Document:

ex10-2.htm

Exhibit 10.2

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of January 20, 2017, between Interpace Diagnostics 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 an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), as to the Shares 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.

 

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

 

“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 third Trading Day following the date hereof.

 

“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 $0.01 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 Pepper Hamilton LLP, with offices located at The New York Times Building, 37th Floor, 620 Eighth Avenue, New York, New York 10018-1405.

 

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

 

 

 

 

 

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

 

“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(s).

 

“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, restricted stock units, options or other similar equity securities to employees, consultants (provided that any such securities issued to consultants shall be issued as restricted securities pursuant to Regulation D of the Securities Act), officers or directors of the Company or any Subsidiary pursuant to any equity incentive, 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, (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, or other similar rights, 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), and (c) securities issued pursuant to acquisitions or strategic transactions or agreements approved by a majority of the disinterested directors of the Company, 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 or complementary to 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.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Liens” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other similar restriction.

 

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

 

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(n).

 

“Per Share Purchase Price” equals $4.69, 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).

 

“Placement Agent” means Maxim Group LLC.

 

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

 

 

 

 

 

“Prospectus” means the final 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 4.7.

 

“Registration Statement” means the effective registration statement with Commission file No. 333-207263 which registers the sale of the Shares to the Purchasers.

 

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

“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.

 

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities” means the 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).

 

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Shares 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 Warrants and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

“Transfer Agent” means American Stock Transfer and Trust Company, LLC, the current transfer agent of the Company, with a mailing address of 6201 15th Avenue, Brooklyn, NY 11219, and any successor transfer agent of the Company.

 

“Variable Rate Transaction” shall have the meaning ascribed to such term in Section 4.10(b).

 

“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 at the specified time(s) following the date of issuance and shall have a term of exercise equal to five years, 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 $4,009,950 of Shares 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. The Company shall deliver to each Purchaser its respective Shares and Warrants 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 B attached hereto;

 

 

(iii)     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;     

 

 

(iv)     a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 100% of such Purchaser’s Shares, with an exercise price equal to $4.69, subject to adjustment therein; and

 

 

 (v)     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, as applicable, 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.

 

 

 

 

 

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;

 

(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)

Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

 

(b)

Organization and Qualification. Except as disclosed in Schedule 3.1(b), the Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c)

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

 

 

 

 

 

(d)

No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not have or reasonably be expected to result in a Material Adverse Effect.

 

(e)

Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission of the Prospectus Supplement, (iii) application(s) to each applicable Trading Market for the listing of the Shares and the Warrant Shares for trading thereon in the time and manner required thereby and (iv) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).

 

(f)

Issuance of the Securities; Registration. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer of the Warrants provided for in the Transaction Documents or imposed by applicable securities laws. The Warrant Shares, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer of the Warrants provided for in the Transaction Documents or imposed by applicable securities laws. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement and the Warrants. The Company has prepared and filed the Registration Statement in conformity with the requirements of the Securities Act, which became effective on October 9, 2015 (the “Effective Date”), including the Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement. The Company was at the time of the filing of the Registration Statement eligible to use Form S-3. The Company is eligible to use Form S-3 under the Securities Act and it meets the transaction requirements with respect to the aggregate market value of securities being sold pursuant to this offering in accordance with General Instruction I.B.6. of Form S-3. The Registration Statement is effective under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Prospectus has been issued by the Commission and no proceedings for that purpose have been instituted or, to the knowledge of the Company, are threatened by the Commission. The Company, if required by the rules and regulations of the Commission, shall file the Prospectus with the Commission pursuant to Rule 424(b). At the time the Registration Statement and any amendments thereto became effective, at the date of this Agreement and at the Closing Date, the Registration Statement and any amendments thereto conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus and any amendments or supplements thereto, at time the Prospectus or any amendment or supplement thereto was issued and at the Closing Date, conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

 

 

 

 

(g)

Capitalization. The capitalization of the Company is as set forth on Schedule 3.1(g). Other than as reflected on Schedule 3.1(g), the Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the Company’s equity incentive plans, the issuance of shares of Common Stock to employees, directors or consultants pursuant to the Company’s equity incentive plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as a result of the purchase and sale of the Securities or as disclosed in Schedule 3.1(g), there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock or the capital stock of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents or capital stock of any Subsidiary. The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. There are no securities of the Company or any Subsidiary that have any anti-dilution or similar adjustment rights (other than adjustments for stock splits, recapitalizations, and the like) to the exercise or conversion price, have any exchange rights, or reset rights. Except as disclosed in Schedule 3.1(g), there are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance in all material respects with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

(h)

SEC Reports; Financial Statements. Except as disclosed in Schedule 3.1(h), the Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with the Prospectus and the Prospectus Supplement, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company has never been an issuer subject to Rule 144(i) under the Securities Act. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

 

 

 

 

(i)

Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as reflected or specifically disclosed in a subsequent SEC Report filed prior to the date hereof, (i) there has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any material liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company equity incentive plans or as reflected in Schedule 3.1(g). The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to the date that this representation is made.

 

(j)

Litigation. There is no action, suit, inquiry, notice of violation or proceeding pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) would, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Except as disclosed in Schedule 3.1(j), neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

(k)

Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which would reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

 

 

 

 

(l)

Compliance. Except as disclosed in the SEC Reports and as set forth on Schedule 3.1(l), neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as would not have or reasonably be expected to result in a Material Adverse Effect.

 

(m)

Environmental Laws. The Company and its Subsidiaries (i) are in compliance in all material respects with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”); (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval where in each clause (i), (ii) and (iii), the failure to so comply would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(n)

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

 

(o)

Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance in all material respects.

 

(p)

Intellectual Property. To the knowledge of the Company, the Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or required for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or be abandoned, within two (2) years from the date of this Agreement, except where such action would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as would not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has no knowledge that it lacks or will be unable to obtain any rights or licenses to use all Intellectual Property Rights that are necessary to conduct its business.

 

 

 

 

 

(q)

Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a significant increase in cost.

 

(r)

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

 

(s)

Sarbanes-Oxley; Internal Accounting Controls. The Company and the Subsidiaries are in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective and applicable to the Company as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. Except as set forth in the SEC Reports, the Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.

 

 

 

 

 

(t)

Certain Fees; FINRA Affiliation. Except as set forth in the Prospectus Supplement, no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 3.1(t) that may be due in connection with the transactions contemplated by the Transaction Documents. Except for the Placement Agent, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to (i) any person, as a finder’s fee, investing fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who provided capital to the Company, (ii) any FINRA member, or (iii) any person or entity that has any direct or indirect affiliation or association with any FINRA member within the 12-month period prior to the date on which the Registration Statement was filed with the Commission (the “Filing Date”) or thereafter. To the Company’s knowledge, no (i) officer or director of the Company or its subsidiaries, (ii) owner of 5% or more of the Company’s unregistered securities or that of its subsidiaries or (iii) owner of any amount of the Company’s unregistered securities acquired within the 180-day period prior to the Filing Date, has any direct or indirect affiliation or association with any FINRA member. The Company will advise the Placement Agent and their respective counsel if it becomes aware that any officer, director or stockholder of the Company or its subsidiaries is or becomes an affiliate or associated person of a FINRA member participating in the Offering.

 

(u)

Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. 

 

(v)

Registration Rights. Except as reflected in Schedule 3.1(v), 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.

 

(w)

Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. Except as disclosed in the SEC Reports, the Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. Except as disclosed in the SEC Reports, the Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Common Stock is currently eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

 

(x)

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

 

 

 

 

 

(y)

Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed in the Prospectus Supplement. The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.

 

(z)

No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company or any Person acting on its behalf, nor, to the Company’s knowledge, any of the Company’s Affiliates or any Person acting on their behalf, has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act under which the registration of the Warrants or Warrant Shares would be required or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

 

(aa)

Solvency. Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, may be insufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). Except as set forth on Schedule 3.1(aa), the Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Schedule 3.1(aa) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Except as set forth on Schedule 3.1(l), neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

(bb)

Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, or as set forth on Schedule 3.1(bb), each of the Company and its Subsidiaries (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.

 

 

 

 

 

(cc)

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

 

(dd)

Accountants. The Company’s accounting firm is set forth on Schedule 3.1(dd) of the Disclosure Schedules. To the knowledge and belief of the Company, such accounting firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal year ending December 31, 2016.

 

(ee)

Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

(ff)

Acknowledgement Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(f) and 4.14 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term; (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities; (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently may have a “short” position in the Common Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, and (z) such hedging activities (if any) could reduce the value of the existing stockholders’ equity interests in the Company at and after the time that the hedging activities are being conducted.  The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.

 

 

 

 

 

(gg)

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

 

(hh)

FDA. As to each product, if any, subject to the jurisdiction of the U.S. Food and Drug Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act, as amended, and the regulations thereunder (“FDCA”) that is manufactured, packaged, labeled, tested, distributed, sold, and/or marketed by the Company or any of its Subsidiaries (each such product, a “Pharmaceutical Product”), such Pharmaceutical Product is being manufactured, packaged, labeled, tested, distributed, sold and/or marketed by the Company in compliance with all applicable requirements under FDCA 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, labeling, advertising, record keeping and filing of reports, except where the failure to be in compliance would not have a Material Adverse Effect. 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, investigation or complaint) against the Company or any of its Subsidiaries, and none of the Company or any of its Subsidiaries has received any notice, warning letter or other communication from the FDA or any other governmental entity, 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 Pharmaceutical Product, (ii) withdraws its approval of, requests the recall, suspension, or seizure of, or withdraws or orders the withdrawal of advertising or sales promotional materials relating to, any Pharmaceutical Product, (iii) imposes a clinical hold on any clinical investigation by the Company or any of its Subsidiaries, (iv) enjoins production at any facility of the Company or any of its Subsidiaries, (v) enters or proposes to enter into a consent decree of permanent injunction with the Company or any of its Subsidiaries, or (vi) 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 have been and are being conducted in all material respects in accordance with all applicable laws, rules and regulations of the FDA.  The Company has not been informed by the FDA that the FDA will prohibit the marketing, sale, license or use in the United States of any product proposed to be developed, produced or marketed by the Company nor has the FDA expressed any concern as to approving or clearing for marketing any product being developed or proposed to be developed by the Company. There are no legal or governmental proceedings relating to the FDCA, the Public Health Service Act or any regulations of the FDA pending or threatened in writing to which the Company is a party, nor is it aware of any violations of such acts or regulations by the Company, which would reasonably be expected to have a Material Adverse Effect.

