Document:

ex_156590.htm

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of August 26, 2019, between Sophiris Bio Inc., a British Columbia corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to (i) an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”) as to the Shares and Pre-Funded Warrants and (ii) an exemption from the registration requirements of Section 5 of the Securities Act contained in Section 4(a)(2) thereof and/or Regulation D thereunder as to the Series A Warrants, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

 

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

 

ARTICLE I.

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived, but in no event later than August 29, 2019.

 

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

 

“Common Shares” means the common shares of the Company, no par value per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

“Common Share Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Shares, including, without limitation, any debt, preferred shares, 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 Shares.

 

“Common Units” means each Common Unit consisting of (a) one Common Share and (b) a Series A Warrant to purchase one (1) Series A Warrant Share.

 

“Common Unit Purchase Price” equals $0.75 per each Common Unit, subject to adjustment for reverse and forward share splits, share dividends, share combinations and other similar transactions of the Common Shares that occur after the date of this Agreement.

 

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

 

“Company Canadian Counsel” means Fasken Martineau DuMoulin LLP, with offices located at 5500 Burrard Street, Suite 2900, Vancouver, BC, V6C 0A3, Canada.

 

“Company U.S. Counsel” means Cooley LLP, with offices located at 4401 Eastgate Mall, San Diego, CA 92121.

 

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

 

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

 

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

 

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

 

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“Exempt Issuance” means the issuance of (a) Common Shares or options to employees, officers or directors of the Company pursuant to any share or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose for services rendered to the Company, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into Common Shares issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with share splits or combinations) or to extend the term of such securities, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and carry no registration rights that require or permit the filing of any registration statement in connection therewith during the prohibition period in Section 4.12(a) herein, and provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Placement Agent” means H.C. Wainwright & Co., LLC.

 

“Pre-Funded Units” means each Pre-Funded Unit consisting of (a) one Pre-Funded Warrant to initially purchase one (1) Pre-Funded Warrant Share, and (b) a Series A Warrant to purchase one (1) Series A Warrant Share.

 

“Pre-Funded Unit Purchase Price” equals $0.74, subject to adjustment for reverse and forward share splits, share dividends, share combinations and other similar transactions of the Common Shares that occur after the date of this Agreement.

 

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

 

“Pre-Funded Warrants” means, collectively, the Pre-Funded Common Share purchase warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Pre-Funded Warrants shall be exercisable immediately and shall expire when exercised in full, in the form of Exhibit A-2 attached hereto.

 

“Pre-Funded Warrant Shares” means the Shares issuable upon exercise of the Pre-Funded Warrants.

 

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

 

“Prospectus” means the final base prospectus filed for the Registration Statement.

 

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

 

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

 

“Registration Statement” means the effective registration statement with Commission file No. 333-219887 which registers the sale of the Shares, the Pre-Funded Warrants and the Pre-Funded Warrant Shares to the Purchasers.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Series A Warrants” means, collectively, the Series A Common Share Purchase Warrants delivered to the Purchasers at the Closing in accordance with Section 2.2(a) hereof, which Warrants shall be exercisable commencing six (6) months from the issuance date and have a term equal to five and one-half (5.5) years, in the form of Exhibit A-1 attached hereto.

 

“Series A Warrant Shares” means the Common Shares issuable upon exercise of the Series A Warrants.

 

“Shares” means the Common Shares issued or issuable to each Purchaser pursuant to this Agreement, but excludes the Warrant Shares.

 

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

 

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

 

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

 

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

 

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“Trading Market” means any of the following markets or exchanges on which the Common Shares are 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 (or any successors to any of the foregoing).

 

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

 

“Transfer Agent” means Computershare Investor Services Inc., the current transfer agent of the Company, with a mailing address of 510 Burrard Street, 3rd Floor, Vancouver, British Columbia V6C 3B9, and any successor transfer agent of the Company.

 

“Units” means, collectively, the Common Units and the Pre-Funded Units.

 

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

 

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

 

“Warrant Shares” means collectively, the Series A Warrant Shares and the Pre-Funded Warrant Shares issuable upon exercise of the Warrants.

 

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ARTICLE II.

PURCHASE AND SALE

 

2.1     Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, up to an aggregate of $4,000,000.50 of Common Units as determined pursuant to Section 2.2(a); provided, however, that, solely to the extent a Purchaser determines that such Purchaser (together with such Purchaser’s Affiliates, and any Person acting as a group together with such purchaser or any of such Purchaser’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation, in lieu of purchasing Common Units, such Purchaser may elect to purchase Pre-Funded Units at the Pre-Funded Unit Purchase Price in lieu of Common Units. Each Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser shall be made available for “Delivery Versus Payment” settlement with the Company or its designees. The Company shall deliver to each Purchaser its respective Shares and Warrants as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of the Placement Agent or such other location as the parties shall mutually agree. Unless otherwise directed by the Placement Agent, settlement of the Shares shall occur via “Delivery Versus Payment” (“DVP”) (i.e., on the Closing Date, the Company shall issue the Shares registered in the Purchasers’ names and addresses and released by the Transfer Agent directly to the account(s) at the Placement Agent identified by each Purchaser; upon receipt of such Shares, the Placement Agent shall promptly electronically deliver such Shares to the applicable Purchaser, and payment therefor shall be made by the Placement Agent (or its clearing firm) by wire transfer to the Company). The “Beneficial Ownership Limitation” shall be 4.99% (or, at the election of the Purchaser, 9.99%) of the number of Common Shares outstanding immediately after giving effect to the issuance of the Securities on the Closing Date. The Company covenants that, if the Purchaser delivers a Notice of Exercise (as defined in the Pre-Funded Warrant) no later than 12:00 p.m. (New York City time) on the Closing Date to exercise any Pre-Funded Warrants between the date hereof and the Closing Date, the Company shall deliver Pre-Funded Warrant Shares to the Purchaser on the Closing Date in connection with such Notice of Exercise.

 

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 legal opinion of Company Canadian Counsel and Company U.S. Counsel, in a form acceptable to the Placement Agent and Purchasers;

 

(iii)     the Company shall have provided each Purchaser with the Company’s wire instructions, on Company letterhead and executed by the Chief Executive Officer or Chief Financial Officer;

 

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

 

(v)      for each Purchaser of Pre-Funded Units, a Pre-Funded Warrant registered in the name of such Purchaser to purchase up to a number of Common Shares equal to such Purchaser’s Pre-Funded Unit Subscription Amount divided by the Pre-Funded Unit Purchase Price, with an exercise price equal to $0.01, subject to adjustment therein (such Pre-Funded Warrant certificate may be delivered within three Trading Days of the Closing Date);

 

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(vi)    such number of Series A Warrants registered in the name of such Purchaser to purchase up to a number of Common Shares equal to 100% of such Purchaser’s Shares and Pre-Funded Warrant Shares initially underlying the Pre-Funded Warrants, with an exercise price equal to $0.95, subject to adjustment therein (such Warrant certificate may be delivered within three Trading Days of the Closing Date); and

 

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

 

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

 

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

 

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

 

2.3      Closing Conditions. 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(v)      from the date hereof to the Closing Date, trading in the Common Shares shall not have been suspended by the Commission or the Company’s principal Trading Market, and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of 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 Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

 

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

 

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

 

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(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 shareholders 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 or Breach. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, anti-dilution or similar adjustments, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect. Neither the Company, its subsidiaries nor, to its knowledge, any other party is in violation, breach or default of any agreement, lease, credit facility, debt, note, bond, mortgage, indenture or other instrument that is reasonably likely to result in a Material Adverse Effect.

