EXHIBIT
A
NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY
A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Original
Issue Date: _________, 2018
Original
Conversion Price (subject to adjustment herein): $2.00
$_______
10% SENIOR CONVERTIBLE DEBENTURE
DUE __________, 2019
THIS
10% SENIOR CONVERTIBLE DEBENTURE is one of a series of duly
authorized and validly issued 10% Senior Convertible Debentures of
GT Biopharma, Inc., a Delaware corporation, (the
“Company”),
having its principal place of business at 100 South Ashley Dr., Ste
600, Tampa, FL 33602, designated as its 10% Senior Convertible
Debenture due ______t 31, 2019 (this debenture, the
“Debenture” and,
collectively with the other debentures of such series, the
“Debentures”).
FOR
VALUE RECEIVED, the Company promises to pay to ___________; or its
registered assigns (the “Holder”), or shall have
paid pursuant to the terms hereunder, the principal sum of
$_________ on _________, 2019 (the “Maturity Date”) or such
earlier date as this Debenture is required or permitted to be
repaid as provided hereunder, and to pay interest to the Holder on
the aggregate unconverted and then outstanding principal amount of
this Debenture in accordance with the provisions hereof. This
Debenture is subject to the following additional
provisions:
Section
1.
Definitions. For the purposes hereof, in
addition to the terms defined elsewhere in this Debenture, (a)
capitalized terms not otherwise defined herein shall have the
meanings set forth in the Purchase Agreement and (b) the following
terms shall have the following meanings:
“Alternate Consideration”
shall have the meaning set forth in Section 5(e).
“Bankruptcy Event” means
any of the following events: (a) the Company or any Significant
Subsidiary (as such term is defined in Rule 1-02(w) of Regulation
S-X) thereof commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction relating to the Company or any Significant
Subsidiary thereof, (b) there is commenced against the Company or
any Significant Subsidiary thereof any such case or proceeding that
is not dismissed within 60 days after commencement, (c) the Company
or any Significant Subsidiary thereof is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such
case or proceeding is entered, (d) the Company or any Significant
Subsidiary thereof suffers any appointment of any custodian or the
like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such
appointment, (e) the Company or any Significant Subsidiary thereof
makes a general assignment for the benefit of creditors, (f) the
Company or any Significant Subsidiary thereof calls a meeting of
its creditors with a view to arranging a composition, adjustment or
restructuring of its debts or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the
foregoing or takes any corporate or other action for the purpose of
effecting any of the foregoing.
“Beneficial Ownership
Limitation” shall have the meaning set forth in
Section 4(d).
“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.
“Buy-In” shall have the
meaning set forth in Section 4(c)(v).
“Change of Control
Transaction” means the occurrence after the date
hereof of any of (a) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in
Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective
control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33%
of the voting securities of the Company (other than by means of
conversion or exercise of the Debentures and the Securities issued
together with the Debentures), (b) the Company merges into or
consolidates with any other Person, or any Person merges into or
consolidates with the Company and, after giving effect to such
transaction, the stockholders of the Company immediately prior to
such transaction own less than 66% of the aggregate voting power of
the Company or the successor entity of such transaction, (c) the
Company sells or transfers all or substantially all of its assets
to another Person and the stockholders of the Company immediately
prior to such transaction own less than 66% of the aggregate voting
power of the acquiring entity immediately after the transaction,
(d) a replacement at one time or within a three year period of more
than one-half of the members of the Board of Directors which is not
approved by a majority of those individuals who are members of the
Board of Directors on the Original Issue Date (or by those
individuals who are serving as members of the Board of Directors on
any date whose nomination to the Board of Directors was approved by
a majority of the members of the Board of Directors who are members
on the date hereof), or (e) the execution by the Company of an
agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth in clauses (a) through
(d) above.
“Conversion” shall have
the meaning ascribed to such term in Section 4.
“Conversion Date” shall
have the meaning set forth in Section 4(a).
“Conversion Price” shall
have the meaning set forth in Section 4(b).
“Conversion Schedule”
means the Conversion Schedule in the form of Schedule 1 attached
hereto.
“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of this Debenture in accordance with the terms hereof.
“Debenture Register” shall
have the meaning set forth in Section 2.
“Dilutive Issuance” shall
have the meaning set forth in Section 5(b).
“Dilutive Issuance Notice”
shall have the meaning set forth in Section 5(b).
“Event of
Default” shall have the
meaning set forth in Section 8(a).
“Fundamental Transaction”
shall have the meaning set forth in Section 5(e).
“Interest Payment Date”
shall have the meaning set forth in Section 2(a).
“Late Fees” shall have the
meaning set forth in Section 2.
“Majority in Interest,” at
any given time, means the Holders then holding a majority of the
then-outstanding principal under all the Debentures issued pursuant
to the Purchase Agreement.
“Mandatory Default Amount”
means the sum of (a) the greater of (i) the outstanding principal
amount of this Debenture, plus all accrued and unpaid interest
hereon, divided by the Conversion Price on the date the Mandatory
Default Amount is either (A) demanded (if demand or notice is
required to create an Event of Default) or otherwise due or (B)
paid in full, whichever has a lower Conversion Price, multiplied by
the VWAP on the date the Mandatory Default Amount is either (x)
demanded or otherwise due or (y) paid in full, whichever has a
higher VWAP, or (ii) 130% of the outstanding principal amount of
this Debenture, plus 100% of accrued and unpaid interest hereon,
and (b) all other amounts, costs, expenses and liquidated damages
due in respect of this Debenture.
