Filed pursuant to Rule 424(b)(3)
Registration No. 333-239858
PROSPECTUS SUPPLEMENT NO. 6
TO THE PROSPECTUS DATED JULY 31, 2020
GT BIOPHARMA, INC.
This
prospectus supplement no. 6 (the “Prospectus
Supplement”) supplements information contained in the
prospectus, dated July 28, 2020 (the “Prospectus”),
relating to the resale by selling stockholders of up to 31,924,929
shares of common stock, par value $0.001 per share of GT Biopharma,
Inc., a Delaware corporation (the
“Company”).
This
Prospectus Supplement is being filed to update and supplement
the information in the Prospectus with the information contained in
our Current Report on Form 8-K filed with the Securities and
Exchange Commission (“SEC”) on November 9, 2020, which
is set forth below.
This
Prospectus Supplement should be read in conjunction with the
Prospectus. This Prospectus Supplement is not complete without, and
may not be delivered or utilized except in connection with the
Prospectus, including any amendments or supplements thereto. Any
statement contained in the Prospectus shall be deemed to be
modified or superseded to the extent that information in this
Prospectus Supplement modifies or supersedes such statement. Any
statement that is modified or superseded shall not be deemed to
constitute a part of the Prospectus except as modified or
superseded by this Prospectus Supplement.
Neither the SEC nor any state securities commission has approved or
disapproved of these securities or determined if this Prospectus
Supplement is truthful or complete. Any representation to the
contrary is a criminal offense.
The
date of this Prospectus Supplement is November 9, 2020
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported): November 6,
2020
GT Biopharma, Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
(State
or other jurisdiction of incorporation or
organization)
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000-08092
(Commission
File Number)
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94-1620407
(IRS
Employer Identification No.)
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9350 Wilshire Blvd. Suite 203
Beverly Hills, CA 90212
Phone: (800) 304-9888
(Address,
including zip code, and telephone number, including area code,
of
registrant’s
principal executive offices)
N/A
(Former
name, former address and former fiscal year, if changed since last
report)
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
☐ Written communications pursuant to Rule 425 under
the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule l 4a- l 2 under
the Exchange Act ( 17 CFR 240. l 4a- l 2)
☐ Pre-commencement communications pursuant to Rule l
4d-2(b) under the Exchange Act (17 CFR 240. l 4d-2(b))
☐ Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240. l
3e-4(c))
Securities
registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol
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Name of exchangeon which registered
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N/A
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N/A
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N/A
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Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of
1934 (§240.12b-2 of this chapter).
Emerging
growth company ☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Item 1.01. Entry into a Material Definitive Agreement.
On
November 6, 2020, GT Biopharma, Inc. (the "Company") entered into a
Securities Purchase Agreement with two purchasers (individually, a
"Purchaser," and collectively, the "Purchasers") pursuant to which
the Company has issued to the Purchasers Convertible Debentures in
an aggregate principal amount of $250,000 (the "Debentures"), which
Debentures are convertible into the Company's common stock (the
"Common Stock") at a price of $0.20 per share.
The
issuance of the Debentures was made in reliance on the exemption
provided by Section 4(a)(2) of the Securities Act of 1933, as
amended (the "Securities Act"), for the offer and sale of
securities not involving a public offering and Regulation D
promulgated under the Securities Act.
The
foregoing summaries of the Securities Purchase Agreement, and the
Debentures are qualified in their entirety by reference to the full
text of the agreements, which are attached hereto as Exhibits 10.1
and 4.1, respectively, and are incorporated herein by
reference.
Item 2.03. Creation of a Direct Financial Obligation or an
Obligation under an Off Balance Sheet Arrangement of a
Registrant.
The
information set forth in Item 1.01 of this Current Report on Form
8-K is incorporated by reference into this Item 2.03.
Item 3.02. Unregistered Sales of Equity Securities.
The information set forth above in Item 1.01 of this Report is
incorporated by reference herein.
ITEM 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Exhibit No.
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Description
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4.1
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Form
of Secured Convertible Note
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10.1
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Securities
Purchase Agreement
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SIGNATURE
PAGE
Pursuant to the
requirement of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
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GT
Biopharma, Inc.
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Dated: November 9,
2020
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By:
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/s/ Steven
Weldon
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Steven
Weldon
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Chief Financial
Officer
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8NEITHER
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 BORROWER. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR”
AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
Original
Issue Date: ___
2020
Principal Amount: $______
Original Conversion Price (subject to adjustment herein):
$0.20
CONVERTIBLE NOTE
DUE: ________, 2021
THIS
CONVERTIBLE NOTE is one of a series of duly authorized and validly
issued Notes of GT BIOPHARMA,
INC., a Delaware corporation, (the “Borrower”), having its
principal place of business at 9350 Wilshire Blvd, Suite 203,
Beverly Hills, CA 90212,
due_____, 2021 (this note, the “Note” and, collectively
with the other notes of such series, the “Notes”).
FOR
VALUE RECEIVED, Borrower promises to pay to ____________ or its registered assigns
(the “Holder”), or shall have
paid pursuant to the terms hereunder, the principal sum of
______________________________
($____________) on ________, 2021 (the “Maturity Date”) or such
earlier date as this Note is required or permitted to be repaid as
provided hereunder, and to pay interest, if any, to the Holder on
the aggregate unconverted and then outstanding principal amount of
this Note in accordance with the provisions hereof.
This
Note is subject to the following additional
provisions:
Section
1. Definitions.
For the purposes hereof, in addition to the terms defined elsewhere
in this Note, (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(f).
“Bankruptcy Event” means
any of the following events: (a) Borrower or any Subsidiary 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 Borrower or any Subsidiary thereof, (b)
there is commenced against Borrower or any Subsidiary thereof any
such case or proceeding that is not dismissed within 60 days after
commencement, (c) Borrower or any Subsidiary thereof is adjudicated
insolvent or bankrupt or any order of relief or other order
approving any such case or proceeding is entered, (d) Borrower or
any 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) Borrower or any Subsidiary thereof makes a general
assignment for the benefit of creditors, (f) Borrower or any
Subsidiary thereof calls a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts
or (g) Borrower or any 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(e).
“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 required by law or other
governmental action to close.
“Buy-In” shall have the
meaning set forth in Section 4(d)(v).
“Change of Control
Transaction” means, other than by means of conversion
or exercise of the Notes and the Securities issued together with
the Notes, 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 Borrower,
by contract or otherwise) of in excess of 50% of the voting
securities of Borrower, (b) Borrower merges into or consolidates
with any other Person, or any Person merges into or consolidates
with Borrower and, after giving effect to such transaction, the
stockholders of Borrower immediately prior to such transaction own
less than 50% of the aggregate voting power of Borrower or the
successor entity of such transaction, (c) Borrower sells or
transfers all or substantially all of its assets to another Person
and the stockholders of Borrower immediately prior to such
transaction own less than 50% 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 Borrower of an
agreement to which Borrower 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(c).
“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of this Note in accordance with the terms hereof.
“Debentures” means those
certain 10% Senior Convertible Debentures of the Borrower issued on
August 2, 2018, September 7, 2018, September 24, 2018, December 19,
2019, January 30, 2020, April 20, 2020, May 7, 2020, June 19, 2020,
July 7, 2020 and the Senior Convertible Notes issued on February 4,
2019.
“Dilutive Issuance” shall
have the meaning set forth in Section 5(f).
“Equity Conditions” means,
during the period in question, (a)
Borrower shall have duly honored all conversions scheduled to occur
or occurring by virtue of one or more Notices of Conversion of the
applicable Holder on or prior to the dates so requested or
required, if any, (b) Borrower shall have paid all liquidated
damages and other amounts owing to the applicable Holder in respect
of this Note and the other Transaction Documents, (c) all of
the Underlying Shares (and shares issuable in lieu of cash payments
of interest) may be resold by Persons other than Affiliates of the
Borrower pursuant to Rule 144 without volume or manner-of-sale
restrictions or current public information requirements as
confirmed by counsel to Borrower in a written opinion letter to
such effect, addressed and acceptable to the Borrower’s
Transfer Agent and the affected Holders, (d) the Common Stock is
listed or quoted for trading on a Trading Market (and Borrower
believes, in good faith, that trading of the Common Stock on a
Trading Market will continue uninterrupted for the foreseeable
future), (e) there is a sufficient number of authorized, but
unissued and otherwise unreserved, shares of Common Stock for the
issuance of all of the shares then issuable pursuant to the
Transaction Documents, (f) an Event of Default has not occurred,
whether or not such Event of Default has been cured, (g) there is
no existing event which, with the passage of time or the giving of
notice, would constitute an Event of Default, (h) the issuance of
the shares in question to the applicable Holder would not exceed
the Beneficial Ownership Limitation, (i) there has been no public announcement of a
pending or proposed Fundamental Transaction or Change of Control
Transaction that has not been consummated, (j) the applicable
Holder, if not an Affiliate of the Borrower is not in possession of
any information provided by Borrower that constitutes, or may
constitute, material non-public information, and (k) a Public
Information Failure has not occurred.
“Event of Default” shall
have the meaning set forth in Section 8(a).
“Fundamental Transaction”
shall have the meaning set forth in Section 5(f).
“Interest Payment Date”
shall have the meaning set forth in Section 2(1).
“Mandatory Default Amount”
means the sum of (a) the greater of (i) the outstanding principal
amount of this Note 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 (if demand or notice is required to create an
Event of Default) or otherwise due or (y) paid in full, whichever
has a higher VWAP, or (ii) 130% of the outstanding principal amount
of this Note and (b) all other amounts, costs, expenses and
liquidated damages due in respect of this Note.
“New York Courts” shall
have the meaning set forth in Section 10(d).
“Note Register” shall have
the meaning set forth in Section 2(c).
“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 Notes, regardless of
any transfers of any Note and regardless of the number of
instruments which may be issued to evidence such
Notes.
“Other Holders” means
holders of Other Notes.
“Other Notes” means Notes
nearly identical to this Note issued to other Holders pursuant to
the Purchase Agreement.
“Permitted Indebtedness”
shall have the meaning provided in the Purchase
Agreement.
“Permitted Lien” shall
have the meaning provided in the Purchase Agreement.
“Purchase
Agreement” means the Securities Purchase Agreement,
dated as of May __, 2019 among Borrower and the original Holders,
as amended, modified or supplemented from time to time in
accordance with its terms.
“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(d)(ii).
“Successor
Entity” shall have the meaning set forth in Section
5(f).
“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
American, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market, the New York Stock Exchange, the OTC
Bulletin Board, the OTCQB, the OTCQX or the OTC Pink Marketplace
(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 any of the Nasdaq markets or exchanges 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 on the OTCQX, OTCQB or OTC Pink
Marketplace maintained by the OTC Markets Group, Inc. (or a similar
organization or agency succeeding to its functions of reporting
prices), the volume weighted average price of the Common Stock on
the first such facility (or a similar organization or agency
succeeding to its functions of reporting prices), or (d) in
all other cases, the fair market value of a share of Common Stock
as determined by an independent appraiser, the fees and expenses of
which shall be paid by Borrower.
Section
2.
Interest and General
Provisions.
a) Payment
of Interest in Cash or Kind. The Borrower shall pay interest
to the Holder on the aggregate unconverted and then outstanding
principal amount of this Note 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 based on the Conversion Price then in
effect. Borrower may not pay any interest in shares of Common Stock
in excess of the Beneficial Ownership Limitation when applicable,
unless waived by Holder. Following the occurrence and during the
continuance of an Event of Default, then from the first date of
such occurrence, the annual interest rate on this Note shall be
eighteen percent (18%). Such interest shall be due and payable on
the Maturity Date, whether by acceleration or
otherwise.
b) Payment
Grace Period. Except as described in this Note, the Borrower
shall not have any grace period to pay any monetary amounts due
under this Note.
c)
Conversion
Privileges. The Conversion Rights set forth in Section 4
shall remain in full force and effect immediately from the date
hereof and until the Note is paid in full regardless of the
occurrence of an Event of Default. This Note shall be payable in
full on the Maturity Date, unless previously converted into Common
Stock in accordance with Section 4 hereof.
d)
Application of
Payments. Interest on this Note shall be calculated on the
basis of a 360-day year and the actual number of days elapsed.
Payments made in connection with this Note shall be applied first
to amounts due hereunder other than principal and interest,
thereafter to interest and finally to principal.
e)
Pari Passu. Except
as otherwise set forth herein, all payments made on this Note and
the Other Notes and all actions taken by the Borrower with respect
to this Note and the Other Notes, shall be made and taken
pari passu with respect to
this Note and the Other Notes. Notwithstanding anything to the
contrary contained herein or in the Transaction Documents, it shall
not be considered non-pari passu for a Holder or Other Holder to
elect to receive interest paid in Common Stock or for Borrower to
actually pay interest in Common Stock to such electing Holder or
Other Holder.
f) Manner
and Place of Payment. Principal and interest on this Note
and other payments in connection with this Note shall be payable at
the Holder’s offices as designated above in lawful money of
the United States of America in immediately available funds without
set-off, deduction or counterclaim. Upon assignment of the interest
of Holder in this Note, Borrower shall instead make its payment
pursuant to the assignee’s instructions upon receipt of
written notice thereof. Except as set forth herein, this Note may
not be prepaid or mandatorily converted without the consent of the
Holder.
g) Prepayment.
Except as otherwise set forth in this Note, the Borrower may not
prepay any portion of the principal amount of this Note without the
prior written consent of the Holder.
Section
3.
Registration of Transfers and
Exchanges.
a)
Different Denominations. This
Note is exchangeable for an equal aggregate principal amount of
Notes 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)
Investment Representations.
This Note 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 Note Register.
Prior to due presentment for transfer to Borrower of this Note,
Borrower and any agent of Borrower may treat the Person in whose
name this Note is duly registered on the Note Register as the owner
hereof for the purpose of receiving payment as herein provided and
for all other purposes, whether or not this Note is overdue, and
neither Borrower nor any such agent shall be affected by notice to
the contrary.
Section
4.
