Document:

pierisspapipenovembere5d

                                                          EXECUTION VERSION                         SECURITIES PURCHASE AGREEMENT         This Securities Purchase Agreement (this “Agreement”) is dated as of November 2, 2019  by and among Pieris Pharmaceuticals, Inc., a Nevada corporation (the “Company”), and each  purchaser identified on the signature pages hereto (each, including its successors and assigns, a  “Purchaser” and collectively, the “Purchasers”).                                      RECITALS         A.    The Company and each Purchaser is executing and delivering this Agreement in  reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the  Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of Regulation D  (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the  “Commission”) under the Securities Act.          B.    Each Purchaser, severally and not jointly, wishes to purchase, and the Company  wishes to sell, upon the terms and conditions stated in this Agreement: (i) that aggregate number  of shares of common stock, par value $0.001 per share (the “Common Stock”), of the Company,  set forth below such Purchaser’s name on the signature page of this Agreement (which aggregate  amount for all Purchasers together shall be 5,492,960 shares of Common Stock (the “Common  Shares”)), (ii) that aggregate number of shares of Series C Convertible Preferred Stock, par value  $0.001 per share (the “Preferred Stock”), of the Company, if any, set forth below such  Purchaser’s name on the signature page of this Agreement (which aggregate amount for all  Purchasers together shall be 3,522 shares of Preferred Stock (the “Preferred Shares” and,  together with the Common Shares shall be collectively referred to herein as the “Shares”)) (the  shares of Common Stock issuable upon conversion of the Preferred Stock collectively are  referred to herein as the “Underlying Shares”) and (iii) warrants, in substantially the form  attached hereto as Exhibit A (the “Warrants”), to acquire up to that number of additional shares  of Common Stock equal to 100% of the number of Shares purchased by such Purchaser (for such  purpose, counting the Preferred Shares with reference to the number of Underlying Shares),  rounded up to the nearest whole share (the shares of Common Stock issuable upon exercise of or  otherwise pursuant to the Warrants collectively are referred to herein as the “Warrant Shares”).          C.    The Shares, the Underlying Shares, the Warrants and the Warrant Shares  collectively are referred to herein as the “Securities”.          D.    The Company has engaged William Blair & Company to act as lead placement  agent (the “Placement Agent”) for the offering of the Shares and Warrants on a “best efforts”  basis.          E.    Contemporaneously with the execution and delivery of this Agreement, the  parties hereto are executing and delivering a Registration Rights Agreement, substantially in the  form attached hereto as Exhibit B (the “Registration Rights Agreement”), pursuant to which,  among other things, the Company will agree to provide certain registration rights with respect to  the Shares and the Warrant Shares under the Securities Act and the rules and regulations  promulgated thereunder and applicable state securities laws.  

 

       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 hereby agree as follows:                                      ARTICLE I                                    DEFINITIONS          Section 1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,   for all purposes of this Agreement, the following terms shall have the meanings indicated in this   Section 1.1:           “Action” means any action, suit, inquiry, notice of violation, proceeding (including any   partial proceeding such as a deposition) or investigation pending or, to the Company’s   Knowledge, threatened against the Company or any of their respective properties or any officer,   director or employee of the Company acting in his or her capacity as an officer, director or   employee before or by any federal, state, county, local or foreign court, arbitrator, governmental   or administrative agency, regulatory authority, stock market, stock exchange or trading facility.           “Accredited Investor Questionnaire” means the Accredited Investor Questionnaire set   forth as Exhibit F hereto.           “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly   through one or more intermediaries, Controls, is controlled by or is under common control with   such Person, as such terms are used in and construed under Rule 405 under the Securities Act.   With respect to a Purchaser, any investment fund or managed account that is managed on a   discretionary basis by the same investment manager as such Purchaser will be deemed to be an   Affiliate of such Purchaser.           “Board of Directors” means the board of directors of the Company.           “Business Day” means any day except Saturday, 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.           “Certificate of Designation” means the Certificate of Designation to be filed prior to the   Closing by the Company with the Nevada Secretary of State, in the form of Exhibit E attached   hereto.           “Closing” means the closing of the purchase and sale of the Shares and the Warrants on   the Closing Date pursuant to Section 2.1.           “Closing Bid Price” means, for any security as of any date: (a) the last reported closing   bid price per share for such security on the Principal Trading Market, as reported by Bloomberg   Financial Markets, or, (b) if the Principal Trading Market begins to operate on an extended hours   basis and does not designate the closing bid price then the last bid price of such security prior to   4:00 p.m., New York City time, as reported by Bloomberg Financial Markets, or (c) if the   foregoing do not apply, the last closing price of such security in the over-the-counter market on  the electronic bulletin board for such security as reported by Bloomberg Financial Markets, or,                                          2    

 

 (d) if no closing bid price is reported for such security by Bloomberg Financial Markets, the   average of the bid prices of any market makers for such security as reported in the “pink sheets”   by Pink Sheets LLC. If the Closing Bid Price cannot be calculated for a security on a particular   date on any of the foregoing bases, the Closing Bid Price of such security on such date shall be   the fair market value as mutually determined by the Company and the holder of such security. If   the Company and such holder are unable to agree upon the fair market value of such security,   then the Board of Directors shall use its good faith judgment to determine the fair market value.   The Board of Directors’ determination shall be binding on all parties absent demonstrable error.  All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock  combination or other similar transaction during the applicable calculation period.          “Closing Date” means the Trading Day when all of the Transaction Documents have  been executed and delivered by the applicable parties thereto, and all of the conditions set forth  in Sections 2.1, 2.2, 5.1 and 5.2 hereof are satisfied or waived, as the case may be, or such other   date as the parties may agree.           “Common Stock” has the meaning set forth in the Recitals, and also includes any other   class of securities into which the Common Stock may hereafter be reclassified or changed.           “Common Stock Equivalents” means any securities of the Company which would entitle   the holder thereof to acquire at any time Common Stock, including, without limitation, any debt,   preferred stock, rights, options, warrants or other instrument that is at any time convertible into   or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or other   securities that entitle the holder to receive, directly or indirectly, Common Stock.           “Company Counsel” means Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with   offices located at One Financial Center, Boston, Massachusetts 02111.           “Company Covered Person” means, with respect to the Company as an “issuer” for   purposes of Rule 506 promulgated under the Securities Act, any Person listed in the first   paragraph of Rule 506(d)(1).           “Company’s Knowledge” means with respect to any statement made to the Company’s   Knowledge, that the statement is based upon the actual knowledge of the officers of the   Company having responsibility for the matter or matters that are the subject of the statement,   after reasonable inquiry.           “Control” (including the terms “controlling”, “controlled by” or “under common control   with”) means the possession, direct or indirect, of the power to direct or cause the direction of   the management and policies of a Person, whether through the ownership of voting securities, by   contract or otherwise.           “Effective Date” means the date on which the initial Registration Statement required by   Section 2(a) of the Registration Rights Agreement is first declared effective by the Commission.           “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any   successor statute, and the rules and regulations promulgated thereunder.                                           3    

 

       “GAAP” means U.S. generally accepted accounting principles, as applied by the   Company.           “Lien” means any lien, charge, claim, encumbrance, security interest, right of first   refusal, preemptive right or other restrictions of any kind.           “Material Adverse Effect” means a material adverse effect on the results of operations,   assets, prospects, business or financial condition of the Company, except that any of the  following, either alone or in combination, shall not be deemed a Material Adverse Effect: (i)  effects caused by changes or circumstances affecting general market conditions in the U.S. or   applicable foreign economy or which are generally applicable to the industry in which the   Company operates, provided that such effects are not borne disproportionately by the Company,   or (ii) effects caused by earthquakes, hostilities, acts of war, sabotage or terrorism or military   actions or any escalation or material worsening of any such hostilities, acts of war, sabotage or   terrorism or military actions existing as of the date hereof.           “Material Contract” means any contract of the Company that has been filed or was   required to have been filed as an exhibit to the SEC Reports pursuant to Item 601(b)(4) or Item   601(b)(10) of Regulation S-K.           “New York Courts” means the state and federal courts sitting in the City of New York,   Borough of Manhattan.          “Nevada Counsel” means Brownstein Hyatt Farber Schreck, LLP, with offices located at  100 North City Parkway, Suite 1600, Las Vegas, Nevada 89106.           “Outside Date” means the tenth (10th) Business Day following the date of this   Agreement.           “Person” means an individual, corporation, partnership, limited liability company, trust,   business trust, association, joint stock company, joint venture, sole proprietorship,   unincorporated organization, governmental authority or any other form of entity not specifically   listed herein.           “Principal Trading Market” means the Trading Market on which the Common Stock is   primarily listed on and quoted for trading, which, as of the date of this Agreement and the   Closing Date, shall be the Nasdaq Capital Market.           “Pro Rata Portion” means, with respect to any Purchaser, the ratio of (i) such Purchaser’s   Subscription Amount and (ii) the aggregate sum of the Subscription Amounts for all of the   Purchasers.           “Proceeding” means an Action, claim, suit, investigation or proceeding (including,   without limitation, an investigation or partial proceeding, such as a deposition), whether   commenced or threatened.           “Purchase Price” means $3.55 per unit, with $3.425 of each unit attributable to the share   of Common Stock or Preferred Stock (for such purpose, counting the Preferred Shares with                                          4    

 

reference to the number of Underlying Shares), as applicable, included therein and $0.125 of  each unit attributable to the Warrants included therein to purchase each Warrant Share.          “Registration Statement” means a registration statement meeting the requirements set  forth in the Registration Rights Agreement and covering the resale by the Purchasers of the  Registrable Securities (as defined in the Registration Rights Agreement).          “Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities  Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter  adopted by the Commission having substantially the same effect as such Rule.          “Short Sales” include, without limitation, (i) all “short sales” as defined in Rule 200  promulgated under Regulation SHO under the Exchange Act, whether or not against the box, and  all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short  sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under the Exchange Act)  and similar arrangements (including on a total return basis), and (ii) sales and other transactions  through non-U.S. broker dealers or foreign regulated brokers (but shall not be deemed to include  the location and/or reservation of borrowable shares of Common Stock).          “Subscription Amount” means, with respect to each Purchaser, the aggregate amount to  be paid for the Shares and the related Warrants purchased hereunder as indicated on such  Purchaser’s signature page to this Agreement next to the heading “Aggregate Purchase Price  (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, include any subsidiary of the Company formed or acquired after the date  hereof.          “Trading Affiliate” means an Affiliate of a Purchaser who (x) had knowledge of the  transactions contemplated hereby, (y) has or shares discretion relating to such Purchaser’s  investments or trading or information concerning such Purchaser’s investments, including in  respect of the Securities, and (z) is subject to such Purchaser’s review or input concerning such  Affiliate’s investments or trading.         “Trading Day” means (i) a day on which the Common Stock is listed or quoted and  traded on its Principal Trading Market (other than the OTCMarkets), or (ii) if the Common Stock  is not listed on a Trading Market (other than the OTCMarkets), a day on which the Common  Stock is traded in the over-the-counter market, as reported by the OTCMarkets, or (iii) if the  Common Stock is not quoted on any Trading Market, a day on which the Common Stock is  quoted in the over-the-counter market as reported in the “pink sheets” by Pink Sheets LLC (or  any similar organization or agency succeeding to its functions of reporting prices); provided, that  in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof,  then Trading Day shall mean a Business Day.          “Trading Market” means whichever of the New York Stock Exchange, the NYSE Mkt,  the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or the  OTCMarkets on which the Common Stock is listed or quoted for trading on the date in question.                                          5   

 

      “Transaction Documents” means this Agreement, the schedules and exhibits attached  hereto, the Warrants, the Registration Rights Agreement, the Irrevocable Transfer Agent  Instructions and any other documents or agreements explicitly contemplated hereunder.          “Transfer Agent” means Computershare Trust Company, N.A., the current transfer agent  of the Company, with a mailing address of 250 Royall Street #1011, Canton, MA 02021 0, and a  telephone number of (800) 942-5909, or any successor transfer agent for the Company.                                     ARTICLE II                               PURCHASE AND SALE         Section 2.1 Closing.                (a)   Amount. Subject to the terms and conditions set forth in this Agreement,  at the Closing, the Company shall issue and sell to each Purchaser, and each Purchaser shall,  severally and not jointly, purchase from the Company, such number of units equal to the quotient  resulting from dividing (i) the Subscription Amount for such Purchaser as indicated below such  Purchaser’s name on its signature page to this Agreement by (ii) the Purchase Price, rounded  down to the nearest whole Share. A “unit” shall consist of (x) one share of Common Stock or  0.001 shares of Preferred Stock, as applicable, and (y) a Warrant to purchase one Warrant Share  at an exercise price of $7.10 per share, subject to adjustment as provided in such Warrants.               (b)   Closing. The Closing of the purchase and sale of the Shares and Warrants  shall take place at the offices of Goodwin Procter LLP, The New York Times Building, 620  Eight Avenue, New York, New York 10018 on the Closing Date or at such other location(s) or  remotely by facsimile transmission or other electronic means as the parties may mutually agree.               (c)   Form of Payment. Except as may otherwise be agreed to among the  Company and one or more of the Purchasers, on or prior to the Business Day immediately prior  to the Closing Date, each Purchaser shall wire its Subscription Amount, in United States dollars  and in immediately available funds, to a bank account designated by the Company.                (d)   On the Closing Date, upon receipt of the aggregate Purchase Price: (i) the  Company shall irrevocably instruct the Transfer Agent to deliver to each Purchaser (within three  Trading Days after the Closing) one or more stock certificates, or evidence of book entry, free  and clear of all restrictive and other legends (except as expressly provided in Section 4.1(b)  hereof), evidencing the number of Shares such Purchaser is purchasing as is set forth on such  Purchaser’s signature page to this Agreement next to the heading “Number and Type of Shares  to be Acquired,” and (ii) the Company shall on the Business Day following the Closing Date  send for overnight delivery to each Purchaser one or more Warrants, free and clear of all  restrictive and other legends (except as expressly provided in Section 4.1(b) hereof), evidencing  the number of Warrant Shares such Purchaser is entitled to purchase as is set forth on such  Purchaser’s signature page to this Agreement next to the heading “Warrant Shares Subject to  Warrant.”          Section 2.2 Closing Deliveries.                                          6   

 

