UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

  

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  July 3, 2017 (June 30, 2017)

 

SPHERIX INCORPORATED

 

(Exact name of registrant as specified in its charter)

 

Delaware   000-05576   52-0849320

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

One Rockefeller Plaza, 11 th Floor, New York, NY   10020
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code:  (212) 745-1374  

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company     ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

Item 1.01.           Entry into a Material Definitive Agreement.

 

On June 30, 2017 (the “Closing Date”), Spherix Incorporated (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Hoth Therapeutics, Inc., a Nevada corporation (“Hoth”), for the purchase of an aggregate of 6,800,000 shares of common stock, par value $0.0001 (the “Shares”), of Hoth, for a purchase price of $675,000. As of the Closing Date, Hoth had a total of 17,000,000 shares of common stock issued and outstanding. Hoth is a development stage biopharmaceutical company focused on unique targeted therapeutics for patients suffering from indications such as atopic dermatitis, also known as eczema. Hoth’s primary asset is a sublicense agreement with Chelexa Biosciences, Inc. (“Chelexa”) pursuant to which Chelexa has granted Hoth an exclusive sublicense to use its BioLexa products for the treatment of eczema.

 

Under the Purchase Agreement, following the occurrence of a Going Public Event (as defined below), Hoth covenants to timely file all reports required to be filed under the Securities Exchange Act of 1934 (the “Exchange Act”) and to take all necessary steps to cause the Shares to be approved for listing or quotation on a trading market such as NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or OTCQX. A “Going Public Event” means (i) an initial public offering of Hoth’s securities pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), or (ii) Hoth’s entry into a merger, consolidation, transfer or share exchange transaction pursuant to which Hoth becomes subject to the reporting requirements of the Exchange Act.

 

In connection with the Purchase Agreement, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”). Under the Registration Rights Agreement, Hoth is obligated to register for resale on a registration statement on Form S-1 under the Securities Act, all of the Shares, no later than June 30, 2018, or twelve months from the Closing Date. In addition, Hoth shall use its best efforts to cause such registration statement to be declared effective by the Securities and Exchange Commission no later than December 30, 2018 and to keep such registration statement continuously effective until the date the Shares have been sold, thereunder or pursuant to Rule 144, or may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined by counsel to Hoth pursuant to a written opinion letter.

 

Pursuant to the Registration Rights Agreement, Hoth shall also indemnify and hold harmless the Company and certain persons or entities related to them, such as their officers, directors, employees, agents and representatives, from and against any and all losses, claims, damages, liabilities, costs and expenses, as incurred, arising out of or relating to (i) any untrue or alleged untrue statement of material fact contained in a registration statement, or (ii) any violation or alleged violation by Hoth of the Securities Act, the Exchange Act or any state securities law, but only to the extent that such information relates to the Company or the Company’s proposed method of distribution of its Shares and was reviewed and expressly approved in writing by the Company in a registration statement or related document. The Company shall have piggyback registration rights in the event that there is no effective registration statement covering the Shares and Hoth determines to file a registration statement under the Securities Act, other than on Form S-4 or Form S-8.

 

In connection with the Purchase Agreement, the Company, Hoth and Hoth’s existing shareholders also entered into a Shareholders Agreement (the “Shareholders Agreement”), pursuant to which the Company shall have the right to appoint one director to the board of directors of Hoth for so long as the Company holds at least 10% of the issued and outstanding shares of common stock of Hoth. The shareholders that are a party to the Shareholders Agreement also covenant and agree that during the period which the Company is eligible to appoint a director to Hoth’s board, each shall vote or cause their shares to be votes in favor of the director designated by the Company.

 

Under the Shareholders Agreement, the Company is subject to certain drag-along rights in the event that holders of a majority or more of the voting shares of Hoth (a “Control Group”) elect to transfer all of their shares of stock of Hoth owned by them to an unaffiliated third party whereby such Control Group shall have the right to cause the Company to transfer all of its Shares to such third party at the same price and on the same terms and conditions as the Control Group proposes to transfer their shares (the “Drag-Along Right”). Further, the Company is entitled to certain rights under the Shareholders Agreement, including (i) certain pre-emptive rights in the event that Hoth proposes to issue additional equity securities, and (ii) and tag-along rights in the event that a Control Group elects to transfer all or a portion of shares of Hoth owned by them to a third party and such Control Group has not exercised its Drag-Along Right. Under the Shareholders Agreement, Hoth is entitled to a right of first refusal should the Company receive a written offer to purchase all or a portion of its Shares by a third party.

 

 

 

 

The foregoing description of the Purchase Agreement, Registration Rights Agreement and Shareholders Agreement does not purport to be complete and is qualified in its entirety by reference to such agreements, which are filed as Exhibits 10.1, 10.2 and 10.3 hereto and incorporated herein by reference.

 

A copy of the press release issued by the Company announcing the transaction with Hoth is attached as Exhibit 99.1 hereto and incorporated herein by reference.

 

Item 9.01.        Financial Statements and Exhibits.

 

(d)        Exhibits

 

Exhibit No.   Description
     
10.1   Securities Purchase Agreement, dated as of June 30, 2017, between Hoth Therapeutics, Inc. and Spherix Incorporated.
     
10.2   Registration Rights Agreement, dated as of June 30, 2017, between Hoth Therapeutics, Inc. and Spherix Incorporated.
     
10.3   Form of Shareholders Agreement, dated as of June 30, 2017
     
99.1   Press release, dated July 3, 2017

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  SPHERIX INCORPORATED
   
Date: July 3, 2017 By: /s/ Anthony Hayes
  Name: Anthony Hayes
  Title: Chief Executive Officer

 

 

  

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “ Agreement ”) is dated as of June 30, 2017, between Hoth Therapeutics, Inc., a Nevada 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 Section 4(a)(2) of the Securities Act of 1933, as amended (the “ Securities Act ”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase 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:

 

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

 

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 Business Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived.

 

Commission ” means the United States Securities and Exchange Commission.

 

     
     

 

Common Stock ” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

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

 

Company Counsel ” means Sheppard Mullin Richter & Hampton LLP, with offices located at 30 Rockefeller Plaza, New York, New York 10112-0015.

 

Disclosure Schedules ” shall have the meaning ascribed to such term in Section 3.1.

 

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

 

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

 

Going Public Event ” means the earlier to occur of (i) Company’s offering of securities pursuant to an effective registration statement (including, without limitation, a Registration Statement) pursuant to the Securities Act or (ii) the Company’s merger, consolidation, transfer, or share exchange transaction pursuant to which the Company becomes subject to the reporting requirements of the Exchange Act.

 

Going Public Event Date ” means the date of the effectiveness of the Going Public Event.

 

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

 

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

 

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).

 

Per Share Purchase Price ” equals $0.09926471, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

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

 

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.

 

Purchaser Party ” shall have the meaning ascribed to such term in Section 4.7.

 

Registration Rights Agreement ” means the Registration Rights Agreement, dated on or about the date hereof, among the Company and the Purchasers, in the form of Exhibit A attached hereto.

 

Registration Statement ” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale by the Purchasers of the Shares.

 

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.

 

Securities ” means the Shares.

 

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

 

Shareholders Agreement ” means the Shareholders Agreement, dated on or about the date hereof, by and among the Company, the Purchasers and the current stockholders of the Company, in the form of Exhibit C attached hereto

 

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

 

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

 

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Subsidiary ” means, if applicable, 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.

 

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

 

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

 

Transfer Agent ” means, as to any date in question following the Going Public Event Date, the then transfer agent of the Company and any successor thereto.

 

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

 

ARTICLE II.
PURCHASE AND SALE

 

2.1            Closing . On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, up to an aggregate of $675,000 of Shares. Each Purchaser shall deliver to the Company, via wire transfer or a certified check, immediately available funds equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser, and the Company shall deliver to each Purchaser its respective Shares as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of EGS or such other location as the parties shall mutually agree.

