Document:

gtbp_ex104

 

Exhibit 10.4

 

SECURITIES PURCHASE AGREEMENT

 

This
Securities Purchase Agreement (this “Agreement”) is dated as
of_______, 2020, between GT Biopharma, Inc., a Delaware corporation
and includes any successor Company thereto (the “Company”), and each
purchaser identified on the signature pages hereto (each, including
its successors and permitted assigns, a “Purchaser” and
collectively, the “Purchasers”).

 

WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase in not
more than two closings from the Company, securities of the Company
as more fully described in this Agreement (the “Offering”).

 

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

 

ARTICLE I.

DEFINITIONS

 

1.1           Definitions.
In addition to the terms defined elsewhere in this Agreement: (a)
capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Notes (as defined herein), and
(b) the following terms have the meanings set forth in this Section
1.1:

 

“Accredited Investor”
shall have the meaning ascribed to such term in Section
3.2(c).

 

“Acquiring Person” shall
have the meaning ascribed to such term in Section 4.7.

 

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

 

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

 

“Applicable Law” shall
mean any law, rule or regulation of any governmental authority or
jurisdiction applicable to any party to this Agreement, as the case
may be.

 

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

 

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

 

“Buy-In” shall have the
meaning ascribed to such term in Section 4.1(h).

 

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

 

“Closing Date”
means, with respect to any Closing,
the date of such Closing.

 

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

 

 

 

1

 

 

 

 

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

 

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

 

“Conversion Price” shall
have the meaning ascribed to such term in the Notes.

 

“Debentures” means those
certain 10% Senior Convertible Debentures of the Company issued on
August 2, 2018, September 7, 2018, September 24, 2018, May 22,
2019, August 16, 2019, December 18, 2019, January 30, 2020 and the
Senior Convertible Notes issued on February 4, 2019.

 

“DGCL” means the Delaware
General Corporation Law.

 

“Disclosure Schedules”
means the Disclosure Schedules of the Company delivered
concurrently herewith.

 

“Disqualification Event”
shall have the meaning ascribed to such term in Section
3.1(oo).

 

 “Effective
Date” means the earliest of the date that (a) a
Registration Statement has been declared effective by the
Commission with respect to all of the Underlying Shares (as defined
herein) and has been continuously effective for not less than sixty
(60) Business Days, or (b) (i) all of the Underlying Shares have
been sold pursuant to Rule 144, or (ii) may be sold by the holders
thereof (other than Affiliates of the Company) pursuant to Rule 144
without the requirement for the Company to be in compliance with
the current public information required under Rule 144 and without
volume or manner-of-sale restrictions, and (c) Company counsel has
delivered to the Transfer Agent and Purchasers a standing written
unqualified opinion that resales may then be made by such holders
of the Underlying Shares (other than Affiliates of the Company)
pursuant to an effective Registration Statement or the exemption
described in (b)(ii) above, which opinion shall be in form and
substance reasonably acceptable to such Purchasers.

 

“End Date” means the first
date that (i) less than 10% of the aggregate amount of Note
principal is outstanding, and (ii) no Event of Default (as defined
in the Note) nor an event which with the passage of time or the
giving of notice could become an Event of Default is
pending.

 

“Equity Line of Credit”
shall have the meaning ascribed to such term in Section
4.13.

 

 “Event
of Default” shall have the meaning ascribed to such
term in the Note.

 

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

 

 

 

2

 

 

 

 

“Exempt Issuance” means
the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or
option plan duly adopted for such purpose, by a majority of the
non-employee members of the Board of Directors or a majority of the
members of a committee of non-employee directors established for
such purpose and only as disclosed on Schedule 3.1(g), (b) securities
exercisable or exchangeable for or convertible into shares of
Common Stock issued and outstanding on the date of this Agreement,
provided that such securities and any term thereof have not been
amended since the date of this Agreement to increase the number of
such securities or to decrease the issue price, exercise price,
exchange price or conversion price of such securities and which
securities and the principal terms thereof are set forth on
Schedule 3.1(g),
and described in the SEC Reports, (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of
the disinterested directors of the Company, provided that any such
issuance shall only be to a Person (or to the equity holders of a
Person) which is, itself or through its subsidiaries, an operating
company or an owner of an asset in a business synergistic with the
business of the Company and shall be intended to provide to the
Company substantial additional benefits in addition to the
investment of funds, but shall not include a transaction in which
the Company is issuing securities primarily for the purpose of
raising capital or to an entity whose primary business is investing
in securities, (
d) as set forth on Schedule 3.1(g), and (e)
securities issued or issuable to the Purchasers and their assigns
pursuant to this Agreement, the Notes and other Transaction
Documents including without limitation, Section 4.16 and Section
4.22 herein, or upon exercise, conversion or exchange of any such
securities.

 

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

 

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

 

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

 

“G&M” shall mean
Grushko & Mittman, P.C., with offices located at 515 Rockaway
Avenue, Valley Stream, New York 11581, Fax:
212-697-3575.

 

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

 

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

 

 “Issuer
Covered Person” means the Company, any of its
predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the
Offering, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, and any promoter (as that term is
defined in Rule 405 under the Securities Act) connected with the
Company in any capacity at the time of sale.

 

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

 

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

 

“Listing Default” shall
have the meaning ascribed to such term in Section
4.11(b).

 

“Majority in Interest”
shall have the meaning ascribed to such term in Section
5.5.

 

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

 

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

 

“Maximum Rate” shall have
the meaning ascribed to such term in Section 5.17.

 

“Money Laundering
Laws” shall have the
meaning ascribed to such term in Section 3.1(qq).

 

“Notes” means the
convertible notes issuable pursuant to this Agreement, in the form
of Exhibit A
hereto.

 

 

 

3

 

 

 

 

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

 

“Participation Maximum”
shall have the meaning ascribed to such term in Section
4.16(a).

 

“Permitted Indebtedness”
means (a) the Indebtedness evidenced by the Notes and the
Debentures all as set forth on Schedule 3.1(aa), (b) any
liabilities for borrowed money or amounts owed not in excess of
$10,000 in the aggregate (other than trade accounts payable
incurred in the ordinary course of business), (c) all guaranties,
endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be
reflected in the Company’s consolidated balance sheet (or the
notes thereto) not affecting more than $10,000 in the aggregate,
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; (d) the present value of any lease payments not
in excess of $100,000 due under leases required to be capitalized
in accordance with GAAP; and (e) any liabilities for borrowed money
that are junior to the Debentures pursuant to an intercreditor
agreement acceptable to Purchasers, and the holders of which are
not granted any security interest.

 

“Permitted Lien” means the
individual and collective reference to the following: (a) Liens for
taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges
or levies being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith judgment
of the management of the Company) have been established in
accordance with GAAP, (b) Liens imposed by law which were incurred
in the ordinary course of the Company’s business, such as
carriers’, warehousemen’s and mechanics’ Liens,
statutory landlords’ Liens, and other similar Liens arising
in the ordinary course of the Company’s business, and which
(x) do not individually or in the aggregate materially detract from
the value of such property or assets or materially impair the use
thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being contested in good faith
by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the
property or asset subject to such Liens, and (c) Liens in
connection with Permitted Indebtedness under clauses (a), (b) and
(c) thereunder.

 

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

 

“Pre-Notice” shall have
the meaning ascribed to such term in Section 4.16(b).

 

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

 

“Pro-Rata Portion” shall
have the meaning ascribed to such term in Section
4.16(e).

 

 “Public
Information Failure” shall have the meaning ascribed
to such term in Section 4.3(b).

 

“Public Information Failure
Payments” shall have the meaning ascribed to such term
in Section 4.3(b).

 

“Purchaser Party” shall
have the meaning ascribed to such term in Section
4.10.

 

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

 

 

 

4

 

 

 

 

“Registration Statement”
means a registration statement declared effective by the Commission
allowing the public resale of not less than all of the Underlying
Shares by the Purchaser, at the time such registration statement is
effective and the prospectus contained therein is
current.

 

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

 

“Required Minimum” means,
as of any date, 150% of the maximum aggregate number of shares of
Common Stock then issued or potentially issuable in the future
pursuant to the Transaction Documents, including any Underlying
Shares issuable upon conversion in full of all Notes, ignoring any
conversion or exercise limits set forth therein.

 

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

 

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

 

“Securities” means the
Notes and the Underlying Shares.

 

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

 

“Short Sales” means
“short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, swaps and
similar arrangements (including on a total return basis) whether
such transactions are made through U.S. or non-U.S. broker dealers
or foreign regulated brokers. 

 

“Stock Option Plans” means
the Stock Option Plan of the Company in effect as the date of this
Agreement, the principal terms of which have been disclosed in the
SEC Reports.

 

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

 

“Subsequent Financing”
shall have the meaning ascribed to such term in Section
4.16(a).

 

“Subsequent Financing
Notice” shall have the meaning ascribed to such term
in Section 4.16(b).

 

“Subsidiary” means
with respect to any entity at any
date, any direct or indirect Person, limited or general
partnership, limited liability company, trust, estate, association,
joint venture or other business entity of which (A) more than
50% of (i) the outstanding capital stock having (in the
absence of contingencies) ordinary voting power to elect a majority
of the board of directors or other managing body of such entity,
(ii) in the case of a partnership or limited liability
company, the interest in the capital or profits of such partnership
or limited liability company or (iii) in the case of a trust,
estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity
business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such
entity, or (B) is under the actual control of the
Company.

 

 “Termination
Date” means August 31, 2019.

 

 

 

5

 

 

 

 

“Trading Day” means a day
on which the principal Trading Market is open for trading for three
or more hours, or if there is no applicable Trading Market, Trading
Day shall mean Business Day.

 

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

 

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

 

“Transfer Agent” means
Computershare, the current transfer agent of the Company, with a
mailing address of 350 Indiana Street, Suite 800 Golden, Colorado
80401, and a facsimile number of (303) 262-0610, and any successor
transfer agent of the Company.

 

“Underlying Shares” means
the shares of Common Stock issued and issuable upon conversion of
the Notes and issued and issuable in lieu of the cash payment of
interest on the Notes in accordance with the terms of the Notes and
any other shares of Common Stock issued or issuable to a Purchaser
in connection with or pursuant to the Securities or Transaction
Documents.

 

“Unlegended Shares” shall
have the meaning ascribed to such term in Section
4.1(d).

 

“Variable Priced Equity Linked
Instruments” shall have the meaning ascribed to such
term in Section 4.13.

 

“Variable Rate
Transaction” shall have
the meaning ascribed to such term in Section
4.13.

 

  “VWAP”
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b)  if the Common Stock is not then listed
or quoted for trading on a Trading Market but is then reported on
the OTC Pink Marketplace maintained by the OTC Markets Group, Inc.
(or a similar organization or agency succeeding to its functions of
reporting prices), the volume weighted average price of the Common
Stock on the first such facility (or a similar organization or
agency succeeding to its functions of reporting prices), or
(d) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected by
the Company, the fees and expenses of which shall be paid by the
Company.

 

 

ARTICLE II.

PURCHASE AND SALE

 

2.1           Purchase
and Sale of Notes.

 

(a)           Subject
to the terms and conditions of this Agreement, each Purchaser
agrees to purchase and the Company agrees to sell and issue to each
Purchaser at the Closing (as defined below) the principal amount of
Notes of the Company as is set forth opposite such
Purchaser’s name on such Purchaser’s signature page
hereto. The Notes issued to the Purchasers pursuant to this
Agreement (including any notes issued at the Initial Closing and
any Additional Notes, as defined below) shall be referred to in
this Agreement as the “Notes.” Each Note shall
be in the form attached hereto as Exhibit A hereto.

 

 

 

6

 

 

 

 

(b)           The
initial purchase and sale of the Notes shall take place remotely
via the electronic exchange of documents and signatures on the
Business Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligation to pay
the Subscription Amount at such Closing, and (ii) the
Company’s obligations to deliver the Securities to be issued
and sold at such Closing, in each case, have been satisfied or
waived, but in no event later than the tenth Business Day following
the date hereof (such initial closing is referred to herein as the
“Initial
Closing”).

 

(c)           After
the Initial Closing, the Company may sell, in one or more closings
and on the terms and conditions contained in this Agreement, Notes
in the aggregate principal amount of up to $6,000,000
(collectively, the “Additional Notes”), to
one or more purchasers (the “Additional Purchasers”)
reasonably acceptable to the Company, provided that (A) such
subsequent sale is consummated prior to May 31, 2020 (the
“Termination
Date”), or such date as the Company and a Majority in
Interest may mutually agree upon; and (B) each Additional Purchaser
shall become a party to the Transaction Documents by executing and
delivering a counterpart signature page to each of the Transaction
Documents. Signature pages shall be added to this Agreement to
reflect the amount of Additional Notes purchased at each such
closing (an “Additional Closing” and
together with the Initial Closing, each, a “Closing”) and the parties
purchasing such Additional Notes.

 

(d)           At
each Closing, the payment by a Purchaser of such Purchaser’s
Subscription Amount may be made via wire transfer or a certified
check in immediately available funds to the Company.

 

NO
MINIMUM AMOUNT OF NOTES MUST BE SOLD IN ORDER FOR THE COMPANY TO
ACCEPT ANY SUBSCRIPTIONS, AND ALL NET PROCEEDS OF THE OFFERING WILL
BE IMMEDIATELY AVAILABLE FOR COMPANY PURPOSES UPON
CLOSING.

 

2.2           Deliveries.

 

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

 

(i)           this
Agreement duly executed by the Company;

 

(ii)           a
Note with a principal amount as set forth on the signature page
hereto equal to each Purchaser’s Subscription Amount,
registered in the name of such Purchaser;

 

(iii)           the
Registration Rights Agreement duly executed by the
Company;

(iv)           a
certificate executed on behalf of the Company by its Principal
Executive Officer or Chief Executive Officer (each as defined in
the Exchange Act) of the Company, dated as of the Closing Date, in
which such officer shall certify that the conditions set forth in
Section 2.3(b) have
been fulfilled; and

 

(v)           a
certificate executed on behalf of the Company by its
Secretary’s certificate containing (i) copies of the text of
the resolutions by which the corporate action on the part of the
Company necessary to approve this Agreement and the other
Transaction Documents and the transactions and actions contemplated
hereby and thereby, which shall be accompanied by a certificate of
the corporate secretary or assistant corporate secretary of Company
dated as of the Closing Date certifying to the Purchasers that such
resolutions were duly adopted and have not been amended or
rescinded, (ii) an incumbency certificate dated as of the Closing
Date executed on behalf of Company by its corporate secretary or
one of its assistant corporate secretaries certifying the office of
each officer of Company executing this Agreement, or any other
agreement, certificate or other instrument executed pursuant
hereto, and (iii) copies of (A) the Company’s Certificate of
Incorporation and bylaws in effect on the Closing Date, and (B) the
certificate evidencing the good standing of Company as of a day
within five (5) Business Days prior to the Closing
Date.

 

 

7

 

 

 

 

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

 

(i)           this
Agreement duly executed by such Purchaser;

 

(ii)           such
Purchaser’s Subscription Amount;

 

(iii)           Accredited
Investor Questionnaire duly executed by each Purchaser;
and

 

(iv)           the
Registration Rights Agreement duly executed by each
Purchaser.

 

2.3           Closing
Conditions.

 

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

 

(i)           the
accuracy in all material respects (determined without regard to any materiality,
Material Adverse Effect or other similar qualifiers therein)
on the date of this Agreement and the Closing Date of the
representations and warranties of the Purchasers contained herein
(unless as of a specific date therein in which case they shall be
accurate as of such date);

 

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

 

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

 

(b)           The
respective obligations of a Purchaser hereunder to effect the
Closing, unless waived by such Purchaser, are subject to the
following conditions being met:

 

(i)           the
accuracy in all material respects (determined without regard to any materiality,
Material Adverse Effect or other similar qualifiers therein)
on the date of this Agreement and Closing Date of the
representations and warranties of the Company contained herein
(unless as of a specific date therein in which case they shall be
accurate as of such date);

 

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

 

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

 

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

 

 

 

8

 

 

 

 

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

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

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

 

(a)           Subsidiaries.
All of the direct and indirect Subsidiaries of the Company and the
Company’s ownership interests therein are set forth on
Schedule 3.1(a).
The Company owns, directly or indirectly, the capital stock or
other equity interests of each Subsidiary set forth on Schedule 3.1(a), free and clear
of any Liens, and all of the issued and outstanding shares of
capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of pre-emptive and similar rights to
subscribe for or purchase securities.