 

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

 

(f)     Issuance of the Securities; Registration. The Shares are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Warrants are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with their terms, except as may be limited by bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent conveyance, moratorium or other laws now or hereafter in effect relating to or affecting enforcement of creditors' rights generally and by general principles of equity (including without limitation concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether such enforcement is considered in a proceeding at law or in equity. The Warrant Shares are duly authorized and, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Company has reserved from its duly authorized capital share the maximum number of Common Shares issuable pursuant to this Agreement and the Warrants. The Company has prepared and filed the Registration Statement in conformity with the requirements of the Securities Act, which became effective on August 30, 2017 (the “Effective Date”), including the Prospectus, and such amendments and supplements thereto as may have been required to the date of this Agreement. The Company was at the time of the filing of the Registration Statement eligible to use Form S-3. The Company is eligible to use Form S-3 under the Securities Act and it meets the transaction requirements with respect to the aggregate market value of securities being sold pursuant to this offering and during the twelve (12) calendar months prior to this offering as set forth in General Instruction I.B.6 of Form S-3. The Registration Statement is effective under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Prospectus has been issued by the Commission and no proceedings for that purpose have been instituted or, to the knowledge of the Company, are threatened by the Commission. The Company, if required by the rules and regulations of the Commission, shall file the Prospectus Supplement with the Commission pursuant to Rule 424(b). At the time the Registration Statement and any amendments thereto became effective, at the date of this Agreement and at the Closing Date, the Registration Statement and any amendments thereto conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus and any amendments or supplements thereto, at the time the Prospectus or any amendment or supplement thereto was issued and at the Closing Date, conformed and will conform in all material respects to the requirements of the Securities Act and did not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

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

 

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

 

(i)     Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited annual or unaudited quarterly financial statements included within the SEC Reports, except as set forth on Schedule 3.1(i), (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 shareholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital share and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company share 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, prospects, properties, operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to the date that this representation is made.

 

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

 

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

 

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

 

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

 

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

 

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

 

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(p)     Intellectual Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or required for use in connection with their respective businesses as described in the SEC Reports 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. The Company has no knowledge of any facts that would preclude it from having valid license rights or clear title to the Intellectual Property Rights. The Company has no knowledge that it lacks or will be unable to obtain any rights or licenses to use all Intellectual Property Rights that are necessary to conduct its business.

 

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

 

(r)     Transactions With Affiliates and Employees. Except as set forth on Schedule 3.1(r), 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, shareholder, member or partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including share option agreements under any share option plan of the Company.

 

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

 

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

 

(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.

 

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(v)     Registration Rights. No Person has any right to cause the Company or any Subsidiary to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.

 

(w)     Listing and Maintenance Requirements. The Common Shares are 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 Shares under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. Except as disclosed in the SEC Reports, the Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Shares are or have been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. Except as disclosed in the SEC Reports, the Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Common Shares are 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. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

 

(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 which is not otherwise disclosed in the Prospectus Supplement. 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 the light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.

 

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(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 the Series A Warrants or Series A Warrant Shares 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)     Solvency. Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs 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. The SEC Reports set forth all material outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness” means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

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

 

(cc)     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.

 

(dd)     Accountants. The Company’s independent registered public accounting firm is set forth on Schedule 3.1(dd) 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, 2019.     

 

(ee)      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.

 

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(ff)     Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except for Sections 3.2(e) and 4.14 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the 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, presently may have a “short” position in the Common Shares, and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Warrant Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing shareholders' 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.

 

(gg)     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.

 

(hh)     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. 

 

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(ii)     Share Option Plans. Each share option granted by the Company under the Company’s share option plan was granted (i) in accordance with the terms of the Company’s share option plan and (ii) with an exercise price at least equal to the fair market value of the Common Shares on the date such share option would be considered granted under GAAP and applicable law. No share option granted under the Company’s share 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, share options prior to, or otherwise knowingly coordinate the grant of share options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.

 

(jj)     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”).

 

(kk)     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.

 

(ll)      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.

 

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

 

(nn)     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 Series A Warrants or the Series A Warrant Shares by the Company to the Purchasers as contemplated hereby.

 

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

 

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

 

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

 

(rr)     Notice of Disqualification Events. The Company will notify the Purchasers and the Placement Agent 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, reasonably be expected to become a Disqualification Event relating to any Issuer Covered Person, in each case of which it is aware.

 

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

 

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

 

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

 

(c)     Purchaser Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it exercises any Warrants, it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser understands that the Series A Warrants and the Series A Warrant Shares are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law.

 

(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.

 

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

 

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

 

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

 

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

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1      Removal of Legends.

 

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

 

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

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE 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)     [Reserved]

 

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(d)     Certificates evidencing the Series A Warrant Shares shall not contain any legend (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, or (ii) following any sale of such Series A Warrant Shares pursuant to Rule 144 (assuming cashless exercise of the Series A Warrants), or (iii) if such Series A Warrant Shares are eligible for sale under Rule 144 (assuming cashless exercise of the Series A Warrants), or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent or the Purchaser promptly if required by the Transfer Agent to effect the removal of the legend hereunder, or if requested by a Purchaser, respectively. If all or any portion of a Series A Warrant is exercised at a time when there is an effective registration statement to cover the resale of the Series A Warrant Shares, or if such Series A Warrant Shares may be sold under Rule 144 (assuming cashless exercise of the Series A Warrants) 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 Series A Warrant 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), the Company will, no later than the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Series A Warrant Shares, as applicable, issued with a restrictive legend (such date, 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. Series A Warrant 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. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Shares as in effect on the date of delivery of a certificate representing Series A Warrant Shares issued with a restrictive legend.

 

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

 

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(f)     The Shares and Pre-Funded Warrants shall be issued free of legends. If all or any portion of a Pre-Funded Warrant is exercised at a time when there is an effective registration statement to cover the issuance or resale of the Pre-Funded Warrant Shares or if the Pre-Funded Warrant is exercised via cashless exercise, the Pre-Funded Warrant Shares issued pursuant to any such exercise shall be issued free of all legends. If at any time following the date hereof the Registration Statement (or any subsequent registration statement registering the sale or resale of the Pre-Funded Warrant Shares) is not effective or is not otherwise available for the sale or resale of the Pre-Funded Warrant Shares, the Company shall immediately notify the holders of the Pre-Funded Warrants in writing that such registration statement is not then effective and thereafter shall promptly notify such holders when the registration statement is effective again and available for the sale or resale of the Pre-Funded Warrant Shares (it being understood and agreed that the foregoing shall not limit the ability of the Company to issue, or any Purchaser to sell, any of the Pre-Funded Warrant Shares in compliance with applicable federal and state securities laws). The Company shall use best efforts to keep a registration statement (including the Registration Statement) registering the issuance or resale of the Pre-Funded Warrant Shares effective during the term of the Pre-Funded Warrants.

