Document:

a50353689ex4_2.htm

Exhibit 4.2

 

CERTIFICATE OF DESIGNATION OF PREFERENCES, RIGHTS

AND LIMITATIONS OF

SERIES A CONVERTIBLE PREFERRED STOCK OF

OPEXA THERAPEUTICS, INC.

 

___________________

 

Pursuant to Sections 21.155 and 21.156 of the

Texas Business Organizations Code

___________________

 

Opexa Therapeutics, Inc. (the “Company”), a corporation organized and existing under the Texas Business Organizations Code (the “Code”),

 

HEREBY CERTIFIES:

 

A.           That, pursuant to the authority expressly vested in the Board of Directors of the Company (the “Board of Directors”) by Article IV of the Certificate of Formation of the Company, as amended (the “Certificate of Formation”), the Board of Directors duly adopted by all necessary action by written consent dated as of July 24, 2012, a resolution providing for the creation of a series of preferred stock, having no par value, consisting of 80,000 shares, which resolution is as follows:

 

RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of Directors of the Company by the provisions of Article IV of the Company’s Certificate of Formation, as amended (the “Charter”), the Board of Directors hereby creates a series of preferred stock, having no par value, of the Company, and hereby fixes the designation, powers, preferences and relative participating, optional or other special rights, and the qualifications, limitations or restrictions thereon, of the shares of such series, in addition to those set forth in the Charter, as set forth in the Certificate of Designation of Preferences, Rights and Limitations attached hereto (the “Series A Certificate”) designating 80,000 shares of the Company’s preferred stock as Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and setting forth the powers, preferences, rights, qualifications, limitations and restrictions of the Series A Preferred Stock, including provisions for the conversion of shares of Series A Preferred Stock into shares of the Company’s common stock, par value $0.01 per share.

 

B.           That the designation, powers, preferences and relative participating, optional or other special rights, and the qualifications, limitations or restrictions thereon, of the shares of such series of preferred stock are as follows:

	
1)  

	
Designation, Amount and Rank.

 

	
a)  

	
Series A Preferred Stock.  The shares of the series of preferred stock shall be designated as “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”) and the number of shares constituting the Series A Preferred Stock shall be 80,000.  Such number of shares may be increased or decreased by resolution of the Board of Directors of the Company (the “Board of Directors”); provided, however, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series A Preferred Stock.

 

  

  

  

 

	
b)  

	
Rank.  Notwithstanding any provision herein to the contrary:  (i) the rights of the shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), and any other equity securities of the Company designated as ranking junior to the Series A Preferred Stock shall be subject to the preferences and relative rights of the Series A Preferred Stock; and (ii) without limiting the provisions of Section 4(b), the rights of the Series A Preferred Stock shall be subject to the preferences and relative rights of any other equity securities of the Company designated by the Company as ranking senior to or pari passu with the Series A Preferred Stock.

	
2)  

	
Dividends; Share Repurchases.

 

	
a)  

	
Accruing Dividends.  From and after the date of the issuance of any shares of Series A Preferred Stock, but terminating as of the Dividend Termination (as defined below), a dividend at the rate per annum of eight percent (8%) of the Series A Original Issue Price (as defined below) for each share of Series A Preferred Stock shall accrue on such outstanding shares of Series A Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock) (the “Accruing Dividends”).  The “Dividend Termination” is the earlier of (i) the Automatic Conversion (as defined below), regardless of whether all shares of Series A Preferred Stock are converted (i.e., due to Section 5(b)), (ii) any Liquidation (as defined below) or (iii) any Deemed Liquidation Event (as defined below).  Accruing Dividends shall be cumulative and shall accrue from day to day whether or not earned or declared, and whether or not there are profits, surplus or other funds legally available for the payment of dividends, and shall be paid semi-annually on the 30th day of June and the 31st day of December of each year (with the first payment of Accruing Dividends on a semi-annual payment date to be prorated based on the number of days occurring between the date on which each share of Series A Preferred Stock was issued and such semi-annual payment date), although if any such payment date is not a Trading Day (as defined below), then the actual payment date shall be the next Trading Day.  The Accruing Dividends may be paid either in cash or in shares of Common Stock, as determined in the sole discretion of the Board of Directors, provided that, if paid in Common Stock, (a) there is an effective registration statement under the Securities Act of 1933 for the resale of such shares and (b) the shares of Common Stock are then traded upon the NASDAQ Capital Market.  For purposes of the payment of the Accruing Dividends in shares of Common Stock, each share of Common Stock shall be deemed to have a value equal to the volume weighted average price for the Common Stock on the Trading Market for the five (5) Trading Days ending three (3) Trading Days prior to any payment date at issue, where “Trading Day” means a day on which the Common Stock is traded on the Trading Market, and “Trading Market” means the NASDAQ Capital Market (or, if the NASDAQ Capital Market is not the primary market on which the Common Stock is then traded, such other market or exchange on which the Common Stock is then primarily listed or quoted or quoted for trading).

 

  

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b)  

	
Other Dividends.  The Company shall not declare, pay or set aside any dividends or other distributions on shares of Common Stock (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (i) all Accruing Dividends have been fully paid to date (i.e., through the most recent payment date pursuant to Section 2(a)) and (ii) the holders of the Series A Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend or distribution on each outstanding share of Series A Preferred Stock in an amount equal to the product of (A) the dividend or distribution payable on each share of Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of Series A Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or distribution.

 

	
c)  

	
Share Repurchases.  The Company may not purchase any shares of Common Stock or any other equity securities of the Company designated as ranking junior to the Series A Preferred Stock unless the holders of at least two thirds (66-2/3%) of the outstanding shares of Series A Preferred Stock approve otherwise (by written consent or affirmative vote), other than repurchases of stock from former employees, officers, directors or consultants who performed services for the Company pursuant to any agreement under which the Company has the option or right to repurchase such shares in connection with the cessation of such employment or service.

 

	
3)  

	
Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.

 

	
a)  

	
Liquidation.  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company (a “Liquidation”), the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its shareholders, before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) $100.00, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock (the “Series A Original Issue Price”), plus any Accruing Dividends accrued but unpaid thereon together with any other dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock pursuant to Section 5 immediately prior to such Liquidation (the amount payable pursuant to this sentence is hereinafter referred to as the “Series A Liquidation Amount”); provided, however, that following the Automatic Conversion, the Series A Liquidation Amount shall be solely as provided in the foregoing clause (ii).  Following payment to the holders of Series A Preferred Stock of the Series A Liquidation Amount, such holders shall not be entitled to any further payment.  If upon any Liquidation the assets of the Company available for distribution to the holders of Series A Preferred Stock shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled under this Section 3(a), the holders of shares of Series A Preferred Stock shall share ratably in any distribution of the assets available for distribution to the holders of Series A Preferred Stock in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

 

  

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b)  

	
Deemed Liquidation Event.  Each of the following events shall be considered a “Deemed Liquidation Event” unless the holders of at least two thirds (66-2/3%) of the outstanding shares of Series A Preferred Stock approve otherwise (by written consent or affirmative vote):

	
i)  

	
a merger or consolidation in which the Company or a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation, except that any such merger or consolidation involving the Company or a subsidiary in which the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (A) the surviving or resulting corporation or (B) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation (provided that, for the purpose of this Section 3(b)(i), all shares of Common Stock issuable upon (x) exercise of rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities (as defined below) (“Options”) outstanding immediately prior to such merger or consolidation, or (y) conversion of any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options (“Convertible Securities”) outstanding immediately prior to such merger or consolidation, shall be deemed to be outstanding immediately prior to such merger or consolidation and, if applicable, converted or exchanged in such merger or consolidation on the same terms as the actual outstanding shares of Common Stock are converted or exchanged); or

	
ii)  

	
the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Company.

The Company shall not have the power to effect a Deemed Liquidation Event in which the holders of Common Stock will receive any assets in respect of such shares, or to distribute to the holders of Common Stock in respect of such shares any assets resulting from a Deemed Liquidation Event, unless the holders of the Series A Preferred Stock then outstanding shall first receive, or simultaneously receive, the Series A Liquidation Amount.