 

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

 

 

 

9

 

 

 

 

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

 

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

 

(e)           Filings,
Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or
other Person in connection with the execution, delivery and
performance by the Company of the Transaction Documents, other
than: (i) the filings required pursuant to Section 4.6 of this
Agreement, (ii) the notice and/or application(s) to each applicable
Trading Market for the issuance and sale of the Securities and the
listing of the Underlying Shares for trading thereon in the time
and manner required thereby and (iii) the filing of Form D with the
Commission and such filings as are required to be made under
applicable state securities laws (collectively, the
“Required
Approvals”).

 

(f)           Issuance
of the Securities. The Securities are duly authorized and,
when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer provided for in the
Transaction Documents. The Underlying Shares, when issued in
accordance with the terms of the Transaction Documents, will be
validly issued, fully paid and nonassessable, free and clear of all
Liens imposed by the Company other than restrictions on transfer
provided for in the Transaction Documents.

 

 

 

10

 

 

 

 

(g)           Capitalization.
Except as set forth on Schedule 3.1(g), the
Company has not issued any capital stock since its most recently
filed annual report on Form 10-K. Except as set forth on
Schedule 3.1(g), no
Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as
disclosed on Schedule
3.1(g), there are no outstanding options, employee or
incentive stock option plans, warrants, scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to,
or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to
subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of
Common Stock or Common Stock Equivalents. Except as set forth on
Schedule 3.1(g),
the issuance and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) and will not result in a right
of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under any of such securities.
All of the outstanding shares of capital stock of the Company are
duly authorized, validly issued, fully paid and nonassessable, have
been issued in material compliance with all federal and state
securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe
for or purchase securities. Except as contemplated by Section
3.1(e), no further approval or authorization of any stockholder,
the Board of Directors or other Person is required for the issuance
and sale of the Securities and the Company’s compliance with
the terms of the Transaction Documents. There are no stockholders
agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company
is a party or, to the knowledge of the Company, between or among
any of the Company’s stockholders. Except as disclosed on
Schedule 3.1(g),
the Company is not a party to any Variable Rate Transaction and as
of Closing, there will not be outstanding any Equity Line of Credit
nor Variable Priced Equity Linked Instruments as of the
Closing.

 

(h)           SEC
Reports; Financial Statements. Except as set forth on
Schedule 3.1(h),
the Company has filed all reports, schedules, forms, statements and
other documents required to be filed by the Company under the
Securities Act and the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the three years preceding the date
hereof (or such shorter period as the Company was required by law
or regulation to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the
“SEC
Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports
prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act,
as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Company has never
been an issuer subject to Rule 144(i) under the Securities Act. The
financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

 

 

 

11

 

 

 

 

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

 

(j)           Litigation.
Except as set forth in Schedule 3.1(j), there is no
action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an
“Action”) which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has
not been, and to the knowledge of the Company, there is not pending
or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or
the Securities Act.

 

(k)           Labor
Relations. No labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a
Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates
to such employee’s relationship with the Company or such
Subsidiary, and neither the Company nor any of its Subsidiaries is
a party to a collective bargaining agreement, and the Company and
its Subsidiaries believe that their relationships with their
employees are good. To the knowledge of the Company, no executive
officer of the Company or any Subsidiary, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or
any restrictive covenant in favor of any third party, and the
continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. Except as set forth
on Schedule 3.1(k),
the Company and its Subsidiaries are in compliance with all U.S.
federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.

 

(l)           Compliance.
Except as set forth on Schedule 3.1(l), neither the
Company nor any Subsidiary: (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in
violation of any judgment, decree or order of any court, arbitrator
or other governmental authority or (iii) is or has been in
violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material
Adverse Effect.

 

 

 

12

 

 

 

 

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

 

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

 

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

 

(p)           Insurance.
The Company
and each Subsidiary maintain insurance coverage for Product/Human
Clinical Trial Liability, Professional Liability, General
Liability, Property and Directors and Officers.

 

(q)           Transactions
With Affiliates and Employees. Except as set forth in the
SEC Reports and on Schedule 3.1(q), none of the
officers or directors of the Company or any Subsidiary and, to the
knowledge of the Company, none of the employees of the Company or
any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from
providing for the borrowing of money from or lending of money to,
or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $60,000 other than for: (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.

 

 

 

13

 

 

 

 

(r)           Sarbanes-Oxley;
Internal Accounting Controls. The Company and the
Subsidiaries are not in compliance with any and all applicable
requirements of the Sarbanes-Oxley Act of 2002 that are effective
as of the date hereof, and any and all applicable rules and
regulations promulgated by the Commission thereunder that are
effective as of the date hereof and as of the Closing Date. The
Company and the Subsidiaries currently do not maintain a system of
internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.

 

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

 

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

 

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

 

(v)           Registration
Rights. No Person has any right to cause the Company to
effect the registration under the Securities Act of any securities
of the Company or any Subsidiaries other than as set forth on
Schedule
3.1(v).

 

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

 

 

 

14

 

 

 

 

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

 

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

 

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

 

(aa)           Indebtedness.
Schedule 3.1(aa)
sets forth as of the date hereof all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for
which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, “Indebtedness” means (x)
any liabilities for borrowed money or amounts owed in excess of
$10,000 (other than trade accounts payable incurred in the ordinary
course of business), (y) all guaranties, endorsements and other
contingent obligations in respect of indebtedness of others,
whether or not the same are or should be reflected in the
Company’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (z) the present value of any lease payments
in excess of $10,000 due under leases required to be capitalized in
accordance with GAAP.

 

 

 

15

 

 

 

 

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

 

(cc)           Tax
Status. Except as set forth on Schedule 3.1(cc) and for
matters that would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, the
Company and its Subsidiaries each (i) has made or filed all United
States federal, state and local income and all foreign income and
franchise tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and
other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and
declarations and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company or of any Subsidiary
know of no basis for any such claim.

 

(dd)           No
General Solicitation. Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only
to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the
Securities Act.

 

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

 

(ff)           Accountants.
The Company’s accounting firm is set forth on Schedule 3.1(ff) of the
Disclosure Schedules. To the knowledge and belief of the Company,
such accounting firm: (i) is a registered public accounting firm as
required by the Exchange Act and (ii) shall express its opinion
with respect to the financial statements to be included in the
Company’s Annual Report for the fiscal year ending December
31, 2018.

 

 

 

16

 

 

 

 

(gg)           Seniority.
As of the Closing Date, except as set forth on Schedule 3.1(gg), no
Indebtedness or other claim against the Company is senior to the
Debentures and Notes in right of payment, whether with respect to
interest or upon liquidation or dissolution, or otherwise, other
than indebtedness secured by purchase money security interests
(which is senior only as to underlying assets covered thereby) and
capital lease obligations (which is senior only as to the property
covered thereby).

 

(hh)           No
Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the
accountants and lawyers formerly or presently employed by the
Company.

 

(ii)       
     Acknowledgment Regarding
Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm’s length purchaser with
respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities. The
Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.

 

(jj)           Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere
herein to the contrary notwithstanding (except for Sections 3.2(f)
and 4.15 hereof), it is understood and acknowledged by the Company
that: (i) none of the Purchasers has been asked by the Company to
agree, nor has any Purchaser agreed, to desist from purchasing or
selling, long and/or short, securities of the Company, or
“derivative” securities based on securities issued by
the Company or to hold the Securities for any specified term, (ii)
past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing
of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded
securities, (iii) any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser
is a party, directly or indirectly, may presently have a
“short” position in the Common Stock and (iv) each
Purchaser shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any
“derivative” transaction. The Company further
understands and acknowledges that (y) one or more Purchasers may
engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation,
during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and
(z) such hedging activities (if any) could reduce the value of the
existing stockholders' equity interests in the Company at and after
the time that the hedging activities are being conducted.  The
Company acknowledges that such aforementioned hedging activities do
not constitute a breach of any of the Transaction
Documents.

 

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

 

 

 

17

 

 

 

 

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

 

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

 

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

 

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

 

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

 

 

 

18

 

 

 

 

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

 

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

 

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

 

(tt)           Survival.
The foregoing representations and warranties shall survive the
Closing.

 

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

 

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

 

(b)           Understandings
or Arrangements. Such Purchaser understands that the
Securities are “restricted securities” and have not
been registered under the Securities Act or any applicable state
securities law and is acquiring the Securities as principal for its
own account and not with a view to or for distributing or reselling
such Securities or any part thereof in violation of the Securities
Act or any applicable state securities law, has no present
intention of distributing any of such Securities in violation of
the Securities Act or any applicable state securities law and has
no direct or indirect arrangement or understandings with any other
persons to distribute or regarding the distribution of such
Securities in violation of the Securities Act or any applicable
state securities law (this representation and warranty not limiting
such Purchaser’s right to sell the Securities pursuant to any
registration statement or otherwise in compliance with applicable
federal and state securities laws). Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its
business.

 

 

 

19

 

 

 

 

(c)           Purchaser
Status. At the time such Purchaser was offered the
Securities, it was, and as of the date hereof it is, and on each
date on which it converts any Notes it will be either: (i) an
accredited investor (“Accredited Investor”) as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act or (ii) a “qualified institutional
buyer” as defined in Rule 144A(a) under the Securities Act.
Such Purchaser is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act. Such Purchaser has the
authority and is duly and legally qualified to purchase and own the
Securities. Such Purchaser is able to bear the risk of such
investment for an indefinite period and to afford a complete loss
thereof. The information set forth on the signature pages hereto
regarding such Purchaser is true and complete in all respects.
Except as disclosed, such Purchaser has had no position, office or
other material relationship within the past three years with the
Company or Persons (as defined below) known to such Purchaser to be
affiliates of the Company, and is not a member of the Financial
Industry Regulatory Authority or an “associated person”
(as such term is defined under the FINRA Membership and
Registration Rules Section 1011).

 

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

 

(e)           Information
on Company. Such Purchaser has been furnished with or has
had access to the SEC Reports and Disclosure Schedules. Purchasers
are not deemed to have any knowledge of any information not
included in the SEC Reports and Disclosure Schedules unless such
information is delivered in the manner described in the next
sentence.  In addition, such Purchaser may have received
in writing from the Company such other information concerning its
operations, financial condition and other matters as such Purchaser
has requested, identified thereon as OTHER WRITTEN INFORMATION
(such other information is collectively, the “Other Written Information”), and
considered all factors such Purchaser deems material in deciding on
the advisability of investing in the Securities.  Such
Purchaser was afforded (i) the opportunity to ask such questions as
such Purchaser deemed necessary of, and to receive answers from,
representatives of the Company concerning the merits and risks of
acquiring the Securities; (ii) the right of access to information
about the Company and its financial condition, results of
operations, business, properties, management and prospects
sufficient to enable such Purchaser to evaluate the Securities; and
(iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision
with respect to acquiring the Securities.

 

(f)           Compliance
with Securities Act; Reliance on Exemptions. Such Purchaser
understands and agrees that the Securities have not been registered
under the Securities Act or any applicable state securities laws,
by reason of their issuance in a transaction that does not require
registration under the Securities Act, and that such Securities
must be held indefinitely unless a subsequent disposition is
registered under the Securities Act or any applicable state
securities laws or is exempt from such registration. Such Purchaser
understands and agrees that the Securities are being offered and
sold to such Purchaser in reliance on specific exemptions from the
registration requirements of United States federal and state
securities laws and regulations and that the Company is relying in
part upon the truth and accuracy of, and such Purchaser’s
compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth
herein in order to determine the availability of such exemptions
and the eligibility of such Purchaser to acquire the
Securities.

 

 

 

20

 

 

 

 

(g)           Communication
of Offer. Such Purchaser is not purchasing the Securities as
a result of any “general solicitation” or
“general advertising,” as such terms are defined in
Regulation D, which includes, but is not limited to, any
advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media or
on the internet or broadcast over television, radio or the internet
or presented at any seminar or any other general solicitation or
general advertisement.

 

(h)         
No Governmental
Review. Such Purchaser understands that no United States
federal or state agency or any other governmental or state agency
has passed on or made recommendations or endorsement of the
Securities or the suitability of the investment in the Securities
nor have such authorities passed upon or endorsed the merits of the
Offering.

 

(i)           No
Conflicts. The execution, delivery and performance of this
Agreement and performance under the other Transaction Documents and
the consummation by such Purchaser of the transactions contemplated
hereby and thereby or relating hereto or thereto do not and will
not (i) result in a violation of such Purchaser’s charter
documents, bylaws or other organizational documents, if applicable,
(ii) conflict with nor constitute a default (or an event which with
notice or lapse of time or both would become a default) under any
agreement to which such Purchaser is a party, nor (iii) result in a
violation of any law, rule, or regulation, or any order, judgment
or decree of any court or governmental agency applicable to such
Purchaser or its properties (except for such conflicts, defaults
and violations as would not, individually or in the aggregate, have
a material adverse effect on such Purchaser). Such Purchaser is not
required to obtain any consent, authorization or order of, or make
any filing or registration with, any court or governmental agency
in order for it to execute, deliver or perform any of its
obligations under this Agreement or perform under the other
Transaction Documents nor to purchase the Securities in accordance
with the terms hereof, provided that for purposes of the
representation made in this sentence, such Purchaser is assuming
and relying upon the accuracy of the relevant representations and
agreements of the Company herein.

 

(j)           Certain
Transactions and Confidentiality. Other than consummating
the transactions contemplated hereunder, such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or
pursuant to any understanding with such Purchaser, executed any
purchases or sales, including Short Sales, of the securities of the
Company during the period commencing as of the time that such
Purchaser first received a written term sheet from the Company or
any other Person representing the Company setting forth the
material terms of the transactions contemplated hereby and ending
immediately prior to the execution hereof.

 

(k)           Survival.
The foregoing representations and warranties shall survive the
Closing.

 

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

 

 

 

21

 

 

 

 

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1           (a)           Transfer
Restrictions. The Securities may only be disposed of in
compliance with state and federal securities laws. In connection
with any transfer of Securities other than pursuant to an effective
registration statement or Rule 144, to the Company or to an
Affiliate of a Purchaser or in connection with a pledge as
contemplated in Section 4.1(c), the Company may require the
transferor thereof to provide to the Company, at the
Company’s expense, an opinion of counsel selected by the
transferor and reasonably acceptable to the Company, the form and
substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities
Act. As a condition of such transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and
shall have the rights and obligations of a Purchaser under this
Agreement and the other Transaction Documents.

 

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

 

[NEITHER] THIS
SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY [AND THE SECURITIES
ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN ACCREDITED INVESTOR AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

 

(c)           Pledge.
The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
Accredited Investor and who agrees to be bound by the provisions of
this Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledge or secure
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are
subject to registration pursuant to Section 4.26 hereof, the
preparation and filing of any required prospectus supplement under
Rule 424(b)(3) under the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of
selling stockholders thereunder.