 

4.2      Furnishing of Information.

 

(a)     Until the earlier of the time that (i) no Purchaser owns Securities or (ii) the Warrants have expired, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.

 

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(b)     At any time during the period commencing from the date hereof and ending at such time that all of the Series A Warrant Shares (assuming cashless exercise) may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company (i) shall fail for any reason to satisfy the current public information requirement under Rule 144(c) or (ii) has ever been an issuer described in Rule 144(i)(1)(i) or becomes an issuer in the future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) (a “Public Information Failure”) then, in addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Series A Warrant Shares, an amount in cash equal to two percent (2.0%) of the aggregate Exercise Price of such Purchaser’s Series A Warrants 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 Series A Warrant Shares pursuant to Rule 144. The payments to which a Purchaser shall be entitled pursuant to this Section 4.2(b) are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3rd) Business Day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.   

 

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

 

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

 

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

 

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

 

4.7     Use of Proceeds. Except as set forth in the Prospectus Supplement, the Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes and shall not use such proceeds: (a) for the redemption of any Common Shares or Common Share Equivalents, (b) for the settlement of any outstanding litigation or (c) in violation of FCPA or OFAC regulations.

 

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4.8     Indemnification of Purchasers. Subject to the provisions of this Section 4.8, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any shareholder 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 solely based upon a material 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 shareholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which is finally judicially determined to constitute fraud, gross negligence or willful misconduct) or (c) in connection with any registration statement of the Company providing for the resale by the Purchasers of the Series A Warrant Shares issued and issuable upon exercise of the Series A Warrants, the Company will indemnify each Purchaser Party, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses, as incurred, arising out of or relating to (i) any untrue or alleged untrue statement of a material fact contained in such registration statement, any prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding such Purchaser Party furnished in writing to the Company by such Purchaser Party expressly for use therein, or (ii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder in connection therewith. 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 (x) the employment thereof has been specifically authorized by the Company in writing, (y) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (z) 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 (1) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (2) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.8 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.

 

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

 

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

 

4.11    Reserved.

 

4.12    Subsequent Equity Sales.

 

(a)     From the date hereof until thirty (30) days after the Closing Date, neither the Company nor any Subsidiary shall issue, enter into any agreement to issue or announce the issuance or proposed issuance of any Common Shares or Common Share Equivalents.

 

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

 

4.13   Equal Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration is also offered 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.

 

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

 

4.15     Capital Changes. Until the one year anniversary of the Closing Date, other than a share split or reclassification that is effected to maintain the listing of the Common Shares on the primary Trading Market, the Company shall not undertake a reverse or forward share split or reclassification of the Common Shares without the prior written consent of the holders of a majority in interest of the outstanding Common Shares.

 

4.16     Exercise Procedures. The form of Notice of Exercise included in the Warrants set forth the totality of the procedures required of the Purchasers in order to exercise the Warrants. No additional legal opinion, other information or instructions shall be required of the Purchasers to exercise their Warrants. Without limiting the preceding sentences, no ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required in order to exercise the Warrants. The Company shall honor exercises of the Warrants and shall deliver Warrant Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

 

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4.17     Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Series A Warrant and Series A Warrant Shares 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 Series A Warrant and Series A Warrant Shares for, sale to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.

 

ARTICLE V.

MISCELLANEOUS

 

5.1     Termination.  This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before the fifth (5th) Trading Day following the date hereof; provided, however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties).

 

5.2     Fees and Expenses. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

 

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

 

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

 

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5.5     Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and Purchasers which purchased at least 50.1% in interest of the Shares based on the initial Subscription Amounts hereunder or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought, provided that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any proposed amendment or waiver that disproportionately, materially and adversely affects the rights and obligations of any Purchaser relative to the comparable rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected Purchaser. Any amendment effected in accordance with this Section 5.5 shall be binding upon each Purchaser and holder of Securities and the Company.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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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     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 the legal counsel of the Placement Agent. The legal counsel of the Placement Agent does not represent any of the Purchasers and only represents the Placement Agent. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.

 

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

 

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

 

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

 

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

 

 

 

(Signature Pages Follow)

 

38

 

 

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.

 

 

	
			Sophiris Bio Inc.

				
			Address for Notice:

			
	 	 
	
			 

			By: _____________________________________

			     Name: Peter Slover

			     Title: Chief Financial Officer

			 

			 

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

				
			1258 Prospect Street

			La Jolla, CA 92037

			Attention: Chief Financial Officer

			E-mail: peter@sophiris.com

			
	
			 

			Cooley LLP

			4401 Eastgate Mall

			San Diego, CA 92121

			Attention: Barbara Borden

			Fax: (858) 550-6420

			E-mail: bordenbl@cooley.com

			 

				 

 

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

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[PURCHASER SIGNATURE PAGES TO SPHS SECURITIES PURCHASE AGREEMENT]

 

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

 

Name of Purchaser:

 

Signature of Authorized Signatory of Purchaser:

 

Name of Authorized Signatory:  

 

Title of Authorized Signatory: 

 

Email Address of Authorized Signatory: 

 

Facsimile Number of Authorized Signatory:

 

Address for Notice to Purchaser:

 

 

 

 

 

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

 

 

DWAC for Shares:

 

Common Unit Subscription Amount:

 

Common Units:

 

Shares:

 

Pre-Funded Unit Subscription Amount:

 

Pre-Funded Units:

 

Pre-Funded Warrant Shares:

 

Series A Warrant Shares:

 

EIN Number:

 

40

 

 

☐ Notwithstanding anything contained in this Agreement to the contrary, by checking this box (i) the obligations of the above-signed to purchase the securities set forth in this Agreement to be purchased from the Company by the above-signed, and the obligations of the Company to sell such securities to the above-signed, shall be unconditional and all conditions to Closing shall be disregarded, (ii) the Closing shall occur by the second (2nd) Trading Day following the date of this Agreement and (iii) any condition to Closing contemplated by this Agreement (but prior to being disregarded by clause (i) above) that required delivery by the Company or the above-signed of any agreement, instrument, certificate or the like or purchase price (as applicable) shall no longer be a condition and shall instead be an unconditional obligation of the Company or the above-signed (as applicable) to deliver such agreement, instrument, certificate or the like or purchase price (as applicable) to such other party on the Closing Date.

 

 

[SIGNATURE PAGES CONTINUE]

 

41Exhibit 10.1

 

EXECUTION COPY

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT
(this “Agreement”) is entered into as of August 26, 2019 by and between PAPA JOHN’S INTERNATIONAL, INC.,
a Delaware corporation (the “Company”), and Robert Lynch, a resident of Georgia (“Executive”).

 

RECITALS

 

WHEREAS, Executive
has been offered the position of Chief Executive Officer of the Company.