 

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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 Counsel, substantially in the form of Exhibit B attached hereto;

 

(iii)        a certificate evidencing a number of Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price, registered in the name of such Purchaser;

 

(iv)        the Shareholders Agreement duly executed by the Company and each of the stockholders of the Company; and

 

(v)         the Registration Rights Agreement duly executed by the Company.

 

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

 

(i)          this Agreement duly executed by such Purchaser;

 

(ii)         such Purchaser’s Subscription Amount by wire transfer to the account specified in writing by the Company;

 

(iii)        the Shareholders Agreement duly executed by such Purchaser; and

 

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

 

2.3           Closing Conditions .

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(v)         from the date hereof to the Closing Date, trading in 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, 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.

 

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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 stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded .

 

(b)           Organization and Qualification . The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, 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.

 

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

 

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(d)           No Conflicts . The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the 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, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected, except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

 

(e)           Filings, Consents and Approvals . The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) the filing with the Commission pursuant to the Registration Rights Agreement and (ii) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “ Required Approvals ”).

 

(f)           Issuance of the Securities . The 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 other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement.

 

(g)           Capitalization . The capitalization of the Company is as set forth on Schedule 3.1(g) . Other than pursuant to the Shareholders Agreement, 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. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. Other than the Shareholders Agreement, there are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

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(h)         [Intentionally Omitted]

 

(i)           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.

 

(j)           Labor Relations . 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.

 

(k)           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.

 

(l)           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, 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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(m)          Intellectual Property . The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights as necessary or required for use in connection with their respective businesses and which the failure to so have could have a Material Adverse Effect (collectively, the “ Intellectual Property Rights ”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has received 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.

 

(n)           Certain Fees . 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.

 

(o)           Private Placement . Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby.

 

(p)           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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(q)           Disclosure . All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.

 

(r)           Solvency . The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date. Schedule 3.1(r) sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “ Indebtedness ” means (x) any liabilities for borrowed money or amounts owed, (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness of others, 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. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

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

 

(t)           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 ”).

 

(u)           No Disqualification Events .  With respect to the Securities 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 ” and, together, “ Issuer Covered Persons ”) 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.

 

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

 

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

 

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

 

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(c)           Purchaser Status . At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act.

 

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

 

(e)           General Solicitation . Such Purchaser is not, to such Purchaser’s knowledge, 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            Transfer Restrictions .

 

(a)          The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(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 Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and the Registration Rights Agreement and shall have the rights and obligations of a Purchaser under this Agreement and the Registration Rights Agreement.

 

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

 

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. 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.

 

The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the Securities are subject to registration pursuant to the Registration Rights Agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders (as defined in the Registration Rights Agreement) thereunder.

 

(c)          Certificates evidencing the Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof), (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Shares pursuant to Rule 144, (iii) if such Shares are eligible for sale under Rule 144, 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 and/or the Purchaser if required by the Transfer Agent to effect the removal of the legend hereunder, or if requested by a Purchaser, respectively. The Company agrees that, at such time as such legend is no longer required under this Section 4.1(c), it will, not later than the earlier of (i) three (3) 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 Shares issued with a restrictive legend (such third Trading Day, the “ Legend Removal Date ”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for 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, following the Going Public Event Date, the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of a certificate representing Shares issued with a restrictive legend.

 

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(d)          Each Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a Registration Statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.

 

4.2           Exchange Act Reporting . On or before the earlier of (x) the 60th calendar day following the Going Public Event Date or (y) the date on which the Company’s securities (or any successor’s securities) are listed or quoted on a Trading Market, the Company shall cause its Common Stock to be registered under Section 12(b) or 12(g) of the Exchange Act. Following the date on which the Company becomes subject to the Exchange Act, and until the time that the Purchasers hold no Shares, 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 pursuant to the Exchange Act, provided that, if after becoming subject to the Exchange Act, the Company is thereafter no longer required to file reports pursuant to the Exchange Act, the Company will, for as long as any Purchaser owns Shares, prepare and furnish to the Purchasers and make publicly available in accordance with Rule 144(c) such information as is required for the Purchasers to sell the Securities, including without limitation, under Rule 144. The Company further covenants that Company will take such further action as any holder of Securities may reasonably request, to the extent required from time to time to enable such Person to sell such Securities without registration under the Securities Act, including, without limitation, within the requirements of the exemption provided by Rule 144.

 

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 Securities.

 

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4.4            Securities Laws Disclosure; Publicity . On or before the Going Public Event Date, the Company agrees to publicly disclose 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 Going Public Event Date, 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 shall consult with each Purchaser in issuing any press releases with respect to the transactions contemplated hereby and the Company shall not issue any such press release or otherwise make any such public statement with respect to the transactions contemplated hereby without the prior consent of each Purchaser, except if such disclosure is required by law, in which case the Company shall promptly provide each Purchaser with prior notice of such public statement or communication, or if such disclosure is in connection with a registration statement (including a Registration Statement). The Company acknowledges that a Purchaser that is a publicly reporting company may publicly disclose the transactions contemplated hereby, including, without limitation, in a press release or on a Current Report on Form 8-K.

 

4.5            Non-Public Information . From and after the Going Public Event Date, the Company covenants and agrees that neither the Company 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. From and after the Going Public Event Date, 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 Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates, or a duty to the Company, and 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. From and after the Going Public Event Date, 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 covenants in effecting transactions in securities of the Company.

 

4.6            Use of Proceeds . Except as set forth on Schedule 4.6 attached hereto, the Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes.

 

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4.7            Indemnification of Purchasers . Subject to the provisions of this Section 4.7, 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 Party in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Parties which constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel, a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other Transaction Documents. The indemnification required by this Section 4.7 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.

 

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

 

4.9            Listing of Common Stock . From and after the Going Public Event Date, the Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading Market an additional shares listing application covering the Shares, (ii) take all necessary steps to cause such Shares to be approved for listing or quotation on such Trading Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing or quotation; and (iv) maintain the listing or quotation of the Shares on such Trading Market or another Trading Market. From and after the Going Public Event Date, the Company agrees to establish and maintain the eligibility of the Common Stock for electronic transfer through the Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic transfer.

 

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

 

4.11          Form D; Blue Sky Filings . The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at 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.

 

4.12         [Intentionally Omitted]

 

4.13          Distribution of Shares . In the event that Spherix determines to distribute the Shares or any securities of the Company held by Spherix to its shareholders, the Company covenants to use best efforts to do and perform and cause to be done and performed all such further acts and things and shall execute and deliver all such further agreements, certificates, instruments and documents as Spherix may reasonably request to effect such distribution of Shares or securities to the shareholders of Spherix.

 

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 July 7, 2017; provided , however , that such termination will not affect the right of any party to sue for any breach by any other party (or parties).

 

5.2            Fees and Expenses . 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 fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Shares to the Purchasers.

 

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

 

5.4            Notices . 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 date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment at the e-mail address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment at the e-mail 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 (2 nd ) 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. From and after the Going Public Event Date, to the extent that any notice provided pursuant to any Transaction Document constitutes, or contains material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.

 

5.5            Amendments; Waivers . No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and Purchasers holding at least 67% in interest of the Shares then outstanding 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 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.”

 

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5.8            No Third-Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.7.

 

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 hereto 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 4.7, 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.

 

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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.

 

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.

 

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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 hereof or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience only, each Purchaser and its respective counsel have chosen to communicate with the Company through EGS. EGS does not represent all of the Purchasers and only represents Spherix. 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.

 

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 shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

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

 

(Signature Pages Follow)

 

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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.