 

 

 

22

 

 

 

 

(d)           Legend
Removal. Certificates evidencing the Underlying Shares shall
not contain any legend (“Unlegended
Shares”) (including the legend set forth in Section
4.1(b) hereof): (i) while a registration statement covering the
resale of such security is effective under the Securities Act, (ii)
following any sale of such Underlying Shares pursuant to Rule 144,
(iii) if such Underlying Shares are eligible for sale under Rule
144 (in the case of a non-Affiliate of the Company), without the
requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Underlying
Shares and without volume or manner-of-sale restrictions or (iv) if
such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company
shall cause its counsel, at the expense of the Company, to issue a
legal opinion to the Transfer Agent promptly after the Effective
Date if required by the Transfer Agent to effect the removal of the
legend hereunder. If all or any Notes are converted at a time when
there is an effective registration statement to cover the resale of
the Underlying Shares, or if such Underlying Shares may be sold
under Rule 144 or if such legend is not otherwise required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission) then such Underlying Shares shall be issued free of all
legends. The Company agrees that following such time as such legend
is no longer required under this Section 4.1(c), it will, no later
than two (2) Trading Days following the delivery by a Purchaser to
the Company or the Transfer Agent of a certificate representing
Underlying Shares, as applicable, issued with a restrictive legend
(such second (2nd) Trading Day, the
“Legend Removal
Date”), deliver or cause to be delivered to such
Purchaser a certificate representing such shares that is free from
all restrictive and other legends. The Company may not make any
notation on its records or give instructions to the Transfer Agent
that enlarge the restrictions on transfer set forth in this Section
4. Certificates for Underlying Shares subject to legend removal
hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime
broker with the Depository Trust Company System as directed by such
Purchaser.

 

(e)           Legend
Removal Default. In addition to such Purchaser’s other
available remedies, provided the conditions for legend removal set
forth in Section 4.1(d) exist, the Company shall pay to a
Purchaser, in cash, as partial liquidated damages and not as a
penalty, for each $1,000 of Underlying Shares (based on the higher
of the actual purchase price or VWAP of the Common Stock on the
date such Securities are submitted to the Transfer Agent) delivered
for removal of the restrictive legend and subject to Section
4.1(d), $10 per Trading Day for each Trading Day after the Legend
Removal Date (increasing to $20 per Trading Day after the fifth
Trading Day) until such certificate is delivered without a legend.
Nothing herein shall limit such Purchaser’s right to pursue
actual damages for the Company’s failure to deliver
certificates representing any Securities as required by the
Transaction Documents, and such Purchaser shall have the right to
pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or
injunctive relief.

 

(f)           DWAC.
In lieu of delivering physical certificates representing the
Unlegended Shares, upon request of a Purchaser, so long as the
certificates therefor do not bear a legend and the Purchaser is not
obligated to return such certificate for the placement of a legend
thereon, the Company shall cause its transfer agent to
electronically transmit the Unlegended Shares by crediting the
account of Purchaser’s prime broker with the Depository Trust
Company through its Deposit Withdrawal At Custodian system,
provided that the Company’s Common Stock is DTC eligible and
the Company’s transfer agent participates in the Deposit
Withdrawal at Custodian system. Such delivery must be made on or
before the Legend Removal Date.

 

(g)           Injunction.
In the event a Purchaser shall request delivery of Unlegended
Shares as described in this Section 4.1 and the Company is required
to deliver such Unlegended Shares, the Company may not refuse to
deliver Unlegended Shares based on any claim that such Purchaser or
anyone associated or affiliated with such Purchaser has not
complied with Purchaser’s obligations under the Transaction
Documents, or for any other reason, unless, an injunction or
temporary restraining order from a court, on notice, restraining
and or enjoining delivery of such Unlegended Shares shall have been
sought and obtained by the Company and the Company has posted a
surety bond for the benefit of such Purchaser in the amount of the
greater of (i) 120% of the amount of the aggregate purchase price
of the Underlying Shares to be subject to the injunction or
temporary restraining order, or (ii) the VWAP of the Common Stock
on the Trading Day before the issue date of the injunction
multiplied by the number of Unlegended Shares to be subject to the
injunction, which bond shall remain in effect until the completion
of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Purchaser to the extent Purchaser obtains
judgment in Purchaser’s favor.

 

 

 

23

 

 

 

 

(h)           Buy-In.
In addition to any other rights available to Purchaser, if the
Company fails to deliver to a Purchaser Unlegended Shares as
required pursuant to this Agreement and after the Legend Removal
Date the Purchaser, or a broker on the Purchaser’s behalf,
purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by such Purchaser
of the shares of Common Stock which the Purchaser was entitled to
receive in unlegended form from the Company (a
“Buy-In”),
then the Company shall promptly pay in cash to the Purchaser (in
addition to any remedies available to or elected by the Purchaser)
the amount, if any, by which (A) the Purchaser’s total
purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (B) the aggregate
purchase price of the shares of Common Stock delivered to the
Company for reissuance as Unlegended Shares together with interest
thereon at a rate of 15% per annum accruing until such amount and
any accrued interest thereon is paid in full (which amount shall be
paid as liquidated damages and not as a penalty). For example, if a
Purchaser purchases shares of Common Stock having a total purchase
price of $11,000 to cover a Buy-In with respect to $10,000 of
purchase price of Underlying Shares delivered to the Company for
reissuance as Unlegended Shares, the Company shall be required to
pay the Purchaser $1,000, plus interest, if any. The Purchaser
shall provide the Company written notice indicating the amounts
payable to the Purchaser in respect of the
Buy-In.

 

4.2           Acknowledgment
of Dilution. The Company acknowledges that the issuance of
the Securities may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain
market conditions. The Company further acknowledges that its
obligations under the Transaction Documents, including, without
limitation, its obligation to issue the Underlying Shares pursuant
to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or
reduction, regardless of the effect of any such dilution or any
claim the Company may have against any Purchaser and regardless of
the dilutive effect that such issuance may have on the ownership of
the other stockholders of the Company.

 

4.3           Furnishing
of Information; Public Information.

 

(a)           Until
no Purchaser owns Securities, the Company covenants to file all
periodic reports with the Commission pursuant to the Exchange Act
and maintain the registration of the Common Stock under Section
12(b) or 12(g) of the Exchange Act after such time as the Company
initially becomes subject to such requirements and to timely file
(or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act and
timely file all reports that would be required to be filed by an
issuer subject to Section 12(b) or 12(g) of the Exchange Act even
if the Company is not then subject to the reporting requirements of
the Exchange Act.

 

(b)           At
any time commencing on the Closing Date, and ending at such time
that all of the Securities may be sold by non-Affiliates of the
Company without the requirement for the Company to be in compliance
with Rule 144(c)(1) and otherwise without restriction or limitation
pursuant to Rule 144, if the Company shall fail for any reason to
satisfy the current public information requirement under Rule
144(c) (a “Public Information Failure”) then, in
addition to such Purchaser’s other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated
damages and not as a penalty, by reason of any such delay in or
impairment of its ability to sell the Securities, an amount in cash
equal to 2.0% of the aggregate principal amount of Notes
outstanding and accrued interest thereon, and aggregate Conversion
Price of Underlying Shares (with respect to the Notes) held by such
Purchaser on the day of a Public Information Failure and on every
thirtieth (30th) day (pro-rated for periods totaling less than
thirty days) thereafter until the earlier of (a) the date such
Public Information Failure is cured and (b) such time that such
public information is no longer required for the Purchasers to
transfer the Underlying Shares pursuant to Rule 144. The payments
to which a Purchaser shall be entitled pursuant to this Section
4.3(b) are referred to herein as “Public Information Failure
Payments.” Public Information Failure Payments shall
be paid on the earlier of (i) the last day of the calendar month
during which such Public Information Failure Payments are incurred
and (ii) the third (3rd) Business Day after the event or failure
giving rise to the Public Information Failure Payments is cured. In
the event the Company fails to make Public Information Failure
Payments in a timely manner, such Public Information Failure
Payments shall bear interest at the rate of 1.5% per month
(prorated for partial months) until paid in full. Nothing herein
shall limit such Purchaser’s right to pursue actual damages
for the Public Information Failure, and such Purchaser shall have
the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief.

 

 

 

24

 

 

 

 

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

 

4.5           Conversion
Procedures. The form of Notice of Conversion included in the
Notes set forth the totality of the procedures required of the
Purchasers in order to convert the Notes. No additional legal
opinion, other information or instructions shall be required of the
Purchasers to convert their Notes. The Company shall honor
conversions of the Notes and shall deliver Underlying Shares in
accordance with the terms, conditions and time periods set forth in
the Transaction Documents.

 

4.6           Securities
Laws Disclosure; Publicity. The Company shall, by 9:30 a.m.
(New York City time) on the first Trading Day following each
Closing Date, file a Current Report on Form 8-K including the
Transaction Documents as exhibits thereto with the Commission
within the time required by the Exchange Act (“Form 8-K”). From and
after the filing of the Form 8-K, the Company represents to the
Purchaser that it shall have publicly disclosed all material,
non-public information delivered to the Purchaser by the Company or
any of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. The Company and
Purchaser shall consult with each other in issuing any press
releases with respect to the transactions contemplated hereby, and
neither the Company nor Purchaser shall issue any press release nor
otherwise make any such public statement without the prior consent
of the Company, with respect to any press release of Purchaser, or
without the prior consent of Purchaser, with respect to any press
release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law,
in which case the disclosing party shall promptly provide the other
party with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not publicly
disclose the name of Purchaser, or include the name of Purchaser in
any filing with the Commission or any regulatory agency or Trading
Market unless the name of Purchaser is already included in the body
of the Transaction Documents, without the prior written consent of
Purchaser, except: (a) as required by federal securities law in
connection with the filing of final Transaction Documents with the
Commission and (b) to the extent such disclosure is required by law
or Trading Market regulations, in which case the Company shall
provide the Purchaser with prior notice of such disclosure
permitted under this clause (b). The Company may file a Form 10-Q
in lieu of the Form 8-K provided such filing contains the content
required to be included in the Form 8-K and the Form 10-Q is filed
not later than the Trading Day after the Closing Date.

 

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

 

 

 

25

 

 

 

 

4.8           Non-Public
Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction
Documents and as required hereunder, the Company covenants and
agrees that neither it, nor any other Person acting on its behalf,
will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material
non-public information, unless prior thereto such Purchaser shall
have entered into a written agreement with the Company regarding
the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on
the foregoing covenant in effecting transactions in securities of
the Company.

 

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

 

4.10           Indemnification
of Purchasers. Subject to the provisions of this Section
4.10, the Company will indemnify and hold each Purchaser and its
directors, officers, shareholders, members, partners, employees and
agents (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such
title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with
a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such
controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to
(a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against
Purchaser Parties in any capacity, or any of them or their
respective Affiliates, by any stockholder of the Company who is not
an Affiliate of such Purchaser Party, with respect to any of the
transactions contemplated by the Transaction Documents (unless such
action is based upon a breach of such Purchaser Party’s
representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party
may have with any such stockholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct
by such Purchaser Party which constitutes fraud, gross negligence,
willful misconduct or malfeasance). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have
the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing,
(ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of counsel, a material conflict
on any material issue between the position of the Company and the
position of such Purchaser Party, in which case the Company shall
be responsible for the reasonable fees and expenses of no more than
one such separate counsel. The Company will not be liable to any
Purchaser Party under this Agreement (y) for any settlement by a
Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or
(z) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party’s
breach of its material representations, warranties or covenants
under the Transaction Documents. The indemnification required by
this Section 4.10 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and
when bills are received or are incurred. The indemnity agreements
contained herein shall be in addition to any cause of action or
similar right of any Purchaser Party against the Company or others
and any liabilities the Company may be subject to pursuant to
law.

 

 

 

26

 

 

 

 

4.11           Reservation
and Listing of Securities.

 

(a)          As
of the date hereof, the Company, ignoring any conversion or
exercise limitations, has reserved for each Purchaser and the
Company shall continue to reserve and keep available at all times,
the “Required Minimum”, free of pre-emptive
rights. If, on any date, the number of authorized but
unissued (and otherwise unreserved) shares of Common Stock is less
than the Required Minimum on such date (an “Authorized Share
Failure”), then the Board of Directors shall use
commercially reasonable efforts to amend the Company’s
articles of incorporation to increase the number of authorized but
unissued shares of Common Stock to at least the Required Minimum
plus such other amount as may be required for the Company’s
other purposes, and reserve the Required Minimum on behalf of the
Purchaser, as soon as possible and in any event not later than the
60th day
after such date. Notwithstanding the foregoing, the occurrence of
an Authorized Share Failure is an Event of Default.

 

(b)          The
Company shall, if applicable: (i) in the time and manner required
by the principal Trading Market, prepare and file with such Trading
Market an additional shares listing application covering a number
of shares of Common Stock at least equal to the Required Minimum on
the date of such application, (ii) take all steps necessary to
cause such shares of Common Stock to be approved for listing or
quotation on such Trading Market as soon as possible thereafter,
(iii) provide to the Purchasers evidence of such listing or
quotation and (iv) maintain the listing or quotation of such Common
Stock on any date at least equal to the Required Minimum on such
date on such Trading Market or another Trading Market. The Company will then take all action necessary to
continue the listing or quotation and trading of its Common Stock
on a Trading Market until the later of (i) at least six (6) years
after the Closing Date, and (ii) for so long as the Notes are
outstanding, and will comply in all respects with the
Company’s reporting, filing and other obligations under the
bylaws or rules of the Trading Market. In the event the
aforedescribed listing is not continuously maintained for six (6)
years after the Closing Date and for so long as Notes are
outstanding (a “Listing Default”), then
in addition to any other rights the Purchasers may have hereunder
or under applicable law, on the first day of a Listing Default and
on each monthly anniversary of each such Listing Default date (if
the applicable Listing Default shall not have been cured by such
date) until the applicable Listing Default is cured, the Company
shall pay to each Purchaser an amount in cash, as partial
liquidated damages and not as a penalty, equal to 2% of the
aggregate Subscription Amount of Notes, and Conversion Price of the
Conversion Shares held by such Purchaser on the day of a Listing
Default and on every thirtieth day (pro-rated for periods less than
thirty days) thereafter until the date such Listing Default is
cured. If the Company fails to pay any liquidated damages pursuant
to this Section in a timely manner, the Company will pay interest
thereon at a rate of 1.5% per month (pro-rated for partial months)
to the Purchaser.

 

4.12           Form
D; Blue Sky Filings. The Company agrees to timely file a
Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof, promptly upon request of any
Purchaser. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption
for, or to qualify the Securities for, sale to the Purchasers at a
Closing under Applicable Law, including “Blue Sky” laws
of the states of the United States, and shall provide evidence of
such actions promptly upon request of any Purchaser.

 

 

 

27

 

 

 

 

4.13           Subsequent
Equity Sales. From the date hereof until the End Date, the
Company and each Subsidiary will not, without the consent of a
Majority in Interest, enter into any Equity Line of Credit or
similar agreement, issue or agree to issue floating or Variable
Priced Equity Linked Instruments nor issue or agree to issue any of
the foregoing or equity with price reset rights (subject to
adjustment for stock splits, distributions, dividends,
recapitalizations and the like) (collectively, a
“Variable Rate
Transaction”). For purposes hereof,
“Equity Line of
Credit” shall include any transaction involving a
written agreement between the Company and an investor or
underwriter whereby the Company has the right to “put”
its securities to the investor or underwriter over an agreed period
of time and at an agreed price or price formula, and
“Variable Priced
Equity Linked Instruments” shall include: (A) any debt
or equity securities which are convertible into, exercisable or
exchangeable for, or carry the right to receive additional shares
of Common Stock or Common Stock Equivalents or any of the foregoing
at a price that can be reduced either (1) at any conversion,
exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for Common Stock at
any time after the initial issuance of such debt or equity
security, or (2) with a fixed conversion, exercise or exchange
price that is subject to being reset at some future date at any
time after the initial issuance of such debt or equity security due
to a change in the market price of the Company’s Common Stock
since date of initial issuance, or upon the issuance of any debt,
equity or Common Stock Equivalent, and (B) any amortizing
convertible security which amortizes prior to its maturity date,
where the Company is required or has the option to (or any investor
in such transaction has the option to require the Company to) make
such amortization payments in shares of Common Stock which are
valued at a price that is based upon and/or varies with the trading
prices of or quotations for Common Stock at any time after the
initial issuance of such debt or equity security (whether or not
such payments in stock are subject to certain equity conditions).
 For purposes of determining the total consideration for a
convertible instrument (including a right to purchase equity of the
Company) issued, subject to an original issue or similar discount
or which principal amount is directly or indirectly increased after
issuance, the consideration will be deemed to be the actual net
cash amount received by the Company in consideration of the
original issuance of such convertible instrument. Until the End
Date, the Company will not, without the consent of a Majority in
Interest, issue any Common Stock or Common Stock Equivalents nor
issue or amend the terms of any securities or Common Stock
Equivalents or of any agreement outstanding or in effect as of the
date of this Agreement pursuant to which same were or may be
acquired without the consent of a Majority in Interest, if the
result of such issuance or amendment would be at an effective price
per share of Common Stock less than the Conversion Price in effect
at the time of such issuance or amendment; all subject to
adjustment as described in Section 5.23 hereof. The restrictions
and limitations in this Section 4.13 are in addition to and shall
apply whether or not a Purchaser exercises its rights pursuant to
Section 4.16 and Section 4.22.

