Contract
Exhibit
4.7
THIS NOTE
AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN
JURISDICTION. THIS NOTE AND SUCH SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
OFFERED, SOLD, PLEDGED, HYPOTHECATED, RENOUNCED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH
APPLICABLE LAWS OF ANY FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND SUCH
FOREIGN JURISDICTION LAWS HAVE BEEN SATISFIED.
VENTRUS
BIOSCIENCES, INC.
CONVERTIBLE
PROMISSORY NOTE
|
New
York, NY
|
|
|
$___________
|
___________
___, 2010
|
1. Principal and
Interest
VENTRUS BIOSCIENCES, INC. (the “Company”), a Delaware
corporation, for value received, hereby promises to pay to the order of
______________________, or assigns (“Holder”), in lawful
money of the United States of America at the address for notices to Holder set
forth in the applicable Purchase Agreement (as defined below) (or such other
address as Holder shall provide to the Company pursuant hereto), the principal
amount of ____________ dollars ($___________), together with interest as set
forth below.
The Company promises to pay interest,
compounded annually, on the unpaid principal amount from the date hereof until
such principal amount is paid in full at the rate of eight percent (8%), or such
lesser rate as shall be the maximum rate allowable under applicable
law. Interest from the date hereof shall be computed on the basis of
a 360-day year of twelve 30-day months, and shall be accrued and added to
principal on an annual basis. Unless converted or prepaid earlier as
set forth below, all unpaid principal and unpaid accrued interest on this Note
shall be due and payable on September 10, 2010 (the “Due Date”); provided, however, that during
the continuance of an Event of Default (as defined herein), the interest rate on
this Note shall be increased to twelve percent (12%) per annum.
This Note is one of a series of
convertible promissory notes of like tenor and ranking (collectively, the
“Notes”) made by the Company in favor of certain investors and issued, from time
to time, on and after the date hereof, all upon terms set forth in that certain
Confidential Private Placement Memorandum, dated April __, 2010, as same may be
amended and supplemented from time (collectively referred to herein as the
“Memorandum”), which has been issued by the Company.
The Notes are unsecured obligations of
the Company and rank pari passu with the Company’s other existing indebtedness,
and no new indebtedness which is secured or senior to the Notes may be issued by
the Company without the consent of the Holders of Notes representing at least
sixty six and two thirds percent (66⅔%) of the principal amount of all
outstanding Notes. No consent of the Holders of the Notes is required
for issuances by the Company of unsecured indebtedness that ranks pari passu
with, or junior to, the Notes.
2. Conversion.
2.1 (a)
All unpaid principal and accrued unpaid interest on this Note shall be
automatically converted into the Company’s common stock, par value $0.001
(“Common Stock”) upon a Qualified IPO (as defined below) at a conversion price
equal to 70% of the price at which such securities of the Company are sold in a
Qualified IPO (the “IPO Price”), and on
such other terms and conditions on which such securities are sold in the
Qualified IPO. For purposes hereof, “Qualified IPO” means
the consummation of an underwritten initial public offering of equity securities
by the Company resulting in aggregate gross cash proceeds (before commissions or
other expenses) to the Company of at least $10,000,000.
(b) In
the event that the Company consummates a merger, share exchange, or other
similar transaction (or series of related transactions), other than in
connection with a Qualified IPO, in which (i) the Company merges into or
otherwise becomes a wholly-owned subsidiary of a company that (A) is subject to
the public company reporting requirements of the Securities Exchange Act of
1934, as amended, and (B) does not engage in any active operations, and (ii) the
aggregate consideration payable to the Company or its stockholders in such
transaction(s) (the “Reverse Merger
Consideration”) is greater than or equal to $10,000,000 (a “Reverse Merger”),
then immediately prior to such Reverse Merger, all unpaid principal and accrued
but unpaid interest on this Note shall be automatically converted into Common
Stock at a conversion price per share equal to 70% of the quotient obtained by
dividing (i) the Reverse Merger Consideration less the amount of unpaid
principal and accrued but unpaid interest on all Notes, 2010 Notes (as defined
below), Bridge Notes (as defined below) and the Existing Notes (as defined
below) immediately prior to the Reverse Merger by (ii) the number of shares of
Common Stock of the Company then outstanding, on a fully diluted basis (the
“Outstanding
Shares”). For this purpose, Outstanding Shares shall (i)
exclude any shares of Common Stock issuable upon conversion of the Notes, 2010
Notes, Bridge Notes or the Existing Notes or upon exercise of the warrants
issued to the Placement Agent in connection with the sale of the Notes or 2010
Notes but (ii) include all shares of Common Stock issuable upon the
exercise of (A) options and other warrants outstanding (to the extent that such
options or warrants are exercised or assumed in connection with the Reverse
Merger) and (B) options that the Company is required by agreement to issue to
one or more employees, consultants, or licensors of the Company in connection
with such Reverse Merger to maintain a specified percentage interest in the
Company (but which have not yet been issued)). For purposes hereof, “Existing Notes” shall
mean collectively, (1) that certain Future Advance Promissory Note dated April
24, 2009, in favor of the Capretti Grandi, LLC and (2) that certain Future
Advance Promissory Note dated June 23, 2008, as amended on July 23, 2009, in
favor of Paramount Biosciences, LLC and “Bridge Notes” shall
mean the notes issued pursuant to those certain Note Purchase Agreements dated
December 21, 2007, January 22, 2008, February 15, 2008 and March 11, 2008. For
purposes hereof, “2010
Notes” shall mean the notes issued pursuant to those certain Subscription
Agreements dated February 26, 2010 and March 31, 2010.