Conversion.
a)
Voluntary Conversion. At any
time after the Original Issue Date until this Note is no longer
outstanding, this Note including interest accrued hereon 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(e) hereof). The Holder shall effect conversions by
delivering to Borrower 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 Note and accrued
interest, if any, 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. To effect conversions hereunder, the
Holder shall not be required to physically surrender this Note to
Borrower unless the entire principal amount of this Note has been
so converted. Conversions hereunder shall have the effect of
lowering the outstanding principal amount of this Note in an amount
equal to the applicable conversion. The Holder and Borrower shall
maintain records showing the principal amount(s) converted and the
date of such conversion(s). Borrower 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 Note, acknowledges and agrees that, by reason of the
provisions of this paragraph, following conversion of a portion of
this Note, the unpaid and unconverted principal amount of this Note
may be less than the amount stated on the face
hereof.
b) Mandatory
Conversion. In the event the Borrower is successful in
obtaining the Second Raise as defined in Section 5.e), the Holder
agrees to convert on the final closing date of the Second Raise
(the “Second Raise Closing Date”), all money owed to
the Borrower pursuant to this Note, whether in principal, interest
or fees, into shares of the Borrower’s Common
Stock.
c)
Conversion Price. The
conversion price for the principal and interest, if any, in
connection with voluntary conversions by the Holder shall be
$0.20 per share of Common
Stock, subject to adjustment herein (the “Conversion Price”). The
conversion price for a mandatory conversion pursuant to Section
4.b) shall be the lessor of (i) the Conversion Price in effect on
the Second Date Closing Date, or (ii) 75% of the lowest per share
price at which Common Stock may be issued in connection with any
conversion rights associated with the Second Raise.
d)
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 Note to be converted plus
interest, if any, elected by the Holder to be converted by (y) the
Conversion Price.
ii. Delivery
of Certificate Upon Conversion. In connection with sales of
the Underlying Shares, not later than two (2) Trading Days after
each Conversion Date (the “Share Delivery Date”),
Borrower shall deliver, or cause to be delivered, to the Holder a
certificate or certificates representing the Conversion Shares
which, on or after the earlier of the one year or six month
anniversary of the Original Issue Date in accordance with Rule 144,
shall be free of restrictive legends and trading restrictions
(other than those which may then be required by the Purchase
Agreement) representing the number of Conversion Shares being
acquired upon the conversion of this Note. Borrower shall use its
best efforts to deliver any certificate or certificates required to
be delivered by Borrower under this Section 4(d) 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 Borrower
at any time on or before its receipt of such certificate or
certificates, to rescind such Conversion, in which event Borrower
shall promptly return to the Holder any original Note delivered to
Borrower and the Holder shall promptly return to Borrower the
Common Stock certificates issued to such Holder pursuant to the
rescinded Conversion Notice.
iv. Obligation
Absolute; Partial Liquidated Damages. Borrower’s
obligations to issue and deliver the Conversion Shares upon
conversion of this Note 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 Borrower 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
Borrower to the Holder in connection with the issuance of such
Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by Borrower of any such action
Borrower may have against the Holder. In the event the Holder of
this Note shall elect to convert any or all of the outstanding
principal amount hereof, Borrower 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 Note shall have been sought and obtained, and Borrower
posts a surety bond for the benefit of the Holder in the amount of
150% of the outstanding principal amount of this Note, 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,
Borrower shall issue Conversion Shares or, if applicable, cash,
upon a properly noticed conversion. If Borrower fails for any
reason to deliver to the Holder such certificate or certificates
pursuant to Section 4(d)(ii) by the Share Delivery Date, Borrower
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 (increasing to $20 per Trading Day on the fifth
(5th)
Trading Day after such liquidated damages being to accrue) 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
Borrower’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 Borrower fails for any reason to deliver to the Holder
such certificate or certificates by the Share Delivery Date
pursuant to Section 4(d)(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 or
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 Borrower
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 Note 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 Borrower had timely complied with its
delivery requirements under Section 4(d)(ii). For example, if the
Holder purchases Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion
of this Note 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, Borrower shall be required
to pay the Holder $1,000. The Holder shall provide Borrower written
notice indicating the amounts payable to the Holder in respect of
the Buy-In and, upon request of Borrower, 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
Borrower’s failure to timely deliver certificates
representing shares of Common Stock upon conversion of this Note as
required pursuant to the terms hereof.
vi. Reservation
of Shares Issuable Upon Conversion. Borrower covenants that
it will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock for the sole purpose
of issuance upon conversion of this Note 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 Notes), 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 Note and interest
which has accrued and would accrue on such principal amount
assuming such principal amount was not converted through the
Maturity Date. Borrower 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 Note.
As to any fraction of a share which the Holder would otherwise be
entitled to purchase upon such conversion, Borrower 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 Note 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, Borrower 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 Note so converted and Borrower 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 Borrower
the amount of such tax or shall have established to the
satisfaction of Borrower that such tax has been paid. Borrower
shall pay all Transfer Agent fees required for same-day processing
of any Notice of Conversion.
e)
Holder’s
Conversion Limitations. Borrower shall not effect any
conversion of this Note, and a Holder shall not have the right to
convert any portion of this Note, 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 Note 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 Note 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 Borrower subject to a limitation on conversion or
exercise analogous to the limitation contained herein (including,
without limitation, any other Notes) beneficially owned by the
Holder or any of its Affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 4.e), 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.e) applies, the determination of whether this Note is
convertible (in relation to other securities owned by the Holder
together with any Affiliates) and of which principal amount of this
Note 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 Note may be
converted (in relation to other securities owned by the Holder
together with any Affiliates) and which principal amount of this
Note 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 Borrower each time it
delivers a Notice of Conversion that such Notice of Conversion has
not violated the restrictions set forth in this paragraph and
Borrower 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.e), 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) Borrower’s
most recent periodic or annual report filed with the Commission, as
the case may be, (ii) a more recent public announcement by
Borrower, or (iii) a more recent written notice by Borrower or
Borrower’s transfer agent setting forth the number of shares
of Common Stock outstanding. Upon the written or oral request
of a Holder, Borrower 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 Borrower, including
this Note, 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
Note held by the Holder. The Holder may decrease the Beneficial
Ownership Limitation at any time upon not less than 61 days’
prior notice to Borrower, and may increase the Beneficial Ownership
Limitation provided that the Beneficial Ownership Limitation in no
event exceeds 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock upon conversion of this Note held by the
Holder and the Beneficial Ownership Limitation provisions of this
Section 4.e) shall continue to apply. Any such increase will not be
effective until the 61st day after such
notice is delivered to Borrower. 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.e) 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 Note. The
provisions of this Section 4.e) notwithstanding, in the event of a
mandatory conversion pursuant to Section 4.b), the mandatory
conversion shall be made into shares of Common Stock up to the
Beneficial Ownership Limitation amount. The balance of the
mandatory conversion shall be made into shares of preferred stock
of the Borrower convertible into shares of the Common Stock on a
share for share basis.
Section 5.
Certain
Adjustments.
a)
Stock Dividends and Stock
Splits. If Borrower, at any time while this Note 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 Borrower upon conversion of the Notes), (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 Borrower, then the
Conversion 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 Borrower) 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. In addition to the reductions of the
Conversion Price described in Section 4(c), if, at any time while
this Note is outstanding, the Borrower 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 Common Stock at an effective price
per share that is lower than the then Conversion 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 Common Stock
at an effective price per share that is lower than the Conversion
Price, such issuance shall be deemed to have occurred for less than
the Conversion Price on such date of the Dilutive Issuance), then
the Conversion Price shall be reduced to equal the Base Conversion
Price, subject to adjustment for reverse and forward stock splits
and the like. 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 Borrower enters into a
Variable Rate Transaction, despite the prohibition set forth in the
Purchase Agreement, the Borrower 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 Borrower 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 Borrower 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 Sections 5(a) and (b) above, if at any time Borrower
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 Note
(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 Note is
outstanding, if Borrower shall declare or make any dividend whether
or not permitted, or makes any 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 Note, 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 Note (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) Adjustment
upon $15,000,000 Raise. This Note is part of a financing
that will be followed by a second financing in the amount of
$15,000,000 (the “Second Raise”). The Second Raise may
consist of the sale of Common Stock, the sale of convertible debt,
and/or the issuance of warrants. Upon the closing of the Second
Raise, the Conversion Price of this Note will automatically be the
lesser of: (i) the Conversion Price of this Note pursuant to the
terms and conditions of this Note; (ii) the price of the Common
Stock sold in the Second Raise discounted by 25%; (iii) the
conversion price of debt sold in the Second Raise discounted by
25%; or (iv) the exercise price of warrants issued in connection
with the Second Raise discounted by 25%.
f)
Fundamental Transaction. If, at
any time while this Note is outstanding, (i) Borrower, directly or
indirectly, in one or more related transactions effects any merger
or consolidation of Borrower with or into another Person, (ii)
Borrower, 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 Borrower 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) Borrower, 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) Borrower, 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 more than 50% 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 Note, 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(e) on the conversion
of this Note), the number of shares of Common Stock of the
successor or acquiring corporation or of Borrower, 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 Note is convertible immediately prior
to such Fundamental Transaction (without regard to any limitation
in Section 4(e) on the conversion of this Note). 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 Borrower 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 Note following such Fundamental Transaction.
Borrower shall cause any successor entity in a Fundamental
Transaction in which Borrower is not the survivor (the
“Successor
Entity”) to assume in writing all of the obligations
of Borrower under this Note and the other Transaction Documents (as
defined in the Purchase Agreement) in accordance with the
provisions of this Section 5(f) pursuant to written agreements in
form prior to such Fundamental Transaction and shall, at the option
of the holder of this Note, deliver to the Holder in exchange for
this Note a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Note
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 Note (without regard to any limitations on
the conversion of this Note) 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 Note 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 Note and the other
Transaction Documents referring to the “Borrower” shall
refer instead to the Successor Entity), and may exercise every
right and power of Borrower and shall assume all of the obligations
of Borrower under this Note and the other Transaction Documents
with the same effect as if such Successor Entity had been named as
Borrower herein.
g) 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 Borrower) issued and outstanding.
i. Adjustment
to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 5, Borrower
shall promptly deliver to each Holder a notice setting forth the
Conversion 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) Borrower shall declare a
dividend (or any other distribution in whatever form) on the Common
Stock, (B) Borrower shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock, (C) Borrower 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 Borrower shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger
to which Borrower is a party, any sale or transfer of all or
substantially all of the assets of Borrower, or any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property or (E) Borrower shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of Borrower, then, in each case, Borrower shall cause to be filed
at each office or agency maintained for the purpose of conversion
of this Note, and shall cause to be delivered to the Holder at its
last address as it shall appear upon the Note 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 Borrower or any of the
Subsidiaries, Borrower 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 Note 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.
i) Reset.
Provided the Holder has acquired from the Borrower a Note in the
principal amount of not less than $30,000, then for so long as this
Note is outstanding, if from and after the Issue Date of this Note
the Holder converts any or all of a Debenture, then with respect to
an aggregate amount of such conversions of the Debenture not
exceeding the initial Principal Amount of this Note, upon the
occurrence of a Dilutive Issuance (as defined in the Debenture),
Borrower shall issue to Holder additional shares of Common Stock
(the “Additional Shares”) for no additional
consideration, so that the average price per share of the shares of
Common Stock issued and issuable upon the aforedescribed conversion
of the Debenture when added to the Additional Shares shall be equal
to the Base Conversion Price (as defined in the
Debenture).
Section
6. Negative
Covenants. As long as any portion of this Note remains
outstanding, Borrower shall not 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, except in connection with an increase in the authorized
shares by the Company;
d) repay,
repurchase or offer to repay, repurchase or otherwise acquire any
shares of its Common Stock or Common Stock Equivalents other than
as to the Conversion Shares as permitted or required under the
Transaction Documents;
e) redeem,
defease, repurchase, repay or make any payments in respect of, by
the payment of cash or cash equivalents (in whole or in part,
whether by way of open market purchases, tender offers, private
transactions or otherwise), all or any portion of any Indebtedness
(other than Permitted Indebtedness or the Notes if on a pro-rata
basis), whether by way of payment in respect of principal of (or
premium, if any) or interest on, such Indebtedness, the foregoing
restriction shall also apply to Permitted Indebtedness from and
after the occurrence of an Event of Default;
f) 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,
liquidation, distribution, preferential payments in connection with
any securities or debt issuances, corporate rearrangement, scheme
of arrangement or other similar transaction;
g) issue
any Common Stock or Common Stock Equivalents in violation of the
terms of the Purchase Agreement;
h) enter
into any transaction with any Affiliate of Borrower which would be
required to be disclosed by a company subject to the reporting
requirements of Section 12(g) of the Exchange Act in any public
filing with the Commission, unless such transaction is made on
reasonable commercial terms and expressly approved by either (i) a
majority of the disinterested directors of Borrower (even if less
than a quorum otherwise required for board approval) or (ii) all of
the directors; or
i) enter
into any agreement with respect to any of the foregoing.
Section
7.
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 this Note, or
(B) interest, liquidated damages and other amounts owing to a
Holder on any Note, 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 a
default under clause (B) above, is not cured within 3 Trading Days
after Borrower has become aware of such default;
ii. Borrower
shall fail to observe or perform any other material covenant or
agreement contained in the Notes (other than a breach by Borrower
of its obligations to deliver shares of Common Stock to the Holder
upon conversion, which breach is addressed in clause (ix) 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
Borrower and (B) 10 Trading Days after Borrower has become aware of
such failure;
iii. a
material 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,
including but not limited to failure to strictly comply with the
material provisions of the Transaction Documents, or (B) any other
material agreement, lease, document or instrument to which Borrower
or any Subsidiary is obligated (and not covered by clause (vi)
below), which in the case of subsection (B) would reasonably be
expected to have a Material Adverse Effect;
iv. any
material representation or warranty made in this Note, 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. Borrower
or any Subsidiary shall be subject to a Bankruptcy
Event;
vi. Borrower
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 $50,000, 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. Borrower
shall be a party to any Change of Control Transaction or
Fundamental Transaction or disposition of all or in excess of 30%
of its assets in one transaction or a series of related
transactions (whether or not such sale would constitute a Change of
Control Transaction);
viii.
Borrower does not meet the current public information requirements
under Rule 144;
ix.
Borrower 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(d) or Borrower shall provide at any time
notice to the Holder, including by way of public announcement, of
Borrower’s intention to not honor requests for conversions of
any Notes in accordance with the terms hereof;
x.
any Person shall materially breach any agreement delivered to
the initial Holders pursuant to Section 2.2 of the Purchase
Agreement, which breach is not cured within any allowed cure
period;
xi.
any monetary judgment, writ or similar final process shall be
entered or filed against Borrower, or any of its respective
property or other assets for more than $50,000, and such judgment,
writ or similar final process shall remain unvacated, unbonded or
unstayed for a period of 90 calendar days;
xii.
any dissolution,
liquidation or winding up by Borrower, of a substantial portion of
their business;
xiii.
cessation of
operations by Borrower;
xiv.
the failure by
Borrower or any material Subsidiary to maintain any material
intellectual property rights, personal, real property, equipment,
leases or other assets which are necessary to conduct its business
(whether now or in the future) and such breach is not cured with
twenty (20) days after written notice to the Borrower from the
Holder;
xv.
the occurrence of a
Listing Default;
xvi.
a Commission or
judicial stop trade order or suspension from the Borrower’s
Principal Trading Market;
xvii.
the restatement
after the date hereof of any financial statements filed by the
Borrower with the Commission for any date or period from the
Original Issue Date and until this Note is no longer outstanding,
if the result of such restatement would, by comparison to the
unrestated financial statements, have constituted a Material
Adverse Effect. For the avoidance of doubt, any restatement related
to new accounting pronouncements shall not constitute a default
under this Section;
xviii.
the
Borrower effectuates a reverse split of its Common Stock without
five (5) days prior written notice to the Holder;
xix.
a failure by
Borrower to notify Holder of any material event of which Borrower
is obligated to notify Holder pursuant to the terms of this Note or
any other Transaction Document;
xx.
a default by the
Borrower of a material term, covenant, warranty or undertaking of
any other agreement to which the Borrower and Holder are parties,
or the occurrence of an event of default under any such other
agreement to which Borrower and Holder are parties which is not
cured after any required notice and/or cure period;
xxi.
the occurrence of an Event of Default under any
Other Note;
xxii.
any material
provision of any Transaction Document shall at any time for any
reason (other than pursuant to the express terms thereof) cease to
be valid and binding on or enforceable against the Borrower, or the
validity or enforceability thereof shall be contested by Borrower,
or a proceeding shall be commenced by Borrower or any governmental
authority having jurisdiction over Borrower or Holder, seeking to
establish the invalidity or unenforceability thereof, or Borrower
shall deny in writing that it has any liability or obligation
purported to be created under any Transaction Document; or
In the
event more than one grace, cure or notice period is applicable to
an Event of Default, then the shortest grace, cure or notice period
shall be applicable thereto.
b)
Remedies Upon Event of Default,
Fundamental Transaction and Change of Control Transaction.