 

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

 

4.15           Capital
Changes. Until the one (1) year anniversary of the Closing
Date, the Company shall not undertake a reverse or forward stock
split or reclassification of the Common Stock without five (5) days
prior written notice to the Purchasers. In no event will the
Company increase the par value of the Common Stock to an amount
greater than the Conversion Price, then in effect.

 

4.16           Participation
in Future Financing.

 

 

 

28

 

 

 

 

(a)          Until
the End Date, upon any proposed issuance by the Company or any of
its Subsidiaries of Common Stock, Common Stock Equivalents,
Indebtedness or a combination thereof, other than (i) a rights
offering to all holders of Common Stock which does not include
extending such rights offering to holders of Notes, or (ii) an
Exempt Issuance (each a “Subsequent Financing”),
the Purchasers shall have the right to participate in up to an
amount of the Subsequent Financing equal to 100% of the Subsequent
Financing (the “Participation Maximum”)
pro rata to each other in proportion to their Subscription Amounts
on the same terms, conditions and price provided for in the
Subsequent Financing, unless the Subsequent Financing is an
underwritten public offering, in which case the Company shall
notify each Purchaser of such public offering when it is lawful for
the Company to do so, but no Purchaser shall be entitled to
purchase any particular amount of such public offering without the
approval of the lead underwriter of such underwritten public
offering.

 

(b)          At
least ten (10) Trading Days prior to the closing of the Subsequent
Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing
(“Pre-Notice”), which
Pre-Notice shall ask such Purchaser if it wants to review the
details of such financing (such additional notice, a
“Subsequent
Financing Notice”). Upon the request of a Purchaser,
and only upon a request by such Purchaser, for a Subsequent
Financing Notice, the Company shall promptly, but no later than one
(1) Trading Day after such request, deliver a Subsequent Financing
Notice to such Purchaser. The requesting Purchaser shall be deemed
to have acknowledged that the Subsequent Financing Notice may
contain material non-public information. The Subsequent Financing
Notice shall describe in reasonable detail the proposed terms of
such Subsequent Financing, the amount of proceeds intended to be
raised thereunder and the Person or Persons through or with whom
such Subsequent Financing is proposed to be effected and shall
include a term sheet or similar document relating thereto as an
attachment.

 

(c)          Any
Purchaser desiring to participate in such Subsequent Financing must
provide written notice to the Company by not later than 5:30 p.m.
(New York City time) on the tenth (10th) Trading Day after
all of the Purchasers have received the Pre-Notice that the
Purchaser is willing to participate in the Subsequent Financing,
the amount of such Purchaser’s participation, and
representing and warranting that such Purchaser has such funds
ready, willing, and available for investment on the terms set forth
in the Subsequent Financing Notice. If the Company receives no such
notice from a Purchaser as of such tenth (10th Trading Day, such
Purchaser shall be deemed to have notified the Company that it does
not elect to participate.

 

(d)          If
by 5:30 p.m. (New York City time) on the fifteenth (15th ) Trading Day after
all of the Purchasers have received the Pre-Notice, notifications
by the Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to participate)
is, in the aggregate, less than the total amount of the
Participation Maximum of the Subsequent Financing, then the Company
may affect the remaining portion of such Subsequent Financing on
the terms and with the Persons set forth in the Subsequent
Financing Notice and the Purchasers shall simultaneously affect
their portion of such Subsequent Financing as set forth in their
notifications to the Company consistent with the terms set forth in
the Subsequent Financing Notice.

 

(e)          If
by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after
all of the Purchasers have received the Pre-Notice, the Company
receives responses to a Subsequent Financing Notice from Purchasers
seeking to purchase more than the aggregate amount of the
Participation Maximum, each such Purchaser shall have the right to
purchase its Pro Rata Portion (as defined below) of the
Participation Maximum.  “Pro Rata Portion” means
the ratio of (x) the principal amount of Notes purchased hereunder
by a Purchaser participating under this Section 4.16 and (y) the
sum of the aggregate principal amounts of Notes purchased hereunder
by all Purchasers participating under this Section
4.16.

 

 

 

29

 

 

 

 

(f)          The
Company must provide the Purchasers with a second Subsequent
Financing Notice, and the Purchasers will again have the right of
participation set forth above in this Section 4.16, if the
Subsequent Financing subject to the initial Subsequent Financing
Notice is not consummated for any reason on the terms set forth in
such Subsequent Financing Notice within sixty (60) Trading Days
after the date of the initial Subsequent Financing
Notice.

 

(g)          The
Company and each Purchaser agree that if any Purchaser elects to
participate in the Subsequent Financing, the transaction documents
related to the Subsequent Financing shall not include any term or
provision whereby such Purchaser shall be required to agree to any
restrictions on trading as to any of the Securities purchased
hereunder (for avoidance of doubt, the securities purchased in the
Subsequent Financing shall not be considered securities purchased
hereunder) or be required to consent to any amendment to or
termination of, or grant any waiver, release or the like under or
in connection with, this Agreement, without the prior written
consent of such Purchaser.

 

(h)          Notwithstanding
anything to the contrary in this Section 4.16 and unless otherwise
agreed to by such Purchaser, the Company shall either confirm in
writing to such Purchaser that the transaction with respect to the
Subsequent Financing has been abandoned or shall publicly disclose
its intention to issue the securities in the Subsequent Financing,
in either case in such a manner such that such Purchaser will not
be in possession of any material, non-public information, by the
seventeenth (17th) Trading Day
following delivery of the Subsequent Financing Notice. If by such
seventeenth (17th) Trading Day, no
public disclosure regarding a transaction with respect to the
Subsequent Financing has been made, and no notice regarding the
abandonment of such transaction has been received by such
Purchaser, such transaction shall be deemed to have been abandoned
and such Purchaser shall not be deemed to be in possession of any
material, non-public information with respect to the Company or any
of its Subsidiaries.

 

4.17           Purchaser’s
Exercise Limitations. The Company shall not effect exercise
of the rights granted in Sections 4.16 and 4.22 of this Agreement,
and a Purchaser shall not have the right to exercise any portion of
such rights granted in Sections 4.16 and 4.22 only to the extent
that after giving effect to such exercise, the Purchaser, would
beneficially own in excess of the Beneficial Ownership Limitation
(as defined in the Note), applied in the manner set forth in the
Note. In such event the right by Purchaser to benefit from such
rights or receive shares in excess of the Beneficial Ownership
Limitation shall be held in abeyance until such times as such
excess shares shall not exceed the Beneficial Ownership Limitation,
provided the Purchaser complies with the Purchaser’s other
obligations in connection with the exercise by Purchaser of its
rights pursuant to Sections 4.16 and 4.22, and with respect to
Section 4.16, provided that the Company receives the purchase price
for any purchased securities in compliance with the terms of such
Subsequent Financing.

 

4.18           Maintenance
of Property/Insurance. The Company shall and shall cause
each Subsidiary to keep all of its property, which is necessary or
useful to the conduct of its business, in good working order and
condition, ordinary wear and tear excepted and insured by insurers
of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary for the
businesses of the Company and Subsidiary.

 

4.19           Preservation
of Corporate Existence. The Company shall preserve and
maintain its corporate existence, rights, privileges and franchises
in the jurisdiction of its incorporation, and qualify and remain
qualified, as a foreign entity in each jurisdiction in which such
qualification is necessary in view of its business or operations
and where the failure to qualify or remain qualified might
reasonably have a Material Adverse Effect upon the financial
condition, business or operations of the Company taken as a
whole.

 

 

 

30

 

 

 

 

4.20           
DTC
Program. At all times that
Notes are outstanding after the listing required by Section 4.11(b)
is completed, the Company shall employ as the transfer agent for
its Common Stock and Underlying Shares a participant in the
Depository Trust Company Automated Securities Transfer Program and
cause the Common Stock and Underlying Shares to be transferable
pursuant to such program.

 

4.21           
Reimbursement. If
any Purchaser becomes involved in any capacity in any Proceeding by
or against any Person who is a stockholder of the Company (except
as a result of sales, pledges, margin sales and similar
transactions by such Purchaser to or with any current stockholder),
solely as a result of such Purchaser’s acquisition of the
Securities under this Agreement, the Company will reimburse such
Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection
therewith) incurred in connection therewith, as such expenses are
incurred. The reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company
may otherwise have, shall extend upon the same terms and conditions
to any Affiliates of the Purchasers who are actually named in such
action, proceeding or investigation, and partners, directors,
agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, the Purchasers and any
such Affiliate and any such Person. The Company also agrees that
neither the Purchasers nor any such Affiliates, partners,
directors, agents, employees or controlling persons shall have any
liability to the Company or any Person asserting claims on behalf
of or in right of the Company solely as a result of acquiring the
Securities under this Agreement.

 

4.22           
Most Favored Nation
Provision. From the date hereof and for so long as a
Purchaser holds any Securities, in the event that the Company
issues or sells any Common Stock or Common Stock Equivalents, if a
Purchaser then holding outstanding Securities reasonably believes
that any of the terms and conditions appurtenant to such issuance
or sale are more favorable to such investors than are the terms and
conditions granted to the Purchasers hereunder, upon notice to the
Company by such Purchaser within five (5) Trading Days after
disclosure of such issuance or sale, the Company shall amend the
terms of this transaction as to such Purchaser only so as to give
such Purchaser the benefit of such more favorable terms or
conditions. This Section 4.22 shall not apply with respect to an
Exempt Issuance. The Company shall provide each Purchaser with
notice of any such issuance or sale not later than ten (10) Trading
Days before such issuance or sale.

 

4.23           
Indebtedness. For
so long as any Note is outstanding, the Company will not incur any
Indebtedness other than Permitted Indebtedness.

 

4.24           
Notice of Disqualification
Events. The Company will notify the Purchasers in writing,
prior to the Closing Date of (i) any Disqualification Event
relating to any Issuer Covered Person and (ii) any event that
would, with the passage of time, become a Disqualification Event
relating to any Issuer Covered Person not otherwise disclosed
herein or in the SEC Reports.

 

4.25           
Duration of
Undertakings. Unless otherwise stated in this Article IV,
all of the Company’s undertakings, obligations and
responsibilities set forth in Article IV of this Agreement shall
remain in effect for so long as any Securities remain
outstanding.

 

4.26           
Registration
Rights. On or before the 30th calendar day
following the Initial Closing, the Company shall file a
registration statement on Form S-1 (the “Resale S-1”) providing
for the resale by the Purchasers of the Underlying Shares
determinable as of the date such registration statement is first
filed (or such lesser number of Underlying Shares as permitted by
the SEC) pursuant to the terms of the Registration Rights
Agreement.

 

 

 

31

 

 

ARTICLE V.

MISCELLANEOUS

 

5.1      
  Termination.  This
Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the other parties, if the final
Closing has not been consummated on or before August 31, 2019;
provided,
however, that such
termination will not affect the right of any party to sue for any
breach by any other party (or parties).

 

5.2           Fees
and Expenses. At the Closing, the Company has agreed to pay
G&M for the legal fees in connection with G&M’s
representation of Alpha Capital Anstalt (and no other Purchasers
except in connection with the Escrow Agreement) in the amount of
$28,500. Except as expressly set forth in the Transaction Documents
and on Schedule
3.1(s), each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all
other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.
The Company shall pay all Transfer Agent fees (including, without
limitation, any fees required for same-day processing of any
instruction letter delivered by the Company and any conversion or
exercise notice delivered by a Purchaser), stamp taxes and other
taxes and duties levied in connection with the delivery of any
Securities to the Purchasers. All of the Purchasers acknowledge
that they have been advised to seek the advice of their own
attorneys.

 

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

 

5.4           Notices.
All notices, demands, requests,
consents, approvals, and other communications required or permitted
hereunder shall be in writing and, unless otherwise specified
herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below or to such other address as
such party shall have specified most recently by written notice.
Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or
delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be: (i) if to
the Company, to: GT Biopharma, Inc., 9350 Wilshire Blvd, Suite 203,
Beverly Hills, CA 90212, Attn: Chief Executive Officer, with a copy
to (which shall not constitute notice): Gary R. Henrie, Esq., P.O.
Box 107, Nauvoo, IL 62354, email: grhlaw@hotmail.com, and
(ii) if to the Purchasers, to: the addresses and fax numbers
indicated on the signature pages hereto.

 

5.5           Amendments;
Waivers. No provision of this Agreement or any other
Transaction Document may be waived, modified, supplemented or
amended except in a written instrument signed, in the case of an
amendment, by the Company and the Purchasers holding at least a
majority in interest of the affected Securities then outstanding
or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought. No waiver of any default
with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.

 

 

 

32

 

 

 

 

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

 

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

 

5.8           No
Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as
otherwise set forth in Section 4.10.

 

5.9     
   Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto
or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any action, suit or
proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or
proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law. If either party shall
commence an action or proceeding to enforce any provisions of the
Transaction Documents, then, in addition to the obligations of the
Company under Section 4.10, the prevailing party in such action,
suit or proceeding shall be reimbursed by the other party for its
reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of
such action or proceeding.

 

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

 

 

 

33

 

 

 

 

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

 

5.13           Rescission
and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions
of) any of the other Transaction Documents, whenever any Purchaser
exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related
obligations within the periods therein provided, then such
Purchaser may, at any time prior to the Company’s performance
of such obligations, rescind or withdraw, in its sole discretion
from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to
its future actions and rights; provided, however, that in the case of a
rescission of a conversion of a Note, the applicable Purchaser
shall be required to return any shares of Common Stock subject to
any such rescinded conversion.

 

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

 

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

 

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

 

5.17           Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any claim, action or
proceeding that may be brought by any Purchaser in order to enforce
any right or remedy under any Transaction Document. Notwithstanding
any provision to the contrary contained in any Transaction
Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for
payments in the nature of interest shall not exceed the maximum
lawful rate authorized under Applicable Law (the
“Maximum
Rate”), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of
them, when aggregated with any other sums in the nature of interest
that the Company may be obligated to pay under the Transaction
Documents exceed such Maximum Rate. It is agreed that if the
maximum contract rate of interest allowed by law and applicable to
the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the
new maximum contract rate of interest allowed by law will be the
Maximum Rate applicable to the Transaction Documents from the
Closing Date thereof forward, unless such application is precluded
by Applicable Law. If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction
Documents, such excess shall be applied by such Purchaser to the
unpaid principal balance of any such indebtedness or be refunded to
the Company, the manner of handling such excess to be at such
Purchaser’s election.

