall be entitled to
obtain injunctive relief against the Company to preclude any such issuance,
which remedy shall be in addition to any right to collect damages.

 

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(b)               From the date hereof until the one year anniversary of the
Closing Date, the Company shall be prohibited from effecting or entering into an
agreement to effect any issuance by the Company or any of its Subsidiaries of
Common Stock or Common Stock Equivalents (or a combination of units thereof)
involving a Variable Rate Transaction. “Variable Rate Transaction” means a
transaction in which the Company (i) issues or sells any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at a
conversion price, exercise price or exchange rate or other price that is based
upon and/or varies with the trading prices of or quotations for the shares of
Common Stock at any time after the initial issuance of such debt or equity
securities, or (B) with a conversion, exercise or exchange price that is subject
to being reset at some future date after the initial issuance of such debt or
equity security or upon the occurrence of specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock or (ii) enters into, or effects a transaction under, any
agreement, including, but not limited to, an equity line of credit, whereby the
Company may issue securities at a future determined price. Any Purchaser shall
be entitled to obtain injunctive relief against the Company to preclude any such
issuance, which remedy shall be in addition to any right to collect damages.

 

(c)               Notwithstanding the foregoing, this Section 4.12 shall not
apply in respect of an Exempt Issuance, except that no Variable Rate Transaction
shall be an Exempt Issuance.

 

4.13          Equal Treatment of Purchasers. No consideration (including any
modification of any Transaction Document) shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of the
Transaction Documents unless the same consideration is also offered to all of
the parties to the Transaction Documents. For clarification purposes, this
provision constitutes a separate right granted to each Purchaser by the Company
and negotiated separately by each Purchaser, and is intended for the Company to
treat the Purchasers as a class and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.

 

4.14          Certain Transactions and Confidentiality. Each Purchaser,
severally and not jointly with the other Purchasers, covenants that neither it
nor any Affiliate acting on its behalf or pursuant to any understanding with it
will execute any purchases or sales, including Short Sales of any of the
Company’s securities during the period commencing with the execution of this
Agreement and ending at such time that the transactions contemplated by the
Transaction Documents are first publicly announced pursuant to the initial press
release as described in Section 4.4.  Each Purchaser, severally and not jointly
with the other Purchasers, covenants that until such time as the transactions
contemplated by the Transaction Documents are publicly disclosed by the Company
pursuant to the initial press release as described in Section 4.4, such
Purchaser will maintain the confidentiality of the existence and terms of this
transaction and the information included in the Disclosure Schedules. 
Notwithstanding the foregoing and notwithstanding anything contained in this
Agreement to the contrary, the Company expressly acknowledges and agrees that
(i) no Purchaser makes any representation, warranty or covenant hereby that it
will not engage in effecting transactions in any securities of the Company after
the time that the transactions contemplated by the Transaction Documents are
first publicly announced pursuant to the initial press release as described in
Section 4.4, (ii) no Purchaser shall be restricted or prohibited from effecting
any transactions in any securities of the Company in accordance with applicable
securities laws from and after the time that the transactions contemplated by
the Transaction Documents are first publicly announced pursuant to the initial
press release as described in Section 4.4 and (iii) no Purchaser shall have any
duty of confidentiality or duty not to trade in the securities of the Company to
the Company or its Subsidiaries after the issuance of the initial press release
as described in Section 4.4.  Notwithstanding the foregoing, in the case of a
Purchaser that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made by the
portfolio managers managing other portions of such Purchaser’s assets, the
covenant set forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement.

 

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4.15          Intentionally Omitted.

 

4.16          Exercise Procedures. The form of Notice of Exercise included in
the Pre-Funded Warrant and Warrants set forth the totality of the procedures
required of the Purchasers in order to exercise the Pre-Funded Warrants and
Warrants. No additional legal opinion, other information or instructions shall
be required of the Purchasers to exercise their Pre-Funded Warrants or Warrants.
Without limiting the preceding sentences, no ink-original Notice of Exercise
shall be required, nor shall any medallion guarantee (or other type of guarantee
or notarization) of any Notice of Exercise form be required in order to exercise
the Pre-Funded Warrants or Warrants. The Company shall honor exercises of the
Pre-Funded Warrants and Warrants and shall deliver Pre-Funded Warrant Shares and
Warrant Shares, respectively, in accordance with the terms, conditions and time
periods set forth in the Transaction Documents.

