Document:

Exhibit
10.1

 

Huntwicke
Capital Group Share Agreement

 

	WS
                                         Advantage LP

        7
        Grove Street, STE 202

        Topsfield,
        MA 01983

         

        Huntwicke
        Capital Group INC.

        6
        Park Street

        Topsfield,
        Mass 01983
	March
    30th, 2017
	 	 	 

 

Re:
Amendment to Exchange of HCGI shares.

 

To
whom it may concern:

 

This
letter formalizes the amendment to the agreement that Hunwicke Capital Group, Inc. agrees to transfer 125,000 shares of HCGI at
$7 per share to WS Advantage LP originally dated November 1st, 2016 in return for:

 

		1.	All
                                         of WS Advantage LP's interests in Riversky Realty LLC in the property located at 17/19
                                         Main Street, Topsfield, Mass. WS Advantage agrees to take on all risk of HCGI shares
                                         moving forward from the date of this agreement. The amendment to the original agreement
                                         is:

 

“This
transaction will officially close once all accounting and auditing conditions are met and approved by Huntwicke's auditor who
will need to receive a satisfactory audit if necessary, prior the final closing of this agreement. All parties will work in good
faith to achieve a final closing as early as possible. In the interim period, HCGI will issue the shares in return for all rights
of ownership/control in accordance with the required fmancial statements and the work being completed to Huntwicke's satisfaction.
Should the audit work not be completed in a reasonable time defined by Huntwicke's sole discretion, the agreement may be undone
by Huntwicke's sole discretion. This amendment to the original agreement is deemed to effective as of the original November 1st,
2016 agreement.”

 

	 	2.	Seller
                                         agrees to keep all information about the Company, its products and services which he
                                         has learned during the course of his membership therein ("Confidential Information")
                                         strictly confidential. Seller will not disclose any Confidential Information to a third
                                         party, or use any Confidential Information for any purpose, at any time. Seller will
                                         promptly, but in no event later than 15 days after the execution and delivery of this
                                         Agreement, return to the Company any Confidential Information now in his possession.

 

	 	3.	By
                                         their respective signatures below, each of Seller and Buyer (the "Releasing Party")
                                         hereby irrevocably and unconditionally releases the other party and the Company, and
                                         their respective successors and assigns, from any action, claim, liability, cause of
                                         action, debt, obligation, agreement or promise whatsoever, known or unknown, that the
                                         Releasing Party ever had, now have or may now or hereafter have against the other party
                                         or the Company, or which the Releasing Party may owe to any of them, from the beginning
                                         of the world to and including the date of this agreement, provided that Seller and Buyer
                                         duly perform their respective obligations under this Agreement.

 

	 	4.	This
                                         agreement contains our entire agreement on this subject, supersedes any and all prior
                                         agreements and understandings, and may not be changed, withdrawn or revoked except by
                                         a written instrument signed by all of the parties hereto. This Agreement shall be governed
                                         by and construed in accordance with the laws of the State of Massachusetts, and any action,
                                         claim or proceeding brought hereunder shall be commenced exclusively in the federal or
                                         state courts located in such State.

 

     

     

    

 

Please
confirm, by signing this letter in the space below, your agreement to the foregoing. Kindly return an original signed counterpart
of this Agreement for my records.

 

	 	 	Very truly yours,
	 	 	 
	 	 	
	 	 	Duly Authorized
	 	 	Huntwicke Capital Group INC.
	 	 	President
	ACCEPTED AND AGREED TO:
	 	 
	 	 	 
	 	 	 
	Duly Authorized	 	 
	WS Advantage LP	 	 
	Managing PartnerExhibit
10.2

 

Huntwicke
Capital Group Share Agreement

 

	WS
                                         Advantage LP

        7
        Grove Street, STE 202

        Topsfield, MA 01983

         

        Huntwicke
        Capital Group INC.

        6 Park Street

        Topsfield,
        Mass 01983
	April
    27th, 2017
	 	 	 

Re:
Riversky Closing Rescinded

 

To
whom it may concern:

 

This
letter formalizes that Hunwicke Capital Group, Inc. requests all consideration, and specifically, the 125,000 shares of HCGI at
$7 per share with agreement dated November 2nd, 2016 in return for ownership of Riversky LLC to be rescinded effective
November 2nd. All parties will continue to work in good faith in the future to eventually successfully acquire Riversky
by HCG.

 

	 	 	Very truly yours,
	 	 	 
	 	 	 
	 	 	Duly Authorized
	 	 	Huntwicke Capital Group INC.
	 	 	President
	ACCEPTED AND AGREED TO:
	 	 
	 	 	 
	 	 	 
	Duly Authorized	 	 
	WS Advantage LP	 	 
	Managing PartnerBlueprint

 

EXHIBIT 10.1

 

 

 

SECURITIES PURCHASE AGREEMENT

 

This
Securities Purchase Agreement (this “Agreement”) is dated as
of May [ ], 2017, between AzurRx BioPharma, Inc., a Delaware
corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).