 

  

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c)  

	
Amount Deemed Paid.  The amount deemed paid or distributed to the holders of capital stock of the Company upon any Liquidation or Deemed Liquidation Event shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Company or the acquiring person, firm or other entity.  If the amount deemed paid or distributed under this Section 3(c) is made in property other than in cash, the value of such distribution shall be the fair market value of such property, determined as follows:

	
i)  

	
For securities not subject to investment letters or other similar restrictions on free marketability:  (A) if traded on the NASDAQ Capital Market or other securities exchange, the value shall be deemed to be the average of the closing prices of the securities on such exchange or market over the thirty (30) day period ending three (3) days prior to the closing of such transaction; (B) if actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the thirty (30) day period ending three (3) days prior to the closing of such transaction; or (C) if there is no active public market, the value shall be the fair market value thereof as determined in good faith by the Board of Directors.

	
ii)  

	
The method of valuation of securities subject to investment letters or other similar restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder’s status as an affiliate or former affiliate) shall take into account an appropriate discount (as determined in good faith by the Board of Directors) from the market value as determined pursuant to clause (i) above so as to reflect the approximate fair market value thereof.  The value of such property, rights or securities shall be determined in good faith by the Board of Directors.

	
d)  

	
Allocation of Escrow.  In the event of a Deemed Liquidation Event, if any portion of the consideration payable to the shareholders of the Company is placed into escrow and/or is payable to the shareholders of the Company subject to contingencies, the relevant agreement shall provide that (i) the portion of such consideration that is not placed in escrow and not subject to any contingencies (the “Initial Consideration”) shall be allocated among the shareholders of the Company in accordance with this Section 3) as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event and (ii) any additional consideration which becomes payable to the shareholders of the Company upon release from escrow or satisfaction of contingencies shall be allocated among the shareholders of the Company in accordance with this Section 3) after taking into account the previous payment of the Initial Consideration as part of the same transaction.

	
4)  

	
Voting.

	
a)  

	
Non-Voting.  The holders of Series A Preferred Stock shall not be entitled to vote on any matter except as otherwise expressly provided for in Section 4(b) or required by applicable law.

 

  

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b)  

	
Protective Provision.  At any time when the number of shares of Series A Preferred Stock outstanding is equal to or greater than 50% of the total number of shares of Series A Preferred Stock ever issued by the Company (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock), the Company shall not, directly or indirectly by amendment, merger, consolidation or otherwise, (i) amend, alter or repeal any provision of the Certificate of Formation in a manner that adversely affects the powers, preferences or rights of the Series A Preferred Stock, (ii) create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock unless the same ranks junior or pari passu to the Series A Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Company, the payment of dividends and rights of redemption, or (iii) increase the authorized number of shares of any additional class or series of capital stock unless the same ranks junior or pari passu to the Series A Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Company, the payment of dividends and rights of redemption, unless the holders of at least two thirds (66-2/3%) of the outstanding shares of Series A Preferred Stock approve (by written consent or affirmative vote).

 

	
5)  

	
Conversion.

	
a)  

	
Events of Conversion.  Subject to the limitation set forth in Section 5(b), each share of Series A Preferred Stock shall be convertible, without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Series A Original Issue Price for such share of Series A Preferred Stock by the Series A Conversion Price (as defined below) in effect at the time of conversion, as follows:

	
i)  

	
As to the shares of Series A Preferred Stock of any holder, at the option and at the sole discretion of such holder so long as notice is delivered by such holder to the Company (pursuant to Section 5(e)) prior to the day which is five (5) days prior to the Redemption Date (as defined below);

	
ii)  

	
As to all shares of Series A Preferred Stock, upon the earlier of the following (the “Automatic Conversion”):  (A) such time, at any time following the Series A Designation Date (defined below), as the shares of Common Stock trade on the Trading Market with a per share closing price on the Trading Day of at least $4.00 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock) for at least twenty (20) consecutive Trading Days [note:  since this clause is measured from the Series A Designation Date, it is possible that shares of Series A Preferred Stock will be deemed converted immediately upon issuance if the requirements of this clause have been satisfied prior to such issuance]; or (B) the date and time, or the occurrence of an event, approved (by written consent or affirmative vote) by the holders of at least two thirds (66-2/3%) of the then outstanding shares of Series A Preferred Stock.

 

  

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b)  

	
Limitation on Conversion.  Shares of Series A Preferred Stock held by each holder thereof shall not be converted pursuant to Section 5(a) to the extent that, after giving effect to such conversion, such holder (together with any person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with such holder, as such terms are used in and construed under Rule 144 under the Securities Act of 1933 and the rules and regulations promulgated thereunder - each an “Affiliate”) would (i) beneficially own shares of Common Stock in excess of 19.9% of the shares of Common Stock outstanding (immediately after giving effect to the issuance of shares of Common Stock upon conversion of the shares of Series A Preferred Stock then subject to, or with respect to which a request has been made for, conversion pursuant to Section 5(a)) or (ii) control in excess of 19.9% of the total voting power of the Company’s securities outstanding (immediately after giving effect to the issuance to the issuance of shares of Common Stock upon conversion of the shares of Series A Preferred Stock then subject to, or with respect to which a request has been made for, conversion pursuant to Section 5(a)) that are entitled to vote on a matter being voted on by holders of Common Stock, unless and until the Company obtains shareholder approval permitting such issuances in accordance with applicable rules of the NASDAQ Stock Market; provided, however, that such limitations on conversion shall not apply to any conversion in connection with and subject to completion of the following if, upon completion, the subject holder and its Affiliates would not exceed the specified limits:  (i) any offering of securities by the Company or its shareholders (including, without limitation, the subject holder); and (ii) a bona fide third party tender offer for the Company securities.  For purposes of this Section 5(b), beneficial ownership shall (x) exclude such number of shares of Common Stock that would be issuable upon exercise or conversion of the unexercised or non-converted portion of any securities of the Company (including, without limitation, options, warrants, shares of Series A Preferred Stock and other convertible securities such as convertible promissory notes) except for a limitation on conversion or exercise analogous to the limitation contained in the first sentence of this Section 5(b) and (y) otherwise be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934 (and the rules promulgated thereunder).  [Note:  If the limitation contained in the first sentence of this Section 5(b) applies to any conversion, then the Company shall nonetheless issue to any holder at issue such number of shares of Common Stock as may be issued below the limitation.]  Upon the written request of any holder of shares of the Series A Preferred Stock, the Company shall within two (2) Trading Days confirm in writing to such holder the number of shares of Common Stock then outstanding.

	
c)  

	
Conversion Price.  The “Series A Conversion Price” shall initially be $0.80, but the Series A Conversion Price, and the rate at which shares of Series A Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

 

  

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d)  

	
No Fractional Shares.  No fractional shares of Common Stock shall be issued upon conversion of the Series A Preferred Stock.  In lieu of any fractional shares to which a holder would otherwise be entitled, the Company shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors.  Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series A Preferred Stock a holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

	
e)  

	
Mechanics for Optional Conversion.  Before any holder of shares of Series A Preferred Stock shall be entitled to convert such shares pursuant to the provisions of Section 5(a)(i) and receive a certificate or certificates evidencing the shares of Common Stock into which such shares of Series A Preferred Stock are convertible, such holder shall give written notice of the same to the Company at its principal executive offices and shall surrender the certificate or certificates evidencing such shares, duly endorsed, at such offices of the Company.  The Company shall, as soon as practicable thereafter, issue and deliver at such offices to such holder a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled.  Any such conversion shall be deemed to have been made immediately prior to the close of business on the date of the holder’s surrender of the certificate or certificates evidencing such holder’s shares of Series A Preferred Stock to be converted, and such holder shall be treated for all purposes as the holder of the shares of Common Stock issuable upon such conversion as of such date.

	
f)  

	
Mechanics for Automatic Conversion.  Upon the Automatic Conversion (or, as applicable, as soon thereafter as and to the extent that the limitation set forth in Section 5(b) does not apply), the outstanding shares of Series A Preferred Stock at issue shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Company; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless the certificates evidencing such shares of Series A Preferred Stock are delivered to the Company at its principal executive offices, or the holder notifies the Company that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates.  Upon the occurrence of such automatic conversion of the outstanding shares of Series A Preferred Stock at issue, the holders of such shares of Series A Preferred Stock shall surrender the certificates representing such shares to the Company at its principal executive offices.  Thereupon, there shall be issued and delivered to each such holder promptly at such office and in each such holder’s name as shown on such surrendered certificate or certificates, a certificate or certificates for the number of shares of Common Stock into which the shares of Series A Preferred Stock surrendered were convertible on the date on which such automatic conversion occurred.

	
g)  

	
Reserved Shares.  The Company shall at all times when the Series A Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series A Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, the Company shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to the Certificate of Formation.