“New York Courts” shall
have the meaning set forth in Section 9(d).
“Notice of Conversion”
shall have the meaning set forth in Section 4(a).
“Original Issue Date”
means the date of the first issuance of the Debentures, regardless
of any transfers of any Debenture and regardless of the number of
instruments which may be issued to evidence such
Debentures.
“Permitted Indebtedness”
means (a) the indebtedness evidenced by the Debentures, (b) the
Indebtedness existing on the Original Issue Date and set forth on
Schedule 3.1(aa)
attached to the Purchase Agreement, and (c) lease obligations and
purchase money indebtedness of up to $100,000, in the aggregate,
incurred in connection with the acquisition of capital assets and
lease obligations with respect to newly acquired or leased
assets.
“Permitted Lien” means the
individual and collective reference to the following: (a) Liens for
taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges
or levies being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith judgment
of the management of the Company) have been established in
accordance with GAAP, (b) Liens imposed by law which were incurred
in the ordinary course of the Company’s business, such as
carriers’, warehousemen’s and mechanics’ Liens,
statutory landlords’ Liens, and other similar Liens arising
in the ordinary course of the Company’s business, and which
(x) do not individually or in the aggregate materially detract from
the value of such property or assets or materially impair the use
thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being contested in good faith
by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the
property or asset subject to such Lien, (c) Liens incurred in
connection with Permitted Indebtedness under clauses (a) and (b)
thereunder, and (d) Liens incurred in connection with Permitted
Indebtedness under clause (c) thereunder, provided that such Liens
are not secured by assets of the Company or its Subsidiaries other
than the assets so acquired or leased.
“Prospectus” means the
Registration Statement, as supplemented by the Prospectus
Supplement specifically relating to the Conversion
Shares.
“Prospectus Supplement”
means the supplement to the Prospectus specifically relating to the
Conversion Shares and complying with Rule 424(b) of the Securities
Act that is to be filed with the Commission in connection with this
Agreement.
“Purchase Agreement” means
the Securities Purchase Agreement, dated as of August 1, 2018,
among the Company and the original Holders, as amended, modified or
supplemented from time to time in accordance with its
terms.
“Registration Statement”
means the effective shelf registration statement on Form S-3,
which has $125,000,000 of unallocated securities, including Common
Stock, registered thereunder (File No. 333-223349).
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Share Delivery Date”
shall have the meaning set forth in Section 4(c)(ii).
“Successor Entity” shall
have the meaning set forth in Section 5(e).
“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, the OTC Bulletin
Board, or any market of the OTC Markets, Inc. (or any successors to
any of the foregoing).
“VWAP” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)),
(b) if the OTC Bulletin Board is not a Trading Market, the
volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the OTC Bulletin Board, (c) if the
Common Stock is not then listed or quoted for trading on the OTC
Bulletin Board and if prices for the Common Stock are then reported
in the “Pink Sheets” published by Pink OTC Markets,
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 Majority in
Interest and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.
a) Payment of Interest in Cash or
Kind. The Company shall pay interest to the Holder on the
aggregate unconverted and then outstanding principal amount of this
Debenture at the rate of 10% per annum, payable on each Conversion
Date (as to that principal amount then being converted), and on the
Maturity Date (each such date, an “Interest Payment Date”)
(if any Interest Payment Date is not a Business Day, then the
applicable payment shall be due on the next succeeding Business
Day), in cash or, at the Holder’s option, in duly authorized,
validly issued, fully paid and non-assessable shares of Common
Stock.
b) Interest Calculations. Interest
shall be calculated on the basis of a 360-day year, consisting of
twelve 30 calendar day periods, and shall accrue daily commencing
on the Original Issue Date until payment in full of the outstanding
principal, together with all accrued and unpaid interest,
liquidated damages and other amounts which may become due
hereunder, has been made. Payment of interest in shares of Common
Stock shall otherwise occur pursuant to Section 4(c)(ii) herein
and, solely for purposes of the payment of interest in shares, the
Interest Payment Date shall be deemed the Conversion Date. Interest
shall cease to accrue with respect to any principal amount
converted, provided that, the Company actually delivers the
Conversion Shares within the time period required by Section
4(c)(ii) herein. Interest hereunder will be paid to the Person in
whose name this Debenture is registered on the records of the
Company regarding registration and transfers of this Debenture (the
“Debenture
Register”).
c) Late
Fee. All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at an interest rate equal to the
lesser of 12% per annum or the maximum rate permitted by applicable
law (the “Late
Fees”) which shall accrue daily from the date such
interest is due hereunder through and including the date of actual
payment in full. Notwithstanding anything to the contrary contained
herein, if, on any Interest Payment Date the Company has elected to
pay accrued interest in the form of Common Stock but the Company is
not permitted to pay accrued interest in Common Stock because it
fails to satisfy the conditions for payment in Common Stock set
forth in Section 2(a) herein, then, at
the option of the Holder, the
Company, in lieu of delivering either shares
of Common Stock pursuant to this Section 2 or paying the regularly scheduled interest payment
in cash, shall deliver, within three (3) Trading Days of each
applicable Interest Payment Date, an amount in cash equal to the
product of (x) the number of shares of Common Stock otherwise
deliverable to the Holder in connection with the payment of
interest due on such Interest Payment Date multiplied by (y) the
highest VWAP during the period commencing on the Interest Payment
Date and ending on the Trading Day prior to the date such payment
is actually made. If any Interest Conversion Shares are issued to
the Holder in connection with an Interest Payment Date and are not
applied against an Interest Share Amount, then the Holder shall
promptly return such excess shares to the
Company.
d) Prepayment. Except as otherwise
set forth in this Debenture, the Company may not prepay any portion
of the principal amount of this Debenture without the prior written
consent of the Holder.