 

(ii)

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

 

(jj)

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

 

(kk)

Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”), and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

 

 

 

 

(ll)

Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.

 

(mm)

Share Option Plans. Each share option granted by the Company under the Company’s share option plans was granted (i) in accordance with the terms of the Company’s share option plans and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such share option would be considered granted under GAAP and applicable law. No share option granted under the Company’s share option plan has been backdated. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, share options prior to, or otherwise knowingly coordinate the grant of share options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.

 

(nn)           Private Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Warrants or the Warrant Shares by the Company to the Purchasers as contemplated hereby.

 

(oo)           No General Solicitation. 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.

 

(pp)           No Disqualification Events. 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.

 

(qq)           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.

 

(rr)           Notice of Disqualification Events. 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. 

 

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)

No Conflicts. The execution, delivery and performance by such Purchaser of the Transaction Documents to which it is a party and the consummation by such Purchaser of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents, if any, of such Purchaser or (ii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Purchaser, except for such violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of such Purchaser to perform its obligations hereunder.

 

 

 

 

 

(c)

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).

 

(d)

Independent Investment Decision. Such Purchaser has independently evaluated the merits of its decision to purchase Securities pursuant to the Transaction Documents, and such Purchaser confirms that it has not relied on the advice of any other Purchaser or party’s business advisors and/or legal counsel in making such decision. Such Purchaser understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to the Purchaser in connection with the purchase of the Securities constitutes legal, tax or investment advice. Such Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Securities.

 

(e)

 

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. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act. Such Purchaser has a substantive, pre-existing relationship with the Company and/or the Placement Agent.

 

(f)

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. The Purchaser understands that there is no established market for the Warrants, nor is any such market expected to develop.

 

(g)

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 SEC Reports 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.  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. 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.

 

 

 

 

 

(h)

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 the identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future.

 

(i)

 

Such Purchaser acknowledges and agrees that neither the Company nor any other Person has made any oral representation or warranty as to the Company or this Agreement.

 

(j)

 

No Governmental Review. Such Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

 

(k)

 

Brokers and Finders. Other than the Placement Agent, no broker or finder has acted for the Purchaser in connection with its purchase of any Security and no broker or finder is entitled to any broker’s or finder’s fees or other commissions in connection therewith based on agreements between the Purchaser and any broker or finder.

 

(l)

 

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 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.

 

 

 

 

  

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

 

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, or (iii) if such Warrant Shares are eligible for sale under Rule 144, 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 promptly if required by the Transfer Agent to effect the removal of the legend hereunder. 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 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) three 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 earlier 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. Certificates for 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.

 

(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         

 

	 	
(a)
	
Until the earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants have expired, the Company covenants to use commercially reasonable efforts to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and 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.

 

(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 one and one-half percent (1.5%) 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) within one hour following the execution of this Agreement, 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 or subsequent filings by the Company 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).

 

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.

 

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 based upon a 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 constitutes fraud, gross negligence, willful misconduct or malfeasance). 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 (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) 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 (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) 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; provided, however, that no Purchaser shall be entitled to any double recovery of damages as a result of the exercise of any other such right.

 

 

 

 

 

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 Warrant Shares pursuant to any exercise of the Warrants. 

 

4.10

Listing of Common Stock. Except as set forth on Schedule 4.10 attached hereto, the Company hereby agrees to use commercially reasonable 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 and Warrant Shares on such Trading Market and promptly secure the listing of all of the 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 and Warrant Shares, and will take such other action as is necessary to cause all of the 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 such other 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

 

Subsequent Equity Sales.

 

(a)

From the date hereof until January 27, 2017, 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.

 

(b)

From the date hereof until January 27, 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.

 

Notwithstanding the foregoing, this Section 4.11 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.

 

 

 

 

 

4.12

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.

 

4.13

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 this Agreement 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 this Agreement 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 this Agreement 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 this Agreement 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.

 

4.14  

              Exercise Procedures. The form of Notice of Exercise included in the Warrants set forth the totality of the procedures required of the Purchasers in order to exercise the Warrants. No additional legal opinion, other information or instructions shall be required of the Purchasers to exercise their 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 Warrants. The Company shall honor exercises of the Warrants and shall deliver Warrant Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

 

4.15       Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Warrants 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.

 

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 January 24, 2017; 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 for all reasonable expenses (including, without limitation, reasonable fees and disbursements of the Placement Agent’s counsel and all reasonable travel and other out-of-pocket expenses) incurred by the Placement Agent in connection with the transaction contemplated by the Transaction Documents. 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 fees and expenses incident to the performance of or compliance with the issuance of the Securities, including without limitation (a) all registration and filing fees and expenses, including without limitation those related to filings with the Commission, any Trading Market, any required filing with FINRA by the Placement Agent, and in connection with applicable state securities or Blue Sky laws, (b) printing expenses, (c) messenger, telephone and delivery expenses, (d) fees and disbursements of counsel for the Company, (e) reasonable fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, and (f) all listing fees to be paid by the Company to the Trading Market. The Company shall also pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company), 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 date of transmission, if such notice or communication is delivered via facsimile or email attachment at the facsimile number or 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 date of transmission, if such notice or communication is delivered via facsimile or email attachment at the facsimile number or 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 50.1% 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 accordance with this Section 5.5 shall be binding upon each Purchaser and holder of Securities and the Company.

 

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 4.7 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 4.7, 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.

 

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 (including all applicable grace or cure periods), 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 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 Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).

 

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 Maxim Group LLC. 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.

 

 

 

 

 

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)

 

 

 

 

 

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.

 

 

	
INTERPACE DIAGNOSTICS GROUP, INC.
	
 
	
Address for Notice:

	
 
	
 
	
 

	
 
	
 
	
 

	
By:
	
 
	
 
	
Fax:

	
 
	
Name:
Title:
	
 
	
 

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

 

 

 

 

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

 

 

 

 

[PURCHASER SIGNATURE PAGES TO 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 Securities to Purchaser (if not same as address for notice):

 

 

 

 

 

Subscription Amount: $_________________

 

Shares: _________________

 

Warrants: _________________

 

EIN Number: _______________________

 

☐  Notwithstanding anything contained in this Agreement to the contrary, by checking this box (i) the obligations of the above-signed to purchase the securities set forth in this Agreement to be purchased from the Company by the above-signed, and the obligations of the Company to sell such securities to the above-signed, shall be unconditional and all conditions to Closing shall be disregarded, (ii) the Closing shall occur on the third (3rd) 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]

 

 

 

 

 

Annex A

 

CLOSING STATEMENT

 

Pursuant to the attached Securities Purchase Agreement, dated as of the date hereof, the purchasers shall purchase up to $[_______] of Common Stock and Warrants from Interpace Diagnostics 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 [  ], 2017

 

 

	
 
	
 

	
I.   PURCHASE PRICE
	
 

	
 
	
 

	
 
	
Gross Proceeds to be Received
	
$

	
 
	
 

	
II.  DISBURSEMENTS

 
	
 

	
 
	
 
	
$

	
 
	
 
	
$

	
 
	
 
	
$

	
 
	
 
	
$

	
 
	
 
	
$

	
 
	
 

	
Total Amount Disbursed:
	
$

	
 
	
 

	
 
	
 

	
 
	
 

	
WIRE INSTRUCTIONS:
	
 

	
 
	
 

	
 
	
 

	
To: _____________________________________

 

 

 

 
	
 

	
To: _____________________________________ 
	
 

 

 

 

 

 

dISCLOSURE schedules
to
securities purchase agreement 

 

This document and any attachments hereto constitute the Disclosure Schedules referred to in the Securities Purchase Agreement (the “Agreement”), dated as of January 20, 2017, between Interpace Diagnostics Group Inc., a Delaware corporation (the “Company”), and each purchaser identified on the signature pages thereto. Capitalized terms used and not otherwise defined herein shall have the respective meanings ascribed to such terms as set forth in the Agreement.

 

The numbered sections and subsections referenced in this Disclosure Schedule correspond to the numbered sections and subsections of the Agreement. The headings in this Disclosure Schedule are for reference purposes only and are not a part of the responses to representations or warranties or a qualification of the representations and warranties of the Company set forth in the Agreement.

 

Notwithstanding anything to the contrary contained in this Disclosure Schedule or in the Agreement, the information and disclosures contained in any section of this Disclosure Schedule shall be deemed to be disclosed and incorporated by reference in any other section of this Disclosure Schedule as though fully set forth in such other section for which applicability of such information and disclosure is readily apparent on its face. The fact that any item of information is disclosed in any section of this Disclosure Schedule shall not be construed to mean that such information is required to be disclosed by the Agreement. Such information and the dollar thresholds set forth in the Agreement shall not be used as a basis for interpreting the terms “material” or “Material Adverse Effect” or similar terms whether used in the Agreement or otherwise.  

 

 

 

 

  

SCHEDULE 3.1(a)

 

SUBSIDIARIES 

 

	
 
	
1.
	
Interpace Diagnostics, LLC, a Delaware limited liability company, is a wholly-owned subsidiary of Interpace Diagnostics Group, Inc.

	
 
	
2.
	
Interpace BioPharma, LLC, a New Jersey limited liability company, is a wholly-owned subsidiary of Interpace Diagnostics Group, Inc.

	
 
	
3.
	
Group DCA, LLC, a Delaware limited liability company, is a wholly-owned subsidiary of Interpace Diagnostics Group, Inc.

	
 
	
4.
	
Interpace Diagnostics Corporation, a Delaware corporation, is a wholly-owned subsidiary of Interpace Diagnostics, LLC.

	
 
	
5.
	
Interpace Diagnostics Lab Inc. (f/k/a JS Genetics, Inc.), a Delaware corporation, is a wholly-owned subsidiary of Interpace Diagnostics, LLC.

  

 

 

 

  

SCHEDULE 3.1(b)

 

ORGANIZATION AND QUALIFICATION 

 

	
 
	
 
	
None.

  

 

 

 

  

SCHEDULE 3.1(g)

 

CAPITALIZATION 

 

	
Common Stock
	
Restricted Stock
Units
	
Stock Appreciation
Rights
	
Options
	
Total

	
  
	
  
	
  
	
  
	
  

	
2,806,252
	
102,369
	
102,680
	
87,871
	
3,099,172

  

 

 

 

  

SCHEDULE 3.1(h)

 

SEC REPORTS; FINANCIAL STATEMENTS 

 

	
 
	
1.
	
Current Report on Form 8-K filed on October 13, 2016

  

 

 

 

  

SCHEDULE 3.1(j)

 

LITIGATION 

 

	
 
	
1.
	