             (a)   On or prior to the Closing, the Company shall issue, deliver or cause to be   delivered to each Purchaser the following (the “Company Deliverables”):                       (i)   facsimile or .pdf copies of one or more stock certificates, free and   clear of all restrictive and other legends (except as provided in Section 4.1(b) hereof), evidencing   the Shares subscribed for by such Purchaser hereunder, registered in the name of such Purchaser   as set forth on the signature pages hereto (the “Stock Certificates”), with the original Stock   Certificates delivered by the Transfer Agent within three Trading Days of Closing;                       (ii)  facsimile or .pdf copies of one or more Warrants, executed by the   Company and registered in the name of such Purchaser as set forth on the signature pages hereto,   pursuant to which such Purchaser shall have the right to acquire such number of Warrant Shares   equal to 100% of the number of Shares (for such purpose, counting the Preferred Shares with   reference to the number of Underlying Shares) issuable to such Purchaser pursuant to   Section 2.2(a)(i), rounded up to the nearest whole share (provided, however, that in the event any   Purchasers are Affiliates of each other, all Shares purchased by such Purchasers shall be   aggregated together for the purpose of determining the aggregate number of Warrant Shares   subject to all Warrants purchased by such Purchasers), on the terms set forth therein, with the  original Warrants to be sent on the Business Day following the Closing Date for overnight  delivery to the Purchasers;                      (iii) a legal opinion of (A) Company Counsel, dated as of the Closing  Date and in substantially the form attached hereto as Exhibit C-1, executed by such counsel and   addressed to the Purchasers and the Placement Agent, and (B) Nevada Counsel, dated as of the   Closing Date and in substantially the form attached hereto as Exhibit C-2, executed by such   counsel and addressed to the Purchasers and the Placement Agent;                       (iv)  the Registration Rights Agreement, duly executed by the   Company;                       (v)   duly executed Irrevocable Transfer Agent Instructions   acknowledged in writing by the Transfer Agent instructing the Transfer Agent to deliver, on an   expedited basis, a certificate evidencing a number of Shares equal to such Purchaser’s   Subscription Amount divided by the Purchase Price, registered in the name of such Purchaser;   and                       (vi)  the Compliance Certificate referred to in Section 5.1(h).                (b)   On or prior to the Closing, each Purchaser shall deliver or cause to be  delivered to the Company (or the Placement Agent in the case of clause (ii) below) the  following, with respect to such Purchaser (the “Purchaser Deliverables”):                      (i)   subject to the completion of Section 2.2(a)(i) and (ii), its  Subscription Amount, in United States dollars and in immediately available funds, in the amount  set forth as the “Purchase Price” indicated below such Purchaser’s name on the applicable  signature page hereto under the heading “Aggregate Purchase Price (Subscription Amount)” by  wire transfer to a bank account designated by the Company;                                           7    

 

                  (ii)  the Registration Rights Agreement, duly executed by such  Purchaser;                     (iii) a fully completed and duly executed Accredited Investor  Questionnaire, satisfactory to the Company, in the form attached hereto as Exhibit F.                                        ARTICLE III                      REPRESENTATIONS AND WARRANTIES         Section 3.1 Representations and Warranties of the Company. Except as (i) set forth in  the schedules delivered herewith (the “Disclosure Schedules”), which Disclosure Schedules shall  be deemed a part hereof and shall qualify any representation made herein to the extent of the  disclosure contained in the corresponding section of the Disclosure Schedules, or (ii) disclosed in  the SEC Reports, the Company hereby represents and warrants as of the date hereof and the  Closing Date (except for the representations and warranties that speak as of a specific date,  which shall be made as of such date), to each of the Purchasers and the Placement Agent:                (a)   Subsidiaries. The Company has no direct or indirect Subsidiaries other  than those listed in Schedule 3.1(a) hereto. Except as disclosed in Schedule 3.1(a) hereto, the  Company owns, directly or indirectly, all of the capital stock or comparable equity interests of  each Subsidiary free and clear of any and all Liens, and all the issued and outstanding shares of  capital stock or comparable equity interest of each Subsidiary are validly issued and are fully  paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase  securities.                (b)   Organization and Qualification. The Company and each of its 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 (as applicable), with the requisite  corporate power and authority to own or lease and use its properties and assets and to carry on its  business as currently conducted. Neither the Company nor any Subsidiary is in violation or  default of any of the provisions of its articles of incorporation or bylaws or other organizational  documents. The Company and each of its 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 a Material Adverse Effect, and no Proceeding has  been instituted, is pending, or, to the Company’s Knowledge, has been threatened in any such  jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and  authority or qualification.                (c)   Authorization; Enforcement; Validity. The Company has the requisite  corporate power and authority to enter into and to consummate the transactions contemplated by  each of the Transaction Documents to which it is a party and otherwise to carry out its  obligations hereunder and thereunder. The Company’s execution and delivery of each of the  Transaction Documents to which it is a party and the consummation by it of the transactions                                         8   

 

contemplated hereby and thereby (including, but not limited to, the sale and delivery of the  Shares and the Warrants and the reservation for issuance and the subsequent issuance of the  Warrant Shares upon exercise of the Warrants) have been duly authorized by all necessary  corporate action on the part of the Company, and no further corporate action is required by the  Company, its Board of Directors or its stockholders in connection therewith other than in  connection with the Required Approvals. Each of the Transaction Documents to which it is a  party has been (or upon delivery will have been) duly executed by the Company and is, or when  delivered in accordance with the terms hereof, will constitute the legal, valid and binding  obligation of the Company enforceable against the Company in accordance with its terms, except  (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization,  moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of,  creditors’ rights and remedies or by other equitable principles of general application, (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 the Transaction Documents to which it is a party and the consummation by the Company of  the transactions contemplated hereby or thereby (including, without limitation, the issuance of  the Shares and Warrants and the reservation for issuance and issuance of the Warrant Shares) do  not and will not (i) conflict with or violate any provisions of the Company’s or any Subsidiary’s  articles of incorporation or bylaws or other similar organizational documents of any Subsidiary,  (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both  would result in 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 Material  Contract, 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 and the rules and regulations, assuming the correctness of  the representations and warranties made by the Purchasers herein, of any self-regulatory  organization to which the Company or its securities are subject, including all applicable Trading  Markets), or by which any property or asset of the Company is bound or affected, except in the  case of clauses (ii) and (iii) such as would not, individually or in the aggregate, have or  reasonably be expected to result in a Material Adverse Effect or a material adverse effect on the  legality, validity or enforceability of any Transaction Document or the Company’s ability to  perform in any material respect on a timely basis its obligations under any Transaction  Document.                (e)   Filings, Consents and Approvals. Neither the Company nor any of its  Subsidiaries is required to obtain any consent, waiver, approval, 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, holder of outstanding securities of the Company or other Person in  connection with the execution, delivery and performance by the Company of the Transaction  Documents (including the issuance of the Securities), other than (i) the filing with the  Commission of one or more Registration Statements in accordance with the requirements of the  Registration Rights Agreement, (ii) filings required by applicable state securities laws, (iii) the                                         9   

 

 filing of a Notice of Sale of Securities on Form D with the Commission under Regulation D of   the Securities Act, (iv) the filing of any requisite notices and/or application(s) to the Principal   Trading Market for the issuance and sale of the Securities and the listing of the Shares and   Warrant Shares for trading or quotation, as the case may be, thereon in the time and manner   required thereby, (v) the filings required in accordance with Section 4.4 of this Agreement and   (vi) those that have been made or obtained prior to the date of this Agreement (collectively, the  “Required Approvals”).                (f)   Issuance of the Securities. The Shares have been duly authorized and,  when issued and paid for in accordance with the terms of the Transaction Documents, will be  duly and validly issued, fully paid and non-assessable and free and clear of all Liens, other than  restrictions on transfer provided for in the Transaction Documents or imposed by applicable  securities laws, and shall not be subject to preemptive or similar rights of stockholders. The  Warrants have been duly authorized and, when issued and paid for in accordance with the terms  of the Transaction Documents, will be duly and validly issued, free and clear of all Liens, other  than restrictions on transfer provided for in the Transaction Documents or imposed by applicable  securities laws, and shall not be subject to preemptive or similar rights of stockholders. The  Warrant Shares issuable upon exercise of the Warrants have been duly authorized and, when  issued and paid for in accordance with the terms of the Transaction Documents and the Warrants,  will be duly and validly issued, fully paid and non-assessable, free and clear of all Liens, other  than restrictions on transfer provided for in the Transaction Documents or imposed by applicable  securities laws, and shall not be subject to preemptive or similar rights of stockholders.  Assuming the accuracy of the representations and warranties of the Purchasers in this  Agreement, the Securities will be issued in compliance with all applicable federal and state  securities laws. As of the Closing Date, the Company shall have reserved from its duly  authorized capital stock the number of shares of Common Stock issuable upon exercise of the  Warrants (without taking into account any limitations on the exercise of the Warrants set forth in  the Warrants). The Company shall, so long as any of the Warrants are outstanding, take all action  necessary to reserve and keep available out of its authorized and unissued capital stock, solely  for the purpose of effecting the exercise of the Warrants, the number of shares of Common Stock  issuable upon exercise of the Warrants (without taking into account any limitations on the  exercise of the Warrants set forth in the Warrants). No “bad actor” disqualifying event described  in Rule 506(d)(1)(i)-(viii) of the Securities Act (a “Disqualification Event”) is applicable to the  Company or, to the Company’s knowledge, any Company Covered Person, except for a  Disqualification Event as to which Rule 506(d)(2)(ii–iv) or (d)(3), is applicable.                (g)   Capitalization. The capitalization of the Company is as described in its  most recently filed SEC Report on Form 10-Q, except for issuances pursuant to this Agreement,  stock option exercises, issuances pursuant to equity incentive plans, exercises of warrants or  issuances pursuant to the Company’s “at the market” equity program. The Company has not  issued any capital stock since the date of its most recently filed SEC Report other than to reflect  stock option and warrant exercises that do not, individually or in the aggregate, have a material  effect on the issued and outstanding capital stock, options and other securities of the Company.  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 that have not  been effectively waived as of the Closing Date. Except as set forth on Schedule 3.1(g) or a result  of the purchase and sale of the Shares and Warrants, there are no outstanding options, warrants,                                          10    

 

 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 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.   Except as set forth on Schedule 3.1(g), the issuance and sale of the Shares and Warrants will not   obligate the Company 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. All of the   outstanding shares of capital stock of the Company are validly issued, fully paid and non-  assessable, have been issued in compliance in all material respects with all applicable 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 which violation would   have or would reasonably be expected to result in a Material Adverse Effect. 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 Company’s Knowledge,   between or among any of the Company’s stockholders.                 (h)   SEC Reports; Disclosure Materials. The Company has filed all reports,   schedules, forms, statements and other documents required to be filed by it under the Exchange   Act, including pursuant to Section 13(a) or 15(d) thereof, for the 12 months preceding the date   hereof (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, being collectively referred to herein as the “SEC Reports”, and the SEC   Reports, together with the Disclosure Schedules, being collectively referred to as the “Disclosure    Materials”) 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, except where the failure to   file on a timely basis would not have or reasonably be expected to result in a Material Adverse   Effect and would not have or reasonably be expected to result in any limitation or prohibition on   the Company’s ability to register the Shares and Warrant Shares for resale on Form S-3 or any  Purchaser’s ability to use Rule 144 to resell any Securities. As of their respective filing dates, or  to the extent corrected by a subsequent amendment, the SEC Reports complied in all material  respects with the requirements of the Securities Act and the Exchange Act and the rules and  regulations of the Commission promulgated thereunder, 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 light of the  circumstances under which they were made, not misleading. Each of the Material Contracts to  which the Company or any Subsidiary is a party or to which the property or assets of the  Company or any of its Subsidiaries are subject has been filed (or incorporated by reference) as an  exhibit to the SEC Reports.                (i)   Financial Statements. The consolidated 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 (or to the extent corrected by a subsequent amendment). Such  consolidated financial statements have been prepared in accordance with GAAP applied on a  consistent basis during the periods involved, except as may be otherwise specified in such                                          11    

 

 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 taken as a whole 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.                 (j)   Material Changes. Since the date of the latest financial statements   included within the SEC Reports, except as specifically disclosed in a subsequent SEC Report   filed prior to the date hereof and except as disclosed in Schedule 3.1(j), (i) there have been no   events, occurrences or developments that have had or would reasonably be expected to have,   either individually or in the aggregate, 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 required to be disclosed in filings made with the Commission, (iii) the Company has   not altered materially its method of accounting or the manner in which it keeps its accounting   books and records, (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 (other than in connection with repurchases of   unvested stock issued to employees of the Company) and (v) the Company has not issued any   equity securities to any officer, director or Affiliate, except Common Stock issued in the ordinary   course as dividends on outstanding preferred stock or issued pursuant to existing Company stock   option or stock purchase plans or executive and director compensation arrangements disclosed in   the SEC Reports. Except as disclosed in Schedule 3.1(j) and except for the issuance of the Shares   and Warrants contemplated by this Agreement, no event, liability or development has occurred   or exists with respect to the Company or its Subsidiaries or their respective business, properties,   operations or financial condition, that would be required to be disclosed by the Company under   applicable securities laws at the time this representation is made that has not been publicly   disclosed at least one Trading Day prior to the date that this representation is made.                 (k)   Litigation. There is no Action which (i) adversely affects or challenges the   legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii)   except as disclosed in Schedule 3.1(k), would, if there were an unfavorable decision, individually   or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. During   the past five years, neither the Company nor any Subsidiary, nor to the Company’s Knowledge   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 Company’s Knowledge 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. During the past five years, the Commission has not  issued any stop order or other order suspending the effectiveness of any registration statement  filed by the Company under the Exchange Act or the Securities Act.                (l)   Employment Matters. No material labor dispute exists or, to the  Company’s Knowledge, is imminent with respect to any of the employees of the Company  which would have or would reasonably be expected to result in a Material Adverse Effect. None  of the Company’s or any Subsidiary’s employees is a member of a labor union that relates to                                          12    

 

 such employee’s relationship with the Company, and neither the Company nor any of its   Subsidiaries is a party to a collective bargaining agreement. Except as disclosed in Schedule   3.1(l), no executive officer of the Company (as defined in Rule 501(f) of the Securities Act) has   notified the Company or any of its Subsidiaries that such officer intends to leave the Company or   any such Subsidiary or otherwise terminate such officer’s employment with the Company or any   such Subsidiary. To the Company’s Knowledge, no executive officer or key employee, 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 to   the Company’s Knowledge, the continued employment of each such executive officer or key   employee does not subject the Company or any Subsidiary to any liability with respect to any of   the foregoing matters, except, in each case, matters that, individually or in the aggregate, would   not reasonably be expected to result in a Material Adverse Effect. The Company is 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 result in a Material Adverse Effect.                (m)   Compliance. Neither the Company nor any of its Subsidiaries (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 of its   Subsidiaries under), nor has the Company or any of its Subsidiaries received written notice of a   claim that it is in default under or that it is in violation of, any Material Contract (whether or not   such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator   or governmental body having jurisdiction over the Company or any of its Subsidiaries or their   properties or assets, or (iii) is in violation of, or in receipt of written notice that it is in violation   of, any statute, rule or regulation of any governmental authority applicable to the Company or   any of its Subsidiaries, except in each case as would not, individually or in the aggregate, have or   reasonably be expected to result in a Material Adverse Effect.                (n)   Regulatory Permits. The Company and each of its Subsidiaries possesses  all certificates, authorizations and permits issued by the appropriate federal, state, local or  foreign regulatory authorities necessary to conduct its business as currently conducted, except as  set forth in the SEC Reports, or such that where the failure to possess such permits, individually  or in the aggregate, has not and would not have or would not reasonably be expected to result in  a Material Adverse Effect (“Material Permits”), and neither the Company nor any of its   Subsidiaries has received any notice of Proceedings relating to the revocation or modification of   any such Material Permits.                 (o)   Title to Assets. The Company and each of its Subsidiaries has good and   marketable title to all tangible personal property owned by it that is material to its business, in   each case free and clear of all Liens except such as do not materially affect the value of such   property and do not interfere with the use made and proposed to be made of such property by the   Company. Any real property and facilities held under lease by the Company and any of its   Subsidiaries are held by it under valid, subsisting and enforceable leases with such exceptions as   are not material and do not interfere with the use made and proposed to be made of such property   and buildings by the Company and its Subsidiaries.                                           13    