 

  

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h)  

	
Issue Taxes.  The Company shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Series A Preferred Stock pursuant to this Section 5; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Series A Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid.

	
i)  

	
Adjustments to Series A Conversion Price.

	
i)  

	
If the Company shall at any time or from time to time after the filing of this Certificate (the “Series A Designation Date”) effect a subdivision of the outstanding Common Stock, the Series A Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding.  If the Company shall at any time or from time to time after the Series A Designation Date combine the outstanding shares of Common Stock, the Series A Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding.  Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.

	
ii)  

	
In the event the Company at any time or from time to time after the Series A Designation Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Series A Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Series A Conversion Price then in effect by a fraction:

 

  

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a.  

	
the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

	
b.  

	
the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

Notwithstanding the foregoing: (x) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (y) no such adjustment shall be made if the holders of Series A Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series A Preferred Stock had been converted into Common Stock on the date of such event.

	
iii)  

	
If, as of the close of business on December 31, 2012, the Company has not entered into an agreement with a partner or potential partner pursuant to which the Company has received, or will receive, at least $5 million in funding (x) for use toward the clinical development of TcelnaTM or (y) in return for granting a license, other rights, or an option to license or otherwise acquire rights with respect to TcelnaTM (as determined in the reasonable discretion of the Board of Directors), then the then applicable Series A Conversion Price shall be adjusted, in the event of the closing of a Down Financing (as defined below), to be the Down Financing Per Share Price (as defined below) or, if higher, $0.780625 (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction affecting the Common Stock after the Series A Designation Date).  A “Down Financing” is the first issuance of securities by the Company (other than any financing involving the issuance of Series A Preferred Stock or securities convertible into Series A Preferred Stock) primarily for the purpose of raising capital which occurs following the Series A Designation Date and in which the Company issues shares of Common Stock or Common Stock Equivalents (as defined below) entitling any person to acquire shares of Common Stock at a price per share (determined in the reasonable discretion of the Board of Directors and in accordance with this Section 5(i)(iii)) less than the then applicable Series A Conversion Price (such lower price, the “Down Financing Per Share Price”).  “Common Stock Equivalents” mean any securities of the Company which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.  If any shares of Common Stock or any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants, rights or options being called “Options” and such convertible or exchangeable stock or securities being called “Convertible Securities”) shall be issued or issuable for cash, the consideration received therefor shall be deemed to be the gross proceeds therefor.  If any shares of Common Stock, Options or Convertible Securities shall be issued or issuable for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair market value of such consideration as determined in good faith by the Board of Directors.  In case any Options shall be issued in connection with the issue and sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued for such consideration as determined in good faith by the Board of Directors.  If Common Stock, Options or Convertible Securities shall be issued or sold by the Company and, in connection therewith, other Options or Convertible Securities (the “Additional Rights”) are issued, then the consideration received or deemed to be received by the Company shall be reduced by the fair market value of the Additional Rights (as determined in good faith by the Board of Directors).  Notwithstanding the foregoing, and without limitation, the following activities are deemed not to be eligible for consideration as an issuance of securities by the Company primarily for the purpose of raising capital:  (1) the issuance of securities upon the exercise or conversion of any Common Stock Equivalents issued by the Company prior to the Series A Designation Date; (2) securities issued with approval of a majority of the members of the Board of Directors or a majority of the members of a committee of directors established for such purpose, pursuant to options, stock or similar awards to employees, directors, and consultants; (3) securities issued to any bank or equipment lessor in connection with a financing or equipment lease; or (4) securities issued pursuant to a “Strategic Transaction” approved by a majority of the Board of Directors.  A “Strategic Transaction” shall mean any transaction with an acquiror, acquisition target company or merger partner, or a joint venture, corporate alliance, research agreement or licensing transaction, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital.

 

  

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iv)  

	
Upon the occurrence of each adjustment or readjustment of the Series A Conversion Price pursuant to this Section 5, the Company at its expense shall, as promptly as reasonably practicable but in any event not later than ten (10) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series A Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series A Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based.  The Company shall, as promptly as reasonably practicable after the written request at any time of any holder of Series A Preferred Stock (but in any event not later than ten (10) days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Series A Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series A Preferred Stock.

 

  

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j)  

	
Other Adjustments.

	
i)  

	
In the event the Company at any time or from time to time after the initial issuance of the Series A Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Company (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 2(b) do not apply to such dividend or distribution, then and in each such event the holders of Series A Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Series A Preferred Stock had been converted into Common Stock on the date of such event.

	
ii)  

	
If after the Series A Designation Date there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Company in which the Common Stock (but not the Series A Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Section 3(a) or Section 3(b)), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series A Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock issuable upon conversion of one share of Series A Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Section 5 with respect to the rights and interests thereafter of the holders of the Series A Preferred Stock, to the end that the provisions set forth in this Section 5 (including provisions with respect to changes in and other adjustments of the Series A Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series A Preferred Stock.

	
6)  

	
Acquired Shares.  Any shares of Series A Preferred Stock that are acquired by the Company or any of its subsidiaries shall automatically and immediately be (i) retired as shares of Series A Preferred Stock and (ii) resume their status as authorized but unissued shares of the Company’s preferred stock.

 

  

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7)  

	
Waiver.  Any of the rights, powers, preferences and other terms of the Series A Preferred Stock set forth herein may be waived on behalf of all holders of Series A Preferred Stock (both present and future) by the approval (by written consent or affirmative vote) of the holders of at least two thirds (66-2/3%) of the shares of Series A Preferred Stock then outstanding.

	
8)  

	
Notices.  Any notice required or permitted by the provisions of this Certificate to be given to a holder of shares of Series A Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Company, or given by electronic communication in compliance with the provisions of applicable law, and shall be deemed sent upon such mailing or electronic transmission.

 

  

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IN WITNESS WHEREOF, the Company has caused this Certificate to be executed on behalf of the Company by its Chief Executive Officer on this 25 day of July, 2012.

 

	  	
/s/ Neil K. Warma

	  	
Neil K. Warma 

	  	
Chief Executive Officer

14a50353689ex10_1.htm

Exhibit 10.1

 

NOTE PURCHASE AGREEMENT

 

THIS NOTE PURCHASE AGREEMENT (“Agreement”) is made effective as of July 25, 2012, by and among Opexa Therapeutics, Inc., a Texas corporation (the “Company”), and each of the persons executing a copy of this Agreement (each an “Investor” and, collectively, the “Investors”).

 

Recitals

 

A.           WHEREAS, each Investor wishes to purchase from the Company, and the Company wishes to sell and issue to each Investor, upon the terms and conditions stated in this Agreement, (i) a convertible secured promissory note in the form attached hereto as Exhibit A (individually, a “Note” and, collectively, the “Notes”), which is convertible, upon the occurrence of certain events, into shares of the Company’s Series A Convertible Preferred Stock, no par value per share, having the rights, restrictions, preferences and privileges set forth in the Certificate of Designation in the form attached hereto as Exhibit B (the “Certificate of Designation”); and (ii) a warrant to purchase shares of the Company’s Common Stock, $0.01 par value per share (the “Common Stock”), in the form attached hereto as Exhibit C, identified by the Company as its “Series I Warrants”  (individually, a “Warrant” and, collectively, the “Warrants”);

 

WHEREAS, the initial principal amount of each Note and the number of shares of Common Stock subject to each Warrant are set forth on Schedule I attached hereto;

 

WHEREAS, contemporaneous with the execution of this Agreement, the parties hereto will execute and deliver a Registration Rights Agreement, in the form attached hereto as Exhibit D (the “Registration Rights Agreement”), pursuant to which the Company will agree to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, and applicable state securities laws;

 

WHEREAS, contemporaneous with the execution of this Agreement, the parties hereto will execute and deliver a Security Agreement, in the form attached hereto as Exhibit E (the “Security Agreement”), pursuant to which the Company will issue a security interest in substantially all of the Company’s assets in favor of the Investors;

 

WHEREAS, contemporaneous with the execution of this Agreement, the Company and Alkek & Williams Ventures, Ltd., a Texas limited partnership (as collateral agent for the Investors - the “Collateral Agent”), will execute and deliver a Depository Account Control Agreement, in the form attached hereby as Exhibit F (the “DACA”), pursuant to which the Company will agree to grant the Investors (including through the Collateral Agent) certain control rights relating to certain of the Company’s bank accounts; and

 

WHEREAS, contemporaneous with the execution of this Agreement, the Company and the Collateral Agent will execute and deliver a Patent and Trademark Security Agreement, in the form attached hereto as Exhibit G (the “Patent Security Agreement”), pursuant to which the Company will issue to the Collateral Agent for the benefit of the Investors a security interest in substantially all of the Company’s intellectual property.

 

  

  

  

 

NOW, THEREFORE, in consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.             Definitions.  In addition to those terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings set forth below:

 

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

 

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

 

“Affiliate” means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common control with, such Person.

