Document:

Exhibit 10.4

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT is made and entered into as of the 17th day of February, 2014 (the “Agreement”), by and between THOMPSON DESIGNS, INC., a Nevada corporation (the “Company”), and Kin Chan (the “Executive”), (collectively the “Parties”).

 

WITNESSETH:

 

WHEREAS, Executive has represented that she has the experience, background and expertise necessary to enable him to be the Company’s Executive Vice President of R&D; and

 

WHEREAS, based on such representation, and the Company’s reasonable due diligence, the Company wishes to employ Executive as its Executive Vice President of R&D and Executive wishes to be so employed, in each case, upon the terms hereinafter set forth.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements herein contained, and other good and valuable consideration, the Parties agree as follows:

 

1.              DEFINITIONS.  As used herein, the following terms shall have the following meanings:

 

1.1                   “Affiliate” means any Person controlling, controlled by or under common control with the Company.

 

1.2                   “Board” means the Board of Directors of the Company.

 

1.3                   “Change of Control” means the occurrence of any of the following:

 

1.3.1                     An acquisition of any common stock or other voting securities of the Company entitled to vote generally for the election of directors (the “Voting Securities”) by any “Person” or “Group” (as such term is used for purposes of Section 13(d) or 14(d) of the Exchange Act), immediately after which such Person or Group, as the case may be, has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the then outstanding shares of common stock or the combined voting power of the Company’s then outstanding Voting Securities; provided, however, that in determining whether a Change of Control has occurred, shares of common stock or Voting Securities that are acquired in a Non-Control Acquisition (as defined below) shall not constitute an acquisition which would cause a Change of Control. “Non-Control Acquisition” shall mean an acquisition by (i) the Company, (ii) any subsidiary of the Company (“Subsidiary”) or (iii) any employee benefit plan maintained by the Company or any Subsidiary, including a trust forming part of any such plan (an “Employee Benefit Plan”);

 

1.3.2                     The consummation of:

 

1.3.2.1           a merger, consolidation or reorganization involving the Company or any Subsidiary, unless the merger, consolidation or reorganization is a Non-Control Transaction. “Non-Control Transaction” shall mean a merger, consolidation or reorganization of the Company or any Subsidiary where:

 

 

1.3.2.1.1 the shareholders of the Company immediately prior to the merger, consolidation or reorganization own, directly or indirectly, immediately following such merger, consolidation or reorganization, at least 50% of the combined voting power of the outstanding voting securities of the corporation resulting from such merger, consolidation or reorganization (the “Surviving Corporation”) in substantially the same proportion as their ownership of the common stock or Voting Securities, as the case may be, immediately prior to the merger, consolidation or reorganization,

 

1.3.2.1.2 the individuals who were members of the Incumbent Board of directors immediately prior to the execution of the agreement providing for the merger, consolidation or reorganization constitute at least two-thirds of the members of the board of directors of the Surviving Corporation, or a corporation beneficially owning, directly or indirectly, a majority of the voting securities of the Surviving Corporation, and

 

1.3.2.1.3 no Person or Group, other than (1) the Company, (2) any Subsidiary, (3) any Employee Benefit Plan or (4) any other Person or Group who, immediately prior to the merger, consolidation or reorganization, had Beneficial Ownership of not less than 20% of the then outstanding Voting Securities or common stock, has Beneficial Ownership of 20% or more of the combined voting power of the Surviving Corporation’s then outstanding voting securities or common stock;

 

1.3.2.2 a complete liquidation or dissolution of the Company; or

 

1.3.2.3 the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Subsidiary).

 

Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred solely because any Person or Group (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the then outstanding Voting Securities or common stock of the Company as a result of an acquisition of Voting Securities or common stock by the Company which, by reducing the number of shares of Voting Securities or common stock then outstanding, increases the proportional number of shares beneficially owned by the Subject Person; provided, however, that if a Change of Control would have occurred (but for the operation of this sentence) as a result of the acquisition of Voting Securities or common stock by the Company, and after such acquisition by the Company, the Subject Person becomes the beneficial owner of any additional shares of Voting Securities or common stock, which increases the percentage of the then outstanding shares of Voting Securities or common stock beneficially owned by the Subject Person, then a Change of Control shall be deemed to have occurred.

 

1.4                   “Code” means the Internal Revenue Code of 1986, as amended.

 

1.5                   “Common Stock” means the Company’s common stock, par value $.001 per share.

 

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1.6                   “Cause” means (i) conviction of any crime whether or not committed in the course of his employment by the Company; (ii) Executive’s refusal to carry out resolutions of the Board which are consistent with Executive’s role as Chief Executive Officer; or (iii) the breach of any representation, warranty or agreement between Executive and Company.

 

1.7                   “Date of Termination” means (a) in the case of a termination for which a Notice of Termination (as hereinafter defined in Section 5.3) is required, 15 days from the date of actual receipt of such Notice of Termination or, if later, the date specified therein, as the case may be, and (b) in all other cases, the actual date on which the Executive’s employment terminates during the Term of Employment (as hereinafter defined in Section 3) (it being understood that nothing contained in this definition of “Date of Termination” shall affect any of the cure rights provided to the Executive or the Company in this Agreement).

 

1.8                   “Disability” means Executive’s inability to render, for a period of three consecutive months, services hereunder due to his physical or mental incapacity.

 

1.9                   “Effective Date” means the date hereof.

 

1.10            “Good Reason” means a reduction by the Company in Executive’s base compensation (base salary and target bonus) as in effect immediately prior to such reduction.

 

1.11            “Person(s)” means any individual or entity of any kind or nature, including any other person as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, and as used in Sections 13(d) and 14(d) thereof.

 

1.12            “Prospective Customer” shall mean any Person which has either (a) entered into a nondisclosure agreement with the Company or any Company subsidiary or Affiliate or (b) has within the preceding 12 months received a currently pending and not rejected written proposal in reasonable detail from the Company or any of the Company’s subsidiary or Affiliate.

 

1.13            “Separation from Service” or “Separates from Service” means a termination of employment with the Company that the Company determines is a Separation from Service in accordance with Section 409A of the Code.

 

1.14            “Severance Payment” means the payment of severance compensation as provided in Section 7 of this Agreement.

 

2.              EMPLOYMENT.

 

2.1       Agreement to Employ. Effective as of the Effective Date, the Company hereby agrees to employ Executive, and Executive hereby agrees to serve, subject to the provisions of this Agreement, as an officer and executive of the Company.

 

2.2       Duties and Schedule. Executive shall serve as the Company’s Executive Vice President of R&D and shall have such responsibilities as designated by the Chief Executive Officer of the Company that are not inconsistent with applicable laws, regulations and rules.  Executive shall report directly to the President and Chief Executive Officer of the Company.

 

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3.              TERM OF EMPLOYMENT. Unless Executive’s employment shall sooner terminate pursuant to Section 5, the Company shall employ Executive for a term commencing on the Effective Date and ending on the fourth anniversary thereof (the “Term”). The Term shall automatically renew for an additional year unless either Party provides notice to the other that the Term shall not continue within 30 days prior to the end of the prior Term. The period during which Executive is employed pursuant to this Agreement shall be referred to as the “Term” or the “Term of Employment.”

 

4.              COMPENSATION.

 

4.1                   Salary and Bonus. Executive’s salary during the Term shall be a gross amount of US$225,000 per annum or such other higher rate as the Board of Directors may determine from time to time (the “Salary”), payable monthly in arrears from the Effective Date. Subject to Section 8.5, the Executive shall be responsible for paying all applicable taxes on his Salary. The Executive shall be entitled to an annual bonus if performance targets are met at the discretion of the Board of the Directors.