If any Event of Default or a Fundamental Transaction or a Change of
Control Transaction occurs, the outstanding principal amount of
this Note, 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 on the Maturity Date and also
five (5) days after the occurrence of any Event of Default interest
on this Note shall accrue at an interest rate equal to the lesser
of 18% 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 Note to or as directed by
Borrower. In connection with such acceleration described herein,
the Holder need not provide, and Borrower 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 Note 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
8.
Miscellaneous.
a)
Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall
be (i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or
(iv) transmitted by hand delivery, telegram, facsimile, or
electronic mail, addressed as set forth below or to such other
address as such party shall have specified most recently by written
notice. Any notice or other communication required or permitted to
be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by
the transmitting facsimile machine, at the address or number
designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to
be received), or (b) upon receipt, when sent by electronic mail
(provided confirmation of transmission is electronically generated
and keep on file by the sending party), or (c) on the second
business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses
for such communications shall be: (i) if to Borrower, to: GT
Biopharma, Inc., 9350 Wilshire Blvd, Suite 203, Beverly
Hills, CA 90212, Attn: Chief Executive
Officer, with a copy to (which shall not constitute notice): Gary
R. Henrie, Esq., P.O. Box 3448, Alpine, WY 83128, email:
grhlaw@hotmail.com, and (ii) if to the Holder, to: the
address and fax number indicated on the front page of this
Note.
b)
Absolute Obligation. Except as
expressly provided herein, no provision of this Note shall alter or
impair the obligation of Borrower, which is absolute and
unconditional, to pay the principal of, liquidated damages and
accrued interest, as applicable, on this Note at the time, place,
and rate, and in the coin or currency, herein prescribed. This Note
is a direct debt obligation of Borrower. This Note ranks
pari passu with all other Notes now
or hereafter issued under the terms set forth
herein.
c)
Lost or Mutilated Note. If this
Note shall be mutilated, lost, stolen or destroyed, Borrower shall
execute and deliver, in exchange and substitution for and upon
cancellation of a mutilated Note, or in lieu of or in substitution
for a lost, stolen or destroyed Note, a new Note for the principal
amount of this Note so mutilated, lost, stolen or destroyed, but
only upon receipt of evidence of such loss, theft or destruction of
such Note, and of the ownership hereof, reasonably satisfactory to
Borrower.
d)
Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Note 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 Note 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 Note or the transactions
contemplated hereby. If any party shall commence an action or
proceeding to enforce any provisions of this Note, 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. This
Note shall be deemed an unconditional obligation of Borrower for
the payment of money and, without limitation to any other remedies
of Holder, may be enforced against Borrower by summary proceeding
pursuant to New York Civil Procedure Law and Rules Section 3213 or
any similar rule or statute in the jurisdiction where enforcement
is sought. For purposes of such rule or statute, any other document
or agreement to which Holder and Borrower are parties or which
Borrower delivered to Holder, which may be convenient or necessary
to determine Holder’s rights hereunder or Borrower’s
obligations to Holder are deemed a part of this Note, whether or
not such other document or agreement was delivered together
herewith or was executed apart from this Note.
e)
Waiver. Any waiver by Borrower
or the Holder of a breach of any provision of this Note 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
Note. The failure of Borrower or the Holder to insist upon strict
adherence to any term of this Note 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 Note on any other occasion. Any waiver by
Borrower or the Holder must be in writing.
f) Severability.
If any provision of this Note is invalid, illegal or unenforceable,
the balance of this Note 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.
g)
Usury. 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. Borrower
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 Borrower
from paying all or any portion of the principal of or interest on
this Note as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the
performance of this Note, and Borrower (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.
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 Note and shall not be deemed to limit or
affect any of the provisions hereof.
j) Amendment.
This Note may be amended and any provisions hereof may be waived by
written consent of Borrower.
k)
Facsimile Signature. In the
event that the Borrower’s signature is delivered by facsimile
transmission, PDF, electronic signature or other similar electronic
means, such signature shall create a valid and binding obligation
of the Borrower with the same force and effect as if such signature
page were an original thereof.
*********************
(Signature Pages Follow)
IN WITNESS WHEREOF, Borrower has caused
this Note to be signed in its name by an authorized officer as of
September 3, 2020.
By:
___________________________________
Name:
Steven Weldon
Title:
Chief Financial Officer
ANNEX A
NOTICE OF CONVERSION
The
undersigned hereby elects to convert principal under the
Convertible Note Due ________, 2021 of GT Biopharma, Inc., a
Delaware corporation (the “Company”), into shares of
common stock (the “Common Stock”), of
Borrower 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
Borrower 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 Borrower that its ownership of the Common Stock
does not exceed the amounts specified under Section 4 of this Note,
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:
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Date to
Effect Conversion: ____________________________
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Principal
Amount of Note to be Converted: $__________________
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Accrued
Interest to be Converted, if any: $______________
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Conversion
Price: $_________________
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Number
of shares of Common Stock to be issued: ______________
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Signature:
_________________________________________
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Name:
____________________________________________
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Address
for Delivery of Common Stock Certificates: __________
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_____________________________________________________
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_____________________________________________________
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Or
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DWAC
Instructions: _________________________________
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Broker
No:_____________
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Account
No: _______________
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SECURITIES
PURCHASE AGREEMENT
This Securities
Purchase Agreement (this “Agreement”) is dated as
of November 6, 2020, between GT Biopharma, Inc., a Delaware
corporation and includes any successor Company thereto (the
“Company”), and each
purchaser identified on the signature pages hereto (each, including
its successors and permitted assigns, a “Purchaser” and
collectively, the “Purchasers”).
WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase in not
more than two closings from the Company, securities of the Company
as more fully described in this Agreement (the “Offering”).
NOW, THEREFORE, IN
CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each
Purchaser agree as follows:
ARTICLE
I.
DEFINITIONS
1.1 Definitions. In addition to the
terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to
such terms in the Notes (as defined herein), and (b) the following
terms have the meanings set forth in this Section 1.1:
“Accredited Investor”
shall have the meaning ascribed to such term in Section
3.2(c).
“Acquiring Person” shall
have the meaning ascribed to such term in Section 4.7.
“Action” shall have the
meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
“Applicable Law” shall
mean any law, rule or regulation of any governmental authority or
jurisdiction applicable to any party to this Agreement, as the case
may be.
“Board of Directors” means
the board of directors of the Company.
“Business
Day” means any day except any Saturday, any Sunday,
any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are
required by law or other governmental action to close.
“Buy-In” shall have the
meaning ascribed to such term in Section 4.1(h).
“Closing”
means the closing of the purchase and
sale of the Securities pursuant to Section 2.1.
“Closing Date”
means, with respect to any Closing,
the date of such Closing.
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means the
common stock of the Company, par value $0.001 per share, and any
other class of securities into which such securities may hereafter
be reclassified or changed.
“Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.
“Conversion Price” shall
have the meaning ascribed to such term in the Notes.
“Debentures” means those
certain 10% Senior Convertible Debentures of the Company issued on
August 2, 2018, September 7, 2018, September 24, 2018, May 22,
2019, August 16, 2019, December 18, 2019, January 30, 2020, April
20, 2020, May 7, 2020, June 19, 2020, July 7, 2020, September 16,
2020 and the Senior Convertible Notes issued on February 4,
2019.
“DGCL” means the Delaware
General Corporation Law.
“Disclosure Schedules”
means the Disclosure Schedules of the Company delivered
concurrently herewith.
“Disqualification Event”
shall have the meaning ascribed to such term in Section
3.1(oo).
“Effective
Date” means the earliest of the date that (a) a
Registration Statement has been declared effective by the
Commission with respect to all of the Underlying Shares (as defined
herein) and has been continuously effective for not less than sixty
(60) Business Days, or (b) (i) all of the Underlying Shares have
been sold pursuant to Rule 144, or (ii) may be sold by the holders
thereof (other than Affiliates of the Company) pursuant to Rule 144
without the requirement for the Company to be in compliance with
the current public information required under Rule 144 and without
volume or manner-of-sale restrictions, and (c) Company counsel has
delivered to the Transfer Agent and Purchasers a standing written
unqualified opinion that resales may then be made by such holders
of the Underlying Shares (other than Affiliates of the Company)
pursuant to an effective Registration Statement or the exemption
described in (b)(ii) above, which opinion shall be in form and
substance reasonably acceptable to such Purchasers.
“End Date” means the first
date that (i) less than 10% of the aggregate amount of Note
principal is outstanding, and (ii) no Event of Default (as defined
in the Note) nor an event which with the passage of time or the
giving of notice could become an Event of Default is
pending.
“Equity Line of Credit”
shall have the meaning ascribed to such term in Section
4.13.
“Event
of Default” shall have the meaning ascribed to such
term in the Note.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“Exempt Issuance” means
the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or
option plan duly adopted for such purpose, by a majority of the
non-employee members of the Board of Directors or a majority of the
members of a committee of non-employee directors established for
such purpose and only as disclosed on Schedule 3.1(g), (b) securities
exercisable or exchangeable for or convertible into shares of
Common Stock issued and outstanding on the date of this Agreement,
provided that such securities and any term thereof have not been
amended since the date of this Agreement to increase the number of
such securities or to decrease the issue price, exercise price,
exchange price or conversion price of such securities and which
securities and the principal terms thereof are set forth on
Schedule 3.1(g),
and described in the SEC Reports, (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of
the disinterested directors of the Company, provided that any such
issuance shall only be to a Person (or to the equity holders of a
Person) which is, itself or through its subsidiaries, an operating
company or an owner of an asset in a business synergistic with the
business of the Company and shall be intended to provide to the
Company substantial additional benefits in addition to the
investment of funds, but shall not include a transaction in which
the Company is issuing securities primarily for the purpose of
raising capital or to an entity whose primary business is investing
in securities, ( d) as set forth on Schedule 3.1(g), and (e)
securities issued or issuable to the Purchasers and their assigns
pursuant to this Agreement, the Notes and other Transaction
Documents including without limitation, Section 4.16 and Section
4.22 herein, or upon exercise, conversion or exchange of any such
securities.
“FCPA” means the Foreign
Corrupt Practices Act of 1977, as amended.
“FDA” shall have the
meaning ascribed to such term in Section 3.1(jj).
“GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).
“Indebtedness” shall have
the meaning ascribed to such term in Section 3.1(aa).
“Intellectual Property
Rights” shall have the meaning ascribed to such term
in Section 3.1(o).
“Issuer
Covered Person” means the Company, any of its
predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the
Offering, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, and any promoter (as that term is
defined in Rule 405 under the Securities Act) connected with the
Company in any capacity at the time of sale.
“Legend
Removal Date” shall have the meaning ascribed to such
term in Section 4.1(d).
“Liens” means a lien,
charge, pledge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
“Listing Default” shall
have the meaning ascribed to such term in Section
4.11(b).
“Majority in Interest”
shall have the meaning ascribed to such term in Section
5.5.
“Material Adverse Effect”
shall have the meaning assigned to such term in Section
3.1(b).
“Material Permits” shall
have the meaning ascribed to such term in Section
3.1(m).
“Maximum Rate” shall have
the meaning ascribed to such term in Section 5.17.
“Money Laundering
Laws” shall have the
meaning ascribed to such term in Section 3.1(qq).
“Notes” means the
convertible notes issuable pursuant to this Agreement, in the form
of Exhibit A
hereto.
“OFAC” shall have the
meaning ascribed to such term in Section 3.1(nn).
“Participation Maximum”
shall have the meaning ascribed to such term in Section
4.16(a).
“Permitted Indebtedness”
means (a) the Indebtedness evidenced by the Notes and the
Debentures all as set forth on Schedule 3.1(aa), (b) any
liabilities for borrowed money or amounts owed not in excess of
$10,000 in the aggregate (other than trade accounts payable
incurred in the ordinary course of business), (c) all guaranties,
endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be
reflected in the Company’s consolidated balance sheet (or the
notes thereto) not affecting more than $10,000 in the aggregate,
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; (d) the present value of any lease payments not
in excess of $100,000 due under leases required to be capitalized
in accordance with GAAP; and (e) any liabilities for borrowed money
that are junior to the Debentures pursuant to an intercreditor
agreement acceptable to Purchasers, and the holders of which are
not granted any security interest.
“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 Liens, and (c) Liens in
connection with Permitted Indebtedness under clauses (a), (b) and
(c) thereunder.
“Person”
means an individual, corporation or Company, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Pre-Notice” shall have
the meaning ascribed to such term in Section 4.16(b).
“Proceeding”
means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
“Pro-Rata Portion” shall
have the meaning ascribed to such term in Section
4.16(e).
“Public
Information Failure” shall have the meaning ascribed
to such term in Section 4.3(b).
“Public Information Failure
Payments” shall have the meaning ascribed to such term
in Section 4.3(b).
“Purchaser Party” shall
have the meaning ascribed to such term in Section
4.10.
“Registration Statement”
means a registration statement declared effective by the Commission
allowing the public resale of not less than all of the Underlying
Shares by the Purchaser, at the time such registration statement is
effective and the prospectus contained therein is
current.
“Required Approvals” shall
have the meaning ascribed to such term in Section
3.1(e).
“Required Minimum” means,
as of any date, 150% of the maximum aggregate number of shares of
Common Stock then issued or potentially issuable in the future
pursuant to the Transaction Documents, including any Underlying
Shares issuable upon conversion in full of all Notes, ignoring any
conversion or exercise limits set forth therein.
“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“SEC Reports” shall have
the meaning ascribed to such term in Section 3.1(h).
“Securities” means the
Notes and the Underlying Shares.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Short Sales” means
“short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, swaps and
similar arrangements (including on a total return basis) whether
such transactions are made through U.S. or non-U.S. broker dealers
or foreign regulated brokers.