 

            (p)   Patents and Trademarks. Except as disclosed in Schedule 3.1(p), to the  Company’s Knowledge, the Company and each of its Subsidiaries owns, possesses, licenses or  has other rights to use, all patents, patent applications, trade and service marks, trade and service  mark applications and registrations, trade names, trade secrets, inventions, copyrights, licenses,  technology, know-how and other intellectual property rights and similar rights necessary or  material for use in connection with its businesses as described in the SEC Reports and which the  failure to so would have or reasonably be expected to result in a Material Adverse Effect  (collectively, the “Intellectual Property Rights”). Except as disclosed in Schedule 3.1(p), to the  Company’s Knowledge, none of the Intellectual Property Rights used by the Company or any  Subsidiary violates or infringes upon the patent, trademark, copyright, trade secret or other  proprietary rights of any Person. There is no pending or, to the Company’s Knowledge,  threatened Proceeding or claim by any Person that the Company’s or any Subsidiary’s business  as now conducted infringes or otherwise violates any patent, trademark, copyright, trade secret or  other proprietary rights of another. To the Company’s Knowledge, there is no existing  infringement by another Person of any of the Intellectual Property Rights that would have or  would reasonably be expected to result in a Material Adverse Effect. There is no pending or, to  the Company’s Knowledge, threatened Proceeding or claim by another Person challenging the  Company’s or any Subsidiary’s rights in or to any material Intellectual Property Rights, or  challenging inventorship, validity or scope of any such Intellectual Property Rights. The  Company has taken reasonable security measures to protect the secrecy, confidentiality and  value of all of its and its Subsidiaries’ Intellectual Property Rights, except where failure to do so  would not, individually or in the aggregate, reasonably be expected to result in a Material  Adverse Effect. None of the technology employed by the Company or any of its Subsidiaries has  been obtained or is being used by the Company or any Subsidiary in violation of any contractual  obligation binding on the Company or any Subsidiary or, to the Company’s Knowledge, any of  its or its Subsidiaries’ officers, directors or employees or otherwise in violation of the rights of  any Person, which violations would have or would reasonably be expected to have a Material  Adverse Effect.                (q)   Insurance. The Company and each of its Subsidiaries is insured by  insurers of recognized financial responsibility against such losses and risks and in such amounts  as the Company believes to be prudent and customary in the businesses and locations in which  the Company and the Subsidiaries are engaged. None of the Company or any of its Subsidiaries  has received any written notice of cancellation of any such insurance, nor, to the Company’s  Knowledge, will it or any Subsidiary be unable 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 material increase in cost.                (r)   Transactions With Affiliates and Employees. Except as set forth in the  SEC Reports, none of the executive officers or directors of the Company and, to the Company’s  Knowledge, none of the employees of the Company is presently a party to any transaction with  the Company (other than for services as employees, officers and directors) that would be  required to be disclosed pursuant to Item 404 of Regulation S-K promulgated under the  Securities Act.                (s)   Internal Accounting Controls. The Company maintains a system of  internal accounting controls sufficient to provide reasonable assurance that (i) transactions are                                         14   

 

 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 and liability accountability, (iii) access to assets or incurrence of liabilities   is permitted only in accordance with management’s general or specific authorization, and (iv) the   recorded accountability for assets and liabilities is compared with the existing assets and   liabilities at reasonable intervals and appropriate action is taken with respect to any differences.                (t)   Sarbanes-Oxley; Disclosure Controls. The Company is in compliance in   all material respects with all of the provisions of the Sarbanes-Oxley Act of 2002 which are  applicable to it. The Company has established disclosure controls and procedures (as such term  is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) for the Company 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 Company’s  disclosure controls and procedures as of the end of the period covered by the Company’s 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 Company’s internal control over financial reporting (as such term is   defined in the Exchange Act) that have materially affected, or are reasonably likely to materially   affect, the Company’s internal control over financial reporting.                 (u)   Certain Fees. Except as disclosed in Schedule 3.1(u), no Person will have,   as a result of the transactions contemplated by this Agreement, any valid right, interest or claim   against or upon the Company or a Purchaser for any commission, fee or other compensation   pursuant to any agreement, arrangement or understanding entered into by or on behalf of the   Company, other than the Placement Agent with respect to the offer and sale of the Shares and   Warrants (which fees are being paid by the Company). The Purchasers shall have no obligation   with respect to any fees or with respect to any claim made by or on behalf of other Persons for   fees of a type contemplated in this paragraph (u) pursuant to any agreement to which the   Company is a party that may be due in connection with the transactions contemplated by the   Transaction Documents. The Company shall indemnify, pay, and hold each Purchaser harmless   against, any liability, loss or expense (including, without limitation, attorneys’ fees and out-of-  pocket expenses) arising in connection with any such right, interest or claim.                 (v)   Private Placement. Assuming the accuracy of the Purchasers’   representations and warranties set forth in Section 3.2 of this Agreement and the accuracy of the   information disclosed in the Accredited Investor Questionnaires provided by the Purchasers, no   registration under the Securities Act is required for the offer and sale of the Securities by the   Company to the Purchasers under the Transaction Documents. The issuance and sale of the   Securities hereunder does not contravene the rules and regulations of the Principal Trading   Market.                 (w)   Investment Company. The Company is not, and is not an Affiliate of, and   immediately after receipt of payment for the Shares and Warrants, will not be or be an Affiliate                                          15    

 

 of, an “investment company” within the meaning of the Investment Company Act of 1940, as   amended. The Company shall conduct its business in a manner so that it will not become subject   to the Investment Company Act of 1940, as amended.                 (x)   Registration Rights. Other than each of the Purchasers pursuant to the   Registration Rights Agreement or as disclosed in Schedule 3.1(x), no Person has any right to   cause the Company to effect the registration under the Securities Act of any securities of the   Company.                 (y)   Listing and Maintenance Requirements. The Company’s Common Stock   is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken   no action designed to terminate the registration of the Common Stock under the Exchange Act,   nor has the Company received any notification that the Commission is contemplating terminating   such registration. The Company has not, in the 12 months preceding the date hereof, received   written notice from any Trading Market on which the Common Stock is listed or quoted to the   effect that the Company is not in compliance with the listing or maintenance requirements of   such Trading Market. The Company is in compliance with all listing and maintenance   requirements of the Principal Trading Market on the date hereof and the issuance of the   Securities will not violate any such listing or maintenance requirements.                 (z)   Application of Takeover Protections; Rights Agreements. 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 charter  documents or the laws of its state of incorporation that is or could reasonably be expected to  become applicable to any of 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, the Company’s issuance of the Securities and the Purchasers’ ownership of  the Securities.                (aa)  [RESERVED]                (bb)  No Integrated Offering. Assuming the accuracy of the Purchasers’  representations and warranties set forth in Section 3.2, neither the Company nor, to the  Company’s Knowledge, any Person acting on its behalf has, directly or indirectly, at any time  within the past six months, made any offers or sales of any Company security or solicited any  offers to buy any security under circumstances that would (i) eliminate the availability of the  exemption from registration under Regulation D under the Securities Act in connection with the  offer and sale by the Company of the Securities as contemplated hereby or (ii) cause the offering  of the Securities pursuant to the Transaction Documents to be integrated with prior offerings by  the Company for purposes of any applicable law, regulation or stockholder approval provisions,  including, without limitation, under the rules and regulations of any Trading Market on which  any of the securities of the Company are listed or designated unless such integration would not  have or reasonably be expected to result in a Material Adverse Effect.                (cc)  Tax Matters. The Company and each of its Subsidiaries (i) has accurately  and timely prepared and filed (or requested valid extensions thereof) all foreign, federal and state                                          16    

 

income and all other 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,  except those being contested in good faith, with respect to which adequate reserves have been set  aside on the books of the Company and (iii) has set aside on its books provisions reasonably  adequate for the payment of all taxes for periods subsequent to the periods to which such returns,  reports or declarations apply, except, in the case of clauses (i) and (ii) above, where the failure to  so pay or file any such tax, assessment, charge or return would not have or reasonably be  expected to result in a Material Adverse Effect. The Company has not received notice of any  unpaid taxes in any material amount claimed to be due by the Company or any Subsidiary by the  taxing authority of any jurisdiction.                (dd)  Environmental Matters. To the Company’s Knowledge, none of the  Company or any of its Subsidiaries (i) is in violation of any statute, rule, regulation, decision or  order of any governmental agency or body or any court, domestic or foreign, relating to the use,  disposal or release of hazardous or toxic substances or relating to the protection or restoration of  the environment or human exposure to hazardous or toxic substances (collectively,  “Environmental Laws”), (ii) owns or operates any real property contaminated with any substance  that is in violation of any Environmental Laws, (iii) is liable for any off-site disposal or  contamination pursuant to any Environmental Laws, or (iv) is subject to any claim relating to any  Environmental Laws; which violation, contamination, liability or claim has had or would have,  individually or in the aggregate, a Material Adverse Effect; and there is no pending investigation  or, to the Company’s Knowledge, investigation threatened in writing that might lead to such a  claim.                (ee)  No General Solicitation. Neither the Company nor, to the Company’s  Knowledge, any Person acting on behalf of the Company has offered or sold any of the  Securities by any form of general solicitation or general advertising.                (ff)  Off Balance Sheet Arrangements. There is no transaction, arrangement, or  other relationship between the Company, any Subsidiary and an unconsolidated or other off  balance sheet entity that is required to be disclosed by the Company in the SEC Reports and is  not so disclosed and would have or reasonably be expected to result in a Material Adverse  Effect.                (gg)  Foreign Corrupt Practices. Neither the Company nor any of its  Subsidiaries, nor to the Company’s Knowledge, any agent or other Person acting on behalf of the  Company or any of its Subsidiaries, 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 the Foreign Corrupt Practices Act of 1977,  as amended.                                           17   

 

            (hh)  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 hereby and 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.                (ii)  Regulation M Compliance. The Company has not, and to the Company’s  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 in violation of  Regulation M under the Exchange Act, 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 Placement Agent in connection with  the placement of the Shares and Warrants.                (jj)  PFIC Status. Neither the Company nor any of its Subsidiaries is or intends  to become a “passive foreign investment company” within the meaning of Section 1297 of the  U.S. Internal Revenue Code of 1986, as amended.                (kk)  OFAC Status. Neither the Company nor any of its Subsidiaries is and, to  the Company’s Knowledge, no director, officer, agent, employee, Affiliate or Person acting on  behalf 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”); and the  Company will not directly or indirectly use the proceeds of the sale of the Securities, or lend,  contribute or otherwise make available such proceeds to any joint venture partner or other Person  or entity, towards any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar or any other  country sanctioned by OFAC or for the purpose of financing the activities of any Person  currently subject to any U.S. sanctions administered by OFAC.                (ll)  FDA. There is no legal or governmental proceeding to which the  Company or any Subsidiary is a party or of which any property or assets of the Company or any  Subsidiary is the subject, including any proceeding before the United States Food and Drug  Administration of the U.S. Department of Health and Human Services (“FDA”) or comparable  federal, state, local or non-U.S. governmental bodies (it being understood that the interaction  between the Company and the FDA and such comparable governmental bodies relating to the  clinical development and product approval process shall not be deemed proceedings for purposes  of this representation), which, singularly or in the aggregate, if determined adversely to the  Company or any Subsidiary, would have or would reasonably be expected to have a Material  Adverse Effect; and to the Company’s Knowledge, no such proceedings are threatened or                                         18   

 

 contemplated by governmental authorities or threatened by others. The Company and each   Subsidiary is in compliance with all applicable federal, state, local and non-U.S. laws,  regulations, orders and decrees governing its business as prescribed by the FDA, or any other  federal, state or non-U.S. agencies or bodies engaged in the regulation of pharmaceuticals,  except where noncompliance would not, singularly or in the aggregate, be reasonably likely to  have a Material Adverse Effect. All preclinical studies and clinical trials conducted by or on  behalf of the Company and any subsidiary, including those necessary to support approval for  commercialization of the Company’s or any Subsidiary’s products or product candidates, have  been conducted by the Company or any Subsidiary, as applicable, or to the Company’s  Knowledge by third parties, in material compliance with all applicable federal, state or non-U.S.   laws, rules, orders and regulations.                 (mm)  No Additional Agreements. The Company does not have any agreement or   understanding with any Purchaser with respect to the transactions contemplated by the   Transaction Documents other than as specified in the Transaction Documents.           Section 3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby,   for itself and for no other Purchaser, represents and warrants as of the date hereof and as of the   Closing Date to the Company and the Placement Agent as follows:                 (a)   Organization; Authority. Such Purchaser is an entity duly organized,   validly existing and in good standing under the laws of the jurisdiction of its organization with   the requisite corporate, limited liability company or partnership power and authority to enter into   and to consummate the transactions contemplated by the applicable Transaction Documents and   otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of   this Agreement by such Purchaser and performance by such Purchaser of the transactions   contemplated by this Agreement have been duly authorized by all necessary corporate or, if such   Purchaser is not a corporation, such partnership, limited liability company or other applicable   like action, 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 as such enforceability may be limited  by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws  relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other  equitable principles of general application.                (b)   No Conflicts. The execution, delivery and performance by such Purchaser  of this Agreement and the Registration Rights Agreement and the consummation by such  Purchaser of the transactions contemplated hereby and thereby will not (i) result in a violation of   the organizational documents of such Purchaser, (ii) conflict with, or constitute a default (or an   event which with notice or lapse of time or both would become a default) under, or give to others   any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture   or instrument to which such Purchaser is a party, or (iii) result in a violation of any law, rule,   regulation, order, judgment or decree (including federal and state securities laws) applicable to   such Purchaser, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults,   rights or violations which would not, individually or in the aggregate, reasonably be expected to                                          19    

 

 have a material adverse effect on the ability of such Purchaser to perform its obligations   hereunder.                 (c)   Investment Intent. Such Purchaser understands that the Securities are   “restricted securities” and have not been registered under the Securities Act or any applicable   state securities law and is acquiring the Shares and Warrants and, upon exercise of the Warrants,   will acquire the Warrant Shares issuable upon exercise thereof as principal for 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 laws, provided, however, that by   making the representations herein, such Purchaser does not agree to hold any of the Securities for   any minimum period of time and reserves the right, subject to the provisions of this Agreement   and the Registration Rights Agreement, at all times to sell or otherwise dispose of all or any part   of such Securities pursuant to an effective registration statement under the Securities Act or   under an exemption from such registration and 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 does not presently have any agreement, plan or understanding, directly  or indirectly, with any Person to distribute or effect any distribution of any of the Securities (or  any securities which are derivatives thereof) to or through any Person; such Purchaser is not a  registered broker-dealer under Section 15 of the Exchange Act or an entity engaged in a business  that would require it to be so registered as a broker-dealer.                (d)   Purchaser Status. At the time such Purchaser was offered the Shares and  Warrants, it was, and at the date hereof it is, and on each date on which it exercises the Warrants  it will be, an “accredited investor” as defined in Rule 501(a) under the Securities Act.                (e)   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 advertisement.                (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.                (g)   Access to Information. Such Purchaser acknowledges that it has had the  opportunity to review the Disclosure Materials and has been afforded 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. Neither such  inquiries nor any other investigation conducted by or on behalf of such Purchaser or its  representatives or counsel shall modify, amend or affect such Purchaser’s right to rely on the  truth, accuracy and completeness of the Company’s representations and warranties contained in  the Transaction Documents.                                            20    