On May 27, 2016, Michael J. Swann, one of the Company’s former employees, filed a complaint against the Company in the Court of Common Pleas of the Fifth Judicial Circuit in South Carolina in a matter entitled Michael J. Swann v. Akorn, Inc., and Interpace Diagnostic Group Inc. (Civil Action No. 2016-CP-40-03362). In the complaint, Mr. Swann alleges, among other things, that he was discriminated against and wrongfully terminated as a member of a sales force marketing pharmaceutical products of Akorn, Inc., because of an illness suffered by Mr. Swann. Mr. Swann alleges that he was discriminated against in violation of the Americans with Disabilities Act/Americans with Disabilities Act Amendments Act and the Family Medical Leave Act and seeks damages for back pay, reinstatement, front pay, compensatory and punitive damages in an amount not less than $300,000, attorney’s fees and costs. The Company denies that it is liable to Mr. Swann for any of the claims asserted and intends to vigorously defend itself against those claims.

 

 

	
 
	
2.
	
The Company received a letter dated August 29, 2016 (the “Letter”) from Douglas S. Bramley of the law firm McMoran, O’Connor & Bramley representing Nancy Lurker in connection with the Agreement and General Release she signed with the Company on or about December 22, 2015. The Letter alleges that $1,331,275 in severance and incentive compensation was due and payable to Ms. Lurker on or before June 23, 2016. The Letter threatened to take legal action to protect Ms. Lurker’s rights under the Agreement if not remedied. The Company responded through its counsel by letter dated September 13, 2016. Ms. Lurker agreed to accept 35% of the total severance obligation due to her if the payment is received by March 1, 2017. She has also agreed to execute a release of the Company and its directors, officers and agents.

 

 

	
 
	
3.
	
The Company received an e-mail dated November 7, 2016 from Julie A. Uebler of the law firm Uebler Law LLC representing Frank Arena, Jennifer Leonard, and Gerry Melillo in connection with their respective Separation Agreements with the Company. The e-mail indicated that it was an attempt to exhaust all pre-litigation efforts to resolve the matter and attached a copy of a draft complaint alleging a breach of contract claims relating to their respective Separation Agreements.  Mr. Arena, Ms. Leonard and Mr. Melillo have each agreed to accept 35% of the total severance obligations due them if the payment is received by each of them by March 1, 2017. They have agreed to execute releases of the Company and its directors, officers and agents.

 

 

 

 

  

SCHEDULE 3.1(l)

 

COMPLIANCE  

 

	
 
	
1.
	
The Company received a Notice of Default dated December 12, 2016 for non-payment of November and December rent for its Parsippany, New Jersey facility (“the Parsippany Lease”), which has been substantially vacant since the sale of the Company’s CSO operations in December 2015. In the notice, the landlord stated the amount of rent due, $112,519.19, had been deducted from a security deposit of $136,975.25. The Company paid the past due November 2016 rent and negotiations are underway to obtain a waiver of default and to replenish the deposit amount. The landlord is also assisting the Company to procure a smaller space more suitable and affordable to match the Company’s current needs. The lease term for the existing property ends on June 30, 2017.

 

 

	
 
	
2.
	
Pursuant to the terms of the Company’s Credit and Security Agreement dated September 28, 2016 with SCM Specialty Finance Opportunities Fund, L.P. (the “Credit Agreement”), the default under the Parsippany Lease creates a cross-default under the Credit Agreement. The Company has not yet drawn down on the credit facility, as it is negotiating revisions to certain covenants in the Credit Agreement, and the Company will not be permitted to draw down under the credit facility until the default referred to above is cured.

 

 

	
 
	
3.
	
The Company has outstanding severance obligations in the amount of $2.9 million due to five former senior executives in connection with their respective separation agreements.  The five executives have agreed to accept 35% of the total severance obligations if the payment is received by each of the severance holders by March 1, 2017. The Company intends to use approximately $1.028 million of the proceeds of the investment contemplated by this offering to satisfy the obligations due to the five former senior executives once releases of the Company and its directors, officers and agents are executed.

 

 

	
 
	
4.
	
See Item 3 of Schedule 3.1(a)(a), which is incorporated herein by reference.

 

 

	
 
	
5.
	
The Company received a notice, dated December 9, 2016, indicating that it is in default of amounts owed totaling € 177,262.50 under the Research Agreement for Human Tissue Study with Academisch Medisch Centrum. The Company is in the process of negotiating payment terms for the liability. 

 

 

	
 
	
6.
	
The Company received a Notice of Default dated December 16, 2016 for non-payment of December rent in the amount of $30,666.67 and an additional amount of $3,616.48 (a portion of which relates to November rent, plus a late fee of $900 for failing to timely pay December rent) for its Pittsburgh, Pennsylvania facility. The Company has since paid the December 2016 rent but has not yet paid rent due January 1, 2017.

  

 

 

 

  

SCHEDULE 3.1(o)

 

TITLE TO ASSETS 

 

	
 
	
1.
	
In connection with the Company’s acquisition of RedPath Integrated Pathology, Inc. (“RedPath”) on October 31, 2014, the Company, its subsidiary, Interpace Diagnostics, LLC and RedPath Equityholder Representative, LLC entered into that certain Non-Negotiable Subordinated Secured Promissory Note, dated as of October 31, 2014 (the “Note”) in favor of RedPath Equityholder Representative, LLC on behalf of the former equityholders of RedPath. The obligations of the Company under the Note are guaranteed by the Company and its subsidiaries pursuant to a Guarantee and Collateral Agreement pursuant to which the Company and its subsidiaries also granted a security interest in substantially all of their respective assets, including intellectual property, to secure their obligations to RedPath Equityholder Representative, LLC.

 

 

	
 
	
2.
	
See Item 1 of Schedule 3.1(l), which is incorporated herein by reference.

  

 

 

 

  

SCHEDULE 3.1(v)

 

REGISTRATION RIGHTS

 

 

None. 

 

 

 

 

  

SCHEDULE 3.1(a)(a)

 

SOLVENCY

 

	
 
	
1.
	
Below is the Company’s Current Liabilities, non-Trade Payables for over $50,000 as of January 20, 2017

 

	
Interpace Diagnostics Group
	
  
	
  
	
  
	
  
	
 

	
Portion of 10Q Total Current Liabilities, non-Trade Payables and >$50,000 (Estimates – All figures are in thousands)
	
  

	
20-Jan-17
	
  
	
  
	
  
	
  
	
  
	
  

	
Discontinued Operations
	
  
	
01/20/17
	
  
	
Continuing Operations
	
01/20/17 
	
  

	
  
	
  
	
  
	
  
	
Current portion of RedPath debt
	
       3,757 
	
  

	
Purdue
	
  
	
              567 
	
  
	
Accrued Severance to Executives, CSO divestiture
	
      777 
	
  

	
Greer
	
  
	
              339 
	
  
	
Accrued professional fees (Pepper, BDO, KPMG, etc.)
	
       1,634 
	
  

	
CSO vendor terminations
	
  
	
              249 
	
  
	
Indemnification liability
	
           875 
	
  

	
ARI
	
  
	
              238 
	
  
	
DOJ settlement 
	
           580 
	
  

	
Due to Publicis
	
  
	
              206 
	
  
	
Unclaimed property
	
           544 
	
  

	
Veeva
	
  
	
              256 
	
  
	
AMC Rebus
	
           195 
	
  

	
Akorn
	
  
	
              106 
	
  
	
Quadax
	
           332 
	
  

	
C3I
	
  
	
              228 
	
  
	
Washington St Univ
	
           107 
	
  

	
  
	
  
	
  
	
  
	
Ohio St Foundation
	
             82 
	
  

	
  
	
  
	
 
	
  
	
Rent 
	
           110 
	
  

	
  
	
  
	
  
	
  
	
Contingent Consideration - short term
	
           184 
	
  

	
Subtotal
	
  
	
           2,189 
	
  
	
Subtotal
	
       9,177
	
  

	
  
	
  
	
  
	
  
	
  
	
  
	
  

	
ERT bonus
	
  
	
              545 
	
  
	
Long Term Portion of RedPath debt
	
       4,485 
	
  

	
CSO severance
	
  
	
              306 
	
  
	
Contingent Consideration - long term
	
     17,691 
	
  

	
Total Liabilities - Disc Ops
	
  
	
          3,040 
	
  
	
Uncertain tax positions
	
       3,556 
	
  

	
  
	
  
	
  
	
  
	
DOJ Settlement - long term
	
       1,000 
	
  

	
  
	
  
	
  
	
  
	
Other
	
             59 
	
  

	
  
	
  
	
  
	
  
	
  
	
  
	
  

	
Continuing Operations
	
     35,968 
	
  
	
  
	
  
	
  
	
  

	
Discontinued Operations
	
       3,040 
	
  
	
  
	
Total Liabilities - Continuing Ops
	
     35,968 
	
  

	
Total liabilities > $50,000
	
     39,008 
	
  
	
  
	
  
	
  
	
  

 

 

 

 

  

SCHEDULE 3.1(a)(a) (Continued)

 

SOLVENCY 

 

 

	
 
	
2.
	
In connection with our acquisition of RedPath on October 31, 2014, we entered into the Note. On November 16, 2016, the Note was further amended to, among other things, extend the due date for the first quarterly payment until December 31, 2016. Subsequent payments are to be made on the first day of each fiscal quarter, beginning on April 1, 2017. We made our first payment due under the Note of $1,333,750 on December 29, 2016. The Company may have the funds to make the April 1, 2017 payment but is uncertain of its ability to make any subsequent payments. In the event we do not raise sufficient equity or debt capital to enable us to make the April 1st payment or future payment when due, RedPath Equityholder Representative, LLC may determine at such times to begin foreclosure proceedings, bankruptcy proceedings or similar proceedings or pursue other remedies available to it.

 

 

 

 

  

SCHEDULE 3.1(a)(a) (Continued)

 

SOLVENCY

 

	
 
	
3.
	