 

4.17          Form D; Blue Sky Filings. The Company agrees to timely file a Form
D with respect to the Warrant and Warrant Shares as required under Regulation D
and to provide a copy thereof, promptly upon request of any Purchaser. The
Company shall take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to qualify the Warrant and
Warrant Shares for, sale to the Purchasers at the Closing under applicable
securities or “Blue Sky” laws of the states of the United States, and shall
provide evidence of such actions promptly upon request of any Purchaser.

 

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4.18          Registration Statement. The Company shall use commercially
reasonable efforts to cause a registration statement on Form S-1 providing for
the issuance and resale by the Purchasers of the Warrant Shares issued and
issuable upon exercise of the Warrants to become effective 180 days following
the Closing Date and to keep such registration statement effective at all times
until (a) the Warrant Shares are sold under such registration statement or
pursuant to Rule 144 under the Securities Act, (b) the Warrant Shares may be
sold without volume or manner-of-sale restrictions pursuant to Rule 144 under
the Securities Act, and (c) the three (3) year anniversary of the date of the
issuance of the Warrants, whichever is the earliest to occur. Subject to the
accuracy of the information provided by the Purchasers to the Company, the
Company shall ensure that such registration statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein (in the case of
prospectuses, in the light of the circumstances in which they were made) not
misleading. After the date hereof and during any period in which a prospectus or
prospectus supplement relating to any of the Securities subject to registration
under this Section 4.18 is required to be delivered by any Purchaser pursuant to
the Securities Act (including in circumstances where such requirement may be
satisfied pursuant to Rule 172 of the Securities Act), (i) the Company will
notify the Purchasers promptly of the time when any subsequent amendment to such
registration statement, other than documents incorporated by reference, has been
filed with the Commission or has become effective or any subsequent supplement
to the prospectus regarding such Securities or any of the Purchasers or any
subsequent amendment to the prospectus or any supplement or amendment to the
prospectus supplement has been filed with the Commission and of any comment
letter from the Commission or any request by the Commission for any amendment or
supplement to such registration statement, any amendment to the prospectus, any
supplement to the prospectus that relates to the Securities subject to such
registration statement under this Section or any of the Purchasers, or any
amendment or supplement to the prospectus supplement, provided that no
notification of the Purchasers shall be required if such amendment, supplement,
or comment, or request would not, and would not seek, to limit the rights of the
Purchasers or the Warrant Shares, (ii) the Company will prepare and file with
the Commission, promptly upon a Purchaser’s request, any amendments or
supplements to such registration statement, prospectus or prospectus supplement
that, in the Company’s reasonable opinion, may be necessary in connection with
any resale of the Warrant Shares by such Purchaser (provided, however, that the
failure of such Purchaser to make such request shall not relieve the Company of
any obligation or liability hereunder), (iii) the Company will not file any
amendment or supplement to a registration statement, prospectus or prospectus
supplement, other than documents incorporated by reference, relating to the
Warrant Shares subject to registration under this Section 4.18 unless a copy
thereof has been submitted or made available to each Purchaser within a
reasonable period of time before the filing and no Purchaser has reasonably
objected in writing thereto (provided, however, that (A) the failure of any
Purchaser to make such objection shall not relieve the Company of any obligation
or liability hereunder, and (B) the Company has no obligation to provide a
Purchaser any advance copy of such filing or to provide such Purchaser an
opportunity to object to such filing if such filing does not name such Purchaser
or specifically discuss the Warrant Shares subject to registration under this
Section 4.18 as contemplated hereby) and the Company will furnish or make
available to each Purchaser at the time of filing thereof a copy of any document
that upon filing is deemed to be incorporated by reference into a registration
statement, prospectus or prospectus supplement, except for those documents
available via EDGAR, and (iv) the Company will cause each amendment or
supplement to the prospectus or prospectus supplement, other than documents
incorporated by reference, to be filed with the Commission as required pursuant
to the applicable paragraph of Rule 424(b) of the Securities Act. All fees and
expenses incident to the performance of or compliance with, this Section 4.18 by
the Company shall be borne by the Company whether or not any Warrant Shares are
sold pursuant to a registration statement. Notwithstanding anything to the
contrary contained herein, in no event shall the Company be permitted to name
any Purchaser or Affiliate of a Purchaser as an underwriter without the prior
written consent of such Purchaser.

