PROVENTION BIO, INC. SECURITIES PURCHASE AGREEMENT

 

PROVENTION BIO, INC.

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of April 25, 2017, is made and entered into by and between PROVENTION BIO, INC., a Delaware corporation with its principal executive offices located at ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the “Company”), and each of the purchasers listed on Schedule A hereto (the “Purchasers”).

 

RECITALS

 

WHEREAS, the Company and the Purchasers are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”);

 

WHEREAS, the Purchasers, severally and not jointly, desire to purchase and the Company desires to issue and sell to the Purchasers, in each case upon the terms and subject to the conditions set forth in this Agreement, up to an aggregate of [●] shares of Series A Preferred Stock, $0.0001 par value per share, of the Company (the “Preferred Stock”), at a purchase price of $[●] per share (the “Per Share Purchase Price”), which shares are being offered on a Minimum $[●] and Maximum $[●] basis;

 

WHEREAS, each Purchaser, severally and not jointly, wishes to purchase, upon the terms and conditions stated in this Agreement, such number of shares of Preferred Stock as is set forth immediately next to such Purchaser’s name on Schedule A hereto;

 

WHEREAS, the Company has engaged MDB Capital Group, LLC as its exclusive placement agent (the “Placement Agent”) for the offering contemplated hereby, which is being conducted on a “reasonable efforts, all or none” basis as to the Minimum offering amount and a “reasonable efforts” basis for all amounts in excess of the Minimum offering amount;

 

WHEREAS, the Company prepared a private placement memorandum (the “Memorandum”) for use by the Placement Agent and the Purchasers, which describes the Company and certain conditions to the closing of the sale of the Securities, among other things.

 

NOW THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements herein contained, the Company and each Purchaser severally (and not jointly) hereby agree as follows:

 

1.       Purchase and Sale of Preferred Stock.

 

1.1       Purchase of Preferred Stock. Subject to the terms and conditions set forth in this Agreement, on the Closing Date (as defined below), the Company shall issue and sell to each Purchaser and each Purchaser, severally and not jointly, agrees to purchase from the Company such number of shares of Preferred Stock as is set forth next to such Purchaser’s name on Schedule A hereto for an aggregate purchase price equal to the Per Share Purchase Price multiplied by the number of such shares to be purchased by such Purchaser (such product, the “Subscription Amount”). The shares of Preferred Stock issued to the Purchasers pursuant to this Agreement shall be referred to herein as the “Shares”.

 

 

1.2       Closing Date. The date and time of the issuance and sale of the Shares pursuant to this Agreement (the “Closing Date”) shall be April 19, 2017 at 5:00 p.m., New York time, on the day all of the conditions to closing set forth in Section 6 and Section 7 below have been satisfied (or waived), or such other mutually agreed upon date and time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties and may be undertaken remotely by facsimile or other electronic transmission.

 

1.3       Closing Deliverables. Unless other arrangements have been made between the Company and a specific Purchaser, on or prior to the Closing, each Purchaser shall deliver or cause to be delivered to the Company the following in accordance with the subscription procedures described in Subsection 1(e) below:

 

(i)       this Agreement and each Transaction Document to which such Purchaser is a party, duly executed by such Purchaser;

 

(ii)       the Subscription Amount, in the form of a wire transfer to the Escrow Agent, in accordance with the Escrow Agent’s written instructions; and

 

(iii)       a fully completed and duly executed Questionnaire in the form attached as Exhibit A hereto (the “Questionnaire”).

 

1.4       The Subscription Amounts received pursuant to Subsection 1.3(ii) will be placed with Delaware Trust Company, who will serve as escrow agent for the Closing (the “Escrow Agent”), pursuant to an Escrow Agreement among the Company, the Placement Agent and the Escrow Agent substantially in the form attached hereto as Exhibit B (the “Escrow Agreement”). At the Closing, as evidenced by a written certificate signed by the Company and the Placement Agent certifying that the conditions to Closing hereon have been satisfied or waived, the Escrow Agent will deliver the Subscription Amounts to the Company. If this Agreement is terminated, each Purchaser shall receive back its Subscription Amount promptly, without interest. The Closing will not take place until all the Transaction Documents have been duly delivered as provided herein, the Escrow Agent has received in escrow the Subscription Amounts for all the Shares being sold to the Purchasers, and all of the conditions set forth in Section 6 and Section 7 below have been satisfied (or waived). At the Closing, the Company shall direct its transfer agent to credit to each Purchaser the Shares being purchased hereunder by book entry.

 

1.5       Subscription Procedure. Each Purchaser shall deliver or cause to be delivered a duly executed copy of this Agreement, the Registration and Investor Rights Agreement, and a fully completed and duly executed Questionnaire to the Placement Agent at the following address: MDB Capital Group, LLC, Attention: Compliance Department, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Unless other arrangements have been made with a particular Purchaser, each Purchaser shall also deliver or cause to be delivered the Subscription Amount pursuant to Subsection 1.3(ii) hereof.

 

 

1.6       Acceptance. This Agreement sets forth various representations, warranties, covenants and agreements of the Company and the Purchasers, as the case may be, all of which shall be deemed made, and shall be effective without further action by the Company and the Purchasers, immediately upon the Company’s acceptance of a Purchaser’s subscription and shall thereupon be binding upon the Company and the applicable Purchasers. Acceptance is evidenced only by execution of this Agreement by the Company on its signature page attached hereto, and the Company shall have no obligation hereunder to a Purchaser until the Company shall have delivered to such Purchaser an executed copy of this Agreement.

 

1.7       The Company shall adopt and file with the Secretary of State of the State of Delaware on or before the Closing, the Amended and Restated Certificate of Incorporation of the Company in the form attached hereto as Exhibit C (the “Certificate of Incorporation”).

 

2.       Representations and Warranties of the Purchasers. Each Purchaser severally (and not jointly) represents and warrants to the Company solely as to such Purchaser that, as of the date hereof and as of the Closing Date:

 

2.1       Investment Purpose. The Securities to be acquired by such Purchaser are being acquired or will be acquired for investment for such Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Securities Act, and such Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the Securities Act. Such Purchaser does not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Securities in violation of the Securities Act. Such Purchaser has not been formed for the specific purpose of acquiring the Securities.