Below is a summary of outstanding royalty payments as of November 30, 2016 

   

	
Royalties estimated through November 30, 2016      
	
 
	
ThygenX

(mirInform)
	
Thyramir
	
Pancramir

	
 
	
 
	
Totals
	
 
	
 
	
Method for calculation 
	
 
	
Max
	
Stacked
	
Max
	
Stacked
	
Max
	
Stacked

	
Johns Hopkins
	
 
	
 143,954
	
 
	
 
	
See table,/use stacked rate
	
 
	
4.00%
	
2.00%
	
4.00%
	
2.00%
	
N/A
	
N/A

	
Wellcome Trust
	
 
	
 52,846
	
 
	
 
	
See table,/use stacked rate
	
 
	
2.25%
	
1.13%
	
2.25%
	
1.13%
	
N/A
	
N/A

	
Brigham & Women's
	
 
	
 187,904
	
 
	
 
	
See table,/use stacked rate
	
 
	
6.00%
	
4.00%
	
6.00%
	
4.00%
	
N/A
	
N/A

	
Exiqon
	
 
	
  71,875
	
 
	
 
	
See table,/use stacked rate
	
 
	
N/A
	
N/A
	
6.00%
	
3.00%
	
N/A
	
N/A

	
CPRIT
	
 
	
 70,463
	
 
	
 
	
See table,/use stacked rate
	
 
	
5.00%
	
1.50%
	
5.00%
	
1.50%
	
5.00%
	
1.50%

	
Ohio St Innovation Foundation
	
 
	
 50,000
	
 
	
 
	
Invoiced
	
 
	
N/A
	
N/A
	
N/A
	
N/A
	
4.00%
	
4.00%

	
Asuragen
	
 
	
 128,712
	
 
	
 
	
3.5% of ThyGenx, ThyraMir, & Mirinform
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 705,753
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

  

 

	
 
	
4.
	
In September 2016, the Company stopped making payments pursuant to certain payment plans it had entered into with certain vendors for outstanding claims with an aggregate amount of $1.8 million.  

  

 

 

 

  

SCHEDULE 3.1(b)(b)

 

TAX STATUS

 

 

The Company has approximately $226,000 of outstanding state tax liabilities known to be claimed due by the taxing authority of various state jurisdictions. 

 

 

 

 

  

SCHEDULE 3.1(d)(d)

 

ACCOUNTANTS

 

 

BDO USA, LLP 

 

 

 

 

  

SCHEDULE 4.6

 

USE OF PROCEEDS 

 

 

The Company intends to use the net proceeds from this offering for working capital, repayment of indebtedness and general corporate purposes. In addition, the Company intends to use approximately $1.028 million of the proceeds of the investment contemplated by this offering in settlement of outstanding severance obligations due to five former senior executives once releases of the Company and its directors, officers and agents are executed.

 

 

 

 

  

SCHEDULE 4.10

 

LISTING OF COMMON STOCK 

 

 

As previously disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 29, 2016, the Company is non-compliant with the NASDAQ stockholders’ equity requirement of $2.5 million, as set forth in Listing Rule 5550(b)(1). The Company was given until January 9, 2017 to submit a compliance plan for the NASDAQ staff’s consideration and timely submitted its compliance plan to NASDAQ on such date. The NASDAQ staff will consider the Company’s plan for regaining compliance with the stockholders’ equity requirement and has the discretion to grant the Company an additional extension of time not to exceed May 22, 2017. If the NASDAQ staff determines not to grant the Company’s request for an additional extension of time to regain compliance with the stockholders’ equity requirement, or if the Company does not regain compliance within any additional extension of time granted by the staff, the Company would at that time receive a delisting notice. Upon the receipt of such delisting notice, the Company would have the right to request a hearing before the Nasdaq Listing Qualifications Panel (the “Panel”) which, would result in an automatic stay of any suspension or delisting action pending the issuance of the Panel decision following the hearing and the expiration of any additional extension granted by the Panel. In the event that the Company does request a hearing, there can be no assurance that the Company would be successful in maintaining its listing on The Nasdaq Capital Market.

 

As previously disclosed in the Company’s Current Report on Form 8-K filed on October 4, 2016, Heinrich Dreismann, Ph.D., resigned as a member of the Board of Directors of the Company effective as of September 30, 2016. In connection with Dr. Dreismann’s resignation and to comply with Nasdaq Listing Rule 5605(c)(4)(B), on October 5, 2016, the Company notified NASDAQ that, as a result of the vacancy on the Audit Committee of the Board of Directors of the Company (the “Audit Committee”) created by Dr. Dreismann’s resignation, the Audit Committee only has two members and the Company was not in compliance with Nasdaq Listing Rule 5605(c)(2)(A), which requires the Audit Committee be comprised of at least three members. In response to the Company’s notice, NASDAQ issued a letter to the Company on October 6, 2016 acknowledging the Company’s notice that it was no longer in compliance with the audit committee requirements set forth in Nasdaq Listing Rule 5605(c)(2)(A). In its letter, NASDAQ notified the Company that it can rely on the cure period provided by Nasdaq Listing Rule 5605(c)(4), which allows the Company until the earlier of (i) the Company’s next annual meeting of stockholders or (ii) October 2, 2017 to regain compliance, or, if the next annual meeting of stockholders is held before March 29, 2017, then the Company must evidence compliance no later than March 29, 2017. The Company intends to appoint an additional independent director to its Board of Directors and to the Audit Committee prior to the end of the cure period.10.1

Exhibit 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of January 16, 2017, (the “Effective Date”) by and between SCG Financial Merger I Corp., a Delaware corporation (together with any successor thereto, the “Company”), and Robert Michelson (“Executive”).

RECITALS

WHEREAS, Executive and the Company have previously entered into that certain Executive Employment Agreement dated July 22, 2014 (the “Prior Agreement”);

WHEREAS, Executive is employed by the Company as its Chief Executive Officer, and possesses significant knowledge and information with respect to the Company’s business, which knowledge and information includes trade secrets of the Company and which will be increased, developed and enhanced through Executive’s continued employment by the Company; and

WHEREAS, the term of the Prior Agreement will expire by its own terms effective as of January 22, 2016 and the parties hereto desire to enter into an agreement for the Company’s continued employment of Executive on the terms and conditions contained in this Agreement;

NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.

Representations and Warranties.  Executive represents and warrants to the Company that (a) other than with respect to the Company, Executive is not bound by any restrictive covenants and has no prior or other obligations or commitments of any kind (written, oral or otherwise) that would in any way prevent, restrict, hinder or interfere with Executive’s acceptance of employment with the Company or the performance of all duties and responsibilities hereunder to the fullest extent of Executive’s ability and knowledge, and (b) Executive has full power and capacity to execute and deliver, and to perform all of Executive’s obligations under, this Agreement.

2.

Term.  Unless otherwise terminated as provided herein, the term of employment pursuant to this Agreement will be for a period of two years, commencing on the Effective Date (the “Term”); provided that Executive’s employment pursuant to this Agreement may be extended upon the mutual agreement of Executive and the Company and to the extent extended, the Term will include all such extension periods.

3.

Duties.  Executive will hold the office of Chief Executive Officer of the Company, the Parent (as defined below) and each of its subsidiaries (“CEO”).   Executive will have such duties, responsibilities, functions and authority consistent with the position of chief executive officer, as may be assigned, from time to time, by and subject to the direction and supervision of, and shall report to, the Company’s Executive Chairman or if there is no Executive Chairman or the Executive Chairman is unavailable the Company’s board of directors (the “Board”), including, in Executive’s capacity as CEO, such duties and responsibilities to the Company, the subsidiaries of the Company and RMG Networks Holding Corporation, a Delaware corporation (the “Parent”), consistent with the position of chief executive officer, as may be assigned, from time to time, by and subject to the direction and supervision of the Company’s Executive Chairman or the Board.  During the period of employment, Executive will serve as a member of the Board, and a member of the board of directors of the Parent and each of its other subsidiaries. All officers of the Parent, the Company and their subsidiaries shall report to Executive or his designee, notwithstanding the foregoing, the Company’s Executive Chairman shall have direct and immediate access to all Parent, Company and subsidiary employees. During the period of employment, and excluding any periods of vacation or personal leave to which Executive is entitled, (i) Executive will render Executive’s services on a full-time basis to the Company, primarily at the Company’s facility in and around Dallas, Texas, (ii) Executive will apply on a full-time basis all of Executive’s skill and experience to the performance of Executive’s duties, and (iii) Executive may have no other employment and, without the prior written consent of the Company (not to be unreasonably withheld or delayed), no outside business activities (provided that the management of Executive’s personal or family assets and affairs and Executive’s time spent on charitable activities will not be deemed outside activities so long as such activities do not significantly interfere with Executive’s performance of duties under this Agreement).  Executive will perform Executive’s duties under this Agreement with fidelity and loyalty to the Company, to the best of Executive’s ability, experience and talent in a diligent, trustworthy, businesslike and efficient manner consistent with Executive’s duties and responsibilities and in accord with best practices within the Company’s industry.  So long as they are not inconsistent with the terms of this Agreement, Executive shall also comply with all policies, rules and regulations of the Company as well as all lawful directives and instructions from the Company’s Executive Chairman or the Board of the Parent.  The Company shall have the right to purchase in Executive’s name a “key man” life insurance policy naming the Company and any of its subsidiaries as the sole beneficiary thereunder, and Executive agrees to cooperate with the Company’s procurement of such policy, provided that any information provided to an insurance company or broker shall not be provided to the Company without the prior written authorization of Executive.

4.

Compensation.  In exchange for services rendered by Executive hereunder, the Company will provide Executive with the following compensation and benefits during Executive’s employment under this Agreement:

(a)

Compensation.  During the period of employment, the Company will pay Executive a salary (the “Base Salary”) of $400,000 per annum, subject to consideration for annual or other increases as may be determined by the Board, in accordance with the general payroll practices of the Company in effect from time to time. Executive’s compensation under this Agreement will be subject to such withholding as may be required by law.

(b)

Bonus.  Executive shall be eligible for an annual bonus of up to one hundred twenty percent (120%) of Executive’s Base Salary for such calendar year (“Bonus Target”), conditioned upon the achievement of the Company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) target (the “EBITDA Target”) established by the Compensation Committee of the Board (the “Compensation Committee”) and the performance criteria established by the Compensation Committee after consultation with Executive (the “Performance Criteria”).  The Compensation Committee will adjust the EBITDA Target each calendar year, but the Performance Criteria will not be adjusted during the Term.    Based on the books and records of the Company, the Board shall, in good faith determine the achievement of the EBITDA Target, the Performance Criteria and entitlement to any bonus for each calendar year.

The annual bonus for each calendar year during the period of employment shall be paid to Executive on a date chosen by the Board, which date shall be the earlier of (i) thirty (30) days after the completion of the Company’s annual audited financial statements, or (ii) two and one-half (2 1/2) months after the end of the calendar year, so long as Executive is employed by the Company as of the last day of the calendar year to which such bonus relates.