“Stock Option Plans” means
the Stock Option Plan of the Company in effect as the date of this
Agreement, the principal terms of which have been disclosed in the
SEC Reports.
“Subscription Amount”
means, as to each Purchaser, the
aggregate amount to be paid for
the Notes purchased hereunder at the Closing as specified below
such Purchaser’s name on the signature page of this Agreement
and next to the heading “Subscription Amount,” in
United States dollars and in immediately available
funds.
“Subsequent Financing”
shall have the meaning ascribed to such term in Section
4.16(a).
“Subsequent Financing
Notice” shall have the meaning ascribed to such term
in Section 4.16(b).
“Subsidiary” means
with respect to any entity at any
date, any direct or indirect Person, limited or general
partnership, limited liability company, trust, estate, association,
joint venture or other business entity of which (A) more than
50% of (i) the outstanding capital stock having (in the
absence of contingencies) ordinary voting power to elect a majority
of the board of directors or other managing body of such entity,
(ii) in the case of a partnership or limited liability
company, the interest in the capital or profits of such partnership
or limited liability company or (iii) in the case of a trust,
estate, association, joint venture or other entity, the beneficial
interest in such trust, estate, association or other entity
business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such
entity, or (B) is under the actual control of the
Company.
“Termination
Date” means October 1, 2020.
“Trading Day” means a day
on which the principal Trading Market is open for trading for three
or more hours, or if there is no applicable Trading Market, Trading
Day shall mean Business Day.
“Trading Market” means the
first listed of 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 American, the Nasdaq Capital Market, the Nasdaq
Global Market, the Nasdaq Global Select Market, the New York Stock
Exchange, the OTC Bulletin Board, the OTCQB, or the OTCQX (or any
successors to any of the foregoing).
“Transaction Documents”
means this Agreement, the Notes, t, all exhibits and schedules
thereto and hereto and any other documents or agreements executed
by any party hereto in connection with the transactions
contemplated hereunder.
“Transfer Agent” means
Computershare, the current transfer agent of the Company, with a
mailing address of 350 Indiana Street, Suite 800 Golden, Colorado
80401, and a facsimile number of (303) 262-0610, and any successor
transfer agent of the Company.
“Underlying Shares” means
the shares of Common Stock issued and issuable upon conversion of
the Notes and issued and issuable in lieu of the cash payment of
interest on the Notes in accordance with the terms of the Notes and
any other shares of Common Stock issued or issuable to a Purchaser
in connection with or pursuant to the Securities or Transaction
Documents.
“Unlegended Shares” shall
have the meaning ascribed to such term in Section
4.1(d).
“Variable Priced Equity Linked
Instruments” shall have the meaning ascribed to such
term in Section 4.13.
“Variable Rate
Transaction” shall have
the meaning ascribed to such term in Section
4.13.
“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 Common Stock is not then listed
or quoted for trading on a Trading Market but is then reported on
the OTC Pink Marketplace maintained by the OTC Markets Group, Inc.
(or a similar organization or agency succeeding to its functions of
reporting prices), the volume weighted average price of the Common
Stock on the first such facility (or a similar organization or
agency succeeding to its functions of reporting prices), or
(d) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected by
the Company, the fees and expenses of which shall be paid by the
Company.
ARTICLE
II.
PURCHASE
AND SALE
2.1 Purchase and Sale of
Notes.
(a) Subject to the
terms and conditions of this Agreement, each Purchaser agrees to
purchase and the Company agrees to sell and issue to each Purchaser
at the Closing (as defined below) the principal amount of Notes of
the Company as is set forth opposite such Purchaser’s name on
such Purchaser’s signature page hereto. The Notes issued to
the Purchasers pursuant to this Agreement (including any notes
issued at the Initial Closing and any Additional Notes, as defined
below) shall be referred to in this Agreement as the
“Notes.” Each Note shall
be in the form attached hereto as Exhibit A hereto.
(b) The initial
purchase and sale of the Notes shall take place remotely via the
electronic exchange of documents and signatures on the Business Day
on which all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions
precedent to (i) the Purchasers’ obligation to pay the
Subscription Amount at such Closing, and (ii) the Company’s
obligations to deliver the Securities to be issued and sold at such
Closing, in each case, have been satisfied or waived, but in no
event later than the tenth Business Day following the date hereof
(such initial closing is referred to herein as the
“Initial
Closing”).
(c) After the Initial
Closing, the Company may sell, in one or more closings and on the
terms and conditions contained in this Agreement, Notes in the
aggregate principal amount of up to $6,000,000 (collectively, the
“Additional
Notes”), to one or more purchasers (the
“Additional
Purchasers”) reasonably acceptable to the Company,
provided that (A) such subsequent sale is consummated prior to
October 1, 2020 (the “Termination Date”), or
such date as the Company and a Majority in Interest may mutually
agree upon; and (B) each Additional Purchaser shall become a party
to the Transaction Documents by executing and delivering a
counterpart signature page to each of the Transaction Documents.
Signature pages shall be added to this Agreement to reflect the
amount of Additional Notes purchased at each such closing (an
“Additional
Closing” and together with the Initial Closing, each,
a “Closing”) and the parties
purchasing such Additional Notes.
(d) At
each Closing, the payment by a Purchaser of such Purchaser’s
Subscription Amount may be made via wire transfer or a certified
check in immediately available funds to the Company.
NO
MINIMUM AMOUNT OF NOTES MUST BE SOLD IN ORDER FOR THE COMPANY TO
ACCEPT ANY SUBSCRIPTIONS, AND ALL NET PROCEEDS OF THE OFFERING WILL
BE IMMEDIATELY AVAILABLE FOR COMPANY PURPOSES UPON
CLOSING.
2.2 Deliveries.
(a) On or prior to the
Closing Date, the Company shall deliver or cause to be delivered to
each Purchaser the following:
(i) this Agreement duly
executed by the Company;
(ii) a Note with a
principal amount as set forth on the signature page hereto equal to
each Purchaser’s Subscription Amount, registered in the name
of such Purchaser;
(iii) a certificate
executed on behalf of the Company by its Principal Executive
Officer or Chief Executive Officer (each as defined in the Exchange
Act) of the Company, dated as of the Closing Date, in which such
officer shall certify that the conditions set forth in Section 2.3(b) have been
fulfilled; and
(iv) a certificate
executed on behalf of the Company by its Secretary’s
certificate containing (i) copies of the text of the resolutions by
which the corporate action on the part of the Company necessary to
approve this Agreement and the other Transaction Documents and the
transactions and actions contemplated hereby and thereby, which
shall be accompanied by a certificate of the corporate secretary or
assistant corporate secretary of Company dated as of the Closing
Date certifying to the Purchasers that such resolutions were duly
adopted and have not been amended or rescinded, (ii) an incumbency
certificate dated as of the Closing Date executed on behalf of
Company by its corporate secretary or one of its assistant
corporate secretaries certifying the office of each officer of
Company executing this Agreement, or any other agreement,
certificate or other instrument executed pursuant hereto, and (iii)
copies of (A) the Company’s Certificate of Incorporation and
bylaws in effect on the Closing Date, and (B) the certificate
evidencing the good standing of Company as of a day within five (5)
Business Days prior to the Closing Date.
(b) On or prior to the
Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company the following:
(i) this Agreement duly
executed by such Purchaser;
(ii) such
Purchaser’s Subscription Amount;
(iii) Accredited Investor
Questionnaire duly executed by each Purchaser; and
(iv)
2.3 Closing
Conditions.
(a) The obligations of
the Company hereunder to effect the Closing are subject to the
following conditions being met:
(i) the accuracy in all
material respects (determined without
regard to any materiality, Material Adverse Effect or other similar
qualifiers therein) on the date of this Agreement and the
Closing Date of the representations and warranties of the
Purchasers contained herein (unless as of a specific date therein
in which case they shall be accurate as of such date);
(ii) all obligations,
covenants and agreements of each Purchaser under this Agreement
required to be performed at or prior to the Closing Date shall have
been performed in all material respects; and
(iii) the delivery by
each Purchaser of the items set forth in Section 2.2(b) of this
Agreement.
(b) The respective
obligations of a Purchaser hereunder to effect the Closing, unless
waived by such Purchaser, are subject to the following conditions
being met:
(i) the accuracy in all
material respects (determined without
regard to any materiality, Material Adverse Effect or other similar
qualifiers therein) on the date of this Agreement and
Closing Date of the representations and warranties of the Company
contained herein (unless as of a specific date therein in which
case they shall be accurate as of such date);
(ii) all Required
Approvals, obligations, covenants and agreements of the Company
under the Transaction Documents required to be performed or
obtained at or prior to the Closing Date shall have been performed
or obtained;
(iii) the delivery by the
Company of the items set forth in Section 2.2(a) of this
Agreement;
(iv) there shall have
been no Material Adverse Effect with respect to the Company since
the date hereof; and
(v) from the date
hereof to the Closing Date, and, at any time prior to the Closing
Date, trading in securities generally as reported by Bloomberg L.P.
shall not have been suspended or limited, or minimum prices shall
not have been established on securities whose trades are reported
by such service, or on any Trading Market, nor shall a banking
moratorium have been declared either by the United States or New
York State authorities nor shall there have occurred any material
outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each
case, in the reasonable judgment of such Purchaser, makes it
impracticable or inadvisable to purchase the Securities at the
Closing.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1 Representations and
Warranties of the Company. Except as set forth in the SEC Reports or
the Disclosure Schedules, which Disclosure Schedules shall be
deemed a part hereof and shall qualify any representation made
herein only to the extent of the disclosure contained in the
corresponding or cross-referenced section of the Disclosure
Schedules, the Company hereby makes the following representations
and warranties to each Purchaser:
(a) Subsidiaries. All of the direct
and indirect Subsidiaries of the Company and the Company’s
ownership interests therein are set forth on Schedule 3.1(a). The Company
owns, directly or indirectly, the capital stock or other equity
interests of each Subsidiary set forth on Schedule 3.1(a), free and clear
of any Liens, and all of the issued and outstanding shares of
capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of pre-emptive and similar rights to
subscribe for or purchase securities.
(b) Organization and Qualification.
The Company and each Subsidiary is an entity duly incorporated or
otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization,
with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation
nor default of any of the provisions of its respective certificate
or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and each Subsidiary is duly
qualified to conduct business and is in good standing as a foreign
Person or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not
reasonably be expected to result in: (i) a material adverse effect
on the legality, validity or enforceability of any Transaction
Document, (ii) a material adverse effect on the results of
operations, assets, business, or condition (financial or otherwise)
of the Company and each Subsidiary, taken as a whole, or (iii) a
material adverse effect on the Company’s ability to perform
in any material respect on a timely basis its obligations under any
Transaction Document (any of (i), (ii) or (iii), a
“Material Adverse
Effect”) and, no Proceeding has been instituted in any
such jurisdiction revoking, limiting or curtailing or seeking to
revoke, limit or curtail such power and authority or
qualification.
(c) Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and
no further action is required by the Company, the Board of
Directors or the Company’s stockholders in connection
herewith or therewith other than in connection with the Required
Approvals. This Agreement and each other Transaction Document to
which it is a party has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except: (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by Applicable Law.
(d) No Conflicts. The execution,
delivery and performance by the Company and all Persons other than
the Purchasers of this Agreement and the other Transaction
Documents, the issuance and sale of the Securities and the
consummation by it of the transactions contemplated hereby and
thereby to which it is a party do not and will not: (i) conflict
with or violate any provision of the Company’s or any
Subsidiary’s or such other Person’s certificate or
articles of incorporation, bylaws or other organizational or
charter documents, (ii) conflict with, or constitute a default (or
an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the
properties or assets of the Company or any Subsidiary, or give to
others any rights of termination, amendment, acceleration,
adjustment, exchange, reset, exercise or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit
facility, debt, equity or other instrument (evidencing Company or
Subsidiary equity, debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or
affected, or (iii) subject to the Required Approvals, conflict with
or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary or such
other Person is subject (including federal and state securities
laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of
each of clause (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect.
(e) Filings, Consents and
Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than: (i) the filings
required pursuant to Section 4.6 of this Agreement, (ii) the notice
and/or application(s) to each applicable Trading Market for the
issuance and sale of the Securities and the listing of the
Underlying Shares for trading thereon in the time and manner
required thereby and (iii) the filing of Form D with the Commission
and such filings as are required to be made under applicable state
securities laws (collectively, the “Required
Approvals”).
(f) Issuance of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Underlying
Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction
Documents.
(g) Capitalization. Except as set
forth on Schedule 3.1(g), the
Company has not issued any capital stock since its most recently
filed annual report on Form 10-K. Except as set forth on
Schedule 3.1(g), no
Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as
disclosed on Schedule
3.1(g), there are no outstanding options, employee or
incentive stock option plans, warrants, scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to,
or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to
subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of
Common Stock or Common Stock Equivalents. Except as set forth on
Schedule 3.1(g),
the issuance and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) and will not result in a right
of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under any of such securities.
All of the outstanding shares of capital stock of the Company are
duly authorized, validly issued, fully paid and nonassessable, have
been issued in material compliance with all federal and state
securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe
for or purchase securities. Except as contemplated by Section
3.1(e), no further approval or authorization of any stockholder,
the Board of Directors or other Person is required for the issuance
and sale of the Securities and the Company’s compliance with
the terms of the Transaction Documents. There are no stockholders
agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company
is a party or, to the knowledge of the Company, between or among
any of the Company’s stockholders. Except as disclosed on
Schedule 3.1(g),
the Company is not a party to any Variable Rate Transaction and as
of Closing, there will not be outstanding any Equity Line of Credit
nor Variable Priced Equity Linked Instruments as of the
Closing.
(h) SEC Reports; Financial
Statements. Except as set forth on Schedule 3.1(h), the Company
has filed all reports, schedules, forms, statements and other
documents required to be filed by the Company under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the three years preceding the date hereof (or
such shorter period as the Company was required by law or
regulation to file such material) (the foregoing materials,
including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the
“SEC
Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports
prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act,
as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Company has never
been an issuer subject to Rule 144(i) under the Securities Act. The
financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Material Changes; Undisclosed Events,
Liabilities or Developments. Since the date of the latest
audited financial statements included within the SEC Reports,
except as set forth on Schedule 3.1(i) or as
specifically disclosed in a subsequent SEC Report filed prior to
the date hereof: (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A)
trade payables and accrued expenses incurred in the ordinary course
of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial
statements pursuant to GAAP or disclosed in filings made with the
Commission, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock and (v) the Company has not issued
any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans. The Company does
not have pending before the Commission any request for confidential
treatment of information. Except for the issuance of the Securities
contemplated by this Agreement or as set forth on Schedule 3.1(i), no event,
liability, fact, circumstance, occurrence or development has
occurred or exists or is reasonably expected to occur or exist with
respect to the Company or its Subsidiaries or their respective
businesses, properties, operations, assets or financial condition,
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least one
(1) Trading Day prior to the date that this representation is
made.