 

2.2       Accredited Investor Status. Such Purchaser is an “accredited investor,” as that term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act (an “Accredited Investor”) and satisfies the requirements under “Terms of this Offering – Accredited Investors” in the Memorandum.

 

2.3       Reliance on Exemptions. Such Purchaser understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and such Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of such Purchaser to acquire the Securities.

 

 

2.4       Information. Such Purchaser and its advisors, if any, have been furnished with the Memorandum, and considered all factors such Purchaser deems material in deciding on the advisability of investing in the Securities. Such Purchaser and its advisors, if any, have been afforded the opportunity to ask questions of the Company, and to obtain additional information to the extent the Company possesses such information or can acquire it without unreasonable effort or expense. Notwithstanding the foregoing representations, neither such inquiries nor any other due diligence investigation conducted by Purchaser or any of its advisors or representatives shall modify, amend or affect Purchaser’s right to rely on the Company’s representations and warranties contained in Section 3 below.

 

2.5       No Governmental Review. Such Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

 

2.6       Restricted Securities. Such Purchaser understands that the Securities have not been registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of such Purchaser’s representations as expressed herein. Such Purchaser understands that the Securities are characterized as “restricted securities” under applicable U.S. federal and state securities laws and that, pursuant to these laws, such Purchaser must hold the Securities indefinitely unless the Securities are subsequently registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from such registration and qualification requirements is available.

 

2.7       Legends. Such Purchaser understands that the book entries evidencing the Shares may bear the following or substantially similar legends:

 

(i)       “The securities represented hereby have not been registered under the Securities Act of 1933, as amended, and have been acquired for investment and not with a view to, or in connection with, the sale or distribution thereof. No such transfer may be effected without an effective registration statement related thereto or an opinion of counsel in a form satisfactory to the Company that such registration is not required under the Securities Act of 1933. The securities may be pledged in connection with a bona fide margin account or other loan or financing arrangement secured by the securities.”

 

(ii)       Any legend set forth in, or required by, the other Transaction Documents; and

 

(iii)       Any legend required by the securities laws of any state to the extent such laws are applicable to the Shares represented by the certificate so legended.

 

2.8       Authorization; Enforcement. Each Transaction Document to which such Purchaser is a party: (i) has been duly and validly authorized by such Purchaser, (ii) has been duly executed and delivered by or on behalf of such Purchaser, and (iii) will constitute, upon execution and delivery by such Purchaser thereof and the Company, the valid and binding agreements of such Purchaser enforceable in accordance with its terms, except to the extent limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights and general principles of equity that restrict the availability of equitable or legal remedies.

 

 

2.9       Residency. If the Purchaser is an individual, then such Purchaser resides in the state or province identified on the signature pages hereto as the address for such Purchaser. If the Purchaser is a partnership, corporation, limited liability company or other entity, then the office or offices of such Purchaser identified on the signature pages hereto as the address of such Purchaser is the location of its principal place of business and such entity is duly organized in its state of formation.

 

2.10       Investment Experience. Such Purchaser is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of United States companies in private placements in the past, and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable such Purchaser to utilize the information made available by the Company to evaluate the merits and risks of and to make an informed investment decision with respect to, the proposed purchase of the Securities, which represents a speculative investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and is able to afford a complete loss of such investment.

 

2.11       Communication of Offer. Such Purchaser was contacted by either the Company or the Placement Agent with respect to a potential investment in the Securities. Purchaser is not purchasing the Securities as a result of any “general solicitation” or “general advertising,” as such terms are defined in Regulation D of the Securities Act, which includes, but is not limited to, any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or on the internet or broadcast over television, radio or the internet or presented at any seminar or any other general solicitation or general advertisement.

 

2.12       Brokers and Finders. Other than the Placement Agent with respect to the Company, no Person will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company or any Purchaser for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Purchaser. The Company has agreed to pay a commission and expense reimbursement to the Placement Agent in connection with the sale of the Securities as described in the Memorandum. Such Purchaser acknowledges that it is purchasing the Securities directly from the Company and not from the Placement Agent.

 

2.13       FINRA. Such Purchaser (i) has had no position, office or other material relationship within the past three years with the Company or persons known to it to be affiliates of the Company, and (ii) if such Purchaser is a member of the Financial Industry Regulatory Authority (“FINRA”) or an associated Person of a member of FINRA, such Purchaser, together with its affiliates and any other associated persons of such member of FINRA, does not, and as of the Closing will not, directly or indirectly have a beneficial interest (as determined under FINRA Rule 5130(i)(1)) of more than 50% of the outstanding voting securities of the Company.

 

 

3.       Representations and Warranties of the Company. The Company hereby represents and warrants to each Purchaser that, except as set forth on the Disclosure Schedule attached as Exhibit D to this Agreement (the “Disclosure Schedule”), which exceptions shall be deemed to be part of the representations and warranties made hereunder, the following representations are true and complete as of the date hereof and as of the Closing Date, unless otherwise indicated. The Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections and subsections contained in this Section 3, and the disclosures in any section or subsection of the Disclosure Schedule shall qualify other sections and subsections in this Section 3 to the extent it is readily apparent from a reading of the disclosure that such disclosure is applicable to such other sections and subsections.

 

3.1       Organization and Qualification. The Company 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 (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company is not in violation or default of any of the provisions of its Certificate of Incorporation, Bylaws (as defined below) or other organizational or charter documents. The Company 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, liabilities, business or condition (financial or otherwise) of the Company, 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 of which the Company has received written notice or otherwise has Knowledge (as defined below) has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

3.2       Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated hereby and by each of the Transaction Documents, to issue the Shares at Closing and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of this Agreement, the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, including the issuance of the Shares and the Common Stock issuable upon conversion of the Shares (the “Conversion Shares”) and have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, its Board of Directors or the Company’s stockholders in connection therewith other than in connection with the Required Approvals (as defined below). Each Transaction Document to which the Company is a party has been (or upon the execution and delivery thereof by the Company 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.