(c)

Benefits.  During the period of employment, Executive and Executive’s eligible dependents will be offered the opportunity to participate in such medical and other employee benefit plans for which they are eligible as may be established from time to time by the Board for other employees of the Company or the subsidiaries of the Company and for other executive employees of the Company or the subsidiaries of the Company, and at rates and terms that are not more expensive to Executive than those extended to other such employees.  In no event shall Executive be eligible to participate in any severance plan or program of the Company or its subsidiaries, except as set forth in Section 6 of this Agreement.

(d)

Vacation.  During the period of employment, Executive will be entitled to four (4) weeks of paid vacation per calendar year in accordance with the Company’s policy in effect from time to time.  Paid vacation to which Executive is entitled in any calendar year may not be carried forward to any subsequent calendar year and no compensation shall be payable in lieu thereof.  Vacation days will be taken at such times and dates at the discretion of Executive and as will not significantly interfere with Executive’s duties and responsibilities to the Company.

(e)

Expense Reimbursement.  During the period of employment the Company will reimburse Executive for all reasonable and necessary out-of-pocket business and travel expenses incurred by Executive in the performance of the duties and responsibilities hereunder, subject to written policies and procedures for expense verification and documentation that the Company or the Board may adopt from time to time.  The Company shall provide Executive with an apartment and automobile in the Dallas, Texas area during the period of employment.  The Company shall pay the reasonable cost of Executive to travel between Chicago, Illinois and Dallas, Texas via commercial airline during the period of employment.  To the extent the use of such automobile, apartment and/or travel is taxable, the Company will pay Executive an additional amount such that after payment of all taxes on such amount Executive is left with amount equal to the aggregate tax imposed on such payments and benefits.

(f)

Equity Incentive Plan.  Executive shall be eligible to participate in the Company’s current equity incentive plans, subject to Board approval.

5.

Termination.  Notwithstanding anything to the contrary in this Agreement, Executive’s employment hereunder will terminate under any of the following conditions:

(a)

Death.  Except as provided for in Section 6(c), Executive’s employment under this Agreement and any obligations hereunder will terminate automatically upon the date of Executive’s death.

(b)

Disability.  The Company will have the right to terminate this Agreement if Executive becomes disabled; provided, however, that the provisions of this Section 5(b) shall not excuse the Company from its obligations under the Americans with Disabilities Act or the Family and Medical Leave Act providing for Executive’s continued employment during such disability.  For purposes of this Agreement, “disabled” shall mean that Executive suffers from a physical or mental impairment that prevents Executive from performing the essential functions of Executive’s position, as set forth in this Agreement, for (i) ninety (90) days or more (whether or not consecutive) in any twelve (12) month period or (ii) a period of ninety (90) consecutive days, in each case, as determined by a physician satisfactory to both Executive and the Company (and, if they cannot agree, then one to be selected and mutually accepted by their respective doctors).

2

(c)

Termination for Cause.  Executive’s employment hereunder may be terminated by the Board (excluding, for this purpose, Executive, if applicable) at any time for Cause.  For purposes of this Agreement, “Cause” for termination means the following:

(i)

Executive is convicted of or pleads guilty or nolo contendere to any felony or any crime or offense involving acts of theft, fraud, embezzlement or other misappropriation of funds, whether from the Company or otherwise;

(ii)

Executive’s commission of any act of moral turpitude that brings the Company into public disrepute or disgrace or causes harm to the customer relations, operations or business prospects of the Company;

(iii)

any material breach by Executive of Executive’s obligations under this Agreement or any other written agreement with the Company or any of its subsidiaries, which Executive fails to cure, if curable, within thirty (30) days after receipt of written notice of such breach;

(iv)

Executive’s material breach of written policies or procedures of the Company or any of its subsidiaries in each case that have been provided to Executive, been made available to him in either physical or electronic format or of which he has knowledge which causes, or could reasonably be expected to cause, harm to the Company or its subsidiaries, which Executive fails to cure, if curable, within thirty (30) days of receipt of written notice of such event;  

(v)

any intentional misrepresentation of a fact material to the Company's business at any time by Executive to the Company or any of its affiliates or the Board;

(vi)

to the extent consistent with the terms of this Agreement, Executive’s willful failure or refusal to comply with the lawful instruction of the Company’s Executive Chairman or the Board which Executive fails to cure, if curable, within thirty (30) days of receipt of written notice of such event; or

(viii)

Executive’s reporting to work under the influence of alcohol or illegal drugs, or other alcohol or drug abuse that adversely affects the performance of Executive’s duties or responsibilities.

In order to effect a termination for Cause, the Board (excluding, for this purpose, Executive, if applicable) must terminate Executive’s employment within sixty (60) days of (x) the expiration of the cure period for any act or failure to act that remains uncured under this Section 5(c), if applicable, or (y) the Board’s (excluding, for this purpose, Executive, if applicable) discovery of such action, event or inaction that constitutes Cause.

(d)

Constructive Termination.  If any of the following events shall have occurred, Executive shall be deemed to have been constructively terminated:

(i)

the Company’s material breach of this Agreement which remains uncured following thirty (30) days prior written notice from Executive; 

(ii)

a reduction in Executive’s Base Salary, other than a reduction in the same percentage as is applied to all senior officers of the Company; or

(iii) 

a material diminution in Executive's duties or authority.

Notwithstanding the foregoing, no act or failure to act by the Company shall give rise to “Constructive Termination” if cured within thirty (30) days of written notice by Executive to the Company received within thirty (30) days of the discovery of the occurrence of such act or failure to act. Further, Executive must terminate Executive’s employment within sixty (60) days following the expiration of the cure period for any act or failure to act that remains uncured under this Section 5(d) in order to effect a termination for Constructive Termination.

(e)

Termination After Notice.  Executive’s employment hereunder may be terminated either by the Company without Cause or by Executive.  To the extent reasonably practicable, Executive will provide the Company with at least thirty (30) days’ prior written notice of Executive’s intent to terminate employment pursuant to this Section 5(e).  If Executive’s employment is being terminated pursuant to any provision of Section 5(c) above, Company shall provide Executive with notice of the section and the specific reasons for such termination.  Notwithstanding the foregoing, the Company may elect to provide Executive with compensation and benefits during any notice period and request or direct Executive not to perform duties for Company during such period.

3

(f)

Resignation from Board. Upon termination of Executive’s employment for any reason or resignation of employment by Executive for any reason, unless otherwise requested by the Board, Executive agrees to resign from the Board, the board of directors of the Parent and each of its other subsidiaries and all other positions held at the Company and its affiliates, and Executive, at the Board’s request, will execute any documents necessary to reflect such resignation.

6.

Payments Upon Termination.

(a)

Accrued Compensation.  Upon termination of Executive’s employment hereunder, the Company will be obligated to pay and Executive will be entitled to receive the Base Salary that has accrued for services performed until the date of termination and which has not yet been paid.  In addition, (i) Executive will be entitled to any vested benefits to which Executive is entitled under the terms of any applicable benefit plan of the Company, and, to the extent applicable, short-term or long-term disability plan or program with respect to any disability, and in all events subject to the payment timing and other restrictions as may be set forth in such plan or program, and (ii) to the extent permitted by applicable law and the terms of the Company’s health insurance, long-term healthcare insurance and life insurance plans, Executive and Executive’s family may (but will not be required to) elect to continue to participate in the Company’s health insurance, long-term healthcare insurance and life insurance plans, including any period required pursuant to COBRA or other applicable law.

(b)

Without Cause or for Constructive Termination.  Upon termination of Executive’s employment by the Company without Cause or a resignation by Executive for Constructive Termination, the Company will be obligated to pay and Executive will be entitled to receive: (i) all of the amounts and benefits described in Section 6(a), (ii) the prior calendar year’s annual bonus if such termination date occurs after January 1st of the then current year and such prior calendar year’s annual bonus determined under, and payable pursuant to, Section 4(b) has not yet been paid, (iii) a pro rata portion of Executive’s annual bonus for the calendar year during which such termination occurs, determined under, and payable pursuant to, Section 4(b), and (iv) subject to Section 6(f), Executive’s then Base Salary (paid in accordance with the Company’s ordinary payroll policies) during the period beginning on the date of Executive’s termination of employment and ending on the date that is one (1) year following the date of Executive’s termination of employment or through the end of the Term, if greater (the “Severance Amount”).  Further, Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business and travel expenses incurred during the period of employment by Executive in the performance of the duties and responsibilities hereunder, subject to written policies and procedures for expense verification and documentation that the Company or the Board may adopt from time to time.

(c)

Death; Disability.  Upon termination of Executive’s employment upon the death of Executive pursuant to Section 5(a) or upon Executive’s becoming disabled pursuant to Section 5(b), the Company will be obligated to pay, and Executive will be entitled to receive (i) all of the amounts and vested benefits described in Section 6(a) and (ii) any bonus determined under, and payable pursuant to, Section 4(b). For purposes of this Section 6(c), Executive’s designated beneficiary will be such individual beneficiary or trust, located at such address, as Executive may designate by notice to the Company from time to time or, if Executive fails to give notice to the Company of such a beneficiary, Executive’s estate.  Notwithstanding the preceding sentence, the Company will have no duty, in any circumstances, to attempt to open an estate on behalf of Executive, to determine whether any beneficiary designated by Executive is alive or to ascertain the address of any such beneficiary, to determine the existence of any trust, to determine whether any person or entity purporting to act as Executive’s personal representative (or the trustee of a trust established by Executive) is duly authorized to act in that capacity, or to locate or attempt to locate any beneficiary, personal representative, or trustee.

(d)

Other Termination.  

(i)

Upon the resignation of employment by Executive other than for Constructive Termination, the Company will have no further liability under or in connection with this Agreement, except to (A) provide all of the amounts and vested benefits described in Section 6(a), (B) provide the prior calendar year’s annual bonus if such resignation occurs after January 1st of the then current year and such prior calendar year’s annual bonus determined under, and payable pursuant to, Section 4(b) has not yet been paid, (C) provide a pro rata portion of Executive’s annual bonus for the calendar year during which such resignation occurs, determined under, and payable pursuant to, Section 4(b), and (D) reimburse expenses as set forth in Section 4(e).  

(ii)

Upon the termination of employment by the Company for Cause, the Company will have no further liability under or in connection with this Agreement, except to provide all of the amounts and vested benefits described in Section 6(a) and to reimburse expenses as set forth in Section 4(e).  