 

             (h)   Brokers and Finders. No Person will have, as a result of the transactions   contemplated by this Agreement, any valid right, interest or claim against or upon the Company   or any Purchaser for any commission, fee or other compensation pursuant to any agreement,  arrangement or understanding entered into by or on behalf of such Purchaser.                 (i)   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’s business 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. Such Purchaser understands that the Placement Agent has acted solely as the agent of   the Company in this placement of the Shares and Warrants and such Purchaser has not relied on   the business or legal advice of the Placement Agent or any of its agents, counsel or Affiliates in   making its investment decision hereunder, and confirms that none of such Persons has made any   representations or warranties to such Purchaser in connection with the transactions contemplated   by the Transaction Documents.                 (j)   Reliance on Exemptions. Such Purchaser understands that the Securities   are being offered and sold to it in reliance on specific exemptions from the registration   requirements of United States federal and state securities laws and that the Company is relying in   part upon the truth and accuracy of, and such Purchaser’s compliance with, the representations,   warranties, agreements, acknowledgements and understandings of such Purchaser set forth   herein in order to determine the availability of such exemptions and the eligibility of such   Purchaser to acquire the Securities.                 (k)   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                (l)   Residency.  Such Purchaser’s residence (if an individual) or offices in   which its investment decision with respect to the Securities was made (if an entity) are located at   the address immediately below such Purchaser’s name on its signature page hereto.                (m)   Accuracy of Accredited Investor Questionnaire.  The Accredited Investor   Questionnaire delivered by such Purchaser in connection with this Agreement is complete and   accurate in all respects as of the date of this Agreement and will be correct as of the Closing   Date.           The Company and each of the Purchasers acknowledge and agree that no party to this   Agreement has made or makes any representations or warranties with respect to the transactions   contemplated hereby other than those specifically set forth in this Article III and the Transaction   Documents.                                           21    

 

                                ARTICLE IV                      OTHER AGREEMENTS OF THE PARTIES         Section 4.1 Transfer Restrictions.                (a)   Compliance with Laws. Notwithstanding any other provision of this  Article IV, each Purchaser, severally but not jointly, covenants that the Securities may be  disposed of only pursuant to an effective registration statement under, and in compliance with  the requirements of, the Securities Act, or pursuant to an available exemption from, or in a  transaction not subject to, the registration requirements of the Securities Act, and in compliance  with any applicable state and federal securities laws. In connection with any transfer of the  Securities other than (i) pursuant to an effective registration statement, (ii) to the Company, (iii)  pursuant to Rule 144 (provided that such Purchaser provides the Company with reasonable  assurances (in the form of seller and, if applicable, broker representation letters) that the  securities may be sold pursuant to such rule) or (iv) in connection with a bona fide 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  Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in  writing to be bound by the terms of this Agreement and the Registration Rights Agreement and  shall have the rights of a Purchaser under this Agreement and the Registration Rights Agreement  with respect to such transferred Securities.                (b)   Legends. Certificates evidencing the Securities shall bear any legend as  required by the “blue sky” laws of any state and a restrictive legend in substantially the following  form, until such time as they are not required under Section 4.1(c):          [NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON        EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE        SECURITIES HAVE NOT BEEN REGISTERED] UNDER THE SECURITIES ACT        OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE        SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,        SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN        EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE        SECURITIES ACT OR (B) 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 OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL        OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY        AND ITS TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT TO RULE 144        UNDER SAID ACT.          The Company acknowledges and agrees that a Purchaser may from time to time pledge,  and/or grant a security interest in, some or all of the legended Securities in connection with  applicable securities laws, pursuant to a bona fide margin agreement in compliance with a bona  fide margin loan. Such a pledge would not be subject to approval or consent of the Company and                                         22   

 

 no legal opinion of legal counsel to the pledgee, secured party or pledgor shall be required in   connection with the pledge, but such legal opinion shall be required in connection with a   subsequent transfer or foreclosure following default by such Purchaser transferee of the pledge.   No notice shall be required of such pledge, but such Purchaser’s transferee shall promptly notify   the Company of any such subsequent transfer or foreclosure of such legended Securities. Each   Purchaser acknowledges that the Company shall not be responsible for any pledges relating to, or   the grant of any security interest in, any of the Securities or for any agreement, understanding or   arrangement between any Purchaser and its pledgee or secured party. At the appropriate   Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a   pledgee or secured party of Securities may reasonably request in connection with a pledge or   transfer of the Securities, including the preparation and filing of any required prospectus   supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the   Securities Act to appropriately amend the list of selling stockholders thereunder. Each Purchaser   acknowledges and agrees that, except as otherwise provided in Section 4.1(c), any Securities   subject to a pledge or security interest as contemplated by this Section 4.1(b) shall continue to  bear the legend set forth in this Section 4.1(b) and be subject to the restrictions on transfer set  forth in Section 4.1(a).                (c)   Removal of Legends. The legend set forth in Section 4.1(b) above shall be  removed and the Company shall issue a certificate or book-entry statement without such legend   or any other legend to the holder of the applicable Securities upon which it is stamped or issue to   such holder by electronic delivery at the applicable balance account at the Depository Trust   Company (“DTC”), if (i) such Securities are registered for resale under the Securities Act   (provided that, if a Purchaser is selling pursuant to the Registration Statement, such Purchaser   agrees to only sell such Securities during such time that the Registration Statement is effective   and not withdrawn or suspended, and only as permitted by the Registration Statement), (ii) such   Securities are sold or transferred pursuant to Rule 144 (if the transferor is not an Affiliate of the   Company), or (iii) such Securities are eligible for sale under Rule 144, without the requirement   for the Company to be in compliance with the current public information required under Rule   144 as to such securities and without volume or manner-of-sale restrictions. Following the earlier   of (i) the Effective Date or (ii) Rule 144 becoming available for the resale of Securities, without   the requirement for the Company to be in compliance with the current public information   required under Rule 144 as to such securities and without volume or manner-of-sale restrictions,  the Company shall deliver to the Transfer Agent irrevocable instructions that the Transfer Agent  shall reissue a certificate representing the applicable Shares or issue a certificate representing the  applicable Warrant Shares without legend upon receipt by the Transfer Agent of the legended  certificates for such Shares. Any fees (with respect to the Transfer Agent or otherwise)  associated with the removal of such legend shall be borne by the Company. Following the  Effective Date, or at such earlier time as a legend is no longer required for certain Securities (in  which case a Purchaser shall also be required to provide reasonable assurances, in the form of  seller and, if applicable, broker representation letters), the Company will no later than three  Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent (with  notice to the Company) of (i) a legended certificate representing Shares or Warrant Shares  (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary  to affect the reissuance and/or transfer) or (ii) an Exercise Notice and payment of the applicable  exercise price in the manner stated in the Warrants to effect the exercise of such Warrant in  accordance with its terms, and an opinion of counsel to the extent required by Section 4.1(a),                                         23    

 

 deliver or cause to be delivered to the transferee of such Purchaser or such Purchaser, as   applicable, a certificate representing such Securities 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 4.1(c) other than   to comply with applicable law. Certificates or book entry statements for Shares or Warrant   Shares subject to legend removal hereunder may be transmitted by the Transfer Agent to a   Purchaser by crediting the account of such Purchaser’s prime broker with DTC as directed by   such Purchaser.                 (d)   Irrevocable Transfer Agent Instructions. The Company shall issue   irrevocable instructions to the Transfer Agent, and any subsequent transfer agent, in substantially   the form of Exhibit D attached hereto (the “Irrevocable Transfer Agent Instructions”). The  Company represents and warrants that no instruction other than the Irrevocable Transfer Agent  Instructions referred to in this Section 4.1(d) (or instructions that are consistent therewith) will be  given by the Company to the Transfer Agent in connection with this Agreement, and that the  Securities shall otherwise be freely transferable on the books and records of the Company as and  to the extent provided in this Agreement and the other Transaction Documents and applicable  law. The Company acknowledges that a breach by it of its obligations under this Section 4.1(d)  will cause irreparable harm to a Purchaser. Accordingly, the Company acknowledges that the  remedy at law for a breach of its obligations under this Section 4.1(d) will be inadequate and  agrees, in the event of a breach or threatened breach by the Company of the provisions of this  Section 4.1(d), that a Purchaser shall be entitled, in addition to all other available remedies, to an  order and/or injunction restraining any breach and requiring immediate issuance and transfer,  without the necessity of showing economic loss and without any bond or other security being  required.                (e)   Acknowledgement. Each Purchaser, severally but not jointly,  acknowledges its primary responsibilities under the Securities Act and accordingly will not sell  or otherwise transfer the Securities or any interest therein without complying with the  requirements of the Securities Act and applicable law. While the Registration Statement remains  effective, each Purchaser hereunder may sell the Shares and Warrant Shares in accordance with  the plan of distribution contained in the Registration Statement and if it does so it will comply  therewith and with the related prospectus delivery requirements unless an exemption therefrom is  available. Each Purchaser, severally and not jointly with the other Purchasers, agrees that if it is  notified by the Company in writing at any time that the Registration Statement registering the  resale of the Shares or the Warrant Shares is not effective or that the prospectus included in such  Registration Statement no longer complies with the requirements of Section 10 of the Securities  Act, such Purchaser will refrain from selling such Shares and Warrant Shares until such time as  the Purchaser is notified by the Company that such Registration Statement is effective or such  prospectus is compliant with Section 10 of the Securities Act, unless such Purchaser is able to,  and does, sell such Shares or Warrant Shares pursuant to an available exemption from the  registration requirements of Section 5 of the Securities Act. Both the Company and its Transfer  Agent, and their respective directors, officers, employees and agents, may rely on this Section  4.1(e) and each Purchaser, severally but not jointly, with the other Purchasers will indemnify and  hold harmless each of such persons from any breaches or violations of this Section 4.1(e).                                            24    

 

             (f)   Buy-In. If the Company shall fail for any reason or for no reason to issue   to a Purchaser un-legended certificates or book-entry statements within three Trading Days after   receipt of all documents necessary for the removal of the legend set forth above (the “Deadline   Date”), then, in addition to all other remedies available to such Purchaser, if on or after the   Trading Day immediately following such three Trading Day period, such Purchaser is required to   purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in   satisfaction of a sale by the holder of shares of Common Stock that such Purchaser anticipated   receiving from the Company without any restrictive legend (a “Buy-In”), then the Company   shall, within three Trading Days after such Purchaser’s request and in the Company’s sole   discretion, either (i) pay cash to such Purchaser in an amount equal to such Purchaser’s total   purchase price (including brokerage commissions, if any) for the shares of Common Stock so   purchased (the “Buy-In Price”), at which point the shares of Common Stock held by such   Purchaser equal to the number of shares of Common Stock so purchased shall be forfeited to the   Company and the Company’s obligation to deliver such certificate or book-entry statement (and   to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to   deliver to such Purchaser a certificate or certificates or book-entry statements representing such   shares of Common Stock and pay cash to the Purchaser in an amount equal to the excess (if any)   of the Buy-In Price over the product of (a) such number of shares of Common Stock, multiplied   by (b) the Closing Bid Price on the Deadline Date. A Purchaser shall provide the Company   written notice indicating the amounts payable to such Purchaser in respect of the Buy-In,   together with applicable confirmations and other evidence reasonably requested by the   Company.           Section 4.2 Reservation of Common Stock.                 (a)   The Company shall take all action necessary to at all times during the   period the Warrants are outstanding have authorized, and reserved for the purpose of issuance   from and after the Closing Date, the number of shares of Common Stock issuable upon exercise   of the Warrants issued at the Closing (without taking into account any limitations on exercise of   the Warrants set forth in the Warrants).                (b)   The Company shall reserve and keep available at all times during which  the Preferred Shares remain outstanding, free of preemptive rights, a sufficient number of shares  of Common Stock for the purpose of enabling the Company to issue the Underlying Shares upon  conversion of the Preferred Shares pursuant to the Certificate of Designation. The form of Notice  of Conversion included in the Certificate of Designation sets forth the totality of the procedures  required of the Purchasers in order to convert the Preferred Shares. No additional legal opinion,  other information or instructions shall be required of the Purchasers to convert their Preferred  Shares. The Company shall honor conversions of the Preferred Shares and shall deliver  Underlying Shares in accordance with the terms, conditions and time periods set forth in the  Transaction Documents.                (c)   Acknowledgment of Dilution. The Company acknowledges that the  issuance of the Shares may result in dilution of the outstanding shares of Common Stock, which  dilution may be substantial under certain market conditions. The Company further acknowledges  that its obligations under the Transaction Documents, including without limitation its obligation  to issue the Shares pursuant to the Transaction Documents, are unconditional and absolute and                                          25    

 

not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any  such dilution or any claim the Company may have against any Purchaser and regardless of the  dilutive effect that such issuance may have on the ownership of the other stockholders of the  Company.                (d)   Furnishing of Information. In order to enable the Purchasers to sell the  Securities under Rule 144, until the earlier of (i) the date that the Securities cease to be  Registrable Securities (as defined in the Registration Rights Agreement) (and for no less than 12  months from the Closing), (ii) the date that is 24 months from the Closing or (iii) a Fundamental  Transaction (as defined in the Warrant) pursuant to which the Company is no longer a reporting  company under the Exchange Act, the Company shall use its commercially reasonable efforts 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.  Except as set forth in clause (iii) above, during such period, if the Company is not required to file  reports pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and make  publicly available in accordance with Rule 144(c) such information as is required for the  Purchasers to sell the Securities under Rule 144.          Section 4.3 No Integration. The Company shall not, and shall use its commercially  reasonable efforts to ensure that no Affiliate of the Company shall, 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 will 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 Securities to the  Purchasers, or that will 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 stockholder approval prior  to the closing of such other transaction unless stockholder approval is obtained before the closing  of such subsequent transaction.          Section 4.4 Securities Laws Disclosure; Publicity. On or before 9:00 a.m., New York  City time, on the Business Day immediately following the date hereof, the Company shall issue a  press release (the “Press Release”) reasonably acceptable to the Placement Agent disclosing all  material terms of the transactions contemplated hereby. On or before 5:30 p.m., New York City  time, on the fourth Trading Day immediately following the execution of this Agreement, the  Company will file a Current Report on Form 8-K with the Commission describing the terms of  the Transaction Documents (and including as exhibits to such Current Report on Form 8-K the  material Transaction Documents (including, without limitation, this Agreement, the form of  Warrant and the Registration Rights Agreement)). Notwithstanding the foregoing, the Company  shall not publicly disclose the name of any Purchaser or an Affiliate of any Purchaser, or include  the name of any Purchaser or an Affiliate of any Purchaser in any press release or filing with the  Commission (other than the Registration Statement) or any regulatory agency or Trading Market,  without the prior written consent of such Purchaser, except (i) as required by federal securities  law in connection with (A) any registration statement contemplated by the Registration Rights  Agreement and (B) the filing of final Transaction Documents (including signature pages thereto)  with the Commission and (ii) to the extent such disclosure is required by law, request of the Staff  of the Commission or Trading Market regulations, in which case the Company shall provide the  Purchasers with prior written notice of such disclosure permitted under this subclause (ii). From  and after the issuance of the Press Release, no Purchaser shall be in possession of any material,                                         26   