 

WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and Rule 506 promulgated thereunder, the
Company is selling, in a private placement, a minimum of $1,500,000
worth of shares of the Company’s Common Stock (the
“Minimum
Offering”) and up to $5,000,000 worth of shares (the
“Maximum
Amount”), and certain Warrants, as defined in this
Agreement (the “Offering”);
and

 

WHEREAS, the
Company desires, at the Initial Closing or any Subsequent Closing
during the Offering Period, to issue and sell to each Purchaser,
and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described
in this Agreement.

 

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

 

ARTICLE I.

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

“Closing” means any
closing of the purchase and sale of the Securities pursuant to this
Agreement, including the Initial Closing and any Subsequent
Closing.

 

 

 

1

 

 

 

“Closing Date” means, in
connection with any Closing, the Trading Day on which all of the
Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) the
applicable Purchasers’ obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the
Securities, in each case, have been satisfied or
waived.

 

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

 

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

 

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

 

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

 

“Company Counsel” means
Disclosure Law Group, a Professional Corporation, with offices
located at One American Plaza, 600 West Broadway, Suite 700, San
Diego, CA 92101.

 

 “Disclosure
Schedules” shall have the meaning ascribed to such
term in Section 3.1.

 

“Effective Date” means the
earliest of the date that (a) the initial Registration Statement
has been declared effective by the Commission, (b) all of the
Shares and Warrant Shares have been sold pursuant to Rule 144 or
may be sold pursuant to Rule 144 without the requirement for the
Company to be in compliance with the current public information
required under Rule 144 and without volume or manner-of-sale
restrictions, (c) following the one year anniversary of the initial
Closing Date provided that a holder of Shares or Warrant Shares is
not an Affiliate of the Company, or (d) all of the Shares and
Warrant Shares may be sold pursuant to an exemption from
registration under Section 4(1) of the Securities Act without
volume or manner-of-sale restrictions and Company Counsel has
delivered to such holders a standing written unqualified opinion
that resales may then be made by such holders of the Shares and
Warrant Shares pursuant to such exemption which opinion shall be in
form and substance reasonably acceptable to such
holders.

 

 “Escrow
Agent” means Signature Bank, a New York State
chartered bank, with offices at 565 Fifth Avenue, 12th Floor, New York,
New York 10017.

 

“Escrow Agreement” means
the escrow agreement entered into prior to the date hereof, by and
among the Company, the Escrow Agent and the Placement Agent
pursuant to which the Purchasers shall deposit Subscription Amounts
with the Escrow Agent to be applied to the transactions
contemplated hereunder.

 

 

 

2

 

 

 

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

 

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

 

“Exempt Issuance” means
the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or
option plan duly adopted for such purpose, by a majority of the
non-employee members of the Board of Directors or a majority of the
members of a committee of non-employee directors established for
such purpose for services rendered to the Company, (b) securities
upon the exercise or exchange of or conversion of any Securities
issued hereunder and/or other securities exercisable or
exchangeable for or convertible into shares of Common Stock issued
and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement
to increase the number of such securities or to decrease the
exercise price, exchange price or conversion price of such
securities (other than in connection with stock splits or
combinations) or to extend the term of such securities, (c)
securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors
of the Company, provided that any such issuance shall only be to a
Person (or to the equityholders of a Person) which is, itself or
through its subsidiaries, an operating company or an owner of an
asset in a business synergistic with the business of the Company
and shall provide to the Company additional benefits in addition to
the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is
investing in securities, and (d) Securities to issued to Burke Ross
and his affiliates pursuant to that certain Securities Purchase
Agreement, dated on or about May __, 2017, on or before June 30,
2017.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

3

 

 

 

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

 

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

 

 “Per
Share Purchase Price” equals $3.75, subject to
adjustment for reverse and forward stock splits, stock dividends,
stock combinations and other similar transactions of the Common
Stock that occur after the date of this Agreement.

 

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

 

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

 

“Placement Agency
Agreement” means the placement agency agreement by and
between the Company and the Placement Agent dated April 27,
2017.

 

“Placement Agent” means
Alexander Capital, LP.

 

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

 

“Public Information
Failure” shall have the meaning ascribed to such term
in Section 4.2(b).

 

“Public Information Failure
Payments” shall have the meaning ascribed to such term
in Section 4.2(b).

 

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

 

“Registration Rights
Agreement” means the Registration Rights Agreement,
dated the date hereof, among the Company and the Purchasers, in the
form of Exhibit A
attached hereto.

 

“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 Shares and the Warrant Shares.

 

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

 

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

 

 

 

4

 

 

 

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

 

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

 

“Securities” means the
Shares, the Warrants and the Warrant Shares.

 

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

 

“Series A Warrants” means,
collectively, the Common Stock purchase warrants delivered to the
Purchasers at the applicable Closing in accordance with Section
2.3(a) hereof, which warrants shall be exercisable immediately and
will expire on December 31, 2017, in the form of Exhibit C attached
hereto.

