Document:

bmmj_ex103.htm

EXHIBIT 10.3
  
 MANAGEMENT AGREEMENT
  
 This Management agreement (“Agreement”), effective as of this 15th day of March, 2019 (“Effective Date”) by and between Nevada Medical Group, a Nevada limited liability company (“Management”), with its principal office at 3375 Pepper Lane, Las Vegas, NV 89120 and Comprehensive Care Group LLC, an Arkansas limited liability company (“Owner”) with its principal office at 11323 Arcade Drive, Suite C107, Little Rock, AR 72212 (each being referred to individually as a “Party” and collectively as the “Parties”).
  
  	  
	 THIS MANAGEMENT AGREEMENT IS SUBJECT TO AND CONTINGENT UPON APPROVAL OF THE ARKANSAS ALCOHOLIC BEVERAGE CONTROL DIVISION OF THE ARKANSAS DEPARTMENT OF FINANCE AND ADMINISTRATION AND APPLICABLE LOCAL LICENSING AUTHORITIES, INCLUDING THE ARKANSAS MEDICAL MARIJUANA COMMISSION (TOGETHER, THE “AUTHORITIES”). IF PROFIT SHARING IS FORBIDDEN BY STATE OR LOCAL LAW, PARTIES AGREE TO NEGOTIATE IN GOOD FAITH TO CONFORM THE CONSULTANT’S FEE STRUCTURE ACCORDING TO GUIDANCE PROVIDED FROM THE AUTHORITIES. 
	  

  
 RECITALS
  
 WHEREAS, Owner possesses one or more licenses entitling Owner to own and operate a marijuana retail establishment (the “Business”) under Provisional Application in Zone 3 pursuant to Arkansas Alcohol Beverage and Control Board/Department, MMC Rules and other applicable state and local law, and the regulations issued by the state of Arkansas as may be amended from time to time (collectively the “Regulations”);
  
 WHEREAS, Management is in the business of providing management, staffing, operations, administration, oversight, and other related services for licensed marijuana facilities;
  
 WHEREAS, Owner desires to retain certain Services (as defined below) of Management, and Management wishes to provide such Services to owner pursuant to the terms of this Agreement; and 
  
 WHEREAS, the Owner desires to enter into a contractual relationship with Management whereby Management’s compensation may include sharing in the profit from the services provided by Management, subject to the approvals from the various state and local government agencies that regulate the marijuana industries;
  
 WHEREAS, the Parties desire this Agreement to be contingent on the express or implied approval of the Authorities, if necessary.
   	 
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 NOW, THEREFORE, for good and valuable consideration, and the mutual promises and covenants contained herein, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
  
 1. Engagement and Services.
  
 1.1 Owner hereby agrees to hire Management as an independent contractor to perform the operations and management services set forth in the Statement of Work attached hereto as Exhibit A (the “Services”). Management hereby accepts such engagement by Owner upon the terms and conditions set forth herein. 
  
 1.2. Management shall provide the Services to Owner’s retail facility, the building structure and real property upon which the building structure sits, located at 203 N. Ok St., West Memphis, AR 72301 (the “Owner’s Facility”). This Agreement shall apply only to Owner’s Facility as currently defined.
  
 2. Compensation and Expenses.
  
 2.1. Management. As consideration for Management’s performance of the Services, Owner shall provide compensation to Management for Operations Management services and pursuant to the Compensation for Services schedule attached hereto as Exhibit B (the “Compensation”).
  
 2.2. Management Personnel. Management Personnel means all workers, independent contractors, and employees of Management. In addition to the Compensation referenced in Section 2.1, Owner shall pay to Management the aggregate cost of all payroll-related expenses incurred by Management, including but not limited to, wages for Management Personnel, overtime wages, salaries, payroll taxes, amounts payable by Management to its independent contractors, Workers’ Compensation insurance, and unemployment insurance, in the delivery of the Services (as defined in Exhibit A) and performance of this Agreement. Management shall provide Owner with reasonable proof of Management’s actual payroll and independent contractor expenses, and Owner shall pay Management for Management’s actual payroll and independent contractor expenses at least five (5) business days in advance of each payday as determined by Management, following which Management shall use these funds to cover all Management’s payroll and independent contractor expenses. At the Effective Date of this Agreement, Owner shall pay to Management an amount equal to one (1) month of Management’s payroll-related expenses, as determined in the reasonable judgment of Management, for Management to keep as a reserve to be applied solely to Management’s payroll-related expenses. Owner and Management shall meet at a designated date/time on a monthly basis and at other times as agreed between the Parties, but not less than monthly, to discuss and review any forecasted or projected payroll-related (and other operational) expenses arising out of Section 2.2 of this Agreement.
  
  	 
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 2.3. Non-Labor Related Expenses. In addition to the Compensation referenced in Section 2.1 and the costs and expenses referenced in Section 2.2, Owner shall cover the cost of all operating and capital expenses incurred by Management in the delivery of the Services (as defined in Exhibit A), all marketing expenses incurred by Management, Owner, or any third-parties in connection with the Business, and the performance of this Agreement. Management shall obtain Owner’s authorization prior to incurring any non-payroll expenses related to the Services performed, any marketing efforts in connection with the Business, or performance of this Agreement. Management shall submit a request for reimbursement, accompanied with proof of the expense, to Owner on a monthly basis. Owner shall pay Management and any applicable third-parties on or before the fifth of each calendar month for the prior month’s submitted requests for reimbursement. Owner and Management shall meet on a monthly basis (as referenced in the preceding paragraph) and at other times as agreed between the Parties, but not less than monthly, to discuss and review any forecasted or projected operating and capital expenses and any non-payroll expenses arising out of Section 2.3 of this Agreement. 
  
 3. Obligations of Owner.
  
 3.1 Owner shall comply with all Regulations, including any law regarding marijuana cultivation, dispensaries, manufacturing, processing, marketing, distribution and sales, and shall maintain the validity of all requisite licenses. Owner shall at all times be required to furnish Management with verification of all relevant licenses.
  
 3.2 Owner shall ensure Management’s access to Owner’s Facility at all times necessary for Management to perform the Services as permitted by the Regulations.
  