Section
3.
Registration of Transfers and Exchanges.
a) Different Denominations. This
Debenture is exchangeable for an equal aggregate principal amount
of Debentures of different authorized denominations, as requested
by the Holder surrendering the same. No service charge will be
payable for such registration of transfer or exchange.
b) Investor Representations. This
Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance
with the Purchase Agreement and applicable federal and state
securities laws and regulations.
c) Reliance on Debenture Register.
Prior to due presentment for transfer to the Company of this
Debenture, the Company and any agent of the Company may treat the
Person in whose name this Debenture is duly registered on the
Debenture Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or
not this Debenture is overdue, and neither the Company nor any such
agent shall be affected by notice to the contrary.
Section
4.
Conversion.
a) Voluntary Conversion. At any
time after the issue date of this Debenture until this Debenture is
no longer outstanding, this Debenture shall be convertible, in
whole or in part, into shares of Common Stock at the option of the
Holder, at any time and from time to time (subject to the
conversion limitations set forth in Section 4(d) hereof). The
Holder shall effect conversions by delivering to the Company a
Notice of Conversion, the form of which is attached hereto as
Annex A (each, a
“Notice of
Conversion”), specifying therein the principal amount
of this Debenture and the accrued but unpaid interest thereon to be
converted and the date on which such conversion shall be effected
(such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion is
deemed delivered hereunder. No ink-original Notice of Conversion
shall be required, nor shall any medallion guarantee (or other type
of guarantee or notarization) of any Notice of Conversion form be
required. To effect
conversions hereunder, the Holder shall not be required to
physically surrender this Debenture to the Company unless the
entire principal amount of this Debenture, plus all accrued and
unpaid interest thereon, has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding
principal amount of this Debenture in an amount equal to the
applicable conversion. The Holder and the Company shall maintain
records showing the principal amount(s) converted and the date of
such conversion(s). The Company may deliver an objection to any
Notice of Conversion within one (1) Business Day of delivery of
such Notice of Conversion. In the event of any dispute or
discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder, and any assignee by acceptance of
this Debenture, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a portion of
this Debenture, the unpaid and unconverted principal amount of this
Debenture may be less than the amount stated on the face
hereof.
b) Conversion Price. The
conversion price (the “Conversion Price”) shall
be $2.00, subject to adjustment as set forth in Section
5.
c)
Mechanics of
Conversion.
i. Conversion Shares Issuable Upon
Conversion of Principal Amount. The number of Conversion
Shares issuable upon a conversion hereunder shall be determined by
the quotient obtained by dividing (x) the outstanding principal
amount of this Debenture to be converted by (y) the Conversion
Price.
ii. Delivery of Certificate Upon
Conversion. Not later than two (2) Trading Days after each
Conversion Date (the “Share Delivery Date”),
the Company shall deliver, or cause to be delivered, to the Holder
(A) a certificate or certificates representing the Conversion
Shares which (i) while a registration statement covering the resale
of such Conversion Shares is effective under the Securities Act or
(ii) on or after the six-month anniversary of the Original Issue
Date, shall be free of restrictive legends and trading restrictions
representing the number of Conversion Shares being acquired upon
the conversion of this Debenture (including, at the option of the
Holder, shares of Common Stock representing the payment of accrued
interest at the then effective Conversion Price) and (B) a bank
check in the amount of accrued and unpaid interest (if the
Purchaser has elected to receive accrued interest in cash). On or
after the six-month anniversary of the Original Issue Date, the
Company shall deliver any certificate or certificates required to
be delivered by the Company under this Section 4(c) electronically
through the Depository Trust Company or another established
clearing corporation performing similar functions.
iii. Failure
to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to
or as directed by the applicable Holder by the Share Delivery Date,
the Holder shall be entitled to elect by written notice to the
Company at any time on or before its receipt of such certificate or
certificates, to rescind such Conversion, in which event the
Company shall promptly return to the Holder any original Debenture
delivered to the Company and the Holder shall promptly return to
the Company the Common Stock certificates issued to such Holder
pursuant to the rescinded Conversion Notice.