 

“Series A-1 Warrants”
means, collectively, the Common Stock purchase warrants delivered
to the Purchasers at the applicable Closing in accordance with
Section 2.3(a) hereof, which warrants shall be exercisable on or
after __________ [ ], 2017 and have a term of exercise equal to
five years, in the form of Exhibit D attached
hereto.

 

“Shareholder Approval”
means such approval as may be required by the applicable rules and
regulations of the Nasdaq Stock Market (or any successor entity)
from the shareholders of the Company with respect to the
transactions contemplated by the Transaction Documents, including
the issuance of all of the Shares and Warrant Shares in excess of
19.99% of the issued and outstanding Common Stock on the applicable
Closing Date.

 

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

 

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

 

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

 

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

 

“Termination Date” shall
have the meaning ascribed to such term in Section
2.1(a).

 

 

 

5

 

 

 

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

 

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

 

“Transaction Documents”
means this Agreement, the Placement Agency Agreement, the Warrants,
the Registration Rights Agreement, the Escrow Agreement, all
exhibits and schedules thereto and hereto and any other documents
or agreements executed in connection with the transactions
contemplated hereunder.

 

“Transfer Agent” means
Transhare Corporation, the current transfer agent of the Company,
with a mailing address of 4626 South Broadway, Englewood, Colorado
80113, and any successor transfer agent of the
Company.

 

“Variable Rate
Transaction” shall have the meaning ascribed to such
term in Section 4.11(b).

 

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

 

“Warrants” means,
collectively, the Series A Warrants and Series A-1
Warrants.

 

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

 

 

 

6

 

 

 

ARTICLE II.

PURCHASE AND SALE

 

2.1           The
Offering; Offering Period; No Minimum Purchase.

 

(a)           The
purchase and sale of the Securities by the Company to the
Purchasers shall occur at one or more Closings of the Offering to
occur during a period (the “Offering
Period”) beginning on May
__, 2017 and ending on the first to occur of: (a) June 30, 2017,
(b) the date on which the Maximum Amount is raised by the Company
in the Offering or (c) the date on which the Company, in its sole
and absolute discretion, elects to terminate the Offering (it being
agreed that no notice to the Purchasers shall be required in
connection with such termination by the Company) (the
“Termination
Date”). The Offering
Period may be further extended for an additional thirty (30) days
in the sole discretion of the Company.

 

(b)           The
Company may conduct multiple Closings during the Offering Period.
The initial Closing of the Offering (the “Initial
Closing”) shall occur
upon satisfaction of the conditions set forth herein. The Company
may, in its sole discretion and subject to the satisfaction of the
conditions set forth herein, conduct subsequent Closings of the
Offering (each, a “Subsequent
Closing”) until the
conclusion of the Offering Period. Purchasers signing a counterpart
signature page to this Agreement as of a Closing Date shall become
parties to this Agreement only as of such Closing
Date.

 

(c)           Each
Purchaser expressly acknowledges and agrees that the Company shall
not be obligated, and may be unable, to sell the Maximum Amount and
that the Offering is being undertaken on a “commercially
reasonable best efforts” basis only, with no minimum purchase
requirement, meaning that the Company may, and shall the have
absolute right in its sole discretion, to sell any amount of
Securities in the Offering, subject to the Minimum Offering
requirement. Each Purchaser acknowledges that they have been
informed that they should not purchase any Securities in the
expectation that any specific aggregate amount is to be raised in
the Offering.

 

2.2           Closings.
On each Closing Date, upon the terms and subject to the conditions
set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the Company and the applicable
Purchasers, the Company agrees to sell, and each Purchaser,
severally and not jointly with the other Purchasers (as the case
may be), agrees to purchase, the Securities indicated on such
Purchaser’s signature page hereto. Prior to each Closing
Date, each Purchaser shall deliver to the Escrow Agent, via wire
transfer or a certified check, in immediately available funds equal
to such Purchaser’s Subscription Amount as set forth on the
signature page hereto executed by such Purchaser, and the Company
shall deliver to each Purchaser its respective Shares and Warrants,
as determined pursuant to Section 2.3(a), and the Company and each
Purchaser shall deliver the other items set forth in Section 2.3
deliverable at the applicable Closing. Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the
applicable Closing shall occur at the offices of the
Company’s Counsel or such other location as the parties shall
mutually agree, including remotely via the delivery of electronic
Closing documents.