 

 

 

34

 

 

 

 

5.18        
Independent Nature of
Purchasers’ Obligations and Rights. The obligations of
each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser
shall be responsible in any way for the performance or
non-performance of the obligations of any other Purchaser under any
Transaction Document. Nothing contained herein or in any other
Transaction Document, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as
a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out
of this Agreement or out of the other Transaction Documents, and it
shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in its
review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, each Purchaser and its respective
counsel have chosen to communicate with the Company through
G&M. The Company has elected to provide all Purchasers with the
same terms and Transaction Documents for the convenience of the
Company and not because it was required or requested to do so by
any of the Purchasers. It is expressly understood and agreed that
each provision contained in this Agreement and in each other
Transaction Document is between the Company and a Purchaser,
solely, and not between the Company and the Purchasers collectively
and not between and among the Purchasers.

 

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

 

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

 

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

 

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

 

5.23           Equitable
Adjustment. Trading volume amounts, price/volume amounts,
the amount of shares of Common Stock identified in this Agreement,
Conversion Price, Underlying Shares and similar figures in the
Transaction Documents shall be equitably adjusted (but without
duplication) to offset the effect of stock splits, similar events
and as otherwise described in this Agreement and Note.

 

(Signature Pages Follow)

 

 

 

35

 

 

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

 

	

GT BIOPHARMA, INC.

 

 

	

Address for
Notice:

 

9350 Wilshire Blvd, Suite 203

Beverly Hills, CA 90212

	

By:
__________________________________________

  
   Name: Steven Weldon

      Title: Chief Financial Officer

 

	
 

 

 

 

 

 

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

 

SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

 

 

 

36

 

[PURCHASER
SIGNATURE PAGE TO GT BIOPHARMA, INC.

SECURITIES
PURCHASE AGREEMENT]

 

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

 

Name of
Purchaser: __________________________________________________________

 

Signature of Authorized Signatory of Purchaser:
__________________________________

 

Name of
Authorized Signatory: ________________________________________________

 

Title
of Authorized Signatory: _____________________________________________________

 

Email
Address of Authorized Signatory: ______________________________________________

 

Facsimile
Number of Authorized Signatory:
__________________________________________

 

State
of Residence of Purchaser: ___________________________________________________

 

Address
for Notice to Purchaser:

 

 

 

 

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

 

 

 

 

 

Cash
Subscription Amount: US$___________

 

Total
Note principal amount: ___________________

 

EIN
Number, if applicable, will be provided under separate
cover

 

Date:
___________________________

 

 

 

[SIGNATURE
PAGES CONTINUE]

 

 

37

 

 

Annex A

 

CLOSING STATEMENT

 

Pursuant
to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase $______ of Debentures from GT
Biopharma, Inc., a Delaware corporation (the “Company”). All funds will
be wired into an account maintained by the Company. All funds will
be disbursed in accordance with this Closing
Statement.

 

 

 

Disbursement Date: 

_________,
2020

 

 

 

 

 

	

I. PURCHASE
PRICE

 

 

 

	

Gross
Proceeds to be Received

 

	

$0

 

	
 

	

II. DISBURSEMENTS

 

 

 

	
 

	
 

	
 

	

$0.00

 

	
 

	

$0.00

 

	
 

	

$0.00

 

	
 

	

$0.00

 

	
 

	

Total Amount Disbursed:

 

	
 

	
 

 

 

 

38

 

 

EXHIBITS AND SCHEDULES

 

Exhibit
A               

Form of
Note

Exhibit
B          

Registration Rights
Agreement

 

 

Schedule
3.1(a)

Schedule
3.1(g)

Schedule
3.1(h)

Schedule
3.1(i)

Schedule
3.1(j)

Schedule
3.1(k)

Schedule
3.1(l)

Schedule
3.1(q)

Schedule
3.1(s)

Schedule
3.1(aa)

Schedule
3.1(bb)

Schedule
3.1(cc)

Schedule
3.1(ff)

Schedule
3.1(gg)

Schedule
4.9

 

 

 

39gtbp_ex105

 

Exhibit 10.5

 

REGISTRATION RIGHTS AGREEMENT

 

REGISTRATION RIGHTS AGREEMENT (this
"Agreement"), dated as of
____2020, by and among GT Biopharma, Inc., a Delaware corporation, with headquarters
located at 9350 Wilshire Blvd, Suite
203, Beverly Hills, CA 90212 (the "Company"), and the investors listed on
the Schedule of Purchasers attached hereto (each, a "Purchaser" and collectively, the
"Purchasers").

 

WHEREAS:

 

A.           In
connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions of
the Securities Purchase Agreement, to issue and sell to each
Purchaser, a Convertible Note (collectively, the
“Notes”), which
will be convertible into shares of the Company's common stock, par
value $0.001 per share (the "Common
Stock") (the shares of Common Stock issuable upon conversion
of the Notes, collectively, the "Common Shares").

 

B.           In
accordance with the terms of the Securities Purchase Agreement, the
Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable
state securities laws.

 

NOW, THEREFORE, in consideration of the
premises and the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and each of the Purchasers
hereby agree as follows:

 

1.           Definitions.

 

Capitalized terms
used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement.
As used in this Agreement, the following terms shall have the
following meanings:

 

(a)           "Additional
Effective Date" means the date the Additional Registration
Statement is declared effective by the SEC.

 

(b)           "Additional
Effectiveness Deadline" means the date which is the earlier
of (x) (i) in the event that the Additional Registration Statement
is not subject to a full review by the SEC, thirty (30) calendar
days after the earlier of the
Additional Filing Date and the Additional Filing Deadline or
(ii) in the event that the Additional Registration Statement is
subject to a full review by the SEC, fifty (50) calendar days after
the earlier of the Additional Filing
Date and the Additional Filing Deadline and (y) the fifth
(5th)
Business Day after the date the Company is notified (orally or in
writing, whichever is earlier) by the SEC that such Additional
Registration Statement will not be reviewed or will not be subject
to further review; provided, however, that if the Additional
Effectiveness Deadline falls on a Saturday, Sunday or other day
that the SEC is closed for business, the Additional Effectiveness
Deadline shall be extended to the next Business Day on which the
SEC is open for business.

 

(c)           "Additional
Filing Date" means the date on which the Additional
Registration Statement is filed with the SEC.

 

(d)           "Additional
Filing Deadline" means if Cutback Shares are required to be
included in any Additional Registration Statement, thirty (30) days
after the date substantially all of the Registrable Securities
registered under the immediately preceding Registration Statement
are sold.

 

 

1

 

 

 

(e)           "Additional
Registrable Securities" means, (i) any Cutback Shares not
previously included on a Registration Statement and (ii) any
capital stock of the Company issued or issuable with respect to the
Common Shares, or the Cutback Shares, as applicable, as a result of
any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise.

 

(f)           "Additional
Registration Statement" means a registration statement or
registration statements of the Company filed under the 1933 Act
covering the resale of any Additional Registrable
Securities.

 

(g)           "Additional
Required Registration Amount" means (I) any Cutback Shares
not previously included on a Registration Statement, all subject to
adjustment as provided in Section 2(f) or (II) such other amount as
may be permitted by the staff of the SEC pursuant to Rule
415.

 

(h)           "Business
Day" means any day other than Saturday, Sunday or any other
day on which commercial banks in the City of New York are
authorized or required by law to remain closed.

 

(i)           "Closing
Date" shall have the meaning set forth in the Securities
Purchase Agreement.

 

(j)           "Cutback
Shares" means any of the Initial Required Registration
Amount or the Additional Required Registration Amount (without
regard to clause (II) in the definition thereof) of Registrable
Securities not included in all Registration Statements previously
declared effective as contemplated hereunder as a result of a
limitation on the maximum number of shares of Common Stock of the
Company permitted to be registered by the staff of the SEC pursuant
to Rule 415. For the purpose of determining the Cutback Shares, in
order to determine any applicable Required Registration Amount,
unless an Investor gives written notice to the Company to the
contrary with respect to the allocation of its Cutback Shares, the
Common Shares shall be excluded on a pro rata basis among the
Investors until all of the Common Shares have been
excluded.

 

(k)           "Effective
Date" means the Initial Effective Date and the Additional
Effective Date, as applicable.

 

 

(l)           "Effectiveness
Deadline" means the Initial Effectiveness Deadline and the
Additional Effectiveness Deadline, as applicable.

 

(m)           "Eligible
Market" means the Principal Market, The New York Stock
Exchange, Inc., the NYSE American, The Nasdaq Capital Market, The
Nasdaq Global Select Market, The Nasdaq Global Market, the OTC
Bulletin Board, the OTCQB or the OTCQX (or any successor to any of
the foregoing).

 

(n)           "Filing
Deadline" means the Initial Filing Deadline and the
Additional Filing Deadline, as applicable.

 

(o)           "Initial
Effective Date" means the date that the Initial Registration
Statement has been declared effective by the SEC.

 

(p)           "Initial
Effectiveness Deadline" means the date which is the earlier
of (x) (i) in the event that the Initial Registration Statement is
not subject to a full review by the SEC, forty-five (45) calendar
days after the Initial Filing Deadline, or (ii) in the event that
the Initial Registration Statement is subject to a full review by
the SEC, ninety (90) calendar days after the Initial Filing
Deadline, and (y) the fifth (5th) Business Day after
the date the Company is notified (orally or in writing, whichever
is earlier) by the SEC that such Initial Registration Statement
will not be reviewed or will not be subject to further review;
provided, however, that if the Initial Effectiveness Deadline falls
on a Saturday, Sunday or other day that the SEC is closed for
business, the Initial Effectiveness Deadline shall be extended to
the next Business Day on which the SEC is open for
business.

 

 

 

2

 

 

 

 

(q)           "Initial
Filing Date" means the date on which the Initial
Registration Statement is filed with the SEC.

 

(r)           "Initial
Filing Deadline" means thirty (30) days after the Initial
Closing (as defined in the Securities Purchase
Agreement).

 

(s)           "Initial
Registrable Securities" means (i) the Common Shares issued
or issuable upon conversion of the Notes issued pursuant to the
terms of the Securities Purchase Agreement, and (ii) any capital
stock of the Company issued or issuable with respect to the Common
Shares, or the Notes as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise
without regard to any limitations on conversion of the
Notes.

 

(t)           "Initial
Registration Statement" means a registration statement or
registration statements of the Company filed under the 1933 Act
covering the resale of the Initial Registrable
Securities.

 

(u)           "Initial
Required Registration Amount" means (i) the sum of the number of Common
Shares, or (ii) such other amount as may be permitted by the
staff of the SEC pursuant to Rule 415.

 

(v)           "Investor"
means a Purchaser or any transferee or assignee thereof to whom a
Purchaser assigns its rights under this Agreement and who agrees to
become bound by the provisions of this Agreement in accordance with
Section 9 and any transferee or assignee thereof to whom a
transferee or assignee assigns its rights under this Agreement and
who agrees to become bound by the provisions of this Agreement in
accordance with Section 9.

 

(w)           "Person"
means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency
thereof.

 

(x)           "Principal
Market" means The OTCQB.

 

(y)           "register,"
"registered," and
"registration" refer to a
registration effected by preparing and filing one or more
Registration Statements (as defined below) in compliance with the
1933 Act and pursuant to Rule 415, and the declaration or ordering
of effectiveness of such Registration Statement(s) by the
SEC.

 

(z)           "Registrable
Securities" means the Initial Registrable Securities and the
Additional Registrable Securities.

 

 

(aa)           "Registration
Statement" means the Initial Registration Statement and the
Additional Registration Statement, as applicable.

 

 

(bb)           "Required
Holders" means holders of at least a majority of the
Registrable Securities.

 

 

 

3

 

 

(cc)           "Required
Registration Amount" means either the Initial Required
Registration Amount or the Additional Required Registration Amount,
as applicable.

 

(dd)           "Rule
415" means Rule 415 promulgated under the 1933 Act or any
successor rule providing for offering securities on a continuous or
delayed basis.

 

(ee)           "SEC"
means the United States Securities and Exchange
Commission.

 

(ff)           "Trading
Day" means any
day on which the Common Stock is traded on the Principal Market,
or, if the Principal Market is not the principal trading market for
the Common Stock, then on the principal securities exchange or
securities market on which the Common Stock is then traded;
provided that "Trading Day" shall not include any day on which the
Common Stock is scheduled to trade on such exchange or market for 3
or more hours or any day that the Common Stock is suspended from
trading during the final hour of trading on such exchange or market (or if
such exchange or market does not designate in advance the closing
time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York time).

 

2.           Registration.

 

(a)           Initial
Mandatory Registration. Promptly following the Closing Date,
the Company shall prepare, and, as soon as practicable but in no
event later than the Initial Filing Deadline, file with the SEC the
Initial Registration Statement on Form S-1 covering the resale of
all of the Initial Registrable Securities. In the event that Form
S-3 is unavailable for such a registration, the Company shall use
Form S-1 or such other form as is available for such a registration
on another appropriate form reasonably acceptable to the Required
Holders, subject to the provisions of Section 2(e). The Initial
Registration Statement prepared pursuant hereto shall register for
resale at least the number of shares of Common Stock equal to the
Initial Required Registration Amount determined as of the date the
Initial Registration Statement is initially filed with the SEC,
subject to adjustment as provided in Section 2(f). The Initial
Registration Statement shall contain (except if otherwise directed
by the Required Holders) the "Plan of Distribution" and
"Selling
Shareholders" sections in substantially the form attached
hereto as Exhibit
B, with such modifications as may be required by law. The
Company shall use its commercially reasonable efforts to have the
Initial Registration Statement declared effective by the SEC as
soon as practicable, but in no event later than the Initial
Effectiveness Deadline. By 9:30 a.m. New York time on the second
(2nd)
Business Day following the Initial Effective Date, the Company
shall file with the SEC in accordance with Rule 424 under the 1933
Act the final prospectus to be used in connection with sales
pursuant to such Initial Registration Statement. The Company
represents and warrants that it is the Company’s
understanding that the SEC will not cause there to be Cutback
Shares with respect to up to one-third of the Company’s
public float, calculated under SEC rules.

 

(b)           Additional
Mandatory Registrations. The Company shall prepare, and, as
soon as practicable but in no event later than the Additional
Filing Deadline, file with the SEC an Additional Registration
Statement on Form S-1 covering the resale of all of the Additional
Registrable Securities not previously registered on an Additional
Registration Statement hereunder. To the extent the staff of the
SEC does not permit the Additional Required Registration Amount to
be registered on an Additional Registration Statement, the Company
shall file Additional Registration Statements successively trying
to register on each such Additional Registration Statement the
maximum number of remaining Additional Registrable Securities until
the Additional Required Registration Amount has been registered
with the SEC; provided that after two rejections by the SEC of
Additional Registration Statements, the Company shall not be
required to file Additional Registration Statements more frequently
than once per sixty day period commencing subsequent to the second
rejection. In the event that Form S-3 is unavailable for such a
registration, the Company shall use Form S-1 or such other form as
is available for such a registration on another appropriate form
reasonably acceptable to the Required Holders, subject to the
provisions of Section 2(e). Each Additional Registration Statement
prepared pursuant hereto shall register for resale at least that
number of shares of Common Stock equal to the Additional Required
Registration Amount determined as of the date such Additional
Registration Statement is initially filed with the SEC, subject to
adjustment as provided in Section 2(f). Each Additional
Registration Statement shall contain (except if otherwise directed
by the Required Holders) the "Plan of Distribution" and
"Selling
Shareholders" sections in substantially the form attached
hereto as Exhibit
B, with such modifications as may be required by law. The
Company shall use its commercially reasonable efforts to have each
Additional Registration Statement declared effective by the SEC as
soon as practicable, but in no event later than the Additional
Effectiveness Deadline. By 9:30 a.m. New York time on the second
(2nd)
Business Day following the Additional Effective Date, the Company
shall file with the SEC in accordance with Rule 424 under the 1933
Act the final prospectus to be used in connection with sales
pursuant to such Additional Registration Statement.