 

 non-public information received from the Company or any of its officers, directors, employees or   agents that is not disclosed in the Press Release unless a Purchaser shall have executed a written   agreement regarding confidentiality and use of such information. Each Purchaser, severally and   not jointly with the other Purchasers, covenants that it will comply with the provisions of any   confidentiality or nondisclosure agreement executed by it and, in addition, until such time as the  transactions contemplated by this Agreement are required to be publicly disclosed by the  Company as described in this Section 4.4 or as otherwise set forth in any such confidentiality or  nondisclosure agreement, such Purchaser will maintain the confidentiality of all disclosures  made to it in connection with this transaction (including the existence and terms of this  transaction).          Section 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, in either case solely by virtue   of receiving Securities under the Transaction Documents or under any other written agreement   between the Company and the Purchasers.           Section 4.6 Non-Public Information. Except with respect to the material terms and   conditions of the transactions contemplated by the Transaction Documents, including this   Agreement, or as expressly required by any applicable securities law, 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 regarding the Company that the Company believes   constitutes material non-public information without the express written consent of such   Purchaser, unless prior thereto such Purchaser shall have executed a written agreement regarding   the confidentiality and use of such information. The Company understands and confirms that   each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities   of the Company.           Section 4.7 Use of Proceeds. The Company shall use the net proceeds from the sale of   the Shares and Warrants hereunder for working capital and general corporate purposes.           Section 4.8 Listing of Securities. In the time and manner required by the Principal   Trading Market, the Company shall prepare and file with such Principal Trading Market an   additional shares listing application covering all of the Shares and Warrant Shares and shall use   its reasonable best efforts to take all steps necessary to cause all of the Shares and Warrant   Shares to be approved for listing on the Principal Trading Market as promptly as possible   thereafter.           Section 4.9 Form D; Blue Sky. The Company agrees to timely file a Form D with   respect to the Securities as required under Regulation D and to provide a copy thereof, promptly   upon the written request of any Purchaser. The Company, on or before the Closing Date, shall   take such action as the Company shall reasonably determine is necessary in order to obtain an   exemption for or to qualify the Securities for sale to the Purchasers at the Closing pursuant to   this Agreement under applicable securities or “Blue Sky” laws of the states of the United States                                          27    

 

(or to obtain an exemption from such qualification) and shall provide evidence of such actions  promptly upon the written request of any Purchaser.          Section 4.10 Indemnification of Purchasers. Subject to the provisions of this Section  4.10, 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 breach of  any of the representations, warranties, covenants or agreements made by the Company in this  Agreement or in the other Transaction Documents or (ii) any Action instituted against a  Purchaser in any capacity, or any Purchaser Party, by any stockholder of the Company who is  not an Affiliate of such Purchaser seeking indemnification, with respect to any of the  transactions contemplated by the Transaction Documents (unless such Action is based upon a  breach of such Purchaser’s representations, warranties or covenants under the Transaction  Documents or any other agreement with the Company, or any agreements or understandings such  Purchaser may have with any such stockholder or any violations by the Purchaser of state or  federal securities laws or any conduct by such Purchaser which constitutes fraud, gross  negligence, willful misconduct or malfeasance). Promptly after receipt by any such Person (the  “Indemnified Person”) of notice of any demand, claim or circumstances which would or might  give rise to a claim or the commencement of any Proceeding or investigation in respect of which  indemnity may be sought pursuant to this Section 4.10, such Indemnified Person shall promptly  notify the Company in writing and the Company shall assume the defense thereof, including the  employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the  payment of all fees and expenses relating to such Proceeding or investigation; provided,  however, that the failure of any Indemnified Person so to notify the Company shall not relieve  the Company of its obligations hereunder except to the extent that the Company is actually and  materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Person  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 Person unless: (i) the Company and the Indemnified Person  shall have mutually agreed to the retention of such counsel; (ii) the Company shall have failed  promptly to assume the defense of such proceeding and to employ counsel reasonably  satisfactory to such Indemnified Person in such proceeding; or (iii) in the reasonable judgment of  counsel to such Indemnified Person, representation of both parties by the same counsel would be  inappropriate due to actual or potential differing interests between them. The Company shall not  be liable for any settlement of any proceeding effected without its prior written consent, which  consent shall not be unreasonably withheld, delayed or conditioned or to the extent fees or costs  incurred pursuant to this Section 4.10 are attributable to the Indemnified Person’s breach of any  of the representations, warranties, covenants or agreements made by the Purchasers in this  Agreement or the other Transaction Documents. Without the prior written consent of the  Indemnified Person, which consent shall not be unreasonably withheld, delayed or conditioned,                                        28   

 

 the Company shall not effect any settlement of any pending or threatened proceeding in respect   of which any Indemnified Person is or could have been a party and indemnity could have been   sought hereunder by such Indemnified Person, unless such settlement includes an unconditional   release of such Indemnified Person from all liability arising out of such proceeding.           Section 4.11 Short Sales and Confidentiality After The Date Hereof. Such Purchaser   shall not, and shall cause its Trading Affiliates not to, engage, directly or indirectly, in any   transactions in the Company’s securities (including, without limitation, any Short Sales   involving the Company’s securities) during the period from the date hereof until the earlier of   such time as (i) the transactions contemplated by this Agreement are first publicly announced as   required by and described in Section 4.4 or (ii) this Agreement is terminated in full pursuant to   Section 6.17. 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 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 Transaction  Documents and Disclosure Schedules. Notwithstanding the foregoing, no Purchaser makes any  representation, warranty or covenant hereby that it will not engage in Short Sales in the securities  of the Company after the time that the transactions contemplated by this Agreement are first  publicly announced as described in Section 4.4 (subject to any written agreement between such  Purchaser and the Company regarding the confidentiality and use of material non-public  information); provided, however, each Purchaser agrees, severally and not jointly with any  Purchasers, that they will not enter into any Net Short Sales (as hereinafter defined) from the  period commencing on the Closing Date and ending on the earliest of (x) the Effective Date of  the initial Registration Statement, (y) the second anniversary of the Closing Date or (z) the date  that such Purchaser no longer holds any Securities. For purposes of this Section 4.11, a “Net  Short Sale” by any Purchaser shall mean a sale of Common Stock by such Purchaser that is  marked as a non-exempt short sale and that is made at a time when there is no equivalent   offsetting long position in Common Stock held by such Purchaser. For purposes of determining   whether there is an equivalent offsetting position in Common Stock held by the Purchaser,   Warrant Shares that have not yet been issued pursuant to the exercise of Warrants shall be   deemed to be held long by the Purchaser, and the amount of shares of Common Stock held in a   long position shall be all Shares and unexercised Warrant Shares (ignoring any exercise   limitations included therein) issuable to such Purchaser on such date, plus any shares of   Common Stock or Common Stock Equivalents otherwise then held by such Purchaser.   Notwithstanding the foregoing, in the event that a Purchaser 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 apply only with respect to the portion of assets managed by the portfolio   manager that have knowledge about the financing transaction contemplated by this Agreement.   Moreover, notwithstanding the foregoing, in the event that a Purchaser has sold Securities   pursuant to Rule 144 prior to the Effective Date of the initial Registration Statement and the   Company has failed to deliver certificates book-entry statements without legends prior to the   settlement date for such sale (assuming that such certificates or book-entry statements meet the   requirements set forth in Section 4.1(c) for the removal of legends), the provisions of this Section   4.11 shall not prohibit the Purchaser from entering into Net Short Sales for the purpose of   delivering shares of Common Stock in settlement of such sale.                                          29    

 

      Section 4.12 Delivery of Shares and Warrants After Closing. The Company shall  deliver, or cause to be delivered, the respective Shares and Warrants purchased by each  Purchaser to such Purchaser within three Trading Days of the Closing Date.          Section 4.13  [RESERVED]          Section 4.14  [RESERVED]          Section 4.15 No Dilutive Issuances. For a period of 90 days from the Closing Date, the  Company may not offer or sell any Common Stock or Common Stock Equivalents for a per- share price (determined on an as-converted basis) of less than $3.55 (adjusted for stock splits,  reverse splits, etc.). Notwithstanding the foregoing, this Section 4.15 shall not apply in respect of  the issuance of (a) shares of Common Stock or options to employees, consultants, officers or  directors of the Company pursuant to any stock or option plan (or a bona fide inducement grant  to new employees outside of any such plan) duly adopted by a majority of the non-employee  members of the Board of Directors of the Company or a majority of the members of a committee  of non-employee directors established for such purpose, (b) securities upon the exercise of or  conversion of any convertible securities or warrants issued and outstanding on or prior to the  date of or pursuant to this Agreement or any options held by current or former employees or  consultants of the Company, (c) shares of Common Stock or securities convertible into Common  Stock issued in connection with acquisitions, asset purchases, licenses, joint ventures, technology  license agreements, collaborations or strategic transactions involving the Company and other  entities approved by the Board of Directors, or (d) securities issued to financial institutions or  lessors in connection with credit or lending arrangements, equipment financings or lease  arrangements. The Company acknowledges that this covenant is a material inducement to cause  the Purchasers to enter into this Agreement.                                     ARTICLE V                      CONDITIONS PRECEDENT TO CLOSING         Section 5.1 5.1 Conditions Precedent to the Obligations of the Purchasers to Purchase  Securities. The obligation of each Purchaser to acquire Shares and Warrants at the Closing is  subject to the fulfillment to such Purchaser’s satisfaction, on or prior to the Closing Date, of each  of the following conditions, any of which may be waived by such Purchaser (as to itself only):                (a)   Representations and Warranties. The representations and warranties of the  Company contained herein shall be true and correct in all material respects (except for those  representations and warranties which are qualified as to materiality, in which case such  representations and warranties shall be true and correct in all respects) as of the date when made  and as of the Closing Date, as though made on and as of such date, except for such  representations and warranties that speak as of a specific date.                (b)   Performance. The Company shall have performed, satisfied and complied  in all material respects with all covenants, agreements and conditions required by the Transaction  Documents to be performed, satisfied or complied with by it at or prior to the Closing.                (c)   No Injunction. No statute, rule, regulation, executive order, decree, ruling  or injunction shall have been enacted, entered, promulgated or endorsed by any court or                                        30   

 

governmental authority of competent jurisdiction that prohibits the consummation of any of the  transactions contemplated by the Transaction Documents.                (d)   Consents. The Company shall have obtained in a timely fashion any and  all consents, permits, approvals, registrations and waivers necessary for consummation of the  purchase and sale of the Securities at the Closing (including all Required Approvals), all of  which shall be and remain so long as necessary in full force and effect.                (e)   Adverse Change. Since the date of execution of this Agreement, no event  or series of events shall have occurred that has had or would reasonably be expected to have a  Material Adverse Effect.                (f)   No Suspensions of Trading in Common Stock. The Common Stock shall  not have been suspended, as of the Closing Date, by the Commission or the Principal Trading  Market from trading on the Principal Trading Market nor shall suspension by the Commission or  the Principal Trading Market have been threatened, as of the Closing Date, either (A) in writing  by the Commission or the Principal Trading Market or (B) by falling below the minimum listing  maintenance requirements of the Principal Trading Market.                (g)   Company Deliverables. The Company shall have delivered the Company  Deliverables in accordance with Section 2.2(a).                (h)   Compliance Certificate. The Company shall have delivered to each  Purchaser a certificate, dated as of the Closing Date and signed by its Chief Executive Officer or  its Principal Accounting and Financial Officer, certifying to the fulfillment of the conditions  specified in Sections 5.1(a) and (b).                (i)   Termination. This Agreement shall not have been terminated as to such  Purchaser in accordance with Section 6.17 herein.          Section 5.2 Conditions Precedent to the Obligations of the Company to sell Securities.  The Company’s obligation to sell and issue the Shares and Warrants at the Closing to the  Purchasers is subject to the fulfillment to the satisfaction of the Company on or prior to the  Closing Date of the following conditions, any of which may be waived by the Company:                (a)   Representations and Warranties. The representations and warranties made  by the Purchasers in Section 3.2 hereof shall be true and correct in all material respects (except  for those representations and warranties which are qualified as to materiality, in which case such  representations and warranties shall be true and correct in all respects) as of the date when made,  and as of the Closing Date as though made on and as of such date, except for representations and  warranties that speak as of a specific date.                (b)   Performance. Such Purchaser shall have performed, satisfied and complied  in all material respects with all covenants, agreements and conditions required by the Transaction  Documents to be performed, satisfied or complied with by such Purchaser at or prior to the  Closing Date.                                           31   

 

            (c)   No Injunction. No statute, rule, regulation, executive order, decree, ruling  or injunction shall have been enacted, entered, promulgated or endorsed by any court or  governmental authority of competent jurisdiction that prohibits the consummation of any of the  transactions contemplated by the Transaction Documents.                (d)   Consents. The Company shall have obtained in a timely fashion any and  all consents, permits, approvals, registrations and waivers necessary for consummation of the  purchase and sale of the Securities at the Closing (including all Required Approvals), all of  which shall be and remain so long as necessary in full force and effect.                (e)   Purchasers Deliverables. Such Purchaser shall have delivered its Purchaser  Deliverables in accordance with Section 2.2(b).                (f)   Termination. This Agreement shall not have been terminated as to such  Purchaser in accordance with Section 6.17 herein.                                    ARTICLE VI                                 MISCELLANEOUS         Section 6.1 Fees and Expenses. The Company and each Purchaser, severally and not  jointly with any other Purchaser, shall pay the fees and expenses of their respective advisers,  counsel, accountants and other experts, if any, and all other expenses incurred by such party in  connection with the negotiation, preparation, execution, delivery and performance of this  Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and  duties levied in connection with the sale and issuance of the Securities to the Purchasers. Each  Purchaser, severally and not jointly with any other Purchaser, shall be responsible for all other  tax liability that may arise as a result of holding or transferring the Securities by it.  Notwithstanding the foregoing, the Company shall reimburse the Lead Investor for its fees and  expenses incurred in connection with the purchase of the Securities and the registration of such  Securities under the Registration Rights Agreement, such fees not to exceed $25,000 in the  aggregate.          Section 6.2 Entire Agreement. The Transaction Documents, together with the exhibits  and schedules thereto, and any confidentiality or nondisclosure agreement entered into prior to  the date of this Agreement with respect to the transactions contemplated thereby, contain the  entire understanding of the parties with respect to the subject matter hereof and supersede all  prior agreements, understandings, discussions and representations, oral or written, with respect to  such matters, which the parties acknowledge have been merged into such documents, exhibits  and schedules. At or after the Closing, and without further consideration, the Company and the  Purchasers will execute and deliver to the other such further documents as may be reasonably  requested in order to give practical effect to the intention of the parties under the Transaction  Documents.          Section 6.3 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 (provided the sender receives a machine-generated confirmation of                                         32   