 

4.2                   Vacation. Executive shall be entitled to twenty (20) days of paid vacation per year taken at such times so as to not materially impede his duties hereunder. Vacation days that are not taken in the current year may be carried over into future years.  Sick leaves shall be consistent with the Company’s standard policies and applicable U.S. law.  Executive should be entitled to standard U.S. government holidays in addition to vacation or sick leaves.

 

4.3                   Business Expenses. Executive shall be reimbursed by the Company for all ordinary and necessary expenses incurred by Executive in the performance of his duties hereunder on behalf of the Company subject to the approval by the Board of Directors.

 

5.              TERMINATION.

 

5.1                   Termination Due to Death or Disability.

 

5.1.1                     Death. This Agreement shall terminate immediately upon the death of Executive.  Upon Executive’s death, Executive’s estate or Executive’s legal representative, as the case may be, shall be entitled to Executive’s accrued and unpaid Salary and vacation as of the date of Executive’s death, plus all other compensation and benefits that were vested through the date of Executive’s death.

 

5.1.2                     Disability. In the event of Executive’s Disability, this Agreement shall terminate and Executive shall be entitled to (a) accrued and unpaid vacation through the first date that a Disability is determined; and (b) all other compensation and benefits that were vested through the first date that a Disability has been determined.

 

5.2                   Termination.  Both the Company and the Executive may terminate the employment hereunder by delivery of written notice to the other party at least fifteen (15) days prior to termination date or with a shorter notice period if agreed upon by the Parties provided, however, that in the event of a breach of this Agreement by the Executive or an event which would constitute “Cause,” the Company may immediately terminate this Agreement upon written notice with no waiting period. Upon the effective date of termination under this Section 5.2, Executive shall be entitled to all compensation that was vested through such effective date.

 

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5.3                   Notice of Termination.  Any termination of the Executive’s employment by the Company or the Executive shall be communicated by a notice in accordance with Section 8.4 of this Agreement (the “Notice of Termination”).

 

5.4                   Payment. Except as otherwise provided in this Agreement, any payments to which the Executive shall be entitled under this Section 5, including, without limitation, any economic equivalent of any benefit, shall be made as promptly as possible following the Date of Termination, but in no event more than 30 days after the Date of Termination.  If the amount of any payment due to the Executive cannot be finally determined within 30 days after the Date of Termination, such amount shall be reasonably estimated on a good faith basis by the Company and the estimated amount shall be paid no later than thirty (30) days after such Date of Termination.  As soon as practicable thereafter, the final determination of the amount due shall be made and any adjustment requiring a payment to Executive shall be made as promptly as practicable.  The payment of any amounts under this Section 5 shall not affect Executive’s rights to receive any workers’ compensation benefits.

 

6.              EXECUTIVE’S REPRESENTATIONS. Executive hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound, and (ii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms.  Executive hereby acknowledges and represents that he has consulted with independent legal counsel regarding his rights and obligations under this Agreement and that he fully understands the terms and conditions contained herein.

 

7.              COMPENSATION UPON SEPARATION FROM SERVICE FOLLOWING A CHANGE OF CONTROL. If Executive Separates from Service on account of (i) an involuntary termination or (ii) a voluntary termination for Good Reason, within twelve (12) months after a Change in Control, then subject to (x) Executive’s signing and not revoking a separation agreement and release of claims in a form reasonably satisfactory to the Company.

 

7.1                   Executive will be entitled to a Severance Payment in an amount computed as follows:

 

7.1.1                     A lump sum payment, paid in accordance with subsection 7.3 below, equal to two (2) times the Executive’s Annual Compensation; plus

 

7.1.2                     The same Company-paid health and group-term life insurance benefits as were provided to Executive and his family under plans of the Company as of the Change of Control for a total of eighteen (18) months, provided that all payments be made prior to December 31 of the second year following the year in which Executive Separates from Service. Notwithstanding the foregoing, the Company may, at its option, satisfy any requirement that the Company provide coverage under any plan by instead providing coverage under a separate plan or plans providing coverage that is no less favorable.

 

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7.2                   The Company agrees that, in addition to the payments provided under Section 7.1, all outstanding unvested stock options, restricted stock, performance shares and stock appreciation rights previously granted to Executive under any Company equity or long-term incentive plan or program (a “Company Incentive Plan”) (including any stock options, restricted stock, performance shares and stock appreciation rights assumed by the Company in connection with its acquisition of another entity) or otherwise shall immediately be 100% vested upon such Separation from Service. Notwithstanding anything to the contrary contained therein, Executive shall be entitled to exercise any stock options or stock appreciation rights until the expiration of three months following his Separation from Service (or until such later date as may be applicable under the terms of the award agreement governing the stock option or stock appreciation right upon termination of employment), subject to the maximum full term of the stock option or stock appreciation right. In addition, the Company agrees that all restricted stock units, performance-based restricted stock units, and long-term incentive cash programs (“Long-Term Incentives”) previously granted to Executive under any Company Incentive Plan shall immediately be 100% vested upon such Separation from Service. However, the issuance or payment of such restricted stock units, performance-based restricted stock units or long-term incentives shall be governed by Executive’s applicable grant or award agreement. Notwithstanding the immediately preceding sentence, in no event will the 100% vesting apply to restricted stock units, performance-based restricted stock units or long-term incentives if the 100% vesting would cause adverse tax consequences under Code Sec. 409A.

 

7.3                   All payments made to Executive under subsection 7.1 shall be made as soon as administratively practicable following the six-month anniversary of the date of his Separation from Service, provided that no Severance Payment shall be made to Executive if the separation agreement and release of claims referenced above have not become effective as of the six-month anniversary of the date of your Separation from Service. Notwithstanding anything contained in subsections 7.1 and 7.2 above, the Company shall have no obligation to make any payment or offer any benefits to Executive under this Section 7 if Executive Separates from Service prior to a Change in Control or if he Separates from Service within twelve (12) months after a Change in Control for Cause, death, Disability, retirement or voluntary resignation other than for Good Reason or if he Separates from Service for any reason after twelve (12) months following a Change in Control.

 

8.              NON-COMPETITION: NON-DISCLOSURE; INVENTIONS.

 

8.1                   Trade Secrets. Executive acknowledges that his employment position with the Company is one of trust and confidence. Executive further understands and acknowledges that, during the course of Executive’s employment with the Company, Executive will be entrusted with access to certain confidential information, specialized knowledge and trade secrets which belong to the Company, or its subsidiaries, including, but not limited to, their methods of operation and developing customer base, its manner of cultivating customer relations, its practices and preferences, current and future market strategies, formulas, patterns, patents, devices, secret inventions, processes, compilations of information, records, and customer lists, all of which are regularly used in the operation of their business and which Executive acknowledges

 

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have been acquired, learned and developed by them only through the expenditure of substantial sums of money, time and effort, which are not readily ascertainable, and which are discoverable only with substantial effort, and which thus are the confidential and the exclusive property of the Company and its subsidiaries (hereinafter “Trade Secrets”). Executive covenants and agrees to use his best efforts and utmost diligence to protect those Trade Secrets from disclosure to third parties.  Executive further acknowledges that, absent the protections afforded the Company and its subsidiaries in Section 7, Executive would not be entrusted with any of such Trade Secrets. Accordingly, Executive agrees and covenants (which agreement and covenant shall survive the termination of this Agreement regardless of the reason) as follows:

 

8.1.1                     Executive will at no time take any action or make any statement that will disparage or discredit the Company, any of its subsidiaries or their products or services;