(e)

Breach Post-Termination.  If (i) the Company has any obligation pursuant to Section 6(a)-(c) to make payments or provide other benefits to Executive following the last day of Executive’s employment by the Company, and (ii) (A) Executive breaches in any material respect the terms and conditions of the Release, Section 7 or Section 8 or (B) engages in conduct in violation of Section 9, then the Company may, upon providing thirty (30) days prior written notice (and providing Executive the reasonable opportunity to cure such breach or violation during such thirty (30) day period) in its discretion and without limiting any other remedies that may be available to the Company, cease providing any such payments or other benefits pursuant to Section 6(b).

4

(f)

Release.  Notwithstanding anything herein to the contrary, payments of the Severance Amount are conditioned on Executive (or, in the event of Executive’s death or disability, the estate of Executive or the authorized legal representative, if any, of Executive, respectively) executing on or before the twenty-first (21st) day following Executive’s Separation from Service (as defined below), and not revoking, a release agreement of all claims against the Company (the “Release”), in the form attached hereto as Exhibit A, and continued compliance in all material respects with the provisions of Section 7, Section 8 and Section 9.

7.

Ownership of Intellectual Property.  During the period of Executive’s employment or service with the Company, to the extent that Executive, alone or with others, develops, makes, conceives, contributes to or reduces to practice, or has prior to the date hereof done any of the foregoing, any intellectual property related to the duties of Executive hereunder or which results in any way from Executive using the resources of the Company or any of its affiliates, whether or not during working hours, such intellectual property is and will be the sole and exclusive property of the Company.  The foregoing provision shall not apply to any intellectual property that is not related to the direct out of home advertising or digital signage industry of the Company (the “Business”) and which was not developed using resources of the Company or any of its affiliates or during working hours.  To the extent any such intellectual property can be protected by copyright, and is deemed in any way to fall within the definition of “work made for hire” as such term is defined in 17 U.S.C. §101, such intellectual property will be considered to have been produced under contract for the Company as a work made for hire. In any event, and regardless of whether such intellectual property is deemed to be a “work made for hire”, Executive will disclose any and all such intellectual property to the Company and does hereby assign to the Company any and all right, title and interest which Executive may have in and to such intellectual property. Upon the Company’s request at any time and at their expense, including any time after termination of Executive’s employment, to the extent Executive can reasonably do so, Executive will execute and deliver to the Company such other documents as the Company deems reasonably necessary to vest in the Company the sole ownership of and exclusive worldwide rights in and to, all of such intellectual property.

8.

Non-Disclosure of Confidential Information.  Executive acknowledges and agrees that, during the period of employment, Executive may have access to and become familiar with various trade secrets and other confidential or proprietary information of the Company or any of its affiliates including, but not limited to, the Company’s existing and contemplated services and products, documentation, technical data, contracts, business and financial methods, practices and plans, costs and pricing, lists of the Company’s customers, prospective customers and contacts, suppliers, vendors, consultants and employees, methods of obtaining customers, suppliers, vendors, consultants and employees, financial and operational data of the Company’s present and prospective customers, suppliers, vendors, consultants and employees, and the particular business requirements of the Company’s present and prospective customers, suppliers, vendors, consultants and employees, marketing and sales literature, records, software, diagrams, source code, object code, product development, trade secrets; and the Company’s techniques of doing business, business strategies and standards (including all non-public information of the Company, collectively, the “Confidential Information”); provided that notwithstanding anything to the contrary “Confidential Information” will exclude any information that is already generally available to the public.  Executive expressly agrees not to disclose any Confidential Information, directly or indirectly, nor use Confidential Information in any way, either during the period of employment and during the five year period thereafter.  Specifically, during the period of employment and during the five year period thereafter, Executive (i) will maintain the Confidential Information in strict confidence; (ii) will not disclose any Confidential Information to any person or other entity; (iii) will not use any Confidential Information to the detriment of the Company or any of its affiliates; (iv) will not authorize or permit such use or disclosure; and (v) will comply with the lawful policies and procedures of the Company regarding use and disclosure of Confidential Information.  All files, papers, records, documents, drawings, specifications, equipment and similar items relating to the business of the Company and Confidential Information, whether prepared by Executive or otherwise coming into Executive’s possession, will at all times remain the exclusive property of the Company and such items and all copies thereof will be returned to the Company at the Company’s request or upon the expiration or termination of Executive’s employment.  In connection with Executive’s termination of employment with the Company, Executive will reasonably cooperate with the Company in completing and signing a termination statement or affidavit in the form reasonably proscribed by the Company, which will contain Executive’s certification that Executive has no tangible Confidential Information in Executive’s possession.

9.

Restrictive Covenants.  In the course of the employment of Executive hereunder, and because of the nature of Executive’s responsibilities, Executive will acquire valuable and confidential information and trade secrets with regard to the Company’s and its affiliates’ business operations, including, but not limited to, the Confidential Information.  In addition, Executive may develop on behalf of the Company, a personal acquaintance with some of the Company’s and its affiliates’ customers and prospective customers.  As a consequence, Executive will occupy a position of trust and confidence with respect to the Company’s and its affiliates’ affairs and its services.  In view of the foregoing, and in consideration of the remuneration paid and to be paid to Executive under this Agreement, Executive agrees that it is reasonable and necessary for the protection of the goodwill and business of the Company and its affiliates that Executive make the restrictive covenants contained in this Agreement regarding the conduct of Executive during and after the employment relationship with the Company, and that the Company may suffer irreparable injury if Executive engages in conduct prohibited thereby.  In consideration of Executive’s employment hereunder, and other good and valuable consideration, the receipt of which is hereby acknowledged, Executive agrees as follows:

5

(a)

Non-Competition.  Except upon Executive’s termination by the Company without Cause or for Constructive Termination, during the period commencing on the Effective Date and ending on the date that is one year following the end of the period of employment (such period, which will be extended by the amount of time during which Executive is in violation of any provision of this Section 9, the “Restricted Period”), Executive will not, in the United States (the “Territory”), engage in, manage, operate, finance, control or participate in the ownership, management or financing or control of, become employed by, or become affiliated or associated with, directly or indirectly, whether as an officer, director, shareholder, owner, co-owner, affiliate, partner, agent, representative, consultant, independent contractor or advisor, or otherwise render services or advice to, guarantee any obligation of, or acquire or hold (of record, beneficially or otherwise) any direct or indirect interest in a business that sells or provides products or services that are the same as or substantially similar to or otherwise competitive with the products or specialized services (provided that such “specialized services” shall not include those services which would unreasonably restrict Executive from utilizing Executive’s education and expertise in future employment, as long as such employment and specialized services are not competitive with the Company or any of its subsidiaries) sold or provided, or that Executive has knowledge are planned to be sold or provided, by the Company or its subsidiaries in the Business at any time while Executive is an employee or director of the Company (a “Competitor”); provided, however, that Executive may own, as a passive investment, shares of capital stock of any Competitor if (A) such shares are listed on a national securities exchange or traded on a national market system in the United States, (B) Executive, together with any of Executive’s affiliates and Executive’s immediate family members (which shall mean Executive’s wife and direct lineal descendants, but shall not include any other blood relative), owns beneficially (directly or indirectly) less than five percent (5%) of the total number of shares of such entity’s issued and outstanding capital stock, and (C) neither Executive nor any of Executive’s affiliates is otherwise associated directly or indirectly with such Competitor or any of its affiliates.

(b)

Non-Solicitation.  Except upon Executive’s termination by the Company without Cause or for Constructive Termination, during the Restricted Period, Executive will not, either on Executive’s own behalf or on behalf of any third party (except the Company or any of its affiliates), directly or indirectly (and except in the case of broad solicitations that do not directly target a specific individual):

(i)

(A) seek to induce or otherwise cause any person or entity that is a then-current customer of the Company, or has been a customer of the Company or one of its affiliates within the then-preceding twenty-four (24) months (a “Customer”), or any prospective customer to which the Company or one of its affiliates has made a proposal at that time or has taken actions or made efforts of which Executive is aware related to making a proposal at that time (1) to cease being a customer of or to not become a customer of the Company or one of its affiliates, or (2) to divert any business of such Customer from the Company or one of its affiliates, or otherwise, to discontinue or alter in a manner adverse to the Company or one of its affiliates, such business relationship, or (B) in any manner that is in competition with the Company or one of its affiliates: solicit for business, provide services to, do business with or become employed or retained by, any Customer or potential customer solicited the Company or one of its affiliates;

(ii) 

hire, solicit or encourage to leave the employment or service of the Company or one of its affiliates, any officer or employee of the Company or one of its affiliates, or hire or participate (with another third party) in the process of hiring any person or entity who is then, or who within the preceding six (6) months was an employee of the Company or one of its affiliates, or provide names or other information about the Company’s or its affiliates’ employees to any person or entity under circumstances which could lead to the use of that information for purposes of recruiting or hiring; or

(iii)

except as an employee of a Customer as permitted herein, otherwise interfere with, disrupt, or attempt to interfere with or disrupt, the relationship between the Company or one of its affiliates and any of their respective Customers, suppliers, consultants or employees.

(c)

Non-Disparagement.  During the period of employment and thereafter, Executive will not at any time publish or communicate to any person or entity, directly or indirectly, any Disparaging (as defined below) remarks, comments or statements concerning the Company, its parent, subsidiaries and affiliates, or any of their respective present and former members, managers, directors, officers, successors and assigns.  During the period of employment and thereafter, Company will not at any time publish or communicate to any person or entity, directly or indirectly, any Disparaging remarks, comments or statements concerning Executive.  “Disparaging” remarks, comments or statements are those that impugn the character, honesty, integrity, reputation, morality or business acumen or abilities in connection with any aspect of the operation of business of the individual or entity being disparaged.  This Section 9(c) will not be applicable to (i) truthful testimony obtained through subpoena, (ii) any truthful information provided pursuant to investigation by any Governmental Authority, or (iii) any truthful information provided pursuant to any claim by Executive or the Company under this Agreement or any of the other documents relating to the Transaction asserted in good faith.