iv. Obligation Absolute; Partial
Liquidated Damages. The Company’s obligations to issue
and deliver the Conversion Shares upon conversion of this Debenture
in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the
same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other
Person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in
connection with the issuance of such Conversion Shares;
provided,
however, that such
delivery shall not operate as a waiver by the Company of any such
action the Company may have against the Holder. In the event the
Holder of this Debenture shall elect to convert any or all of the
outstanding principal amount hereof, the Company may not refuse
conversion based on any claim that the Holder or anyone associated
or affiliated with the Holder has been engaged in any violation of
law, agreement or for any other reason, unless an injunction from a
court, on notice to Holder, restraining and or enjoining conversion
of all or part of this Debenture shall have been sought and
obtained, and the Company posts a surety bond for the benefit of
the Holder in the amount of 150% of the outstanding principal
amount of this Debenture, which is subject to the injunction, which
bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds
of which shall be payable to the Holder to the extent it obtains
judgment. In the absence of such injunction, the Company shall
issue Conversion Shares or, if applicable, cash, upon a properly
noticed conversion. If the Company fails for any reason to deliver
to the Holder such certificate or certificates pursuant to Section
4(c)(ii) by the Share Delivery Date, the Company shall pay to the
Holder, in cash, as liquidated damages and not as a penalty, for
each $1,000 of principal amount being converted, $10 per Trading
Day for each Trading Day after such Share Delivery Date until such
certificates are delivered or Holder rescinds such conversion.
Nothing herein shall limit a Holder’s right to pursue actual
damages or declare an Event of Default pursuant to Section 8 hereof
for the Company’s failure to deliver Conversion Shares within
the period specified herein and the Holder shall have the right to
pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance
and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holder from seeking to enforce damages pursuant to any
other Section hereof or under applicable law.
v. Compensation for Buy-In on Failure to
Timely Deliver Certificates Upon Conversion. In addition to
any other rights available to the Holder, if the Company fails for
any reason to deliver to the Holder such certificate or
certificates by the Share Delivery Date pursuant to Section
4(c)(ii), and if after such Share Delivery Date the Holder is
required by its brokerage firm to purchase (in an open market
transaction or otherwise), or the Holder’s brokerage firm
otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Conversion Shares which
the Holder was entitled to receive upon the conversion relating to
such Share Delivery Date (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder (in addition to any
other remedies available to or elected by the Holder) the amount,
if any, by which (x) the Holder’s total purchase price
(including any brokerage commissions) for the Common Stock so
purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that the Holder was entitled to receive from
the conversion at issue multiplied by (2) the actual sale price at
which the sell order giving rise to such purchase obligation was
executed (including any brokerage commissions) and (B) at the
option of the Holder, either reissue (if surrendered) this
Debenture in a principal amount equal to the principal amount of
the attempted conversion (in which case such conversion shall be
deemed rescinded) or deliver to the Holder the number of shares of
Common Stock that would have been issued if the Company had timely
complied with its delivery requirements under Section 4(c)(ii). For
example, if the Holder purchases Common Stock having a total
purchase price of $13,000 to cover a Buy-In with respect to an
attempted conversion of this Debenture with respect to which the
actual sale price of the Conversion Shares (including any brokerage
commissions) giving rise to such purchase obligation was a total of
$10,000 under clause (A) of the immediately preceding sentence, the
Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts
payable to the Holder in respect of the Buy-In and, upon request of
the Company, evidence of the amount of such loss. Nothing herein
shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief with respect to the Company’s failure to timely
deliver certificates representing shares of Common Stock upon
conversion of this Debenture as required pursuant to the terms
hereof.
vi. Reservation of Shares Issuable Upon
Conversion. The Company covenants that it will reserve and
keep available out of its authorized and unissued shares of Common
Stock for the sole purpose of issuance upon conversion of this
Debenture and payment of interest on this Debenture, each as herein
provided, free from preemptive rights or any other actual
contingent purchase rights of Persons other than the Holder (and
the other holders of the Debentures), not less than 150% of the
aggregate number of shares of the Common Stock as shall (subject to
the terms and conditions set forth in the Purchase Agreement) be
issuable (taking into account the adjustments and restrictions of
Section 5) upon the conversion of the then outstanding principal
amount of this Debenture and payment of interest hereunder. The
Company covenants that all shares of Common Stock that shall be so
issuable shall, upon issue, be duly authorized, validly issued,
fully paid and nonassessable.
vii. Fractional
Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of this
Debenture. As to any fraction of a share which the Holder would
otherwise be entitled to purchase upon such conversion, the Company
shall at its election, either pay a cash adjustment in respect of
such final fraction in an amount equal to such fraction multiplied
by the Conversion Price or round up to the next whole
share.
viii. Transfer
Taxes and Expenses. The issuance of certificates for shares
of the Common Stock on conversion of this Debenture shall be made
without charge to the Holder hereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or
delivery of such certificates, provided that, the Company shall not
be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such
certificate upon conversion in a name other than that of the Holder
of this Debenture so converted and the Company shall not be
required to issue or deliver such certificates unless or until the
Person or Persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid. The
Company shall pay all Transfer Agent fees required for same-day
processing of any Notice of Conversion and all fees to the
Depository Trust Company (or another established clearing
corporation performing similar functions) required for same-day
electronic delivery of the Conversion Shares.
