STANDSTILL AND FORBEARANCE AGREEMENT
This
Standstill and Forbearance Agreement (this “Agreement”) is made and
entered into as of this 23rd day of June, 2020
by and among GT Biopharma, Inc., a Delaware corporation (the
“Company”) and ___________
(the “Lender”).
RECITALS
(a) The
Company and the Lender are parties to certain Securities Purchase
Agreements as set forth on Schedule A (the “Purchase Agreements”),
pursuant to which the Company issued to the Lender certain
convertible debentures and/or convertible notes as set forth on
Schedule A (each debenture and note is individually a
“Note” and collectively the “Notes”). There is an
aggregate principal balance of $______on the Notes as well as
$______ in accrued and unpaid interest as of April 30, 2020 on the
Notes (the aggregate principal amount together with the accrued and
unpaid interest is referred to herein as the “Indebtedness”). [Two of
the Notes, one issued on ______ and the other on ______, having an
aggregate principal balance of $______ (exclusive of interest), are
secured by a senior security interest held by Lender in certain
shares of the Company as well as all assets of the Company (the
“Security Interest”), as further described in Section
3(a) of this Agreement and pursuant to applicable pledge and
security agreements as further described in Section 3(a) of this
Agreement.]*
(b) The Company
acknowledges that an Event of Default has occurred under each of
the Notes (“Existing
Defaults”) which entitles the Lender to payment of the
Indebtedness as well as default amounts on the Notes in the
aggregate amount of $______ as of April 30, 2020 (the
“Default
Amounts” and, together with the Indebtedness, the
“Default
Indebtedness”). The Default Indebtedness is
subject to change daily due to accrual of interest. As a result of
the occurrence and continuation of the Existing Defaults, the
Lender is entitled to, among other things, immediately enforce its
rights and remedies against the Company including but not limited
to immediate payment of the Default Indebtedness and enforcement of
its Security Interest.
(c) The Company has
requested that the Lender refrain and forbear from exercising
certain rights and remedies with respect to the Notes and Default
Indebtedness, and the Lender is willing to do so for a specified
period of time on the terms and conditions set forth
herein.
NOW THEREFORE, in consideration of the
premises and the mutual agreement contained therein, and for good
and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as
follows:
Section
1. Definitions and
Recitals. Capitalized
terms used and not otherwise defined herein have the meanings
ascribed to such terms in the Purchase Agreements. The above
recitals shall be incorporated and construed as part of this
Agreement. The “Effective Date” shall be the date, the
Company has entered into Standstill and Forbearance Agreements (the
“Other SFAs”) identical, except for the name of the
lender and the securities owned by such lender, to this Agreement
with the holders (the “Other Holders”) of securities
issued by the Company convertible, exercisable, or exchangeable for
shares of the Company’s common stock covering all securities
convertible, exercisable, or exchangeable for shares of the
Company’s common stock.
Section
2. Ratification and Incorporation of
Purchase Agreements, Outstanding Preferred Stock, Notes and Related
Agreements. Except as expressly modified by this Agreement,
(a) the Company hereby acknowledges, confirms and ratifies all of
the terms and conditions set forth in, and all of its obligations
under, the Purchase Agreements, Outstanding Preferred Stock, Notes
and related Transaction Documents, all of which documents are
valid, binding and in full force and effect and (b) all of the
terms and conditions set forth in the foregoing Transaction
Documents are legal, valid and binding obligations and are
incorporated herein by this reference as if set forth in full
herein.
*
if applicable
Section
3. Acknowledgement of Indebtedness,
Default Indebtedness, Conversion Indebtedness, Security Interest,
and Existing Defaults.