(d)

Acknowledgment.  The parties agree that the restrictions placed upon Executive are reasonable and necessary to protect the Company’s legitimate interests.  Executive acknowledges that, based upon the advice of legal counsel and Executive’s own education, experience and training, (i) these provisions will not prevent Executive from earning a livelihood and supporting Executive and Executive’s family during the Restricted Period, (ii) the Company conducts Business in the Territory, (iii) 

6

the Company competes with other businesses that are or could be located in any part of the Territory, (iv) prior to the closing of the transactions contemplated in the Purchase Agreement, the Company (and Executive on behalf of the Company) did Business in and marketed products and services throughout the Territory, (v) the restrictions contained in this Agreement are reasonable and necessary for the protection of the business and goodwill of the Company, (vi) the foregoing restrictions on competition are fair and reasonable in type of prohibited activity, geographic area covered, scope and duration, (vii) the consideration provided by the Company under this Agreement is not illusory, and (viii) such provisions do not impose a greater restraint than is necessary to protect the goodwill or other business interests of the Company.  In consideration of the foregoing, and in light of Executive’s education, skills, and abilities, Executive agrees that Executive will not assert that, and it should not be considered that, any provision of this Section 9 are otherwise void, voidable or unenforceable, or should be voided or held unenforceable.

(e)

Additional Time.  Executive agrees that the period during which the covenants contained in this Section 9 will be effective will be computed by excluding from such computation any time during which Executive is in violation of any provision of this Section 9.

(f)

Independent Agreement.  The covenants on the part of Executive in this Agreement will be construed as an agreement independent of any other agreement and independent of any other provision of this Agreement, and the existence of any claim or cause of action by Executive against the Company, whether predicated upon this Agreement or otherwise, (other than the Company’s willful and intentional failure to pay the Severance Amount, if payable hereunder) will not constitute a defense to the enforcement by the Company of such covenants.  Each of the covenants of this Agreement are given by Executive as part of the consideration for this Agreement and as an inducement to the Company to enter into this Agreement.

(g)

Subsequent Employment.  Executive hereby covenants and agrees to, as promptly as possible following Executive’s acceptance of any subsequent employment or consulting arrangement that Executive undertakes on behalf of persons or entities other than the Company or any of its subsidiaries during the Restricted Period, notify the Company in writing of any such arrangement, provided, however, that failure to so provide such notice shall not result in any claim for damages by Company hereunder unless any subsequent employment or consulting arrangement that Executive undertakes is on behalf of a Competitor.  Executive agrees that, during the Restricted Period, the Company may notify any person or entity employing or otherwise retaining the services of Executive or evidencing an intention of employing or retaining the services of Executive of the existence and provisions of this Section 9.

10.

Reformation.  In furtherance and not in limitation of the foregoing, should any duration, scope or geographical restriction on business activities covered under any provision of this Agreement be found by any court of competent jurisdiction to be less than fully enforceable due to its breadth of restrictiveness or otherwise, Executive and the Company intend that such court will enforce this Agreement to the full extent the court may find permissible by construing such provisions to cover only that duration, extent or activity which may be enforceable.  Executive will, at the Company’s request, join the Company in requesting that such court take such action.  Executive and the Company acknowledge the uncertainty of the law in this respect and intend that this Agreement will be given the construction that renders its provisions valid and enforceable to the maximum extent permitted by law.

11.

Conflicts of Interests.  During the period of employment, without the prior written approval of the Company, Executive will not knowingly engage in any activity which is in conflict with the Company’s interests.  In furtherance of this covenant, Executive agrees during the period of employment that: (a) Executive will notify the Company of any conflicts of interest or excessive gifts or offers of gifts or remuneration from customers, suppliers or others doing or seeking to do business with the Company; (b) Executive will not receive remuneration from any party doing business with or competing with the Company unless the prior written consent of the Company is first obtained; and (c) Executive will promptly inform the Company of any business opportunities that come to Executive’s attention that relate to the existing or prospective business of the Company, and Executive will not participate in any such opportunities on behalf of any person or entity other than the Company; provided, however, that Executive may, whether or not during working hours, engage in reasonable time addressing issues related to Executive’s charitable efforts and managing Executive’s personal investments to the extent that such investments and time do not conflict with the Company’s interests.

12.

Unique Nature of Agreement.  Executive recognizes that the services to be rendered by Executive are of a special, unique, unusual, extraordinary, and intellectual character involving a high degree of skill and having a peculiar value, the loss of which will cause Company immediate and irreparable harm, which cannot be adequately compensated in damages.  In the event of a breach or threatened breach by Executive of this Agreement, Executive consents that the Company may be entitled to injunctive relief, both preliminary and permanent, without bond or proof of specific damages, and Executive will not raise the defense that the Company has an adequate remedy at law.  In addition, the Company may be entitled to any other legal or equitable remedies as may be available under law.  The remedies provided in this Agreement will be deemed cumulative and the exercise of one will not preclude the exercise of any other remedy at law or in equity for the same event or any other event.

7

13.

Miscellaneous.

(a)

Severability.  The covenants, provisions and sections of this Agreement are severable, and in the event that any portion of this Agreement is held to be unlawful or unenforceable, the same will not affect any other portion of this Agreement, and the remaining terms and conditions or portions thereof will remain in full force and effect. This Agreement will be construed in such case as if such unlawful or unenforceable portion had never been contained in this Agreement, in order to effectuate the intentions of the Company and Executive in executing this Agreement.

(b)

No Waiver.  The failure of either the Company or Executive to object to any conduct or violation of any of the covenants made by the other under this Agreement will not be deemed a waiver of any rights or remedies. No waiver of any right or remedy arising under this Agreement will be valid unless set forth in an appropriate writing signed by both the Company and Executive.

(c)

Assignment.  This Agreement is binding upon the Company and Executive and their respective heirs, personal representatives, successors and assigns; provided that, the services to be rendered by Executive to the Company under this Agreement are personal in nature and, therefore, Executive may not assign or delegate Executive’s rights, duties or obligations under this Agreement, and any attempt to do so will be null and void.  The Company may assign its rights under this Agreement or delegate its duties and responsibilities under this Agreement to any subsidiary of the Company or to any entity acquiring all or substantially all of the assets of the Company or to any other entity into which the Company may be liquidated, merged or consolidated.  In furtherance of such right of assignment, Executive agrees to acknowledge such assignment in writing.

(d)

Survival.  Provisions of this Agreement which by their nature are intended to survive termination of Executive’s employment with the Company or expiration of this Agreement will survive any such termination or expiration of this Agreement, including Section 1, Section 6, Section 7, Section 8, Section 9, Section 10, Section 12 and this Section 13.

(e)

Governing Law.  This Agreement will be governed by and construed in accordance with the internal laws of Delaware without giving effect to the choice of laws principles thereof.

(f)

Jurisdiction; Venue.  Each of the parties hereto by its execution hereof:

(i)

irrevocably submits to the jurisdiction of any state or federal court covering the Dallas, Texas area for the purpose of any suit, action or other proceeding arising out of or based on this Agreement or the subject matter hereof, and agrees that any state and federal court serving Dallas, Texas will be deemed to be a convenient forum; and

(ii)

waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such proceeding brought in any of the above-named courts, any claim that it is not subject personally to the jurisdiction of such courts, that its property is exempt or immune from attachment or execution, that any such proceeding is brought in an inconvenient forum, that the venue of such proceeding is improper, or that this Agreement, or the subject matter hereof, may not be enforced in or by such court.

The parties hereto hereby consent to service of process in any such proceeding in any manner permitted by the laws of Texas, and agree that service of process by registered or certified mail, return receipt requested, at its address specified in or pursuant to this Agreement is reasonably calculated to give actual notice.

(g)

Disputes or Controversies.  Executive recognizes that should a dispute or controversy arising from or relating to this Agreement be submitted for adjudication to any court, the preservation of the secrecy of Confidential Information may be jeopardized.  Therefore, if the dispute or controversy involves significant trade secrets of the Company or its subsidiaries, then, at the Company’s reasonable request, all pleadings, documents, testimony, and records relating to any such adjudication will be maintained in secrecy and will be available for inspection by the Company, Executive and their respective attorneys, experts and other agents, who will agree, in advance and in writing, to receive and maintain all such information in secrecy, except as may be limited by them in writing.

(h)

No Oral Modifications.  No alterations, amendments, changes or additions to this Agreement will be binding upon either the Company or Executive unless reduced to writing and signed by both the Company and Executive.

(i)

Notices.  All notices under this Agreement will be sent and deemed duly given when posted in the United States first-class mail, postage prepaid to the addresses set forth on the signature page of this Agreement.  These addresses may be changed from time to time by written notice to the appropriate party.

(j)

Entire Agreement.  This Agreement, including the Exhibits attached hereto, constitutes the entire understanding between the Company and Executive, and supersedes as of the Effective Date all prior oral or written communications, proposals, representations, warranties, covenants, understandings or agreements between the Company and Executive, relating to the 

8

subject matter of this Agreement, including the Prior Agreements.  By entering into this Agreement, Executive certifies and acknowledges that Executive has carefully read all of the provisions of this Agreement, and that Executive voluntarily and knowingly enters into said Agreement.

(k)

NO JURY TRIAL.  THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH EXECUTIVE’S EMPLOYMENT WITH THE COMPANY.  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

(l)

Advice of Counsel and Construction.  The parties acknowledge that all parties to this Agreement have been represented by counsel, or had the opportunity to be represented by counsel of their choice.  Accordingly, the rule of construction of contract language against the drafting party is hereby waived by all parties.  Additionally, neither the drafting history nor the negotiating history of this Agreement may be used or referred to in connection with the construction or interpretation of this Agreement.

(m)

Indemnification.  The Company shall indemnify Executive with respect to activities in connection with Executive’s employment hereunder to the fullest extent provided in the Company’s bylaws and as provided under state law.  

(n)

Section 409A.  Each payment under this Agreement, including each payment in a series of installment payments, is intended to be a separate payment for purposes of Treas. Reg. §1.409A-2(b), and is intended to be: (i) exempt from Section 409A of the Internal Revenue Code of 1986, as amended, the regulations and other binding guidance promulgated thereunder (“Section 409A”), including, but not limited to, by compliance with the short-term deferral exemption as specified in Treas. Reg. § 1.409A-1(b)(4) and the involuntary separation pay exception within the meaning of Treas. Reg. §1.409A-1(b)(9)(iii), or (ii) in compliance with Section 409A, including, but not limited to, being paid pursuant to a fixed schedule or specified date pursuant to Treas. Reg. § 1.409A-3(a) and the provisions of this Agreement will be administered, interpreted and construed accordingly.  If, nonetheless, this Agreement either fails to satisfy the requirements of Section 409A or is not exempt from the application of Section 409A, then the parties hereby agree to amend or to clarify this Agreement in a timely manner so that this Agreement either satisfies the requirements of Section 409A or is exempt from the application of Section 409A, provided, however, that no such amendment or clarification shall reduce the economic benefit that Executive was to derive from this Agreement prior to such amendment or clarification.