 

WHEREAS, the
Company desires to employ Executive, and Executive wishes to be employed as Chief Executive Officer of the Company, to be governed
by the terms and conditions set forth in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE,
in consideration of the foregoing premises and the respective agreements of the Company and Executive set forth below, the Company
and Executive, intending to be legally bound, agree as follows:

 

1.                 
Effective Date. The terms and conditions of Executive’s employment hereunder shall become effective upon August
26, 2019 (the “Effective Date”).

 

2.                 
Employment. Subject to all the terms and conditions of this Agreement, Executive’s period of employment under
this Agreement shall be the period commencing on the Effective Date and ending on August 26, 2022 (the “Third Anniversary
Date”), which term, unless otherwise agreed to by the parties, shall be extended on the Third Anniversary Date and on
each anniversary of that date thereafter, for a period of one year (which term together with such extensions, if any, shall be
hereinafter defined as the “Term”), unless Executive’s employment terminates earlier in accordance with
Section 9 hereof. Either party may elect not to renew the Term by providing written notice to the other party at least 180 days
prior to the expiration of the Term. Thereafter, if Executive continues in the employ of the Company, the employment relationship
shall continue to be at will, terminable by either Executive or the Company at any time and for any reason, with or without cause.

 

3.                 
Position and Duties.

 

(a)              
Employment with the Company. Executive shall be employed as the Chief Executive Officer of the Company and shall
perform the duties and responsibilities of the Chief Executive Officer
position and such other duties and responsibilities as the Board of Directors of the Company (the “Board”)
shall reasonably assign to Executive from time to time, including duties and responsibilities relating to the Company’s wholly-owned
and partially owned subsidiaries and other affiliates.

 

     

     

    

 

(b)              
Performance of Duties and Responsibilities; Location. Executive shall observe and comply with all applicable policies
of the Company and directives promulgated from time to time by the Board that are not inconsistent with this Agreement. Executive
shall serve the Company faithfully and to the best of Executive’s ability and shall devote full working time, attention and
efforts to the business of the Company during Executive’s employment with the Company hereunder. While Executive is employed
by the Company, Executive shall report to the Board. Executive hereby represents and confirms that Executive is under no contractual
or legal commitments that would prevent Executive from fulfilling Executive’s duties and responsibilities as set forth in
this Agreement. During Executive’s employment with the Company, Executive shall not accept other employment or engage in
other material business activity, except as may be approved in writing by the Board. Executive may participate in charitable activities
and personal investment activities to a reasonable extent, and Executive may serve as a director of business organizations as approved
by the Board, so long as such activities and directorships are consistent with the Papa John’s International, Inc. Corporate
Governance Guidelines, as amended from time to time, and do not interfere with the performance of Executive’s duties and
responsibilities hereunder. Executive’s principal office location shall be the Company’s offices located in Louisville,
KY or such other location as mutually agreed by the parties.

 

(c)              
Board. The Board shall appoint Executive to serve as a member
of the Board, within 5 days of the Effective Date. Thereafter, during the Term and subject to the annual approval of the
Corporate Governance and Nominating Committee of the Board in accordance with its duties and responsibilities, Executive shall
be nominated for election to the Board so long as he is then serving as Chief Executive Officer of the Company. Executive’s
service as a member of the Board will terminate automatically upon the termination of Executive’s employment with the Company
for any reason. As a condition to Executive’s appointment to the Board, Executive has submitted, or shall no later than the
date hereof submit, an irrevocable resignation letter pursuant to which Executive shall resign from the Board and all applicable
committees thereof (and all applicable subsidiary boards and committees) effective automatically and immediately upon the termination
of Executive’s employment with the Company for any reason.

 

4.                 
Compensation.

 

(a)              
Base Salary. As of the Effective Date, the Company shall pay to Executive an initial base salary at the rate of $900,000
per year, less deductions and withholdings, which base salary shall be paid in accordance with the Company’s normal payroll
policies and procedures. Executive’s base salary shall be reviewed on an annual basis by the Compensation Committee of the
Board, at the same time and in the same manner as compensation is reviewed by the Compensation Committee of the Board for other
executive officers of the Company generally, to determine whether it should be increased (not decreased). Executive’s annual
base salary, as in effect from time to time, is hereinafter referred to as the “Base Salary.”

 

(b)              
Incentive Bonus and Equity Awards.

 

(i)                
Sign-On Equity Awards. On the Effective Date, Executive shall be granted a time-based restricted stock award under
the Company’s 2018 Omnibus Incentive Plan (the “Omnibus Plan”) with a number of shares equal to $3,000,000
divided by the closing price of a share of the Company’s common stock on the Effective Date (the “Sign-On Equity
Grant”). The Sign-On Equity Grant shall be subject to the terms and conditions of the Omnibus Plan and form of award
agreement attached hereto as Exhibit A.

 

    	 	2	 

     

    

 

(ii)             
Sign-On Cash Bonus. The Company shall pay to Executive a lump sum cash sign-on bonus of $3,000,000 (the “Sign-On
Bonus”) within 15 days following the Effective Date; provided that, Executive shall repay to the Company (A) 100% of
the Sign-On Bonus if, prior to August 26, 2021 (the “Second Anniversary Date”), Executive terminates his employment
without Good Reason (and not due to Disability, each as defined below) or the Company terminates Executive’s employment for
Cause (as defined below); or (B) 50% of the Sign-On Bonus if, after the Second Anniversary Date, but prior to the Third Anniversary
Date, Executive terminates his employment without Good Reason (and not due to Disability) or the Company terminates Executive’s
employment for Cause.

 

(iii)           
Equity Awards. In fiscal year 2020 and thereafter during the Term, Executive shall be entitled to participate in
such equity-based-compensation plans of the Company and its affiliates in effect from time to time for other executive officers
of the Company, and as approved by and at the discretion of the Compensation Committee of the Board. Notwithstanding the foregoing,
in fiscal year 2020, the target grant-date value of Executive’s equity-award grants shall be $3,400,000. All such awards
shall be granted in the same allocation of grant types as other executive officers of the Company and pursuant to the Company’s
standard form of equity-award agreements as used under the Omnibus Plan from time to time, in each case, as approved by the Compensation
Committee of the Board.

 

(iv)            
Annual Performance-Based Bonus. During the Term, Executive shall be eligible to earn an annual bonus (the “Annual
Bonus”) based upon the achievement of such corporate and individual performance goals and other criteria that are established
by the Compensation Committee of the Board and which shall be generally consistent with the goals and measures for other executive
officers of the Company. Executive’s target Annual Bonus opportunity shall be 110% of Executive’s Base Salary (the
 “Target Annual Bonus”) and the maximum Annual Bonus payable shall be equal to 300% of Executive’s Base
Salary. The Annual Bonus shall be paid in accordance with Company practices and any guidelines issued for that given Annual Bonus
year. The Annual Bonus, if earned, shall be paid on the date that eligible executives of the Company are paid a bonus for the applicable
Annual Bonus year. With respect to fiscal year 2019, the Company shall pay to Executive an amount equal to or exceeding the Target
Annual Bonus. Except with respect to fiscal year 2019, the Annual Bonus, if earned, shall be pro-rated for any partial years of
employment.