 

 

 

7

 

 

 

2.3           Deliveries.

 

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

 

(i)           this
Agreement duly executed by the Company;

 

(ii)           a
copy of the irrevocable instructions to 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 Per Share
Purchase Price, registered in the name of such
Purchaser;

 

(iii)           a
Series A Warrant registered in the name of such Purchaser to
purchase up to a number of shares of Common Stock equal to 25% of
such Purchaser’s Shares, with an exercise price equal to
$4.00, subject to adjustment therein;

 

(iv)           a
Series A-1 Warrant registered in the name of such Purchaser to
purchase up to a number of shares of Common Stock equal to 75% of
such Purchaser’s Shares, with an exercise price equal to
$5.50, subject to adjustment therein;

 

(v)           the
Company shall have provided each Purchaser with the Escrow
Agent’s wire instructions; and

 

(vi)         
the Registration Rights Agreement duly executed by the
Company.

 

(b)           On
or prior to any Closing Date, each Purchaser participating in the
applicable Closing shall deliver or cause to be delivered to the
Company or the Escrow Agent, as applicable, the
following:

 

(i)           this
Agreement duly executed by such Purchaser;

 

(ii)           an
Accredited Investor Questionnaire (in the form provided by the
Company to the Purchaser), duly executed by the
Purchaser;

 

(iii)         
an Accredited Investor Certification Letter (in the form provided
by the Company to the Purchaser), duly executed by the
Purchaser’s accountant, attorney or broker; and

 

(iv)         
to Escrow Agent, such Purchaser’s Subscription Amount by wire
transfer to the account specified in the Escrow Agreement;
and

 

(v)         
the Registration Rights Agreement duly executed by such
Purchaser.

 

2.4           Closing
Conditions.

 

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

 

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

 

 

 

8

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(vi)         
the execution of this Agreement by Purchasers, or the receipt by
the Company of gross proceed from the Exempt Offering, from the
sale of Securities in an amount equal to at least the Minimum
Offering.

 

 

 

9

 

 

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

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

 

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

 

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

 

 

 

10

 

 

 

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

 

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

 

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

 

 

 

11

 

 

 

(f)           Issuance
of the Securities. The Securities are duly authorized and,
when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the
Transaction Documents. The Warrant Shares, when issued in
accordance with the terms of the Transaction Documents, will be
validly issued, fully paid and nonassessable, free and clear of all
Liens imposed by the Company other than restrictions on transfer
provided for in the Transaction Documents. The Company has reserved
from its duly authorized capital stock the maximum number of shares
of Common Stock issuable pursuant to this Agreement and the
Warrants.

 

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

 

 

 

12

 

 

 

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

 

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

 

 

 

13

 

 

 

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

 

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

 

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

 

 

 

14

 

 

 

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

 

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

 

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

 

 

 

15

 

 

 

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

 

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

 

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

 

 

 

16

 

 

 

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

 

(t)           Certain
Fees. Except as set forth in Section 5.2 below, no brokerage
or finder’s fees or commissions are or will be payable by the
Company or any Subsidiary to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by the Transaction Documents.

 

(u)           Private
Placement. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the
Trading Market.

 

(v)           Investment
Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not
be or be an Affiliate of, an “investment company”
within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that
it will not become an “investment company” subject to
registration under the Investment Company Act of 1940, as
amended.

 

 

 

17

 

 

 

(w)           Registration
Rights. Other than each of the Purchasers, no Person has any
right to cause the Company to effect the registration under the
Securities Act of any securities of the Company or any
Subsidiary.

 

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

 

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

 

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

 

 

 

18

 

 

 

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

 

(bb)           Solvency.
Based on the consolidated financial condition of the Company as of
the applicable Closing Date, after giving effect to the receipt by
the Company of the proceeds from the sale of the Securities
hereunder: (i) the fair saleable value of the Company’s
assets exceeds the amount that will be required to be paid on or in
respect of the Company’s existing debts and other liabilities
(including known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital
to carry on its business as now conducted and as proposed to be
conducted including its capital needs through December 31, 2017,
taking into account the particular capital requirements of the
business conducted by the Company, consolidated and projected
capital requirements and capital availability thereof, and (iii)
the current cash flow of the Company, together with the proceeds
the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its
liabilities when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts
as they mature (taking into account the timing and amounts of cash
to be payable on or in respect of its debt). The Company has no
knowledge of any facts or circumstances which lead it to believe
that it will file for reorganization or liquidation under the
bankruptcy or reorganization laws of any jurisdiction within one
year from the Initial Closing Date. Schedule 3.1(bb) sets forth as
of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this
Agreement, “Indebtedness” means (x)
any liabilities for borrowed money or amounts owed in excess of
$50,000 (other than trade accounts payable incurred in the ordinary
course of business), (y) all guaranties, endorsements and other
contingent obligations in respect of indebtedness of others,
whether or not the same are or should be reflected in the
Company’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (z) the present value of any lease payments
in excess of $50,000 due under leases required to be capitalized in
accordance with GAAP. Neither the Company nor any Subsidiary is in
default with respect to any Indebtedness.

 

 

 

19

 

 

 

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

 

(dd)           No
General Solicitation. Neither the Company nor 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. The Company has offered the Securities for sale only
to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the
Securities Act.