  

HOTH THERAPEUTICS, INC.   Address for Notice:
       
By: /s/ Robb Knie   Fax:
  Name: Robb Knie    
  Title: Chief Executive Officer   E-Mail: rknie@mac.com
     
With a copy to (which shall not constitute notice):    
     
Sheppard, Mullin, Richter & Hampton LLP    
30 Rockefeller Plaza, 39 th Floor    
New York, New York 10112    
Attn: Richard A. Friedman, Esq.    
Tel: (212) 653-8700    
Fax: (212) 653-8701    

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

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[PURCHASER SIGNATURE PAGES TO HOTH THERAPEUTICS

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:  Spherix Incorporated

 

Signature of Authorized Signatory of Purchaser /s/ Anthony Hayes

 

Name of Authorized Signatory:  Anthony Hayes

 

Title of Authorized Signatory:  CEO

 

Email Address of Authorized Signatory:  ahayes@spherix.com

 

Facsimile Number of Authorized Signatory:   

 

Address for Notice to Purchaser:

 

1 Rockefeller Plaza, 11 th Floor

New York, NY 10020

 

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

 

Subscription Amount: $675,000

 

Shares: 6,800,000

 

EIN Number: 52-0849320

 

[SIGNATURE PAGES CONTINUE]

 

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Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “ Agreement ”) is made and entered into as of June 30, 2017, between Hoth Therapeutics, Inc., a Nevada corporation (the “ Company ”), and each of the several purchasers signatory hereto (each such purchaser, a “ Purchaser ” and, collectively, the “ Purchasers ”).

 

This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date hereof, between the Company and each Purchaser (the “ Purchase Agreement ”).

 

The Company and each Purchaser hereby agrees as follows:

 

1.             Definitions .

 

Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

 

Advice ” shall have the meaning set forth in Section 6(c).

 

Effectiveness Date ” means, with respect to the Initial Registration Statement required to be filed hereunder, the eighteen (18) month anniversary of the Closing Date and, with respect to any additional Registration Statements which may be required pursuant to Section 2(c), the earliest practical date on which the Company is permitted to go effective on such additional Registration Statement; provided , however , that, in the event the Company is notified by the Commission that one or more of the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date as to such Registration Statement shall be the fifth Trading Day following the date on which the Company is so notified if such date precedes the dates otherwise required above.

 

Effectiveness Period ” shall have the meaning set forth in Section 2(a).

 

Filing Date ” means, with respect to the Initial Registration Statement required hereunder, the twelve (12) month anniversary of the Closing Date and, with respect to any additional Registration Statements which may be required pursuant to Section 2(c), the earliest practical date on which the Company is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities.

 

Holder ” or “ Holders ” means the holder or holders, as the case may be, from time to time of Registrable Securities.

 

 

 

 

Indemnified Party ” shall have the meaning set forth in Section 5(c).

 

Indemnifying Party ” shall have the meaning set forth in Section 5(c).

 

Initial Registration Statement ” means the initial Registration Statement filed pursuant to this Agreement.

 

Losses ” shall have the meaning set forth in Section 5(a).

 

Plan of Distribution ” shall have the meaning set forth in Section 2(a).

 

Prospectus ” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

 

Registrable Securities ” means, as of any date of determination, (a) all Shares and (b) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing.

 

Registration Statement ” means any registration statement required to be filed hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 2(c), including, in each case, the Prospectus, amendments and supplements to any such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any such registration statement.

 

Rule 415 ” means Rule 415 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.

 

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SEC Guidance ” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.

 

2.             Registration .

 

(a)          On or prior to each Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all of the Registrable Securities that are not then registered on an effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415. Each Registration Statement filed hereunder shall be on Form S-1 and shall contain substantially the “ Plan of Distribution ” attached hereto as Annex A ; provided , however , that no Holder shall be required to be named as an “underwriter” without such Holder’s express prior written consent. Subject to the terms of this Agreement, the Company shall use its best efforts to cause a Registration Statement filed under this Agreement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the applicable Effectiveness Date, and shall use its best efforts to keep such Registration Statement continuously effective under the Securities Act until the date that all Registrable Securities covered by such Registration Statement (i) have been sold, thereunder or pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Holders (the “ Effectiveness Period ”). The Company shall telephonically request effectiveness of a Registration Statement as of 5:00 p.m. (New York City time) on a Trading Day. The Company shall, by 9:30 a.m. (New York City time) on the Trading Day after the effective date of such Registration Statement, file a final Prospectus with the Commission as required by Rule 424.

 

(b)           Notwithstanding the registration obligations set forth in Section 2(a), if the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the Initial Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-1 or such other form available to register for resale the Registrable Securities as a secondary offering; provided , however , that, prior to filing such amendment, the Company shall be obligated to use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09.

 

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(c)          Notwithstanding any other provision of this Agreement, if the Commission or any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced as follows:

 

a. First, the Company shall reduce or eliminate any securities to be included other than Registrable Securities; and

 

b. Second, the Company shall reduce Registrable Securities applied, in the case that some Shares may be registered, to the Holders on a pro rata basis based on the total number of unregistered Shares held by such Holders).

 

In the event the Company amends the Initial Registration Statement in accordance with the foregoing, the Company will use its best efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-1 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended. Notwithstanding anything to the contrary contained herein, in no event shall the Company be permitted to name any Holder or affiliate of a Holder as any Underwriter without the prior written consent of such Holder.

 

3.              Registration Procedures .

 

In connection with the Company’s registration obligations hereunder, the Company shall:

 

(a)      Not less than five (5) Trading Days prior to the filing of each Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to each Holder copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities shall reasonably object in good faith, provided that the Company is notified of such objection in writing no later than five (5) Trading Days after the Holders have been so furnished copies of a Registration Statement or one (1) Trading Day after the Holders have been so furnished copies of any related Prospectus or amendments or supplements thereto. Each Holder agrees to furnish to the Company a completed selling stockholder questionnaire in customary form on a date that is not less than two (2) Trading Days prior to the Filing Date or by the end of the fourth (4 th ) Trading Day following the date on which such Holder receives draft materials in accordance with this Section.

 

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(b)      (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that the Company shall excise any information contained therein which would constitute material non-public information regarding the Company or any of its Subsidiaries), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

 

(c)      Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus, provided , however , that in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its Subsidiaries.

 

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(d)      Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

 

(e)      Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(c).

 

(f)       Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement, provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

 

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(g)      If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.

 

(h)      Upon the occurrence of any event contemplated by Section 3(c), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(c) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be entitled to exercise its right under this Section 3(h) to suspend the availability of a Registration Statement and Prospectus for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12-month period .

 

(i)      The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because any Holder fails to furnish such information within three Trading Days of the Company’s request, any liquidated damages that are accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to such Holder only, until such information is delivered to the Company.

 

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4.             Registration Expenses . All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, and (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement, the expense of any annual audit, and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any Holder.

 

5.             Indemnification .

 

(a)       Indemnification by the Company . The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and 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 each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and 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 each such controlling Person, 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 (collectively, “ Losses ”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a 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 light of the circumstances under which they were made) not misleading or (2) 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 with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(c)(iii)-(vi), the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section 6(d). The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by any of the Holders in accordance with Section 6(f).

 

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(b)       Indemnification by Holders . Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any 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 light of the circumstances under which they were made) not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company expressly for inclusion in such Registration Statement or such Prospectus or (ii) to the extent, but only to the extent, that such information relates to such Holder’s information provided in the Holder’s selling stockholder questionnaire or the proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement thereto. In no event shall the liability of a selling Holder be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue statement or omission) received by such Holder upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.

 

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(c)       Conduct of Indemnification Proceedings . If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “ Indemnified Party ”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “ Indemnifying Party ”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof, provided that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party.

 

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

 

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Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party, provided that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.

 

(d)       Contribution . If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

 

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. In no event shall the contribution obligation of a Holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.

 

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The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

 

6.             Miscellaneous .

 

(a)          Remedies . In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. Each of the Company and each Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.

 

(b)          No Piggyback on Registrations . Neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in any Registration Statements other than the Registrable Securities, except with the prior consent of the Holders.

 

(c)          Discontinued Disposition . By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(c)(iii) through (vi), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “ Advice ”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable.