 

8.1.2                     During the period of Executive’s employment with the Company and for 60 months immediately following the termination of such employment, Executive will not disclose or reveal to any person, firm or corporation other than in connection with the business of the Company and its subsidiaries or as may be required by law, any Trade Secret used or useable by the Company or any of its subsidiaries, divisions or Affiliates (collectively, the “Companies”) in connection with their respective businesses, known to Executive as a result of his employment by the Company, or other relationship with the Companies, and which is not otherwise publicly available. Executive further agrees that during the term of this Agreement and at all times thereafter, he will keep confidential and not disclose or reveal to any person, firm or corporation other than in connection with the business of the Companies or as may be required by applicable law, any information received by him during the course of his employment with regard to the financial, business, or other affairs of the Companies, their respective officers, directors, customers or suppliers which is not publicly available;

 

8.1.3                     Upon the termination of Executive’s employment with the Company, Executive will return to the Company all documents, customer lists, customer information, product samples, presentation materials, drawing specifications, equipment and other materials relating to the business of any of the Companies, which Executive hereby acknowledges are the sole and exclusive property of the Companies or any one of them.  Nothing in this Agreement shall prohibit Executive from retaining, at all times any document relating to his personal entitlements and obligations, his Rolodex, his personal correspondence files; and any additional personal property;

 

8.1.4                     During the term of the Agreement and, for a period of three (3) months immediately following the termination of the Executive’s employment with the Company, Executive will not: compete, or participate as a shareholder, director, officer, partner (limited or general), trustee, holder of a beneficial interest, employee, agent of or representative in any business competing directly with the Companies without the prior written consent of the Company, which may be withheld in the Company’s sole discretion; provided, however, that nothing contained herein shall be construed to limit or prevent the purchase or beneficial ownership by Executive of less than five percent of any publicly traded security;

 

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8.1.5                     During the term of the Agreement and, for a period of eighteen (18) months immediately following the termination of the Executive’s employment with the Company, Executive will not:

 

8.1.5.1                       solicit or accept competing business from any customer of any of the Companies or any person or entity known by Executive to be or have been, during the preceding eighteen (18) months, a customer or Prospective Customer of any of the Companies without the prior written consent of the Company;

 

8.1.5.2                       encourage, request or advise any such customer or Prospective Customer of any of the Companies to withdraw or cancel any of their business from or with any of the Companies; or

 

8.1.6                     Executive will not during the period of his employment with the Company and, subject to the provisions hereof for a period of eighteen (18) months immediately following the termination of Executive’s employment with the Company,

 

8.1.6.1                       conspire with any person employed by any of the Companies with respect to any of the matters covered by this Section 7;

 

8.1.6.2                       encourage, induce or solicit any person employed by any of the Companies to facilitate Executive’s violation of the covenants contained in this Section 7;

 

8.1.6.3                       assist any entity to solicit the employment of any Executive of any of the Companies; or

 

8.1.6.4                       employ or hire any Executive of any of the Companies, or solicit or induce any such person to join the Executive as a partner, investor, co-venturer, or otherwise encourage or induce them to terminate their employment with any of the Companies.

 

8.2                   Executive expressly acknowledges that all of the provisions of this Section 7 of this Agreement have been bargained for and Executive’s agreement hereto is an integral part of the consideration to be rendered by the Executive which justifies the rate and extent of the compensation provided for hereunder.

 

8.3                   Executive acknowledges and agrees that a violation of any one of the covenants contained in this Section 7 shall cause irreparable injury to the Company, that the remedy at law for such a violation would be inadequate and that the Company shall thus be entitled to temporary injunctive relief to enforce that covenant until such time that a court of competent jurisdiction either (a) grants or denies permanent injunctive relief or (b) awards other equitable remedy(s) as it sees fit.

 

8.4                   Successors.

 

8.4.1                     Executive. This Agreement is personal to Executive and, without the prior express written consent of the Company, shall not be assignable by Executive, except that Executive’s rights to receive any compensation or benefits under this Agreement may be transferred or disposed of pursuant to testamentary disposition, intestate succession or a qualified domestic relations order or in connection with a Disability.  This Agreement shall inure to the benefit of and be enforceable by Executive’s estate, heirs, beneficiaries, and/or legal representatives.

 

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8.4.2                     The Company. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

 

8.5                   Inventions and Patents. The Company shall be entitled to the sole benefit and exclusive ownership of any inventions or improvements in products, processes, or other things that may be made or discovered by Executive within the technological fields of interests while he is in the service of the Company, and all patents for the same. During the Term, Executive shall do all acts necessary or required by the Company to give effect to this section and, following the Term, Executive shall do all acts reasonably necessary or required by the Company to give effect to this section.  In all cases, the Company shall pay all costs and fees associated with such acts by Executive.

 

9.              MISCELLANEOUS.

 

9.1                   Indemnification.  The Company and each of its subsidiaries shall, to the maximum extent provided under applicable law, indemnify and hold Executive harmless from and against any expenses, including reasonable attorney’s fees, judgments, fines, settlements and other legally permissible amounts (“Losses”), incurred in connection with any proceeding arising out of, or related to, Executive’s employment by the Company, other than any such Losses incurred as a result of Executive’s negligence or willful misconduct.  The Company shall, or shall cause a third party to, advance to Executive any expenses, including attorney’s fees and costs of settlement, incurred in defending any such proceeding to the maximum extent permitted by applicable law.  Such costs and expenses incurred by Executive in defense of any such proceeding shall be paid by the Company or applicable third party in advance of the final disposition of such proceeding promptly upon receipt by the Company of (a) written request for payment; (b) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought; and (c) an undertaking adequate under applicable law made by or on behalf of Executive to repay the amounts so advanced if it shall ultimately be determined pursuant to any non-appealable judgment or settlement that Executive is not entitled to be indemnified by the Company. The Company will provide Executive with coverage under all director’s and officer’s liability insurance policies which it has in effect during the Term, with no deductible to Executive.

 

9.2                   Applicable Law.  Except as may be otherwise provided herein, this Agreement shall be governed by and construed in accordance with the laws of the State of New York, applied without reference to principles of conflict of laws.

 

9.3                   Amendments.  This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors or legal representatives.

 

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9.4                   Notices.  All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to the Executive:

 

Kin Chan

 

If to the Company:

 

Thompson Designs, Inc.
 1098 Hamilton Court

Menlo Park, California 94025

Fax: (650) 900-4130

 

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

 

Ofsink, LLC
 900 Third Avenue, 5th Floor
 New York, New York 10022
 Attn: Darren Ofsink
  Fax: 646-224-9844

 

Or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Notices and communications shall be effective when actually received by the addressee.

 

9.5                   Withholding. The Company may withhold from any amounts payable under the Agreement, such federal, state and local income, unemployment, social security and similar employment related taxes and similar employment related withholdings as shall be required to be withheld pursuant to any applicable law or regulation.

 

9.6                   Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and any such provision which is not valid or enforceable in whole shall be enforced to the maximum extent permitted by law.

 

9.7                   Captions. The captions of this Agreement are not part of the provisions and shall have no force or effect.

 

9.8                   Entire Agreement. This Agreement contains the entire agreement among the parties concerning the subject matter hereof and supersedes all prior agreements, understandings,

 

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discussions, negotiations and undertakings, whether written or oral, between the parties with respect thereto.

 

9.9                   Survivorship.  The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement or the Executive’s employment hereunder to the extent necessary to the intended preservation of such rights and obligations.

 

9.10            Waiver.  Either Party’s failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of any such provision or provisions, or prevent that party thereafter from enforcing each and every other provision of this Agreement.