 3.3 Owner shall maintain the following insurances: (i) products liability; (ii) property hazard; (iii) general liability; (iv) multi-peril crop; (v) business interruption; (vi) data protection; and (vii) directors and officers, in such commercially reasonable amounts as required to protect against any potential losses, which shall include loss of business income to Owner and/or Management, and to protect Management from any loss or claim resulting from negligent acts of Owner. Management shall be named as an additional insured to Owner’s insurance policies and Owner shall at all times be required to furnish Management with current certificates of insurance for such policies.
  
 3.4 Owner shall be solely responsible for all reporting to, and communications with, all governmental agencies and representatives.
  
 3.5 Owner shall hire a qualified neutral third-party to maintain the financial books and records of the business contemplated by Owner as part of this Agreement. The expense of this qualified neutral third-party shall be the sole responsibility of Owner.
   	 
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 4. Obligations of Management.
  
 4.1 Management agrees to exercise professionalism, skill and expertise in performing the Services and the tasks required to complete the Services in a diligent, timely and workman-like manner.
  
 4.2 Management shall provide sufficient personnel and Management Personnel as to perform the Services in accordance with the terms of this Agreement in accordance with all Regulations. The personnel will be employees or independent contractors of Management, not of Owner.
  
 4.3 Management shall comply with all Regulations, including any law regarding marijuana cultivation, dispensaries, manufacturing, processing, marketing, distribution, and sales, and shall maintain the validity of all licenses as may be required by any state or local law.
  
 4.4 Management shall maintain Owner’s Facility and Owner’s assets in safe and optimal working condition, normal and reasonable wear and tear expected. For purposes of this section, optimal working condition shall mean that the Owner’s Facility shall meet or exceed all required security and safety laws, rules and codes, and all Regulations. 
  
 4.5 Management shall only allow its employees and subcontractors that are properly licensed pursuant to the Regulations to perform Services in Owner’s marijuana facility.
  
 4.6 Management shall maintain reasonable control over and shall reasonably supervise its employees and independent contractors in the performance of the Services.
  
 4.7 Management shall ensure that any third-party access that may be granted to Owner’s Facility by Management shall be in strict compliance with the Regulations and that Management shall be responsible for the third-party at all times while in Owner’s Facility.
  
 4.8 Management shall maintain general liability insurance in the amount of not less than $1,000,000.00, or the replacement cost of the Owner’s Facility, whichever is greater. Owner shall be named as in additional insured to Management’s insurance policy and Management shall at all times be required to furnish Owner with a current certificate of insurance for such policy. Additionally, Management shall at all times during the term of this Agreement adhere to all Arkansas insurance coverage laws, including, but not limited to, maintaining legally sufficient Workers’ Compensation insurance that covers all necessary parties, as required by law, and ensuring all vehicles used in performing the Services are insured at or above the legal requirements in Arkansas. Owner shall pay for Management’s Worker’s Compensation insurance pursuant to Section 2.2.
  
 4.9 Management shall provide immediate notice and copy to Owner of any material communications with governmental agencies and representatives.
  
 4.10 During the term of this Agreement, Management shall maintain an employee handbook and shall enter and maintain confidentiality agreements with all its employees. Management shall maintain service agreements with its independent contractors and with its subcontractors and shall execute and maintain confidentiality agreements with its independent contractors and with its subcontractors to the extent that such independent contractors or subcontractors have or will have access to any confidential or proprietary information of Management or Owner. 
   	 
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 4.11 Management shall provide Owner with monthly financial reports. Management shall be available at least once per month via either phone conference or in person, to confer with Owner about the financial reports and any budgeting issues. 
  
 5. Intellectual Property.
  
 5.1 Confidential Information. Owner acknowledges that Owner may be entrusted with confidential information belonging to Management, including, but not limited to, Management’s Incorporated Property (“Incorporated Property” shall be defined for purposes of this Agreement as any and all Management-owned information, documents, applications, data, schematics, and diagrams (1) used in association with and/or created in furtherance of this Agreement and/or the completion of any related matters and/or the satisfaction of any relevant state or local legal or regulatory requirements including anything related to the procurement of the necessary approvals to operate the Facility and/or the operation of any business that is operating in the same or similar business as the Owner, (2) included in any application, accompaniment to any application, submission, or other document related to or constituting, in whole or in part, a product of the Services and/or Management’s performance under this Agreement; and/or (3) otherwise originating, in whole or part, out of the Services and/or the performance of this Agreement by Management) and portions thereof, strategies and plans, Management’s contracts, Management’s financial information, Management’s professional fee information, Management’s salary information, Management list, Management’s payor and vendor lists, Management’s cost and profit information, Management’s record keeping practices, Management’s policies and procedures, Management’s operational matters and practices, Management information, Management’s development and research work, Management’s marketing programs, Management’s plans, proposals, Management’s applications, Management’s accompaniments to applications, Management’s narrative descriptions, Management’s manuals and materials, Management’s nutrient formulas, Management’s soil formulas, Management’s chemical formulas, Management’s cultivation processes general and specific to certain strains, Management’s know-how, Management’s other trade secrets, Management’s trademarks, Management’s copyrights, Management’s patents, Management’s marijuana plant genetics and strains, Management’s business and financial records, Management’s customer lists and contractor lists and other information (hereinafter, the “Confidential Information” or “Proprietary Information”). Without limiting the generality or applicability of the foregoing, the terms of this Agreement, all exhibits and schedules referenced in this Agreement and all information on such exhibits, and all written and oral information delivered to, disclosed to, or shared with Owner by Management and/or Management’s agents will constitute Confidential Information notwithstanding the fact that such information may have been delivered to, or shared with others by Management or otherwise become available to the general public, unless Management agrees otherwise in writing. Owner further acknowledges that Owner has been instructed by Management to, and Owner agrees that they will, maintain Management’s Confidential Information in a confidential manner during the term of Agreement and after the termination or expiration of this Agreement. Without limiting the generality or applicability of the foregoing, Owner agrees that Owner will not disclose any of Management’s Confidential Information to any person or entity not authorized in writing by Management to receive or use such Confidential Information. Owner further agrees that Owner will not use, and will not permit or aid others in the use of, Management’s Confidential Information for any purpose other than the purposes contemplated by this Agreement.
   	 