 

(d)          Piggy-Back Registrations . If, at any time during the Effectiveness Period, there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with the Company’s stock option or other employee benefit plans, then the Company shall deliver to each Holder a written notice of such determination and, if within fifteen days after the date of the delivery of such notice, any such Holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities such Holder requests to be registered.

 

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(e)          Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of at least a majority of the then outstanding Registrable Securities. If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.

 

(f)          Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.

 

(g)         Successors and Assigns . This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under Section 5.7 of the Purchase Agreement.

 

(h)          No Inconsistent Agreements . Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof.

 

(i)          Execution and Counterparts . 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 the other party, it being understood that both 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.

 

(j)          Governing Law . All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.

 

(k)          Cumulative Remedies . The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.

 

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(l)          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.

 

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

 

********************

 

(Signature Pages Follow)

 

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Exhibit 10.2

 

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

 

  hoth therapeutics, inc.
     
  By: /s/ Robb Knie
    Name: Robb Knie
    Title: Chief Executive Officer

 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

 

   

 

 

Exhibit 10.2

 

[SIGNATURE PAGE OF HOLDERS TO hoth therapeutics RRA]

 

Name of Holder: Spherix Incorporated

 

Signature of Authorized Signatory of Holder : /s/ Anthony Hayes

 

Name of Authorized Signatory: Anthony Hayes

 

Title of Authorized Signatory: CEO

 

[SIGNATURE PAGES CONTINUE]

 

 

 

 

Annex A

 

Plan of Distribution

 

Each Selling Stockholder (the “ Selling Stockholders ”) of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the principal Trading Market or any other stock exchange, market or trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods when selling securities:

 

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

 

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

 

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

 

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

 

· privately negotiated transactions;

 

· settlement of short sales;

 

· in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per security;

 

· through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

 

· a combination of any such methods of sale; or

 

· any other method permitted pursuant to applicable law.

 

The Selling Stockholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act of 1933, as amended (the “ Securities Act ”), if available, rather than under this prospectus.

 

Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

 

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In connection with the sale of the securities or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

The Selling Stockholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.

 

The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

 

We agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the common stock by the Selling Stockholders or any other person. We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

  

  3  

 

Exhibit 10.3

 

FORM OF SHAREHOLDERS AGREEMENT

 

THIS SHAREHOLDERS AGREEMENT (this “Agreement”) is made effective this 30th day of June, 2017 (the “ Effective Date ”), by Hoth Therapeutics, Inc., a corporation organized under the laws of the state of Nevada (the “ Corporation ”), the persons named on Exhibit “A” attached hereto and any other persons or entities which hereafter join in this Agreement (individually, a “ Shareholder ” and collectively, the “ Shareholders ”).

 

RECITALS

 

WHEREAS , a Certificate of Incorporation (as may be amended from time to time, the “ Certificate ”) for the Corporation has been filed with the Office of the Nevada Secretary of State on May 16, 2017 pursuant to the Nevada Revised Statutes (the “ Act ”);

 

WHEREAS , the Shareholders are the owners of all of the issued and outstanding shares of common stock, par value $0.0001 per share (the “ Shares ”), of the Corporation;

 

WHEREAS , each Shareholder owns the number of Shares set forth opposite that Shareholder’s name on Exhibit A (as such exhibit may be amended from time-to-time); and

 

WHEREAS , the parties desire to enter into an agreement with respect to the Corporation, governance of the Corporation, transfer or other disposition of the Shares and with respect to certain other matters as set forth herein.

 

NOW, THEREFORE , the Shareholders hereby agree as follows:

 

ARTICLE 1

RESTRICTIONS ON TRANSFER

 

1.1            Restrictions on Transfer. No Shareholder shall Transfer (as defined below) the whole or any part of the Shares, or the certificate or certificates representing the same, now owned by that Shareholder or which that Shareholder may at any time own or be entitled to in the Corporation, and any successors of the Corporation, except in accordance with this Agreement, the Corporation’s Bylaws or with the prior written consent of all the Shareholders. The Corporation shall not reflect on its books any attempted Transfer of Shares, or issue any new Shares, except in compliance with all of the applicable conditions of this Agreement. When used in this Agreement, the term “ Transfer ” or “ Transferred ” shall mean to directly or indirectly sell, assign, give, mortgage, pledge, hypothecate, bequeath or in any manner encumber or dispose of, or permit to be sold, assigned, encumbered, attached or otherwise disposed of in any matter, whether voluntarily or by operation of law. Any attempted Transfer in violation of the terms of this Agreement shall be null, void and of no effect.

 

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1.2            Permitted Transfers. Notwithstanding the foregoing, any Transfer by a Shareholder (i) with respect any Shareholder that is an individual, to a trust or other entity wholly owned by or established for the benefit of such Shareholder or exclusively for the benefit of a parent, spouse, sibling or descendant of such Shareholder or (ii) with respect to any Shareholder that is an entity, to an affiliated entity controlled by or under common control with such Shareholder (any such Transferee, a “ Permitted Transferee ”) shall not require the consent of any other Shareholders, provided the Shareholder retains direct or indirect voting control with respect to such Shares, and provided further that the Corporation is provided with a copy of this Agreement or a joiner hereto executed by such Permitted Transferee agreeing to be bound by the terms and conditions of this Agreement; provided , however , that, with respect to any Shareholder that is an entity that files reports with the Securities and Exchange Commission pursuant to Securities Exchange Act of 1934, as amended (“ Exchange Act ”), or an affiliated entity controlled by or under common control with such Shareholder, the shareholders of such Shareholder or such affiliated entity shall be a Permitted Transferee. For the avoidance of doubt, any Transfer to a Permitted Transferee shall not be subject to the requirements of Sections 2.1, 3.2, 3.3 or 4.1 of this Agreement, but the Shares, and any subsequent Transfer or attempted Transfer by of the Shares by a Permitted Transferee, shall remain subject to all restrictions set forth in this Agreement, including without limitation such Sections.

 

1.3            Legend. Any certificates representing Shares shall contain substantially the following provision, which shall bind any persons asserting any interest in the certificates and the Shares they represent:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A CERTAIN SHAREHOLDERS AGREEMENT, DATED EFFECTIVE JUNE __, 2017 (AS AMENDED FROM TIME-TO-TIME), BY AND AMONG THE CORPORATION AND ITS SHAREHOLDERS, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION. NEITHER THIS CERTIFICATE NOR THE SHARES EVIDENCED HEREBY NOR ANY PORTION THEREOF, MAY BE OFFERED, PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN VIOLATION OF SAID AGREEMENT, AND ANY SUCH PURPORTED TRANSFER SHALL BE NULL, VOID AND OF NO EFFECT.

 

Each Shareholder shall deliver to the Corporation all certificates representing that Shareholder’s Shares, and the Corporation shall place the above legend on the certificates and return them to the Shareholders. Certificates representing any new Shares issued by the Corporation while this Agreement is in effect shall bear the above legend.

 

ARTICLE 2
GOVERNANCE

 

2.1           Shareholder and Director Voting. The Shareholders covenant and agree, one to the other, that they shall, at all times and from time to time, if lawfully permitted to do so, vote or cause to be voted their Shares and, if applicable, vote as a Director of the Corporation, to propose or approve any action required to be taken by the Corporation pursuant to this Agreement, including any amendments of the Certificate or Bylaws of the Corporation, reduction of its capital, reappraisal of its assets, or other corporate action that may be necessary in order to lawfully effectuate any action specifically required to be taken by the Corporation pursuant to this Agreement.

 

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2.2           Directors .

 

(a)           Number. Notwithstanding anything to the contrary in the Corporation’s Bylaws, the Board of Directors shall consist of the four (4) individuals and the directors shall be those individuals named on Exhibit “A” as directors as of the Effective Date. The number of directors comprising the Board of Directors shall not be increased or decreased without the unanimous consent of the Board of Directors.