 

 successful transmission) at the facsimile number specified in this Section 6.3 prior to 5:00 p.m.,   New York City time, on a Trading Day, (b) the next Trading Day after the date of transmission,   if such notice or communication is delivered via facsimile at the facsimile number specified in   this Section 6.3 on a day that is not a Trading Day or later than 5:00 p.m., New York City time,   on any Trading Day, (c) the Trading Day following the date of mailing, if sent by U.S. nationally   recognized overnight courier service with next day delivery specified, 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 follows:                    If to the Company:     Pieris Pharmaceuticals, Inc.                            255 State Street                            Boston, MA 02109                           Telephone No.: (857) 246-8998                                                     Attention: Ahmed Mousa, General Counsel                          Email: mousa@pieris.com                  With a copy to (which shall not constitute notice):                                   Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.                           One Financial Center                           Boston, MA 02111                           Telephone No.: (617) 542-6000                            Attention: William C. Hicks                                       Marc D. Mantell                           Email: WCHicks@mintz.com                                       MDMantell@mintz.com           If to a Purchaser:    To the address set forth under such Purchaser’s name on the   signature page hereof; or such other address as may be designated in writing hereafter, in the   same manner, by such Person.           Section 6.4 Amendments; Waivers; No Additional Consideration. 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 the Purchasers holding or having the   right to acquire a majority of the Shares and the Warrant Shares on a fully-diluted basis at the  time of such amendment (which amendment shall be binding on all Purchasers or, in the case of  a waiver, by the party against whom enforcement of any such waiver is sought). No waiver of  any default with respect to any provision, condition or requirement of this Agreement shall be  deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver  of any other provision, condition or requirement hereof, nor shall any delay or omission of either  party to exercise any right hereunder in any manner impair the exercise of any such right. No  consideration shall be offered or paid to any Purchaser to amend or consent to a waiver or  modification of any provision of any Transaction Document that, by its terms, applies to all                                          33    

 

 Purchasers, unless the same consideration is also offered to all Purchasers who then hold   Securities.           Section 6.5 Construction. The headings herein are for convenience only, do not   constitute a part of this Agreement and shall not be deemed to limit or affect any of the   provisions hereof. The language used in this Agreement will be deemed to be the language   chosen by the parties to express their mutual intent, and no rules of strict construction will be   applied against any party. This Agreement shall be construed as if drafted jointly by the parties,   and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of   the authorship of any provisions of this Agreement or any of the Transaction Documents.           Section 6.6 Successors and Assigns. The provisions of this Agreement shall inure to   the benefit of and be binding upon the parties and their successors and permitted assigns. This   Agreement, or any rights or obligations hereunder, may not be assigned by the Company without   the written consent of Purchasers holding or having the right to acquire a majority of the Shares   and the Warrant Shares on a fully-diluted basis at the time of such consent except to a successor   in the event of a Fundamental Transaction. Any Purchaser may assign its rights hereunder in   whole or in part to any Person to whom such Purchaser assigns or transfers any Securities in   compliance with the Transaction Documents and applicable law, provided that such transferee   shall agree in writing to be bound, with respect to the transferred Securities, by the terms and   conditions of this Agreement that apply to the “Purchasers”.           Section 6.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit   of the parties hereto and their respective successors and permitted assigns and is not for the   benefit of, nor may any provision hereof be enforced by, any other Person, except (i) the   Placement Agent is an intended third party beneficiary of Article III hereof and (ii) each   Purchaser Party is an intended third party beneficiary of Section 4.10.           Section 6.8 Survival. Subject to applicable statute of limitations, the representations,   warranties agreements and covenants contained herein shall survive the Closing and the delivery   of the Securities and any confidentiality or nondisclosure obligations set forth in any agreement   entered into prior to the date of this Agreement with respect to the transactions contemplated by   the Transaction Documents shall survive according to the terms of such agreements.           Section 6.9 Execution. This Agreement may be executed in two or more counterparts,   all of which when taken together shall be considered one and the same agreement and shall   become effective when counterparts have been signed by each party and delivered to the other   party, it being understood that both parties need not sign the same counterpart. In the event that   any signature is delivered by facsimile transmission, or 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  signature page were an original thereof.           Section 6.10 Severability. If any provision of this Agreement is held to be invalid or   unenforceable in any respect, the validity and enforceability of the remaining terms and   provisions of this Agreement shall not in any way be affected or impaired thereby and the parties                                          34    

 

 will attempt to agree upon a valid and enforceable provision that is a reasonable substitute   therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.           Section 6.11 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, or in lieu of and substitution   therefor, a new certificate or instrument, but only upon receipt of evidence reasonably   satisfactory to the Company and the Transfer Agent of such loss, theft or destruction and the   execution by the holder thereof of a customary lost certificate affidavit of that fact and an   agreement to indemnify and hold harmless the Company and the Transfer Agent for any losses in   connection therewith or, if required by the Transfer Agent, a bond in such form and amount as is   required by the Transfer Agent. The applicants for a new certificate or instrument under such   circumstances shall also pay any reasonable third-party costs associated with the issuance of  such replacement Securities. If a replacement certificate or instrument evidencing any Securities  is requested due to a mutilation thereof, the Company may require delivery of such mutilated  certificate or instrument as a condition precedent to any issuance of a replacement.           Section 6.12 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 described in the foregoing sentence and hereby agree to waive in   any Action for specific performance of any such obligation (other than in connection with any   Action for a temporary restraining order) the defense that a remedy at law would be adequate.           Section 6.13 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.           Section 6.14 Adjustments in Share Numbers and Prices. In the event of any stock split,   subdivision, dividend or distribution payable in shares of Common Stock (or other securities or   rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of   Common Stock), combination or other similar recapitalization or event occurring after the date   hereof and prior to the Closing, each reference in any Transaction Document to a number of   shares or a price per share shall be deemed to be amended to appropriately account for such   event.           Section 6.15 Governing Law. All questions concerning the construction, validity,   enforcement and interpretation of this Agreement shall be governed by and construed and   enforced in accordance with the internal laws of the State of New York, without regard to the                                          35    

 

principles of conflicts of law thereof. Each party agrees that all 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, employees or agents) shall be commenced exclusively in the New York Courts. Each  party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts 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  Proceeding, any claim that it is not personally subject to the jurisdiction of any such New York  Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each  party hereto hereby irrevocably waives personal service of process and consents to process being  served in any such Proceeding by mailing a copy thereof via registered or certified mail or  overnight delivery (with evidence of delivery) to such party at the address in effect for notices to  it under this Agreement and agrees that such service shall constitute good and sufficient service  of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any  right to serve process in any manner permitted by law. EACH PARTY HERETO HEREBY  IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE  LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING  ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS  CONTEMPLATED HEREBY.          Section 6.16  Waiver of Conflicts. Each Purchaser acknowledges that Mintz, Levin,  Cohn, Ferris, Glovsky and Popeo, P.C., outside general counsel to the Company, has in the past  performed and is or may now or in the future represent one or more Purchasers or their Affiliates  in matters unrelated to the transactions contemplated by the this Agreement, including  representation of such Purchasers or their Affiliates in matters of a similar nature to the  transactions contemplated by this Agreement. The applicable rules of professional conduct  require that Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. inform the Purchasers  hereunder of this representation and obtain their consent. Mintz, Levin, Cohn, Ferris, Glovsky  and Popeo, P.C. has served as outside general counsel to the Company and has negotiated the  terms of this Agreement solely on behalf of the Company. Each Purchaser hereby (a)  acknowledges that they have had an opportunity to ask for and have obtained information  relevant to such representation; (b) acknowledges that with respect to the transactions  contemplated by this Agreement, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. has  represented solely the Company, and not any Purchaser or any stockholder, director or employee  of the Company or any Purchaser; and (c) gives its informed consent to Mintz, Levin, Cohn,  Ferris, Glovsky and Popeo, P.C.’s representation of the Company in the transactions  contemplated by this Agreement.          Section 6.17 Termination. This Agreement may be terminated and the sale and  purchase of the Shares and the Warrants abandoned at any time prior to the Closing by either the  Company or any Purchaser (with respect to itself only) upon written notice to the other, if the  Closing has not been consummated on or prior to 5:00 p.m., New York City time, on the Outside  Date; provided, however, that the right to terminate this Agreement under this Section 6.17 shall  not be available to any Person whose failure to comply with its obligations under this Agreement  has been the cause of or resulted in the failure of the Closing to occur on or before such time.  Nothing in this Section 6.17 shall be deemed to release any party from any liability for any                                         36   

 

 breach by such party of the terms and provisions of this Agreement or the other Transaction   Documents or to impair the right of any party to compel specific performance by any other party  of its obligations under this Agreement or the other Transaction Documents. In the event of a  termination pursuant to this Section 6.17, the Company shall promptly notify all non-terminating   Purchasers. Upon a termination in accordance with this Section 6.17, the Company and the   terminating Purchaser(s) shall not have any further obligation or liability (including arising from   such termination) to the other, and no Purchaser will have any liability to any other Purchaser   under the Transaction Documents as a result therefrom. The Company and any Purchaser(s) may   extend the term of this Agreement in accordance with the amendment provisions of Section 6.4   herein.                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]                                             37    

 

         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.    PIERIS PHARMACEUTICALS, INC.               By:   /s/ Stephen Yoder               Name: Stephen Yoder  Title:   CEO                                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]                                                                                                                                             [SIGNATURE PAGES FOR PURCHASERS FOLLOW]                                                       [Signature Page to Securities Purchase Agreement] 

 

NAME OF PURCHASER:      AQUILO CAPITAL, L.P.     By: /s/ Marc Schneidman               Name: Marc Schneidman  Title: Managing Member, Aquilo Capital Management, LLC, General Partner        Aggregate Purchase Price (Subscription Amount): $4,000,001.55   Number and Type of Shares to be Acquired:                Common Stock: 1,126,761                            Preferred Stock: N/A                               Warrant Shares: 1,126,761                       Tax ID No.:                                        Address for Notice/Residency of Purchaser:                                                                                                                                                                      Delivery Instructions (if different than above):                                                                                                                                                                                             [Signature Page to Securities Purchase Agreement]   

 

   NAME OF PURCHASER:      Biotechnology Value Fund, L.P.     By: /s/ Mark Lampert                  Name: Mark Lampert  Title: President BVF Inc., GP BVF Partners L.P.        Aggregate Purchase Price (Subscription Amount): $6,375,800.00   Number and Type of Shares to be Acquired:                Common Stock: N/A                            Preferred Stock: 1,796                                   Warrant Shares: 1,796,000                       Tax ID No.:                                        Address for Notice/Residency of Purchaser:                                                                                                                                                                      Delivery Instructions (if different than above):                                                                                                                                                                                             [Signature Page to Securities Purchase Agreement] 

 

   NAME OF PURCHASER:      Biotechnology Value Fund II, L.P.     By: /s/ Mark Lampert                  Name: Mark Lampert  Title: President BVF Inc., GP BVF Partners L.P.        Aggregate Purchase Price (Subscription Amount): $5,129,750.00   Number and Type of Shares to be Acquired:                Common Stock: N/A                            Preferred Stock: 1,445                             Warrant Shares: 1,445,000                       Tax ID No.:                                        Address for Notice/Residency of Purchaser:                                                                                                                                                                      Delivery Instructions (if different than above):                                                                                                                                                                                             [Signature Page to Securities Purchase Agreement] 

 

   NAME OF PURCHASER:      Biotechnology Value Trading Fund OS, L.P.     By: /s/ Mark Lampert                  Name: Mark Lampert  Title: President BVF Inc., GP BVF Partners L.P., Sole Member BVF Partners OS, Ltd.        Aggregate Purchase Price (Subscription Amount): $940,750.00   Number and Type of Shares to be Acquired:                Common Stock: N/A                            Preferred Stock: 265                               Warrant Shares: 265,000                         Tax ID No.:                                        Address for Notice/Residency of Purchaser:                                                                                                                                                                      Delivery Instructions (if different than above):                                                                                                                                                                                             [Signature Page to Securities Purchase Agreement] 

 

   NAME OF PURCHASER:      MSI BVF SPV L.L.C.                 By: /s/ Mark Lampert                  Name: Mark Lampert  Title: President BVF Inc., GP BVF Partners L.P., Attorney-In-Fact        Aggregate Purchase Price (Subscription Amount): $56,800.00   Number and Type of Shares to be Acquired:                Common Stock: N/A                            Preferred Stock: 16                                Warrant Shares: 16,000                          Tax ID No.:                                        Address for Notice/Residency of Purchaser:                                                                                                                                                                      Delivery Instructions (if different than above):                                                                                                                                                                                        [Signature Page to Securities Purchase Agreement] 

 

   NAME OF PURCHASER:      EcoR1 Capital Fund, LP     By: /s/ Oleg Nodelman                 Name: Oleg Nodelman  Title: Manger, EcoR1 Capital LLC, as General Partner        Aggregate Purchase Price (Subscription Amount): $1,508,402.10   Number and Type of Shares to be Acquired:                Common Stock: 424,902                              Preferred Stock: n/a                               Warrant Shares: 424,902                         Tax ID No.:                                        Address for Notice/Residency of Purchaser:                                                                                                                                                                      Delivery Instructions (if different than above):                                                                                                                                                                                        [Signature Page to Securities Purchase Agreement] 

 

   NAME OF PURCHASER:      EcoR1 Capital Fund Qualified LP     By: /s/ Oleg Nodelman                 Name: Oleg Nodelman  Title: Manger, EcoR1 Capital LLC, as General Partner        Aggregate Purchase Price (Subscription Amount): $7,491,600.50   Number and Type of Shares to be Acquired:                Common Stock: 2,110,310                            Preferred Stock: n/a                               Warrant Shares: 2,110,310                       Tax ID No.:                                        Address for Notice/Residency of Purchaser:                                                                                                                                                                      Delivery Instructions (if different than above):                                                                                                                                                                                             [Signature Page to Securities Purchase Agreement] 

 

   NAME OF PURCHASER:      Samsara BioCapital, L.P.   By: Samsara BioCapital GP, LLC     By: /s/ Srinivas Akkaraju, MD, PhD    Name: Srinivas Akkaraju, MD, PhD  Title: Managing Member        Aggregate Purchase Price (Subscription Amount): $2,500,002.30   Number and Type of Shares to be Acquired:                Common Stock: 704,226                              Preferred Stock: n/a                               Warrant Shares: 704,226                         Tax ID No.:                                        Address for Notice/Residency of Purchaser:                                                                                                                                                                      Delivery Instructions (if different than above):                                                                                                                                                                                             [Signature Page to Securities Purchase Agreement] 

 

   NAME OF PURCHASER:      Citadel Multi-Strategy Equities Master Fund Ltd.   By: Citadel Advisors LLC, its portfolio manager     By: /s/ Shellane Mulcahy              Name: Shellane Mulcahy  Title: Authorized Signatory        Aggregate Purchase Price (Subscription Amount): $4,000,001.55   Number and Type of Shares to be Acquired:                Common Stock: 1,126,761                            Preferred Stock: n/a                               Warrant Shares: 1,126,761                       Tax ID No.:                                        Address for Notice/Residency of Purchaser:                                                                                                                                                                      Delivery Instructions (if different than above):                                                                                                                                                                                                                                                          