 

 

3.3       Capitalization.

 

(i)       Immediately prior to Closing, the authorized capital stock of the Company consists of 25,000,000 shares of preferred stock, $0.0001 par value, of which 13,000,000 shares have been designated as Series A Preferred Stock, none of which are issued and outstanding, and 50,000,000 shares of common stock, $0.0001 par value, of which 10,000,000 shares are issued and outstanding. The Company has reserved 3,721,765 shares of Common Stock (3,986,118 if the Maximum offering is raised) for issuance to officers, directors, employees and consultants of the Company pursuant to its 2017 Equity Incentive Plan duly adopted by the Board of Directors and approved by the Company stockholders (the “Stock Plan”). The Company has made available to the Purchasers complete and accurate copies of the Stock Plan and forms of agreements used thereunder. All of the outstanding shares of the Company’s capital stock are duly authorized, validly issued, fully paid and non-assessable and free of pre-emptive rights and were issued in compliance in all material respects with applicable state and federal securities law and any rights of third parties. Except as otherwise provided in the Transaction Documents, no shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the stockholders or any mortgage, lien, title claim, assignment, encumbrance, security interest, adverse claim, contract of sale, restriction on use or transfer or other defect of title of any kind, other than those arising under applicable securities laws (each, a “Lien”). The Certificate of Incorporation and the Company’s Bylaws, as in effect on the date hereof and as of the Closing Date (the “Bylaws”) have been made available to the Purchasers.

 

(ii)       Subsection 3.3(ii) of the Disclosure Schedule sets forth the capitalization of the Company immediately following the Closing including the number of shares of the following: (A) issued and outstanding Common Stock, including, with respect to restricted Common Stock, vesting schedule and repurchase price; (B) granted stock options, including vesting schedule and exercise price; (C) shares of Common Stock reserved for future award grants under the Stock Plan; (D) each series of Preferred Stock; and (E) warrants or stock purchase rights, if any.

 

(iii)       Except for (A) the conversion privileges of the Shares to be issued under this Agreement, (B) the conversion privileges of the Placement Agent Warrants as described in Subsection 4.11, (C) the rights provided in Section 13 of the Registration and Investor Rights Agreement and (D) the stock options described in Subsection 3.3(ii)(B) of the Disclosure Schedule, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, to purchase or acquire from the Company any shares of Common Stock or Preferred Stock, or any securities convertible into or exchangeable for shares of Common Stock or Preferred Stock.

 

3.4       Issuance of Shares. The Shares have been 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 (except as otherwise provided in the Transaction Documents), with the holders being entitled to all rights accorded to a holder of Preferred Stock. The Conversion Shares, when issued in accordance with the terms of the Certificate of Incorporation, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens (except as otherwise provided in the Transaction Documents), with the holders being entitled to all rights accorded to a holder of Common Stock. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Conversion Shares underlying the Preferred Stock. Subject to the accuracy of the representations and warranties of the Purchasers in this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the Securities Act.

 

 

3.5       Subsidiaries. The Company does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association, or other business entity.

 

3.6       No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the other transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Company’s Certificate 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 give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound, 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 is subject (including federal and state securities laws and regulations and the rules), or by which any property or asset of the Company is bound; except in the case of clause (ii), such as could not have and would not reasonably be expected to result in a Material Adverse Effect.

 

3.7       Absence of Litigation. There is no material action, suit, inquiry, notice of violation, proceeding or, to the Knowledge of the Company, investigation pending or, to the Knowledge of the Company, threatened against or affecting the Company, or, to the Knowledge of the Company, any officer, director or key employee of the Company, or any of its properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which would reasonably be expected to (i) have a Material Adverse Effect or (ii) adversely affect or challenge the legality, validity or enforceability of any of the Transaction Documents or the Securities. Neither the Company, 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. The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened in writing (or any basis therefor known to the Company) involving the prior employment of either ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.

 

 

3.8       Intellectual Property. The Company owns, or holds a valid and enforceable license to, all trademarks, trade names, service marks, service ▇▇▇▇ registrations, service names, patents, patent rights, copyrights, original works, inventions, licenses, approvals, governmental authorizations, trade secrets, licenses, formulae, mask works, customer lists, internet domain names, know-how and other intellectual property, including trade secrets and other unpatented and/or un-patentable proprietary or confidential information, systems, procedures or registrations or applications relating to the same, that are owned by the Company, or used (whether by license or otherwise) by the Company in the conduct of the Company’s business as now conducted or proposed to be conducted (collectively, “Company Intellectual Property”). The Company owns valid title, free and clear of any Liens, or possesses the requisite valid and current licenses or rights, free and clear of any Liens, to use all Company Intellectual Property in connection with the conduct of its business. Except as disclosed in the Subsection 3.8 of the Disclosure Schedule, there is no claim or action by any Person pertaining to, or proceeding pending, or to the Company’s Knowledge threatened, which challenges the right of the Company to use any Company Intellectual Property as such Company Intellectual Property is currently being used in the business. To the Company’s Knowledge, the Company’s current and intended products, services and processes do not infringe on any intellectual property rights or other rights held by any Person, and to the Company’s Knowledge, there are no facts or circumstances which might give rise to any of the foregoing. Except as disclosed in the Subsection 3.8 of the Disclosure Schedule, the Company has not received any notice of infringement of, or conflict with, the asserted rights of others with respect to the Company Intellectual Property.

 

3.9       Tax Matters. There are no material federal, state, county, local or foreign taxes due and payable by the Company which have not been timely paid, and no accrued and unpaid federal, state, country, local or foreign taxes of the Company which are due, whether or not assessed or disputed. The Company has, when applicable, (i) timely filed all necessary federal, state and foreign income and franchise tax returns, (ii) set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply and timely paid or accrued all taxes shown as due thereon, and, to the Company’s Knowledge no tax deficiency has been asserted or threatened against the Company.