 

(c)              
Benefits. Executive shall be entitled to participate in all employee benefit plans and programs of the Company that
are available to executive officers generally to the extent that Executive meets the eligibility requirements for each individual
plan or program. The Company provides no assurance as to the adoption or continuance of any particular employee benefit plan or
program, and Executive’s participation in any such plan or program shall be subject to the provisions, rules and regulations
applicable thereto.

 

(d)              
Expenses. The Company shall reimburse Executive for all reasonable and necessary out-of-pocket business, travel and
entertainment expenses incurred by Executive in the performance of Executive’s duties and responsibilities hereunder, subject
to the Company’s normal policies and procedures for expenses, expense verification and documentation. The Company shall reimburse
Executive for the reasonable expenses of Executive’s legal counsel, in connection with Executive’s negotiations and
preparation of this Agreement (and Exhibits) to commence employment with the Company, up to a maximum of $25,000.

 

    	 	3	 

     

    

 

(e)              
Vacations and Holidays. Executive shall be entitled to such vacation and holiday benefits as provided to executive
officers generally, as the Company establishes by policy from time to time. Executive shall coordinate Executive’s vacation
schedule with the Company so as not to impose an undue burden on the Company.

 

(f)               
Relocation Benefits. Executive shall be entitled to participate in the Company’s relocation benefits program
available to executive officers, with the modifications set forth on Exhibit B, subject to Executive’s execution of the Company’s
standard form Relocation Agreement.

 

5.                 
Subsidiaries. As used in this Agreement, “Company” shall include the Company and each corporation,
limited liability company, partnership, or other entity that is controlled by the Company (in each case “control” meaning
the direct or indirect ownership of 50% or more of all outstanding equity interests), provided, however, that Executive’s
title need not be identical for each of the affiliated entities nor the same as that for the Company.

 

6.                 
Confidential Information and Other Agreements. Executive agrees to abide by the terms of any and all agreements and
obligations to the Company regarding confidentiality, including but not limited to any offer letter, Code of Ethics provision,
policy, or Executive’s Arbitration Agreement, all the terms of which are reiterated and incorporated by reference herein,
and any successor agreements of similar nature executed by Executive from time to time.

 

7.                 
Restrictive Covenants.

 

(a)              
Covenant Not-to-Compete. Executive agrees that during the period Executive is employed by the Company, and for a
period of 12 months thereafter, regardless of the reasons that such employment ceases or terminates and regardless of whether the
employment is terminated by Executive for Good Reason or without Good Reason or by the Company for Cause or without Cause, Executive
shall not, engage in any of the following activities:

 

(i)                
directly or indirectly enter into the employ of, render any service to or act in concert with any person, partnership corporation
or other entity that owns, operates, manages, franchises or licenses any business that sells pizza on a delivery or carry-out basis,
including business formats such as those described on Exhibit C or for any person, partnership, corporation or other entity
which provides, distributes or manufactures pizza goods, services or products the same or similar to those provided, distributed
or manufactured by the Company (a “Competitive Business”);

 

(ii)             
directly or indirectly engage in any such Competitive Business on Executive’s own account; or

 

    	 	4	 

     

    

 

(iii)           
become interested in any such Competitive Business directly or indirectly as an individual, partner, shareholder, director,
officer, principal, agent, employee, consultant or in any other relationship or capacity; provided, that the purchase of a publicly
traded security of a corporation engaged in such business or service shall not in itself be deemed violative of this Agreement
so long as Employee does not own, directly or indirectly, more than 1% of the securities of such corporation.

 

(b)              
Appropriation and Disclosure of Information. Except as required for Executive to discharge his duties as an officer
of the Company during the Term of the Agreement Executive will not at any time use, copy or duplicate any trade secrets, methods
of operation, processes, formulas, advertising, marketing, designs, plans, know-how or other proprietary ideas or information of
the Company, nor will Executive convey, divulge, make available or communicate such information to any third party or assist others
in using, copying or duplicating any of the foregoing.

 

(c)              
Solicitation of Customers. Executive agrees that during the period Executive is employed by the Company, and for
a period of 12 months thereafter, regardless of the reasons that such employment ceases or terminates and regardless of whether
the employment is terminated by Executive for Good Reason or without Good Reason or by the Company for Cause or without Cause,
Executive will not directly or indirectly, including without limitation, providing information concerning a customer to third parties,
solicit, entice or induce any customer of the Company to cease doing business with the Company.

 

(d)              
Solicitation of Employees. Executive agrees that during the period Executive is employed by the Company, and for
a period of 24 months thereafter, regardless of the reasons that such employment ceases or terminates and regardless of whether
the employment is terminated by Executive for Good Reason or without Good Reason or by the Company for Cause or without Cause,
Executive will not directly or indirectly, including without limitation, providing information concerning an employee to third
parties, solicit, entice or induce any employee to leave the employment of the Company.

 

(e)              
Non-disparagement. Executive agrees that Executive shall not make, directly or indirectly, to any person or entity
including, but not limited to, present or former employees of the Company and/or the press, any disparaging oral or written statements
about the Company, or their products or services. Executive further agrees to not post any such statements on the internet or any
blog or social networking site. The Company (via any authorized public statement), its executive officers and members of the Board
shall not make, directly or indirectly, to any person or entity including, but not limited to, present or former employees of the
Company and/or the press, any disparaging oral or written statements about Executive or his performance with the Company. Each
of Executive, the Company, its executive officers and members of the Board, respectively, agrees to not post any such statements
on the internet or any blog or social networking site. The foregoing shall not be violated by (i) truthful statements by the Company,
Executive or the executive officers or members of the Board in response to an internal investigation, legal process, governmental
investigation, inquiry, request for information, testimony or filings, or administrative, court or arbitral proceedings (including,
without limitation, depositions in connection with such proceedings), (ii) the Company, Executive or the executive officers or
members of the Board rebutting false or misleading statements made by others, (iii) actions taken by the Executive or the executive
officers or members of the Board, or statements made by the Executive or the executive officers or members of Board, in the good
faith performance of their respective duties to the Company, or (iv) any disclosure made by the Company in a filing required to
be made with the Securities and Exchange Commission. Nothing in this Section 7(e) or any other provision of this Agreement shall
be construed or enforced in a manner that would interfere with Executive’s, or the Company’s (or executive officers’
or members of the Board’s) rights under the National Labor Relations Act, if any, to discuss or comment on the terms and
conditions of Executive’s employment.

 

    	 	5	 

     

    

 

(f)               
Reasonableness of Scope and Duration. Executive agrees that the covenants in this Section 7 are, taken as a whole,
reasonable with respect to the activities covered and their geographic scope and duration, and Executive shall not raise any issue
of the reasonableness of the areas, activities or duration of any such covenants in any proceeding to enforce any such covenants.