(j) Litigation. Except as set forth
in Schedule 3.1(j),
there is no action, suit, inquiry, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an
“Action”) which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has
not been, and to the knowledge of the Company, there is not pending
or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or
the Securities Act.
(k) Labor Relations. No labor
dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company, which could
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. Except as set forth on Schedule 3.1(k), the Company
and its Subsidiaries are in compliance with all U.S. federal,
state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(l) Compliance. Except as set forth
on Schedule 3.1(l),
neither the Company nor any Subsidiary: (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority or (iii) is or has been
in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material
Adverse Effect.
(m) Regulatory Permits. The Company
and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such permits could
not reasonably be expected to result in a Material Adverse Effect
(“Material
Permits”), and neither the Company nor any Subsidiary
has received any notice of proceedings relating to the revocation
or modification of any Material Permit.
(n) Title to Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for (i) Liens as do not materially
affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the
Company and the Subsidiaries and (ii) Liens for the payment of
federal, state or other taxes, for which appropriate reserves have
been made therefor in accordance with GAAP and, the payment of
which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are
in compliance.
(o) Intellectual Property. The
Company and the Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights
as described in the SEC Reports as necessary or required for use in
connection with their respective businesses and which the failure
to so have could have a Material Adverse Effect (collectively, the
“Intellectual
Property Rights”). None of, and neither the Company
nor any Subsidiary has received a notice (written or otherwise)
that any of, the Intellectual Property Rights has expired,
terminated or been abandoned, or is expected to expire or terminate
or be abandoned, within two (2) years from the date of this
Agreement. Neither the Company nor any Subsidiary has received,
since the date of the latest audited financial statements included
within the SEC Reports, a written notice of a claim or otherwise
has any knowledge that the Intellectual Property Rights violate or
infringe upon the rights of any Person, except as could not have or
reasonably be expected to not have a Material Adverse Effect. To
the knowledge of the Company, all such Intellectual Property Rights
are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights. The Company and
its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(p) Insurance. The Company and each
Subsidiary maintain insurance coverage for Product/Human Clinical
Trial Liability, Professional Liability, General Liability,
Property and Directors and Officers.
(q) Transactions With Affiliates and
Employees. Except as set forth in the SEC Reports and on
Schedule 3.1(q),
none of the officers or directors of the Company or any Subsidiary
and, to the knowledge of the Company, none of the employees of the
Company or any Subsidiary is presently a party to any transaction
with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal
property to or from providing for the borrowing of money from or
lending of money to, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director,
trustee, stockholder, member or partner, in each case in excess of
$60,000 other than for: (i) payment of salary or consulting fees
for services rendered, (ii) reimbursement for expenses incurred on
behalf of the Company and (iii) other employee benefits, including
stock option agreements under any stock option plan of the
Company.
(r) Sarbanes-Oxley; Internal Accounting
Controls. The Company and the Subsidiaries are not in
compliance with any and all applicable requirements of the
Sarbanes-Oxley Act of 2002 that are effective as of the date
hereof, and any and all applicable rules and regulations
promulgated by the Commission thereunder that are effective as of
the date hereof and as of the Closing Date. The Company and the
Subsidiaries currently do not maintain a system of internal
accounting controls sufficient to provide reasonable assurance
that: (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
(s) Certain Fees. No brokerage or
finder’s fees or commissions are or will be payable by the
Company or any Subsidiaries to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by the Transaction Documents.
(t) Private Placement. Assuming the
accuracy of the Purchasers’ representations and warranties
set forth in Section 3.2, no registration under the Securities Act
is required for the offer and sale of the Securities by the Company
to the Purchasers as contemplated hereby. The issuance and sale of
the Securities hereunder does not contravene the rules and
regulations of the Trading Market.
(u) Investment Company. The Company
is not, and is not an Affiliate of, and immediately after receipt
of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the
Investment Company Act of 1940, as amended. The Company shall
conduct its business in a manner so that it will not become an
“investment company” subject to registration under the
Investment Company Act of 1940, as amended.
(v) Registration Rights. No Person
has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company or any
Subsidiaries other than as set forth on Schedule 3.1(v).
(w) Listing and Maintenance
Requirements. The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration. The Company has not, in the 12 months preceding the
date hereof, received notice from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements. The Common Stock is currently eligible for electronic
transfer through the Depository Trust Company or another
established clearing corporation and the Company is current in
payment of the fees to the Depository Trust Company (or such other
established clearing corporation) in connection with such
electronic transfer.
(x) Application of Takeover
Protections. The Company and the Board of Directors have
taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become
applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a
result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.
(y) Disclosure. Except with respect
to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms
that neither it nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any
information that it believes constitutes or might constitute
material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the
Company. All of the disclosure furnished by or on behalf of the
Company to the Purchasers regarding the Company and its
Subsidiaries, their respective businesses and the transactions
contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. The
Company acknowledges and agrees that no Purchaser makes or has made
any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in
Section 3.2 hereof.
(z) No Integrated Offering.
Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any
of its Affiliates, nor any Person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of
(i) the Securities Act which would require the registration of any
such securities under the Securities Act, or (ii) any applicable
shareholder approval provisions of any Trading Market on which any
of the securities of the Company are listed or
designated.
(aa) Indebtedness. Schedule 3.1(aa) sets forth as
of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this
Agreement, “Indebtedness” means (x)
any liabilities for borrowed money or amounts owed in excess of
$10,000 (other than trade accounts payable incurred in the ordinary
course of business), (y) all guaranties, endorsements and other
contingent obligations in respect of indebtedness of others,
whether or not the same are or should be reflected in the
Company’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (z) the present value of any lease payments
in excess of $10,000 due under leases required to be capitalized in
accordance with GAAP.
(bb) Solvency. Based on the
consolidated financial condition of the Company and Subsidiaries as
of the Closing Date, and the Company’s good faith estimate of
the fair market value of its assets, after giving effect to the
receipt by the Company of the proceeds from the sale of the
Securities hereunder: (i) the fair saleable value of the
Company’s assets exceeds the amount that will be required to
be paid on or in respect of the Company’s existing debts and
other liabilities (including known contingent liabilities) as they
mature, (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business as now
conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of
the business conducted by the Company, consolidated and projected
capital requirements and capital availability thereof, and (iii)
the current cash flow of the Company, together with the proceeds
the Company would receive, were it to liquidate all of its assets,
after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its
liabilities when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts
as they mature (taking into account the timing and amounts of cash
to be payable on or in respect of its debt). The Company has no
knowledge of any facts or circumstances which lead it to believe
that it will file for reorganization or liquidation under the
bankruptcy or reorganization laws of any jurisdiction within one
year from the Closing Date. Schedule 3.1(bb) sets forth as
of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this
Agreement, “Indebtedness” means (x)
any liabilities for borrowed money or amounts owed in excess of
$50,000 in the aggregate (including trade accounts payable and
other liabilities incurred in the ordinary course of business), (y)
all guaranties, endorsements and other contingent obligations in
respect of indebtedness of others, whether or not the same are or
should be reflected in the Company’s consolidated balance
sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the
present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. Neither
the Company nor any Subsidiary is in default with respect to any
Indebtedness.
(cc) Tax Status. Except as set forth
on Schedule 3.1(cc)
and for matters that would not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse
Effect, the Company and its Subsidiaries each (i) has made or filed
all United States federal, state and local income and all foreign
income and franchise tax returns, reports and declarations required
by any jurisdiction to which it is subject, (ii) has paid all taxes
and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and
declarations and (iii) has set aside on its books provision
reasonably adequate for the payment of all material taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company or of any Subsidiary
know of no basis for any such claim.
(dd) No General Solicitation.
Neither the Company nor any person acting on behalf of the Company
has offered or sold any of the Securities by any form of general
solicitation or general advertising. The Company has offered the
Securities for sale only to the Purchasers and certain other
“accredited investors” within the meaning of Rule 501
under the Securities Act.
(ee) Foreign Corrupt Practices.
Neither the Company nor any Subsidiary, nor to the knowledge of the
Company or any Subsidiary, any agent or other person acting on
behalf of the Company or any Subsidiary, has: (i) directly or
indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or
domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate
funds, (iii) failed to disclose fully any contribution made by the
Company or any Subsidiary (or made by any person acting on its
behalf of which the Company is aware) which is in violation of law
or (iv) violated in any material respect any provision of
FCPA.
(ff) Accountants. The
Company’s accounting firm is set forth on Schedule 3.1(ff) of the
Disclosure Schedules. To the knowledge and belief of the Company,
such accounting firm: (i) is a registered public accounting firm as
required by the Exchange Act and (ii) shall express its opinion
with respect to the financial statements to be included in the
Company’s Annual Report for the fiscal year ending December
31, 2018.
(gg) Seniority. As of the Closing
Date, except as set forth on Schedule 3.1(gg), no
Indebtedness or other claim against the Company is senior to the
Debentures and Notes in right of payment, whether with respect to
interest or upon liquidation or dissolution, or otherwise, other
than indebtedness secured by purchase money security interests
(which is senior only as to underlying assets covered thereby) and
capital lease obligations (which is senior only as to the property
covered thereby).
(hh) No Disagreements with Accountants and
Lawyers. There are no disagreements of any kind presently
existing, or reasonably anticipated by the Company to arise,
between the Company and the accountants and lawyers formerly or
presently employed by the Company.
(ii) Acknowledgment Regarding
Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm’s length purchaser with
respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities. The
Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.
(jj) Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere
herein to the contrary notwithstanding (except for Sections 3.2(f)
and 4.15 hereof), it is understood and acknowledged by the Company
that: (i) none of the Purchasers has been asked by the Company to
agree, nor has any Purchaser agreed, to desist from purchasing or
selling, long and/or short, securities of the Company, or
“derivative” securities based on securities issued by
the Company or to hold the Securities for any specified term, (ii)
past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing
of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded
securities, (iii) any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser
is a party, directly or indirectly, may presently have a
“short” position in the Common Stock and (iv) each
Purchaser shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any
“derivative” transaction. The Company further
understands and acknowledges that (y) one or more Purchasers may
engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation,
during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and
(z) such hedging activities (if any) could reduce the value of the
existing stockholders' equity interests in the Company at and after
the time that the hedging activities are being conducted. The
Company acknowledges that such aforementioned hedging activities do
not constitute a breach of any of the Transaction
Documents.
(kk) Regulation M Compliance.
The Company has not, and to its knowledge no one acting on its
behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or
resale of any of the Securities, (ii) sold, bid for, purchased, or
paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any Person any
compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii)
and (iii), compensation paid to the Company’s placement agent
in connection with the placement of the Securities.
(ll) FDA. As to each product subject
to the jurisdiction of the U.S. Food and Drug Administration
(“FDA”)
under the Federal Food, Drug and Cosmetic Act, as amended, and the
regulations thereunder (“FDCA”) that is
manufactured, packaged, labeled, tested, distributed, sold, and/or
marketed by the Company or any of its Subsidiaries (each such
product, a “Pharmaceutical Product”),
such Pharmaceutical Product is being manufactured, packaged,
labeled, tested, distributed, sold and/or marketed by the Company
in compliance with all applicable requirements under FDCA and
similar laws, rules and regulations relating to registration,
investigational use, premarket clearance, licensure, or application
approval, good manufacturing practices, good laboratory practices,
good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the
failure to be in compliance would not have a Material Adverse
Effect. There is no pending, completed or, to the Company's
knowledge, threatened, action (including any lawsuit, arbitration,
or legal or administrative or regulatory proceeding, charge,
complaint, or investigation) against the Company or any of its
Subsidiaries, and none of the Company or any of its Subsidiaries
has received any notice, warning letter or other communication from
the FDA or any other governmental entity, which (i) contests the
premarket clearance, licensure, registration, or approval of, the
uses of, the distribution of, the manufacturing or packaging of,
the testing of, the sale of, or the labeling and promotion of any
Pharmaceutical Product, (ii) withdraws its approval of, requests
the recall, suspension, or seizure of, or withdraws or orders the
withdrawal of advertising or sales promotional materials relating
to, any Pharmaceutical Product, (iii) imposes a clinical hold on
any clinical investigation by the Company or any of its
Subsidiaries, (iv) enjoins production at any facility of the
Company or any of its Subsidiaries, (v) enters or proposes to enter
into a consent decree of permanent injunction with the Company or
any of its Subsidiaries, or (vi) otherwise alleges any violation of
any laws, rules or regulations by the Company or any of its
Subsidiaries, and which, either individually or in the aggregate,
would have a Material Adverse Effect. The properties, business and
operations of the Company have been and are being conducted in all
material respects in accordance with all applicable laws, rules and
regulations of the FDA. The Company has not been informed by
the FDA that the FDA will prohibit the marketing, sale, license or
use in the United States of any product proposed to be developed,
produced or marketed by the Company nor has the FDA expressed any
concern as to approving or clearing for marketing any product being
developed or proposed to be developed by the Company.
(mm) Stock Option Plans. Each stock
option granted by the Company under the Company’s stock
option plan was granted (i) in accordance with the terms of the
Company’s stock option plan and (ii) with an exercise price
at least equal to the fair market value of the Common Stock on the
date such stock option would be considered granted under GAAP and
applicable law. No stock option granted under the Company’s
stock option plan has been backdated. The Company has not knowingly
granted, and there is no and has been no Company policy or practice
to knowingly grant, stock options prior to, or otherwise knowingly
coordinate the grant of stock options with, the release or other
public announcement of material information regarding the Company
or its Subsidiaries or their financial results or
prospects.
(nn) Office of Foreign Assets
Control. Neither the Company nor any Subsidiary nor, to the
Company's knowledge, any director, officer, agent, employee or
affiliate of the Company or any Subsidiary is currently subject to
any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“OFAC”).
(oo) U.S. Real Property Holding
Corporation. The Company is not and has never been a U.S.
real property holding corporation within the meaning of Section 897
of the Internal Revenue Code of 1986, as amended, and the Company
shall so certify upon Purchaser’s request.
(pp) Bank Holding Company Act.
Neither the Company nor any of its Subsidiaries or Affiliates is
subject to the Bank Holding Company Act of 1956, as amended (the
“BHCA”)
and to regulation by the Board of Governors of the Federal Reserve
System (the “Federal
Reserve”). Neither the Company nor any of its
Subsidiaries or Affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of
any class of voting securities or twenty-five percent or more of
the total equity of a bank or any entity that is subject to the
BHCA and to regulation by the Federal Reserve. Neither the Company
nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal
Reserve.
(qq) Money Laundering. The
operations of the Company and its Subsidiaries are and have been
conducted at all times in compliance with applicable financial
record-keeping and reporting requirements of the Currency and
Foreign Transactions Reporting Act of 1970, as amended, applicable
money laundering statutes and applicable rules and regulations
thereunder (collectively, the “Money Laundering Laws”),
and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
the Company or any Subsidiary with respect to the Money Laundering
Laws is pending or, to the knowledge of the Company or any
Subsidiary, threatened.