 

9.11            Joint Efforts/Counterparts.  Preparation of this Agreement shall be deemed to be the joint effort of the parties hereto and shall not be construed more severely against any party.  This Agreement may be signed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

 

9.12            Representation by Counsel.  Each Party hereby represents that it has had the opportunity to be represented by legal counsel of its choice in connection with the negotiation and execution of this Agreement.

 

[Signature page follows]

 

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

 

 

	
EXECUTIVE:
    	
 
    	
THOMPSON DESIGNS, INC.
    
	
 
    	
 
    	
a Nevada corporation
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
/s/ Kin F. Chan
    	
 
    	
By:
    	
/s/ James R.   Pekarsky
    
	
Name: Kin F. Chan
    	
 
    	
Name: James R. Pekarsky
    
	
 
    	
 
    	
Title: CEO
    

 

12Exhibit 10.15

 

BIOPHARMX CORPORATION

 

SUBSCRIPTION AGREEMENT

 

	
 
    	
As of October 24, 2014
    

 

Mr. James Pekarsky

Chief Executive Officer

BioPharmX Corporation

1098 Hamilton Court

Menlo Park, California 94025

 

1.              Subscription.

 

(a)              The undersigned subscriber (the “Subscriber”) hereby irrevocably subscribes for and agrees to purchase the number of shares (the “Shares”) of the Company’s Series A preferred stock, par value $.001 per share (“Series A Preferred Stock”), with the powers, preferences, rights, qualifications, limitations and restrictions as set forth in the certificate of designations in the form of Exhibit A hereto (the “Certificate of Designations”), set forth on the signature page hereto from BioPharmX Corporation, a Delaware corporation (the “Company”) for the purchase price of $1.85 per share in connection with the Company’s offering of up to $8,000,000 in Series A Preferred Stock together with the right to receive warrants for no additional consideration (the “Offering”), in the form of Exhibit B hereto, granting subscriber the right to purchase a number of shares of common stock, par value $.001 per share, of the Company (the “Common Stock”) equal to fifty percent (50%) of the number of shares of Common Stock into which the Shares are convertible (such warrants, the “Warrants;” together with the Series A Preferred Stock, the “Securities”).  The Warrants will have an initial exercise price equal to $3.70 per share and shall be exercisable for a three (3) year period.  In addition, the Shares and shares issuable upon exercise of the Warrants (the “Warrant Shares”) shall have the registration rights as provided in Section 4 hereof.  In addition, Subscriber agrees to enter into the Investor Rights Agreement (the “Investor Rights Agreement”), in the form of Exhibit C hereto, granting the Subscriber additional rights from the Company and certain of its shareholders.

 

This Subscription Agreement and the Investor Rights Agreement (the “Subscription Agreement”) together with the Exhibits and Schedules thereto constitute the “Offering Documents.”

 

This subscription is based solely upon the information provided in the Offering Documents and upon the Subscriber’s own investigation as to the merits and risks of this investment.  The Subscriber shall deliver herewith duly executed copies of the signature pages to the following documents: (i) the Subscription Agreement, and (ii) the Accredited Investor Questionnaire.

 

 

The Offering may be consummated at more than one closing to occur on a date as may be determined by the Company. Each such closing is referred to as a “Closing” and the date of each such Closing is referred to as the “Closing Date.”  A final Closing shall be held by the Company on or before September 30, 2014”), which can be extended up to October 15, 2014 by the Company’s board of directors (the “Final Closing Date”).  At each Closing with respect to the Shares subscribed for hereby and accepted by the Company, the Company shall deliver to the Subscriber, the stock certificate for the Shares and the Warrants certificate.  If the Company does not accept this subscription, in whole or in part, it will promptly refund to the Subscriber, without deduction therefrom, any subscription payment received from the Subscriber for the Shares, the subscription for which was not accepted by the Company.

 

(b)             Subject to the terms and conditions hereinafter set forth, the Subscriber hereby subscribes for and agrees to purchase the number of Shares from the Company set forth on the signature page hereof, and when this Agreement is accepted and executed by the Company, the Company agrees to issue such Shares and Warrants to the Subscriber.  The subscription price is payable by wire transfer pursuant to the following wire instructions.

 

WIRING INSTRUCTIONS

 

	
Bank’s Name and Address:
    	
 
    	
Bank of America
    
	
 
    	
 
    	
315 Montgomery Street
    
	
 
    	
 
    	
San Francisco, CA 94104
    
	
Account #:
    	
 
    	
325000471314
    
	
ABA Routing #:
    	
 
    	
026009593
    
	
SWIFT:
    	
 
    	
BOFAUS3N (for overseas transfers)
    
	
Account Title:
    	
 
    	
BioPharmX
    

 

2.              Subscriber Representations, Warranties and Agreements.  The Subscriber hereby acknowledges, represents and warrants as follows (with the understanding that the Company will rely on such representations and warranties in determining, among other matters, the suitability of this investment for the Subscriber in order to comply with federal and state securities laws):

 

(a)             In connection with this subscription, the Subscriber has read this Subscription Agreement and the other Offering Documents.  The Subscriber acknowledges that this Subscription Agreement is not intended to set forth all of the information which might be deemed pertinent by an investor who is considering an investment in the Securities.  It being the responsibility of Subscriber (i) to determine what additional information he desires to obtain in evaluating this investment and (ii) to obtain such information from the Company.

 

(b)              THIS OFFERING IS LIMITED TO PERSONS WHO ARE “ACCREDITED INVESTORS,” AS THAT TERM IS DEFINED IN REGULATION D UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND

 

 

WHO HAVE THE FINANCIAL MEANS AND THE BUSINESS, FINANCIAL  AND INVESTMENT EXPERIENCE AND ACUMEN TO CONDUCT AN INVESTIGATION AS TO, AND TO EVALUATE, THE MERITS AND RISKS OF THIS INVESTMENT. THE SUBSCRIBER HEREBY REPRESENTS THAT HE HAS READ, IS FAMILIAR WITH AND UNDERSTANDS RULE 501 OF REGULATION D UNDER THE ACT.  THE SUBSCRIBER IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(A) OF REGULATION D.

 

(c)                The Subscriber has had full access to all the information which the Subscriber (or the Subscriber’s advisor) considers necessary or appropriate to make an informed decision with respect to the Subscriber’s investment in the Securities.  The Subscriber acknowledges that the Company has made available to the Subscriber and the Subscriber’s advisors the opportunity to examine and copy any contract, matter or information which the Subscriber considers relevant or appropriate in connection with this investment and to ask questions and receive answers relating to any such matters including, without limitation, the financial condition, management, employees, business, obligations, corporate books and records, budgets, business plans of and other matters relevant to the Company.  To the extent the Subscriber has not sought information regarding any particular matter, the Subscriber represents that he or she had and has no interest in doing so and that such matters are not material to the Subscriber in connection with this investment.  The Subscriber has accepted the responsibility for conducting the Subscriber’s own investigation and obtaining for itself such information as to the foregoing and all other subjects as the Subscriber deems relevant or appropriate in connection with this investment.  The Subscriber is not relying on any representation other than that contained herein.  The Subscriber acknowledges that no representation regarding projected financial performance or a projected rate of return has been made to it by any party.