 

                                        EXHIBITS   A: Form of Warrant     B: Form of Registration Rights Agreement     C: Form of Opinion of Company Counsel      D: Form of Irrevocable Transfer Agent Instructions      E: Form of Certificate of Designation      F: Accredited Investor Questionnaire                                                                                                               

 

 EXHIBIT A   Form of Warrant                                                 49                                       

 

          EXHIBIT B   Form of Registration Rights Agreement                     50                                       

 

         EXHIBIT C-1   Form of Opinion of Company Counsel                   51                                       

 

                         EXHIBIT C-2   Form of Opinion of Nevada Counsel                                                           

 

                           EXHIBIT D   Irrevocable Transfer Agent Instructions                                                                           

 

                         EXHIBIT E   Form of Certificate of Designation                                                                          

 

                               EXHIBIT F   ACCREDITED INVESTOR QUESTIONNAIREpierisformofwarrantpipen

                                                                                   FORM FINAL     NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE   SECURITIES HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE   “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE   OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE   REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) 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 OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL   REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT OR (II) UNLESS SOLD   PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.                                   PIERIS PHARMACEUTICALS, INC.                              WARRANT TO PURCHASE COMMON STOCK                                   Original Issue Date: November     , 2019    Pieris Pharmaceuticals, Inc., a Nevada corporation (the “Company”), hereby certifies that, for value   received,                      or its permitted registered assigns (the “Holder”), is entitled to purchase from the Company   up to a total of                      shares of common stock, $0.001 par value per share (the “Common Stock”), of the   Company (the “Warrant Shares”) at an exercise price per share equal to $7.10 per share (as adjusted from time to   time as provided in Section 9 herein, the “Exercise Price”), at any time and from time to time on or after the date   hereof (the “Original Issue Date”) and through and including the Expiration Date (defined below), subject to the   following terms and conditions:    This Warrant (this “Warrant”) is one of a series of similar tranche of warrants issued pursuant to that certain   Securities Purchase Agreement, dated November 2, 2019, by and among the Company and the Purchasers identified   therein (the “Purchase Agreement”). All such Warrants are referred to herein, collectively, as the “Warrants.”           1.     Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are   not otherwise defined herein have the meanings given to such terms in the Purchase Agreement.           “Expiration Date” means the 5:30 p.m. (ET) on the fifth anniversary of the Original Issue Date, provided   that if the Performance Condition is satisfied, then the Expiration Date shall accelerate and shall be 5:30 p.m. (ET)   on the 60th calendar day following the date of the Initial Data Disclosure.            “Initial Data Disclosure” means the initial public disclosure by means of a press release, 8-K,   presentation, abstract or other similar disclosure of the top-line results of at least one dose level investigated in the   Phase 2a Study that includes the “p” value achieved for the primary endpoint of such study with respect to at least  one dose level investigated in the Phase 2a Study.           “Performance Condition” means the satisfaction of both of the following conditions: (i) the Initial Data   Disclosure reveals top-line data on the primary efficacy endpoint in the Phase 2a Study with a “p” value below 0.05   (i.e., p < 0.05) in at least one dose level; and (ii) the 10-day volume weighted average stock price (as reported by  Bloomberg) commencing on the Trading Day immediately after the Initial Data Disclosure is equal to, or greater  than, three percent (3%) more than the Exercise Price.           “Phase 2a Study” means the Phase 2a study of the investigational compound PRS-060/AZD1402 in   moderate-to-severe asthma.             2.    Registration of Warrants. The Company shall register this Warrant, upon records to be maintained   by the Company for that purpose, which may be a third-party transfer agent (the “Warrant Register”), in the name   of the record Holder (which shall include the initial Holder or, as the case may be, any registered assignee to which                                                                                                       

 

 this Warrant is permissibly assigned hereunder) from time to time. The Company may deem and treat the registered   Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the   Holder, and for all other purposes, absent actual notice to the contrary.             3.     Registration of Transfers. Subject to the restrictions on transfer set forth in Section 4.1 of the   Purchase Agreement and compliance with all applicable securities laws, the Company shall register the transfer of   all or any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of   Assignment attached as Schedule 2 hereto duly completed and signed, to the Company’s transfer agent or to the   Company at its address specified in the Purchase Agreement and (x) delivery, at the request of the Company, of an   opinion of counsel reasonably satisfactory to the Company to the effect that the transfer of such portion of this   Warrant may be made pursuant to an available exemption from the registration requirements of the Securities Act   and all applicable state securities or blue sky laws (other than in connection with any transfer (i) pursuant to an   effective registration statement, (ii) to the Company, (iii) pursuant to Rule 144), and (y) delivery by the transferee of   a written statement to the Company certifying that the transferee is an “accredited investor” as defined in Rule   501(a) under the Securities Act to the Company at its address specified in the Purchase Agreement. Upon any such   registration or transfer, a new warrant to purchase Common Stock in substantially the form of this Warrant (any   such new warrant, a “New Warrant”) evidencing the portion of this Warrant so transferred shall be issued to the   transferee, and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be   issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the   acceptance by such transferee of all of the rights and obligations in respect of the New Warrant that the Holder has   in respect of this Warrant. The Company shall prepare, issue and deliver at its own expense any New Warrant under   this Section 3.         4.  Exercise and Duration of Warrant.          (a)    All or any part of this Warrant shall be exercisable by the registered Holder in any manner  permitted by Section 10 of this Warrant at any time and from time to time on or after the Original Issue Date and  through and including 5:30 p.m. New York City time, on the Expiration Date. At 5:30 p.m., New York City time, on  the Expiration Date, the portion (or all) of this Warrant not exercised prior thereto shall be and become void and of  no value and this Warrant shall be automatically terminated and no longer outstanding, provided, however, that if  the Performance Condition has not been met and the last reported Closing Sale Price immediately prior to the  Expiration Date was greater than the Exercise Price, then this Warrant shall be automatically deemed exercised on a  cashless basis as of 4:01 p.m. (ET) on the Expiration Date.           (b)     The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the   form attached as Schedule 1 hereto (the “Exercise Notice”), completed and duly signed, and (ii) payment of the   Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised (which may, if, and   only if, following the Initial Data Disclosure, the Performance Condition has not been met, take the form of a   “cashless exercise” if so indicated in the Exercise Notice and if a “cashless exercise” may occur at such time   pursuant to Section 10 below), and the date on which Exercise Notice is delivered to the Company (as determined in   accordance with the notice provisions hereof) is an “Exercise Date.” The delivery by (or on behalf of) the Holder of   the Exercise Notice and the applicable Exercise Price as provided above shall constitute the Holder’s certification to   the Company that its representations contained in Section 3.2 of the Purchase Agreement are true and correct as of   the Exercise Date and the date on which Holder pays the Company the Exercise Price as if remade in their entirety   (or, in the case of any transferee Holder that is not a party to the Purchase Agreement, such transferee Holder’s   certification to the Company that such representations are true and correct as to such assignee Holder as of the   Exercise Date). The Holder shall not be required to deliver the original Warrant in order to effect an exercise   hereunder, but if it is not so delivered then such exercise shall constitute an agreement by the Holder to deliver the   original Warrant to the Company as soon as practicable thereafter. Execution and delivery of the Exercise Notice   shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant evidencing the   right to purchase the remaining number of Warrant Shares.         5.  Delivery of Warrant Shares.                                                     2                                                 

 

        (a)    Upon exercise of this Warrant and delivery of the Exercise Price, the Company shall promptly (but  in no event later than two Trading Days after the later of the Exercise Date and delivery of the Exercise Price) issue  or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names  as the Holder may designate (provided that, if the Registration Statement is not effective and the Holder directs the  Company to deliver a certificate for the Warrant Shares in a name other than that of the Holder or an Affiliate of the  Holder, it shall deliver to the Company on the Exercise Date an opinion of counsel reasonably satisfactory to the  Company to the effect that the issuance of such Warrant Shares in such other name may be made pursuant to an  available exemption from the registration requirements of the Securities Act and all applicable state securities or  blue sky laws), (i) a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends, or  (ii) an electronic delivery of the Warrant Shares to the Holder’s account at the Depository Trust Company (“DTC”)   or a similar organization, unless in the case of clause (i) and (ii) a registration statement covering the resale of the   Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective or the Warrant   Shares are not freely transferable without restriction under Rule 144 by Holders who are not affiliates of the   Company, in which case such Holder shall receive a certificate for the Warrant Shares issuable upon such exercise   with appropriate restrictive legends. The Holder, or any Person permissibly so designated by the Holder to receive   Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise   Date. Notwithstanding anything contained herein to the contrary, if the Holder fails to deliver the documents   required to register a transferee as set forth in Section 3 above or to provide the documents required under this   Section 5(a) to issue a certificate or electronic delivery of the Warrant Shares to any Person(s) other than the Holder,   then determination of the three Trading Days shall be tolled until such documents have been delivered to the   Company. If the Warrant Shares are to be issued free of all restrictive legends, the Company shall, upon the written   request of the Holder, use its reasonable best efforts to deliver, or cause to be delivered, Warrant Shares hereunder   electronically through DTC or another established clearing corporation performing similar functions, if available;   provided, that, the Company may, but will not be required to, change its transfer agent if its current transfer agent   cannot deliver Warrant Shares electronically through such a clearing corporation. “Trading Day” means any day on   which the Common Stock are traded on the Principal Market, or, if the Principal Market is not the principal trading   market for the Common Stock, then on the principal securities exchange or securities market on which the Common   Stock is then traded; provided that “Trading Day” shall not include any day on which the Common Stock is   scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock are   suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market   does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at   4:00:00 p.m., New York time).              (b)     If by the close of the second Trading Day after delivery of a properly completed Exercise Notice   and the payment of the aggregate Exercise Price in any manner permitted by Section 10 of this Warrant, the  Company fails to deliver to the Holder a certificate representing the required number of Warrant Shares in the  manner required pursuant to Section 5(a), and if after such second Trading Day and prior to the receipt of such  Warrant Shares, the Holder is required to purchase (in an open market transaction or otherwise) shares of Common  Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving  upon such exercise (a “Buy-In”), then the Company shall, in its sole discretion, within two Trading Days after the   Holder’s request for payment, either (1) pay in cash to the Holder an amount equal to the Holder’s total purchase   price (including brokerage commissions, if any) for the shares of Common Stock so purchased, at which point the   number of Warrant Shares underlying this Warrant equal to the number of shares of Common Stock so purchased   shall be forfeited and the Company’s obligation to deliver such certificate (and to issue such Warrant Shares) shall   terminate or (2) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such   Warrant Shares and pay cash to the Holder in an amount equal to the excess (if any) of Holder’s total purchase price   (including brokerage commissions, if any) for the shares of Common Stock so purchased in the Buy-In over the   product of (A) the number of shares of Common Stock purchased in the Buy-In, multiplied by (B) the closing bid  price of a share of Common Stock on the Exercise Date. The Holder shall provide the Company written notice  indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and  other evidence reasonably requested by the Company.           (c)    To the extent permitted by law, the Company’s obligations to issue and deliver Warrant Shares in  accordance with and subject to the terms hereof (including the limitations set forth in Section 11 below) are absolute  and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent  with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the                                                    3                                                 

 

same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the  Holder or any other Person of any obligation to the Company (other than breaches related to this Warrant or the  Purchase Agreement) or any violation or alleged violation of law by the Holder or any other Person, and irrespective  of any other circumstance that might otherwise limit such obligation of the Company to the Holder in connection  with the issuance of Warrant Shares. Nothing herein shall limit the Holder’s right to pursue any other remedies  available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or  injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common  Stock upon exercise of the Warrant as required pursuant to the terms hereof.          6.     Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of Common Stock  upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, transfer agent  fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses  shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax that may be  payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or the Warrants  in a name other than that of the Holder or an Affiliate thereof. The Holder shall be responsible for all other tax  liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise  hereof.          7.     Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall  issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and  substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the  Company of such loss, theft or destruction (in such case) and, in each case, a customary and reasonable indemnity  and surety bond, if requested by the Company. Applicants for a New Warrant under such circumstances shall also  comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the  Company may prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder  shall deliver such mutilated Warrant to the Company as a condition precedent to the Company’s obligation to issue  the New Warrant.          8.     Reservation of Warrant Shares. The Company represents and warrants that on the date hereof, it  has duly authorized and reserved, and covenants that it will at all times during the period this Warrant is outstanding  reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common  Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided,  the number of Warrant Shares that are initially issuable and deliverable upon the exercise of this entire Warrant, free  from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account  the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and  deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms  hereof, be duly and validly authorized, issued and fully paid and non-assessable and free from all taxes, liens and  charges created by the Company in respect of the original issuance thereof (other than taxes in respect of any  transfer occurring contemporaneously with such issue). The Company further covenants that its issuance of this  Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to  execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under  this Warrant. The Company represents and warrants that the Warrant Shares, when issued and paid for in accordance  with the terms of the Transaction Documents and the Warrants, will be issued free and clear of all security interests,  claims, liens and other encumbrances other than restrictions imposed by applicable securities laws. The Company  will take all such action as may be reasonably necessary to assure that such shares of Common Stock may be issued  as provided herein without violation of any applicable law or regulation, or of any requirements of any securities  exchange or automated quotation system upon which the Common Stock may be listed.        9.  Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this  Warrant are subject to adjustment from time to time as set forth in this Section 9.          (a)    Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding,  (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is  payable in shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock into a larger number of  shares, (iii) combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock  into a smaller number of shares or (iv) issues by reclassification of shares of Common Stock any shares of capital                                                   4                                                 