(a) The Company
acknowledges and agrees that: (i) the aggregate amount of the
Indebtedness due under the Notes is not less than $______ as of
April 30, 2020 (inclusive of accrued and unpaid interest through
April 30, 2020), and the amount of Indebtedness shall increase
daily due to accrual of interest and default interest; (ii) the
aggregate amount of the Default Indebtedness due under the Notes is
not less than $______ as of April 30, 2020 (inclusive of accrued
and unpaid Default Amounts through April 30, 2020), and such
Default Indebtedness shall increase daily due to accrual of
interest and default interest; and (iii) the information reflected
on Schedule A to this Agreement is true and accurate as of April
30, 2020 and the Company's books and records mirror such
information. The Company represents and agrees that it has no
offset, defense, counterclaim, dispute or disagreement of any kind
or nature whatsoever with respect to the liability or amount of
such foregoing Default Indebtedness. [The Company further
acknowledges and agrees that the Default Indebtedness relative to
the Note issued on August 2, 2018 is secured by a security interest
in certain shares of the Company pursuant to a Pledge Agreement
entered into on August 1, 2020 (the “Pledge
Agreement”), and the Default Indebtedness relative to the
Note issued on February 4, 2019, is secured by a senior security
interest held by Lender on a pari
passu basis with certain other lenders in all assets of the
Company, pursuant to the Security Agreement entered into on or
about February 4, 2019, and the entire Default Indebtedness may be
converted into shares of common stock of the Company
(“Common
Stock”), at the conversion price of $0.20 per share,
subject to full ratchet anti-dilution adjustment in the event that
the Company issues common stock or securities convertible or
exercisable into common stock at a price per share lower than the
then conversion price of the Notes (so that the conversion price is
automatically reduced to equal any such lower price). The Company
acknowledges that the shares subject to the Pledge Agreement still
need to be transferred to the Pledgees (as defined in the Pledge
Agreement) and therefore agrees to take any and all actions that
are required and requested by Lender to assist Lender and the
Collateral Agent (as defined in the Pledge Agreement) to effectuate
the completion of the transfer of all shares subject to the Pledge
Agreement to the Pledgees.]*
(b) In addition to the
amount set forth above, the Company is and shall be liable to the
Lender for all interest accrued and accruing, fees, costs,
liquidated damages, expenses, and costs of collection (including
attorney’s fees and expenses and other amounts due under the
Purchase Agreements and other Transaction Documents) heretofore or
hereafter accrued or incurred in connection with the Default
Indebtedness; and
(c) The Company hereby
acknowledges and agrees that Existing Defaults have occurred and
are continuing, each of which constitutes an Event of Default and
entitles the Lender to exercise its rights and remedies under the
Transaction Documents, applicable law or otherwise. The Lender has
not waived, presently does not intend to waive and may never waive
such Existing Defaults and nothing contained herein or the
transactions contemplated hereby shall be deemed to constitute any
such waiver. The Company hereby acknowledges and agrees that Lender
has the right to declare the Default Indebtedness to be immediately
due and payable under the terms of this Agreement; provided,
however, that during the Standstill Period (as defined below), the
Lender may only declare such Default Indebtedness due and payable
in the event that (i) the Company breaches any of the provisions of
this Agreement or makes any representations or statements, written
or otherwise, to any party and through any method of communication,
or takes any action that is inconsistent with Sections 2 and 3 of
this Agreement. After the Standstill Period, the Lender may declare
the Default Indebtedness due and payable at any time without
restriction.
Section
4. The Standstill. In reliance
upon the representations, warranties and covenants of the Company
contained in this Agreement, and subject to Section 5 and provided
that the Company does not take any action that is inconsistent with
Sections 2 and 3 of this Agreement, the Lender agrees that, from
the Effective Date of this Agreement until the earlier of (i) the
date that the Company obtains and closes on the New Financing (as
defined in Section 5 of this Agreement), and (ii) October 1, 2020
(such earlier date being the “Fixed Termination Date”
and the period commencing on the Effective Date and ending on the
Fixed Termination Date being the “Standstill Period”), the
Lender will forbear from exercising its rights and remedies based
on any Existing Default.
* if
applicable
Section
5.
Termination of Standstill Obligations.
(a) The obligation of
the Lender under Section 4 hereof shall terminate (the
“Termination”) on the
earliest of (i) the Fixed Termination Date, (ii) the date, if any,
on which a petition for relief under the United States Bankruptcy
Code or any similar state is filed by or against the Company or any
of its subsidiaries, (iii) the date that the Company defaults under
any of the terms and conditions of this Agreement, or (iv) the date
this Agreement is otherwise terminated or expires.
(b) Upon Termination,
the agreement of Lender to forbear shall automatically and without
further notice or action terminate and be of no force and effect,
it being understood and agreed that the effect of such Termination
will be to permit the Lender to exercise such rights and remedies
hereunder, under the Transaction Documents, or applicable law,
immediately without any further notice, passage of time or
forbearance of any kind.
(c) The Company agrees
that all of the Default Indebtedness shall, if not sooner paid, be
absolutely and unconditionally due and payable in full in cash or
other immediately available funds by the Company and the Lender on
the Termination.
(d) Both parties
acknowledge that this Agreement shall not impact or restrict the
Lender’s ability to convert the Indebtedness into shares of
Common Stock.