 

(g)              
Enforceability. Executive agrees that the Company may not be adequately compensated by damages for a breach of any
of the covenants contained in this Section 7, and that the Company shall, in addition to all other remedies, be entitled to injunctive
relief and specific performance. The covenants contained in this Section 7 shall be construed as separate covenants, and if any
court shall finally determine that the restraints provided for in such covenants are too broad as to the area, activity or time
covered, said area, activity or time covered may be reduced to whatever extent the court deems reasonable, and such covenants shall
be enforced as to such reduced area, activity or time.

 

8.                 
Intellectual Property.

 

(a)              
Disclosure and Assignment. As of the Effective Date, Executive hereby transfers and assigns to the Company (or its
designee) all right, title, and interest of Executive in and to every idea, concept, invention, trade secret and improvement (whether
patented, patentable or not) conceived or reduced to practice by Executive whether solely or in collaboration with others while
Executive is employed by the Company, whether or not conceived or reduced to practice during the regular hours of Executive’s
employment (collectively, “Creations”) and all copyrighted or copyrightable matter created by Executive whether
solely or in collaboration with others while Executive is employed by the Company that relates to the Company’s business
(collectively, “Works”) whether or not created during the regular hours of Executive’s employment. Executive
shall communicate promptly and disclose to the Company, in such form as the Company may request, all information, details, and
data pertaining to each Work and Creation. Every copyrightable Work, regardless of whether copyright protection is sought or preserved
by the Company, shall be a “work made for hire” as defined in 17 U.S.C. § 101, and the Company shall own all rights
in and to such matter throughout the world, without the payment of any royalty or other consideration to Executive or anyone claiming
through Executive.

 

(b)              
Trademarks. All right, title, and interest in and to any and all trademarks, trade names, service marks, and logos
adopted, used, or considered for use by the Company during Executive’s employment (whether or not developed by Executive)
to identify the Company’s business or other goods or services (collectively, the “Marks”), together with
the goodwill appurtenant thereto, and all other materials, ideas, or other property conceived, created, developed, adopted, or
improved by Executive solely or jointly during Executive’s employment by the Company and relating to its business shall be
owned exclusively by the Company. Executive shall not have, and will not claim to have, any right, title, or interest of any kind
in or to the Marks or such other property.

 

    	 	6	 

     

    

 

(c)              
Documentation. Executive shall execute and deliver to the Company such formal transfers and assignments and such
other documents as the Company may request to permit the Company (or its designee) to file and prosecute, defend and enforce such
registration applications and other documents it deems useful to protect or enforce its rights hereunder.

 

9.                 
Termination of Employment.

 

(a)              
Executive’s employment with the Company shall terminate immediately upon:

 

(i)                
Executive’s receipt of written notice from the Company of the termination of Executive’s employment;

 

(ii)             
the Company’s receipt of Executive’s written or oral resignation from the Company;

 

(iii)           
Executive’s Disability (as defined in the Omnibus Plan); or

 

(iv)            
Executive’s death.

 

(b)              
The date upon which Executive’s termination of employment with the Company occurs shall be the “Termination
Date.”

 

10.             
Payments upon Termination of Employment.

 

(a)              
If Executive’s employment with the Company is terminated for any reason, the Company shall pay to Executive his Base
Salary through the Termination Date and all other benefits to which Executive may be entitled under any applicable Company policy,
plan or procedure (without duplication of benefits) through the Termination Date, and reimbursement of Executive’s expenses
incurred through the Termination Date in accordance with Section 4(d), (collectively, “Accrued Obligations”).

 

(b)              
Except in the case of a Change of Control, which is governed by Section 10(c) below, if Executive’s employment with
the Company is terminated by the Company pursuant to Section 9(a)(i) effective on the date of or before the date of expiration
of the Term for any reason other than for Cause or by Executive for Good Reason, then the Company shall provide to Executive, subject
to Section 10(i) of this Agreement, the following:

 

(i)                
the Accrued Obligations;

 

(ii)             
(A) if such termination is on or prior to the Second Anniversary Date, an amount equal to one and one-half (1.5) times the
sum of Executive’s Base Salary and Executive’s Target Annual Bonus, payable in equal installments for the 18 months
following such Termination Date; or (B) if such termination is after the Second Anniversary Date, continuation of Executive’s
Base Salary paid in equal monthly installments for 18 months following such Termination Date;

 

    	 	7	 

     

    

 

(iii)           
any earned and unpaid Annual Bonus for the fiscal year preceding the fiscal year in which the Termination Date occurs;

 

(iv)            
a pro-rata portion of Executive’s Annual Bonus for the fiscal year in which the Termination Date occurs, subject to
the achievement of applicable performance measures, and paid at the same time as bonuses are paid to other executives generally,
but in no event later than March 15 following the year in which the Termination Date occurs;

 

(v)              
in the event that Executive timely elects medical and dental coverage under the provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse Executive for Executive’s cost of COBRA
coverage for 18 months following the Termination Date;

 

(vi)            
the Company shall make outplacement services available to Executive, at a cost not to exceed $12,000, for a period of time
not to exceed 12 months following the Termination Date; and

 

(vii)         
Executive shall not be subject to the repayment obligations set forth in Section 4(b)(ii) or Section 4(f) (and the applicable
Relocation Agreement).

 

(c)              
If Executive’s employment is terminated by the Company without Cause in the 24 months following a Change of Control
(as defined below) and on or prior to the date of the expiration of the Term, or if Executive’s employment is terminated
by Executive for Good Reason in the 24 months following a Change of Control and on or prior to the date of the expiration of the
Term, then the Company shall provide to Executive, subject to Executive’s compliance with Section 10(i) of this Agreement,
the following:

 

(i)                
the Accrued Obligations;

 

(ii)             
(A) if such termination is on or prior to the Second Anniversary Date, an amount equal to two (2) times the sum of Executive’s
Base Salary and Executive’s Target Annual Bonus payable in a single lump sum payment to be paid no later than 60 days following
the Termination Date; or (B) if such termination is after the Second Anniversary Date, an amount equal to three (3) times Executive’s
Base Salary payable in a single lump sum payment paid no later than 60 days following the Termination Date;

 

(iii)           
any earned and unpaid Annual Bonus for the fiscal year preceding the fiscal year in which the Termination Date occurs;

 

(iv)            
a pro-rata portion of Executive’s Target Annual Bonus for the fiscal year in which the Termination Date occurs, to
be paid no later than 60 days following the Termination Date;

 

    	 	8	 

     

    

 

(v)              
in the event that Executive timely elects medical and dental coverage under COBRA, the Company shall reimburse Executive
for Executive’s cost of COBRA coverage for 18 months following the Termination Date;

 

(vi)            
the Company shall make outplacement services available to Executive, at a cost not to exceed $12,000, for a period of time
not to exceed 12 months following the Termination Date; and

 

(vii)         
Executive shall not be subject to the repayment obligations set forth in Section 4(b)(ii) or Section 4(f) (and the applicable
Relocation Agreement).

 

(d)              
 A “Change of Control” hereunder shall mean a “Corporate Transaction” as defined in
the Omnibus Plan (as may be amended from time to time).