 

(d)               The Subscriber understands that the offering of the Securities has not been registered under the Securities Act, in reliance on an exemption for private offerings provided pursuant to Section 4(2) of the Securities Act and that, as a result, the Securities, as well as the securities issuable upon conversion of the Securities as set forth in the Certificate of Designations and the Warrants certificate and the  securities issuable in connection with such securities (collectively, the “Conversion Securities”), will be “restricted securities” as that term is defined in Rule 144 under the Securities Act and, accordingly, under Rule 144 as currently in effect, that the Securities or the Conversion Securities must be held until the latest of (i) at least six (6) months after the investment has been made (or indefinitely if the Subscriber is deemed an “affiliate” within the meaning of such rule), or (ii) January 23, 2015, one year from the closing of the reverse acquisition transaction, unless the Securities or Conversion Securities are subsequently registered under the Securities Act and qualified under any other applicable securities law or exemptions from such registration and qualification are available.  The Subscriber understands that except as set forth in Section 4 hereof the Company is under no obligation to register the Securities under the Securities Act or to register or qualify the Securities under any other

 

 

applicable securities law, or to comply with any other exemption under the Securities Act or any other securities law, and that the Subscriber has no right to require such registration.  The Subscriber further understands that the Offering of the Securities has not been qualified or registered under any foreign or state securities laws in reliance upon the representations made and information furnished by the Subscriber herein and any other documents delivered by the Subscriber in connection with this subscription; that the Offering has not been reviewed by the Commission or by any foreign or state securities authorities; that the Subscriber’s rights to transfer the Securities will be restricted, which includes restrictions against transfers unless the transfer is not in violation of the Securities Act and applicable state securities laws (including investor suitability standards); and that the Company may in its sole discretion require the Subscriber to provide at Subscriber’s own expense an opinion of its counsel to the effect that any proposed transfer is not in violation of the Act or any state securities laws.

 

(e)                The Subscriber is empowered and duly authorized to enter into this Subscription Agreement which constitutes a valid and binding agreement of the Subscriber enforceable against the Subscriber in accordance with its terms; and the person signing this Subscription Agreement on behalf of the Subscriber is empowered and duly authorized to do so.

 

(f)                 The Subscriber has liquid assets sufficient to assure that the purchase price of the Securities will cause no undue financial difficulties and that, after purchasing the Securities the Subscriber will be able to provide for any foreseeable current needs and possible personal contingencies; the Subscriber is able to bear the risk of illiquidity and the risk of a complete loss of this investment.

 

(g)               The information in any documents delivered by the Subscriber in connection with this subscription, including, but not limited to the Investor Questionnaire, is true, correct and complete in all respects as of the date hereof.  The Subscriber agrees promptly to notify the Company in writing of any change in such information after the date hereof.

 

(h)               The offering and sale of the Securities to the Subscriber were not made through any advertisement in printed media of general and regular paid circulation, radio or television or any other form of advertisement, or as part of a general solicitation.

 

(i)                  The Subscriber recognizes that an investment in the Securities involves significant risks.  The Subscriber has read and understands such risks and that such risks, and others, can result in the loss of the Subscriber’s entire investment in the Securities.

 

(j)                  The Subscriber is acquiring the Securities, as principal, for the Subscriber’s own account for investment purposes only, and not with a present intention toward or for the resale, distribution or fractionalization thereof, and no other person has a beneficial interest in the Securities.  The Subscriber has no present intention of selling or otherwise distributing or disposing of the Securities, and understands that an investment in the Securities must be considered a long-term illiquid investment.

 

 

3.              Representations, Warranties and Covenants of the Company.  As a material inducement of the Subscribers to enter into this Subscription Agreement and subscribe for the Securities, the Company represents and warrants to the Subscriber, as of the date hereof, as follows:

 

(a)         Organization and Standing.  The Company is a duly organized corporation, validly existing and in good standing under the laws of the State of Delaware, has full power to carry on its business as and where such business is now being conducted and to own, lease and operate the properties and assets now owned or operated by it and is duly qualified to do business and is in good standing in each jurisdiction where the conduct of its business or the ownership of its properties requires such qualification except where the failure to be so qualified would not have a Material Adverse Effect on the Company.  “Material Adverse Effect” means any circumstance, change in, or effect on the Company that, individually or in the aggregate with any other similar circumstances, changes in, or effects on, the Company taken as a whole: (i) is, or is reasonably expected to be, materially adverse to the business, operations, assets, liabilities, employee relationships, customer or supplier relationships, prospects, results of operations or the condition (financial or otherwise) of the Company taken as a whole, or (ii) is reasonably expected to adversely affect the ability of the Company to operate or conduct the Company’s business in the manner in which it is currently operated or conducted or proposed to be operated or conducted by the Company; provided, however, that none of the following shall be deemed in and of themselves, either alone or in combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Material Adverse Effect: (i) any change, event, state of facts or development generally affecting the general political, economic or business conditions of the United States; (ii) any change, event, state of facts or development generally affecting the medical device industry; (iii) any change, event, state of facts or development arising from or relating to compliance with the terms of this Subscription Agreement; (iv) acts of war (whether or not declared), the commencement, continuation or escalation of a war, acts of armed hostility, sabotage or terrorism or other international or national calamity or any material worsening of such conditions; (v) changes in laws or the U.S. generally accepted accounting principles (“GAAP”) after date hereof or interpretation thereof; or (vi) any matter set forth in the Offering Documents or the Schedules or Exhibits thereto.

 

(b)         Subsidiaries.  Except for BiopharmX Inc., a Nevada corporation, as of the date herein, the Company does not own or control any subsidiaries. For purposes of this Agreement, “Subsidiary” means, with respect to any entity at any date, any corporation, limited or general partnership, limited liability company, trust, estate, association, joint venture or other business entity of which more than 50% of (i) the outstanding capital stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other managing body of such entity, (ii) in the case of a partnership or limited liability company, the interest in the capital or profits of such partnership or limited liability company or (iii) in the case of a trust, estate, association, joint venture or other entity, the beneficial interest in such trust, estate, association or other entity business is, at

 

 

the time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such entity.

 

(c)          Authority.  The execution, delivery and performance of this Subscription Agreement and the other Offering Documents by the Company and the consummation of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Company. Each of the documents contained in the Offering Documents has been (or upon delivery will be) duly executed by the Company, is or, when delivered in accordance with the terms hereof, will constitute, assuming due authorization, execution and delivery by each of the parties thereto, the valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

 

(d)         No Conflict.  The execution, delivery and performance of this Subscription Agreement and the consummation of the transactions contemplated hereby do not (i) violate or conflict with the Company’s Certificate of Incorporation, By-laws or other organizational documents, (ii) conflict with or result (with the lapse of time or giving of notice or both) in a material breach or default under any material agreement or instrument to which the Company is a party or by which the Company is otherwise bound, or (iii) violate any order, judgment, law, statute, rule or regulation applicable to the Company, except where such violation, conflict or breach would not have a Material Adverse Effect on the Company.  This Subscription Agreement when executed by the Company will be a legal, valid and binding obligation of the Company enforceable in accordance with its terms (except as may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws and equitable principles relating to or limiting creditors’ rights generally).

 

(e)          Authorization.  Issuance of the Securities to Subscriber has been duly authorized by all necessary corporate actions of the Company.

 

(f)           Litigation and Other Proceedings.  There are no actions, suits, proceedings or investigations pending or, to the knowledge of the Company, threatened against the Company at law or in equity before or by any court or Federal, state, municipal or their governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign which could materially adversely affect the Company.  The Company is not subject to any continuing order, writ, injunction or decree of any court or agency against it which would have a material adverse effect on the Company.

 

(g)         Use of Proceeds.  The proceeds of this Offering and sale of the Securities, net of payment of placement expenses, will be used by the Company for working capital and general corporate purposes.