(rr) Other Covered Persons. The
Company is not aware of any person (other than any Issuer Covered
Person) that has been or will be paid (directly or indirectly)
remuneration for solicitation of purchasers in connection with the
sale of any Regulation D Securities.
(ss) Notice of Disqualification
Events. The Company will notify the Purchasers in writing,
prior to the Closing Date of (i) any Disqualification Event
relating to any Issuer Covered Person and (ii) any event that
would, with the passage of time, become a Disqualification Event
relating to any Issuer Covered Person.
(tt) Survival. The foregoing
representations and warranties shall survive the
Closing.
3.2 Representations and Warranties of the
Purchasers. Each Purchaser, for itself and for no other
Purchaser, hereby represents and warrants as of the date hereof and
as of the Closing Date to the Company as follows (unless as of a
specific date therein):
(a) Organization; Authority. Such
Purchaser is either an individual or an entity duly incorporated or
formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with full right,
corporate, partnership, limited liability company or similar power
and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and
delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction
Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as
applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited
by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by
Applicable Law.
(b) Understandings or Arrangements.
Such Purchaser understands that the Securities are
“restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and
is acquiring the Securities as principal for its own account and
not with a view to or for distributing or reselling such Securities
or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of
distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or
indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities in
violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such
Purchaser’s right to sell the Securities pursuant to any
registration statement or otherwise in compliance with applicable
federal and state securities laws). Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its
business.
(c) Purchaser Status. At the time
such Purchaser was offered the Securities, it was, and as of the
date hereof it is, and on each date on which it converts any Notes
it will be either: (i) an accredited investor (“Accredited Investor”) as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act or (ii) a “qualified institutional
buyer” as defined in Rule 144A(a) under the Securities Act.
Such Purchaser is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act. Such Purchaser has the
authority and is duly and legally qualified to purchase and own the
Securities. Such Purchaser is able to bear the risk of such
investment for an indefinite period and to afford a complete loss
thereof. The information set forth on the signature pages hereto
regarding such Purchaser is true and complete in all respects.
Except as disclosed, such Purchaser has had no position, office or
other material relationship within the past three years with the
Company or Persons (as defined below) known to such Purchaser to be
affiliates of the Company, and is not a member of the Financial
Industry Regulatory Authority or an “associated person”
(as such term is defined under the FINRA Membership and
Registration Rules Section 1011).
(d) Experience of Such Purchaser.
Such Purchaser, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser
is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete
loss of such investment.
(e) Information on Company. Such
Purchaser has been furnished with or has had access to the SEC
Reports and Disclosure Schedules. Purchasers are not deemed to have
any knowledge of any information not included in the SEC Reports
and Disclosure Schedules unless such information is delivered in
the manner described in the next sentence. In addition,
such Purchaser may have received in writing from the Company such
other information concerning its operations, financial condition
and other matters as such Purchaser has requested, identified
thereon as OTHER WRITTEN INFORMATION (such other information is
collectively, the “Other
Written Information”), and considered all factors such
Purchaser deems material in deciding on the advisability of
investing in the Securities. Such Purchaser was afforded (i)
the opportunity to ask such questions as such Purchaser deemed
necessary of, and to receive answers from, representatives of the
Company concerning the merits and risks of acquiring the
Securities; (ii) the right of access to information about the
Company and its financial condition, results of operations,
business, properties, management and prospects sufficient to enable
such Purchaser to evaluate the Securities; and (iii) the
opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense
that is necessary to make an informed investment decision with
respect to acquiring the Securities.
(f) Compliance with Securities Act;
Reliance on Exemptions. Such Purchaser understands and
agrees that the Securities have not been registered under the
Securities Act or any applicable state securities laws, by reason
of their issuance in a transaction that does not require
registration under the Securities Act, and that such Securities
must be held indefinitely unless a subsequent disposition is
registered under the Securities Act or any applicable state
securities laws or is exempt from such registration. Such Purchaser
understands and agrees that the Securities are being offered and
sold to such Purchaser in reliance on specific exemptions from the
registration requirements of United States federal and state
securities laws and regulations and that the Company is relying in
part upon the truth and accuracy of, and such Purchaser’s
compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Purchaser set forth
herein in order to determine the availability of such exemptions
and the eligibility of such Purchaser to acquire the
Securities.
(g) Communication of Offer. Such
Purchaser is not purchasing the Securities as a result of any
“general solicitation” or “general
advertising,” as such terms are defined in Regulation D,
which includes, but is not limited to, any advertisement, article,
notice or other communication regarding the Securities published in
any newspaper, magazine or similar media or on the internet or
broadcast over television, radio or the internet or presented at
any seminar or any other general solicitation or general
advertisement.
(h) No Governmental Review. Such
Purchaser understands that no United States federal or state agency
or any other governmental or state agency has passed on or made
recommendations or endorsement of the Securities or the suitability
of the investment in the Securities nor have such authorities
passed upon or endorsed the merits of the Offering.
(i) No Conflicts. The execution,
delivery and performance of this Agreement and performance under
the other Transaction Documents and the consummation by such
Purchaser of the transactions contemplated hereby and thereby or
relating hereto or thereto do not and will not (i) result in a
violation of such Purchaser’s charter documents, bylaws or
other organizational documents, if applicable, (ii) conflict with
nor constitute a default (or an event which with notice or lapse of
time or both would become a default) under any agreement to which
such Purchaser is a party, nor (iii) result in a violation of any
law, rule, or regulation, or any order, judgment or decree of any
court or governmental agency applicable to such Purchaser or its
properties (except for such conflicts, defaults and violations as
would not, individually or in the aggregate, have a material
adverse effect on such Purchaser). Such Purchaser is not required
to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations
under this Agreement or perform under the other Transaction
Documents nor to purchase the Securities in accordance with the
terms hereof, provided that for purposes of the representation made
in this sentence, such Purchaser is assuming and relying upon the
accuracy of the relevant representations and agreements of the
Company herein.
(j) Certain
Transactions and Confidentiality. Other than consummating
the transactions contemplated hereunder, such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or
pursuant to any understanding with such Purchaser, executed any
purchases or sales, including Short Sales, of the securities of the
Company during the period commencing as of the time that such
Purchaser first received a written term sheet from the Company or
any other Person representing the Company setting forth the
material terms of the transactions contemplated hereby and ending
immediately prior to the execution hereof.
(k) Survival.
The foregoing representations and warranties shall survive the
Closing.
The Company
acknowledges and agrees that the representations contained in
Section 3.2 shall not modify, amend or affect such
Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 (a) Transfer
Restrictions. The Securities may only be disposed of in
compliance with state and federal securities laws. In connection
with any transfer of Securities other than pursuant to an effective
registration statement or Rule 144, to the Company or to an
Affiliate of a Purchaser or in connection with a pledge as
contemplated in Section 4.1(c), the Company may require the
transferor thereof to provide to the Company, at the
Company’s expense, an opinion of counsel selected by the
transferor and reasonably acceptable to the Company, the form and
substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities
Act. As a condition of such transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and
shall have the rights and obligations of a Purchaser under this
Agreement and the other Transaction Documents.
(b) Legend.
The Purchasers agree to the imprinting, so long as is required by
this Section 4.1, of a legend on any of the Securities in the
following form:
[NEITHER] THIS
SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS 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 [EXERCISE] [CONVERSION] OF THIS SECURITY] MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN ACCREDITED INVESTOR AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
(c) Pledge.
The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
Accredited Investor and who agrees to be bound by the provisions of
this Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledge or secure
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are
subject to registration pursuant to Section 4.26 hereof, the
preparation and filing of any required prospectus supplement under
Rule 424(b)(3) under the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of
selling stockholders thereunder.
(d) Legend
Removal. Certificates evidencing the Underlying Shares shall
not contain any legend (“Unlegended
Shares”) (including the legend set forth in Section
4.1(b) hereof): (i) while a registration statement covering the
resale of such security is effective under the Securities Act, (ii)
following any sale of such Underlying Shares pursuant to Rule 144,
(iii) if such Underlying Shares are eligible for sale under Rule
144 (in the case of a non-Affiliate of the Company), without the
requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Underlying
Shares and without volume or manner-of-sale restrictions or (iv) if
such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company
shall cause its counsel, at the expense of the Company, to issue a
legal opinion to the Transfer Agent promptly after the Effective
Date if required by the Transfer Agent to effect the removal of the
legend hereunder. If all or any Notes are converted at a time when
there is an effective registration statement to cover the resale of
the Underlying Shares, or if such Underlying Shares may be sold
under Rule 144 or if such legend is not otherwise required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission) then such Underlying Shares shall be issued free of all
legends. The Company agrees that following such time as such legend
is no longer required under this Section 4.1(c), it will, no later
than two (2) Trading Days following the delivery by a Purchaser to
the Company or the Transfer Agent of a certificate representing
Underlying Shares, as applicable, issued with a restrictive legend
(such second (2nd) Trading Day, the
“Legend Removal
Date”), deliver or cause to be delivered to such
Purchaser a certificate representing such shares that is free from
all restrictive and other legends. The Company may not make any
notation on its records or give instructions to the Transfer Agent
that enlarge the restrictions on transfer set forth in this Section
4. Certificates for Underlying Shares subject to legend removal
hereunder shall be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime
broker with the Depository Trust Company System as directed by such
Purchaser.
(e) Legend
Removal Default. In addition to such Purchaser’s other
available remedies, provided the conditions for legend removal set
forth in Section 4.1(d) exist, the Company shall pay to a
Purchaser, in cash, as partial liquidated damages and not as a
penalty, for each $1,000 of Underlying Shares (based on the higher
of the actual purchase price or VWAP of the Common Stock on the
date such Securities are submitted to the Transfer Agent) delivered
for removal of the restrictive legend and subject to Section
4.1(d), $10 per Trading Day for each Trading Day after the Legend
Removal Date (increasing to $20 per Trading Day after the fifth
Trading Day) until such certificate is delivered without a legend.
Nothing herein shall limit such Purchaser’s right to pursue
actual damages for the Company’s failure to deliver
certificates representing any Securities as required by the
Transaction Documents, and such Purchaser shall have the right to
pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or
injunctive relief.
(f) DWAC.
In lieu of delivering physical certificates representing the
Unlegended Shares, upon request of a Purchaser, so long as the
certificates therefor do not bear a legend and the Purchaser is not
obligated to return such certificate for the placement of a legend
thereon, the Company shall cause its transfer agent to
electronically transmit the Unlegended Shares by crediting the
account of Purchaser’s prime broker with the Depository Trust
Company through its Deposit Withdrawal At Custodian system,
provided that the Company’s Common Stock is DTC eligible and
the Company’s transfer agent participates in the Deposit
Withdrawal at Custodian system. Such delivery must be made on or
before the Legend Removal Date.
(g) Injunction.
In the event a Purchaser shall request delivery of Unlegended
Shares as described in this Section 4.1 and the Company is required
to deliver such Unlegended Shares, the Company may not refuse to
deliver Unlegended Shares based on any claim that such Purchaser or
anyone associated or affiliated with such Purchaser has not
complied with Purchaser’s obligations under the Transaction
Documents, or for any other reason, unless, an injunction or
temporary restraining order from a court, on notice, restraining
and or enjoining delivery of such Unlegended Shares shall have been
sought and obtained by the Company and the Company has posted a
surety bond for the benefit of such Purchaser in the amount of the
greater of (i) 120% of the amount of the aggregate purchase price
of the Underlying Shares to be subject to the injunction or
temporary restraining order, or (ii) the VWAP of the Common Stock
on the Trading Day before the issue date of the injunction
multiplied by the number of Unlegended Shares to be subject to the
injunction, which bond shall remain in effect until the completion
of arbitration/litigation of the dispute and the proceeds of which
shall be payable to such Purchaser to the extent Purchaser obtains
judgment in Purchaser’s favor.
(h) Buy-In.
In addition to any other rights available to Purchaser, if the
Company fails to deliver to a Purchaser Unlegended Shares as
required pursuant to this Agreement and after the Legend Removal
Date the Purchaser, or a broker on the Purchaser’s behalf,
purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by such Purchaser
of the shares of Common Stock which the Purchaser was entitled to
receive in unlegended form from the Company (a
“Buy-In”),
then the Company shall promptly pay in cash to the Purchaser (in
addition to any remedies available to or elected by the Purchaser)
the amount, if any, by which (A) the Purchaser’s total
purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (B) the aggregate
purchase price of the shares of Common Stock delivered to the
Company for reissuance as Unlegended Shares together with interest
thereon at a rate of 15% per annum accruing until such amount and
any accrued interest thereon is paid in full (which amount shall be
paid as liquidated damages and not as a penalty). For example, if a
Purchaser purchases shares of Common Stock having a total purchase
price of $11,000 to cover a Buy-In with respect to $10,000 of
purchase price of Underlying Shares delivered to the Company for
reissuance as Unlegended Shares, the Company shall be required to
pay the Purchaser $1,000, plus interest, if any. The Purchaser
shall provide the Company written notice indicating the amounts
payable to the Purchaser in respect of the
Buy-In.
4.2 Acknowledgment
of Dilution. The Company acknowledges that the issuance of
the Securities may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain
market conditions. The Company further acknowledges that its
obligations under the Transaction Documents, including, without
limitation, its obligation to issue the Underlying Shares pursuant
to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or
reduction, regardless of the effect of any such dilution or any
claim the Company may have against any Purchaser and regardless of
the dilutive effect that such issuance may have on the ownership of
the other stockholders of the Company.
4.3 Furnishing of Information; Public
Information.
(a) Until
no Purchaser owns Securities, the Company covenants to file all
periodic reports with the Commission pursuant to the Exchange Act
and maintain the registration of the Common Stock under Section
12(b) or 12(g) of the Exchange Act after such time as the Company
initially becomes subject to such requirements and to timely file
(or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act and
timely file all reports that would be required to be filed by an
issuer subject to Section 12(b) or 12(g) of the Exchange Act even
if the Company is not then subject to the reporting requirements of
the Exchange Act.
(b) At
any time commencing on the Closing Date, and ending at such time
that all of the Securities may be sold by non-Affiliates of the
Company without the requirement for the Company to be in compliance
with Rule 144(c)(1) and otherwise without restriction or limitation
pursuant to Rule 144, if the Company shall fail for any reason to
satisfy the current public information requirement under Rule
144(c) (a “Public Information Failure”) then, in
addition to such Purchaser’s other available remedies, the
Company shall pay to a Purchaser, in cash, as partial liquidated
damages and not as a penalty, by reason of any such delay in or
impairment of its ability to sell the Securities, an amount in cash
equal to 2.0% of the aggregate principal amount of Notes
outstanding and accrued interest thereon, and aggregate Conversion
Price of Underlying Shares (with respect to the Notes) held by such
Purchaser on the day of a Public Information Failure and on every
thirtieth (30th) day (pro-rated for periods totaling less than
thirty days) thereafter until the earlier of (a) the date such
Public Information Failure is cured and (b) such time that such
public information is no longer required for the Purchasers to
transfer the Underlying Shares pursuant to Rule 144. The payments
to which a Purchaser shall be entitled pursuant to this Section
4.3(b) are referred to herein as “Public Information Failure
Payments.” Public Information Failure Payments shall
be paid on the earlier of (i) the last day of the calendar month
during which such Public Information Failure Payments are incurred
and (ii) the third (3rd) Business Day after the event or failure
giving rise to the Public Information Failure Payments is cured. In
the event the Company fails to make Public Information Failure
Payments in a timely manner, such Public Information Failure
Payments shall bear interest at the rate of 1.5% per month
(prorated for partial months) until paid in full. Nothing herein
shall limit such Purchaser’s right to pursue actual damages
for the Public Information Failure, and such Purchaser shall have
the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief.