d) Holder’s Conversion
Limitations. The Company shall not effect any conversion of
this Debenture, and a Holder shall not have the right to convert
any portion of this Debenture, to the extent that after giving
effect to the conversion set forth on the applicable Notice of
Conversion, the Holder (together with the Holder’s
Affiliates, and any Persons acting as a group together with the
Holder or any of the Holder’s Affiliates) would beneficially
own in excess of the Beneficial Ownership Limitation (as defined
below). For purposes of the foregoing sentence, the number of
shares of Common Stock beneficially owned by the Holder and its
Affiliates shall include the number of shares of Common Stock
issuable upon conversion of this Debenture with respect to which
such determination is being made, but shall exclude the number of
shares of Common Stock which are issuable upon (i) conversion of
the remaining, unconverted principal amount of this Debenture
beneficially owned by the Holder or any of its Affiliates and (ii)
exercise or conversion of the unexercised or unconverted portion of
any other securities of the Company subject to a limitation on
conversion or exercise analogous to the limitation contained herein
(including, without limitation, any other Debentures) beneficially
owned by the Holder or any of its Affiliates. Except as set
forth in the preceding sentence, for purposes of this Section 4(d),
beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this
Section 4(d) applies, the determination of whether this Debenture
is convertible (in relation to other securities owned by the Holder
together with any Affiliates) and of which principal amount of this
Debenture is convertible shall be in the sole discretion of the
Holder, and the submission of a Notice of Conversion shall be
deemed to be the Holder’s determination of whether this
Debenture may be converted (in relation to other securities owned
by the Holder together with any Affiliates) and which principal
amount of this Debenture is convertible, in each case subject to
the Beneficial Ownership Limitation. To ensure compliance with this
restriction, the Holder will be deemed to represent to the Company
each time it delivers a Notice of Conversion that such Notice of
Conversion has not violated the restrictions set forth in this
paragraph and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 4(d), in
determining the number of outstanding shares of Common Stock, the
Holder may rely on the number of outstanding shares of Common Stock
as stated in the most recent of the following: (i) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (ii) a more recent public
announcement by the Company, or (iii) a more recent written notice
by the Company or the Company’s transfer agent setting forth
the number of shares of Common Stock outstanding. Upon the
written or oral request of a Holder, the Company shall within two
Trading Days confirm orally and in writing to the Holder the number
of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of
the Company, including this Debenture, by the Holder or its
Affiliates since the date as of which such number of outstanding
shares of Common Stock was reported. The “Beneficial Ownership
Limitation” shall be 9.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon conversion of this
Debenture held by the Holder. The Beneficial Ownership Limitation
provisions of this paragraph shall be construed and implemented in
a manner otherwise than in strict conformity with the terms of this
Section 4(d) to correct this paragraph (or any portion hereof)
which may be defective or inconsistent with the intended Beneficial
Ownership Limitation contained herein or to make changes or
supplements necessary or desirable to properly give effect to such
limitation. The limitations contained
in this paragraph shall apply to a successor holder of this
Debenture.
Section
5.
Certain Adjustments.
a) Stock Dividends and Stock
Splits. If the Company, at any time while this Debenture is
outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on
shares of Common Stock or any Common Stock Equivalents (which, for
avoidance of doubt, shall not include any shares of Common Stock
issued by the Company upon conversion of, or payment of interest
on, the Debentures), (ii) subdivides outstanding shares of Common
Stock into a larger number of shares, (iii) combines (including by
way of a reverse stock split) outstanding shares of Common Stock
into a smaller number of shares or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of
capital stock of the Company, then the Set Price shall be
multiplied by a fraction of which the numerator shall be the number
of shares of Common Stock (excluding any treasury shares of the
Company) outstanding immediately before such event, and of which
the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made
pursuant to this Section shall become effective immediately after
the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.
b) Subsequent Equity Sales. If, at
any time while this Debenture is outstanding, the Company or any
Subsidiary, as applicable, sells or grants any option to purchase
or sells or grants any right to reprice, or otherwise disposes of
or issues (or announces any sale, grant or any option to purchase
or other disposition), any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock at an
effective price per share that is lower than the then Set Price
(such lower price, the “Base Conversion Price”
and such issuances, collectively, a “Dilutive Issuance”) (if
the holder of the Common Stock or Common Stock Equivalents so
issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price
per share that is lower than the Set Price, such issuance shall be
deemed to have occurred for less than the Set Price on such date of
the Dilutive Issuance), then the Set Price shall be reduced to
equal the Base Conversion Price. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued.
Notwithstanding the foregoing, no
adjustment will be made under this Section 5(b) in respect of an
Exempt Issuance. If the Company enters into a Variable Rate
Transaction despite the prohibition set forth in the Purchase
Agreement, the Company shall be deemed to have issued Common Stock
or Common Stock Equivalents at the lowest possible conversion price
at which such securities may be converted or exercised. The Company
shall notify the Holder in writing, no later than the Trading Day
following the issuance of any Common Stock or Common Stock
Equivalents subject to this Section 5(b), indicating therein the
applicable issuance price, or applicable reset price, exchange
price, conversion price and other pricing terms (such notice, the
“Dilutive Issuance
Notice”). For purposes of clarification, whether or
not the Company provides a Dilutive Issuance Notice pursuant to
this Section 5(b), upon the occurrence of any Dilutive Issuance,
the Holder is entitled to receive a number of Conversion Shares
based upon the Base Conversion Price on or after the date of such
Dilutive Issuance, regardless of whether the Holder accurately
refers to the Base Conversion Price in the Notice of
Conversion.
c) Subsequent Rights Offerings.