 

(b)           Designated Director. Spherix Incorporated (“ Spherix ”) shall have the right to appoint one director to the Board of Directors. For so long as Spherix owns at least 10% of the issued and outstanding shares of common stock of the Corporation, Spherix shall have the right to designate one director to the Board of Directors (such person, “ Spherix Director ”) at each election of the Board of Directors, and the Shareholders covenant and agree that, during such period, they shall vote or cause to be voted their Shares in favor of the director designated by Spherix at each election of the Board of Directors. A Spherix Director may be removed from the Board of Directors at any time, with or without cause, only at the direction of Spherix. If a vacancy is created on the Board of Directors as a result of the death, disability, retirement, resignation or removal of a Spherix Director, Spherix shall have right to designate a director to fill such vacancy.

 

(c)           Election of Board. After the Board of Directors has completed its term, the Shareholders may elect directors by unanimous written consent or by secret ballot, with those individuals receiving the most votes being deemed elected, subject to Spherix’s right to designate the Spherix Director pursuant to Section 2.2(b). In the event of a tie, a runoff election will be held within forty-eight (48) hours of the first vote among those individuals receiving the same number of votes to determine the remaining Directors of the Board.

 

(d)           Term. Directors shall serve a one (1) year term. Newly elected Directors shall take office at the next regularly scheduled meeting of the Board of Directors following their election.

 

(e)           Quorum. Seventy five percent (75%) of the number of Directors prescribed by this Agreement constitutes a quorum for the transaction of business. Unless otherwise restricted by the Certificate, Directors of the Board may participate in a meeting of the Board by means of telephonic or video conference or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

 

(f)           Voting. If a quorum is present when a vote is taken, the affirmative vote of more than fifty percent (50%) of the number of Directors present, shall be an act of the Board of Directors. Each Director shall have one vote.

 

2.3           Devotion of Time. The Directors shall not be obligated to devote all of their time or business efforts to the Corporation’s affairs, but shall devote that amount of their time, effort and skill to the Corporation as may be reasonably necessary for the ongoing operations of the Corporation’s affairs.

 

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2.4            Remuneration .

 

(a)           Reimbursement . The Corporation shall reimburse a Director for all reasonable and ordinary expenses that such Director incurs or pays in connection with managing the Corporation’s business and affairs and otherwise rendering the services as and when required of such Director hereunder, including expenses relating to travel, meals, marketing and promotional efforts.

 

(b)           No Other Remuneration . Except as provided above in this Section 2.4 or elsewhere in this Agreement, neither a Director nor any affiliate of a Director shall be entitled to remuneration for services rendered or goods provided to or for the benefit of the Corporation unless otherwise determined by Shareholders’ approval.

 

2.5            Distributions . The Shareholders acknowledge and agree that it shall be the policy of the Corporation that the Corporation will not pay any dividends or other distributions to the Shareholders until after the first anniversary of its date of incorporation. After such date, any dividends declared by the Corporation to be paid to the Shareholders shall be determined by the Board of Directors, in its sole and absolute discretion, on a quarterly basis out of funds legally available therefore, after the establishment of adequate reserves set in good faith by the Board of Directors.

 

ARTICLE 3
PRE-EMPTIVE, DRAG ALONG & TAG ALONG RIGHTS

 

3.1            Preemptive Rights .

 

(a)          In the event that the Corporation proposes to issue additional shares of its capital stock, whether or not currently authorized, as well as rights, options, or warrants to purchase any equity securities of the Corporation, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable (in each case, directly or indirectly) for such equity securities (“ New Shares ”) at a time when any Shareholder who has executed this Agreement continues to be an owner of Shares, the Corporation shall provide to each such Shareholder a notice which shall constitute an offer to such Shareholder to purchase (for the price and on the terms established by the Corporation for all purchasers of New Shares as set forth in the notice) such portion of the New Shares so offered for sale as the number of Shares owned by him or her at such time shall bear to the total number of Shares owned by all shareholders of the Corporation (such Shareholder’s “ Pro Rata Portion ”). Each such Shareholder shall inform the Corporation of his or her election to exercise its preemptive right under this Section 3.1 with respect to all or any portion of his or her Pro Rata Portion within fifteen (15) days of receipt of the Corporation’s notice.

 

(b)          If all New Shares referred to in the Corporation’s notice are not elected to be purchased or acquired by the Shareholders pursuant to Section 3.1(a), the Corporation may, following the expiration of the fifteen (15) day period provided in Section 4.1(a), offer and sell the remaining unsubscribed portion of such New Shares to any person or persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Shareholders’ offer notices. If the Corporation does not enter into an agreement for the sale of the New Shares within sixty (60) days, or if such agreement is not consummated within thirty (30) days of the execution thereof, the preemptive right provided hereunder shall be deemed to be revived and such New Shares shall not be offered unless first reoffered to the Shareholders again in accordance with this Section 3.1.

 

  - 4 -  

 

 

3.2            Drag-Along Right.

 

(a)          In the event the holders of a majority or more of the voting shares of the Corporation (the “ Control Group ”) elect to transfer all of the shares of stock owned by them to an unaffiliated third party (a “ Third Party ”) (including any transfer of shares that is being effected by a merger or consolidation of the Corporation with another person), the Control Group shall have the right (the “ Drag-Along Right ”) to cause each of the Shareholders as a group to transfer all of their Shares to the Third Party (or to exchange such shares pursuant to the terms of such merger or consolidation) at the same price and on the same terms and conditions as the Control Group proposes to transfer their Shares.

 

(b)          The Control Group may elect to exercise the Drag-Along Right by delivering written notice to the Shareholders and the Corporation thirty (30) days prior to the consummation of the transfer described in Section 3.2(a) above. The notice delivered pursuant to this subsection will contain a copy of the definitive documentation pursuant to which the Shares will be transferred to the Third Party and will state (i) the bona fide intention of the Control Group to effect the transfer described in Section 3.2(a) above, (ii) the name and address of the Third Party, and (iii) the expected closing date of such transfer.

 

(c)          Each Shareholder as part of its participation in the transfer pursuant to the Drag-Along Right hereby agrees with respect to all Shares which he or she owns or otherwise exercises voting or dispositive authority if the transaction is structured as (i) a merger or consolidation, to vote (in person, by proxy or by action by written consent, as applicable) in favor of such merger or consolidation and to refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect thereto, and (ii) a sale of stock, to sell all of its Shares on the terms and conditions approved by the Control Group.

 

(d)          Each Shareholder shall deliver to the Third Party at a closing to be held at the offices of the Corporation (or such other place as the parties agree), one or more certificates, properly endorsed for transfer, which represent all the Shares owned by such Shareholder and each Shareholder shall make such representations and warranties, and shall enter into such agreements, as are customary and reasonable in the context of the proposed sale, including, without limitation, representations and warranties (and indemnities with respect thereto) that the transferee of the Shares (or interests therein) is receiving good and marketable title to such Shares (or interests therein), free and clear of all pledges, security interests, or other liens; provided, however, that with respect to any matter as to which a Shareholder shall agree to provide indemnification (other than its own title to such Shares), such Shareholder shall in no event be required to provide indemnification in an amount that would exceed its pro rata portion of the total liability for which such indemnification is sought, which pro rata portion shall be determined on the basis of the percentage of the total Shares involved in such transfer that are represented by the Shares owned by such Shareholder. In addition, each Shareholder and the Control Group shall reasonably cooperate and consult with each other in order to effect the transfer described in this Section 4.2, and each Shareholder shall provide reasonable assistance to the Control Group in connection with the preparation of disclosure schedules relating to representations and warranties to be made to the Third Party involved in such transfer and in the determination of the appropriate scope of, or limitations or exceptions to, such representations and warranties.

 

  - 5 -  

 

 

3.3            Tag-Along Right.

 

(a)          In the event the Control Group elects to transfer all or a portion of the Shares of stock owned by them to a Third Party and the Control Group has not exercised the Drag-Along Right pursuant to Section 3.2 hereof, all other Shareholders shall have the right to cause the Control Group to effect the transfer of such Shareholders’ respective Shares to such Third Party at the same price and on the same terms and conditions as the Control Group proposes to transfer their Shares to such Third Party (the “ Tag-Along Right ”) in full if all of the Shares of the Control Group are being transferred or in proportionate amount if some of the Shares of the stock of the Control Group are being transferred.