 

 stock of the Company, then in each such case the Exercise Price shall be adjusted to a price determined by   multiplying the Exercise Price in effect immediately prior to the effective date of such event by a fraction, the   numerator of which shall be the number of shares of Common Stock outstanding on such effective date immediately   before giving effect to such event and the denominator of which shall be the number of shares of Common Stock   outstanding immediately after giving effect to such event. Any adjustment made pursuant to clause (i) of this   paragraph shall become effective immediately after the record date for the determination of stockholders entitled to   receive such dividend or distribution, and any adjustment pursuant to clause (ii), (iii) or (iv) of this paragraph shall   become effective immediately after the effective date of such subdivision, combination or reclassification.           (b)     Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes   to all holders of Common Stock for no consideration (i) evidences of its indebtedness, (ii) any security (other than a   distribution of Common Stock covered by the preceding paragraph) or (iii) rights or warrants to subscribe for or   purchase any security, or (iv) any other asset, including cash (in each case, “Distributed Property”), except, in the   case of subsections (b)(i) through (b)(iv) hereof, for any distributions pursuant to a shareholders’ rights plan or   similar takeover defense agreement or plan adopted by the Company, then, upon any exercise of this Warrant that   occurs after the record date fixed for determination of stockholders entitled to receive such distribution, the Holder   shall be entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable),   the Distributed Property that such Holder would have been entitled to receive in respect of such number of Warrant   Shares had the Holder been the record holder of such Warrant Shares immediately prior to such record date.           (c)    Fundamental Transactions. If, at any time while this Warrant is outstanding (i) the Company   effects (A) any merger of the Company with (but not into) another Person, in which stockholders of the Company   immediately prior to such transaction own less than a majority of the outstanding stock of the surviving entity, or   (B) any merger or consolidation of the Company into another Person, (ii) the Company effects any sale of all or  substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer  approved or authorized by the Company’s Board of Directors is completed pursuant to which holders of at least a  majority of the outstanding Common Stock tender or exchange their shares for other securities, cash or property, or  (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to  which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other  than as a result of a subdivision or combination of shares of Common Stock covered by Section 9(a) above or as a  result of a transaction, the primary purpose of which is to change the jurisdiction of incorporation of the Company)  (in any such case, a “Fundamental Transaction”), then the Holder shall have the right thereafter to receive, upon   exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to   receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental   Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant without   regard to any limitations on exercise contained herein (the “Alternate Consideration”), and the Holder shall no   longer have the right to receive Warrant Shares upon exercise of this Warrant. The Company shall not effect any   such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to   the Company, surviving entity or the corporation purchasing or otherwise acquiring such assets or other appropriate   corporation or Person shall assume the obligation to deliver to the Holder, such Alternate Consideration as, in   accordance with the foregoing provisions, the Holder may be entitled to receive, and the other obligations under this   Warrant. The provisions of this paragraph (c) shall similarly apply to subsequent transactions of an analogous type   to any Fundamental Transaction.           (d)     Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to   paragraph (a) of this Section 9, the number of Warrant Shares that may be purchased upon exercise of this Warrant   shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable   hereunder for the increased or decreased number of Warrant Shares shall be the same as the aggregate Exercise   Price in effect immediately prior to such adjustment.           (e)    Calculations. All calculations under this Section 9 shall be made to the nearest cent or the nearest   share, as applicable.           (f)    Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the   Company at its expense will promptly compute such adjustment, in good faith, in accordance with the terms of this   Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price                                                    5                                                 

 

 and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as  applicable), describing the transactions giving rise to such adjustments and showing in reasonable detail the facts  upon which such adjustment is based. The Company will promptly deliver a copy of each such certificate to the   Holder and to the Company’s transfer agent.           (g)     Notice of Corporate Events. If, while this Warrant is outstanding, the Company (i) declares a   dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including,   without limitation, any granting of rights or warrants to subscribe for or purchase any capital stock of the Company,   (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any   Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the   Company, then, except if such notice and the contents thereof shall be deemed to constitute material non-public   information, the Company shall deliver to the Holder a notice of such transaction at least ten (10) Trading Days  prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to  participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or  any defect therein shall not affect the validity of the corporate action required to be described in such notice.           10.    Payment of Exercise Price. The Holder shall either pay the Exercise Price in immediately   available funds or by way of a “cashless exercise”, in which event the Company shall issue to the Holder the number   of Warrant Shares determined in accordance with the formula set forth below. Notwithstanding the foregoing, the   Holder shall only be permitted to pay the Exercise Price by way of a cashless exercise in accordance with this   Section 10 if, and only if, following the Initial Data Disclosure, the Performance Condition has not been satisfied.                                               X = Y [(A-B)/A]            where:                     X = the number of Warrant Shares to be issued to the Holder.                     Y = the total number of Warrant Shares with respect to which this Warrant is being exercised.                     A = the average of the Closing Sale Prices of the shares of Common Stock (as reported by                     Bloomberg Financial Markets) for the five consecutive Trading Days ending on the date                     immediately preceding the Exercise Date.                     B = the Exercise Price then in effect for the applicable Warrant Shares at the time of such                     exercise.    For purposes of this Warrant, “Closing Sale Price” means, for any security as of any date, the last trade price for   such security on the Principal Trading Market for such security, as reported by Bloomberg Financial Markets, or, if   such Principal Trading Market begins to operate on an extended hours basis and does not designate a last trade price,   then the last trade price of such security prior to 4:00 p.m., New York City time, as reported by Bloomberg Financial   Markets, or if the foregoing do not apply, the last closing price of such security in the over-the-counter market on  the electronic bulletin board for such security as reported by Bloomberg Financial Markets, or, if no closing bid  price is reported for such security by Bloomberg Financial Markets, the average of the bid prices of any market  makers for such security as reported in the “pink sheets” by Pink Sheets LLC. If the Closing Sale Price cannot be  calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on  such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and  the Holder are unable to agree upon the fair market value of such security, then the Board of Directors of the  Company shall use its good faith judgment to determine the fair market value. The Board of Directors’  determination shall be binding upon all parties absent demonstrable error. All such determinations shall be  appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the  applicable calculation period.    For purposes of Rule 144, it is intended, understood and acknowledged that the provisions above permitting   “cashless exercise” are intended, in part, to ensure that a full or partial exchange of this Warrant pursuant to such   provisions will qualify as a conversion, within the meaning of paragraph (d)(3)(ii) of Rule 144, and the holding                                                     6                                                 

 

 period for the Warrant Shares shall be deemed to have commenced as to such original Holder, on the Original Issue   Date.           11.    Limitations on Exercise. Notwithstanding anything to the contrary contained herein, the number of   Warrant Shares that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect   hereof) shall be limited to the extent necessary to ensure that, following such exercise (or other issuance), the total   number of shares of Common Stock then beneficially owned by the Holder (together with such Holder’s Affiliates,   and any other Person whose beneficial ownership of Common Stock would be aggregated with the Holder’s for   purposes of Section 13(d) of the Exchange Act and the applicable regulations of the Commission, including any   “group” of which the Holder is a member) does not exceed [9.99][4.99]% of the total number of then issued and   outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such   exercise) (the “Beneficial Ownership Limit”). For such purposes, beneficial ownership shall be determined in   accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being   acknowledged by the Holder that the Company is not representing to such Holder that such calculation is in   compliance with Section 13(d) of the Exchange Act and such Holder is solely responsible for any schedules required   to be filed in accordance therewith. To the extent that the Beneficial Ownership Limit applies, the determination of   whether this Warrant is exercisable (in relation to other securities owned by such Holder) and of which a portion of   this Warrant is exercisable shall be in the sole discretion of a Holder, and the submission of a Notice of Exercise   shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other   securities owned by such Holder) and of which portion of this Warrant is exercisable, in each case subject to the   Beneficial Ownership Limit, and the Company shall have no obligation to verify or confirm the accuracy of such   determination. In addition, a determination as to any group status as contemplated above shall be determined in   accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For   purposes of this Section 11, in determining the number of outstanding shares of Common Stock, the Holder may  rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10- Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice  by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the  written request of the Holder, the Company shall within three Trading Days confirm orally and in writing to such  Holder the number of shares of Common Stock then outstanding. This provision shall not restrict the number of  shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of  securities or other consideration that such Holder may receive in the event of a Fundamental Transaction as  contemplated in Section 9 of this Warrant. By written notice to the Company, the Holder may increase or decrease  the Beneficial Ownership Limit applicable solely to such Holder to such other percentage limit as may be  determined by the Holder, not to exceed [19.99][9.99]%, provided that any increase in the Beneficial Ownership  Limit shall not be effective until the 61st day after such notice is delivered to the Company.           12.    No Fractional Shares. No fractional Warrant Shares will be issued in connection with any exercise   of this Warrant. In lieu of any fractional shares that would otherwise be issuable, the number of Warrant Shares to   be issued shall be rounded down to the next whole number and the Company shall pay the Holder in cash the fair   market value (based on the Closing Sale Price) for any such fractional shares.           13.    Notices. Any and all notices or other communications or deliveries hereunder (including, without   limitation, any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the  date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in  the Purchase Agreement prior to 5:30 p.m., New York City time, on a Trading Day, (ii) the next Trading Day after   the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified   in the Purchase Agreement on a day that is not a Trading Day or later than 5:30 p.m., New York City time, on any   Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier   service specifying next business day delivery, or (iv) upon actual receipt by the Person to whom such notice is   required to be given, if by hand delivery. The address and facsimile number of a Person for such notices or   communications shall be as set forth in the Purchase Agreement unless changed by such Person by two Trading   Days’ prior notice to the other Person(s) in accordance with this Section 13.           14.    Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon 15 days’   notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or   any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company                                                    7                                                 

 

or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent  transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent  under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its  succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last  address as shown on the Warrant Register.        15.      Miscellaneous.         (a)    No Rights as a Stockholder. The Holder, solely in such Person’s capacity as a holder of this  Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company  for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such  Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to  vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of  stock, consolidation, merger, amalgamation, conveyance or otherwise), receive notice of meetings, receive  dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such  Person is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this  Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities, whether such  liabilities are asserted by the Company or by creditors of the Company.          (b)     Authorized Shares.              (i)       The Company will take all such reasonable action as may be necessary to assure that such       Warrant Shares may be issued as provided herein without violation of any applicable law or regulation or of       any requirements of the Trading Market upon which the Common Stock may be listed.               (ii)      Except and to the extent as waived or consented to by the Holder, the Company shall not       by any action, including, without limitation, amending its articles of incorporation or through any       reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other       voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but       will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as       may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.       Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any       Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in       par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly       and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use       commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public       regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its       obligations under this Warrant.               (iii)     Before taking any action which would result in an adjustment in the number of Warrant       Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such       authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory       body or bodies having jurisdiction thereof.          (c)    Successors and Assigns. Subject to the restrictions on transfer set forth in this Warrant and in  Section 4.1 of the Purchase Agreement, and compliance with applicable securities laws, this Warrant may be  assigned by the Holder. This Warrant may not be assigned by the Company without the written consent of the  Holder except to a successor in the event of a Fundamental Transaction. This Warrant shall be binding on and inure  to the benefit of the Company and the Holder and their respective successors and assigns. Subject to the preceding  sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder  any legal or equitable right, remedy or cause of action under this Warrant.          (d)     Amendment and Waiver. Except as otherwise provided herein, the provisions of the Warrants may  be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to  be performed by it, only if the Company has obtained the written consent of the Holders of Warrants representing no  less than a majority of the Warrant Shares obtainable upon exercise of the Warrants then outstanding.                                                   8                                                 

 

        (e)    Acceptance. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to   all of the terms and conditions contained herein.           (f)    Governing Law; Jurisdiction. ALL QUESTIONS CONCERNING THE CONSTRUCTION,   VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY   AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW   YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH OF THE   COMPANY AND THE HOLDER HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION   OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF   MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION   HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN   (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS),  AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR  PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY  SUCH COURT. EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY WAIVES  PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT,  ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR  OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN  EFFECT FOR NOTICES TO IT UNDER THE PURCHASE AGREEMENT AND AGREES THAT SUCH  SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE  THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT  TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. EACH OF THE COMPANY AND THE  HOLDER HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.           (g)     Headings. The headings herein are for convenience only, do not constitute a part of this Warrant   and shall not be deemed to limit or affect any of the provisions hereof.           (h)     Severability. In case any one or more of the provisions of this Warrant shall be invalid or   unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant   shall not in any way be affected or impaired thereby, and the Company and the Holder will attempt in good faith to   agree upon a valid and enforceable provision which as closely as possible reflects the intent of the parties hereto,   and upon so agreeing, shall incorporate such substitute provision in this Warrant.                          [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,                                     SIGNATURE PAGE FOLLOWS]                                                     9                                                 

 

           IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer  as of the date first indicated above.                                                                                                                                 PIERIS PHARMACEUTICALS, INC.                                                                                                                                By:                                                                  Name:                                                              Title:                                               [Signature Page to Form of Warrant]                              

 

                                                  SCHEDULE 1                                    PIERIS PHARMACEUTICALS, INC.                                      FORM OF EXERCISE NOTICE                [To be executed by the Holder to purchase shares of Common Stock under the Warrant]   Ladies and Gentlemen:    (1) The undersigned is the Holder of Warrant No.                      (the “Warrant”) issued by Pieris Pharmaceuticals,   Inc., a Nevada corporation (the “Company”). Capitalized terms used herein and not otherwise defined herein have   the respective meanings set forth in the Warrant.    (2) The undersigned hereby exercises its right to purchase                  Warrant Shares pursuant to the Warrant.    (3) The Holder intends that payment of the Exercise Price shall be made as (check one):                  Cash Exercise                  “Cashless Exercise” under Section 10 of the Warrant (only if permitted in accordance with Section                   10 of the Warrant)   (4) If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $             in immediately available   funds to the Company in accordance with the terms of the Warrant.    (5) Pursuant to this Exercise Notice, the Company shall deliver to the Holder Warrant Shares determined in   accordance with the terms of the Warrant. Please issue (check applicable box):                  A certificate of certificates representing the Holder Warrant Shares in the name of the undersigned or                   in such other name as is specified below:                                                                                                                                                                                                            The Holder Warrant Shares in electronic form to the following account:                                                           Name and  Contact  for Broker:                   Broker no:                     Account no:                     Account holder:       (6) By its delivery of this Exercise Notice, the undersigned represents and warrants to the Company that in giving   effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of   Common Stock (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as   amended) permitted to be owned under Section 11 of the Warrant to which this notice relates.    Dated:             ,                              Name of Holder:              By:       Name:     Title:       (Signature must conform in all respects to name of Holder as specified on the face of the Warrant)                                                                                                     

 

                                                SCHEDULE 2                                   PIERIS PHARMACEUTICALS, INC.                                        FORM OF ASSIGNMENT                  [To be completed and executed by the Holder only upon transfer of the Warrant]   FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto                      (the “Transferee”)  the right represented by the within Warrant to purchase                  shares of Common Stock of Pieris  Pharmaceuticals, Inc., a Nevada corporation (the “Company”) to which the within Warrant relates and  appoints                      attorney to transfer said right on the books of the Company with full power of substitution in  the premises. In connection therewith, the undersigned represents, warrants, covenants and agrees to and with the  Company that:     (a) the offer and sale of the Warrant contemplated hereby is being made in compliance with Section 4(1) of the     United States Securities Act of 1933, as amended (the “Securities Act”), or another valid exemption from the     registration requirements of Section 5 of the Securities Act and in compliance with all applicable securities laws     of the states of the United States;     (b) the undersigned has not offered to sell the Warrant by any form of general solicitation or general advertising,     including, but not limited to, any advertisement, article, notice or other communication published in any     newspaper, magazine or similar media or broadcast over television or radio, and any seminar or meeting whose     attendees have been invited by any general solicitation or general advertising;     (c) the undersigned has read the Transferee’s investment letter included herewith, and to its actual knowledge, the     statements made therein are true and correct; and     (d) the undersigned understands that the Company may condition the transfer of the Warrant contemplated hereby     upon the delivery to the Company by the undersigned or the Transferee, as the case may be, of a written     opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in     comparable transactions) to the effect that such transfer may be made without registration under the Securities     Act and under applicable securities laws of the states of the United States.                                                       Dated:                                                                                                                                                                                                              (Signature must conform in all respects to name of                                                      holder as specified on the face of the Warrant)                                                                                                                                                                                                                     Address of Transferee                                                      In the presence of:                                                                                                                                                                                                 15      103555343.1

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