 

 

4

 

 

 

 

(c)           Allocation
of Registrable Securities. The initial number of Registrable
Securities included in any Registration Statement and any increase
or decrease in the number of Registrable Securities included
therein shall be allocated pro rata among the Investors based on
the number of Registrable Securities held by each Investor at the
time the Registration Statement covering such initial number of
Registrable Securities or increase or decrease thereof is declared
effective by the SEC. In the event that an Investor sells or
otherwise transfers any of such Investor's Registrable Securities,
each transferee shall be allocated a pro rata portion of the then
remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common
Stock included in a Registration Statement and which remain
allocated to any Person which ceases to hold any Registrable
Securities covered by such Registration Statement shall be
allocated to the remaining Investors, pro rata based on the number
of Registrable Securities then held by such Investors which are
covered by such Registration Statement. In no event shall the
Company include any securities other than Registrable Securities on
any Registration Statement without the prior written consent of the
Required Holders.

 

(d)           Legal
Counsel. Subject to Section 5 hereof, the Required Holders
shall have the right to select one legal counsel to review and
oversee any registration pursuant to this Section 2 ("Legal Counsel"), which shall be Gary
Henrie, Esq., or such other counsel as thereafter designated by the
Required Holders. The Company and Legal Counsel shall reasonably
cooperate with each other in performing the Company's obligations
under this Agreement.

 

(e)           Ineligibility
for Form S-3. In the event that Form S-3 is not available
for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the
Registrable Securities on Form S-1 or another appropriate form
reasonably acceptable to the Required Holders and (ii) undertake to
register the Registrable Securities on Form S-3 if such form
becomes available prior to any required post-effective amendment,
provided that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as any such
Registration Statement on Form S-3 filed by the Company covering
the Registrable Securities has been declared effective by the
SEC.

 

(f)           Sufficient
Number of Shares Registered. In the event the number of
shares available under a Registration Statement filed pursuant to
Section 2(a) or Section 2(b) is insufficient to cover the Required
Registration Amount of Registrable Securities required to be
covered by such Registration Statement or an Investor's allocated
portion of the Registrable Securities pursuant to Section 2(c), the
Company shall amend the applicable Registration Statement, or file
a new Registration Statement (on the short form available therefor,
if applicable), or both, so as to cover at least the Required
Registration Amount as of the Trading Day immediately preceding the
date of the filing of such amendment or new Registration Statement,
in each case, as soon as practicable, but in any event not later
than fifteen (15) days after the necessity therefor arises. The
Company shall use its commercially reasonable efforts to cause such
amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. For purposes of
the foregoing provision, the number of shares available under a
Registration Statement shall be deemed "insufficient to cover all
of the Registrable Securities" if at any time the number of shares
of Common Stock available for resale under the Registration
Statement is less than the Required Registration
Amount.

 

 

5

 

 

 

(g)           Effect
of Failure to File and Obtain and Maintain Effectiveness of
Registration Statement. If (i) the Initial Registration
Statement when declared effective fails to register the Initial
Required Registration Amount of Initial Registrable Securities (a
"Registration Failure"),
(ii) a Registration Statement covering all of the Registrable
Securities required to be covered thereby and required to be filed
by the Company pursuant to this Agreement is (A) not filed with the
SEC on or before the applicable Filing Deadline (a "Filing Failure") or (B) not declared
effective by the SEC on or before the applicable Effectiveness
Deadline, (an "Effectiveness
Failure") or
(iii) on any day after the applicable Effective Date, sales of all
of the Registrable Securities required to be included on such
Registration Statement cannot be made (other than during an
Allowable Grace Period (as defined in Section 3(r))) pursuant to
such Registration Statement or otherwise (including, without
limitation, because of the suspension of trading or any other
limitation imposed by an Eligible Market, a failure to keep such
Registration Statement effective, a failure to disclose such
information as is necessary for sales to be made pursuant to such
Registration Statement, a failure to register a sufficient number
of shares of Common Stock or a failure to maintain the listing of
the Common Stock) (a "Maintenance
Failure" and collectively with a Registration Failure, a
Filing Failure, and an Effectiveness Failure, the
“Failures” and
each a “Failure”), then, as partial relief
for the damages to any holder by reason of a Failure (which remedy
shall not be exclusive of any other remedies available at law or in
equity, including, without limitation, specific performance or the
additional obligation of the Company to register any Cutback
Shares), the Company shall pay to each holder of Registrable
Securities relating to such Registration Statement an amount in
cash equal to one percent (1.0%) of the aggregate Subscription
Amount (as defined in the Securities Purchase Agreement) of such
Investor's Registrable Securities whether or not included in such
Registration Statement, on each of the following dates: (i) the day
of a Registration Failure, (ii) the day of a Filing Failure; (iii)
the day of an Effectiveness Failure; (iv) the initial day of a
Maintenance Failure; (v) on the thirtieth day after the date of a
Registration Failure and every thirtieth day thereafter (pro rated
for periods totaling less than thirty days) until such Registration
Failure is cured; (vi) on the thirtieth day after the date of a
Filing Failure and every thirtieth day thereafter (pro rated for
periods totaling less than thirty days) until such Filing Failure
is cured; (vii) on the thirtieth day after the date of an
Effectiveness Failure and every thirtieth day thereafter (pro rated
for periods totaling less than thirty days) until such
Effectiveness Failure is cured; and (viii) on the thirtieth day
after the initial date of a Maintenance Failure and every thirtieth
day thereafter (pro rated for periods totaling less than thirty
days) until such Maintenance Failure is cured; provided however, in
the event that there shall be more than one Failure occurring
simultaneously, the 1.0% shall apply in the aggregate (e.g., during
any single or multiple Failure, 1% shall be due, however 1% shall
not be due “per Failure” if the Failures are
simultaneous and for so long as such Failures are simultaneous).
The payments to which a holder shall be entitled pursuant to this
Section 2(g) are referred to herein as "Registration Delay Payments."
Registration Delay Payments shall be paid on the earlier of (I) the
dates set forth above and (II) the third Business Day after the
event or failure giving rise to the Registration Delay Payments is
cured. In the event the Company fails to make Registration Delay
Payments in a timely manner, such Registration Delay Payments shall
bear interest at the rate of one percent (1%) per month (prorated
for partial months) until paid in full. Notwithstanding anything to
the contrary contained herein, Registration Delay Payments shall
(i) not, in the aggregate, exceed fifteen percent (15%) of the
aggregate Purchase Price, (ii) cease to accrue when all of the
Registrable Securities may be sold by non-affiliates of the Company
pursuant to Rule 144 without any restrictions or limitations and
(iii) cease to accrue upon the termination of the Registration
Period (as defined below).

 

 

(h)           Limitation
on Other Registration Statements. The Company shall not file
another registration statement under the 1933 Act prior to the
earlier of (i) date that the Initial Registration Statement is
declared effective by the SEC and (ii) the end of the
Registration Period (as defined in Section 3(a); provided that, this Section
2(h) shall not prevent the Company from filing a registration
statement on Form S-4 or Form S-8 with the SEC at any time
beginning thirty (30) days after the initial filing of the Initial
Registration Statement with the SEC.

 

 

6

 

 

3.           Related
Obligations.

 

At such
time as the Company is obligated to file a Registration Statement
with the SEC pursuant to Section 2(a), 2(b), 2(e) or 2(f), the
Company will use its commercially reasonable efforts to effect the
registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the
Company shall have the following obligations:

 

(a)           The
Company shall promptly prepare and file with the SEC a Registration
Statement with respect to the Registrable Securities and use its
commercially reasonable efforts to cause such Registration
Statement relating to the Registrable Securities to become
effective as soon as practicable after such filing (but in no event
later than the Effectiveness Deadline). The Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times
until the earlier of (i) the date that is two (2) years and six (6)
months after the Closing Date, (ii) the date on which the Investors
shall have sold all of the Registrable Securities required to be
covered by such Registration Statement or (iii) the date on which
all of the Registrable Securities may be sold by non-affiliates of
the Company pursuant to Rule 144 without any restrictions or
limitations (the "Registration
Period"). The Company shall ensure that each Registration
Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements
therein (in the case of prospectuses, in the light of the
circumstances in which they were made) not misleading. The term
"commercially reasonable efforts" shall mean, among other things,
that the Company shall submit to the SEC, within two (2) Business
Days after the later of the date that (i) the Company learns that
no review of a particular Registration Statement will be made by
the staff of the SEC or that the staff has no further comments on a
particular Registration Statement, as the case may be, and (ii) the
approval of Legal Counsel pursuant to Section 3(c) (which approval
is immediately sought), a request for acceleration of effectiveness
of such Registration Statement to a time and date not later than
two (2) Business Days after the submission of such request. The
Company shall respond in writing to comments made by the SEC in
respect of a Registration Statement as soon as practicable, but in
no event later than fifteen (15) days after the receipt of comments
by or notice from the SEC that an amendment is required in order
for a Registration Statement to be declared effective.

 

(b)           The
Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with
such Registration Statement, which prospectus is to be filed
pursuant to Rule 424 promulgated under the 1933 Act, as may be
necessary to keep such Registration Statement effective at all
times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by
such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance
with the intended methods of disposition by the seller or sellers
thereof as set forth in such Registration Statement. In the case of
amendments and supplements to a Registration Statement which are
required to be filed pursuant to this Agreement (including pursuant
to this Section 3(b)) by reason of the Company filing a report on
Form 10-K, Form 10-Q, Form 8-K or any analogous report under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the Company shall have
incorporated such report by reference into such Registration
Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act
report is filed which created the requirement for the Company to
amend or supplement such Registration Statement.

 

 

7

 

 

 

 

 

(c)           The
Company shall (A) permit Legal Counsel to review and comment upon
(i) a Registration Statement at least three (3) Business Days prior
to its filing with the SEC and (ii) all amendments and supplements
to all Registration Statements (except for those filed by reason of
the Company filing Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q, Current Reports on Form 8-K, and any similar or
successor reports) within a reasonable number of days prior to
their filing with the SEC, (B) permit each Investor to review and
comment on the “Plan of Distribution” and
“Selling Shareholders” sections of the Registration
Statement and all amendments and supplements to the Registration
Statement to the extent any changes are made to those sections, and
(C) not file any Registration Statement or amendment or supplement
thereto in a form to which Legal Counsel reasonably objects;
provided however, that if the delay in filing the Registration
Statement is due to Legal Counsel’s or an Investor’s
unreasonable objections (and unreasonable refusal to allow the
Company to file the Registration Statement) then in such event, no
Registration Failure (or similar event that triggers a Registration
Delay Payment) shall be deemed to have occurred with such delay
arising from Legal Counsel’s unreasonable objections, or
solely with respect to an Investor, arising from such
Investor’s unreasonable objections. The Company shall not
submit a request for acceleration of the effectiveness of a
Registration Statement or any amendment or supplement thereto
without the prior approval of Legal Counsel, which consent shall
not be unreasonably withheld; provided however, that if the delay
in filing the effectiveness of the Registration Statement is due to
Legal Counsel’s unreasonable objections (and unreasonable
refusal to allow the Registration Statement to become effective)
then in such event, no Effectiveness Failure (or similar event that
triggers a Registration Delay Payment) shall be deemed to have
occurred. The Company shall furnish to Legal Counsel, without
charge, copies of any correspondence from the SEC or the staff of
the SEC to the Company or its representatives relating to any
Registration Statement. The Company shall reasonably cooperate with
Legal Counsel in performing the Company's obligations pursuant to
this Section 3.

 

(d)           The
Company shall furnish to each Investor whose Registrable Securities
are included in any Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at
least one copy of such Registration Statement and any amendment(s)
thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by an
Investor, all exhibits and each preliminary prospectus, (ii) upon
the effectiveness of any Registration Statement, ten (10) copies of
the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies
as such Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus,
as such Investor may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities owned
by such Investor.

 

(e)           The
Company shall use its commercially reasonable efforts to (i)
register and qualify, unless an exemption from registration and
qualification applies, the resale by Investors of the Registrable
Securities covered by a Registration Statement under such other
securities or "blue sky" laws of all applicable jurisdictions in
the United States, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be
necessary to maintain the effectiveness thereof during the
Registration Period, (iii) take such other actions as may be
necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take
all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection
therewith or as a condition thereto to (x) qualify to do business
in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(e), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall
promptly notify Legal Counsel of the receipt by the Company of any
notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under
the securities or "blue sky" laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or
threatening of any proceeding for such purpose.

 

 

8

 

 

 

 

 

(f)           The
Company shall notify Legal Counsel in writing of the happening of
any event, as promptly as practicable but not later than the first
Business Day after becoming aware of such event, (i) as a result of
which the prospectus included in a Registration Statement, as then
in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (provided
that in no event shall such notice contain any material, nonpublic
information), or (ii) that results in the lack of effectiveness of
any Registration Statement, and, subject to Section 3(r), promptly
prepare a supplement or amendment to such Registration Statement to
correct such untrue statement or omission, or lack of effectiveness
of any Registration Statement. The Company shall also promptly
notify Legal Counsel in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed,
and when a Registration Statement or any post-effective amendment
has become effective (notification of such effectiveness shall be
delivered to Legal Counsel by facsimile or email on the same day of
such effectiveness and by overnight mail), (ii) of any request by
the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information, and (iii) of the
Company's reasonable determination that a post-effective amendment
to a Registration Statement would be appropriate. By 9:30 a.m. New
York City time on the second (2nd) day following the
date any post-effective amendment has become effective, the Company
shall file with the SEC in accordance with Rule 424 under the 1933
Act the final prospectus to be used in connection with sales
pursuant to such Registration Statement.

 

(g)           The
Company shall use its commercially reasonable efforts to prevent
the issuance of any stop order or other suspension of effectiveness
of a Registration Statement, or the suspension of the qualification
of any of the Registrable Securities for sale in any jurisdiction
and, if such an order or suspension is issued, to obtain the
withdrawal of such order or suspension at the earliest possible
moment and to notify Legal Counsel of the issuance of such order
and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such
purpose.

 

(h)           If
any Investor is required by the SEC to be described in the
Registration Statement as an underwriter or the Company and an
Investor agree that it should be identified as an underwriter of
Registrable Securities in the Registration Statement and the
Registration Statement is so modified, the Company shall furnish to
such Investor, on the date of the effectiveness of the Registration
Statement and thereafter from time to time on such dates as an
Investor may reasonably request (i) a letter, dated such date, from
the Company's independent certified public accountants in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering,
addressed to the Investors, and (ii) an opinion, dated as of such
date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to
the Investors.

 

 

9

 

 

 

 

 

(i)           If
any Investor is required under applicable securities laws to be
described in the Registration Statement as an underwriter or the
Company and an Investor agrees that it could reasonably be deemed
to be an underwriter of Registrable Securities, the Company shall
make available for inspection by (i) such Investor, (ii) Legal
Counsel and (iii) one firm of accountants or other agents retained
by the Investors (collectively, the "Inspectors"), all pertinent financial
and other records, and pertinent corporate documents and properties
of the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers,
directors and employees to supply all information which any
Inspector may reasonably request; provided, however, that each
Inspector shall agree to hold in strict confidence and shall not
make any disclosure (except to an Investor) or use of any Record or
other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final,
non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has
been made generally available to the public other than by
disclosure in violation of this Agreement. Each Investor agrees
that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential. Nothing
herein (or in any other confidentiality agreement between the
Company and any Investor) shall be deemed to limit the Investors'
ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and
regulations.

 

(j)           The
Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with
federal or state securities laws, (ii) the disclosure of such
information is necessary to avoid or correct a misstatement or
omission in any Registration Statement, (iii) the release of such
information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of
this Agreement or any other agreement. The Company agrees that it
shall, upon learning that disclosure of such information concerning
an Investor is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt written
notice to such Investor and allow such Investor a reasonable period
of time, at the Investor's expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, such
information.