 

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ARTICLE V.

MISCELLANEOUS

 

5.1              Termination.  This Agreement may be terminated by any
Purchaser, as to such Purchaser’s obligations hereunder only and without any
effect whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the other parties, if the Closing has not been
consummated on or before the fifth (5th) Trading Day following the date hereof;
provided, however, that no such termination will affect the right of any party
to sue for any breach by any other party (or parties).

 

5.2              Fees and Expenses. At the Closing, the Company has agreed to
reimburse the Placement Agent the non-accountable sum of $50,000 for its legal
fees and expenses. The Company shall deliver to each Purchaser, prior to the
Closing, a completed and executed copy of the Closing Statement, attached hereto
as Annex A. 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
(including, without limitation, any fees required for same-day processing of any
instruction letter delivered by the Company and any exercise notice delivered by
a Purchaser), stamp taxes and other taxes and duties levied in connection with
the delivery of any Securities to the Purchasers.

 

5.3              Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, the Prospectus and the Prospectus Supplement,
contain the entire understanding of the parties with respect to the subject
matter hereof and thereof and supersede 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.

 

5.4              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 time of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number or email attachment at the email address as set forth on the
signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on
a Trading Day, (b) the next Trading Day after the time of transmission, if such
notice or communication is delivered via facsimile at the facsimile number or
email attachment at the email address as set forth on the signature pages
attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New
York City time) on any Trading Day, (c) the second (2nd) Trading Day following
the date of mailing, if sent by U.S. 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 and communications shall be as set
forth on the signature pages attached hereto. To the extent that any notice
provided pursuant to any Transaction Document constitutes, or contains,
material, non-public information regarding the Company or any Subsidiaries, the
Company shall simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K.

 

5.5              Amendments; Waivers. No provision of this Agreement may be
waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and Purchasers which purchased at
least 67% in interest of the Shares based on the initial Subscription Amounts
hereunder or, in the case of a waiver, by the party against whom enforcement of
any such waived provision is sought, provided that if any amendment,
modification or waiver disproportionately and adversely impacts a Purchaser (or
group of Purchasers), the consent of such disproportionately impacted Purchaser
(or group of Purchasers) shall also be required. 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. Any proposed amendment or waiver
that disproportionately, materially and adversely affects the rights and
obligations of any Purchaser relative to the comparable rights and obligations
of the other Purchasers shall require the prior written consent of such
adversely affected Purchaser. Any amendment effected in accordance with this
Section 5.5 shall be binding upon each Purchaser and holder of Securities and
the Company.

 

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5.6              Headings. 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.

 

5.7              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 each Purchaser (other than by
merger). Any Purchaser may assign any or all of its rights under this Agreement
to any Person to whom such Purchaser assigns or transfers any Securities,
provided that such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction Documents that
apply to the “Purchasers.”

 

5.8              No Third-Party Beneficiaries. The Placement Agent shall be the
third party beneficiary of the representations and warranties of the Company in
Section 3.1 and the representations and warranties of the Purchasers in Section
3.2. This Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.8 and this Section 5.8.

 

5.9              Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced exclusively in the
state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any Action or Proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such
Action or Proceeding is improper or is an inconvenient venue for such
Proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such Action or Proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law. If any party shall commence an Action or Proceeding to enforce
any provisions of the Transaction Documents, then, in addition to the
obligations of the Company under Section 4.8, the prevailing party in such
Action or Proceeding shall be reimbursed by the non-prevailing party for its
reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Action or Proceeding.

 

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5.10          Survival. The representations and warranties contained herein
shall survive the Closing and the delivery of the Securities.