 

During the Term, Executive
shall not participate in the Company’s Change of Control Severance Plan, effective as of November 1, 2018.

 

(e)              
A termination by Executive for “Good Reason” shall mean a termination based on:

 

(i)                
the assignment to Executive of different job responsibilities that results in a material decrease in the level of responsibility
(including reporting responsibilities);

 

(ii)             
removal from, or a failure to nominate Executive for election (and re-election) to, the Board;

 

(iii)           
a material reduction by the Company in Executive’s Base Salary;

 

(iv)            
if occurring on or following a Change of Control, a material reduction by the Company or the surviving company in total
benefits available to Executive under cash incentive and other employee benefit plans after the Change of Control compared to the
total package of such benefits as in effect prior to the Change of Control;

 

(v)              
the requirement that Executive be based more than 50 miles from where Executive’s office is then located, except for
required travel on Company business;

 

(vi)            
the failure by the Company to obtain from any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the Company (“Successor”) the assent
to this Agreement contemplated by Section 14(h) hereof; or

 

(vii)         
the Company’s notice to Executive of a non-extension of the Term under Section 2.

 

Provided, however,
that the foregoing events shall not be deemed to constitute Good Reason unless (x) Executive has notified the Company in writing
of the occurrence of such event(s) within 60 days of such occurrence, (y) the Company has failed to have cured such event(s) (if
curable) within 30 days of its receipt of such written notice, and (z) Executive terminates employment within 30 days of the expiration
of the time within which the Company has to cure and such occurrence is uncured.

 

    	 	9	 

     

    

 

(f)               
If Executive’s employment with the Company is terminated effective on or prior to the date of expiration of the Term
by reason of Executive’s death or Disability, the Company shall pay to Executive or Executive’s beneficiary or estate,
as the case may be, the Accrued Obligations, any earned and unpaid Annual Bonus for the fiscal year preceding the fiscal year in
which the Termination Date occurs, and a pro-rata portion of Executive’s Annual Bonus for the fiscal year in which the Termination
Date occurs, subject to the achievement of applicable performance measures and paid at the same time as bonuses are paid to other
executives generally but in no event later than March 15 following the year in which the Termination Date occurs.

 

(g)              
 “Cause” hereunder shall mean:

 

(i)                
gross negligence or willful material misconduct in connection with the performance of Executive’s duties;

 

(ii)             
conviction of a criminal offense (other than minor traffic offenses) that is, or may reasonably be expected to be, injurious
to the Company, its business, reputation, prospects, or otherwise;

 

(iii)           
material breach of any term of any agreement between Executive and the Company, including any employment, consulting or
other services, confidentiality, intellectual property, non-competition or non-disparagement agreement;

 

(iv)            
violation in any material respect of the code of conduct generally applicable to executive officers, including, but not
limited to, the Company’s Code of Ethics and Business Conduct;

 

(v)              
acts or omissions involving willful or intentional malfeasance or misconduct that is materially injurious to the Company,
its business, reputation, prospects, or otherwise; or

 

(vi)            
commission of any act of fraud or embezzlement against the Company.

 

(h)              
“Disability” hereunder shall have the same meaning as contained in the Omnibus Plan.

 

    	 	10	 

     

    

 

(i)                
Notwithstanding any other provision hereof, the Company shall not be obligated to make any payments under Section 10 of
this Agreement other than for the payment of Base Salary through the Termination Date unless Executive has signed a full release
of claims against the Company substantially in the form attached hereto as Exhibit D, all applicable consideration periods
and rescission periods provided by law shall have expired, and Executive is in strict compliance with the terms of this Agreement
and any other agreements between Executive and the Company as of the dates of the payments. Within five business days of the Termination
Date, the Company shall deliver to Executive the release for Executive to execute. Executive will forfeit all rights to the payments
provided pursuant to Section 10, other than for the payment of the Accrued Obligations, and any equity acceleration provided in
any equity award agreements to which Executive is subject unless Executive executes and delivers to the Company the release within
30 days of delivery of the release by the Company to Executive and such release has become irrevocable by virtue of the expiration
of the revocation period without the release having been revoked (the first such date, the “Release Effective Date”).
The Company shall have no obligation to provide the payments pursuant to Sections 10(b) or any acceleration of equity prior to
the Release Effective Date. Payments will commence with the next regular payroll date that occurs more than three business days
after the Release Effective Date, with any payment that would have been made but for the Release Effective Date not having occurred
being made at that time, provided, however, that if the length of the five business day release delivery date, plus the
30 day or any other applicable review period, plus any revocation period, each as described above or in the release described above,
begins in one taxable year and ends in the next taxable year, the Release Effective Date will not occur until the next taxable
year.

 

(j)                
With respect to payments provided pursuant to Section 10, and subject to Executive’s execution and non-revocation
of a full release of claims as set forth in Section 10(i), in no event shall Executive be obliged to seek other employment
or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement,
nor shall the amount of any payment hereunder be reduced by any compensation earned by Executive as a result of employment by another
employer.

 

(k)              
To the extent Executive would be subject to the additional 20% tax imposed on certain deferred compensation arrangements
pursuant to Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”),
as a result of any provision of this Agreement, such provision shall be deemed amended to the minimum extent necessary to avoid
application of such tax and preserve to the maximum extent possible the original intent and economic benefit to Executive and the
Company, and the parties shall promptly execute any amendment reasonably necessary to implement this Section 10(k).

 

(i)                
For purposes of Section 409A, Executive’s right to receive installment payments pursuant to this Agreement including,
without limitation, each severance shall be treated as a right to receive a series of separate and distinct payments.

 

(ii)             
Executive will be deemed to have a Termination Date for purposes of determining the timing of any payments or benefits hereunder
that are classified as deferred compensation only upon a “separation from service” within the meaning of Section 409A.

 

(iii)           
Notwithstanding any other provision hereof, to the extent Executive is a “specified employee” as defined in
Section 409A and the final regulations promulgated thereunder, and any portion of Executive’s severance pay is not exempt
from Section 409A, but would otherwise be payable within the first six (6) months following the date of Executive’s date
of termination, such severance pay will not be paid to Executive until the first payroll date of the seventh (7th) month following
the date of termination.

 

    	 	11	 

     

    

 

(iv)            
(A) Any amount that Executive is entitled to be reimbursed under this Agreement will be reimbursed to Executive as promptly
as practical and in any event not later than the last day of the fiscal year after the fiscal year in which the expenses are incurred,
(B) any right to reimbursement or in kind benefits will not be subject to liquidation or exchange for another benefit, and (C)
the amount of the expenses eligible for reimbursement during any taxable year will not affect the amount of expenses eligible for
reimbursement in any other taxable year.

 

(v)              
Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment
shall be made within 30 days following the date of termination”), the actual date of payment within the specified period
shall be within the sole discretion of the Company.

 

(vi)            
Notwithstanding anything to the contrary in this Agreement, if payments are to be made pursuant to Section 10(c) as a result
of a Change of Control that is not also a “change in control event” as defined in Section 409A, then payments to be
made pursuant to Section 10(c)(i) shall be made in installments over 18 months.