Section
6. Agreement to Convert Debt to Equity
Upon Terms Acceptable to Lender; Resulting Adjustments. The
Company plans to conduct a capital raise in the amount of
$15,000,000 (the “New Financing”) prior to the Fixed
Termination Date. The New Financing may consist of the sale of
Common Stock, the sale of convertible debt, and/or the issuance of
warrants. Pursuant to Lender’s participation rights set forth
in the Purchase Agreements, the Company is required to provide
detailed terms of the New Financing for Lender’s review. In
the event that (i) the Company is successful in obtaining the New
Financing on or prior to the Fixed Termination Date on terms
acceptable to Lender, and (ii )
the Company has successfully listed its Common Stock for trading on
the NASDAQ Stock Market on or prior to the final closing date of
the New Financing (the “Closing Date”), the Lender
agrees to convert on the Closing Date, the Default Indebtedness
into shares of Common Stock (the “Closing Conversion
Shares”) at a conversion price equal to the lesser of (i) the
conversion price in effect for the Default Indebtedness on the
Closing Date, or (ii) 75% of the lowest per share price at which
Common Stock is or may be issued in connection with the New
Financing, including any Common Stock that may be issuable upon
conversion or exercise of securities issued in the New Financing
(hereinafter the “Conversion Price of the Default
Indebtedness”), provided that the issuance of the Closing
Conversion Shares do not result in Lender’s beneficial
ownership exceeding 9.9% of the Company’s Common Stock (the
“Beneficial Ownership Limitation”). In addition, the
exercise price of all warrants held by the Lender (the
“Warrants”) shall be reduced to equal the Conversion
Price of the Default Indebtedness and the number of shares of
Common Stock underlying such Warrants shall be increased so that
the total exercise price of all Warrants after the decrease in the
exercise price equals the total exercise price of all Warrants
prior to the decrease in the exercise price. Further, the
expiration date of all Warrants shall be extended for three years
following the Closing Date. The Company agrees to take any action
necessary to honor and effectuate the foregoing. In addition, the
Company shall ensure that it has authorized a sufficient number of
shares of its duly filed Series J-1 preferred stock (the
“Preferred Stock”) to issue to Lender in the event that
the conversion of Default Indebtedness results in the Lender
exceeding its Beneficial Ownership Limitation. In the event that
any amount of Default Indebtedness remains after the Closing
Conversion Shares are issued (the “Remaining Default
Indebtedness”), in light of the fact that the number of
Closing Conversion Shares are subject to the Beneficial Ownership
limitation, the Company shall issue such number of shares of the
Preferred Stock to Lender having an aggregate stated value equal to
the amount of the Remaining Default Indebtedness. Following all
conversions pursuant to this Agreement and the issuance of
Preferred Stock to the Lender to cover any Remaining Default
Indebtedness, each share of Preferred Stock in the hands of the
Lender shall have a permanent Set Price as defined in the
Certificate of Designation of Preferences, Rights and Limitations
of Series J-1 Preferred Stock (the “Designation”), on
file with the State of Delaware on the Effective Date, equal to the
Conversion Price of the Default Indebtedness and without Section 6M
of the Designation having any effect going forward. Prior to the
issuance of Preferred Stock in connection with any conversions, the
Company will amend the Designation to fit these protocols. All
Common Stock underlying any and all securities held by Lender shall
be registered in any registration that is required by the New
Financing. The Company hereby affirms that the Company is in full
compliance with the reporting requirements of the Securities
Exchange Act of 1934 as amended, thereby allowing the Lender to
sell Common Stock pursuant to the terms and conditions of Rule 144
promulgated under the Securities Act of 1933 as amended. The
Company agrees to do whatever it can, including providing any
required legal opinions at is sole cost, to ensure that the Company
can issue shares of Common Stock free of any trading restrictions
upon the conversion of any debt instrument held by Lender, the
conversion of Preferred Stock or upon the exercise of Warrants.
Notwithstanding anything to the contrary in this Agreement, the
Lender shall have no obligations under this Agreement, including
without limitation, to convert debt, until and unless the Common
Stock of the Company is listed for trading on the NASDAQ Stock
Market. Furthermore, in the event that the Company does not close
the New Financing on or prior to the Fixed Termination Date or does
not successfully list its Common Stock for trading on the NASDAQ,
the Default Indebtedness shall remain payable and Lender’s
rights under the Notes, Purchase Agreements and related Transaction
Documents shall remain in full force and effect and Section 6M of
the Designation shall be reinstated.
Section
7. Other SFA and Other
Holders. The Company may not terminate, waive compliance with, or
modify any Other SFA or provide any consideration to do any of the
same to any Other Holder without providing the same terms or same
consideration to the Lender.