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 5.2 Ownership; Proprietary Rights. Management shall retain all rights in and to the Confidential Information. Further, each Party shall retain all rights in and to its patents, patent applications, patent disclosures, inventions, improvements (whether patentable or not), copyrights, copyrightable works, trademarks, service marks, registrations, and other intellectual property and applications therefor (collectively, “Intellectual Property”) created, developed, or conceived prior to the Effective Date or outside the performance of the Services, except that any Intellectual Property created, developed, or conceived using the Confidential Information at any time shall be solely owned by Management. To the extent that a Party creates any updates, derivative works, changes, or modifications of any Intellectual Property owned by Management or Intellectual Property incorporating any Management Confidential Information in the performance of the Services or otherwise, such updates, derivative works, changes, modifications or Intellectual Property (“Management Work Product”) will be owned solely by Management (except as to any portion thereof that incorporates any Intellectual Property of Owner, which portion, if any, shall continue to be owned solely by Owner), and Owner hereby irrevocably assigns to Management all right, title, and interest in and to Management Work Product, including all Intellectual Property therein to the extent set forth, and subject to the limitations of, this Section 5.2. All Intellectual Property created, developed, or conceived solely by Management during the term of this Agreement shall be the sole and exclusive property of Management. Except as otherwise set forth in Sections 5.1 and 5.2: (i) all Intellectual Property created, developed, or conceived solely by the Owner during the term of this Agreement that is not otherwise deemed to be owned by Management pursuant to Sections 5.1 or 5.2 shall be the sole and exclusive property of the Owner; and (ii) all Intellectual Property created, developed, or conceived jointly by Owner and Management during the term of this Agreement that is not otherwise deemed to be owned by Management or by Owner pursuant to Sections 5.1 or 5.2 (collectively, “Joint Intellectual Property”) shall be owned by Management and Owner on a 50-50 basis, provided, that, neither Management nor Owner shall license, sell, assign, hypothecate, gift, or otherwise transfer any other their right, title, or interest to any Joint Intellectual Property without the prior written consent of the other Party. Responsibility for all expenses related to ownership of any Intellectual Property shall be borne by the owner of such Intellectual Property. As to any Joint Intellectual Property: (a) responsibility for all expenses related to any said Joint Intellectual Property shall be borne by each Party on the same pro-rata basis as is the ownership interest; (b) the parties shall be entitled to interest in or rights to royalties as to such Joint Intellectual Property likewise on the same pro-rata basis as is the ownership interest; and (c) any other rights or duties not otherwise mentioned, herein, shall flow to the parties on the same pro-rata basis as is the ownership interest as to such Joint Intellectual Property. The parties shall cooperate in good faith to execute appropriate licensing agreements to facilitate the use of Management’s and/or its affiliates’ Intellectual Property in connection with Owner’s operations.
   	 
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 6. Representations and Warranties.
  
 6.1 By Owner. Owner represents and warrants that: (i) it has and will continue to maintain at all times all licenses required to cultivate, manufacture, and distribute marijuana pursuant to state laws and regulations; (ii) it has and will continue to conform to all applicable local, state and federal laws and regulations (excepting federal laws that conflict with state marijuana laws); (iii) the execution and delivery of this Agreement by Owner does not require the consent of any third-party, except for the applicable state-level regulatory agency, and will not violate, with our without notice, Owner’s organizational documents or, any agreement, contract, license or permit to which Owner is a Party or is bound; and (iv) Owner is, and at all times during the term of this Agreement will be, a manager-managed limited liability company or a corporation, and that Management shall at all times during the term of this Agreement be authorized to act as Owner’s manager, officers, or authorized agent of Owner’s manager to perform the Services in the manner set forth under this Agreement.
  
 6.2 By Management. Management represents and warrants that it: (i) is engaged in an independent business and has full right and power to enter into and perform this Agreement without the consent of any third-party, except for the applicable state-level regulatory agency; and (ii) shall only allow Management employees, independent contractors, or subcontractors that are properly licensed pursuant to the Regulations to enter Owner’s facilities to perform the Services.
  
 7. Indemnification.
  
 7.1 By Owner. Owner hereby agrees to defend, indemnify and hold Management, its directors, officers, employees, agents and affiliates harmless from and against any loss, claim, action, damage, expense or liability, including amounts paid in settlement or compromise of any such claim, action or demand (including defense costs and attorneys’ fees) resulting from any third-party claim or suit arising out of or relating to (i) a material breach of this Agreement by Owner; (ii) the intentional or negligent conduct of Owner or any of Owner’s directors, officers, employees, and/or agents; (iii) any product, good, or service sold or provided by Owner; (iv) the failure of any marijuana crop or degradation of any deliverables of Owner (whether under this Agreement or otherwise); provided, however, that the foregoing indemnity obligations shall not apply where such claim is the result of the intentional misconduct or negligent act of Management and there shall be apportionment in accordance with responsibility when such obligation derives in part from the acts or omissions of Owner.
   	 
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 7.2 By Management. Management hereby agrees to defend, indemnify and hold Owner, its directors, officers, employees, agents and affiliates harmless from and against any loss, claim, action, damage, expense or liability, including amounts paid in settlement or compromise of any such claim, action or demand (including defense costs and attorneys’ fees) resulting from any third-party claim or suit arising out of or relating to (i) a material breach of this Agreement by Management; (ii) the intentional or negligent conduct of Management or any of Management’s directors, officers, employees, independent contractors, and/or agents; or (iii) any claim that any cultivation process, dispensary process or product supplied by Management infringes any patent, copyright, trade secret or other right of any third-party; provided, however, that the foregoing indemnity obligation shall not apply where such claim is solely the result of the intentional misconduct or negligent act of Owner and there shall be apportionment in accordance with responsibility when such obligation derives in part from acts of Management.
  