 

5.11          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 each other party, it being understood that the
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf” signature page were an original
thereof.

 

5.12          Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.

 

5.13          Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) any of
the other Transaction Documents, whenever any Purchaser exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in
whole or in part without prejudice to its future actions and rights; provided,
however, that in the case of a rescission of an exercise of a Pre-Funded Warrant
or Warrant, the applicable Purchaser shall be required to return any shares of
Common Stock subject to any such rescinded exercise notice concurrently with the
return to such Purchaser of the aggregate exercise price paid to the Company for
such shares and the restoration of such Purchaser’s right to acquire such shares
pursuant to such Purchaser’s Pre-Funded Warrant or Warrant (including, issuance
of a replacement warrant certificate evidencing such restored right).

 

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5.14          Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof (in the case of mutilation), 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. The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.

 

5.15          Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agree to waive and
not to assert in any Action for specific performance of any such obligation the
defense that a remedy at law would be adequate.

 

5.16          Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

 

5.17          Independent Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser
pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights including, without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
Proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in its review and negotiation of the Transaction
Documents. For reasons of administrative convenience only, each Purchaser and
its respective counsel have chosen to communicate with the Company through EGS.
EGS does not represent any of the Purchasers and only represents the Placement
Agent. The Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by any of the Purchasers. It is expressly
understood and agreed that each provision contained in this Agreement and in
each other Transaction Document is between the Company and a Purchaser, solely,
and not between the Company and the Purchasers collectively and not between and
among the Purchasers.

 

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5.18          Liquidated Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

 

5.19          Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or such right
may be exercised on the next succeeding Business Day.

 

5.20          Construction. The parties agree that each of them and/or their
respective counsel have reviewed and had an opportunity to revise the
Transaction Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of the Transaction Documents or any
amendments thereto. In addition, each and every reference to share prices and
shares of Common Stock in any Transaction Document shall be subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.

 

5.21          WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER
TRIAL BY JURY.

 

(Signature Pages Follow)

 

40

 

 

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

 

SELLAS Life Sciences Group, Inc.  Address for Notice:         By:               
  Name: Angelos M. Stergiou  E-Mail: [__________]   Title: President and Chief
Executive Officer  Fax: [__________] With a copy to (which shall not constitute
notice):   

 

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.   666 Third Avenue   New
York, NY 10017   dabagliebter@mintz.com   Attention:  Daniel Bagliebter, Esq.  

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

41

 

 

[PURCHASER SIGNATURE PAGES TO

SELLAS Life Sciences Group, Inc., SECURITIES PURCHASE AGREEMENT]

 

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

 

Name of Purchaser: ________________________________________________________

 

Signature of Authorized Signatory of Purchaser:
_________________________________

 

Name of Authorized Signatory: _______________________________________________

 

Title of Authorized Signatory: ________________________________________________

 

Email Address of Authorized Signatory: _________________________________________

 

Facsimile Number of Authorized Signatory:
__________________________________________

 

Address for Notice to Purchaser:

 

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

 

 

DWAC for Shares:

 

 

Subscription Amount: $_________________

 

Shares: _________________

 

Warrant Shares: __________________

 

Pre-Funded Warrant Shares: __________________

 

EIN Number: _______________________

 

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

 

 

[SIGNATURE PAGES CONTINUE]

 

42

 

 

 

Annex A

 

CLOSING STATEMENT

 

Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $[___________] of Common Stock,
Pre-Funded Warrants, and Warrants from SELLAS Life Sciences Group, Inc., a
Delaware corporation (the “Company”). All funds will be wired into an account
maintained by the Company. All funds will be disbursed in accordance with this
Closing Statement.

 

Disbursement Date:  January ___, 2020

 

       

 

I.        PURCHASE PRICE

 

  Gross Proceeds to be Received $    

II.       DISBURSEMENTS

 

      $     $     $     $     $     Total Amount Disbursed: $

 

WIRE INSTRUCTIONS:
Please see attached.  

     

Acknowledged and agreed to

this ___ day of January, 2020

 

SELLAS Life Sciences Group, Inc.,

 

By:                   Name: Angelos M. Stergiou Title: President and Chief
Executive Officer

 

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