 

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

 

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

 

(gg)           No
Disagreements with Accountants and Lawyers.  There are
no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the
accountants and lawyers formerly or presently employed by the
Company and the Company is current with respect to any fees owed to
its accountants and lawyers which could affect the Company’s
ability to perform any of its obligations under any of the
Transaction Documents.

 

 

 

20

 

 

 

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

 

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

 

 

 

21

 

 

 

(kk)           FDA.
As to each product subject to the jurisdiction of the U.S. Food and
Drug Administration (“FDA”) under the Federal
Food, Drug and Cosmetic Act, as amended, and the regulations
thereunder (“FDCA”) that is
manufactured, packaged, labeled, tested, distributed, sold, and/or
marketed by the Company or any of its Subsidiaries (each such
product, a “Pharmaceutical Product”),
such Pharmaceutical Product is being manufactured, packaged,
labeled, tested, distributed, sold and/or marketed by the Company
in compliance with all applicable requirements under FDCA and
similar laws, rules and regulations relating to registration,
investigational use, premarket clearance, licensure, or application
approval, good manufacturing practices, good laboratory practices,
good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the
failure to be in compliance would not have a Material Adverse
Effect. There is no pending, completed or, to the Company's
knowledge, threatened, action (including any lawsuit, arbitration,
or legal or administrative or regulatory proceeding, charge,
complaint, or investigation) against the Company or any of its
Subsidiaries, and none of the Company or any of its Subsidiaries
has received any notice, warning letter or other communication from
the FDA or any other governmental entity, which (i) contests the
premarket clearance, licensure, registration, or approval of, the
uses of, the distribution of, the manufacturing or packaging of,
the testing of, the sale of, or the labeling and promotion of any
Pharmaceutical Product, (ii) withdraws its approval of, requests
the recall, suspension, or seizure of, or withdraws or orders the
withdrawal of advertising or sales promotional materials relating
to, any Pharmaceutical Product, (iii) imposes a clinical hold on
any clinical investigation by the Company or any of its
Subsidiaries, (iv) enjoins production at any facility of the
Company or any of its Subsidiaries, (v) enters or proposes to enter
into a consent decree of permanent injunction with the Company or
any of its Subsidiaries, or (vi) otherwise alleges any violation of
any laws, rules or regulations by the Company or any of its
Subsidiaries, and which, either individually or in the aggregate,
would have a Material Adverse Effect. The properties, business and
operations of the Company have been and are being conducted in all
material respects in accordance with all applicable laws, rules and
regulations of the FDA.  The Company has not been informed by
the FDA that the FDA will prohibit the marketing, sale, license or
use in the United States of any product proposed to be developed,
produced or marketed by the Company nor has the FDA expressed any
concern as to approving or clearing for marketing any product being
developed or proposed to be developed by the Company.

 

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

 

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

 

 

 

22

 

 

 

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

 

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

 

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

 

(qq)           No
Disqualification Events.  With respect to the
Securities to be offered and sold hereunder in reliance on Rule 506
under the Securities Act, none of the Company, any of its
predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the offering
hereunder, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is
defined in Rule 405 under the Securities Act) connected with the
Company in any capacity at the time of sale (each, an "Issuer Covered Person" and,
together, "Issuer Covered
Persons") is subject to any of the "Bad Actor"
disqualifications described in Rule 506(d)(1)(i) to (viii) under
the Securities Act (a "Disqualification Event"),
except for a Disqualification Event covered by Rule 506(d)(2) or
(d)(3). The Company has exercised reasonable care to determine
whether any Issuer Covered Person is subject to a Disqualification
Event. The Company has complied, to the extent applicable, with its
disclosure obligations under Rule 506(e), and has furnished to the
Purchasers a copy of any disclosures provided
thereunder.

 

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

 

 

 

23

 

 

 

(ss)           Notice
of Disqualification Events. The Company will notify the
Purchasers and the Placement Agent in writing, prior to the
applicable Closing Date of (i) any Disqualification Event relating
to any Issuer Covered Person and (ii) any event that would, with
the passage of time, become a Disqualification Event relating to
any Issuer Covered Person.

 

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

 

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

 

(b)           Own
Account. 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 Securities 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 law, has no present intention of
distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or
indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities in
violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such
Purchaser’s right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable
federal and state securities laws). Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its
business.

 

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

 

 

 

24

 

 

 

(d)           Experience
of Such Purchaser. Such Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in
the Securities, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.

 

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

 

(f)           Access
to Information. Such Purchaser acknowledges that it has had
the opportunity to review the Transaction Documents (including all
exhibits and schedules thereto) and the SEC Reports and has been
afforded (i) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the
Shares and the merits and risks of investing in the Shares; (ii)
access to information about the Company and its financial
condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information
that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment
decision with respect to the investment.  Such Purchaser
acknowledges and agrees that neither the Placement Agent nor any
Affiliate of the Placement Agent has provided such Purchaser with
any information or advice with respect to the Securities nor is
such information or advice necessary or desired.  Neither the
Placement Agent nor any Affiliate has made or makes any
representation as to the Company or the quality of the Securities
and the Placement Agent and any Affiliate may have acquired
non-public information with respect to the Company which such
Purchaser agrees need not be provided to it.  In connection
with the issuance of the Securities to such Purchaser, neither the
Placement Agent nor any of its Affiliates has acted as a financial
advisor or fiduciary to such Purchaser.