 7.3 Procedures. Unless otherwise agreed in writing by the Parties, in the event that a third-party claim is made or third-party suit is filed for which either Party intends to seek indemnification from the other Party pursuant to this section, the Party seeking indemnification (the “Indemnitee”) shall promptly notify the other Party (the “Indemnitor”) of said claim or suit. The Indemnitor shall have the right to control, through counsel of its choosing, the defense of such third-party claim or suit. The Indemnitee shall cooperate fully with the Indemnitor and its counsel in the defense of any such claim or suit and shall make available to the Indemnitor any books, records or other document necessary or appropriate for such defense. The Indemnitee shall have the right to participate, at the Indemnitee’s expense, in the defense of any such claim or suit through counsel chosen by the Indemnitee. If the Indemnitor fails or refuses to conduct such defense, or the Indemnitee has been advised by counsel that it may have defenses available to it which are different from or in addition to those available to the Indemnitor, or that the Indemnitee’s interests are adverse to the Indemnitor’s interests, then the Indemnitee may defend against the action(s) at the Indemnitor’s expense.
  
 8. No Warranty; Limitation of Liability. ANY AND ALL DELIVERABLES AND PRODUCTS SUPPLIED OR DELIVERED BY MANAGEMENT PURSUANT TO THIS AGREEMENT ARE PROVIDED “AS IS” AND WITHOUT WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. NEITHER PARTY MAKES ANY WARRANTY OR REPRESENTATION OTHER THAN AS EXPRESSLY PROVIDED FOR ABOVE. MANAGEMENT SHALL NOT BE LIABLE TO OWNER OR ITS CUSTOMERS FOR ANY LOSS, CLAIM, DAMAGE OR LIABILITY OF ANY KIND OR NATURE THAT MAY ARISE FROM OR IN CONNECTION WITH ANY SALE OR USE OF THE DELIVERABLES OR PRODUCTS SUPPLIED BY MANAGEMENT, OR ANY MARIJUANA OR OTHER PRODUCT OR SERVICE OF OWNER, OR OTHERWISE ARISING OUT OF THIS AGREEMENT. TO THE EXTENT THE TERMS CONTAINED IN PARAGRAPH 8 CONFLICTS WITH THE TERMS CONTAINED IN PARAGRAPHS 7.0 THROUGH 7.3, PARAGRAPHS 7.0 THROUGH 7.3 SHALL PREVAIL. THIS PARAGRAPH IS SUBJECT TO APPLICABLE LAWS, IF ANY, WHICH PROHIBIT ANY ATTEMPT TO DISCLAIM WARRANTIES WHICH ARE NOT DISCLAIMABLE.
   	 
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 9. Terms and termination.
  
 9.1 Unless earlier terminated as provided for in this section, the term of this Agreement shall commence upon the Effective Date and continue for five (5) years (the “Term”). The Agreement may be renewed by the Parties contingent on terms mutually agreed to by the parties.
  
 9.2 Either Party may terminate this Agreement (i) in the event of a material breach by the other Party as detailed in Section 9.4 or (ii) at any time upon mutual written consent. 
  
 9.3 It is intended that this Agreement shall run with the business. In the event of any transfer of the voting rights or control of the business of Owner, regardless of the form of such transfer, or the sale of the applicable license(s), or any other occurrence that results in an impermissible or intended termination of the Management or that is designed to give rise to any of the conditions enumerated in Section 9.5, the Management shall be entitled to an immediate and complete acceleration of its rights. 
  
 9.4 Subject to the provisions of the section entitled “Force Majeure,” if either Party shall breach any material obligation required under this Agreement, the other Party must give prompt written notice describing in detail the breach and its intention to terminate this Agreement if the breach is not cured (the “Notice of Breach”). If the breaching Party fails to cure such material breach within Ten (10) days following such Notice, or if such breach is not capable of cure within thirty (30) day period, then the non-breaching Party may, in addition to all other remedies available at law or in equity, terminate this Agreement upon written notice of final termination to the breaching Party (the “Final Notice of Breach”). Notwithstanding the foregoing, in the event of non-payment by Owner, the cure period shall not exceed thirty (30) days. For purposes of clarity and not of limitation, breach by either Party of any obligation set forth in Sections 2, 3, 4, 5, 6, 7 or 9.5 shall be considered a breach of a material obligation and give rise to the rights contained in this paragraph.
  
 9.5 Upon termination of this Agreement for any reason, all fees, compensation, and expenses due to Management in connection with Services rendered before the date of termination shall become immediately due and payable to Management. 
  
 10. Relationship of Parties.
  
 10.1 Independent Contractor Status. This Agreement establishes an independent contractor relationship.
  
 10.2 Current Management Status. Management shall be solely responsible for determining the method, details and means of performing the Services. Management may engage the services of such employees, subcontractors, partners or agents, as Management deems necessary to perform the Services, subject to Owner approving the number of employees and compensation of the personnel (collectively, the “Personnel”). The Personnel are not and shall not be employees of Owner, and Management shall be wholly responsible for the professional performance of the Services by the Personnel such that the results are satisfactory to Owner. Management shall have the right, on behalf of Owner, to enter into agreements required to deliver the Services, provided that express, prior authorization by an authorized representative of the Owner has been obtained.
   	 
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 11. Notices. Any notices required or permitted hereunder shall be in writing and shall be personally delivered or sent by mail, Federal Express or similar courier service, all of which shall be effective upon receipt. Notices sent by mail or courier shall be addressed as follows:
  
 If to Management:
  
 Nevada Medical Group, LLC
 Attn: Robert Hasman
 3375 Pepper Lane 
 Las Vegas, NV 89120
 rh@nevada-medical group.com
  
 If to Owner:
  
 Comprehensive Care Group, LLC 
 Attn: Don Marshall
 3375 PO Box 242132
 Little Rock, AR 72223
 donjmar@yahoo.com
  
 12. Assignment.
  
 12.1 No Assignment. This Agreement may not be assigned by either Party without the other’s prior written consent, and any such attempted assignment shall be void and of no effect. Subject to the preceding sentence, Management shall not be required to seek or obtain the consent of Owner in connection with any assignment by Management: (i) to a parent, subsidiary, or affiliate; or (ii) in connection with a merger, acquisition, reorganization or consolidation, but Management shall provide reasonable notice to Owner of any such assignment before such assignment occurs.
  