4.4 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities
or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the
closing of such other transaction or to effectuate such other
transaction unless shareholder approval is obtained before the
earlier of the closing of such subsequent transaction or
effectuation of such other transaction.
4.5 Conversion
Procedures. The form of Notice of Conversion included in the
Notes set forth the totality of the procedures required of the
Purchasers in order to convert the Notes. No additional legal
opinion, other information or instructions shall be required of the
Purchasers to convert their Notes. The Company shall honor
conversions of the Notes and shall deliver Underlying Shares in
accordance with the terms, conditions and time periods set forth in
the Transaction Documents.
4.6 Securities
Laws Disclosure; Publicity. The Company shall, by 9:30 a.m.
(New York City time) on the first Trading Day following each
Closing Date, file a Current Report on Form 8-K including the
Transaction Documents as exhibits thereto with the Commission
within the time required by the Exchange Act (“Form 8-K”). From and
after the filing of the Form 8-K, the Company represents to the
Purchaser that it shall have publicly disclosed all material,
non-public information delivered to the Purchaser by the Company or
any of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. The Company and
Purchaser shall consult with each other in issuing any press
releases with respect to the transactions contemplated hereby, and
neither the Company nor Purchaser shall issue any press release nor
otherwise make any such public statement without the prior consent
of the Company, with respect to any press release of Purchaser, or
without the prior consent of Purchaser, with respect to any press
release of the Company, which consent shall not unreasonably be
withheld or delayed, except if such disclosure is required by law,
in which case the disclosing party shall promptly provide the other
party with prior notice of such public statement or communication.
Notwithstanding the foregoing, the Company shall not publicly
disclose the name of Purchaser, or include the name of Purchaser in
any filing with the Commission or any regulatory agency or Trading
Market unless the name of Purchaser is already included in the body
of the Transaction Documents, without the prior written consent of
Purchaser, except: (a) as required by federal securities law in
connection with the filing of final Transaction Documents with the
Commission and (b) to the extent such disclosure is required by law
or Trading Market regulations, in which case the Company shall
provide the Purchaser with prior notice of such disclosure
permitted under this clause (b). The Company may file a Form 10-Q
in lieu of the Form 8-K provided such filing contains the content
required to be included in the Form 8-K and the Form 10-Q is filed
not later than the Trading Day after the Closing Date.
4.7 Shareholder
Rights Plan. No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that
any Purchaser is an “Acquiring Person” under any
control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or similar
anti-takeover plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents or under any other
agreement between the Company and the Purchasers.
4.8 Non-Public
Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction
Documents and as required hereunder, the Company covenants and
agrees that neither it, nor any other Person acting on its behalf,
will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material
non-public information, unless prior thereto such Purchaser shall
have entered into a written agreement with the Company regarding
the confidentiality and use of such information. The Company
understands and confirms that each Purchaser shall be relying on
the foregoing covenant in effecting transactions in securities of
the Company.
4.9 Use
of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder substantially for the purposes set
forth on Schedule
4.9 hereto and shall not use such proceeds: (a) for the
satisfaction of any portion of the Company’s debt except as
disclosed on Schedule
4.9 (other than payment of trade payables in the ordinary
course of the Company’s business and consistent with prior
practices), (b) for the redemption of any Common Stock or Common
Stock Equivalents, (c) for the settlement of any outstanding
litigation or (d) in violation of FCPA or OFAC
regulations.
4.10 Indemnification
of Purchasers. Subject to the provisions of this Section
4.10, the Company will indemnify and hold each Purchaser and its
directors, officers, shareholders, members, partners, employees and
agents (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such
title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with
a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such
controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to
(a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against
Purchaser Parties in any capacity, or any of them or their
respective Affiliates, by any stockholder of the Company who is not
an Affiliate of such Purchaser Party, with respect to any of the
transactions contemplated by the Transaction Documents (unless such
action is based upon a breach of such Purchaser Party’s
representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party
may have with any such stockholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct
by such Purchaser Party which constitutes fraud, gross negligence,
willful misconduct or malfeasance). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have
the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing,
(ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of counsel, a material conflict
on any material issue between the position of the Company and the
position of such Purchaser Party, in which case the Company shall
be responsible for the reasonable fees and expenses of no more than
one such separate counsel. The Company will not be liable to any
Purchaser Party under this Agreement (y) for any settlement by a
Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or
(z) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party’s
breach of its material representations, warranties or covenants
under the Transaction Documents. The indemnification required by
this Section 4.10 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and
when bills are received or are incurred. The indemnity agreements
contained herein shall be in addition to any cause of action or
similar right of any Purchaser Party against the Company or others
and any liabilities the Company may be subject to pursuant to
law.
4.11 Reservation
and Listing of Securities.
(a) As of the date hereof, the Company, ignoring any
conversion or exercise limitations, has reserved for each Purchaser
and the Company shall continue to reserve and keep available at all
times, the “Required Minimum”, free of pre-emptive
rights. If, on any date, the number of authorized but
unissued (and otherwise unreserved) shares of Common Stock is less
than the Required Minimum on such date (an “Authorized Share
Failure”), then the Board of Directors shall use
commercially reasonable efforts to amend the Company’s
articles of incorporation to increase the number of authorized but
unissued shares of Common Stock to at least the Required Minimum
plus such other amount as may be required for the Company’s
other purposes, and reserve the Required Minimum on behalf of the
Purchaser, as soon as possible and in any event not later than the
60th day
after such date. Notwithstanding the foregoing, the occurrence of
an Authorized Share Failure is an Event of Default.
(b) The Company shall,
if applicable: (i) in the time and manner required by the principal
Trading Market, prepare and file with such Trading Market an
additional shares listing application covering a number of shares
of Common Stock at least equal to the Required Minimum on the date
of such application, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing or quotation on
such Trading Market as soon as possible thereafter, (iii) provide
to the Purchasers evidence of such listing or quotation and (iv)
maintain the listing or quotation of such Common Stock on any date
at least equal to the Required Minimum on such date on such Trading
Market or another Trading Market. The
Company will then take all action necessary to continue the listing
or quotation and trading of its Common Stock on a Trading Market
until the later of (i) at least six (6) years after the Closing
Date, and (ii) for so long as the Notes are outstanding, and will
comply in all respects with the Company’s reporting, filing
and other obligations under the bylaws or rules of the Trading
Market. In the event the aforedescribed listing is not
continuously maintained for six (6) years after the Closing Date
and for so long as Notes are outstanding (a “Listing Default”), then
in addition to any other rights the Purchasers may have hereunder
or under applicable law, on the first day of a Listing Default and
on each monthly anniversary of each such Listing Default date (if
the applicable Listing Default shall not have been cured by such
date) until the applicable Listing Default is cured, the Company
shall pay to each Purchaser an amount in cash, as partial
liquidated damages and not as a penalty, equal to 2% of the
aggregate Subscription Amount of Notes, and Conversion Price of the
Conversion Shares held by such Purchaser on the day of a Listing
Default and on every thirtieth day (pro-rated for periods less than
thirty days) thereafter until the date such Listing Default is
cured. If the Company fails to pay any liquidated damages pursuant
to this Section in a timely manner, the Company will pay interest
thereon at a rate of 1.5% per month (pro-rated for partial months)
to the Purchaser.
4.12 Form
D; Blue Sky Filings. The Company agrees to timely file a
Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof, promptly upon request of any
Purchaser. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption
for, or to qualify the Securities for, sale to the Purchasers at a
Closing under Applicable Law, including “Blue Sky” laws
of the states of the United States, and shall provide evidence of
such actions promptly upon request of any Purchaser.
4.13 Subsequent
Equity Sales. From the date hereof until the End Date, the
Company and each Subsidiary will not, without the consent of a
Majority in Interest, enter into any Equity Line of Credit or
similar agreement, issue or agree to issue floating or Variable
Priced Equity Linked Instruments nor issue or agree to issue any of
the foregoing or equity with price reset rights (subject to
adjustment for stock splits, distributions, dividends,
recapitalizations and the like) (collectively, a
“Variable Rate
Transaction”). For purposes hereof,
“Equity Line of
Credit” shall include any transaction involving a
written agreement between the Company and an investor or
underwriter whereby the Company has the right to “put”
its securities to the investor or underwriter over an agreed period
of time and at an agreed price or price formula, and
“Variable Priced
Equity Linked Instruments” shall include: (A) any debt
or equity securities which are convertible into, exercisable or
exchangeable for, or carry the right to receive additional shares
of Common Stock or Common Stock Equivalents or any of the foregoing
at a price that can be reduced either (1) at any conversion,
exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for Common Stock at
any time after the initial issuance of such debt or equity
security, or (2) with a fixed conversion, exercise or exchange
price that is subject to being reset at some future date at any
time after the initial issuance of such debt or equity security due
to a change in the market price of the Company’s Common Stock
since date of initial issuance, or upon the issuance of any debt,
equity or Common Stock Equivalent, and (B) any amortizing
convertible security which amortizes prior to its maturity date,
where the Company is required or has the option to (or any investor
in such transaction has the option to require the Company to) make
such amortization payments in shares of Common Stock which are
valued at a price that is based upon and/or varies with the trading
prices of or quotations for Common Stock at any time after the
initial issuance of such debt or equity security (whether or not
such payments in stock are subject to certain equity conditions).
For purposes of determining the total consideration for a
convertible instrument (including a right to purchase equity of the
Company) issued, subject to an original issue or similar discount
or which principal amount is directly or indirectly increased after
issuance, the consideration will be deemed to be the actual net
cash amount received by the Company in consideration of the
original issuance of such convertible instrument. Until the End
Date, the Company will not, without the consent of a Majority in
Interest, issue any Common Stock or Common Stock Equivalents nor
issue or amend the terms of any securities or Common Stock
Equivalents or of any agreement outstanding or in effect as of the
date of this Agreement pursuant to which same were or may be
acquired without the consent of a Majority in Interest, if the
result of such issuance or amendment would be at an effective price
per share of Common Stock less than the Conversion Price in effect
at the time of such issuance or amendment; all subject to
adjustment as described in Section 5.23 hereof. The restrictions
and limitations in this Section 4.13 are in addition to and shall
apply whether or not a Purchaser exercises its rights pursuant to
Section 4.16 and Section 4.22.
4.14 Equal
Treatment of Purchasers. No consideration (including any
modification of any Transaction Document) shall be offered or paid
to any Person to amend or consent to a waiver or modification of
any provision of any of this Agreement unless the same
consideration is also offered on a ratable basis to all of the
parties to this Agreement. For clarification purposes, this
provision constitutes a separate right granted to each Purchaser by
the Company and negotiated separately by each Purchaser, and is
intended for the Company to treat the Purchasers as a class and
shall not in any way be construed as the Purchasers acting in
concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.
4.15 Capital
Changes. Until the one (1) year anniversary of the Closing
Date, the Company shall not undertake a reverse or forward stock
split or reclassification of the Common Stock without five (5) days
prior written notice to the Purchasers. In no event will the
Company increase the par value of the Common Stock to an amount
greater than the Conversion Price, then in effect.
4.16 Participation
in Future Financing.
(a) Until the End Date,
upon any proposed issuance by the Company or any of its
Subsidiaries of Common Stock, Common Stock Equivalents,
Indebtedness or a combination thereof, other than (i) a rights
offering to all holders of Common Stock which does not include
extending such rights offering to holders of Notes, or (ii) an
Exempt Issuance (each a “Subsequent Financing”),
the Purchasers shall have the right to participate in up to an
amount of the Subsequent Financing equal to 100% of the Subsequent
Financing (the “Participation Maximum”)
pro rata to each other in proportion to their Subscription Amounts
on the same terms, conditions and price provided for in the
Subsequent Financing, unless the Subsequent Financing is an
underwritten public offering, in which case the Company shall
notify each Purchaser of such public offering when it is lawful for
the Company to do so, but no Purchaser shall be entitled to
purchase any particular amount of such public offering without the
approval of the lead underwriter of such underwritten public
offering.
(b) At least ten (10)
Trading Days prior to the closing of the Subsequent Financing, the
Company shall deliver to each Purchaser a written notice of its
intention to effect a Subsequent Financing (“Pre-Notice”), which
Pre-Notice shall ask such Purchaser if it wants to review the
details of such financing (such additional notice, a
“Subsequent
Financing Notice”). Upon the request of a Purchaser,
and only upon a request by such Purchaser, for a Subsequent
Financing Notice, the Company shall promptly, but no later than one
(1) Trading Day after such request, deliver a Subsequent Financing
Notice to such Purchaser. The requesting Purchaser shall be deemed
to have acknowledged that the Subsequent Financing Notice may
contain material non-public information. The Subsequent Financing
Notice shall describe in reasonable detail the proposed terms of
such Subsequent Financing, the amount of proceeds intended to be
raised thereunder and the Person or Persons through or with whom
such Subsequent Financing is proposed to be effected and shall
include a term sheet or similar document relating thereto as an
attachment.
(c) Any Purchaser
desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York
City time) on the tenth (10th) Trading Day after
all of the Purchasers have received the Pre-Notice that the
Purchaser is willing to participate in the Subsequent Financing,
the amount of such Purchaser’s participation, and
representing and warranting that such Purchaser has such funds
ready, willing, and available for investment on the terms set forth
in the Subsequent Financing Notice. If the Company receives no such
notice from a Purchaser as of such tenth (10th Trading Day, such
Purchaser shall be deemed to have notified the Company that it does
not elect to participate.
(d) If by 5:30 p.m.
(New York City time) on the fifteenth (15th ) Trading Day after
all of the Purchasers have received the Pre-Notice, notifications
by the Purchasers of their willingness to participate in the
Subsequent Financing (or to cause their designees to participate)
is, in the aggregate, less than the total amount of the
Participation Maximum of the Subsequent Financing, then the Company
may affect the remaining portion of such Subsequent Financing on
the terms and with the Persons set forth in the Subsequent
Financing Notice and the Purchasers shall simultaneously affect
their portion of such Subsequent Financing as set forth in their
notifications to the Company consistent with the terms set forth in
the Subsequent Financing Notice.
(e) If by 5:30 p.m.