 

11.             
Return of Property. Upon termination of Executive’s employment with the Company, Executive shall deliver promptly
to the Company all records, files, manuals, books, forms, documents, letters, memoranda, data, customer lists, tables, photographs,
video tapes, audio tapes, computer disks and other computer storage media, and copies thereof, that are the property of the Company,
or that relate in any way to the business, products, services, personnel, customers, prospective customers, suppliers, practices,
or techniques of the Company, and all other property of the Company (such as, for example, computers, cellular telephones, pagers,
credit cards, and keys), whether or not containing Confidential Information, that are in Executive’s possession or under
Executive’s control.

 

12.             
Remedies. Executive acknowledges that it would be difficult to fully compensate the Company for monetary damages
resulting from any breach by Executive of the provisions of Sections 6, 7, 8, and 11 hereof. Accordingly, in the event of any actual
or threatened breach of any such provisions, the Company shall, in addition to any other remedies it may have, be entitled to injunctive
and other equitable relief to enforce such provisions, and such relief may be granted without the necessity of proving actual monetary
damages. Any such action shall only be brought in a court of competent jurisdiction in the Commonwealth of Kentucky, and the parties
consent to the jurisdiction, venue and convenience of such courts.

 

13.             
IRC 280G “Net Best”. Notwithstanding anything to the contrary in this Agreement, to the extent that the
payment and benefits to be provided under this Agreement and any payments and benefits provided to Executive or for Executive’s
benefit under any other Company plan or agreement (collectively, the “Payments”) would be subject to the excise
tax (the “Excise Tax”) imposed under Code Section 4999, the Payments shall be reduced to the extent necessary
so that no portion thereof shall be subject to the Excise Tax, but only if, by reason of such reduction, the net after-tax benefit
(taking all income, employment and excise taxes into account) received by Executive shall exceed the net after-tax benefit that
would be received by Executive if no such reduction was made.

 

    	 	12	 

     

    

 

14.             
Miscellaneous.

 

(a)              
Governing Law. This Agreement shall be governed by, subject to, and construed in accordance with the laws of the
Commonwealth of Kentucky without regard to conflict of law principles.

 

(b)              
Dispute Resolution. Subject to Section 12 of this Agreement, the parties agree that to the extent permitted by law,
any dispute arising between Executive and the Company, including whether any provision of this Agreement has been breached, shall
be resolved through confidential mediation, or confidential binding arbitration in accordance with an Arbitration Agreement to
be entered into in the form provided to Executive in connection with entering into this Agreement (“Arbitration Agreement”).
Any such dispute shall initially be submitted for resolution to a neutral mediator, mutually selected by the parties. If such dispute
is not resolved to the satisfaction of the parties, or the parties cannot agree upon a mediator, then it shall be submitted for
resolution in accordance with the Arbitration Agreement. The parties agree to keep confidential both the fact that any mediation/arbitration
has or will take place between them, all facts related thereto, and any resolution thereunder. Any resolution reached via mediation
or award of an arbitrator shall be final and binding on the parties.

 

(c)              
Indemnification Agreement. Effective the Effective Date, the Company and Executive shall enter into the Company’s
customary Indemnification Agreement for directors and officers in the form that has been provided to Executive.

 

(d)              
Entire Agreement. This Agreement contains the entire agreement of the parties relating to Executive’s employment
with the Company and supersedes all prior agreements and understandings with respect to such subject matter, and the parties hereto
have made no agreements, representations or warranties relating to the subject matter of this Agreement that are not set forth
herein.

 

(e)              
No Violation of Other Agreements. Executive hereby represents and agrees that neither (i) Executive’s entering
into this Agreement, (ii) Executive’s employment with the Company, nor (iii) Executive’s carrying out the provisions
of this Agreement, will violate any other agreement (oral, written or other) to which Executive is a party or by which Executive
is bound.

 

(f)               
Amendments. No amendment or modification of this Agreement shall be deemed effective unless made in writing and signed
by the parties hereto.

 

(g)              
No Waiver. No term or condition of this Agreement shall be deemed to have been waived, except by a statement in writing
signed by the party against whom enforcement of the waiver is sought. Any written waiver shall not be deemed a continuing waiver
unless specifically stated, shall operate only as to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that specifically waived.

 

    	 	13	 

     

    

 

(h)              
Assignment. This Agreement shall not be assignable, in whole or in part, by either party without the prior written
consent of the other party, except that the Company may, without the consent of Executive, assign its rights and obligations under
this Agreement (i) to any entity with which the Company may merge or consolidate, or (ii) to any corporation or other person or
business entity to which the Company may sell or transfer all or substantially all of its assets. Upon Executive’s written
request, the Company will seek to have any Successor by agreement assent to the fulfillment by the Company of its obligations under
this Agreement. After any assignment by the Company pursuant to this Section 14(h), the Company shall be discharged from all further
liability hereunder and such assignee shall thereafter be deemed to be the “Company” for purposes of all terms
and conditions of this Agreement. All amounts due to Executive (including under Section 10, subject in such event to the legal
representative of Executive’s estate satisfying the requirement of a full release of claims provided in Section 10(i) if
Executive had not done so) shall be paid to Executive’s estate or beneficiary, as the case may be, in the event of his death
before all such payments have been made.

 

(i)                
Deductions and Withholdings. Any amount payable to Executive pursuant to this Agreement shall be subject to deductions
and withholdings as required by applicable law.

 

(j)                
Counterparts. This Agreement may be executed in any number of counterparts, and such counterparts executed and delivered,
each as an original, shall constitute but one and the same instrument.

 

(k)              
Severability. To the extent that any portion of any provision of this Agreement shall be invalid or unenforceable,
it shall be considered deleted herefrom and the remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect.

 

(l)                
Survival. The terms and conditions set forth in Sections 3(c), 6, 7, 8, 11, 12, 13 and 14 of this Agreement, and
any other provision that continues by its terms, shall survive expiration of the Term or termination of Executive’s employment
for any reason.

 

(m)            
Captions and Headings. The captions and paragraph headings used in this Agreement are for convenience of reference
only and shall not affect the construction or interpretation of this Agreement or any of the provisions hereof.

 

(n)              
Notices. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and
either delivered in person or sent by first class certified or registered mail, postage prepaid, if to the Company, to SVP, General
Counsel at the Company’s principal place of business, and if to Executive, at Executive’s home address most recently
filed with the Company, or to such other address or addresses as either party shall have designated in writing to the other party
hereto.

 

    	 	14	 

     

    

 

IN WITNESS WHEREOF,
Executive and the Company have executed this Agreement as of the date set forth above.

 

	 	PAPA JOHN’S INTERNATIONAL, INC.
	 	 	 
	 	 	 
	 	By:  	/s/ Jeffrey
    C. Smith
	 	 	Jeffrey C. Smith
	 	 	Chairman of the Board
    of Directors
	 	 	 
	 	 	 
	 	EXECUTIVE
	 	 	 
	 	 	 
	 	By:  	/s/ Robert Lynch
	 	 	Robert Lynch

 

    	 	15

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