 

(h)         Consents/Approvals.  No consents, filings (other than Federal and state securities filings relating to the issuance of the Securities pursuant to applicable exemptions from registration, which the Company hereby undertakes to make in a timely fashion), authorizations or other actions of any governmental authority are required to be obtained or made by the Company for the Company’s execution, delivery and performance of this

 

 

Subscription Agreement which have not already been obtained or made or will be made in a timely manner following the initial Closing.

 

(i)            Placement Agents.  The Company may engage finders, brokers or placement agents in connection with the transactions contemplated hereby and pay to such brokers fees not to exceed ten (10) percent of the gross proceeds of the Offering and shares of Common Stock representing ten (10) percent of shares of Common Stock sold in the Offering.

 

(j)            Capitalization. A capitalization table illustrating the authorized and outstanding capital stock of the Company as of the date hereof is attached as Schedule 3(j).  All of such outstanding shares have been, or upon issuance will be, validly issued, fully paid and non-assessable.  As of the date hereof, except as disclosed in Schedule 3(j), and except for Securities issued in the Offering (i) no shares of the Company’s capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company, (ii) there are no outstanding debt securities, (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, (iv) except for its obligations under Section 4 of this Agreement, there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of their securities under the Securities Act, (v) there are no outstanding securities of the Company or any of its subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its subsidiaries is or may become bound to redeem a security of the Company or any of its subsidiaries, and (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance or exercise of the Securities as described in this Subscription Agreement.  The Company has furnished to the Subscriber true and correct copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible or exchangeable into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto.  Schedule 3(j) also lists all outstanding debt of the Company with sufficient detail acceptable to Subscriber.

 

(k)         Intellectual Property Rights. The Company owns or possesses adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct its businesses as now conducted.  The Company does not have any knowledge of any infringement by the Company of trademark, trade name rights, patents, patent rights, copyrights, inventions,

 

 

licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge, being threatened against, the Company regarding trademarks, trade name rights, patents, patent rights, inventions, copyrights, licenses, service names, service marks, service mark registrations, trade secrets or other infringement.

 

(l)            Disclosure. No representation or warranty by the Company in this Subscription Agreement, the other Offering Documents, nor in any certificate, Schedule or Exhibit delivered or to be delivered pursuant to this Subscription Agreement or the other Offering Documents: contains or will contain any untrue statement of material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading.  To the knowledge of the Company at the time of the execution of this Subscription Agreement and at each Closing, there is no information concerning the Company which has not heretofore been disclosed to the Subscribers that would have a Material Adverse Effect.

 

(m)     Title.  The Company has good and marketable title to all personal property owned by it which is material to the business of the Company, in each case free and clear of all liens, encumbrances and defects.

 

(n)         Tax Status.  The Company has made or filed all United States federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject and all such returns, reports and declarations are true, correct and accurate in all material respects.  The Company has paid all taxes and other governmental assessments and charges, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith, for which adequate reserves have been established, in accordance with GAAP, and except where the failure to do so would not constitute a Material Adverse Effect on the Company.

 

(o)         Compliance with Laws. The business of the Company has been and is presently being conducted so as to comply with all applicable material federal, state and local governmental laws, rules, regulations and ordinances.

 

(p)         Restrictions on Business Activities.  There is no judgment, order, decree, writ or injunction binding upon the Company or any subsidiary or, to the knowledge of the Company or any subsidiary, threatened that has or could prohibit or impair the conduct of their respective businesses as currently conducted or any business practice of the Company or any subsidiary, including the acquisition of property, the provision of services, the hiring of employees or the solicitation of clients, in each case either individually or in the aggregate.

 

(r)          Issuances. The Company’s common stock issuable upon conversion of the Shares and exercise of Warrants will be validly issued, fully paid and nonassessable.

 

 

(s)           USA PATRIOT Act and Money Laundering Laws. The operations of the Company are and have been conducted at all times in compliance with the money laundering requirements of all applicable governmental authorities and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental authority (collectively, the “Money Laundering Laws”) and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. 107-56 (signed into Law October 26, 2001) (the “USA PATRIOT Act”) and no action, suit or proceeding by or before any court or governmental authority or any arbitrator involving any of the Company or any of its Subsidiaries with respect to the Money Laundering Laws or USA PATRIOT Act is pending or, to the best knowledge of the Company, threatened.

 

(t)            For twelve months after the Closing, the Subscribers that have subscribed for at least $500,000 of the Shares shall have the right to purchase on a pro-rata basis up to an aggregate of 50% of the securities offered by the Company in any subsequent offering (the “Follow-On Financing”) upon the same terms as offered to all other offerees. The Subscribers shall be given not less than ten days prior written notice (the “Notice of Sale”) of any proposed Follow-On Financing and shall have the right during the ten days following receipt of the Notice of Sale to purchase the securities offered in the Follow-On Financing.

 

(u)         Within 12 months after the first Closing, the Company shall increase the number of the directors of the Company to 5, including the current directors, and the Board of Directors shall appoint at least one director qualifying as an audit committee financial expert, as defined in Item 407(d)(5)(i) of Regulation S-K, and two directors qualifying as independent directors pursuant to the definition of “independent director” under the Rules of NASDAQ, Marketplace Rule 5605(a)(2).

 

(v)         For sixty (60) days after the date hereof, upon any issuance by the Company or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Subscriber, the Company shall notify the Subscriber of such additional or more favorable term and such term, at Subscriber’s option, shall become a part of the transaction documents with the Subscriber.  The types of terms contained in another security that may be more favorable to the holder of such security shall not include any rights to representation on the Company’s board of directors.

 

(W) The Subscribers shall purchase $2,000,000 of the Shares at the per share price of $1.85 upon the earlier of the Company receiving revenues for Violet of $2,000,000 (the “Milestone”) or upon immediate up listing to the NYSE or NASDAQ exchange, provided that the Subscribers will have no rights to receive Warrants in connection with the purchase of such Shares. Within ten (10) business days after the written notice of the Milestone is provided by the Company, the Subscribers shall remit funds to the Company for the $2,000,000 of Shares.

 

 

Section 4.                                          Registration Rights.

 

(a)               Registration Rights.

 

(i)                 If at any time following the approval of the Common Stock for listing on the NASDAQ or NYSE, (a) there is no effective Registration Statement with respect to shares of Common Stock underlying the Series A Preferred Stock and the Warrant Shares (the “Registrable Shares”) and (b) not all of the outstanding Registrable Shares may be sold without registration pursuant to Rule 144 under the Securities Act, then Subscribers that at the time of the written demand (directly or with their affiliates) hold the Registrable Shares representing more than 50% of the Registrable Shares then outstanding (individually, a “Demanding Holder” and collectively, the “Demanding Holders”), may make a written demand for registration (a “Demand Registration” and the registration statement to be filed pursuant to such Demand Registration, the “Demand Registration Statement”) under the Securities Act of the sale of all or part of its Registrable Shares. Any request for a Demand Registration shall specify the number of shares (or other amount) of Registrable Shares proposed to be sold and the intended method(s) of distribution thereof (such written demand, the “Demand Notice”). The Company will notify the Subscribers other than the Demanding Holder of the Demand Registration (each such Holder including Shares of its Registrable Shares in such registration, a “Participating Holder”) as soon as practicable, and each such other Holder who wishes to include all or a portion of its Registrable Shares of the type that are the subject of the Demand Registration Statement proposed to be filed in such Demand Registration Statement shall so notify the Company within fifteen (15) days after receipt of such notice (the “Demanding Subscribers’ Deadline”).  The Company shall use its best efforts to file such Demand Registration Statement within forty five (45) days (the “Required Filing Date”) after receiving the Demand Notice, and use its best efforts to have the Demand Registration Statement declared effective by the U.S. Securities and Exchange Commission, not later than ninety (90) days after the Required Filing Date. The Company shall not be obligated to effect more than two (2) Demand Registrations under this Section 4(a) in respect of Registrable Shares.