(New York City time) on the fifth (5th) Trading Day after
all of the Purchasers have received the Pre-Notice, the Company
receives responses to a Subsequent Financing Notice from Purchasers
seeking to purchase more than the aggregate amount of the
Participation Maximum, each such Purchaser shall have the right to
purchase its Pro Rata Portion (as defined below) of the
Participation Maximum. “Pro Rata Portion” means
the ratio of (x) the principal amount of Notes purchased hereunder
by a Purchaser participating under this Section 4.16 and (y) the
sum of the aggregate principal amounts of Notes purchased hereunder
by all Purchasers participating under this Section
4.16.
(f) The Company must
provide the Purchasers with a second Subsequent Financing Notice,
and the Purchasers will again have the right of participation set
forth above in this Section 4.16, if the Subsequent Financing
subject to the initial Subsequent Financing Notice is not
consummated for any reason on the terms set forth in such
Subsequent Financing Notice within sixty (60) Trading Days after
the date of the initial Subsequent Financing Notice.
(g) The Company and
each Purchaser agree that if any Purchaser elects to participate in
the Subsequent Financing, the transaction documents related to the
Subsequent Financing shall not include any term or provision
whereby such Purchaser shall be required to agree to any
restrictions on trading as to any of the Securities purchased
hereunder (for avoidance of doubt, the securities purchased in the
Subsequent Financing shall not be considered securities purchased
hereunder) or be required to consent to any amendment to or
termination of, or grant any waiver, release or the like under or
in connection with, this Agreement, without the prior written
consent of such Purchaser.
(h) Notwithstanding
anything to the contrary in this Section 4.16 and unless otherwise
agreed to by such Purchaser, the Company shall either confirm in
writing to such Purchaser that the transaction with respect to the
Subsequent Financing has been abandoned or shall publicly disclose
its intention to issue the securities in the Subsequent Financing,
in either case in such a manner such that such Purchaser will not
be in possession of any material, non-public information, by the
seventeenth (17th) Trading Day
following delivery of the Subsequent Financing Notice. If by such
seventeenth (17th) Trading Day, no
public disclosure regarding a transaction with respect to the
Subsequent Financing has been made, and no notice regarding the
abandonment of such transaction has been received by such
Purchaser, such transaction shall be deemed to have been abandoned
and such Purchaser shall not be deemed to be in possession of any
material, non-public information with respect to the Company or any
of its Subsidiaries.
4.17 Purchaser’s
Exercise Limitations. The Company shall not effect exercise
of the rights granted in Sections 4.16 and 4.22 of this Agreement,
and a Purchaser shall not have the right to exercise any portion of
such rights granted in Sections 4.16 and 4.22 only to the extent
that after giving effect to such exercise, the Purchaser, would
beneficially own in excess of the Beneficial Ownership Limitation
(as defined in the Note), applied in the manner set forth in the
Note. In such event the right by Purchaser to benefit from such
rights or receive shares in excess of the Beneficial Ownership
Limitation shall be held in abeyance until such times as such
excess shares shall not exceed the Beneficial Ownership Limitation,
provided the Purchaser complies with the Purchaser’s other
obligations in connection with the exercise by Purchaser of its
rights pursuant to Sections 4.16 and 4.22, and with respect to
Section 4.16, provided that the Company receives the purchase price
for any purchased securities in compliance with the terms of such
Subsequent Financing.
4.18 Maintenance
of Property/Insurance. The Company shall and shall cause
each Subsidiary to keep all of its property, which is necessary or
useful to the conduct of its business, in good working order and
condition, ordinary wear and tear excepted and insured by insurers
of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary for the
businesses of the Company and Subsidiary.
4.19 Preservation
of Corporate Existence. The Company shall preserve and
maintain its corporate existence, rights, privileges and franchises
in the jurisdiction of its incorporation, and qualify and remain
qualified, as a foreign entity in each jurisdiction in which such
qualification is necessary in view of its business or operations
and where the failure to qualify or remain qualified might
reasonably have a Material Adverse Effect upon the financial
condition, business or operations of the Company taken as a
whole.
4.20
DTC
Program. At all times that
Notes are outstanding after the listing required by Section 4.11(b)
is completed, the Company shall employ as the transfer agent for
its Common Stock and Underlying Shares a participant in the
Depository Trust Company Automated Securities Transfer Program and
cause the Common Stock and Underlying Shares to be transferable
pursuant to such program.
4.21
Reimbursement. If
any Purchaser becomes involved in any capacity in any Proceeding by
or against any Person who is a stockholder of the Company (except
as a result of sales, pledges, margin sales and similar
transactions by such Purchaser to or with any current stockholder),
solely as a result of such Purchaser’s acquisition of the
Securities under this Agreement, the Company will reimburse such
Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection
therewith) incurred in connection therewith, as such expenses are
incurred. The reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company
may otherwise have, shall extend upon the same terms and conditions
to any Affiliates of the Purchasers who are actually named in such
action, proceeding or investigation, and partners, directors,
agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, the Purchasers and any
such Affiliate and any such Person. The Company also agrees that
neither the Purchasers nor any such Affiliates, partners,
directors, agents, employees or controlling persons shall have any
liability to the Company or any Person asserting claims on behalf
of or in right of the Company solely as a result of acquiring the
Securities under this Agreement.
4.22
Most Favored Nation
Provision. From the date hereof and for so long as a
Purchaser holds any Securities, in the event that the Company
issues or sells any Common Stock or Common Stock Equivalents, if a
Purchaser then holding outstanding Securities reasonably believes
that any of the terms and conditions appurtenant to such issuance
or sale are more favorable to such investors than are the terms and
conditions granted to the Purchasers hereunder, upon notice to the
Company by such Purchaser within five (5) Trading Days after
disclosure of such issuance or sale, the Company shall amend the
terms of this transaction as to such Purchaser only so as to give
such Purchaser the benefit of such more favorable terms or
conditions. This Section 4.22 shall not apply with respect to an
Exempt Issuance. The Company shall provide each Purchaser with
notice of any such issuance or sale not later than ten (10) Trading
Days before such issuance or sale.
4.23
Indebtedness. For
so long as any Note is outstanding, the Company will not incur any
Indebtedness other than Permitted Indebtedness.
4.24
Notice of Disqualification
Events. The Company will notify the Purchasers in writing,
prior to the Closing Date of (i) any Disqualification Event
relating to any Issuer Covered Person and (ii) any event that
would, with the passage of time, become a Disqualification Event
relating to any Issuer Covered Person not otherwise disclosed
herein or in the SEC Reports.
4.25
Duration of
Undertakings. Unless otherwise stated in this Article IV,
all of the Company’s undertakings, obligations and
responsibilities set forth in Article IV of this Agreement shall
remain in effect for so long as any Securities remain
outstanding.
ARTICLE
V.
MISCELLANEOUS
5.1 Termination.
This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the other parties, if the final
Closing has not been consummated on or before July 7, 2020;
provided,
however, that such
termination will not affect the right of any party to sue for any
breach by any other party (or parties).
5.2 Fees
and Expenses. Except as expressly set forth in the
Transaction Documents and on Schedule 3.1(s), each party
shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees (including, without limitation,
any fees required for same-day processing of any instruction letter
delivered by the Company and any conversion or exercise notice
delivered by a Purchaser), stamp taxes and other taxes and duties
levied in connection with the delivery of any Securities to the
Purchasers. All of the Purchasers acknowledge that they have been
advised to seek the advice of their own attorneys.
5.3 Entire
Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and thereof
and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.
5.4 Notices.
All notices, demands, requests,
consents, approvals, and other communications required or permitted
hereunder shall be in writing and, unless otherwise specified
herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below or to such other address as
such party shall have specified most recently by written notice.
Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or
delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be: (i) if to
the Company, to: GT Biopharma, Inc., 9350 Wilshire Blvd, Suite 203,
Beverly Hills, CA 90212, Attn: Chief Executive Officer, with a copy
to (which shall not constitute notice): Gary R. Henrie, Esq., P.O.
Box 107, Nauvoo, IL 62354, email: grhlaw@hotmail.com, and
(ii) if to the Purchasers, to: the addresses and fax numbers
indicated on the signature pages hereto.
5.5 Amendments;
Waivers. No provision of this Agreement or any other
Transaction Document may be waived, modified, supplemented or
amended except in a written instrument signed, in the case of an
amendment, by the Company and the Purchasers holding at least a
majority in interest of the affected Securities then outstanding
or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought. No waiver of any default
with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right.
5.6 Headings.
The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.7 Successors
and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each
Purchaser (other than by merger). Following a Closing, any
Purchaser may assign any or all of its rights under this Agreement
to any Person to whom such Purchaser assigns or transfers any
Securities, provided that such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the
“Purchasers.”
5.8 No
Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as
otherwise set forth in Section 4.10.
5.9 Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto
or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any action, suit or
proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or
proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law. If either party shall
commence an action or proceeding to enforce any provisions of the
Transaction Documents, then, in addition to the obligations of the
Company under Section 4.10, the prevailing party in such action,
suit or proceeding shall be reimbursed by the other party for its
reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of
such action or proceeding.
5.11 Execution.
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or
“.pdf” signature page were an original
thereof.
5.12 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
5.13 Rescission
and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions
of) any of the other Transaction Documents, whenever any Purchaser
exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related
obligations within the periods therein provided, then such
Purchaser may, at any time prior to the Company’s performance
of such obligations, rescind or withdraw, in its sole discretion
from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to
its future actions and rights; provided, however, that in the case of a
rescission of a conversion of a Note, the applicable Purchaser
shall be required to return any shares of Common Stock subject to
any such rescinded conversion.
5.14 Replacement
of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof (in the case of mutilation), or in
lieu of and substitution therefor, a new certificate or instrument,
but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction. The applicant for a new
certificate or instrument under such circumstances shall also pay
any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement
Securities.
5.15 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
5.16 Payment
Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a
Purchaser enforces or exercises its rights thereunder, and such
payment or payments or the proceeds of such enforcement or exercise
or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by
or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
5.17 Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any claim, action or
proceeding that may be brought by any Purchaser in order to enforce
any right or remedy under any Transaction Document. Notwithstanding
any provision to the contrary contained in any Transaction
Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for
payments in the nature of interest shall not exceed the maximum
lawful rate authorized under Applicable Law (the
“Maximum
Rate”), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of
them, when aggregated with any other sums in the nature of interest
that the Company may be obligated to pay under the Transaction
Documents exceed such Maximum Rate. It is agreed that if the
maximum contract rate of interest allowed by law and applicable to
the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the
new maximum contract rate of interest allowed by law will be the
Maximum Rate applicable to the Transaction Documents from the
Closing Date thereof forward, unless such application is precluded
by Applicable Law. If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction
Documents, such excess shall be applied by such Purchaser to the
unpaid principal balance of any such indebtedness or be refunded to
the Company, the manner of handling such excess to be at such
Purchaser’s election.
5.18 Independent
Nature of Purchasers’ Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are
several and not joint with the obligations of any other Purchaser,
and no Purchaser shall be responsible in any way for the
performance or non-performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any
Purchaser pursuant hereto or thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to
independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the
other Transaction Documents, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by
its own separate legal counsel in its review and negotiation of the
Transaction Documents. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or
requested to do so by any of the Purchasers. It is expressly
understood and agreed that each provision contained in this
Agreement and in each other Transaction Document is between the
Company and a Purchaser, solely, and not between the Company and
the Purchasers collectively and not between and among the
Purchasers.
5.19 Liquidated
Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not
terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument
or security pursuant to which such partial liquidated damages or
other amounts are due and payable shall have been
canceled.
5.20 Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or
granted herein shall not be a Business Day or Trading Day, as the
case may be, then such action may be taken or such right may be
exercised on the next succeeding Business Day or Trading Day, as
the case may be.
5.21 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto. In addition, each
and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the
date of this Agreement.
5.22 WAIVER
OF JURY TRIAL. IN ANY
ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY
PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY
WAIVES FOREVER TRIAL BY JURY.
5.23 Equitable
Adjustment. Trading volume amounts, price/volume amounts,
the amount of shares of Common Stock identified in this Agreement,
Conversion Price, Underlying Shares and similar figures in the
Transaction Documents shall be equitably adjusted (but without
duplication) to offset the effect of stock splits, similar events
and as otherwise described in this Agreement and Note.
(Signature Pages Follow)
IN WITNESS WHEREOF,
the parties hereto have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as
of the date first indicated above.
|
GT
BIOPHARMA, INC.
|
Address for
Notice:
9350
Wilshire Blvd, Suite 203
Beverly
Hills, CA 90212
|
|
By:__________________________________________
Name:
Steven Weldon
Title:
Chief Financial Officer
|
|
[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR
PURCHASER FOLLOWS]
[PURCHASER
SIGNATURE PAGE TO GT BIOPHARMA, INC.
SECURITIES PURCHASE
AGREEMENT]
IN WITNESS WHEREOF,
the undersigned have caused this Securities Purchase Agreement to
be duly executed by their respective authorized signatories as of
the date first indicated above.
Name of Purchaser:
__________________________________________________________
Signature of Authorized Signatory of
Purchaser: __________________________________
Name of Authorized
Signatory: ________________________________________________
Title of Authorized
Signatory: _____________________________________________________
Email Address of
Authorized Signatory: ______________________________________________
Facsimile Number of
Authorized Signatory:
__________________________________________
State of Residence
of Purchaser: ___________________________________________________
Address for Notice
to Purchaser:
Address for
Delivery of Securities to Purchaser (if not same as address for
notice):
Cash Subscription
Amount: US$___________
Total Note
principal amount: ___________________
EIN Number, if
applicable, will be provided under separate cover
Date:
___________________________
[SIGNATURE PAGES
CONTINUE]
Annex
A
CLOSING
STATEMENT
Pursuant to the
attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase $_____________ of Debentures
from GT Biopharma, Inc., a Delaware corporation (the
“Company”). All funds will
be wired into an account maintained by the Company. All funds will
be disbursed in accordance with this Closing
Statement.
Disbursement Date:
November 5,
2020
|
I.
PURCHASE PRICE
|
|
|
Gross
Proceeds to be Received
|
$_________
|
|
|
|
|
|
II.
DISBURSEMENTS
|
|
|
|
|
|
|
|
$0.00
|
|
|
|
$0.00
|
|
|
|
$0.00
|
|
|
|
$0.00
|
|
|
|
|
|
Total
Amount Disbursed:
|
|
|
|
|
|
|
|
EXHIBITS AND SCHEDULES
Exhibit
A
Form of Note
Schedule
3.1(a)
Schedule
3.1(g)
Schedule
3.1(h)
Schedule
3.1(i)
Schedule
3.1(j)
Schedule
3.1(k)
Schedule
3.1(l)
Schedule
3.1(q)
Schedule
3.1(s)
Schedule
3.1(aa)
Schedule
3.1(bb)
Schedule
3.1(cc)
Schedule
3.1(ff)
Schedule
3.1(gg)
Schedule
4.9