 

(b)          If the Control Group does not intend to deliver a Drag-Along notice to the other Shareholders pursuant to Section 3.2 hereof, the Control Group must deliver a Tag-Along notice to such Shareholders and the Corporation within thirty (30) days prior to the consummation of the transfer described in Section 3.3(a) above. The notice delivered pursuant to this Section 3.3(b) will state (i) the bona fide intention of the Control Group to effect the transfer described in Section 3.3(a) above, (ii) the name and address of the Third Party, (iii) the expected closing date of such transfer, and (iv) the terms of such sale. In order for the Tag-Along Rights to be applicable, Shareholders who choose to participate must deliver a written request for inclusion in such sale to the Control Group within ten (10) days from the date of receipt of notice from the Control Group. To the extent one or more of the Shareholders exercise such right of participation in accordance with the terms and conditions set forth herein, the number of shares that the selling Control Group may sell to the Third Party shall be correspondingly reduced unless the Third Party purchaser agrees to purchase the increased number of offered shares.

 

(c)          Each Shareholder, who timely exercises his or her Tag-Along Rights under this Section 3.3 by delivering the written request provided for above in Section 3.3(b), as part of its participation in the transfer pursuant to the Tag-Along Right shall deliver to the Third Party at a closing to be held at the offices of the Corporation (or such other place as the parties agree), one or more certificates, properly endorsed for transfer, which represent all the Shares owned by such Shareholder and each Shareholder shall make such representations and warranties, and shall enter into such agreements, as are customary and reasonable in the context of the proposed sale, including without limitation representations and warranties and indemnities with respect thereto that the transferee of the Shares (or interests therein) is receiving good and marketable title to such Shares (or interests therein), free and clear of all pledges, security interests, or other liens; provided, however, that with respect to any matter as to which a Shareholder shall agree to provide indemnification (other than its own title to such Shares), such Shareholder shall in no event be required to provide indemnification in an amount that would exceed its pro rata portion of the total liability for which such indemnification is sought, which pro rata portion shall be determined on the basis of the percentage of the total Shares involved in such transfer that are represented by the Shares owned by such Shareholder. In addition, each Shareholder and the Control Group shall reasonably cooperate and consult with each other in order to effect the transfer described in this Section 3.3, and each Shareholder shall provide reasonable assistance to the Control Group in connection with the preparation of disclosure schedules relating to representations and warranties to be made to the Third Party involved in such transfer and in the determination of the appropriate scope of, or limitations or exceptions to, such representations and warranties.

 

  - 6 -  

 

 

ARTICLE 4
TRANSFER OF SHARES DURING SHAREHOLDER’S LIFETIME

 

4.1            First Right of Refusal.

 

(a)           Offer to Corporation to Purchase Shares. If, during his or her lifetime, a Shareholder (“ Selling Shareholder ”) receives a written offer to purchase all or a portion of Selling Shareholder’s Shares that the Selling Shareholder intends to accept if the right of first refusal provided in this Section 4.1 is not exercised (a “ Bona Fide Offer ”), Selling Shareholder shall first offer to sell the Shares to the Corporation at the same price and upon the same terms as are contained in the Bona Fide Offer. Any provision in the Bona Fide Offer to the effect that the prospective purchaser reserves the right to make a further offer or give additional consideration, any non-monetary-term and any side agreement or separate arrangement shall be disregarded for purposes of this Agreement. Selling Shareholder’s offer to sell the Shares to Corporation shall be accompanied by a written statement of the name and address of the person or entity making the Bona Fide Offer to purchase Shares owned by Selling Shareholder and shall state the price, terms and conditions set forth in the Bona Fide Offer. Corporation shall have thirty (30) days following Selling Shareholder’s offer within which to accept all or any part of the Shares so offered.

 

(b)           Offer to Shareholders to Purchase Shares. If Corporation fails to accept all or any part of the Shares offered pursuant to Section 4.1(a), within the time provided in Section 4.1(a), or notifies Selling Shareholder in writing before the end of the time provided in Section 4.1(a) that it will not purchase all or any portion of the offered Shares, Selling Shareholder shall then offer to sell the Shares not accepted by Corporation to the other Shareholders (“ Non-Selling Shareholders ”). Each Non-Selling Shareholder shall have thirty (30) days within which to accept his or her Proportionate Interest (as defined below) or such other proportion as Non-Selling Shareholders shall agree upon, of the Shares not purchased by Corporation at the same price and upon the same terms and conditions set forth in the Bona Fide Offer. Selling Shareholder’s offer to sell the Shares to Non-Selling Shareholders shall be accompanied by a written statement of the name and address of the person or entity making the Bona Fide Offer and shall state the price, terms and conditions set forth in the Bona Fide Offer. If any of the Non-Selling Shareholders fails to accept such an offer, either in whole or in part, within a thirty (30) day period, and if Non-Selling Shareholders have failed to agree on a disproportionate purchase of all the Shares held by Selling Shareholder, then, for a reasonable period of time (not to exceed an additional thirty (30) days), the Shares not accepted may be purchased by the other Non-Selling Shareholders in proportion to their shareholdings and, if any Shares remain unaccepted, this procedure shall be repeated as many times as necessary (within the period specified above) to permit the purchase of as many Shares as possible. When used in this Agreement, the term “ Proportionate Interest ” shall mean the proportion of the Shares offered by a Selling Shareholder that the Shares of each Non-Selling Shareholder bears to the total Shares owned by all Non-Selling Shareholders.

 

  - 7 -  

 

 

(c)           Acceptances Conditional. If Corporation and Non-Selling Shareholders fail to accept all of the Shares offered by Selling Shareholder pursuant to Sections 4.1(a) and (b), then Selling Shareholder may refuse to sell to Corporation and/or Non-Selling Shareholders such partial amount of the Shares that was conditionally accepted by Corporation and/or Non-Selling Shareholders. In this event, the parties’ rights under this Agreement shall be determined as though there were no acceptances of Selling Shareholder’s offers pursuant to Sections 4.1(a) and (b).

 

(d)           No Acceptances of Offers. If Corporation and Non-Selling Shareholders fail to accept any part of the Shares offered by Selling Shareholder or if Selling Shareholder refuses to sell (under the terms of Section 4.1(c)) because the acceptances of Corporation and Non-Selling Shareholders were partial acceptances, Selling Shareholder shall be free to sell those Shares that were offered and not accepted (including those Shares which were conditionally accepted by Corporation or Non-Selling Shareholders but which conditional acceptance was rejected by Selling Shareholder pursuant to Section 4.1(c)) to the person or entity making the Bona Fide Offer in accordance with the price, terms and conditions of the Bona Fide Offer. Provided, however, if the sale is not completed within thirty (30) days after the last day that a Non-Selling Shareholder could accept Selling Shareholder’s offer pursuant to Section 4.1(b), then Selling Shareholder shall not Transfer the Shares without again complying with the terms and conditions of this Section 4.1. A sale is “completed,” for this purpose, when Selling Shareholder has received the full consideration (a note is “received,” for this purpose, when it is delivered, even if some installments are to be paid later). Any purchaser of Shares pursuant to a Bona Fide Offer who is not already a Shareholder shall, at the Closing (as defined in Article 8) of his or her purchase, execute, deliver and become a party to this Agreement.

 

4.2            Prohibited and Involuntary Transfers. If, despite the provisions and intent of this Agreement, any Shares are Transferred (or purported to have been Transferred) in violation of the terms of this Agreement, the Corporation and Non-Selling Shareholders have all rights under this Agreement or under applicable law, including, but not limited to, the right to treat any Transfer or purported Transfer in violation of this Agreement as void, the right to specific performance, and the right to act as attorney-in-fact for any Shareholder (including, but not limited to, any putative Shareholder to whom Shares were Transferred or purportedly Transferred in violation of this Agreement) with respect to the sale of that Shareholder’s Shares pursuant to this Agreement.