 13. Miscellaneous.
  
 13.1 Licensing Fees. Owner shall be solely responsible for all governmental application and/or licensing fees related to this Agreement and Management’s performance of the Services as provided for herein.
   	 
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 13.2 Late Payments. All payments to Management from Owner that are not received when due will accrue a late fee in the amount of five percent (5%) annually, of the outstanding and unpaid balance per month.
  
 13.3 Intentionally omitted.
  
 13.4 Severability. Should any one or more of the provisions contained in this Agreement, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein.
  
 13.5 Waiver of Breach. A waiver by either Party of a breach of any provision of this Agreement by the other Party shall not operate or be construed as a waiver of any subsequent breach by the other Party.
  
 13.6 Limitation of Liability. Neither Party shall be liable for any indirect, special, consequential, punitive or similar damages, it being the intention of the parties to limit any damages awarded to actual damages experienced as a result of any breach by either Party. 
  
 13.7 Force Majeure. Except for obligations of payments to the Party, neither Party shall be held liable or responsible for failure or delay in fulfilling or performing any obligation of this Agreement in the event such failure or delay is due to Acts of God, governmental regulations or actions, inability to obtain material, labor, equipment or transportation or any other condition beyond the reasonable control of the affected Party, provided such Party has taken commercially reasonable steps to avert such causes or conditions. Each Party agrees to give the other Party prompt written notice of such causes or conditions. Each Party agrees to give the other Party prompt written notice of the occurrence and the nature of any such condition, and the extent to which the affected Party will be unable to fully perform its obligation hereunder. Each Party further agrees to use all reasonable efforts to correct the condition as quickly as possible.
  
 The parties agree that in the event that future legislation is enacted or regulations are promulgated or a decision of a court is rendered that, in the opinion of legal counsel for either Party, affects or may affect the legality of this Agreement or materially and adversely affect the ability of either Party to perform its obligations or receive the benefits hereunder, then both parties agree to work in good faith to amend this Agreement as necessary to bring the Agreement into compliance with applicable laws and to carry out the original intention of the parties to the extent possible. In doing so, Parties agree to adhere to the prompt written notice requirements of this Section 13.7 and the notice requirements of Section 11.
  
 13.8 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws the State of Arkansas, without regard to the principals of conflicts of law thereof. The Parties expressly waive any defense to enforcement based upon nonconformance with federal law. 
  
  	 
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 13.9 Dispute Resolution – Negotiation, Mediation and Arbitration. 
  
 (a) Negotiation. In accordance with the terms of this Agreement, and upon written notice of any controversy, dispute, disagreement or claim arising out of or relating to this Agreement, the Parties shall attempt to resolve in good faith the controversy, dispute, disagreement or claim promptly by negotiation between the Parties (the “Negotiation”).
  
 (b) Mediation. If the controversy, dispute, disagreement or claim has not been resolved by the Negotiation in accordance to Section 13.9(a) within thirty (30) calendar days after either Party requested in writing negotiation under Section 13.9(a), then the Parties agree to try in good faith to settle the controversy, dispute, disagreement or claim by mediation administered by the American Arbitration Association (“AAA”) under its Commercial Mediation Procedures, which are incorporated by reference into this Section 13.9(b). The mediation will take place in Pulaski County, Arkansas.
  
 (c) Arbitration. If the Parties are unable to settle the controversy, dispute, disagreement or claim through mediation in accordance with Section 13.9(b) within thirty (30) calendar days after appointment of the mediator, or within such other period as the Parties may agree in writing, their sole avenue for relief shall be through binding Arbitration administered by the AAA under its Arbitration Rules and Mediation Procedures, which are incorporated by referenced into this Section 13.9(c). The arbitration will take place in Pulaski County, Arkansas and the arbitrator(s) shall apply the law of the State of Arkansas to the merits of any dispute or claim, without reference to rules of conflicts of laws. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The parties will determine the number of arbitrators in writing within forty-five (45) calendar days after appointment of the mediator, or within such other period as the Parties may agree in writing. If the Parties cannot make a decision within that forty-five (45) calendar day period of time, the AAA will determine the number of arbitrators.
  
 13.10 Entire Agreement. This Agreement, inclusive of Exhibits, contains the full and complete understanding of the parties with respect to its subject matter and supersedes all prior representations and understanding, whether oral or written. This Agreement may only be modified by the mutual written consent of the parties.
  
 13.11 Remedies. Owner and Management agree that Management and Owner will be entitled to the grant of equitable remedies in order to enforce this Agreement, including, without limitation, an expedited court issued affirmative injunction prohibiting the breach of any of the material provisions contained herein without the need to post any bond.
  
 13.12 Attorneys’ Fees. If any dispute arises between the parties with respect to this Agreement, and there follows a proceeding to resolve such dispute, the prevailing Party in such proceeding shall be entitled to receive its reasonable attorney’s fees, expert witness fees and out-of-pocket costs incurred in connection with any such proceeding at any level, in addition to any other relief it may be awarded.
   	 
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 13.13 Conformance of Agreement to Arkansas Regulatory Conditions and Approval. The Parties acknowledge and agree that the terms of this Agreement are subject to the approval of the Authorities and the Parties agree to negotiate in good faith to conform with any guidance provided by the Authorities relating to this Agreement.
  
 13.14 Survival. Sections 2, 5, 7, 8 and 9 of this agreement and any meant to survive the termination of this Agreement shall survive termination of this Agreement, regardless of the reason for termination.
  
 13.15 Time. Time is of the essence for this Agreement and each provision contained in this Agreement. Any extension of time granted for the performance of any obligation under this Agreement will not be considered an extension of time for the performance of any other obligation under this Agreement.
  
 13.16 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, personal representatives, successors and assigns.
  
 13.17 Advice of Counsel. Each Party acknowledges that, in executing this Agreement, it has had the opportunity to seek the advice of independent legal counsel and has read and understood all of the terms and provisions of this Agreement. This Agreement shall not be construed against any Party by reason of the drafting or preparation hereof.
  