 

3.10       Certain Transactions. Other than as provided in the Transaction Documents or disclosed in Subsection 3.10 of the Disclosure Schedule, none of the officers or directors of the Company nor any of its employees is presently a party to any transaction with the Company (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, 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 or partner, 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.

 

3.11       Disclosure. All disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including in the Memorandum and the schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or, to Company’s Knowledge, omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

 

3.12       No General Solicitation. Neither the Company nor, to the Company’s Knowledge, any Person acting on behalf of the Company has (i) offered or sold any of the Securities by any form of general solicitation or general advertising or (ii) offered the Securities for sale to anyone other than the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

 

3.13       No Integrated Offering. Neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any 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 the Securities Act which would require the registration of any such securities under the Securities Act.

 

3.14       No Brokers. The Company has taken no action which would give rise to any claim by any Person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby, other than to the Placement Agent.

 

3.15       Permits; Compliance. The Company possesses all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct its business, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and the Company has not received any notice of proceedings relating to the revocation or modification of any Material Permit. The Company is not in default in any material respect under any of such Material Permits.

 

3.16       ERISA. The Company has not failed to make any required contributions and has no liability to any employee benefit plan which is subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), other than liability for health plan continuation coverage described in Part 6 of Title I(B) of ERISA, and has complied with all applicable laws for any such employee benefit plan.

 

3.17       Title to Property. The Company has good and marketable title in fee simple to all real property owned by it and good title in all personal property owned by it that is material to the business of the Company free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use currently made of such property by the Company and Liens for the payment of federal, state or other taxes, the payment of which it is not delinquent nor subject to penalties. Any real property and facilities held under lease by the Company is held by it under valid, subsisting and enforceable leases with which the Company is in material compliance.

 

3.18       Insurance. To the Knowledge of the Company, there is no circumstance currently existing that would result in the Company not being able to renew its existing insurance coverage, if any, as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business and in compliance with its contractual obligations.

 

 

3.19       Questionable Payments. Neither the Company nor, to the Company’s Knowledge, any of its current or former directors, officers, employees, agents or other Persons acting on behalf of the Company, has on behalf of the Company or in connection with its business: (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful fund of corporate monies or other assets; (d) made any false or fictitious entries on the books and records of the Company; or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature.

 

3.20       Investments in Other Persons. The Company has not made any loan or advance to any Person, nor is it committed or obligated to make any such loan or advance. The Company does not own any capital stock, assets comprising the business of, obligations of, or any equity, or ownership in any Person.

 

3.21       No Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be an Affiliate of, an “investment company,” an affiliate of an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

3.22       Material Contracts. Except as disclosed herein and in Subsection 3.22 of the Disclosure Schedule, or as contemplated by this Agreement or another Transaction Document, there are no agreements, understandings, commitments, instruments, contracts, employment agreements, or proposed transactions or judgments (each, a “Material Agreement”) to which the Company is a party or by which it is bound which involve (i) obligations (contingent or otherwise), or a related series of obligations (contingent or otherwise), of, or payments, or a related series of payments, by the Company in excess of $50,000 in any one year, (ii) the license of any patent, copyright, trademark, trade secret or other proprietary right to or from the Company, (iii) the grant of rights to manufacture, produce, assemble, license, market, or sell its products to any other Person that limit the Company’s exclusive right to develop, manufacture, assemble, distribute, market or sell its products, or (iv) indemnification by the Company with respect to infringements of proprietary rights. All Material Agreements are in full force and effect and constitute legal, valid and binding obligations of the Company and, to the Company’s Knowledge, are enforceable in accordance with their respective terms. To the Company’s Knowledge, neither the Company nor any other Person is in default under the terms of any Material Agreement, and no circumstance exists that would, with the giving of notice or the passage of time, constitute a default by the Company under any Material Agreement.

 

3.23       Material Liabilities. Except as disclosed in Subsection 3.23 of the Disclosure Schedule, the Company has no liability or obligation, absolute or contingent (individually or in the aggregate), except (i) obligations and liabilities incurred after the date of incorporation in the ordinary course of business that are not material, individually or in the aggregate, and (ii) obligations under contracts made in the ordinary course of business that would not be required to be reflected in financial statements prepared in accordance with the United States generally accepted accounting principles.

 

 

3.24       Employees. As of the date hereof and as of the Closing Date, except as contemplated by Subsection 3.22(d) and (e) of the Disclosure Schedule, the Company does not have any employees or consultants. The Company is in compliance with all applicable 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. As of the date hereof and as of the Closing Date, neither the carrying on of the Company’s business by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, nor the conduct of the Company’s business as now conducted and as presently proposed to be conducted, will conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under which either such individual is now obligated.

 

3.25       Compliance. The Company is not (i) 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), nor has the Company received notice of a claim that it is in default under or that it is in violation of, the Certificate of Incorporation, Bylaws, any indenture, loan or credit agreement or any other Material Agreement 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) in violation of any order of any court, arbitrator or governmental body, or (iii) in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except in each case as could not have or would not reasonably be expected to result in a Material Adverse Effect.

 

3.26       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 of, delivery and performance by the Company of the Transaction Documents, other than the filing of Form D with the SEC and such filings as are required to be made under applicable state securities laws (the “Required Approvals”). Subject to the accuracy of the representations and warranties of each Purchaser set forth in Section 2 hereof, the Company has taken all action necessary to exempt (i) the issuance and sale of the Securities and (ii) the other transactions contemplated by the Transaction Documents from the provisions of any stockholder rights plan or other “poison pill” arrangement, any anti-takeover, business combination or control share law or statute binding on the Company or to which the Company or any of its assets and properties may be subject and any provision of the Company’s Certificate of Incorporation or Bylaws that is or could reasonably be expected to become applicable to the Purchasers as a result of the transactions contemplated hereby, including without limitation, the issuance of the Securities and the ownership, disposition or voting of the Securities by the Purchasers or the exercise of any right granted to the Purchasers pursuant to this Agreement or the other Transaction Documents.