Section
8. Representations and Warranties.
In order to induce the Lender to enter into this Agreement and to
forbear with respect to the Existing Defaults in the manner
provided in this Agreement, the Company represents and warrants to
the Lender as follows:
(a) Power and Authority. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and otherwise to carry out its obligations
hereunder.
(b) Authorization of this
Agreement. The execution and delivery of this Agreement by
the Company and the performance hereunder have been duly authorized
by all necessary action, and this Agreement has been duly executed
and delivered by the Company.
(c) Enforceability. This Agreement
constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its
terms.
(d) No Violation or Conflict. The
execution and delivery by the Company of this Agreement and the
performance by the Company hereunder do not and will not (i)
contravene, in any respect, any provision of any law, regulation,
decree, ruling, judgment or order that is applicable to the Company
or its properties or other assets, or (ii) result in a breach of or
constitute a default under the charter, bylaws or other
organizational documents of the Company or any material agreement,
indenture, lease or instrument binding upon the Company or its
properties or other assets.
(e)
Equal
Consideration. No consideration has been offered or paid to
any person to amend or consent to a waiver, modification,
forbearance or otherwise of any provision of any of the Transaction
Documents.
(f)
No Defaults. Other
than the Existing Defaults, no Event of Default has occurred and is
continuing as of the date hereof.
(g)
Other Agreements.
Attached hereto are the full and complete executed copies of the
Forbearance Agreements that the Company has entered into with other
lenders which are the holders of all other convertible instruments
and warrants outside of those held by Lender.
Section
9. Public Disclosure. The Company
shall, as soon as practical, taking into account legal
requirements, file a Form 8-K with the Commission, reasonably
acceptable to the Lender, disclosing the material terms of the
transactions contemplated hereby. The Company shall consult with
the Lender in issuing any other press releases with respect to the
transactions contemplated hereby.
Section 10.
Effect on Transaction
Documents. Except as specifically provided herein, all of
the Transaction Documents remain in full force and effect in
accordance with their respective terms. Nothing in this Agreement
shall extend to or affect in any way any of the rights or
obligations of the Company arising under the Transaction
Documents.
Section 11.
Waiver of Jury Trial; Governing Law and Consent to
Jurisdiction
(a) Jury Trial. The Company makes
the following waiver knowingly, voluntarily, and intentionally, and
understands that the Lender, in entering into this Agreement, is
relying thereon. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY PRESENT
OR FUTURE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY
IN WHICH THE LENDER, OR EITHER OF THEM, ARE OR BECOME A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE
LENDER, OR EITHER OF THEM, OR IN WHICH THE LENDER, OR EITHER OF
THEM, IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY
ARISES OUT OF, OR IS IN RESPECT OF, ANY RELATIONSHIP BETWEEN THE
COMPANY OR ANY SUCH PERSON, AND THE LENDER, OR EITHER OF
THEM.
(b) Governing Law: Consent To Jurisdiction
And Venue. THIS AGREEMENT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS AND DECISIONS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT
REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF LAWS, AND
ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. COMPANY HEREBY
CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED WITHIN
THE COUNTY OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN COMPANY AND LENDER
PERTAINING TO THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER
AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT. The prevailing party in any action arising out of this
Agreement shall be entitled to recover attorneys’ fees and
costs from the non-prevailing party.
Section 12.
Release and
Waivers.
(a) Waiver of Claims by the
Company. The Company hereby acknowledges and agrees that it
has no offsets, defenses, claims, or counterclaims against the
Lender or any of the Lender’s respective officers, directors,
employees, members, managers, affiliates, attorneys,
representatives, predecessors, successors, or assigns with respect
to the Indebtedness, Default Indebtedness or otherwise, and that if
the Company now has, or ever did have, any such offsets, defenses,
claims, or counterclaims against the Lender, or either of them, or
any of the Lender’s respective officers, directors,
employees, affiliates, attorneys, representatives, predecessors,
successors, or assigns, whether known or unknown, at law or in
equity, from the beginning of the world through this date and
through the time of execution of this Agreement, all of them are
hereby expressly WAIVED, and the Company hereby RELEASES the Lender
and the Lender’s respective officers, directors, employees,
affiliates, attorneys, representatives, predecessors, successors,
and assigns from any liability therefor.