 13.18 Counterparts. The parties may execute this Agreement in any number of counterparts, each of which will be deemed an original.
  
 13.19 Right to Inspect the books. All books, reports, financial reports, records, contracts and accounts of the Owner’s company, together with executed copies of this Agreement and all other company agreements and any amendment thereof, shall be available for inspection and copying by Management upon providing three (3) days’ advance written notice. Any such inspection by Management shall be conducted at reasonable times so as to avoid interfering with Owner’s business.
  
 [Signature page Follows]
   	 
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 IN WITNESS WHEREOF the parties have executed this Agreement effective as of the date first set forth above.
  
 	 OWNER:
	  
	 MANAGEMENT:
	  

	  
	 	  
	  
	  
	  

	 Comprehensive Care Group, LLC
	  
	 Nevada Medical Group LLC
	  

	   
	  
	   
	  

	 By: 
	 /s/ Don Marshall
	  
	 By: 
	 /s/ Robert Hasman
	  

	  
	 Manager 
	  
	  
	 President 
	  

	  
	   
	  
	   
	  
	  

	 Name:
	 Don Marshall
	  
	 Name:
	 Robert Hasman
	  

	 Title: 
	 Manager and Member
	  
	 Title: 
	 President
	  

  
  	
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 EXHIBIT A
 STATEMENT OF WORK
  
 Operations Management Services
  
 Management will have full responsibility and authority to manage the day-to-day operations of all of Owner’s business activities conducted at Owner’s Facility, including but not limited to: General retail management, manufacturing, processing, sales, inventory management, human resource, payroll management, security, marketing, compliance and general administrative functions, provided, however, that Management shall be required to obtain the unanimous written consent of Owner and DEP Nevada Inc., a Nevada corporation (“BAM”) (who serves as a lender to Owner) prior to taking any of the following actions on behalf of Owner in connection with Owner’s Facility:
  
 1. A decision to employ or engage persons where such person’s compensation is in excess of USD $10,000.00 per month; 
  
 2. A decision to contract to sell, sell, exchange, grant any option on, or otherwise transfer or dispose of any real property or personal property of Owner or any portion thereof or any interest therein other than inventory or product sales in the ordinary course of business (collectively, “Non-Product Sales”) in a single transaction or a series of related transactions;
  
 3. A decision to borrow money from any person or entity;
  
 4. A decision to contract to lease any real property of Owner or any portion thereof or any interest therein;
  
 5. A decision to mortgage, pledge, hypothecate or authorize or grant any security interest or lien in or on real property or personal property of Owner;
  
 6. A decision to make any purchases or expenditures for the organization, operation and conduct of the business and affairs of Owner as to any non-cost-of-goods expenses such as capital expenses (collectively, “Non-COGS Expenses), or to negotiate, execute, acknowledge, file, record, deliver and perform any agreements and instruments necessary or appropriate for the conduct of Owner’s business and affairs as to any Non-COGS Expenses with a value greater than USD $10,000.00 per transaction or series of related transactions or any Non-Product Sales with a value greater than USD $10,000.00 per transaction or series of related transactions;
   	 
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 7. A decision to prepay, modify, amend, renew, or extend any authorized indebtedness of Owner;
  
 8. A decision to execute and accept any instrument, conveyance, or agreement incident to the real property or personal property of Owner or the Owner’s except for any inventory or product sales in the ordinary course of business or any cost-of-goods expenses; and
  
 9. A decision to enter into contracts, leases or other business undertakings to further the purposes of the Owner’s business (except for any inventory or product sales in the ordinary course of business or any cost-of-goods expenses) with a value greater than USD $10,000 per transaction or series of related transactions. 
  
 Management shall provide monthly management reports to Owner. Management reports shall provide information on income, expense, human resource, sales updates and projections, and any additional pertinent information.
  
 Owner shall have the right to audit, and/or monitor bookkeeping, management, daily operations as needed.
   	 
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 EXHIBIT B
 COMPENSATION FOR SERVICES
  
 In consideration for the Services, commencing on the effective date of this Agreement, Owner agrees to pay Management an Operations Management Fee (as defined below) for providing the Operations Management Services described in Exhibit A. 
  
 The “Operations Management Fee” will be calculated as follows:
  
 A monthly management fee shall be paid to Management in the amount equal to sixty-six and 67/100 percent (66.67%) of the Monthly Net Profits (as defined below) of Owner for the immediately-preceding month, all as determined in a manner mutually agreeable to Management and Owner. Notwithstanding the foregoing, in the event that BAM effectuates a Conversion (as defined under that certain Convertible Loan Agreement of even date herewith between BAM and Owner), then Management’s Operations Management Fee shall equal USD $6,000.00 per month, unless otherwise agreed by the parties in writing. For purposes of this Agreement, “Monthly Net Profits” means, for each calendar month, an amount equal to Owner’s gross revenue for such calendar month less the Owner’s operating expenses, including all applicable expenses under Section 2 of this Agreement, cost of goods sold, interest, and tax for said month, all as reasonably determined in accordance with generally accepted accounting principles. 
  
 In accordance with the accounting procedures as defined by “Monthly Net Profits” above, the 33.33% remainder of the Monthly Net Profits shall be paid to CCG, which in its sole discretion, may distribute to its owners.
  
  	 
	17Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of March 21, 2019, between BioPharmX Corporation, a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

 

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

 

ARTICLE I.
 DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

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“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.

 

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

 

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

 

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

 

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose for services rendered to the Company, (b) securities upon the exercise or exchange of or conversion of any 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, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith during the prohibition period in Section 4.12(a) herein, and provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Per Share Purchase Price” equals $0.09, 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(dd).

 

“Placement Agent” means Roth Capital Partners, LLC.

                

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

 

“Prospectus” means the final prospectus filed for the Registration Statement and all documents incorporated therein by reference.

 

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

 

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

 

“Registration Statement” means the effective registration statement with Commission file No. 333-229459 which registers the sale of the Shares to the Purchasers.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Shares 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 identified on Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the year ended January 31, 2019, and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.

 

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

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, 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, and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

“Transfer Agent” means Computershare Trust Company, N.A., the current transfer agent of the Company, and any successor transfer agent of the Company.