 

(ii)             The Company will pay all expenses associated with the registration, including, without limitation, filing and printing fees, accounting fees and expenses, costs, if any, associated with clearing the Registrable Securities for sale under applicable state securities laws.

 

(b)               Subscriber Information. Each Subscriber shall (A) furnish to the Company such information regarding itself, the Registrable Securities, other securities of the Company held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably requested by the Company to effect and maintain the effectiveness of the Registration Statement, (B) execute such documents in connection with the Registration Statement as the Company may reasonably request and (C) immediately

 

 

discontinue disposition of Registrable Securities pursuant to any registration statement upon notice from the Company of (x) the issuance of any stop order or other suspension of effectiveness of the Registration Statement by the Commission, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction by the applicable regulatory authorities or (y) the happening of any event, as promptly as practicable after becoming aware of such event, as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or (z) the failure of the prospectus included in the Registration Statement, as then in effect, to comply with the requirements of the Securities Act until the Subscriber’s receipt of a supplemented or amended prospectus or receipt of notice that no supplement or amendment is required.

 

(c)                Indemnification.

 

(i)                  In the event any Registrable Securities are included in the Registration Statement under this Section 4, to the extent permitted by law, the Company will indemnify and hold harmless each of the Subscribers (including their officers, directors, members and partners), any underwriter (as defined in the Securities Act) for the Subscribers and each person, if any, who controls such Subscriber or underwriter within the meaning of the Securities Act or the Exchange Act (each a “Subscriber Indemnified Person”), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law (“Claims”), insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a “Violation”): (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and the Company will pay to the Subscriber Indemnified Person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any Claim; provided, however, that the indemnity agreement contained in this Section 4 shall not apply to amounts paid in settlement of any such Claim if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld or delayed), nor shall the Company be liable to any Subscriber Indemnified Person for any such Claim to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by the Subscriber Indemnified Person. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of

 

 

such Subscriber Indemnified Person and shall survive the transfer of the Registrable Securities by the Subscribers.

 

(ii)              In the event any Registrable Securities are included in the Registration Statement under this Section 4 to the extent permitted by law, each Subscriber shall, severally and not jointly, indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 4, the Company, each of its directors, each of its officers who signs the registration statement and each Person, if any, who controls the Company within the meaning of the Securities Act or the Securities Exchange Act  of 1934, as amended (the “Exchange Act”), (each, a “Company Indemnified Person”), against any Claim, insofar as such Claims arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in strict conformity with written information furnished to the Company by such Subscriber expressly for use in the Registration Statement; and, subject to Section 4, such Subscriber will reimburse any legal or other expenses reasonably incurred by any Company Indemnified Person in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 4 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the indemnifying Subscriber, which consent shall not be unreasonably withheld or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Company Indemnified Person and shall survive the transfer of the Registrable Securities by the Subscribers.

 

(iii)          Promptly after receipt by a Subscriber Indemnified Person or Company Indemnified Person (each, an “Indemnified Person”) under this Section 4 of notice of a Claim, such Indemnified Person shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 4, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall, by giving written notice to the Indemnified Party within fifteen days after the Indemnified Party has given notice of the Claim, have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person; provided, however, that an Indemnified Person shall have the right to retain its own counsel with the fees and expenses of not more than one counsel for such Indemnified Person to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Subscriber Indemnified Person or Company Indemnified Person and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person and any other party represented by such counsel in such proceeding. In the case of any Company Indemnified Person, legal counsel referred to in the proviso of the immediately preceding sentence shall be selected by the holders holding at least a majority in interest of the Registrable Securities included in the registration statement to which the Claim relates. The Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action

 

 

or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Person that relates to such action or Claim. The indemnifying party shall keep the Indemnified Person reasonably apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Person of a full and general release from all liability in respect to such Claim or litigation, and such settlement (a) shall provide for the payment by the Indemnifying Party of money as sole relief for the claimant, (b) shall not include any finding or admission as to fault on the part of the Indemnified Person and (c) shall have no effect on any other claims that may be made against the Indemnified Party.

 

Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person under this Section 4, except to the extent that the indemnifying party is materially prejudiced in its ability to defend such action.

 

5.              Legends.  The Subscriber understands and agrees that the Company will cause any necessary legends to be placed upon any instruments(s) evidencing ownership of the Securities, together with any other legend that may be required by federal or state securities laws or deemed necessary or desirable by the Company.

 

6.              General Provisions.

 

(a)               Confidentiality.  The Subscriber covenants and agrees that it will keep confidential and will not disclose or divulge any confidential or proprietary information that such Subscriber may obtain from the Company pursuant to financial statements, reports, and other materials submitted by the Company to such Subscriber in connection with this offering or as a result of discussions with or inquiry made to the Company, unless such information is known, or until such information becomes known, to the public through no action by the Subscriber; provided, however, that a Subscriber may disclose such information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary in connection with his or her investment in the Company so long as any such professional to whom such information is disclosed is made aware of the Subscriber’s obligations hereunder and such professional agrees to be likewise bound as though such professional were a party hereto, (ii) if such information becomes generally

 

 

available to the public through no fault of the Subscriber, or (iii) if such disclosure is required by applicable law or judicial order.

 

(b)               Successors.  The covenants, representations and warranties contained in this Subscription Agreement shall be binding on the Subscriber’s and the Company’s heirs and legal representatives and shall inure to the benefit of the respective successors and assigns of the Company.  The rights and obligations of this Subscription Agreement may not be assigned by any party without the prior written consent of the other party.

 

(c)                Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original agreement, but all of which together shall constitute one and the same instrument.

 

(d)               Execution by Facsimile.  Execution and delivery of this Agreement by facsimile transmission (including the delivery of documents in Adobe PDF format) shall constitute execution and delivery of this Agreement for all purposes, with the same force and effect as execution and delivery of an original manually signed copy hereof.

 

(e)                Governing Law and Jurisdiction.  This Subscription Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts to be wholly performed within such state and without regard to conflicts of laws provisions.  Any legal action or proceeding arising out of or relating to this Subscription Agreement and/or the other Offering Documents may be instituted in the courts of the State of New York sitting in New York County or in the United States of America for the Southern District of New York, and the parties hereto irrevocably submit to the jurisdiction of each such court in any action or proceeding.  Subscriber hereby irrevocably waives and agrees not to assert, by way of motion, as a defense, or otherwise, in every suit, action or other proceeding arising out of or based on this Subscription Agreement and/or the other Offering Documents and brought in any such court, any claim that Subscriber is not subject personally to the jurisdiction of the above named courts, that Subscriber’s property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.

 

(f)                       (i)             Indemnification Generally.  The Company, on the one hand, and the Subscriber, on the other hand (for the purpose of this Section 6(f) only, each an “Indemnifying Party”), shall indemnify the other from and against any and all losses, damages, liabilities, claims, charges, actions, proceedings, demands, judgments, settlement costs and expenses of any nature whatsoever (including, without limitation, reasonable attorneys’ fees and expenses) resulting from any breach of a representation and warranty, covenant or agreement by the Indemnifying Party and all claims, charges, actions or proceedings incident to or arising out of the foregoing.  Notwithstanding any provision herein to the contrary, the indemnification obligation of any Subscriber shall be limited to the investment amount in the Shares purchased

 

 

by said Subscriber, except to the extent that such indemnification obligation relates to a breach of Section 2(b).