 

“Business Day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.

 

“Certificate of Designation” means the Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock filed with the Secretary of State of the State of Texas prior to the Initial Closing Date by which the Company (i) designated 80,000 shares of the Company’s authorized but unissued preferred stock, no par value, as Series A Preferred Stock and (ii) established the rights, restrictions, preferences and privileges of such Series A Preferred Stock, including the right to convert such Series A Preferred Stock into shares of Company’s Common Stock upon the occurrence of certain events.

 

“Closing” has the meaning set forth in Section 3.

 

“Closing Date” means the date of the Closing.  In the event there is more than one Closing, the term “Closing Date” shall mean, with respect to each Investor, the date of the Closing set forth next to the signature of each Investor.

 

“Collateral Agent” has the meaning set forth in the recitals.

 

“Common Stock” has the meaning set forth in the recitals.

 

“Company’s Knowledge” means the actual knowledge of the executive officers (as defined in Rule 405 under the 1933 Act) of the Company, after due inquiry.

 

“Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

  

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“Conversion Shares” means the shares of Series A Preferred Stock issuable upon conversion of the Notes, together with the shares of Common Stock issuable upon conversion of the Series A Preferred Stock.

 

“DACA” has the meaning set forth in the recitals.

 

“Disclosure Schedules” has the meaning set forth in Section 4.

 

“Effective Date” means the date on which the Registration Statement is declared effective by the SEC.

 

“Evaluation Date” has the meaning set forth in Section 4.16.

 

“Expansion Option” has the meaning set forth in Section 3.3.

 

“GAAP” has the meaning set forth in Section 4.12.

 

“HSR Act” has the meaning set forth in Section 7.10.

 

“HSR Act Restrictions” has the meaning set forth in Section 7.10.

 

“Indemnified Persons” has the meaning set forth in Section 8.2.

 

“Initial Closing Date” means the date of the initial Closing.

 

“Investor” has the meaning set forth in the Preamble.

 

“Material Adverse Effect” means a material adverse effect on (i) the assets, liabilities, results of operations, condition (financial or otherwise), business or prospects of the Company or (ii) the ability of the Company to perform its obligations under the Transaction Documents.

 

“Non-Participating Investor” has the meaning set forth in Section 3.3.

 

“Notes” has the meaning set forth in the recitals.

 

“Obligations” means all liabilities, responsibilities and other obligations of any name or nature under any of the Transaction Documents.

 

“Patent Security Agreement” has the meaning set forth in the recitals.

 

“Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

 

“Prohibited Transaction” has the meaning set forth in Section 5.11.

 

“Purchase Price” means the amount paid by the Investors for each Note and Warrant.

 

  

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“Registration Rights Agreement” has the meaning set forth in the recitals.

 

“Registration Statement” has the meaning set forth in the Registration Rights Agreement.

 

“Series A Preferred Stock” means the Company’s Series A Convertible Preferred Stock, no par value, having the rights, restrictions, preferences and privileges set forth in the Certificate of Designation, and which is convertible, as stated in the Certificate of Designation, into shares of the Company’s Common Stock.

 

“SEC” means the Securities and Exchange Commission.

 

“SEC Filings” has the meaning set forth in Section 4.6.

 

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

 

“Security Agreement” has the meaning set forth in the Recitals.

 

“Trading Affiliates” has the meaning set forth in Section 5.11.

 

“Transaction Documents” means this Agreement, the Notes, the Warrants, the Registration Rights Agreement, the Security Agreement, the DACA, the Patent Security Agreement and the Certificate of Designation.

 

“Transfer Agent” has the meaning set forth in Section 7.9.

 

“Warrants” has the meaning set forth in the recitals.

 

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

 

2.             Purchase and Issuance of the Notes and Warrants.  Subject to the terms and conditions of this Agreement, each of the Investors shall severally, and not jointly, purchase, and the Company shall sell and issue to the Investors, the Notes and the Warrants, each in the respective amounts set forth opposite the Investors’ names on Schedule I attached hereto in exchange for the applicable Purchase Price.

 

3.             Closing.

 

3.1      Upon the satisfaction or waiver of the conditions herein, the initial purchase and sale of the Notes and Warrants shall take place remotely via the exchange of documents and signatures, on or before July 25, 2012, or at such other time and place as the Company and the Investors mutually agree upon, orally or in writing (which time and place are designated as the “Closing”).  In the event there is more than one closing, the term “Closing” shall mean the initial Closing and each such subsequent Closing unless otherwise specified.

 

  

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3.2      At the Closing, the Company shall deliver, or cause to be delivered, to each Investor (i) a convertible secured promissory note, representing the Note purchased by such Investor, and (ii) a warrant, representing the Warrant purchased by such Investor, against delivery to the Company by the Investor of payment of the Purchase Price for such Note and Warrant, by check or in immediately available funds by wire transfer to an account designated by the Company; provided, however, that in respect of the initial Closing and at the sole discretion of the Company upon written notice to each Investor participating in the initial Closing, the Company may elect to issue the Notes in initial principal amounts equal to 50% of the initial principal amounts otherwise issuable for which the Investors have subscribed and, in such an event, the following shall ensue:  (x) the Purchase Price otherwise payable by each Investor participating in the initial Closing shall be reduced by 50%; (y) all Warrants for which the Investors have subscribed shall be issued at the initial Closing regardless of the Company’s election to reduce the issuance of the Notes, and (z) the Company may call for the balance (i.e., 50%) of the full Purchase Price from each Investor participating in the initial Closing, in exchange for the 50% of the initial principal amount of the Notes not issued at the initial Closing, at any time within six (6) months of the initial Closing by written notice to each Investor, in which event the obligation of each Investor to pay such balance of the full Purchase Price promptly upon receipt of such notice (and thereupon to receive additional Notes in aggregate initial principal amounts equal to the balance (i.e., 50%) of the full Purchase Price) shall be absolute and unconditional.  The Company and the Investors shall also deliver such other documents as are called for herein.

 

3.3      On only one occasion, after the initial Closing, the Company may request that the Investors purchase, on the same terms and conditions as those contained in this Agreement and, except as otherwise provided below, for the same price as in the initial Closing (but without the scenario reflected in the proviso in Section 3.2), additional Notes and Warrants in aggregate initial principal amounts up to an amount which, when added to the principal amount of the Notes sold at the initial Closing, equals $8,000,000 (the “Expansion Option”).  If Investors holding Notes, Warrants and/or shares of Series A Preferred Stock representing at least 75% of the Common Stock issuable upon the conversion and/or exercise of all outstanding Notes, Warrants and shares of Series A Preferred Stock consent to the Expansion Option, then: (i) the closing of such Expansion Option shall occur on or before the date which is one hundred and twenty (120) days after the Initial Closing Date; (ii) each Investor may elect, in its sole discretion, whether or not to participate in the Expansion Option, (iii) the additional Notes shall first be offered to the existing Investors on a pro rata basis (based upon the principal amount of the Notes previously purchased); and (iv) each new Investor shall become a party to the Transaction Documents, as applicable, by executing and delivering a counterpart signature page to each of the Transaction Documents.  If any Investor elects not to purchase its pro rata amount of the additional Notes and Warrants (a “Non-Participating Investor”), the Investors that do elect to purchase additional Notes and Warrants shall be permitted to elect to purchase the Notes and Warrants otherwise allocable to the Non-Participating Investor on a pro rata basis, and such process shall be repeated, if necessary, until each Investor has been allocated the full amount of Notes and Warrants that such Investor elects to purchase.  Notwithstanding any provision herein to the contrary, the Expansion Option may not be consummated if, on the closing date for such consummation, either (x) the Series A Conversion Price (as defined in the Certificate of Designation), as adjusted to such closing date, is less than the sum of (A) the consolidated closing bid price of the Company’s Common Stock on the NASDAQ Stock Market on such closing date plus (B) $0.140625 (based upon $0.09375 per share of Common Stock for 75% warrant coverage plus $0.046875 for a potential 50% increase in warrant coverage in certain circumstances pursuant to the terms of the Warrants) or (y) the Warrant Exercise Price (as defined in the Warrants), as adjusted to such closing date, is less than the consolidated closing bid price of the Company’s Common Stock on the NASDAQ Stock Market on such closing date.

 

  

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4.             Representations and Warranties of the Company.  The Company hereby represents and warrants to the Investors that as of the Initial Closing Date, except as set forth in the schedules delivered herewith (collectively, the “Disclosure Schedules”):

 

4.1      Organization, Good Standing and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted and to own its properties.  The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or leasing necessary unless the failure to so qualify has not had and could not reasonably be expected to have a Material Adverse Effect.  The Company does not have any Subsidiaries.