 

 

3.27       Environmental Matters. The Company (A) is in compliance with all Environmental Laws (as defined below), (B) has received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct its business and (C) is in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (A), (B) and (C), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, 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.

 

3.28       No Undisclosed Events, Liabilities, Developments or Circumstances. Since the Company’s incorporation, no event, liability, development or circumstance has occurred or exists, or is reasonably expected to exist or occur with respect to the Company or any of its businesses, properties, liabilities, operations (including results thereof) or condition (financial or otherwise), that would reasonably be expected to have a Material Adverse Effect on the Company.

 

3.29       Foreign Corrupt Practices. Neither the Company nor, to its Knowledge, any director, officer, agent, employee or other Person acting on behalf of the Company has, in the course of its actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

 

3.30       Indebtedness and Other Contracts. The Company, (i) does not have any outstanding Indebtedness (as defined below) in excess of $50,000, (ii) is not a party to any contract, agreement or instrument, the violation of which, or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected to result in a Material Adverse Effect, other than agreements or instruments entered into during the ordinary course of business, (iii) is not in material violation of any term of, or in default under, any contract, agreement or instrument relating to any Indebtedness, and (iv) is not a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. For purposes of this Agreement: (x) “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, “capital leases” in accordance with generally accepted accounting principles) (other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, claim, lien, tax, right of first refusal, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; and (y) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

 

3.31       Bank Holding Company Act. The Company is not subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and is not subject to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its 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 (25%) or more of the total equity of a bank or any equity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor of its 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.

 

3.32       Shell Company Status. The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i) promulgated under the Securities Act.

 

3.33       Money Laundering. The Company is in compliance with, and has not previously violated, the USA Patriot Act of 2001 or any other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, but not limited to, the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including, but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.

 

3.34       Management. No “bad actor” disqualifying event described in Rule 506(d)(1)(i)-(viii) of the Securities Act is applicable to the Company or, to the Company’s Knowledge, any Company Covered Person. No Company Covered Person has been the subject of:

 

 

(i)       a petition under bankruptcy laws or any other insolvency or moratorium law or the appointment by a court of a receiver, fiscal agent or similar officer for such Person, or any partnership in which such Person was a general partner at or within two years before the filing of such petition or such appointment, or any corporation or business association of which such Person was an executive officer at or within two years before the time of the filing of such petition or such appointment;

 

(ii)       a conviction in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations);

 

(iii)       any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining any such Person from, or otherwise limiting, the following activities:

 

1.       Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other Person regulated by the United States Commodity Futures Trading Commission or an associated Person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated Person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

 

2.       Engaging in any type of business practice; or

 

3.       Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of securities laws or commodities laws;

 

(iv)       any order, judgment or decree, not subsequently reversed, suspended or vacated, of any authority barring, suspending or otherwise limiting for more than 60 days the right of any such Person to engage in any activity described in the preceding sub paragraph, or to be associated with persons engaged in any such activity;

 

(v)       a finding by a court of competent jurisdiction in a civil action or by any other governmental authority to have violated any securities law, regulation or decree and the judgment in such civil action or finding by a governmental authority has not been subsequently reversed, suspended or vacated; or

 

(vi)       a finding by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding has not been subsequently reversed, suspended or vacated.

 

3.35       Public Utility Holding Act. The Company is not a “holding company,” or an “affiliate” of a “holding company,” as such terms are defined in the Public Utility Holding Act of 2005.

 

3.36       Federal Power Act. The Company is not subject to regulation as a “public utility” under the Federal Power Act, as amended.

 

 

3.37       No Additional Agreements. The Company does not have any agreement or understanding with any Purchaser with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.

 

4.       Covenants. In addition to the other agreements and covenants set forth herein, the Company hereby covenant as follows:

 

4.1       Use of Proceeds. In accordance with the directions of the Company’s Board of Directors, the Company will use the proceeds from the sale of the Shares as specified in the Memorandum.

 

4.2       Contingency. In the event that the Company shall not have received Subscription Amounts or signed, enforceable agreements for Subscription Amounts, aggregating at least $[•] from the sale of the Securities as contemplated hereby and/or the Closing does not occur by April 19, 2017, or if extended, by no later than May 15, 2017, the Escrow Agent shall be instructed to return each Purchaser’s Subscription Amount deposited with the Escrow Agent.

 

4.3       General Affirmative Obligations. The Company will furnish to the Purchaser and/or their assignees such information relating to the Company as is required by law, which is reasonably requested by the Purchasers.

 

4.4       Form D; Blue Sky Laws. The Company agrees to file a Form D with the SEC with respect to the Securities as required by Regulation D promulgated under the Securities Act. The Company shall also take such action as the Company shall reasonably determine is necessary to comply with all applicable securities or “blue sky” laws of the states of the United States. The Company agrees to file a further state notice for the Company and the Placement Agent in the State of New York.

 

4.5       Corporate Existence. Subject to appropriate shareholder action, the Company will use reasonable commercial efforts to maintain its corporate existence for at least two years after the date hereof, except in connection with a consolidation or merger of the Company with or into another corporation or any transfer of all or substantially all of the assets of the Company.

 

4.6       ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Matters. When and if required to do so, the Company will comply with any and all requirements applicable to the Company of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and any and all rules and regulations applicable to the Company promulgated by the SEC thereunder including, without limitation, implementing such programs and taking such steps as reasonably necessary to provide for compliance (not later than the relevant statutory and regulatory deadline therefor) with all provisions of Section 404 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002.

 

4.7       No Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the Securities Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

 

 

4.8      Financial Information. For two years after the date hereof, the Company agrees to send promptly the following to each Investor (as defined in the Registration and Investor Rights Agreement), provided such Investor is a holder of the Securities at such time, unless the following are filed with or furnished to the SEC through ▇▇▇▇▇ and are available to the public through the ▇▇▇▇▇ system, a copy of its financial statements prepared in accordance with generally accepted accounting principles, for its fiscal year and each fiscal quarter, if and when prepared, which will include any consolidated balance sheets, income statements, stockholders’ equity statements and/or cash flow statements, and copies of any notices and other information made available or given to the stockholders of the Company generally, contemporaneously with the making available or giving thereof to the stockholders.  