 

“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 Shares then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

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ARTICLE II.
 PURCHASE AND SALE

 

2.1                               Closing.  On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and the Purchasers, severally and not jointly,  agree to purchase, up to an aggregate of $3,928,050 of Shares.  Each Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser shall be made available for “Delivery Versus Payment” settlement with the Company or its designee. The Company shall deliver to each Purchaser its respective Shares as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing.  Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of EGS or such other location as the parties shall mutually agree.  Unless otherwise directed by the Placement Agent, settlement of the Shares shall occur via “Delivery Versus Payment” (“DVP”) (i.e., on the Closing Date, the Company shall issue the Shares registered in the Purchasers’ names and addresses and released by the Transfer Agent directly to the account(s) at the Placement Agent identified by each Purchaser; upon receipt of such Shares, the Placement Agent shall promptly electronically deliver such Shares to the applicable Purchaser, and payment therefor shall be made by the Placement Agent (or its clearing firm) by wire transfer to the Company).

 

2.2                               Deliveries.

 

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

 

(i)                                     this Agreement duly executed by the Company;

 

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

 

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

 

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

 

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

 

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

 

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

 

2.3                               Closing Conditions.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(v)                                 from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market, and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of

 

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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 Shares at the Closing.

 

ARTICLE III.
 REPRESENTATIONS AND WARRANTIES

 

3.1                               Representations and Warranties of the Company.  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 Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the year ended January 31, 2019.  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, would not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

(c)                                  Authorization; Enforcement.  The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the

 

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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 Shares and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not have or reasonably be expected to result in a Material Adverse Effect.

 

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

 

(f)                                   Issuance of the Shares; Registration.  The Shares 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

 

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imposed by the Company.  The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement. The  Company has prepared and filed the Registration Statement that conformed in all material respects with the requirements of the Securities Act, which became effective on February 13, 2019 (the “Effective Date”), including the Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement.  The Registration Statement is effective under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Prospectus has been issued by the Commission and no proceedings for that purpose have been instituted or, to the knowledge of the Company, are threatened by the Commission.  The Company, if required by the rules and regulations of the Commission, shall file the Prospectus with the Commission pursuant to Rule 424(b).  At the time the Registration Statement and any amendments thereto became effective, at the date of this Agreement and at the Closing Date, the Registration Statement and any amendments thereto complied and will comply in all material respects to the requirements of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made, not misleading; and the Prospectus and any amendments or supplements thereto, at time the Prospectus or any amendment or supplement thereto was issued and at the Closing Date, complied and will comply in all material respects to the requirements of the Securities Act and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company was at the time of the filing of the Registration Statement eligible to use Form S-3. The Company is eligible to use Form S-3 under the Securities Act and it meets the transaction requirements with respect to the aggregate market value of securities being sold pursuant to this offering and during the twelve (12) months prior to this offering, as set forth in General Instruction I.B.6 of Form S-3.

 

(g)                                  Capitalization.  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.  Except as otherwise set forth in the Prospectus, no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents that have not otherwise been satisfied or waived.  Except as a result of the purchase and sale of the Shares and as set forth in SEC Reports, 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.

 

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Except as otherwise set forth in the Prospectus, the issuance and sale of the Shares 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 that have not otherwise been satisfied or waived. Except as set forth in the SEC Reports, there are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance 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 Shares.  Except as set forth in the SEC Reports, there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

(h)                                 SEC Reports; Financial Statements.  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 one year preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, together with the Prospectus and the Prospectus Supplement, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The 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.

 

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(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 Shares contemplated by this Agreement or as set forth on the SEC Reports, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to the date that this representation is made.

 

(j)                                    Litigation.  Except as set forth in the SEC Reports, 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 Shares 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 

 

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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.

 

(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 

 

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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, except where the failure to so comply would not be reasonably be expected to result in a Material Adverse Effect.

 

(p)                                 Intellectual Property.  The Company and the Subsidiaries are not aware of any third-party patents, patent applications, trademarks, trademark applications, service marks, trade names,  and copyrights, (collectively, the “Intellectual Property Rights”) that are necessary for the conduct of the Company’s and Subsidiaries’ business relating to BPX01 as described in the SEC Reports, except which the failure to acquire rights to such Intellectual Property Rights would not reasonably be expected to result in a Material Adverse Effect.  Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim that any such Intellectual Property Rights violate or infringe upon the rights of any Person, except as would not have or reasonably be expected to have a Material Adverse Effect.  The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(q)                                 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)

 

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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.

 

(r)                                    Certain Fees.  Except as set forth in the Prospectus Supplement, no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents.  The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

 

(s)                                   Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Shares, 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.

 

(t)                                    Registration Rights.   Except as otherwise disclosed in the Prospectus Supplement or in the SEC Reports, no Person has any right to require registration of shares of Common Stock or Common Stock Equivalents of the Company or any Subsidiary because of the filing of the Registration Statement or the Prospectus that have not otherwise been waived.

 

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

 

(v)                                 Disclosure.  Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed in the 

 

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Prospectus Supplement.   The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company.  As of the date of this Agreement, 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, if any, 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.

 

(w)                               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 Shares to be integrated with prior offerings by the Company for purposes of any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

 

(x)                                 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.

 

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

 

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Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of FCPA.

 

(z)                                  Accountants.  The Company’s accounting firm is set forth the SEC Reports.  To the knowledge and belief of the Company, such accounting firm is a registered public accounting firm as required by the Exchange Act

 

(aa)                          Acknowledgment Regarding Purchasers’ Purchase of Shares.  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 Shares.  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.

 

(bb)                          Acknowledgement Regarding Purchaser’s Trading Activity.  Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(e) 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 Shares for any specified term; (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities; (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently may have a “short” position in the Common Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction.  The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the Shares are outstanding, and (z) such hedging activities (if any) could reduce the value of the existing stockholders’ equity interests in the Company at and after the time that the hedging activities are being conducted.  The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.

 

(cc)                            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 Shares, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Shares, or (iii) paid or 

 

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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 Shares.

 

(dd)                          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.

 

(ee)                            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”).