 

4.2      Authorization.  The Company has full power and authority and has taken all requisite action on the part of the Company, its officers, directors and shareholders necessary for (i) the authorization, execution and delivery of the Transaction Documents, (ii) the authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Securities.  The Transaction Documents constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

 

4.3      Capitalization.  Schedule 4.3 sets forth (immediately prior to the initial Closing) (a) the authorized capital stock of the Company on the date hereof, (b) the number of shares of capital stock issued and outstanding, (c) the number of shares of capital stock issuable pursuant to the Company’s stock plans, and (d) the number of shares of capital stock issuable and reserved for issuance pursuant to securities (other than the Notes or the Warrants) exercisable for, or convertible into or exchangeable for any shares of capital stock of the Company.  The Certificate of Designation designates 80,000 shares of the Company’s preferred stock as Series A Preferred Stock, and no such shares are currently issued or outstanding.  The rights, restrictions, preferences and privileges of the Series A Preferred Stock are as stated in the Certificate of Designation.

 

All of the issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights and were issued in full compliance with applicable state and federal securities law and any rights of third parties.  Except as described on Schedule 4.3, no Person is entitled to pre-emptive or similar statutory or contractual rights with respect to any securities of the Company.  Except as described on Schedule 4.3 or as contemplated by this Agreement, there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company is or may be obligated to issue any equity securities of any kind.  Except as described on Schedule 4.3, and for the Registration Rights Agreement or as contemplated by this Agreement, there are no voting agreements, buy-sell agreements, option or right of first purchase agreements or other agreements of any kind among the Company and any of the securityholders of the Company relating to the securities of the Company held by them.  Except as described on Schedule 4.3 and except as provided in the Registration Rights Agreement, no Person has the right to require the Company to register any securities of the Company under the 1933 Act, whether on a demand basis or in connection with the registration of securities of the Company for its own account or for the account of any other Person.

 

  

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The issuance and sale of the Securities hereunder will not obligate the Company to issue shares of Common Stock or other securities to any other Person (other than the Investors) and will not result in the adjustment of the exercise, conversion, exchange or reset price of any outstanding security, including with respect to any of the outstanding warrants and options listed on Schedule 4.3. The Company does not have outstanding shareholder purchase rights, a “poison pill” or any similar arrangement.

 

4.4      Valid Issuance.  The Notes and the Warrants have been duly and validly authorized.  Upon the due conversion of the Notes and the exercise of the Warrants, the Conversion Shares and the Warrant Shares, respectively, will be validly issued, fully paid and non-assessable free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except for those created by the Investors.  The Company has reserved (i) a sufficient number of shares of Series A Preferred Stock for issuance upon conversion of the Notes, (ii) a sufficient number of shares of Common Stock for issuance upon the conversion of the Series A Preferred Stock, and (iii) a sufficient number of shares of Common Stock for issuance upon exercise of the Warrants, free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except for those created by the Investors.

 

4.5      Consents.  Except as described on Schedule 4.5, the execution, delivery and performance by the Company of the Transaction Documents and the offer, issuance and sale of the Securities require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official other than such filings as shall have been made prior to and shall be effective on and as of the Closing and such filings required to be made after the Closing pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods.  Subject to the accuracy of the representations and warranties of each Investor set forth in Section 5 hereof, the Company has taken all action necessary to exempt from the registration requirements of the applicable state and federal securities laws (i) the issuance and sale of the Securities, (ii) the issuance of the Conversion Shares upon due conversion of the Notes and the Series A Preferred Stock, and (iii) the issuance of the Warrant Shares upon due exercise of the Warrants.

 

4.6      Delivery of SEC Filings; Business.  The Company has made available to the Investors through the EDGAR system, true and complete copies of the Company’s (i) Annual Report on Form 10-K for the fiscal year ended December 31, 2011, (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2012 and (iii) Current Reports on Form 8-K filed since the most recent Annual Report on Form 10-K and prior to the date hereof (collectively, the “SEC Filings”).  The SEC Filings are the only filings required of the Company pursuant to the 1934 Act for such periods.  The Company is engaged in all material respects only in the business described in the SEC Filings and the SEC Filings contain a complete and accurate description in all material respects of the business of the Company, taken as a whole.

 

  

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4.7      Use of Proceeds.  The net proceeds of the issuance and sale of the Notes and the Warrants hereunder shall be used by the Company (i) to proceed directly in a commercially reasonable manner to commencement of a Phase IIb clinical trial of TcelnaTM in Secondary Progressive MS patients, (ii) for the conduct of such trial and (iii) for working capital and corporate expenses while the Company is preparing to conduct and during the pendency of such trial.  The Company will, at all times while the Notes are outstanding, maintain a cash balance (inclusive of cash and cash equivalents) of no less than $1,000,000, subject to the DACA.

 

4.8      SEC Filings.  At the time of filing thereof, the SEC Filings complied as to form in all material respects with the requirements of the 1934 Act and did 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 the light of the circumstances under which they were made, not misleading.

 

4.9      No Conflict, Breach, Violation or Default.  The execution, delivery and performance of the Transaction Documents by the Company and the issuance and sale of the Securities will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) the Company’s Certificate of Formation or the Company’s Bylaws, both as in effect on the date hereof (true and complete copies of which have been made available to the Investors through the EDGAR system), as modified by the Certificate of Designation, (ii) any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company or any of its assets or properties (except in the case of this clause (ii) for such breaches, violations or defaults which would not, individually or in the aggregate, have a Material Adverse Effect) or (iii) any agreement or instrument to which the Company is a party or by which the Company is bound (except in the case of this clause (iii) for such breaches, violations or defaults which would not, individually or in the aggregate, have a Material Adverse Effect).

 

4.10    Tax Matters.  The Company has timely prepared and filed all tax returns required to have been filed by the Company with all appropriate governmental agencies and timely paid all taxes shown thereon or otherwise owed by it.  The charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal periods are adequate in all material respects, and there are no material unpaid assessments against the Company nor, to the Company’s Knowledge, any basis for the assessment of any additional taxes, penalties or interest for any fiscal period or audits by any federal, state or local taxing authority except for any assessment which is not material to the Company, taken as a whole.  All taxes and other assessments and levies that the Company is required to withhold or to collect for payment have been duly withheld and collected and paid to the proper governmental entity or third party when due.  There are no tax liens or claims pending or, to the Company’s Knowledge, threatened against the Company or any of its assets or property.  There are no outstanding tax sharing agreements or other such arrangements between the Company and any other corporation or entity.

 

  

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4.11    Title to Properties.  Except as disclosed in the SEC Filings, the Company has good and marketable title to all real properties and all other properties and assets owned by it, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or currently planned to be made thereof by them or as disclosed in the SEC Filings; and except as disclosed in the SEC Filings, the Company holds any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or currently planned to be made thereof by them.

 

4.12    Financial Statements.  The financial statements included in each SEC Filing present fairly, in all material respects, the consolidated financial position of the Company as of the dates shown and its consolidated results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis (“GAAP”) (except as may be disclosed therein or in the notes thereto).  Except as set forth in the financial statements of the Company included in the SEC Filings filed prior to the date hereof or as described on Schedule 4.12, the Company has not incurred any liabilities, contingent or otherwise, except those incurred in the ordinary course of business, consistent (as to amount and nature) with past practices since the date of such financial statements, none of which, individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect.

 

4.13    No Directed Selling Efforts or General Solicitation.  Neither the Company nor any Person acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offer or sale of any of the Securities.

 

4.14    No Integrated Offering.  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 Company security or solicited any offers to buy any security, under circumstances that would adversely affect reliance by the Company on Section 4(2) of the 1933 Act for the exemption from registration for the transactions contemplated hereby or would require registration of the Securities under the 1933 Act.

 

4.15    Private Placement.  Assuming the accuracy of the representations set forth in Section 5, the offer and sale of the Securities to the Investors as contemplated hereby is exempt from the registration requirements of the 1933 Act.

 

4.16    Internal Controls.  The Company is in material compliance with the provisions of the Sarbanes-Oxley Act of 2002 currently applicable to the Company.  The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in 1934 Act Rules 13a-14 and 15d-14) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s most recently filed period report under the 1934 Act, as the case may be, is being prepared.  The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures as of the end of the period covered by the most recently filed periodic report under the 1934 Act (such date, the “Evaluation Date”).  The Company presented in its most recently filed periodic report under the 1934 Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no significant changes in the Company’s internal controls (as such term is defined in Item 308 of Regulation S-K) or, to the Company’s Knowledge, in other factors that could significantly affect the Company’s internal controls.  The Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with GAAP and the applicable requirements of the 1934 Act.