In addition to any adjustments
pursuant to Section 5(a) above, if at any time the Company grants,
issues or sells any Common Stock Equivalents or rights to purchase
stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Debenture
(without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights (provided, however, to the extent that the
Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).
d) Pro Rata Distributions. During
such time as this Debenture is outstanding, if the Company shall
declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of shares of Common
Stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a “Distribution”), at any
time after the issuance of this Debenture, then, in each such case,
the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if
the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Debenture (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the
Holder’s right to participate in any such Distribution would
result in the Holder exceeding the Beneficial Ownership Limitation,
then the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).
e) Fundamental Transaction. If, at
any time while this Debenture is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
(v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires
a majority of the outstanding shares of Common Stock (not including
any shares of Common Stock held by the other Person or other
Persons making or party to, or associated or affiliated with the
other Persons making or party to, such stock or share purchase
agreement or other business combination) (each a
“Fundamental
Transaction”), then, upon any subsequent conversion of
this Debenture, the Holder shall have the right to receive, for
each Conversion Share that would have been issuable upon such
conversion immediately prior to the occurrence of such Fundamental
Transaction (without regard to any limitation in Section 4(d) on
the conversion of this Debenture), the number of shares of Common
Stock of the successor or acquiring corporation or of the Company,
if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Debenture is
convertible immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 4(d) on the conversion
of this Debenture). For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one (1)
share of Common Stock in such Fundamental Transaction, and the
Company shall apportion the Conversion Price among the Alternate
Consideration in a reasonable manner reflecting the relative value
of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities,
cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Debenture
following such Fundamental Transaction. The Company shall cause any
successor entity in a Fundamental Transaction in which the Company
is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under this
Debenture and the other Transaction Documents (as defined in the
Purchase Agreement) in accordance with the provisions of this
Section 5(e) pursuant to written agreements in form and substance
reasonably satisfactory to the Majority in Interest (which approval
shall not be unreasonably withheld, delayed or conditioned) prior
to such Fundamental Transaction and shall, at the option of the
holder of this Debenture, deliver to the Holder in exchange for
this Debenture a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to
this Debenture which is convertible for a corresponding number of
shares of capital stock of such Successor Entity (or its parent
entity) equivalent to the shares of Common Stock acquirable and
receivable upon conversion of this Debenture (without regard to any
limitations on the conversion of this Debenture) prior to such
Fundamental Transaction, and with a conversion price which applies
the conversion price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common
Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock, such number of shares of capital
stock and such conversion price being for the purpose of protecting
the economic value of this Debenture immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Debenture and the other Transaction Documents referring to the
“Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall
assume all of the obligations of the Company under this Debenture
and other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein.
f) Calculations. All calculations
under this Section 5 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 5, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding any treasury shares of
the Company) issued and outstanding.
g) Notice to the
Holder.
i. Adjustment to Set Price.
Whenever the Set Price is adjusted pursuant to any provision of
this Section 5, the Company shall promptly deliver to each Holder a
notice setting forth the Set Price after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment.
ii. Notice to Allow Conversion by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock of rights or warrants
to subscribe for or purchase any shares of capital stock of any
class or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company, then, in each case, the
Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of this Debenture, and shall cause to
be delivered to the Holder at
its last address as it shall appear upon the Debenture Register, at
least twenty (20) calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of the
Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined
or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that
holders of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation,
merger, sale, transfer or share exchange, provided that the failure
to deliver such notice or any defect therein or in the delivery
thereof shall not affect the validity of the corporate action
required to be specified in such notice. To the extent that any
notice provided hereunder 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. The
Holder shall remain entitled to convert this Debenture during the
20-day period commencing on the date of such notice through the
effective date of the event triggering such notice except as may
otherwise be expressly set forth herein.
Section
6.
Registration Rights. Within
15 days after the consummation of the transactions contemplated by
this Agreement, or as soon as practicable thereafter, the Company
shall file with the SEC the Prospectus Supplement in order to
register the Conversion Shares. All fees and expenses of such
registration (including the fees and expenses of one counsel to the
holders of Registrable Securities but excluding underwriting
discounts and commissions) shall be borne by the
Company.
Section
7.
Negative Covenants. As long
as any portion of this Debenture remains outstanding, unless the
Majority in Interest shall have otherwise given prior written
consent, the Company shall not, and shall not permit any of the
Subsidiaries to, directly or indirectly:
a) other
than Permitted Indebtedness, enter into, create, incur, assume,
guarantee or suffer to exist any indebtedness for borrowed money of
any kind, including, but not limited to, a guarantee, on or with
respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits
therefrom;
b) other
than Permitted Liens, enter into, create, incur, assume or suffer
to exist any Liens of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom;
c) amend
its charter documents, including, without limitation, its
certificate of incorporation and bylaws, in any manner that
materially and adversely affects any rights of the Holder
(provided, however, the consent of the Holders shall not be
required in connection with the first clause of the first sentence
of Section 4(c)(vi) above);
d) repay, repurchase
or offer to repay, repurchase or otherwise acquire more than a
de minimis number of shares
of its Common Stock or Common Stock Equivalents other than as to
(i) the Conversion Shares as permitted or required under the
Transaction Documents and (ii) repurchases of Common Stock or
Common Stock Equivalents of departing officers and directors of the
Company, provided that such repurchases shall not exceed an
aggregate of $5,000 for all officers and directors during the term
of this Debenture;
e) repay,
repurchase or offer to repay, repurchase or otherwise acquire any
Indebtedness, other than the Debentures if on a pro-rata basis,
other than regularly scheduled principal and interest payments as
such terms are in effect as of the Original Issue Date, provided
that such payments shall not be permitted if, at such time, or
after giving effect to such payment, any Event of Default exist or
occur;
f) pay
cash dividends or distributions on any equity securities of the
Company;
g) enter into any
transaction with any Affiliate of the Company which would be
required to be disclosed in any public filing with the Commission,
unless such transaction is made on an arm’s-length basis and
expressly approved by a majority of the disinterested directors of
the Company (even if less than a quorum otherwise required for
board approval); or
h) enter
into any agreement with respect to any of the foregoing.