 

ARTICLE 5
TERMINATION

 

5.1            Termination.

 

(a)           Events of Termination. This Agreement, and the rights and obligations of the parties under it, shall terminate immediately, without further liability, upon the first occurrence of any one of the following events:

 

  - 8 -  

 

 

(i)          Mutual written agreement of the then current parties to this Agreement;

 

(ii)         The death of all but one of Shareholders who have executed or otherwise become bound by the terms of this Agreement after full performance of the Agreement by the surviving Shareholder(s);

 

(iii)        The Corporation is declared to be bankrupt under federal law, makes an assignment for the benefit of creditors, or is otherwise found insolvent;

 

(iv)        The Corporation dissolves or winds up its affairs, whether voluntarily or involuntarily;

 

(v)         A merger, consolidation or other reorganization involving Corporation and another entity pursuant to which all the Shares are exchanged for or converted into shares of stock of another entity that are unrestricted and readily tradeable on an established securities market;

 

(vi)        On the consummation of the Corporation’s initial public offering of shares of common stock, if any; or

 

(vii)       The date on which the Corporation becomes subject to the reporting requirements of the Exchange Act.

 

(b)           Effect of Termination. The termination of this Agreement shall not affect any rights or obligations that shall have arisen or accrued prior to the date of termination. Upon termination of this Agreement, each Shareholder shall surrender to the Corporation all of the Shares issued by the Corporation represented by any certificate that contains the legend set forth in Article 1. The Corporation shall issue to each Shareholder a new certificate for the Shares that shall not bear such legend.

 

5.2            Death Within Sixty Days. This Agreement shall be of no force or effect if all Shareholders die in or as a result of a common disaster or accident or die within sixty (60) days of each other.

 

  - 9 -  

 

 

ARTICLE 6
MISCELLANEOUS

 

6.1            Indemnification.

 

(a)          The Corporation shall indemnify, defend, protect and hold harmless each Shareholder and each Director, and each of their respective principals, partners, shareholders, controlling persons, trustees, officers, directors, heirs, trustees, beneficiaries, administrators, executors, employees, agents, representatives, successors and assigns, from and against any and all demands, judgments, settlements, penalties, claims, lawsuits, liabilities, damages, costs, losses, expenses, obligations and fines, including reasonable attorneys’, accountants’ and other professional fees, costs and expenses (collectively, “ Claims and Liabilities ”), that such person may suffer or incur by reason of or in connection with his, her or its management of, ownership in, involvement in or affiliation with the Corporation’s business or affairs. Such indemnity shall be permitted, however, only if the person seeking indemnity (i) acted in accordance with the terms of this Agreement and otherwise in a manner he, she or it reasonably believed to be in, or not opposed to, the Corporation’s best interests, (ii) was not guilty of gross negligence, and (iii) with respect to any criminal proceeding, had no reasonable cause to believe his, her or its conduct was unlawful. The termination of a proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere , or its equivalent, shall not, of itself, create a presumption that such person did not meet such standards, unless it is finally adjudicated that such person did not meet such standards.

 

(b)          The Corporation may also indemnify any person who was or is, or is threatened to be made, a party to any threatened, pending or completed action because such person is or was an officer, employee or agent of the Corporation. The foregoing indemnity shall be permitted only if approved by the Directors and if such person acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, the Corporation’s best interests. If such person is adjudged to be liable for misconduct in performing his, her or its duty to the Corporation, such indemnity shall be permitted only to the extent that the court in which such Claims and Liabilities was brought, or another court of appropriate jurisdiction, determines that, despite the adjudication of liability, but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses that such court shall deem proper. In no event, however, shall any person be entitled to indemnification under this paragraph for any Claims and Liabilities arising from such person’s gross negligence, willful misconduct or reckless disregard in performing such person’s duties on the Corporation’s behalf.

 

(c)          If approved by the Directors, the Corporation may pay expenses (including attorneys’ fees) incurred in defending any proceeding under Sections 6.1(a) or (b) in advance of the final disposition of such proceeding if the person entitled to indemnification agrees to repay such amount if it is ultimately determined that such person is not entitled to such indemnification.

 

(d)          The indemnification provided by this Section 6.1 shall not be deemed to be exclusive of any other rights or remedies to which the indemnified person may be entitled, whether by agreement or as a matter of law.

 

(e)          The Directors shall have power to purchase and maintain insurance, at the Corporation’s expense, on behalf of the persons who may be entitled to indemnification under this Section 6.1. That insurance may cover amounts for which the Corporation may be liable under this Section 6.1.

  

  - 10 -  

 

 

6.2            Restrictive Covenants.

 

(a)           Confidential Information. Each Shareholder agrees that, both while such person is a Shareholder or Director and thereafter, such Shareholder or Director shall not divulge, furnish or make accessible to anyone or use in any way (other than in the ordinary course of the business of the Corporation or its subsidiaries, affiliates and divisions) any of Corporation’s Confidential Information. As used in this Agreement, “ Corporation’s Confidential Information ” means any confidential or secret information regarding the Corporation, Corporation trade secrets, and any other confidential or secret aspect of the business of the Corporation. Without limiting the generality of the foregoing, the parties agree the Corporation’s Confidential Information includes (a) any knowledge or information concerning the Corporation’s business, whether developed by a Shareholder or Director, or by others, and whether developed or acquired by the Corporation or from others, (b) the Corporation’s planned business operations and business plan for future operations, (c) the Corporation’s confidential or secret development or research work (including information concerning any future or proposed services or products), (d) all of the Corporation’s accounting, cost, revenue and other financial records and documents, as well as the contents of such information, and (e) the Corporation’s documents, contracts, agreements, correspondence and other similar business records. Notwithstanding anything to the contrary in this Agreement, any knowledge or information that is part of the public domain shall not be deemed Confidential Information. The Shareholders and the Directors agree that monetary damages would be an inadequate remedy for any breach of the provisions of this paragraph and that the Corporation may, therefore, seek injunctive relief in the case of any such breach or threatened breach.

 

(b)           Non-disparagement. Each Shareholder agrees that, both while such person is a Shareholder or Director and thereafter, such Shareholder shall not take any action that is intended to diminish the value of the Corporation or that would interfere with the business of the Corporation, including disparaging the name or business of the Corporation or its affiliates, or their respective employees or business relationships.

 

(c)           Non-solicitation . Each Shareholder agrees that, both while such person is a Shareholder or Director and for a period of one (1) year thereafter, such Shareholder shall not interfere, solicit, disrupt or attempt (directly or indirectly) to make any contact, deal or be involved in any transaction with or otherwise disrupt the relationship, contractual or otherwise, between the Corporation and any individual who is employed by the Corporation on or within six (6) months prior to the date such Shareholder ceased to be a Shareholder.

 

(d)           Non-competition . Each Shareholder agrees that, both while such person is a Shareholder or Director and for a period of one (1) year thereafter, such Shareholder shall not, directly or indirectly, whether individually or through a corporation, partnership, limited liability company or other business entity, or as a partner, member, shareholder, director, manager, officer, employee or agent of any of the foregoing, have any business interests or engage in business activities in direct competition with the Corporation’s business in any location in the world where the Corporation shall operate as of the date the Shareholder ceases to be a Shareholder; provided that a Shareholder shall be entitled to own up to 5% of any class of securities of any entity, whether or not it may compete with the Corporation, which are publicly traded on a national or regional stock exchange or on the over-the-counter market.

 

  - 11 -  

 

 

(e)          It is expressly understood and agreed that although the Shareholders consider the non-competition, non-disparagement and non-solicitation restrictions contained in this Agreement to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction in that regard is an unenforceable restriction against a Shareholder, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any such restriction is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

 

6.3            Amendment. This Agreement may be amended only in writing and only with the unanimous consent of Shareholders.