 

  

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5.             Representations and Warranties of the Investors.  Each of the Investors hereby severally, and not jointly, represents and warrants to the Company that:

 

5.1      Organization and Existence.  Such Investor is either an individual or a validly existing corporation, limited partnership or limited liability company and has all requisite corporate, partnership or limited liability company power and authority to invest in the Securities pursuant to this Agreement.

 

5.2     Authorization.  The execution, delivery and performance by such Investor of the Transaction Documents to which such Investor is a party have been duly authorized and will each constitute the valid and legally binding obligation of such Investor, enforceable against such Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.

 

5.3      Purchase Entirely for Own Account.  The Securities to be received by such Investor hereunder will be acquired for such Investor’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the 1933 Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the 1933 Act without prejudice, however, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws.  Nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time.  Such Investor is not a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in a business that would require it to be so registered.

 

5.4      Investment Experience.  Such Investor acknowledges that it can bear the economic risk and complete loss of its investment in the Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby.

 

  

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5.5      Disclosure of Information.  Such Investor has had an opportunity to receive all information related to the Company requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Securities.  Such Investor acknowledges receipt of copies of the SEC Filings.  Neither such inquiries nor any other due diligence investigation conducted by such Investor shall modify, amend or affect such Investor’s right to rely on the Company’s representations and warranties contained in this Agreement.

 

5.6      Restricted Securities.  Such Investor understands that the Securities are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the 1933 Act only in certain limited circumstances.  Such Investor represents that it is familiar with Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.  Such Investor acknowledges that the Securities have not been registered under the 1933 Act or registration or qualified under any applicable blue sky laws in reliance, in part, on the representations and warranties herein.

 

5.7      Legends.  It is understood that, except as provided below, certificates evidencing the Securities may bear the following or any similar legend:

 

(a) “THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS.  SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM.  THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT.”

 

(b) If required by the authorities of any state in connection with the issuance of sale of the Securities, the legend required by such state authority.

 

5.8      Accredited Investor.  Such Investor is an accredited investor as defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act.

 

5.9      No General Advertisement.  Such Investor did not learn of the investment in the Securities as a result of any public solicitation or advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television, radio or internet or presented at any seminar or other general advertisement.

 

  

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5.10    Brokers and Finders.  No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Investor.

 

5.11    Prohibited Transactions.  During the last thirty (30) days prior to the date hereof, neither such Investor nor any Affiliate of such Investor which (x) had knowledge of the transactions contemplated hereby, (y) has or shares discretion relating to such Investor’s investments or trading or information concerning such Investor’s investments, including in respect of the Securities, or (z) is subject to such Investor’s review or input concerning such Affiliate’s investments or trading (collectively, “Trading Affiliates”) has, directly or indirectly, effected or agreed to effect any short sale, whether or not against the box, established any “put equivalent position” (as defined in Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock, granted any other right (including, without limitation, any put or call option) with respect to the Common Stock or with respect to any security that includes, relates to or derived any significant part of its value from the Common Stock, or otherwise sought to hedge its position in the Securities (each, a “Prohibited Transaction”).  Prior to the earliest to occur of (i) the termination of this Agreement or (ii) the Effective Date, such Investor shall not, and shall cause its Trading Affiliates not to, engage, directly or indirectly, in a Prohibited Transaction.  Such Investor acknowledges that the representations, warranties and covenants contained in this Section 5.11 are being made for the benefit of the Investors as well as the Company and that each of the other Investors shall have an independent right to assert any claims against such Investor arising out of any breach or violation of the provisions of this Section 5.11.

 

5.12    Financial Condition.  Such Investor has received and reviewed such information as the Investor deems necessary in order to make an informed investment decision, including, without limitation, relating to the Company’s current assets, liabilities, cash position, burn rate and liquidity position.

 

5.13    Limitation on Conversion or Exercise.  Such Investor understands and acknowledges that, unless and until the Company obtains shareholder approval in accordance with applicable rules of the NASDAQ Stock Market permitting the issuance of shares which would result in an Investor beneficially owning in excess of 20% of the Common Stock or the voting power of the Company’s securities (with respect to matters on which the Common Stock votes) as the result of any conversion of Notes (as well as the underlying Series A Preferred Stock) or exercise of Warrants, each of the Notes, the Warrants and the Certificate of Designation will include certain limitations on a holder’s ability to convert Notes, convert shares of Series A Preferred Stock and/or exercise Warrants.

 

  

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6.             Conditions to Closing.

 

6.1      Conditions to the Investors’ Obligations. The obligation of each Investor to purchase the Notes and Warrants at the Closing is subject to the fulfillment to such Investor’s satisfaction, on or prior to the Closing Date, of the following conditions, any of which may be waived by such Investor (as to itself only):

 

(a) The representations and warranties made by the Company in Section 4 hereof qualified as to materiality shall be true and correct at all times prior to and on the Initial Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date, and the representations and warranties made by the Company in Section 4 hereof not qualified as to materiality shall be true and correct in all material respects at all times prior to and on the Initial Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date.  The Company shall have performed in all material respects all obligations and covenants herein required to be performed by it on or prior to the Initial Closing Date.

 

(b) The Company shall have obtained any and all consents, permits, approvals, registrations and waivers necessary or appropriate for consummation of the purchase and sale of the Securities and the consummation of the other transactions contemplated by the Transaction Documents, all of which shall be in full force and effect.

 

(c) The Certificate of Designation shall have been duly filed with the Secretary of State of the State of Texas and shall be in full force and effect as of the Closing Date.

 

(d) The Company shall have executed and delivered the Registration Rights Agreement.

 

(e) The Company shall have executed and delivered the Security Agreement.

 

(f) The Company shall have executed and delivered the DACA.

 

(g) The Company shall have executed and delivered the Patent Security Agreement.

 

(h) No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby or in the other Transaction Documents.

 

(i) The Company shall have delivered a Certificate, executed on behalf of the Company by its Chief Executive Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in Subsections (a), (b), (h) and (k) of this Section 6.1.

 

  

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(j) The Company shall have delivered a Certificate, executed on behalf of the Company by its Secretary, dated as of the Closing Date, certifying the resolutions adopted by the Board of Directors of the Company approving the transactions contemplated by this Agreement and the other Transaction Documents and the issuance of the Securities, certifying the current versions of the Certificate of Formation and Bylaws of the Company and certifying as to the signatures and authority of persons signing the Transaction Documents and related documents on behalf of the Company.

 

(k) No stop order or suspension of trading shall have been imposed by the SEC or any other governmental or regulatory body with respect to public trading in the Common Stock.

 

6.2      Conditions to Obligations of the Company.  The Company’s obligation to sell and issue the Notes and Warrants at the Closing is subject to the fulfillment to the satisfaction of the Company on or prior to the Closing Date of the following conditions, any of which may be waived by the Company:

 

(a) The representations and warranties made by the Investors in Section 5 hereof shall be true and correct in all material respects when made, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date.  The Investors shall have performed in all material respects all obligations and covenants herein required to be performed by them on or prior to the Closing Date.

 

(b) The Investors shall have executed and delivered the Registration Rights Agreement.

 

(c) The Investors shall have executed and delivered the Security Agreement.

 

(d) The Collateral Agent shall have executed and delivered the DACA.

 

(e) The Collateral Agent shall have executed and delivered the Patent Security Agreement.

 

(f) The Investors shall have delivered the Purchase Price to the Company.

 

6.3      Termination of Obligations to Effect Initial Closing; Effects.

 

(a) The obligations of the Company, on the one hand, and the Investors, on the other hand, to effect the initial Closing shall terminate as follows:

 

(i) Upon the mutual written consent of the Company and the Investors;

 

  

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(ii) By the Company if any of the conditions set forth in Section 6.2 shall have become incapable of fulfillment, and shall not have been waived by the Company;

 

(iii) By an Investor (with respect to itself only) if any of the conditions set forth in Section 6.1 shall have become incapable of fulfillment, and shall not have been waived by the Investor; or

 

(iv) By either the Company or any Investor (with respect to itself only) if the initial Closing has not occurred on or prior to 5:00 p.m., Houston time, on July 25, 2012;  provided, however, that, except in the case of clause (i) above, the party seeking to terminate its obligation to effect the initial Closing shall not then be in breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the other Transaction Documents if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate its obligation to effect the initial Closing.

 

(b) In the event of termination by the Company or any Investor of its obligations to effect the initial Closing pursuant to this Section 6.3, written notice thereof shall forthwith be given to the other Investors and the other Investors shall have the right to terminate their obligations to effect the initial Closing upon written notice to the Company and the other Investors.  Nothing in this Section 6.3 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.