Section
8.
Events of Default.
a) “Event of Default” means,
wherever used herein, any of the following events (whatever the
reason for such event and whether such event shall be voluntary or
involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental
body):
i. any
default in the payment of (A) the principal amount of any Debenture
or (B) interest, liquidated damages and other amounts owing to a
Holder on any Debenture, as and when the same shall become due and
payable (whether on a Conversion Date or the Maturity Date or by
acceleration or otherwise) which default, solely in the case of an
interest payment or other default under clause (B) above, is not
cured within 3 Trading Days;
ii. the
Company shall fail to observe or perform any other covenant or
agreement contained in the Debentures (other than a breach by the
Company of its obligations to deliver shares of Common Stock to the
Holder upon conversion, which breach is addressed in clause (xi)
below) which failure is not cured, if possible to cure, within the
earlier to occur of
(A) 5 Trading Days after notice of
such failure sent by the Holder or by any other
Holder to the Company and (B)
10 Trading Days after the Company has become or should have become
aware of such failure;
iii. a
default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall
occur under (A) any of the Transaction Documents or (B) any other
material agreement, lease, document or instrument to which the
Company or any Subsidiary is obligated (and not covered by clause
(vi) or (x) below);
iv. any representation or warranty made in this Debenture, any
other Transaction Documents, any written statement pursuant hereto
or thereto or any other report, financial statement or certificate
made or delivered to the Holder or any other Holder shall be untrue
or incorrect in any material respect as of the date when made or
deemed made;
v. the Company or any
Significant Subsidiary (as such term is defined in Rule 1-02(w) of
Regulation S-X) shall be subject to a Bankruptcy
Event;
vi. the Company or any
Subsidiary shall default on any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced, any
indebtedness for borrowed money or money due under any long term
leasing or factoring arrangement that (a) involves an obligation
greater than $5,000, whether such indebtedness now exists or shall
hereafter be created, and (b) results in such indebtedness becoming
or being declared due and payable prior to the date on which it
would otherwise become due and payable;
vii. the
Common Stock shall not be eligible for listing or quotation for
trading on a Trading Market and shall not be eligible to resume
listing or quotation for trading thereon within five Trading
Days;
viii. the
Company shall be a party to any Change of Control Transaction or
Fundamental Transaction or shall agree to sell or dispose of all or
in excess of 33% of its assets in one transaction or a series of
related transactions (whether or not such sale would constitute a
Change of Control Transaction);
ix. from and after the
date of this Debenture, the Company fails to have authorized and
reserved 150% of the Underlying Shares issuable upon conversion of
the Debentures;
x. the Company shall
fail for any reason to deliver certificates to a Holder prior to
the fifth Trading Day after a Conversion Date pursuant to Section
4(c) or the Company shall provide at any time notice to the Holder,
including by way of public announcement, of the Company’s
intention to not honor requests for conversions of any Debentures
in accordance with the terms hereof;
xi. Reserved
xii. the
electronic transfer by the Company of shares of Common Stock
through the Depository Trust Company or another established
clearing corporation is no longer available or is subject to a
“chill”; or
xiii. any
monetary judgment, writ or similar final process shall be entered
or filed against the Company, any subsidiary or any of their
respective property or other assets for more than $1,000, and such
judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of 45 calendar days.
b) Remedies Upon Event of Default.
If any Event of Default occurs, the outstanding principal amount of
this Debenture, plus accrued but unpaid interest, liquidated
damages and other amounts owing in respect thereof through the date
of acceleration, shall become, at the Holder’s election,
immediately due and payable in cash at the Mandatory Default
Amount. Commencing 5 days after the occurrence of any Event of
Default that results in the eventual acceleration of this
Debenture, the interest rate on this Debenture shall accrue at an
interest rate equal to the lesser of 12% per annum or the maximum
rate permitted under applicable law. Upon the payment in full of
the Mandatory Default Amount, the Holder shall promptly surrender
this Debenture to or as directed by the Company. In connection with
such acceleration described herein, the Holder need not provide,
and the Company hereby waives, any presentment, demand, protest or
other notice of any kind, and the Holder may immediately and
without expiration of any grace period enforce any and all of its
rights and remedies hereunder and all other remedies available to
it under applicable law. Such acceleration may be rescinded and
annulled by Holder at any time prior to payment hereunder and the
Holder shall have all rights as a holder of the Debenture until
such time, if any, as the Holder receives full payment pursuant to
this Section 8(b). No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent
thereon.
Section
9.
Miscellaneous.
a) Notices. Any and all notices or
other communications or deliveries to be provided by the Holder
hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, or sent
by a nationally recognized overnight courier service, addressed to
the Company, at the address set forth above, or such other
facsimile number or address as the Company may specify for such
purposes by notice to the Holder delivered in accordance with this
Section 9(a). Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile, or sent by a
nationally recognized overnight courier service addressed to each
Holder at the facsimile number or address of the Holder appearing
on the books of the Company, or if no such facsimile number or
address appears on the books of the Company, at the principal place
of business of such Holder, as set forth in the Purchase Agreement.
Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages
attached hereto prior to 5:30 p.m. (New York City time) on any
date, (ii) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the
facsimile number 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, (iii) the second Trading Day
following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (iv) upon actual receipt by
the party to whom such notice is required to be given.
b) Absolute Obligation. Except as
expressly provided herein, no provision of this Debenture shall
alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, liquidated damages and
accrued interest, as applicable, on this Debenture at the time,
place, and rate, and in the coin or currency, herein prescribed.
This Debenture is a direct debt obligation of the Company. This
Debenture ranks pari passu
with all other Debentures now or hereafter issued under the terms
set forth herein.
c) Lost or Mutilated Debenture. If
this Debenture shall be mutilated, lost, stolen or destroyed, the
Company shall execute and deliver, in exchange and substitution for
and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed Debenture, a new
Debenture for the principal amount of this Debenture so mutilated,
lost, stolen or destroyed, but only upon receipt of evidence of
such loss, theft or destruction of such Debenture, and of the
ownership hereof, reasonably satisfactory to the
Company.
d) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Debenture 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 conflict of laws
thereof. Each party agrees that all legal proceedings concerning
the interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). Each
party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts 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 such New York Courts, or such New York Courts are
improper or 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 Debenture 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 applicable law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Debenture or the transactions
contemplated hereby. If any party shall commence an action or
proceeding to enforce any provisions of this Debenture, then the
prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys’ fees and other costs
and expenses incurred in the investigation, preparation and
prosecution of such action or proceeding.
e) Waiver. Any waiver by the
Company or the Holder of a breach of any provision of this
Debenture shall not operate as or be construed to be a waiver of
any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the
Holder to insist upon strict adherence to any term of this
Debenture on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Debenture on any
other occasion. Any waiver by the Company or the Holder must be in
writing.
f) Severability. If any provision
of this Debenture is invalid, illegal or unenforceable, the balance
of this Debenture shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it
shall be found that any interest or other amount deemed interest
due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under
applicable law. The Company covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would
prohibit or forgive the Company from paying all or any portion of
the principal of or interest on this Debenture as contemplated
herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this
Debenture, and the Company (to the extent it may lawfully do so)
hereby expressly waives all benefits or advantage of any such law,
and covenants that it will not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the
Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.
g) Remedies, Characterizations, Other
Obligations, Breaches and Injunctive Relief. The
remedies provided in this Debenture shall be cumulative and in
addition to all other remedies available under this Debenture and
any of the other Transaction Documents at law or in equity
(including a decree of specific performance and/or other injunctive
relief), and nothing herein shall limit the Holder’s right to
pursue actual and consequential damages for any failure by the
Company to comply with the terms of this Debenture. The
Company covenants to the Holder that there shall be no
characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the Holder and
shall not, except as expressly provided herein, be subject to any
other obligation of the Company (or the performance thereof). The
Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or
threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any such
breach or any such threatened breach, without the necessity of
showing economic loss and without any bond or other security being
required. The Company shall provide all information and
documentation to the Holder that is requested by the Holder to
enable the Holder to confirm the Company’s compliance with
the terms and conditions of this Debenture.
h) Next Business Day. Whenever any
payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day.
i) Headings. The headings
contained herein are for convenience only, do not constitute a part
of this Debenture and shall not be deemed to limit or affect any of
the provisions hereof.
*********************
(Signature Pages Follow)
IN
WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above
indicated.
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GT BIOPHARMA, INC.
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By:
___________________________
Name:
Steven Weldon
Title: CFO
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[Signature Page to GT BioPharma, Inc. Debenture
Agreement]
23
ANNEX
A
NOTICE
OF CONVERSION
The
undersigned hereby elects to convert principal under the 10% Senior
Convertible Debenture due ________, 2019 of GT Biopharma, Inc., a
Delaware corporation (the “Company”), into shares of
common stock (the “Common Stock”), of the
Company according to the conditions hereof, as of the date written
below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if
any.
By the
delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Common Stock
does not exceed the amounts specified under Section 4 of this
Debenture, as determined in accordance with Section 13(d) of the
Exchange Act.
The
undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection
with any transfer of the aforesaid shares of Common
Stock.
Conversion
calculations:
Date to
Effect Conversion:
Principal Amount of
Debenture to be Converted:
Payment
of Interest in Common Stock __ yes __ no
If yes,
$_____ of Interest Accrued on Account of Conversion at
Issue.
Number
of shares of Common Stock to be issued:
Signature:
Name:
Address
for Delivery of Common Stock Certificates:
Or
DWAC
Instructions:
Account
No:
Broker
No:
Schedule
1
CONVERSION
SCHEDULE
The 10%
Senior Convertible Debenture due on __________, 2019 in the
original principal amount of $________ are issued by GT Biopharma,
Inc., a Delaware corporation. This Conversion Schedule reflects
conversions made under Section 4 of the above referenced
Debenture.
Dated:
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Date of
Conversion
(or for
first entry, Original Issue Date)
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Amount
of Conversion
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Aggregate
Principal Amount Remaining Subsequent to Conversion
(or
original Principal Amount)
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Company
Attest
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