 

4.9       Conduct of Business. The business of the Company shall not be conducted in material violation of any law, ordinance or regulation of any governmental entity.

 

4.10       Passive Foreign Investment Company. The Company shall conduct its business in such a manner as will ensure that the Company will not be deemed to constitute a passive foreign investment company within the meaning of Section 1297 of the U.S. Internal Revenue Code of 1986, as amended.

 

4.11       Initial Public Offering. The Company intends to file or submit on a confidential basis an S-1 Registration Statement in connection with the initial public offering of its securities pursuant to the Securities Act (an “IPO”) by no later than seven (7) months following the Closing and attempt to complete an IPO within fifteen (15) months (the “Initial Term”) after the Closing; provided, that if the SEC has no material comments to the confidential submission to the Company’s IPO S-1 Registration Statement, or if all such comments have been resolved to the SEC’s satisfaction, but the Placement Agent (or other underwriter for the IPO) reasonably believes it will be unable to complete timely the IPO at or above a $75 million pre-money valuation prior to the expiration of the Initial Term, the Company shall have an additional six (6) months following the Initial Term in which to attempt to complete the IPO.

 

4.12       Payment of Placement Agent Commission; Issuance of Warrant. The Company agrees that at the Closing, it will (i) pay to the Placement Agent a cash commission (the “Placement Agent Fee”) equal to 7% of the gross Purchase Price from the sale of the Shares (excluding any Shares sold to ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Innovation – JJDC, Inc. (“JJDC”) and JDRF Therapeutics Fund, LLC (“JDRF T1D Fund”)); and (ii) issue a warrant to the Placement Agent, substantially in the form attached hereto as Exhibit E (the “Placement Agent Warrant”) for the purchase of that number of shares of Common Stock equal to 7% of the number of Conversion Shares underlying Shares sold (excluding any Shares sold to JJDC and JDRF T1D Fund), which warrant will be exercisable at the price of $[•] per share [i.e., the initial conversion price of the Preferred Stock] for a period of seven years from the Closing Date.

 

4.13       Audit. Following Closing, the Company shall engage an independent accounting firm registered under the Public Company Accounting Oversight Board to perform and complete on or before the date that is seven (7) months following the Closing Date, an audit of the Company’s financial statements to the extent required to comply with the Securities Act and the rules promulgated by the SEC thereunder in connection with the IPO and to comply with the listing requirements of NASDAQ and the NYSE.

 

 

4.14       Fees and Expenses. At the Closing, the Company shall pay the reasonable legal fees and expenses of (i) ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP, the counsel for JJDC, in an amount not to exceed, in the aggregate, $[●], (ii) Golenbock ▇▇▇▇▇▇▇ Assor ▇▇▇▇ & ▇▇▇▇▇▇ LLP, the counsel for the Placement Agent, in an amount not to exceed, in the aggregate, $[●] and (iii) ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, the counsel for the Company, in an amount not to exceed, in the aggregate, $[●].

 

4.15       Publicity. The Company shall make no written or other public disclosure regarding JJDC without the prior written consent of JJDC, except as may be required by applicable law.

 

5.       Register; Transfer Agent Instructions; Legends.

 

5.1       Register. The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to each holder of Securities), a register for the Securities and shall record the name and address of the Person to whom the Securities have been issued (including the name and address of each transferee, to the extent it is appropriately notified of transfers) and held by such Person. The Company shall keep the register open and available at all times during normal business hours for inspection of any Purchaser or its legal representatives so long as a Purchaser continues to hold any Securities.

 

5.2       Legend Removal. In connection with any sale or disposition of the Securities by a Purchaser pursuant to Rule 144 or pursuant to any other exemption or registration under the Securities Act such that the purchaser acquires freely tradable shares and upon compliance by the Purchaser with the requirements of this Agreement, the Company shall or, shall cause its transfer agent (the “Transfer Agent”) to issue replacement certificates representing the Securities sold or disposed of without restrictive legends, at the Company’s sole expense, provided that the Purchaser has provided at its sole expense (1) a customary representation by the Purchaser that Rule 144 applies to the Securities represented thereby, or (2) a statement by the Purchaser that such Purchaser has sold the Securities represented thereby in accordance with a plan of distribution contained in the registration statement, if any, used in connection with the sale or disposition. Notwithstanding the foregoing, if the Securities are subject to the lock up provisions set forth herein, the Purchaser will not be entitled to have the restrictive legend removed in respect of Rule 144.

 

6.       Conditions to the Company’s Obligation to Sell. The obligation of the Company hereunder to issue and sell the Shares to a Purchaser at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

 

6.1       The applicable Purchaser shall have executed this Agreement and each Transaction Document to which it is a party, and delivered the same to the Company.

 

6.2       The applicable Purchaser shall have delivered the Subscription Amount in accordance with Subsection 1.4 above.

 

 

6.3       The representations and warranties of the applicable Purchaser shall be true and correct in all material respects, and the applicable Purchaser shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement and the other Transaction Documents to be performed, satisfied or complied with by the applicable Purchaser at or prior to the Closing Date.

 

6.4       No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement and the other Transaction Documents.

 

7.       Conditions to Each Purchaser’s Obligation to Purchase. The obligation of each Purchaser hereunder to purchase the Shares at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for such Purchaser’s sole benefit and may be waived by such Purchaser at any time in its sole discretion:

 

7.1       The Company and each Purchaser (other than the Purchaser relying upon this condition to excuse such Purchaser’s performance hereunder) shall have executed and delivered to such Purchaser this Agreement and each other Transaction Document to which it is a party.

 

7.2       The Company shall have provided evidence to the Placement Agent of the filing and acceptance of the Certificate of Incorporation from the Secretary of State of Delaware.