 

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

 

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

 

 

 

25

 

 

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1           Transfer
Restrictions.

 

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

 

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

 

THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

 

The
Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are
subject to registration pursuant to the Registration Rights
Agreement, the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend
the list of Selling Stockholders (as defined in the Registration
Rights Agreement) thereunder.

 

 

 

26

 

 

 

(c)           Certificates
evidencing the Shares and Warrant Shares shall not contain any
legend (including the legend set forth in Section 4.1(b) hereof),
(i) while a registration statement (including the Registration
Statement) covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Shares or
Warrant Shares pursuant to Rule 144, (iii) if such Shares or
Warrant Shares 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 Shares and
Warrant Shares and without volume or manner-of-sale restrictions,
or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Transfer Agent promptly after the Effective Date if
required by the Transfer Agent to effect the removal of the legend
hereunder. If all or any portion of a Warrant is exercised at a
time when there is an effective registration statement to cover the
resale of the Warrant Shares, or if such Shares or Warrant Shares
may be sold under Rule 144 and the Company is then in compliance
with the current public information required under Rule 144, or if
the Shares or Warrant Shares may be sold 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 Shares or
Warrant Shares or if such legend is not otherwise required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission) then such Warrant Shares shall be issued free of all
legends. The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section
4.1(c), it will, no later than the earlier of (i) three (3) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period (as defined below) following the delivery by a
Purchaser to the Company or the Transfer Agent of a certificate
representing Shares or Warrant Shares, as the case may be, issued
with a restrictive legend (such third Trading Day, the
“Legend Removal
Date”), deliver or cause to be delivered to such
Purchaser a certificate representing such shares that is free from
all restrictive and other legends. The Company may not make any
notation on its records or give instructions to the Transfer Agent
that enlarge the restrictions on transfer set forth in this Section
4. Certificates for Securities subject to legend removal hereunder
shall be transmitted by the Transfer Agent to the Purchaser by
crediting the account of the Purchaser’s prime broker with
the Depository Trust Company System as directed by such Purchaser.
As used herein, “Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of a certificate representing Shares
or Warrants Shares, as the case may be, issued with a restrictive
legend.

 

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

 

 

 

27

 

 

 

(e)           Each
Purchaser, severally and not jointly with the other Purchasers,
agrees with the Company that such Purchaser will sell any
Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are
sold pursuant to a Registration Statement, they will be sold in
compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section
4.1 is predicated upon the Company’s reliance upon this
understanding.

 

4.2           Furnishing
of Information; Public Information.

 

(a)           If
the Common Stock is not registered under Section 12(b) or 12(g) of
the Exchange Act on the date hereof, the Company agrees to cause
the Common Stock to be registered under Section 12(g) of the
Exchange Act on or before the 60th calendar day
following the date hereof. Until the earliest of the time that (i)
no Purchaser owns Securities or (ii) the Warrants have expired, the
Company covenants to maintain the registration of the Common Stock
under Section 12(b) or 12(g) of the Exchange Act and to timely file
(or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act even if
the Company is not then subject to the reporting requirements of
the Exchange Act.

 

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

 

 

 

28

 

 

 

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

 

4.4           Securities
Laws Disclosure; Publicity. The
Company shall (a) by 9:30 a.m. (New York City time) on the Trading
Day immediately following the date hereof, issue a press release
disclosing the material terms of the transactions contemplated
hereby, and (b) file a Current Report on Form 8-K, including the
Transaction Documents as exhibits thereto, with the Commission
within the time required by the Exchange Act. From and after the
issuance of such press release, the Company represents to the
Purchasers that it shall have publicly disclosed all material,
non-public information delivered to any of the Purchasers by the
Company or any of its Subsidiaries, or any of their respective
officers, directors, employees or agents in connection with the
transactions contemplated by the Transaction Documents. In
addition, effective upon the issuance of such press release, the
Company acknowledges and agrees that any and all confidentiality or
similar obligations under any agreement, whether written or oral,
between the Company, any of its Subsidiaries or any of their
respective officers, directors, agents, employees or Affiliates on
the one hand, and any of the Purchasers or any of their Affiliates
on the other hand, shall terminate. The Company and each Purchaser
shall consult with each other in issuing any other press releases
with respect to the transactions contemplated hereby, and neither
the Company nor any Purchaser shall issue any such press release
nor otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any
Purchaser, or without the prior consent of each Purchaser, with
respect to any press release of the Company, which consent shall
not unreasonably be withheld or delayed, except if such disclosure
is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public
statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission
or any regulatory agency or Trading Market, without the prior
written consent of such Purchaser, except: (a) as required by
federal securities law in connection with (i) any registration
statement contemplated by the Registration Rights Agreement and
(ii) the filing of final Transaction Documents with the Commission
and (b) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company
shall provide the Purchasers with prior notice of such disclosure
permitted under this clause (b).