 

(k)           The
Company shall use its commercially reasonable efforts either to (i)
cause all of the Registrable Securities covered by a Registration
Statement to be listed on each securities exchange on which
securities of the same class or series issued by the Company are
then listed, if any, if the listing of such Registrable Securities
is then permitted under the rules of such exchange or (ii) secure
the inclusion for quotation of all of the Registrable Securities on
the Principal Market or (iii) if, despite the Company's
commercially reasonable efforts, the Company is unsuccessful in
satisfying the preceding clauses (i) and (ii), to secure the
inclusion for quotation on another Eligible Market for such
Registrable Securities and, without limiting the generality of the
foregoing, to use its commercially reasonable efforts to arrange
for at least two market makers to register with the Financial
Industry Regulatory Authority, Inc. ("FINRA") as such with respect to such
Registrable Securities. The Company shall pay all fees and expenses
in connection with satisfying its obligation under this Section
3(k).

 

(l)           The
Company shall cooperate with the Investors who hold Registrable
Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing
any restrictive legend) representing the Registrable Securities to
be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case
may be, as the Investors may reasonably request and registered in
such names as the Investors may request.

 

(m)           If
reasonably requested by an Investor, the Company shall as soon as
practicable (i) incorporate in a prospectus supplement or
post-effective amendment such information as an Investor reasonably
requests to be included therein relating to the sale and
distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable
Securities being offered or sold, the purchase price being paid
therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering; (ii) make all required
filings of such prospectus supplement or post-effective amendment
after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii)
supplement or make amendments to any Registration Statement if
reasonably requested by an Investor holding any Registrable
Securities.

 

 

10

 

 

 

 

 

(n)           The
Company shall use its commercially reasonable efforts to cause the
Registrable Securities covered by a Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of
such Registrable Securities.

 

(o)           The
Company shall make generally available to its security holders as
soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form
complying with, and in the manner provided by, the provisions of
Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal
quarter next following the applicable Effective Date of a
Registration Statement.

 

(p)           The
Company shall otherwise use its commercially reasonable efforts to
comply in all material respects with all applicable rules and
regulations of the SEC in connection with any registration
hereunder.

 

(q)           Within
two (2) Business Days after a Registration Statement which covers
Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to
deliver, to the transfer agent for such Registrable Securities
(with copies to the Investors whose Registrable Securities are
included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in
the form attached hereto as Exhibit A.

 

(r)           Notwithstanding
anything to the contrary herein, at any time after the Effective
Date, the Company may delay the disclosure of material, non-public
information concerning the Company the disclosure of which at the
time is not, in the good faith opinion of the Board of Directors of
the Company and its counsel, in the best interest of the Company
and, in the opinion of counsel to the Company, otherwise required
(a "Grace Period");
provided, that the Company shall promptly (i) notify the Investors
in writing of the existence of material, non-public information
giving rise to a Grace Period (provided that in each notice the
Company will not disclose the content of such material, non-public
information to the Investors) and the date on which the Grace
Period will begin, and (ii) notify the Investors in writing of the
date on which the Grace Period ends; and, provided further, that no
Grace Period shall exceed thirty (30) consecutive Trading Days and
during any three hundred sixty five (365) day period such Grace
Periods shall not exceed an aggregate of sixty (60) Trading Days
and the first day of any Grace Period must be at least five (5)
Trading Days after the last day of any prior Grace Period (each, an
"Allowable Grace Period").
For purposes of determining the length of a Grace Period above, the
Grace Period shall begin on and include the date the Investors
receive the notice referred to in clause (i) and shall end on and
include the later of the date the Investors receive the notice
referred to in clause (ii) and the date referred to in such notice.
The provisions of Section 3(g) hereof shall not be applicable
during the period of any Allowable Grace Period. Upon expiration of
the Grace Period, the Company shall again be bound by the first
sentence of Section 3(f) with respect to the information giving
rise thereto unless such material, non-public information is no
longer applicable. Notwithstanding anything to the contrary, the
Company shall cause its transfer agent to deliver unlegended shares
of Common Stock to a transferee of an Investor in accordance with
the terms of the Securities Purchase Agreement in connection with
any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale, prior to the
Investor's receipt of the notice of a Grace Period and for which
the Investor has not yet settled.

 

 

11

 

 

 

 

 

(s)           Except
as required by applicable law, neither the Company nor any
Subsidiary or affiliate thereof shall identify any Investor as an
underwriter in any public disclosure or filing with the SEC, the
Principal Market or any
Eligible Market and any Purchaser being deemed an underwriter by
the SEC shall not relieve the Company of any obligations it has
under this Agreement or any other Transaction Document (as defined in the Securities Purchase
Agreement); provided,
however,
that the foregoing shall not prohibit the Company from including
the disclosure found in the "Plan of Distribution" section attached
hereto as Exhibit B
in the Registration Statement.
If the Company is required by law to identify any Investor as an
underwriter in any public disclosure or filing with the SEC, the
Principal Market or any Eligible Market, prior to so identifying
any such Investor, the Company shall promptly notify each such
Investor of the legal requirement and give each such Investor a
reasonable opportunity to persuade the applicable regulator that
said disclosure is not required. If the applicable Investors are
unable to eliminate the legal requirement to be identified as an
underwriter, the applicable Investor shall have five (5) Business
Days, or such shorter time as required by the applicable regulator
or applicable law, to consent to such disclosure or to agree to
withdraw as a selling shareholder under the Registration Statement.
If an Investor agrees to withdraw as a selling shareholder under
the Registration Statement, the Company shall not be responsible
for any such Failures with respect to any such
Investor.

 

(t)           Neither
the Company nor any of its Subsidiaries has entered, as of the date
hereof, nor shall the Company or any of its Subsidiaries, on or
after the date of this Agreement, enter into any agreement with
respect to its securities, that would have the effect of preventing
the Company from performing its obligations hereunder.

 

4.           Obligations
of the Investors.

 

(a)           At
least five (5) Business Days prior to the first anticipated Filing
Date of a Registration Statement, the Company shall notify each
Investor in writing of the information the Company requires from
each such Investor if such Investor elects to have any of such
Investor's Registrable Securities included in such Registration
Statement. It shall be a condition precedent to the obligations of
the Company to complete any registration pursuant to this Agreement
with respect to the Registrable Securities of a particular Investor
that such Investor shall timely furnish to the Company such
information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required by the
Company to effect and maintain the effectiveness of the
registration of such Registrable Securities and shall timely
execute such documents in connection with such registration as the
Company may reasonably request.

 

(b)           Each
Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and
filing of any Registration Statement hereunder, unless such
Investor has notified the Company in writing of such Investor's
election to exclude all of such Investor's Registrable Securities
from such Registration Statement.

 

(c)           Each
Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f) (a “No Sale Notice”), such Investor
will immediately discontinue disposition of Registrable Securities
pursuant to any Registration Statement(s) covering such Registrable
Securities until such Investor's receipt of copies of the
supplemented or amended prospectus as contemplated by Section 3(g)
or the first sentence of 3(f) or receipt of notice that no
supplement or amendment is required. Notwithstanding anything to
the contrary, the Company shall cause its transfer agent to deliver
unlegended shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to
which an Investor has entered into a contract for sale prior to the
Investor's receipt of a notice from the Company of the happening of
any event of the kind described in Section 3(g) or the first
sentence of 3(f) and for which the Investor has not yet
settled.

 

 

12

 

 

 

 

 

(d)           Each
Investor covenants and agrees that it will comply with the
prospectus delivery requirements of the 1933 Act as applicable to
it or an exemption therefrom in connection with sales of
Registrable Securities pursuant to the Registration
Statement.

 

5.           Expenses
of Registration.

 

All
reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualifications fees,
printers and accounting fees, and fees and disbursements of counsel
for the Company shall be paid by the Company.

 

6.           Indemnification.

 

In the
event any Registrable Securities are included in a Registration
Statement under this Agreement:

 

(a)           To
the fullest extent permitted by law, the Company will, and hereby
does, indemnify, hold harmless and defend each Investor, the
directors, officers, partners, members, employees, agents,
representatives of, and each Person, if any, who controls any
Investor within the meaning of the 1933 Act or the 1934 Act (each,
an "Indemnified Person"),
against any losses, claims, damages, liabilities, judgments, fines,
penalties, charges, costs, reasonable attorneys' fees, amounts paid
in settlement or expenses, joint or several (collectively,
"Claims"), incurred in
investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or
other regulatory agency, body or the SEC, whether pending or
threatened, whether or not an indemnified party is or may be a
party thereto ("Indemnified
Damages"), to which any of them may reasonably become
subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of
a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the
qualification of the offering under the securities or other "blue
sky" laws of any jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"),
or the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary
prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which
the statements therein were made, not misleading, (iii) any
violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to
the offer or sale of the Registrable Securities pursuant to a
Registration Statement or (iv) any violation of this Agreement (the
matters in the foregoing clauses (i) through (iv) being,
collectively, "Violations").
Subject to Section 6(c), the Company shall reimburse the
Indemnified Persons, promptly as such expenses are incurred and are
due and payable, for any legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any
such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section
6(a): (i) shall not apply to a Claim by an Indemnified Person
arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished to the Company by
such Indemnified Person for such Indemnified Person expressly for
use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; and
(ii) shall not apply to amounts paid in settlement of any Claim if
such settlement is effected without the prior written consent of
the Company, which consent shall not be unreasonably withheld or
delayed. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section
9.

 

 

13

 

 

 

 

 

(b)           In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and
in the same manner as is set forth in Section 6(a), the Company,
each of its directors, each of its officers who signs the
Registration Statement and each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act (each,
an "Indemnified Party"),
against any Claim or Indemnified Damages to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or are
based upon any Violation, in each case to the extent, and only to
the extent, that such Violation occurs in reliance upon and in
conformity with information furnished to the Company by such
Investor expressly for use in connection with such Registration
Statement; and, subject to Section 6(c), such Investor shall
reimburse the Indemnified Party for any legal or other expenses
reasonably incurred by an Indemnified Party in connection with
investigating or defending any such Claim; provided, however, that
the indemnity agreement contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall
not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld or
delayed; provided, further, however, that the Investor shall be
liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant
to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on
behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section
9.

 

 (c)           Promptly
after receipt by an Indemnified Person or Indemnified Party under
this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding)
involving a Claim, such Indemnified Person or Indemnified Party
shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires and has
acknowledged its indemnification obligations hereunder in writing,
jointly with any other indemnifying party similarly noticed, to
assume control of the defense thereof with counsel mutually
satisfactory to the indemnifying party and the Indemnified Person
or the Indemnified Party, as the case may be; provided, however,
that an Indemnified Person or Indemnified Party shall have the
right to retain its own counsel with the fees and expenses of not
more than one counsel for all such Indemnified Person or
Indemnified Party to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the Indemnified Person or
Indemnified Party, as applicable, the representation by such
counsel of the Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to differing
interests between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding. In
the case of an Indemnified Person, legal counsel referred to in the
immediately preceding sentence shall be selected by the Investors
holding at least a majority in interest of the Registrable
Securities included in the Registration Statement to which the
Claim relates. The Indemnified Party or Indemnified Person shall
reasonably cooperate with the indemnifying party in connection with
any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or Claim. The
indemnifying party shall keep the Indemnified Party or Indemnified
Person fully apprised at all times as to the status of the defense
or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written
consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No
indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any
judgment or enter into any settlement or other compromise which
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party or Indemnified
Person of a release from all liability in respect to such Claim or
litigation and such settlement shall not include any admission as
to fault on the part of the Indemnified Party. Following
indemnification as provided for hereunder, the indemnifying party
shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or
corporations relating to the matter for which indemnification has
been made. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.

 

 

14

 

 

 

 

 

(d)           The
indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or
Indemnified Damages are incurred.

 

(e)           The
indemnity agreements contained herein shall be in addition to (i)
any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and
(ii) any liabilities the indemnifying party may be subject to
pursuant to the law.

 

7.           Contribution.

 

To the
extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would
otherwise be liable under Section 6 to the fullest extent permitted
by law; provided, however, that: (i) no Person involved in the sale
of Registrable Securities which Person is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933
Act) in connection with such sale shall be entitled to contribution
from any Person involved in such sale of Registrable Securities who
was not guilty of fraudulent misrepresentation; and (ii)
contribution by any seller of Registrable Securities shall be
limited in amount to the amount of net proceeds received by such
seller from the sale of such Registrable Securities pursuant to
such Registration Statement.

 

8.           Reports
Under the 1934 Act.

 

With a
view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to
sell securities of the Company to the public without registration
("Rule 144"), the Company
agrees to:

 

(a)           make
and keep public information available, as those terms are
understood and defined in Rule 144;

 

(b)           file
with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long
as the Company remains subject to such requirements and the filing
of such reports and other documents is required for the applicable
provisions of Rule 144; and

 

(c)           furnish
to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, a written statement by the
Company, if true, that it has complied with the reporting
requirements of the 1933 Act and the 1934 Act and that it has
satisfied the current public information provisions set forth in
Rule 144.

 

 

15

 

 

 

 

 

9.           Assignment
of Registration Rights.

 

The
rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of such
Investor's Registrable Securities if: (i) the Investor agrees in
writing with the transferee or assignee to assign such rights, and
a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within
a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii)
immediately following such transfer or assignment the further
disposition of such securities by the transferee or assignee is
restricted under the 1933 Act or applicable state securities laws;
(iv) at or before the time the Company receives the written notice
contemplated by clause (ii) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of
the provisions contained herein; and (v) such transfer shall have
been made in accordance with the applicable requirements of the
Securities Purchase Agreement.

 

10.           Amendment
of Registration Rights.

 

Provisions of this
Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of
the Company and the Required Holders; provided that any such
amendment or waiver that complies with the foregoing but that
disproportionately, materially and adversely affects the rights and
obligations of any Investor relative to the comparable rights and
obligations of the other Investors shall require the prior written
consent of such adversely affected Investor. Any amendment or
waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company. No such amendment shall be
effective to the extent that it applies to less than all of the
holders of the Registrable Securities. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or
modification of any provision of this Agreement unless the same
consideration (other than the reimbursement of legal fees) also is
offered to all of the parties to this Agreement.

 

11.           Miscellaneous.

 

(a)           A
Person is deemed to be a holder of Registrable Securities whenever
such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from such record owner
of such Registrable Securities.

 

(b)           Any
notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party);
(iii) when sent, if sent by electronic mail; or (iv) one Business
Day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive
the same. The addresses, facsimile numbers and email addresses for
such communications shall be:

 

If to
the Company:

 

GT
Biopharma, Inc.

9350
Wilshire Blvd, Suite 203

Beverly
Hills, CA 90212

Attn:
Chief Financial Officer

Email:
sww@gtbiopharma.com

 

 

16

 

 

 

 

If to
the Transfer Agent:

Computershare

350
Indiana Street, Suite 800

Golden,
Colorado 80401

Fax:
(303) 262-0610

 

If to
Legal Counsel:

 

Gary
R. Henrie, Esq.

P.O.
Box 5174

Etna,
WY 83118

Email:
grhlaw@hotmail.com

 

If to a
Purchaser, to its address, facsimile number and/or email address
set forth on the Schedule of Purchasers attached hereto or on the
signature pages of the Securities Purchase Agreement, with copies
to such Purchaser's representatives as set forth on the Schedule of
Purchasers, or to such other address, facsimile number and/or email
address to the attention of such other Person as the recipient
party has specified by written notice given to each other party
five (5) days prior to the effectiveness of such change. Written
confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine or email
containing the time, date, recipient facsimile number and an image
of the first page of such transmission or (C) provided by a courier
or overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause
(i), (ii) or (iii) above, respectively.

 

(c)           Failure
of any party to exercise any right or remedy under this Agreement
or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

 

(d)           All
questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by the internal
laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State
of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in The City of
New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in
an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

 

 

17

 

 

 

 

 

(e)           If
any provision of this Agreement is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the
invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Agreement so long
as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal
obligations of the parties or the practical realization of the
benefits that would otherwise be conferred upon the parties. The
parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable
provision(s).