(o)

Separation from Service.  Notwithstanding anything in this Agreement to the contrary, any compensation or benefits payable under this Agreement that are designated under this Agreement as payable upon Executive’s termination of employment shall be payable only upon Executive’s “separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided below, any such compensation or benefits shall not be paid, or, in the case of installments, shall not commence payment, until the later of: (i) the thirtieth (30th) day following Executive’s Separation from Service; or (ii) if Executive is a “specified employee”, then no payment or benefit that is payable on account of Executive’s “separation from service” shall be made before the date that is six months after Executive’s “separation from service” (or, if earlier, the date of Executive’s death) if and to the extent that such payment or benefit constitutes deferred compensation (or may be nonqualified deferred compensation) under Section 409A and such deferral is required to comply with the requirements of Section 409A.  Any payment or benefit delayed by reason of the prior sentence shall be paid out or provided in a single lump sum at the end of such required delay period in order to catch up to the original payment schedule and the remaining payments shall be made as provided in this Agreement.  Unless otherwise required to comply with Section 409A, a payment or benefit shall not be deferred if:

(x) it is not made on account of Executive’s “separation from service”,

(y) it is required to be paid no later than within 2 1⁄2  months after the end of the taxable year of Executive in which the payment or benefit is no longer subject to a “substantial risk of forfeiture”, as that term is defined for purposes of Section 409A, or

(z) the payment satisfies the following requirements: (A) it is being paid or provided due to the Company’s termination of Executive’s employment without Cause or Executive’s termination of employment pursuant to a Constructive Termination, (B) it does not exceed two times the lesser of (1) Executive’s annualized compensation from the Company for the calendar year prior to the calendar year in which the termination of Executive’s employment occurs, and (2) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive’s employment terminates, and (C) the payment is required under this Agreement to be paid no later than the last day of the second calendar year following the calendar year in which Executive incurs a “separation from service”.

9

For purposes of this provision, Executive shall be considered to be a “specified employee” if, at the time of his separation from service, Executive is a “key employee”, within the meaning of Section 416(i) of the Code, of the Company (or any person or entity with whom the Company would be considered a single employer under Section 414(b) or Section 414(c) of the Code) any stock in which is publicly traded on an established securities market or otherwise.

(p)

Counterparts; Electronic Signature.  This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.  Further, this Agreement may be executed by transfer of an originally signed document by facsimile, e-mail or other electronic means, any of which will be as fully binding as an original document.

(q)

EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS CAREFULLY READ THIS AGREEMENT, HAS CONSULTED WITH AN ATTORNEY OF EXECUTIVE’S CHOOSING TO THE EXTENT EXECUTIVE DESIRES LEGAL ADVICE REGARDING THIS AGREEMENT, AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.

(Signatures on following page.)

10

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year above written.

COMPANY:

SCG FINANCIAL MERGER I CORP. 

/s/  Gregory H. Sachs                               

By: Gregory H. Sachs

Title: Executive Chairman

Address:

RMG Networks Holding Corporation

Attention:  Gregory H. Sachs

615 N. Wabash Ave.

Chicago, IL 60611

Email:  gsachs@sachscapitalgroup.com

Copy to:

Greenberg Traurig, LLP

Attention: Ameer Ahmad

77 West Wacker Drive

Suite 3100

Chicago, IL 60601

Facsimile: (312) 456-8435

Email: ahmada@gtlaw.com

Signature Page to Executive Employment Agreement

EXECUTIVE:

/s/ ROBERT MICHELSON                      

ROBERT MICHELSON

Address:

136 Beach Road

Glencoe, IL 60022

Copy to:

Kirkland & Ellis LLP

300 North LaSalle Street

Chicago, IL 60654

Facsimile: (312) 862-2200

Attention: Sanford E. Perl, P.C.

Signature Page to Executive Employment Agreement

Exhibit A

Form of Waiver and Release

I am entering into this Waiver and Release pursuant to Section 6(f) of the Executive Employment Agreement dated as of January 16, 2017 (the “Employment Agreement”) between SCG Financial Merger I. Corp. and me, and in consideration of the payments and other benefits to be made to me pursuant to the Employment Agreement (the “Benefits”), which were offered to me in exchange for my agreement, among other things, to waive all of my claims against and release [_____________] and its current or former predecessors, successors, owners and assigns (collectively referred to as the “Company”), all of the current or former affiliates (including parents and subsidiaries) of the Company (collectively referred to as the “Affiliates”) and the Company’s and Affiliates’ current or former directors and officers, employees and agents, insurers, employee benefit plans and the fiduciaries and agents of said plans (collectively, with the Company and Affiliates, referred to as the “Covered Parties”) from any and all claims, demands, actions, liabilities and damages arising out of or relating in any way to (i) my employment with or separation from the Company or the Affiliates or (ii) any acts, omissions or occurrences prior to or on the Effective Date (as defined below) of this Waiver and Release[, other than those claims, demands, actions, liabilities and damages arising exclusively out of (A) my status as a stockholder of the Company, (B) the Stockholder Agreement of the Company to which I am a party or (C) any Award Agreement evidencing an award of Options to the me pursuant to the Company’s 2013 Equity Incentive Plan]1.  Further, this waiver and release does not apply to any claim or rights I may have to (A) indemnification under the Company’s bylaws, agreements, employment policies and practices, and insurance policies for claims asserted against me by third parties for any actions or omissions by me in the good faith performance of my employment duties for the Company and (B) benefits that are accrued and vested under any tax-advantaged employee pension and welfare benefit plan, policy, or practice.

I understand that signing this Waiver and Release is an important legal act.  I acknowledge that the Company has advised me in writing to consult an attorney before signing this Waiver and Release and has given me at least 21 days from the day I received a copy of this Waiver and Release to sign it, or I have waived such time period in accordance with applicable law.

In exchange for the payment to me of Benefits, I, among other things, (1) agree not to sue in any local, state and/or federal court regarding or relating in any way to my employment with or separation from the Company or the Affiliates, and (2) knowingly and voluntarily waive all claims and release the Covered Parties from any and all claims, demands, actions, liabilities, and damages, whether known or unknown, arising out of or relating in any way to my employment with or separation from the Company or the Affiliates, except:  (A) my vested rights under the terms of employee benefit plans sponsored by the Company or the Affiliates; (B) with respect to such rights, claims as may arise after the Effective Date of this Waiver and Release; (C) rights to indemnity I may be otherwise be entitled to by contract or by law; and (D) moneys, compensation or other benefits already owing to me.  This Waiver and Release includes, but is not limited to, claims and causes of action under:  Title VII of the Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act of 1967, as amended, including the Older Workers Benefit Protection Act of 1990; the Civil Rights Act of 1866, as amended; the Civil Rights Act of 1991; the Americans with Disabilities Act of 1990; the Energy Reorganization Act, as amended, 42 U.S.C. §§ 5851; the Workers Adjustment and Retraining Notification Act of 1988; the Sarbanes-Oxley Act of 2002; the Employee Retirement Income Security Act of 1974, as amended; the Family and Medical Leave Act of 1993; the Fair Labor Standards Act; the Occupational Safety and Health Act; claims in connection with workers’ compensation or “whistle blower” statutes; and/or contract, tort, defamation, slander, wrongful termination or any other state or federal regulatory, statutory or common law.  Further, I expressly represent that no promise or agreement which is not expressed in the Employment Agreement has been made to me in executing this Waiver and Release, and that I am relying on my own judgment in executing this Waiver and Release, and that I am not relying on any statement or representation of the Company, any of the Affiliates or any other member of the Covered Parties or any of their agents.  I agree that this Waiver and Release is valid, fair, adequate and reasonable, is entered into with my full knowledge and consent, was not procured through fraud, duress or mistake and has not had the effect of misleading, misinforming or failing to inform me.

Notwithstanding the foregoing, nothing contained in this Waiver and Release is intended to prohibit or restrict me in any way from (1) bringing a lawsuit against the Company to enforce the Company’s obligations under the Employment Agreement; (2) making any disclosure of information required by law; (3) providing information to, or testifying or otherwise assisting in any investigation or proceeding brought by, any federal regulatory or law enforcement agency or legislative body, any self-regulatory organization, or the Company’s legal, compliance or human resources officers; (4) testifying or participating in or otherwise assisting in a proceeding relating to an alleged violation of any federal, state or municipal law relating to fraud or any rule or regulation of the Securities and Exchange Commission or any self-regulatory organization; or (5) filing any claims that are not permitted to be waived or released under applicable law (although my ability to recover damages or other relief is still waived and released to the extent permitted by law).

                                           

 

1   To be updated at the time of separation.

Should any of the provisions set forth in this Waiver and Release be determined to be invalid by a court, agency or other tribunal of competent jurisdiction, it is agreed that such determination shall not affect the enforceability of other provisions of this Waiver and Release.  I acknowledge that this Waiver and Release and the Employment Agreement set forth the entire understanding and agreement between me and the Company or any other member of the Covered Parties concerning the subject matter of this Waiver and Release and supersede any prior or contemporaneous oral and/or written agreements or representations, if any, between me and the Company or any other member of the Covered Parties.  I understand that for a period of 7 calendar days following the date that I sign this Waiver and Release, I may revoke my acceptance of the offer, provided that my written statement of revocation is received on or before that seventh day by [to be completed at the time of separation:] [Name], [Title], [Company] [Address, City, State ZIP], in which case the Waiver and Release will not become effective.  In the event I revoke my acceptance of this offer, the Company shall have no obligation to provide me Benefits.  I understand that failure to revoke my acceptance of the offer within 7 calendar days from the date I sign this Waiver and Release will result in this Waiver and Release being permanent and irrevocable on the eighth day after I signed this Waiver and Release (the “Effective Date”).

I acknowledge that I have read this Waiver and Release, have had an opportunity to ask questions and have it explained to me and that I understand that this Waiver and Release will have the effect of knowingly and voluntarily waiving any action I might pursue, including breach of contract, personal injury, retaliation, discrimination on the basis of race, age, sex, national origin, or disability and any other claims arising prior to or on the Effective Date of this Waiver and Release.  By execution of this document, I do not waive or release or otherwise relinquish any legal rights I may have which are attributable to or arise out of acts, omissions, or events of the Company or any other member of the Covered Parties which occur after the date of the execution of this Waiver and Release.

			
	 
	 
	 

	Employee’s Printed Name

	 
	Company Representative

	 
	 
	 

	 
	 
	 

	Employee’s Signature

	 
	Company’s Signature Date

	 
	 
	 

	 
	 
	 

	Employee’s Signature Date

	 
	 

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