 

 

 

29

 

 

 

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

 

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

 

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

 

 

 

30

 

 

 

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

 

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

 

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

 

 

 

31

 

 

 

4.11           Subsequent
Equity Sales.

 

(a)           From
the date hereof until forty five (45) days after the Effective
Date, neither the Company nor any Subsidiary shall issue, enter
into any agreement to issue or announce the issuance or proposed
issuance of any shares of Common Stock or Common Stock Equivalents,
except for issuances of Common Stock priced at a price per share of
Common Stock in excess of 110% of the Per Share Purchase
Price.

 

(b)           From
the date hereof until the earlier to occur of such time as no
Purchaser holds any of the Warrants or one year from the date
hereof, the Company shall be prohibited from effecting or entering
into an agreement to effect any issuance by the Company or any of
its Subsidiaries of Common Stock or Common Stock Equivalents (or a
combination of units thereof) involving a Variable Rate
Transaction. “Variable Rate
Transaction” means a transaction in which the Company
(i) issues or sells any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the
right to receive, additional shares of Common Stock either (A) at a
conversion price, exercise price or exchange rate or other price
that is based upon, and/or varies with, the trading prices of or
quotations for the shares of Common Stock at any time after the
initial issuance of such debt or equity securities or (B) with a
conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt
or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock or (ii) enters into,
or effects a transaction under, any agreement, including, but not
limited to, an equity line of credit, whereby the Company may issue
securities at a future determined price. Any Purchaser shall be
entitled to obtain injunctive relief against the Company to
preclude any such issuance, which remedy shall be in addition to
any right to collect damages.

 

(c)           Unless
Shareholder Approval has been obtained and deemed effective,
neither the Company nor any Subsidiary shall make any issuance
whatsoever of Common Stock or Common Stock Equivalents which would
cause any adjustment of the exercise price of the Warrants to the
extent the holders of the Warrants would not be permitted, pursuant
to Section 2(f) of the Warrants, to exercise their respective
Warrants in full, ignoring for such purposes the other exercise
limitations therein. Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such
issuance, which remedy shall be in addition to any right to collect
damages.

 

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

 

 

 

32

 

 

 

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

 

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

 

4.14           Form
D; Blue Sky Filings. 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 request of any Purchaser. The Company shall
take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to the Purchasers at the applicable Closing
under applicable securities or “Blue Sky” laws of the
states of the United States, and shall provide evidence of such
actions promptly upon request of any Purchaser.

 

 

 

33

 

 

 

4.15           Capital
Changes. Until the one year
anniversary of the date hereof, except as may be necessary to
continue to list the Shares on a Trading Market, the Company shall
not undertake a reverse or forward stock split or reclassification
of the Common Stock (a “Split”)
without the prior written consent of the Purchasers holding a
majority in interest of the Shares; provided,
however, in the event the
Company undertakes a Split, it shall provide Placement Agent with
written notice of such intention on or before the date that
disclosure of such Split is made public.

 

4.16           Acknowledgment
of Dilution. The Company
acknowledges that the issuance of the Securities 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 and Warrant Shares pursuant to the Transaction
Documents, are unconditional and absolute and 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.

 

ARTICLE V.

MISCELLANEOUS

 

5.1           Termination. 
This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the other parties, if the
applicable Closing in which such Purchaser is participating has not
been consummated on or before the third (3rd)
Trading Day following such Purchaser’s execution of this
Agreement and delivery of the items referred to in Section 2.3(b)
to the Company ; provided,
however,
that such termination will not affect the right of any party to sue
for any breach by any other party (or parties).

 

5.2           Fees
and Expenses. At the Initial
Closing, the Company has agreed to pay to the Placement Agent
certain fees, pursuant to the terms and conditions of a Placement
Agency Agreement, executed by the Company and the Placement Agent
on or about the date first set forth above, which agreement also
provides for the reimbursement, by the Company to the Placement
Agent, of up to $_________ for its legal fees and expenses. The
Company shall deliver to each Purchaser, prior to the applicable
Closing, a completed and executed copy of the Closing Statement,
attached hereto as Annex
A. Except as expressly set
forth in the Transaction Documents to the contrary, each party
shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees (including, without limitation,
any fees required for same-day processing of any instruction letter
delivered by the Company and any exercise notice delivered by a
Purchaser), stamp taxes and other taxes and duties levied in
connection with the delivery of any Securities to the
Purchasers.