 

7.3       The Company shall instruct the Transfer Agent to record such Purchaser’s Shares set forth opposite such Purchaser’s name on Schedule A, in book entry promptly after the Closing.

 

7.4       The representations and warranties made by the Company in Section 3 hereof qualified as to materiality shall be true and correct at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date, and, the representations and warranties made by the Company in Section 3 hereof not qualified as to materiality shall be true and correct in all material respects at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date. The Company shall have performed in all material respects all obligations and covenants herein required to be performed by it on or prior to the Closing Date.

 

7.5       The Company shall have obtained any and all consents, permits, approvals, registrations and waivers as necessary or appropriate for consummation of the purchase and sale of the Securities and the consummation of the other transactions contemplated by the Transaction Documents, all of which shall be in full force and effect, and the Company will have made all pre-Closing filings under the Blue Sky laws.

 

 

7.6       The Company shall have executed and obtained from ▇▇▇▇▇▇▇ Pharmaceutica, N.V., ▇▇▇▇▇▇▇ Sciences Ireland UC and Vactech Oy license agreements for certain rights of each company as described in the Memorandum.

 

7.7       The Company shall have executed and obtained employment agreements from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.

 

7.8       The Company shall have received Subscription Amounts or signed, enforceable agreements for Subscription Amounts, aggregating at least $26.5 million from the sale of the Securities as contemplated hereby.

 

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

 

7.10       No event shall have occurred which would reasonably be expected to have a Material Adverse Effect on the Company.

 

7.11       The Company shall have delivered a Certificate, executed on behalf of the Company by its Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions of this Section 7.

 

7.12       The Company shall have delivered a Certificate, executed on behalf of the Company by its Secretary, dated as of the Closing Date certifying (i) the Bylaws of the Company, (ii) resolutions of the Board of Directors of the Company approving, this Agreement, the Transaction Documents and the transactions contemplated hereby and thereby, and (iii) resolutions of the stockholders of the Company approving the Certificate of Incorporation.

 

7.13       The Purchasers shall have received from ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP, counsel for the Company, an opinion, dated as of the Closing Date, in substantially the form of Exhibit F attached to this Agreement.

 

7.14       The Company shall have paid or made arrangements to pay to the Placement Agent the Placement Agent Fee and shall have issued and delivered or made arrangements to issue and deliver to the Placement Agent the Placement Agent Warrant.

 

 

8.       Governing Law; Jurisdiction; Waiver of Jury Trial.

 

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

 

9.       Miscellaneous.

 

9.1       Counterparts; Facsimile. This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission or other electronic transmission (such as but not limited to an email attachment in PDF format) of a copy of this Agreement bearing the signature of the party so delivering this Agreement. This Agreement may also be executed by electronic or facsimile signature.

 

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

 

9.3       Gender. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.

 

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

 

 

9.5       Entire Agreement; Amendments. This Agreement, the other Transaction Documents and the instruments, documents, exhibits and schedules referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor any Purchaser makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Required Holders (defined below) and (i) if on or prior to the Closing Date, all the Purchasers or (ii) if after the Closing Date, the Required Holders (but all the Purchasers with respect to any amendment of Subsection 1.2, Schedule A or Section 9 hereof), and any amendment to any provision of this Agreement made in conformity with the provisions of this Subsection 9.5 shall be binding on all Purchasers; provided that no such amendment shall be effective to the extent that it (A) applies to less than all of the Purchasers or (B) imposes any obligation or liability on any Purchaser without such Purchaser’s prior written consent (which may be granted or withheld in such Purchaser’s sole discretion); and provided, further, that (I) neither Subsection 4.13(i) nor Subsection 4.14 may be amended without the written consent of JJDC, (II) neither Subsection 4.5 nor Subsection 4.13(ii) may be amended without the written consent of the Placement Agent, and (iii) Subsection 4.13(iii) may not be amended without the written consent of the Company. Neither the Company nor the Purchasers make any representation or warranty as to any matter of fact except as expressly contained in this Agreement or the other Transaction Documents. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party, provided that after the Closing Date, the Required Holders may waive any provision of this Agreement (other than Subsection 1(b) or this Section 9), and any waiver of any provision of this Agreement made in conformity with the provisions of this Subsection 9.5 shall be binding on all Purchasers and holders of Securities, as applicable, provided that no such waiver shall be effective to the extent that it (1) applies to less than all of the holders of the Securities then outstanding (unless a party gives a waiver as to itself only) or (2) imposes any obligation or liability on any Purchaser without such Purchaser’s prior written consent (which may be granted or withheld in such Purchaser’s sole discretion). “Required Holders” means (i) prior to the Closing Date, each Purchaser entitled to purchase Shares at the Closing and (ii) on or after the Closing Date, holders of a majority of all Shares then outstanding.

 

9.6       Notices. Any notices required or permitted to be given under the terms of this Agreement shall be sent by certified or registered mail (return receipt requested) or delivered personally or by courier (including a recognized overnight delivery service) or by facsimile transmission and shall be effective five days after being placed in the mail, if mailed by regular United States mail, or upon receipt, if delivered personally or by courier (including a recognized overnight delivery service) or by facsimile transmission, with printed confirmation of receipt, in each case addressed to a party. The addresses for such communications shall be:

 

If to the Company:

 

Provention Bio, Inc.

▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇

 ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇

 Attention: ▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇

 Telephone: (▇▇▇) ▇▇▇-▇▇▇▇

 Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇

 

 

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

 

▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP,

 ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇

 ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇,

 Telephone: (▇▇▇) ▇▇▇-▇▇▇▇

 Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇

 email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇.

 Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.

 

If to a Purchaser:

 

To the address and fax number set forth immediately below such Purchaser’s name on the counterpart signature pages hereto.

 

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

 

MDB Capital Group, LLC

 ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇

 ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇

 Attention: Compliance Department

 Telephone: (▇▇▇) ▇▇▇-▇▇▇▇

 Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇

 

Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service.