 

(ii)          Indemnification Procedures.  Each person entitled to indemnification under this Section 6 (for the purpose of this Section 6(f) only, an “Indemnified Party”) shall give notice as promptly as reasonably practicable to each party required to provide indemnification under this Section 6 of any action commenced against or by it in respect of which indemnity may be sought hereunder, but failure to so notify an Indemnifying Party shall not release such Indemnifying Party from any liability that it may have, otherwise than on account of this indemnity agreement so long as such failure shall not have materially prejudiced the position of the Indemnifying Party.  Upon such notification, the Indemnifying Party shall assume the defense of such action if it is a claim brought by a third party, and, if and after such assumption, the Indemnifying Party shall not be entitled to reimbursement of any expenses incurred by it in connection with such action except as described below.  In any such action, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the contrary or (ii) the named parties in any such action (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing or conflicting interests between them.  The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent (which shall not be unreasonably withheld or delayed by such Indemnifying Party), but if settled with such consent or if there be final judgment for the plaintiff, the Indemnifying Party shall indemnify the Indemnified Party from and against any loss, damage or liability by reason of such settlement or judgment.

 

g.                    Notices.  All notices, requests, demands, claims and other communications hereunder shall be in writing and shall be delivered by certified or registered mail (first class postage pre-paid), guaranteed overnight delivery, or facsimile transmission if such transmission is confirmed by delivery by certified or registered mail (first class postage pre-paid) or guaranteed overnight delivery, to the following addresses and facsimile numbers (or to such other addresses or facsimile numbers which such party shall subsequently designate in writing to the other party):

 

(i)                         if to the Issuer:

 

BioPharmX Corporation

1098 Hamilton Court

Menlo Park, California 94025

Attn: Mr. James Pekarsky

Facsimile: (650) 900-4130

 

 

(ii)                      if to the Subscriber to the address set forth next to its name on the signature page hereto.

 

h.                    Entire Agreement.  This Subscription Agreement (including the Exhibits attached hereto) and other Offering Documents delivered at  a Closing pursuant hereto, contain the entire understanding of the parties in respect of its subject matter and supersede all prior agreements and understandings between or among the parties with respect to such subject matter.  The Exhibits constitute a part hereof as though set forth in full above.

 

i.                       Amendment; Waiver.  This Subscription Agreement may not be modified, amended, supplemented, canceled or discharged, except by written instrument executed by the Company and the holders of not less than a majority of the Shares at the time such consent is sought.  No failure to exercise, and no delay in exercising, any right, power or privilege under this Subscription Agreement shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege hereunder preclude the exercise of any other right, power or privilege.  No waiver of any breach of any provision shall be deemed to be a waiver of any proceeding or succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing between the parties.  No extension of time for performance of any obligations or other acts hereunder or under any other agreement shall be deemed to be an extension of the time for performance of any other obligations or any other acts.  The rights and remedies of the parties under this Subscription Agreement are in addition to all other rights and remedies, at law or equity, that they may have against each other.

 

j.                       No Impairment.  At all times after the date hereof, the Company will not take or permit any action, or cause or permit any subsidiary to take or permit any action that materially impairs or adversely affects the rights of the Subscribers under the this Agreement or any of the other Offering Documents.

 

[SIGNATURE PAGES FOLLOW]

 

 

IN WITNESS WHEREOF, the Company has executed this Subscription Agreement as of the date first written above.

 

 

	
 
    	
BIOPHARMX   CORPORATION
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ James Pekarsky
    
	
 
    	
Name:
    	
James Pekarsky
    
	
 
    	
Title:
    	
Chief Executive Officer
    

 

 

SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

 

INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL

 

DOLLAR AMOUNT INVESTED:  $1,000,000 UPON SIGNING, $2,000,000 UPON MEETING THE MILESTONE IN SECTION 3 (W)

 

NUMBER OF SHARES:  540,541 UPON SIGNING, 1,081,082 UPON MILESTONE IN SECTION 3 (W)

 

NUMBER OF WARRANTS: 270,27O UPON SIGNING

 

NAME IN WHICH SHARES AND WARRANT SHOULD BE ISSUED: KIP OVERSEAS EXPANSION PLATFORM FUND

 

	
AMOUNT INVESTED TO BE SENT   VIA:
    	
 
    	
o Check (enclosed)
    	
 
    	
x Wire
    

 

Address Information

 

For individual subscribers this address should be the Subscriber’s primary legal residence.  For entities other than individual subscribers, please provide address information for the entities primary place of business.  Information regarding a joint subscriber should be included in the column at right.

 

	
10F ASEM Tower, 517   Yeongdong-daero
    	
 
    	
 
    
	
Legal Address
    	
 
    	
Legal Address
    
	
 
    	
 
    	
 
    
	
Gangnam-gu, Seoul,   135-798 Republic of Korea
    	
 
    	
 
    
	
City, State, and   Zip Code, Country
    	
 
    	
City, State, and Zip Code, Country
    

 

Alternate Address Information

 

Subscribers who wish to receive correspondence at an address other than the address listed above should complete the Alternate Address section on the following page.

 

	
 
    	
                           N/A
    	
 
    	
 
    
	
 
    	
Tax ID # or Social Security #
    	
 
    	
Tax ID # or Social Security #
    

 

	
AGREED   AND SUBSCRIBED
    	
AGREED   AND SUBSCRIBED
    
	
This   24th day of October, 2014
    	
SIGNATURE   OF JOINT SUBSCRIBER (if any)
    
	
 
    	
 
    
	
By:
    	
/s/   Baek Yer Hyun
    	
 
    	
This        day of                                             , 2014
    
	
Name:    Baek Yer Hyun
    	
By:
    	
 
    
	
Title   (if any):
    	
Name:
    
	
 
    	
Title   (if any):
    
	
KIP Overseas Expansion Platform Fund
    	
 
    
	
Subscriber Name (Typed or Printed)
    	
Additional Subscriber Name (Typed or Printed)
    
					

 

 

	
ACCEPTED:
    	
 
    
	
 
    	
 
    
	
BIOPHARMX   CORPORATION
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
/s/ James Pekarsky
    	
 
    
	
Name:
    	
James Pekarsky
    	
 
    
	
Title:
    	
Chief Executive Officer
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Date of Acceptance:
    	
October 24, 2014
    	
 
    
				

 

Alternate Address Information (if applicable)

 

 

	
 
    	
 
    	
 
    	
 
    
	
 
    	
Alternate Address for Correspondence
    	
 
    	
Alternate Address for Correspondence
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
City, State and Zip Code
    	
 
    	
City, State and Zip Code
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Telephone
    	
 
    	
Telephone
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Facsimile
    	
 
    	
Facsimile
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Tax ID # or Social Security #
    	
 
    	
Tax ID # or Social Security #
    

 

 

CERTIFICATE OF SIGNATORY

 

(To be completed if the Shares are

being subscribed for by an entity)

 

I, Baek Yer Hyun , am the CEO of KIP Overseas Expansion Platform Fund (the “Entity”).

 

I certify that I am empowered and duly authorized by the Entity to execute and carry out the terms of the Subscription Agreement and to purchase and hold the Shares, and certify further that the Subscription Agreement has been duly and validly executed on behalf of the Entity and constitutes a legal and binding obligation of the Entity.

 

IN WITNESS WHEREOF, I have set my hand this 24th day of October, 2014.

 

 

	
 
    	
/s/ Baek Yer Hyun
    
	
 
    	
(Signature)

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