(b) Release. In consideration of
the agreements of the Lender contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Company on behalf of itself and its
successors, assigns, heirs, executor, administrator and other legal
representatives, hereby, jointly and severally, absolutely,
unconditionally and irrevocably releases, remises and forever
discharges the Lender, successors and assigns, and its respective
present and former shareholders, affiliates, subsidiaries,
divisions, predecessors, directors, officers, attorneys, employees,
members, managers, agents and other representatives (the Lender and
all such other parties being hereinafter referred to collectively
as the “Releasees” and
individually as a “Releasee”), of and from
all demands, actions, causes of action, suits, covenants,
contracts, controversies, agreements, promises, sums of money,
accounts, bills, reckonings, damages and any and all other claims,
counterclaims, defenses, rights of set off, demands and liabilities
whatsoever (individually, a “Claim” and collectively,
“Claims”) of every name
and nature, known or unknown, suspected or unsuspected, both at law
and in equity, which the Company, or any of its officers,
directors, employees, successors, assigns, heirs, executor,
administrator or other legal representatives, as the case may be,
may now or hereafter own, hold, have or claim to have against the
Releasees or any of them for, upon, or by reason of any nature,
cause or thing whatsoever which arises at any time on or prior to
the day and date of this Agreement, for or on account of, or in
relation to, or in any way in connection with this Agreement, as
amended and supplemented through the date hereof.
(c) The Company
understands, acknowledges and agrees that the release set forth
above may be pleaded as a full and complete defense and may be used
as a basis for an injunction against any action, suit or other
proceeding which may be instituted, prosecuted or attempted in
breach of the provisions of such release. The Company agrees that
no fact, event, circumstance, evidence or transaction which could
now be asserted or which may hereafter be discovered shall affect
in any manner the final and unconditional nature of the release set
forth above.
(d) Covenant Not to Sue. The
Company, on behalf of itself and its successors, shareholders,
assigns, heirs, executor, administrator and other legal
representatives, hereby jointly and severally, absolutely,
unconditionally and irrevocably, covenants and agrees with each
Releasee that it will not sue (at law, in equity, in any regulatory
proceeding or otherwise) any Releasee on the basis of any Claim
released, remised and discharged by the Company. If the Company or
any party on its behalf violates the foregoing covenant, the
Company agrees to pay, in addition to such other damages as any
Releasee may sustain as a result of such violation, all
attorneys’ fees and costs incurred by any Releasee as a
result of such violation.
Section 13.
Miscellaneous.
(a) This Agreement (i)
contains the entire understanding of the parties with respect to
the subject matter hereof, (ii) may not be amended except in
writing signed by all of the parties hereto, (iii) shall inure to
the benefit of the parties hereto and their respective successors
and assigns, (iv) may be executed in multiple counterparts, each of
which shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(b) Any determination
that any provision of this Agreement or any application thereof is
invalid, illegal, or unenforceable in any respect in any instance
shall not affect the validity, legality, or enforceability of such
provision in any other instance, or the validity, legality, or
enforceability of any other provision of this Agreement. Section
headings used herein are for convenience of reference only, are not
part of this Agreement, and are not to be taken into consideration
in interpreting this Agreement.
(c) The Company
represents and warrants that it (a) has engaged counsel and
understands fully the terms of this Agreement and the consequences
of the execution and delivery of this Agreement, (b) has been
afforded an opportunity to have this Agreement reviewed by, and to
discuss this Agreement with such attorneys and other persons as the
Company may wish, and (c) has entered into this Agreement and
executed and delivered all documents in connection herewith of its
own free will and accord and without threat, duress or other
coercion of any kind by any person. The parties hereto acknowledge
and agree that neither this Agreement nor the other documents
executed pursuant hereto shall be construed more favorably in favor
of one than the other based upon which party drafted the same, it
being acknowledged that all parties hereto contributed
substantially to the negotiation and preparation of this Agreement
and the other documents executed pursuant hereto or in connection
herewith.
(d) In making proof of
this Agreement, it shall not be necessary to produce or account for
more than one counterpart thereof signed by each of the parties
hereto. 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. Any party delivering an executed counterpart of this
Agreement by telefacsimile or by e-mail delivery also shall deliver
an original executed counterpart of this Agreement, but the failure
to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Agreement as
to such party or any other party.
(e) Any statute of
limitations applicable to any claims or causes of action
of the Lender against the Company and its officers
and directors which have not expired as of the date
of this Agreement, the running of any time under any such statute
of limitations is hereby tolled from the date hereof through
the Termination Date.
IN
WITNESS WHEREOF, the parties have executed this Standstill and
Forbearance Agreement as of the date first above
written.
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GT
BIOPHARMA, INC.
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By:
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Name:
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Title:
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Name of
Lender:
By:
______________________________________________
Name:____________________________________________
Title:_____________________________________________
Schedule A
Schedule
of Documents, Dates and Amounts of Indebtedness