 

6.4            Intentionally Omitted .

 

6.5            Governing Law; Jurisdiction, Etc . All questions concerning the construction, validity, enforcement and interpretation of this Agreement 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 (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, 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 suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

6.6            Limitation of Liability . Notwithstanding anything to the contrary in this Agreement, the Corporation’s debts, obligations and liabilities shall be solely the Corporation’s debts, obligations and liabilities, and neither a Director nor any Shareholder shall be obligated personally for any Corporation debt, obligation or liability solely by reason of being a Director or a Shareholder.

 

6.7            Attorneys’ Fees . If an action is brought to interpret or enforce any of the terms of this Agreement, or because of a party’s breach of any provision of this Agreement, the losing party shall pay the prevailing party’s reasonable attorneys’ fees, costs and expenses, court costs and other costs of action incurred in connection with the prosecution or defense of such action, whether or not the action is prosecuted to a final judgment. In addition to the foregoing award of attorneys’ fees, the prevailing party shall be entitled to its reasonable attorneys’ fees incurred in any post judgment proceeding to enforce any judgment in connection with this Agreement. This paragraph is separate and several and shall survive the merger of this paragraph into any judgment.

 

  - 12 -  

 

 

6.8            Binding Effect . Subject to the restrictions on transfer set forth in this Agreement, this Agreement shall be binding on and inure to the benefit of the Shareholders and their respective transferees, successors, assigns and legal representatives.

 

6.9            Covenant of Married Shareholders.

 

(a)          Each Shareholder covenants and agrees that, if there is a legal separation, divorce or division of property between the Shareholder and his spouse, domestic partner or legal beneficiary, the Shareholder will make provisions in any property settlement agreement as may be necessary to eliminate any interest of the Shareholder’s spouse in the Corporation's Shares.

 

(b)          By executing this Agreement, each Shareholder represents and warrants that he has secured the permission and consent of his spouse, domestic partner or legal beneficiary to enter into this Agreement and fully perform his obligations under this Agreement. Each Shareholder will obtain the signature of his spouse, domestic partner or legal beneficiary on the consents attached hereto and incorporated herein as Exhibit B.

 

6.10          Notices . All notices, requests, consents and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given (i) if delivered personally, when delivered; (ii) if delivered by overnight carrier, on the first business day following such delivery; (iii) if delivered by registered or certified mail, return receipt requested, on the third business day after having been mailed in Los Angeles, California; or (iv) if delivered by electronic transmission, at the time when sent, provided that a copy of the item delivered is sent to the addressee by first class mail. All such communications, if to the Corporation or the Directors, shall be delivered to the Corporation’s principal office, as set forth above, or if to any Shareholder, shall be delivered to the Shareholder’s address at his, her or its address as set forth in the Corporation’s records or at such other place as such party may notify the Corporation in accordance with this paragraph.

 

6.11          Waiver or Termination . No waiver or termination of this Agreement, or any part hereof, shall be effective unless made in writing and signed by the party or parties sought to be bound thereby. No failure to pursue or elect any remedy shall constitute a waiver of any default under or breach of any provision of this Agreement, nor shall any waiver of any such default or breach be deemed to be a waiver of any other subsequent default or breach.

 

6.12          Further Assurances . The parties shall execute and deliver any further instruments or documents and perform any additional acts that are or may become necessary to effectuate and carry on the Corporation as contemplated by this Agreement.

 

6.13          Counterparts . This Agreement may be executed in one or more counterparts, each of which shall constitute an original and together which shall constitute one and the same instrument.

 

  - 13 -  

 

 

6.14          Incorporation by Reference . The exhibits and schedules attached to this Agreement are incorporated into this Agreement by this reference.

 

6.15          Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the other provisions, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted.

 

6.16          Rights of Others. Except as expressly provided, nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give to any person, firm or corporation, other than the parties to this Agreement, or other persons who become bound by the terms of this Agreement, any rights or remedies under or by reason of any term, provision, condition, or agreement contained in this Agreement; provided, however, that it is expressly understood and agreed that the provisions, terms and conditions of this Agreement shall be binding upon and shall inure to the benefit of and shall be enforceable by the Corporation, Shareholders and/or beneficiaries or the estate of any deceased Shareholder and the successors or assigns of the Corporation.

 

6.17          Specific Performance. The parties agree that the Shares are unique and that failure to perform the obligations under this Agreement will result in irreparable damage to the other parties and that the parties shall be entitled to the specific performance of such obligations.

 

6.18          Entire Agreement. This instrument contains the entire understanding and agreement among the parties concerning the subject matter of this Agreement, and this Agreement supersedes and merges herein all prior and contemporaneous understandings, agreements, covenants, negotiations and representations concerning the subject matter of this Agreement.

 

  - 14 -  

 

 

IN WITNESS WHEREOF , the parties have executed this Agreement effective as of the Effective Date set forth above.

 

“CORPORATION”    
     
HOTH THERAPEUTICS, INC.    
     
By:      
     Its:  Chief Executive Officer      
       
“SHAREHOLDERS”    
     
If Shareholder is an individual:   Title:
     
     
Name:      
       
If Shareholder is an entity:    
     
Name of Shareholder:    
       
     
       
By:      
Name:      

 

[Signature Page to Hoth Therapeutics Shareholders Agreement]

 

   

  

Exhibit 99.1

 

 

Spherix Inc. Announces Closing of the Deal with Hoth Therapeutics

 

Spherix Incorporated Acquires 6,800,000 shares of Hoth Therapeutics

 

New York, NY July 3, 2017 /PR Newswire/ Spherix Incorporated (NASDAQ: SPEX) reported today, following the disclosure made June 20 th 2017, that the Company has closed the transaction with Hoth Therapeutics. Hoth Therapeutics is a development stage biopharmaceutical company focused on the development of therapeutics for patients suffering from atopic dermatitis, such as eczema.

 

Hoth Therapeutics is the exclusive sublicensee of proprietary, patented, drug compounds developed at the University of Cincinnati and tested at the University of Miami to treat eczema. Eczema impacts millions Americans and represents a multi-billion market in the U.S. alone.

 

Anthony Hayes, the CEO of Spherix stated, “We are pleased to have completed this investment and to begin working with Hoth to develop their exciting compound. We believe this is an accretive asset that will deliver value to our shareholders and show continuing efforts to build shareholder value.”

 

About Spherix

 

Spherix Incorporated was launched in 1967 as a scientific research company. Spherix is committed to advancing innovation by participation in the development of new technology. Spherix draws on portfolios of pioneering technology to support product innovation.

 

Forward-Looking Statements

 

Certain statements in this press release constitute “forward-looking statements” within the meaning of the federal securities laws. Words such as “may,” “might,” “will,” “should,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “predict,” “forecast,” “project,” “plan,” “intend” or similar expressions, or statements regarding intent, belief, or current expectations, are forward-looking statements. We are a small company with limited financial resources and our scientific background and abilities to implement a commercialization strategy is subject to ever-changing market conditions and rapidly-advancing technologies over which we have no control. While we believe that these forward-looking statements are reasonable, market conditions and competition in the marketplace is ever-changing and we have no control over these influences. As a result, undue reliance should not be placed on any such forward-looking statements, which are based on information available to us on the date of this release. These forward looking statements are based upon current estimates and assumptions and are subject to various risks and uncertainties, including without limitation those set forth in the Company's filings with the Securities and Exchange Commission (the “SEC”) including, but not limited to, the Risk Factors relating to the Company’s patent business and other aspects of the Company’s business contained therein. Thus, actual results could be materially different. The Company expressly disclaims any obligation to update or alter statements whether as a result of new information, future events or otherwise , except as required by law.

 

 

 

 

Contact :

 

Investor Relations Inquires:

Spherix Investor Relations

Phone: (212) 745-1373

Email: investorrelations@spherix.com

 

Spherix Inc. Contact:

Phone: (703) 992-9325

Email: info@spherix.com

www.spherix.com