 

(ff)                              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 

 

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Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s request.

 

(gg)                            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.

 

(hh)                          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.

 

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

 

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

 

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(b)                                 Understandings or Arrangements.  Such Purchaser is acquiring the Shares as principal for its own account and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Shares (this representation and warranty not limiting such Purchaser’s right to sell the Shares pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws).  Such Purchaser is acquiring the Shares hereunder in the ordinary course of its business.

 

(c)                                  Purchaser Status.  At the time such Purchaser was offered the Shares, it was, and as of the date hereof it is 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.

 

(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 Shares, 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 Shares and, at the present time, is able to afford a complete loss of such investment.

 

(e)                                  Access to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits and schedules thereto) and the 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 nothing in this Agreement or any other materials presented to the Investor in connection with the purchase and sale of the Shares constitutes legal, tax or investment advice. Neither the Placement Agent nor any Affiliate of the Placement Agent has provided such Purchaser with any information or advice with respect to the Shares nor is such information or advice necessary or desired.  Such Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Shares. Neither the Placement Agent nor any Affiliate has made or makes any representation as to the Company or the quality of the Shares 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 Shares to such Purchaser, neither the Placement Agent nor any of its Affiliates has acted as a financial advisor or fiduciary to such Purchaser.

 

(f)                                   Certain Transactions and Confidentiality.  Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly 

 

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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 Shares covered by this Agreement.  Other than to other Persons party to this  Agreement or to such Purchaser’s representatives, including, without limitation, its officers, directors, partners, legal and other advisors, employees, agents and Affiliates, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).  Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to locating or borrowing shares in order to effect Short Sales or similar transactions in the future.

 

The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby.

 

ARTICLE IV.
 OTHER AGREEMENTS OF THE PARTIES

 

4.1                               [RESERVED]

 

4.2                               [RESERVED]

 

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 Shares 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 by the Disclosure Time, issue a press release disclosing the material terms of the transactions contemplated hereby, and (b) file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the Exchange Act.  From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees or 

 

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agents in connection with the transactions contemplated by the Transaction Documents.  In addition, effective upon the issuance of such press release, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates on the one hand, and any of the Purchasers or any of their Affiliates on the other hand, shall terminate. The Company and each Purchaser shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice  of such public statement or communication.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law in connection with the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b).

 

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 Shares under the Transaction Documents or under any other agreement between the Company and the Purchasers.

 

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

 

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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.  The Company shall use the net proceeds from the sale of the Shares hereunder in the manner described in the Prospectus Supplement.

 

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 Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct or malfeasance).  If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party.  Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.  The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents or the fraud, gross negligence, willful misconduct or malfeasance of such Purchaser Party.  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 

 

22

 

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.

 

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

 

4.11                        [RESERVED]

 

4.12                        Subsequent Equity Sales.

 

(a)                                 From the date hereof until (i) the date that is 30 calendar days after the Closing Date, neither the Company nor any Subsidiary shall issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents, or file any registration statements, including any amendments or supplements to any registration statement, other than the Prospectus Supplement required pursuant to this Agreement (including but not limited to any for exchanges of existing securities of the Company and any issuances pursuant to existing securities that are amended after the date hereof), (ii) the date that is 30 calendar days after the Closing Date, neither the Company nor any Subsidiary shall effect any reverse stock split of the Common Stock, unless the Company receives formal notice from the Trading Market that an immediate split is necessary to maintain its listing on such Trading Market, and (iii) April 14, 2019, neither the Company nor any Subsidiary shall publicly announce a reverse stock split, a record date for a reverse stock split or the Company’s intention to do any of the foregoing; provided, however, the restrictions set forth in clause (ii) and (iii) above shall no longer apply if the VWAP on any Trading Day during such period is less than $0.075.

 

(b)                                 Notwithstanding the foregoing, this Section 4.12 shall not apply in respect of an Exempt Issuance.

 

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

 

4.14        Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales of any of the Company’s securities during the period commencing with the execution of this Agreement and  ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.4.  Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.4, such Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the disclosure schedules, if any.  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 Shares covered by this Agreement.

 

4.15        [RESERVED]

 

ARTICLE V.
 MISCELLANEOUS

 

5.1          Termination.  This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before the fifth (5th) Trading Day following the date

 

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hereof; provided, however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties).

 

5.2          Fees and Expenses.  Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its own 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 Shares to the Purchasers.

 

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

 

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

 

5.5          Amendments; Waivers.  No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed by the Company and Purchasers which purchased at least 50.1% in interest of the Shares based on the initial Subscription Amounts hereunder, 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,

 

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Any amendment effected in accordance with accordance with this Section 5.5 shall be binding upon each Purchaser and holder of Shares 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.  Any Purchaser may assign any or all of its rights under this Agreement to any Person that is an Affiliate of the Purchaser, provided that such transferee agrees in writing to be bound, with respect to the transferred Shares, by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

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

 

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

 

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

 

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

 

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

 

5.13        Rescission and Withdrawal Right.  Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser properly 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.

 

5.14        Replacement of Shares.  If any certificate or instrument evidencing any Shares 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 Shares.

 

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.

 

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

 

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

 

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 Trading Day, then such action may be taken or such right may be exercised on the next succeeding Trading Day.

 

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

 

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

 

(Signature Pages Follow)

 

29

 

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.

 

	
BIOPHARMX   CORPORATION
    	
 
    	
Address   for Notice:
    
	
 
    	
 
    	
David   S. Tierney, M.D.
    
	
 
    	
 
    	
BioPharmX   Corporation
    
	
 
    	
 
    	
115   Nicholson Lane
    
	
 
    	
 
    	
San   Jose, CA 95134
    
	
By:
    	
 
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    	
E-Mail: dtierney@biopharmx.com
    
	
 
    	
Title:
    	
 
    	
 
    

 

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

Robert Freedman

Fenwick & West LLP

San Francisco, CA 94104

Email: rfreedman@fenwick.com

Fax: 415.281.1350

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

30

 

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

 

 

Subscription Amount: $

 

Shares:

 

EIN Number:

 

[SIGNATURE PAGES CONTINUE]

 

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