 

Each party shall provide notice to the other party of any change in address, telephone or facsimile number (including, if a Purchaser is holding any Securities purchased hereunder in street name, the address, telephone and facsimile of the beneficial owner of such Securities), and each Purchaser and its assignees under Section 9.4 acknowledge and agree that such parties must provide such notice and contact information promptly (but in any event within 30 days of any change in such information or assignment of any rights hereunder).

 

9.7       Successors and Assigns. Except as provided herein, this Agreement may not be assigned by a party hereto without the prior written consent of the Company and the Purchasers. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Without limiting the generality of the foregoing, in the event that the Company is a party to a merger, consolidation, share exchange or similar business combination transaction in which the Securities are converted into the equity securities of another Person, from and after the effective time of such transaction, such Person shall, by virtue of such transaction, be deemed to have assumed the obligations of the Company hereunder, the term “Company” shall be deemed to refer to such Person and the term “Shares” and “Conversion Shares” shall be deemed to refer to the securities received by the Purchasers in connection with such transaction. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

 

9.8       Survival. The representations and warranties of the Company set forth in Section 3 hereof shall survive the Closing. The representations and warranties of each Purchaser set forth in Section 2 shall survive the Closing.

 

9.9       Further Assurances. At any time or from time to time after the date hereof, the parties hereto agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other parties hereto may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the parties hereunder.

 

9.10       Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. No specific representation or warranty shall limit the generality or applicability of a more general representation or warranty. Each and every reference to share prices, shares of Preferred Stock and any other numbers in this Agreement that relate to the Preferred Stock shall be automatically adjusted for stock splits, stock combinations and other similar transactions that occur with respect to the Preferred Stock after the date of this Agreement.

 

9.11       Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under the Transaction Documents are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the 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, and the Company acknowledges that the Purchasers do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Purchasers are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by the Transaction Documents or any matters, and the Company acknowledges that the Purchasers are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by the Transaction Documents. The decision of each Purchaser to purchase the Shares pursuant to the Transaction Documents has been made by such Purchaser independently of any other Purchaser. Each Purchaser acknowledges that no other Purchaser has acted as agent for such Purchaser in connection with such Purchaser making its investment hereunder and that no other Purchaser will be acting as agent of such Purchaser in connection with monitoring such Purchaser’s investment in the Securities or enforcing its rights under the Transaction Documents. The Company and each Purchaser confirms that each Purchaser has independently participated with the Company in the negotiation of the transactions contemplated hereby with the advice of its own counsel and advisors. 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 any 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. The use of a single agreement to effectuate the purchase and sale of the Shares contemplated hereby was solely in the control of the Company, not the action or decision of any Purchaser, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Purchaser. 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.

 

 

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

 

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

 

“Company Covered Person” means, with respect to the Company as an “issuer” for purposes of Rule 506 promulgated under the Securities Act, any Person listed in the first paragraph of Rule 506(d)(1).

 

“Company’s Knowledge,” “Knowledge of the Company” and words of similar import means the actual knowledge of the executive officers (as defined in Rule 405 under the Securities Act) of the Company, including, but not limited to, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.

 

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

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

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

 

“Registration and Investor Rights Agreement” means the agreement among the Company, the Purchasers and the Placement Agent, dated as of the date of the Closing, in the form of Exhibit F attached to this Agreement.

 

“Right of First Refusal and Co-Sale Agreement” means the agreement among the Company, the Purchasers, and certain other stockholders of the Company, dated as of the date of the Closing, in the form of Exhibit G attached to this Agreement.

 

 

“Securities” means the Shares and the Conversion Shares, collectively.

 

“Transaction Documents” means the Registration and Investor Rights Agreement, the Right of First Refusal and Co-Sale Agreement, the Voting Agreement and the Escrow Agreement.

 

“Voting Agreement” means the agreement among the Company, the Purchasers and certain other stockholders of the Company, dated as of the date of the Closing, in the form of Exhibit H attached to this Agreement.

 

[Signature Page to Follow]

 

 

IN WITNESS WHEREOF, the undersigned Purchasers and the Company have caused this Securities Purchase Agreement to be duly executed as of the date first above written.

 

	Provention BIO, Inc.
	By:
	Name:
	Title:
	PURCHASERS
	The Purchasers executing the Signature Page in the form attached hereto as Annex A and delivering the same to the Company or its agents shall be deemed to have executed this Agreement and agreed to the terms hereof.

 

[Signature Page to Securities Purchase Agreement for Provention Bio, Inc.]

 

 

Annex A

 

Securities Purchase Agreement

 

Purchaser Counterpart Signature Page

 

The undersigned, desiring to: (i) enter into that certain Securities Purchase Agreement, dated April 25, 2017 (the “Agreement”), between the undersigned, Provention Bio, Inc., a Delaware corporation (the “Company”), and the other parties thereto, in or substantially in the form furnished to the undersigned and (ii) purchase the securities of the Company appearing next to the undersigned’s name on Schedule A to the Agreement, on the terms and subject to conditions contained therein, hereby agrees to purchase such securities from the Company as of the Closing and further agrees to join the Agreement as a party thereto, with all the rights and privileges appertaining thereto, and to be bound in all respects by the terms and conditions thereof.

 

IN WITNESS WHEREOF, the undersigned has executed the Agreement as of ______________.

 

	PURCHASER:
	Name, Address, Phone No., Email and Social Security No./EIN of Purchaser:
	Phone No.:
	Email.:
	Soc. Sec. No./EIN:
	If a partnership, corporation, trust or other business entity:
	By:
	Name:
	Title:
	If an individual:
	Signature

 

 

Schedule A

 

 

Exhibit A

 

Form of Questionnaire

 

 

Exhibit B

 

Form of Escrow Agreement Available on Request

 

 

Exhibit C

 

 Amended and Restated Certificate of Incorporation

 

 

Exhibit D

 

Disclosure Schedules

 

 

Exhibit E

 

Form of Placement Agent Warrant

 

 

Exhibit F

 

Form of Registration and Investor Rights Agreement

 

 

Exhibit G

 

Form of Right of First Refusal and Co-Sale Agreement

 

 

Exhibit H

 

Form of Voting Agreement