 

(f)           This
Agreement, the other Transaction Documents (as defined in the
Securities Purchase Agreement) and the instruments referenced
herein and therein constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and
therein. This Agreement, the other Transaction Documents and the
instruments referenced herein and therein supersede all prior
agreements and understandings among the parties hereto with respect
to the subject matter hereof and thereof.

 

(g)           Subject
to the requirements of Section 9, this Agreement shall inure to the
benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.

 

(h)           The
headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning
hereof.

 

(i)           This
Agreement may be executed in identical counterparts, each of which
shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of
the party so delivering this Agreement.

 

(j)           Each
party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.

 

(k)           All
consents and other determinations required to be made by the
Investors pursuant to this Agreement shall be made, unless
otherwise specified in this Agreement, by the Required
Holders.

 

(l)           The
language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any
party.

 

(m)         
This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person.

 

(n)           The
obligations of each Investor hereunder are several and not joint
with the obligations of any other Investor, and no provision of
this Agreement is intended to confer any obligations on any
Investor vis-à-vis any other Investor. Nothing contained
herein, and no action taken by any Investor pursuant hereto, 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 herein.

 

* * * *
* *

 

[Signature Page Follows]

 

18

 

 

 

IN
WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

 

 

 

	
 

	

COMPANY:

 

	
 

	

GT BIOPHARMA, INC.

By:
     
                 
        
                                                        

Name:
Steven Weldon 

Title:
Chief Financial Officer

 

	
 

	
 

 

 

[SIGNATURE
PAGE OF HOLDERS FOLLOWS]

 

 

 

19

 

 

[SIGNATURE
PAGE OF PURCHASERS TO GT BIOPHARMA, INC. RRA]

 

 

 

Name of
Purchaser:
______________________________________________________________

 

 

Address
of Purchaser:
____________________________________________________________

 

 

Signature
of Authorized Signatory of Purchaser:
________________________________________

 

 

Name of
Authorized Signatory:
______________________________________________________

 

 

Title
of Authorized Signatory:
_______________________________________________________

 

 

 

 

[SIGNATURE PAGES
CONTINUE]

 

 

 

20

 

 

 

EXHIBIT A

 

FORM OF NOTICE OF EFFECTIVENESS

 

OF REGISTRATION STATEMENT

 

Computershare

350
Indiana Street, Suite 800

Golden,
Colorado 80401

Fax:
(303) 262-0610

 

Re:           

GT Biopharma, Inc.

 

Ladies
and Gentlemen:

 

We have
been requested by GT Biopharma, Inc., a Delaware corporation (the
“Company”), and
have represented the Company in connection with that certain
Securities Purchase Agreement, dated as of August 14, 2019 (the
"Securities Purchase Agreement"), entered into by
and among the Company and the purchasers named therein
(collectively, the "Holders") pursuant to which the Company
issued to the Holders convertible promissory notes
(“Notes”)
convertible for shares of the Company's common stock, par value
$0.001 per share (the "Common
Stock") (the shares of Common Stock issuable pursuant to the
terms of the Notes and Securities Purchase Agreement, collectively,
the "Conversion Shares").
Pursuant to the Securities Purchase Agreement, the Company also has
entered into a Registration Rights Agreement with the Holders (the
"Registration Rights
Agreement") pursuant to which the Company agreed, among
other things, to register the resale of the Registrable Securities
(as defined in the Registration Rights Agreement), including the
Conversion Shares issuable pursuant to the Securities Purchase
Agreement under the Securities Act of 1933, as amended (the
"1933 Act"). The description
of the Registrable Securities are set forth on Schedule A hereto [Selling Shareholder
Table]. In connection with the Company's obligations under the
Registration Rights Agreement, on August 14, 2019, the Company
filed a Registration Statement on Form S-3 (File No. 333-229667)
(the "Registration
Statement") with the Securities and Exchange Commission (the
"SEC") relating to the
Registrable Securities which names each of the Holders as a selling
shareholder thereunder.

 

In
connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an
order declaring the Registration Statement effective under the 1933
Act at [ENTER TIME OF
EFFECTIVENESS] on
[ENTER DATE OF
EFFECTIVENESS]. We have no
knowledge, subsequent to such telephonic conversation with the
SEC's staff, that any stop order suspending its effectiveness has
been issued or that any proceedings for that purpose are pending
before, or threatened by, the SEC. Based on the foregoing, the
Registrable Securities set forth on Schedule A hereto are available for
resale under the 1933 Act pursuant to the Registration
Statement.

 

This
letter, unless and until subsequently revoked or modified orally by
the Company’s securities counsel or in writing from any
member of this firm (which writing may include email
correspondence), shall serve as our standing instruction to you
that the Registrable Securities set forth on Schedule A hereto are freely
transferable by the Holders pursuant to the Registration Statement.
You need not require further letters from us to effect any future
legend-free issuance or reissuance of Registrable Securities to the
Holders as contemplated by the Company's Irrevocable Transfer Agent
Instructions dated January [●], 2020.

 

Very
truly yours,

 

 

 

EXHIBIT B

SELLING SHAREHOLDERS

 

The
shares of Common Stock being offered by the selling stockholders
are those issued upon conversion of the Notes that were issued to
the selling stockholders pursuant to the Securities Purchase
Agreement dated as of August 14,2019 (the “Securities Purchase Agreement”),
by and among the Company and the investors named therein. We are
registering the shares of Common Stock in order to permit the
selling stockholders to offer the shares for resale from time to
time. Except for the ownership of the shares of common stock issued
pursuant to the Securities Purchase Agreement, the selling
shareholders have not had any material relationship with us within
the past three years.

 

 The table
below lists the selling stockholders and other information
regarding the beneficial ownership of the shares of Common Stock by
each of the selling stockholders. The second column lists the
number of shares of Common Stock beneficially owned by each selling
stockholder, based on its ownership of the Notes as of April 20,
2020.

 

The
third column lists the shares of Common Stock being offered by this
prospectus by the selling stockholders and does not take in account
any limitations on conversion of the Notes or issuance of Common
Stock.

 

 In accordance
with the terms of a registration rights agreement with the selling
stockholders (the “Registration Rights Agreement”),
this prospectus generally covers the resale of at least the sum of
the number of shares of Common Stock issued upon conversion of the
Notes issued pursuant to the Securities Purchase Agreement as of
the trading day immediately preceding the date the registration
statement is initially filed with the SEC. The fourth column assumes the sale
of all of the shares offered by the selling stockholders pursuant
to this prospectus.

 

Under
the terms of the Notes, a selling stockholder may not convert the
Notes to the extent such exercise would cause such selling
stockholder, together with its affiliates, to beneficially own a
number of shares of Common Stock which would exceed 9.99% of our
then outstanding shares of Common Stock following such exercise.
The number of shares in the second column does not reflect these
limitations. The selling stockholders may sell all, some or none of
their shares in this offering. See “Plan of
Distribution.” 

 

 

	

Name of Selling
Shareholder

	

Number of Shares
of Common Stock Owned Prior to Offering

	

Maximum Number
of Shares of Common Stock to be Sold Pursuant to this
Prospectus

	

Number of Shares
of Common Stock Owned After Offering

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

 

 

 

 

 

 

PLAN
OF DISTRIBUTION

 

We are
registering the shares of Common Stock that may be issued upon
conversion of the Notes issued pursuant to the Securities Purchase
Agreement to permit the resale of these shares of Common Stock by
the holders of such shares from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale
by the selling stockholders of the shares of Common Stock. We will
bear all fees and expenses incident to our obligation to register
the shares of Common Stock. 

 

The
selling stockholders may sell all or a portion of the shares of
Common Stock beneficially owned by them and offered hereby from
time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of Common Stock are sold
through underwriters or broker-dealers, the selling stockholders
will be responsible for underwriting discounts or commissions or
agent's commissions. The shares of Common Stock may be sold in one
or more transactions at fixed prices, at prevailing market prices
at the time of the sale, at varying prices determined at the time
of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,
pursuant to one or more of the following methods:

 

	
 

	

●

	

on any
national securities exchange or quotation service on which the
securities may be listed or quoted at the time of
sale;

 

	
 

	

●

	

in the
over-the-counter market;

 

	
 

	

●

	

in
transactions otherwise than on these exchanges or systems or in the
over-the-counter market;

 

	
 

	

●

	

through
the writing of options, whether such options are listed on an
options exchange or otherwise;

 

	
 

	

●

	

ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

 

	
 

	

●

	

block
trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;

 

	
 

	

●

	

purchases
by a broker-dealer as principal and resale by the broker-dealer for
its account;

 

	
 

	

●

	

an
exchange distribution in accordance with the rules of the
applicable exchange;

 

	
 

	

●

	

privately
negotiated transactions;

 

	
 

	

●

	

short
sales effected after the effective date of this Registration
Statement;

 

	
 

	

●

	

sales
pursuant to Rule 144;

 

	
 

	

●

	

broker-dealers
may agree with the selling securityholders to sell a specified
number of such shares at a stipulated price per share;

 

	
 

	

●

	

a
combination of any such methods of sale; and

 

	
 

	

●

	

any
other method permitted pursuant to applicable law.

 

If the
selling stockholders effect such transactions by selling shares of
Common Stock to or through underwriters, broker-dealers or agents,
such underwriters, broker-dealers or agents may receive commissions
in the form of discounts, concessions or commissions from the
selling stockholders or commissions from purchasers of the shares
of Common Stock for whom they may act as agent or to whom they may
sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved).
In connection with sales of the shares of Common Stock or
otherwise, the selling stockholders may enter into hedging
transactions with broker-dealers, which may in turn engage in short
sales of the shares of Common Stock in the course of hedging in
positions they assume. The selling stockholders may also sell
shares of Common Stock short and deliver shares of Common Stock
covered by this prospectus to close out short positions and to
return borrowed shares in connection with such short sales. The
selling stockholders may also loan or pledge shares of Common Stock
to broker-dealers that in turn may sell such shares.

 

 

 

 

 

 

The
selling stockholders may pledge or grant a security interest in
some or all of the shares of Common Stock or Notes owned by them
and, if they default in the performance of their secured
obligations, the pledgees or secured parties may offer and sell the
shares of Common Stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling stockholders
to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. The selling
stockholders also may transfer and donate the shares of Common
Stock in other circumstances in which case the transferees, donees,
pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.

 

The
selling stockholders and any broker-dealer participating in the
distribution of the shares of Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act, and any
commission paid, or any discounts or concessions allowed to, any
such broker-dealer may be deemed to be underwriting commissions or
discounts under the Securities Act. At the time a particular
offering of the shares of Common Stock is made, a prospectus
supplement, if required, will be distributed which will set forth
the aggregate amount of shares of Common Stock being offered and
the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other
terms constituting compensation from the selling stockholders and
any discounts, commissions or concessions allowed or re-allowed or
paid to broker-dealers.

 

Under
the securities laws of some states, the shares of Common Stock may
be sold in such states only through registered or licensed brokers
or dealers. In addition, in some states the shares of Common Stock
may not be sold unless such shares have been registered or
qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.

 

There
can be no assurance that any selling stockholder will sell any or
all of the shares of Common Stock registered pursuant to the
registration statement, of which this prospectus forms a
part.

 

The
selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may
limit the timing of purchases and sales of any of the shares of
Common Stock by the selling stockholders and any other
participating person. Regulation M may also restrict the ability of
any person engaged in the distribution of the shares of Common
Stock to engage in market-making activities with respect to the
shares of Common Stock. All of the foregoing may affect the
marketability of the shares of Common Stock and the ability of any
person or entity to engage in market-making activities with respect
to the shares of Common Stock.

 

We will
pay all expenses of the registration of the shares of Common Stock
pursuant to the Registration Rights Agreement, estimated to be
$10,000 in total, including, without limitation, SEC filing fees
and expenses of compliance with state securities or "blue sky"
laws; provided, however, that a selling stockholder will pay all
underwriting discounts and selling commissions, if any. We will
indemnify the selling stockholders against liabilities, including
some liabilities under the Securities Act, in accordance with the
Registration Rights Agreement, or the selling stockholders will be
entitled to contribution. We may be indemnified by the selling
stockholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information
furnished to us by the selling stockholder specifically for use in
this prospectus, in accordance with the Registration Rights
Agreement, or we may be entitled to contribution.

  

Once
sold under the registration statement, of which this prospectus
forms a part, the shares of Common Stock will be freely tradable in
the hands of persons other than our affiliates.

 

 

 

 

TRANSFER AGENT INSTRUCTIONS

 

GT BIOPHARMA, INC.

 

April
20, 2020

 

 

Computershare
Trust Company, N.A.

250
Royall Street

Canton,
MA 02021

Attn:
Kathy Heagerty

 

Ladies
and Gentlemen:

 

Reference is made
to that certain Securities Purchase Agreement, dated as of April
20, 2020 (the "Agreement"),
by and among GT Biopharma, Inc., a Delaware corporation (the
"Company"), and the
purchasers identified on the signature pages thereto (collectively,
the "Purchasers"), pursuant
to which the Company is issuing to the Purchasers (i) the 10%
senior secured convertible notes (the “Notes”), which are convertible
into shares of the common stock of the Company, par value $0.001
per share (the "Common
Stock").

 

This
letter shall serve as our irrevocable authorization and direction
to you (provided that you are the transfer agent of the Company at
such time) to issue shares of the Common Stock upon conversion of
the Notes (the "Conversion
Shares"), promptly upon your receipt of an instruction
letter on Company letterhead and signed by a duly authorized
officer of the Company, which the Company shall provide to you upon
its receipt of a properly completed and duly executed conversion
notice, in the form attached hereto as Exhibit I. The Company shall
instruct you as to whether such shares of the Common Stock will
contain a restrictive legend or legends, and the details of such
legend(s), if applicable.

 

Subject
to compliance with Computershare’s issuance, transfer, and
restricted stock processing requirements, including, but not
limited to, documents being submitted in good order, you
acknowledge and agree that so long as you have previously received
(a) written confirmation from the Company's legal counsel that
either (i) a registration statement covering resales of the
Conversion Shares has been declared effective by the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act"),
or (ii) sales of the Conversion Shares may be made in conformity
with Rule 144 under the 1933 Act ("Rule 144") and (b) if applicable, a copy
of such registration statement, then within two (2) business days
for routine items of your receipt of a Company issuance
instruction, you shall issue the certificates representing the
Conversion Shares registered in the names of such transferees, and
such certificates shall not bear any legend restricting transfer of
the Conversion Shares thereby and should not be subject to any
stop-transfer restriction; provided, however, that if such
Conversion Shares are not registered for resale under the 1933 Act
or able to be sold under Rule 144, then the certificates for such
Conversion Shares shall bear the following legend:

 

“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (1) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL SELECTED BY THE
HOLDER, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT, OR (II) UNLESS SOLD PURSUANT TO RULE 144
OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
SECURITIES.”

 

 

 

 

 

A form
of written confirmation from the Company's outside legal counsel
that a registration statement covering resales of the Conversion
Shares has been declared effective by the SEC under the 1933 Act is
attached hereto as Exhibit
A.

 

The
Company issues this instruction in accordance with, and this
instruction and your performance hereunder are subject to, the
terms of the Transfer Agency and Service Agreement currently in
effect between you and the Company.

 

Please
execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you
have any questions concerning this matter, please contact me at
sww@gtbiopharma.com.

 

Very
truly yours,

 

GT
BIOPHARMA, INC.

 

 

 

By:
_______________________________________

Name:
Anthony Cataldo

Title:
Chief Executive Officer

 

THE
FOREGOING INSTRUCTIONS ARE

ACKNOWLEDGED
AND AGREED TO

THIS
____ day of _____________, 2019

 

COMPUTERSHARE
TRUST COMPANY, N.A.

 

 

 

By:
_____________________________________

Name:

Title:

 

 

Enclosures

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