 

7.             Covenants and Agreements of the Company.

 

7.1      Reservation of Preferred Stock and Common Stock.  The Company shall at all times reserve and keep available the following:  (i) out of its authorized but unissued shares of Preferred Stock, solely for the purpose of providing for the conversion of the Notes, such number of shares of Series A Preferred Stock as shall from time to time equal the number of shares sufficient to permit the conversion of the Notes; (ii) out of its authorized but unissued shares of Common Stock, solely for the purpose of providing for the conversion of the Series A Preferred Stock, such number of shares of Common Stock as shall from time to time equal the number of shares sufficient to permit the conversion of the Series A Preferred Stock; and (iii) out of its authorized but unissued shares of Common Stock, solely for the purpose of providing for the exercise of the Warrants, such number of shares of Common Stock as shall from time to time equal the number of shares sufficient to permit the exercise of the Warrants, issued pursuant to this Agreement in accordance with their respective terms.

 

7.2      Reports.  The Company will furnish to the Collateral Agent, promptly after the end of each calendar month, the following: (a) all SEC Filings made by the Company during such calendar month, and (b) all of the information set forth on Schedule II attached hereto.

 

7.3      Other Information.  The Company will furnish to the Investors and/or their assignees such information relating to the Company and any Subsidiaries as from time to time may reasonably be requested by the Investors and/or their assignees; provided, however, that the Company shall not disclose material nonpublic information to the Investors, or to advisors to or representatives of the Investors, unless prior to disclosure of such information the Company identifies such information as being material nonpublic information and provides the Investors and such advisors and representatives with the opportunity to accept or refuse to accept such material nonpublic information for review and any Investor (and any advisors and representatives) wishing to obtain such information enters into an appropriate confidentiality agreement with the Company with respect thereto.

 

  

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7.4      No Conflicting Agreements.  The Company will not take any action, enter into any agreement or make any commitment that would conflict or interfere in any material respect with the Company’s obligations to the Investors under the Transaction Documents.

 

7.5      Compliance with Laws.  The Company will comply in all material respects with all applicable laws, rules, regulations, orders and decrees of all governmental authorities.

 

7.6      Listing of Underlying Shares and Related Matters.  Promptly following the Closing, the Company shall take all necessary action to cause (i) the Warrant Shares and (ii) the Common Stock underlying the Series A Preferred Stock issuable upon conversion of the Notes to be listed on the NASDAQ Stock Market as soon as practicable after the Closing Date.  Further, if the Company applies to have its Common Stock or other securities traded on any other principal stock exchange or market, it shall include in such application the Warrant Shares and the Common Stock underlying the Series A Preferred Stock issuable upon conversion of the Notes, and will take such other action as is necessary to cause such Common Stock to be so listed.  Once approved for listing, the Company will use commercially reasonable efforts to continue the listing and trading of its Common Stock on the NASDAQ Stock Market and, in accordance, therewith, will use commercially reasonable efforts to comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of such market or exchange, as applicable.

 

7.7      DACA.  The Company shall, immediately upon the receipt of Purchase Price proceeds totaling at least $1,000,000 in the aggregate (and in any event not later than 5:00 p.m., Houston, Texas time on the date of Closing), cause an account subject to the DACA to be funded with at least $1,000,000 in immediately available funds.

 

7.8      Termination of Covenants.  The provisions of Sections 7.2, 7.3 and 7.7 shall terminate and be of no further force and effect on the date on which the Company’s obligations under the Convertible Notes have been paid in full or otherwise discharged.

 

7.9      Removal of Legends.  Upon the registration for resale pursuant to the Registration Rights Agreement with respect to the applicable Securities then held by such Investor, the Company shall (A) deliver to the transfer agent for the Common Stock (the “Transfer Agent”) irrevocable instructions that the Transfer Agent shall reissue a certificate representing shares of Common Stock without legends upon receipt by such Transfer Agent of the legended certificates for such shares, together with a statement by the Investor or the Investor’s broker that such Investor has sold the shares of Common Stock represented thereby in accordance with the Plan of Distribution contained in the Registration Statement and, if applicable, in accordance with any prospectus delivery requirements, and (B) cause its counsel to deliver to the Transfer Agent one or more blanket opinions to the effect that the removal of such legends in such circumstances may be effected under the 1933 Act.

 

  

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7.10    HR Compliance.  The Company acknowledges that issuance of the Warrant Shares, Notes, Series A Preferred Stock, or Common Stock underlying the Series A Preferred Stock issuable upon conversion of the Notes to an Investor may subject such Investor to the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”).  As a result, such issuance may be subject to compliance by the Investors with all applicable filing requirements and the expiration of all waiting periods under the HSR Act (the “HSR Act Restrictions”).  If, on or before the expiration of any period of time for an Investor to exercise any right or comply with any obligation with respect to the Warrant Shares, Notes, Series A Preferred Stock, or Common Stock underlying the Series A Preferred Stock issuable upon conversion of the Notes under any Transaction Document or otherwise, such Investor has notified the Company of its inability to exercise such right or comply with such obligation prior to the expiration of such period because of HSR Act Restrictions, such Investor shall be entitled to exercise such right or comply with such obligation without waiver or breach of any Transaction Document, notwithstanding the fact that the exercise of such right or compliance with such obligation would occur after expiration of such period, so long as such Investor uses its reasonable best efforts to comply with the filing requirements of the HSR Act (including its waiting periods) until such time as such Investor exercises such right or complies with such obligation.  The Company will cooperate with each Investor in making all applicable filings under the HSR Act.

 

8.             Survival and Indemnification.

 

8.1      Survival.  The representations, warranties, covenants and agreements contained in this Agreement shall survive the Closing of the transactions contemplated by this Agreement.

 

8.2      Indemnification.  The Company agrees to indemnify and hold harmless each Investor and its Affiliates and their respective directors, officers, employees and agents (collectively, “Indemnified Persons”) from and against any and all losses, claims, damages, liabilities, expenses, penalties, actions, judgments, suits, claims, and disbursements of any kind or nature whatsoever (including without limitation reasonable attorney fees and disbursements and other expenses reasonably incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement thereof) (collectively, “Losses”) (a) arising out of or related to any breach, inaccuracy or non-fulfillment, as applicable, of any representation, warranty, covenant or agreement made by or to be performed on the part of the Company under the Transaction Documents, or (b) incurred in connection with any action or proceeding against the Company or any Indemnified Person arising out of or in connection with the Transaction Documents (or any other document or instrument executed pursuant to the Transaction Documents) or the transactions contemplated in any Transaction Document, other than Losses that are finally determined in such action or proceeding to be primarily or directly a result of (i) the gross negligence of such Indemnified Person; (ii) a breach of a fiduciary duty, if any, owed by such Indemnified Person to the Company; (iii) the willful misconduct or a knowing violation of applicable law by such Indemnified Person; or (iv) a transaction from which such Indemnified Person received an improper personal benefit.  The Company will reimburse any such Indemnified Person for all such amounts as they are incurred by such Person.

 

  

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8.3      Conduct of Indemnification Proceedings.  Promptly after receipt by any Person (the “Indemnified Person”) of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 8.2, such Indemnified Person shall promptly notify the Company in writing and the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person, and shall assume the payment of all fees and expenses; provided, however, that the failure of any Indemnified Person so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that the Company is materially prejudiced by such failure to notify.  In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Company and the Indemnified Person shall have mutually agreed to the retention of such counsel; or (ii) in the reasonable judgment of counsel to such Indemnified Person representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them.  The Company shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, but if settled with such consent, or if there be a final judgment for the plaintiff, the Company shall indemnify and hold harmless such Indemnified Person from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment.  Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such proceeding.

 

9.             Miscellaneous.

 

9.1      Successors and Assigns.  This Agreement may not be assigned by a party hereto without the prior written consent of the Company or the Investors, as applicable; provided, however, that an Investor may assign its rights and delegate its duties hereunder in whole or in part to an Affiliate or to a third party acquiring some or all of its Securities in a private transaction without the prior written consent of the Company or the other Investors, after notice duly given by such Investor to the Company and the Collateral Agent (with such notice to include the assignee’s “Address for Notices” as set forth on the signature pages hereto) provided that no such assignment or obligation shall affect the obligations of such Investor hereunder.  The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

  

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9.2      Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  A signature to this Agreement transmitted electronically shall have the same authority, effect and enforceability as an original signature.