 

5.3           Entire
Agreement. The Transaction
Documents, together with the exhibits and schedules thereto,
contain the entire understanding of the parties with respect to the
subject matter hereof and thereof and supersede all prior
agreements and understandings, oral or written, with respect to
such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.

 

 

 

34

 

 

 

5.4           Notices.
Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of: (a) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number or email attachment as set forth
on the signature pages attached hereto at or prior to 5:30 p.m.
(New York City time) on a Trading Day, (b) the next Trading Day
after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number or email attachment
as set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time)
on any Trading Day, (c) the second (2nd)
Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (d) upon actual
receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set
forth on the signature pages attached hereto. To the extent that
any notice provided pursuant to any Transaction Document
constitutes, or contains material, non-public information regarding
the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K.

 

5.5           Amendments;
Waivers. No provision of this
Agreement may be waived, modified, supplemented or amended except
in a written instrument signed, in the case of an amendment, by the
Company and Purchasers holding interest in the Shares then
outstanding exceeding 50% or, in the case of a waiver, by the party
against whom enforcement of any such waived provision is sought,
provided that if any amendment, modification or waiver
disproportionately and adversely impacts a Purchaser (or group of
Purchasers), the consent of such disproportionately impacted
Purchaser (or group of Purchasers) shall also be required. No
waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right
hereunder in any manner impair the exercise of any such right. Any
proposed amendment or waiver that disproportionately, materially
and adversely affects the rights and obligations of any Purchaser
relative to the comparable rights and obligations of the other
Purchasers shall require the prior written consent of such
adversely affected Purchaser, Any amendment effected in accordance
with accordance with this Section 5.5 shall be binding upon each
Purchaser and holder of Securities and the
Company.

 

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

 

5.7           Successors
and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign
this Agreement or any rights or obligations hereunder without the
prior written consent of each Purchaser (other than by merger). Any
Purchaser may assign any or all of its rights under this Agreement
to any Person to whom such Purchaser assigns or transfers any
Securities, provided that such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the
“Purchasers.”

 

 

 

35

 

 

 

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

 

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

 

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

 

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

 

 

 

36

 

 

 

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

 

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

 

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

 

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

 

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

 

 

 

37

 

 

 

5.17           Independent
Nature of Purchasers’ Obligations and
Rights. The obligations of each
Purchaser under any Transaction Document are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall
be responsible in any way for the performance or non-performance of
the obligations of any other Purchaser under any Transaction
Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Purchaser pursuant hereof or
thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out
of this Agreement or out of the other Transaction Documents, and it
shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in its
review and negotiation of the Transaction Documents.
The Company has elected to provide all Purchasers
with the same terms and Transaction Documents for the convenience
of the Company and not because it was required or requested to do
so by any of the Purchasers.

 

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

 

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

 

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

 

 

 

38

 

 

 

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

 

 

 

(Signature Pages Follow)

 

 

 

39

 

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.

 

 

	

AZURRX BIOPHARMA, INC.

 

 

	

Address
for Notice:

 

760
Parkside Avenue, Suite 304

Brooklyn,
New York 11226

	

By:__________________________________________

     Name:
Johan M. Spoor

     Title:
Chief Executive Officer

 

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

	
 

	

 

Daniel
W. Rumsey, Esq.

Disclosure
Law Group, a Professional Corporation

600
West Broadway, Suite 700

San
Diego, California 92101

danrumsey@disclosurelawgroup.com

	
 

 

 

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

 

 

40

 

[PURCHASER
SIGNATURE PAGES TO AZURRX BIOPHARMA, INC. SECURITIES PURCHASE
AGREEMENT]

 

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

 

Name of
Purchaser:
________________________________________________________

Signature of Authorized Signatory of
Purchaser: __________________________________

Name of
Authorized Signatory:
____________________________________________________

Title
of Authorized Signatory:
_____________________________________________________

Email
Address of Authorized Signatory:
______________________________________________

Facsimile Number of
Authorized Signatory:
_____________________________________________

Address
for Notice to Purchaser:

 

 

 

 

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

 

 

 

 

 

Subscription
Amount: $_________________

 

Shares:
_________________

 

Warrant
Shares: __________________

 

EIN
Number: _______________________

 

 

[SIGNATURE
PAGES CONTINUE]

 

 

41

 

 Annex A

 

CLOSING STATEMENT

 

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

 

Disbursement Date: 

[________ ___,
2017

 

 

	

I. PURCHASE
PRICE

 

	
 

	

Gross Proceeds to be Received

	

$

	
 

	
 

	

II. DISBURSEMENTS

 

	
 

	
 

	

$

	
 

	

$

	
 

	

$

	
 

	

$

	
 

	

$

	
 

	
 

	

Total Amount Disbursed:

	

$

	
 

	
 

	
 

	
 

	
 

	
 

	

WIRE
INSTRUCTIONS:

 

 

	
 

	

To:
_____________________________________

 

 

 

 

 

	
 

	

To:
_____________________________________

 

 

 

 

 

	
 

 

 

42

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