 

9.3      Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

9.4      Notices.  Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or telecopier, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one Business Day after delivery to such carrier.  All notices shall be addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days’ advance written notice to the other party:

 

If to the Company:

Opexa Therapeutics, Inc.

2635 Technology Forest Blvd.

The Woodlands, Texas  77381

Attention:  President

Facsimile:  (281) 872-8585

With a copy to:

Pillsbury Winthrop Shaw Pittman LLP

12255 El Camino Real, Suite 300

San Diego, California  92130

Attention:  Mike Hird, Esq.

Facsimile:  (858) 509-4010

If to the Investors:

 

to the addresses set forth on the signature pages hereto.

 

Each of the Investors agrees to provide prompt written notice to the Collateral Agent and the Company of any change to its applicable notice information set forth on the signature pages hereto.  

 

9.5      Expenses.  The parties hereto shall pay their own costs and expenses in connection herewith; provided, however, that immediately following the initial Closing, the Company shall reimburse Alkek & Williams Ventures, Ltd. (as the lead Investor) for its legal fees and expenses incurred in connection with negotiation the Transaction Documents.  In the event that legal proceedings are commenced by any party to this Agreement against another party to this Agreement in connection with this Agreement or the other Transaction Documents, the party or parties which do not prevail in such proceedings shall severally, but not jointly, pay their pro rata share of the reasonable attorneys’ fees (based upon the relative number of Notes and Warrants purchased hereunder by each Investor) and other reasonable out-of-pocket costs and expenses incurred by the prevailing party in such proceedings.

 

  

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9.6      Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and Investors holding Notes, Warrants and/or shares of Series A Preferred Stock representing at two thirds (66-2/3%) of the Common Stock issuable upon the conversion and/or exercise of all outstanding Notes, Warrants and shares of Series A Preferred Stock.  Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Securities purchased under this Agreement at the time outstanding, each future holder of all such Securities, and the Company.

 

9.7      Publicity.  Except as set forth below, no public release or announcement concerning the transactions contemplated hereby shall be issued by the Company or the Investors without the prior consent of the Company (in the case of a release or announcement by the Investors) or the Investors (in the case of a release or announcement by the Company), which consents shall not be unreasonably withheld, except in the instance of the Company as such release or announcement may be required by law or the applicable rules or regulations of any securities exchange or securities market.  In addition, the Company will make such other filings and notices in the manner and time required by the SEC.  Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Investor, or include the name of any Investor in any filing with the SEC (other than the Registration Statement and any exhibits to filings made in respect of this transaction in accordance with periodic filing requirements under the 1934 Act) or any regulatory agency, without the prior written consent of such Investor, except to the extent such disclosure is required by law or trading market regulations, in which case the Company shall provide the Investors with prior notice of such disclosure.

 

9.8      Severability.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.

 

9.9      Entire Agreement.  This Agreement, including the Exhibits and the Disclosure Schedules, and the other Transaction Documents constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.

 

  

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9.10    Further Assurances.  The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

 

9.11    Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.  This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Texas without regard to the choice of law principles thereof.  Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of Texas located in Harris County and the United States District Court for the Southern District of Texas for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby.  Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement.  Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

9.12    Independent Nature of Investors’ Obligations and Rights.  The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document.  The decision of each Investor to purchase Securities pursuant to the Transaction Documents has been made by such Investor independently of any other Investor.  Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors 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 Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no Investor will be acting as agent of such Investor in connection with monitoring its investment in the Securities or enforcing its rights under the Transaction Documents.  Each Investor 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 Investor to be joined as an additional party in any proceeding for such purpose.

 

[signature pages follow]

 

  

21

  

 

IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

 

 

	 	THE COMPANY:
	 	 	 
	 	
OPEXA THERAPEUTICS, INC.

	 	 	 
	 	 	 
	 	
By:

	 
	 	
Name:  

	Neil K. Warma
	 	
Title:    

	President and Chief Executive Officer

 

[signature page to Note Purchase Agreement]

  

  

  

 

IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

 

 

	 	
THE INVESTORS:

	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	
By:

	 	 	 	 
	 	
Printed Name:

	 	 	 
	 	
Title (if applicable):

	 	 
	 	
Entity Name (if applicable):

	 

 

 

	Aggregate Purchase Price:  	$ 	 	 
	Closing Date (if multiple tranches):	 	 	 

 

 

 

	Address for Notices:  	 	 
	 	 	 
	 	 	 
	 	Attention: 	 	 
	 	Facsimile:  	 	 
	 	Email:     	 	 

 

[signature page to Note Purchase Agreement]

 

  

  

  

 

SCHEDULE I

 

	
Investor

	 	
Principal 

amount of 

Note

	 	 	
Number of 

shares 

subject to Warrant

	 
	
Alkek & Williams Ventures Ltd.

	 	$	500,000	 	 	 	468,750	 
	
Albert and Margaret Alkek Foundation

	 	$	300,000	 	 	 	281,250	 
	
DLD Family Investments, LLC

	 	$	500,000	 	 	 	468,750	 
	
Charles  E. Sheedy

	 	$	250,000	 	 	 	234,375	 
	
George McDaniel

	 	$	200,000	 	 	 	187,500	 
	
Robert & Susan deRose Family Trust 11/16/86

	 	$	100,000	 	 	 	93,750	 
	
David L. Anderson

	 	$	75,000	 	 	 	70,313	 
	
The Arnold Corporation

	 	$	200,000	 	 	 	187,500	 
	
Paul Anthony Jacobs & Nancy E. Jacobs Joint Trust U/A dated 10/16/97

	 	$	100,000	 	 	 	93,750	 
	
J.R. Seward Revocable Trust DTD 11/05/97

	 	$	100,000	 	 	 	93,750	 
	
Mossman Partners LP

	 	$	50,000	 	 	 	46,875	 
	
Arrow Realty, LLC

	 	$	200,000	 	 	 	187,500	 
	
William F. Miller III

	 	$	50,000	 	 	 	46,875	 
	
Tom Juda and Nancy Juda Living Trust

	 	$	300,000	 	 	 	281,250	 
	
JMJ Financial

	 	$	500,000	 	 	 	468,750	 
	
Neil K. Warma

	 	$	15,000	 	 	 	14,063	 
	
David E. Jorden

	 	$	115,000	 	 	 	107,813	 
	
DIT Equity Holdings, LLC

	 	$	100,000	 	 	 	93,750	 
	
Brio Capital L.P.

	 	$	300,000	 	 	 	281,250	 
	
The James P Miscoll Bypass Trust

	 	$	30,000	 	 	 	28,125	 
	
Iroquois Master Fund Ltd.

	 	$	100,000	 	 	 	93,750	 
	  	 	 	 	 	 	 	 	 
	
   Total

	 	$	4,085,000	 	 	 	3,829,688	 

 

  

  

  

 

SCHEDULE II

 

MONTHLY REPORTING OBLIGATIONS

In accordance with Section 7.2(b) of the Agreement, the Company will furnish to Alkek & Williams Ventures, Ltd., a Texas limited partnership (as collateral agent for the Investors), promptly after the end of each calendar month, the following information:

	
1.  

	
Unaudited monthly income statements comparing the Company’s actual performance to its budgeted performance;

	
2.  

	
A bank statement pertaining to the Company’s segregated cash account (minimum $1,000,000), which the Company will use its commercially reasonable efforts to cause the bank to send directly to the Investors;

	
3.  

	
Borrower’s Certificate that includes:

	
a.  

	
A representation from the Company’s Chief Financial Officer that the Company (i) is meeting all of its financial obligations on a timely basis, and (ii) that the Company is not past due on its rent payable under the terms of its real property lease(s), payroll, taxes, insurance, utilities, licensing fees (if any), accounts payable to any of its major suppliers, and equipment leases; and

	
b.  

	
A list of any accounts payable for which the Company is then currently more than thirty (30) days past due.

	
4.  

	
A list of the Company’s non-segregated cash balances.

 

  

  

  

 

EXHIBIT A

 

Form of Note

 

(to be attached)

 

  

  

  

 

EXHIBIT B

 

Form of Certificate of Designation

 

(to be attached)

 

  

  

  

 

EXHIBIT C

 

Form of Series I Warrant

 

(to be attached)

 

  

  

  

EXHIBIT D

 

Form of Registration Rights Agreement

 

(to be attached)

 

  

  

  

EXHIBIT E

 

Form of Security Agreement

 

(to be attached)

 

  

  

  

 

EXHIBIT F

 

Form of Deposit Account Control Agreement

 

(to be attached)

 

  

  

  

 

EXHIBIT G

 

Form of Patent and Trademark Security Agreement

 

(to be attached)

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00206-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00206-of-00352.parquet"}]]