The
shares of Common Stock issuable pursuant to clause 2.1(b) above shall be issued
effective prior to the consummation of the Reverse Merger and conditioned upon
the consummation of such Reverse Merger. As a holder of such shares of
Common Stock, the Holder will receive the consideration payable in connection
with such Reverse Merger on a share-for-share basis with all other stockholders
of the Company and in like kind, at the same time and upon the same conditions
as all other stockholders of the Company.
If any
Reverse Merger Consideration is other than cash, its value will be deemed to be
its fair market value as determined, in good faith, by the Board of Directors of
the Company. The value of any securities shall be determined by the Board
of Directors of the Company as set forth for a Sale of the Company in Section
2.1(c) below.
(c)
The Notes plus any unpaid accrued interest thereon shall automatically convert
into shares of Common Stock of the Company effective immediately prior to the
consummation of a Sale of the Company. For purposes hereof, “Sale of the Company”
shall mean a transaction (or series of related transactions) with one or more
non-affiliates of the Company, pursuant to which such party or parties acquire
(i) capital stock of the Company or the surviving entity possessing the voting
power to elect a majority of the board of directors of the Company or the
surviving entity (whether by merger, consolidation, sale or transfer of the
Company’s capital stock or otherwise) (a “Stock Acquisition”);
or (ii) all or substantially all of the Company’s assets determined on a
consolidated basis (an “Asset Sale”);
provided, however, that notwithstanding anything to the contrary contained
herein, to the extent any transaction (or series of related transactions)
qualifies as a Qualified Financing or a Reverse Merger, such transaction(s)
shall not be deemed to constitute a Sale of the Company. For purposes
hereof, “Sale
Proceeds” shall mean (i) in the event of a Stock Acquisition, the cash or
securities paid by the acquirer to the Company or the selling stockholders to
acquire such shares; and (ii) in the event of an Asset Sale, the cash or
securities legally available for distribution to the Company’s stockholders,
after creation of adequate reserves for liabilities of the
Company.
The price
per share at which the Notes will convert into Common Stock of the Company upon
a Sale of the Company will be equal to the lesser of (i) 70% of the quotient
obtained by dividing (x) the value of the Sale Proceeds received in such
transaction less the unpaid principal and accrued but unpaid interest on the
Notes, 2010 Notes, Bridge Notes and the Existing Notes immediately prior to the
Sale of the Company by (y) the number of Outstanding Shares, and (ii) the
quotient obtained by dividing (x) $50,000,000 less the unpaid principal and
accrued but unpaid interest on the Notes, 2010 Notes, the Bridge Notes and the
Existing Notes by (y) the number of Outstanding Shares. For purposes
of this Section 2.1(c), Outstanding Shares shall be determined as set forth in
Section 2.1(b) of this Note, except that it shall not include any shares of
Common Stock issuable upon the exercise of any options and warrants outstanding
immediately prior to such Sale of the Company if such options or warrants have
an exercise price in excess of the Note conversion price determined under this
Section 2.1(c)).
(d) In
the event the Company completes (in one or a series of related transactions) a
merger, consolidation, sale or transfer of more than fifty percent (50%) of the
Company’s capital stock, in each case, which does not constitute a Sale of the
Company, a Reverse Merger or a Qualified Financing (an “Other Transaction”),
then the term “Securities” as used herein shall thereafter refer to the equity
securities or securities convertible into or exchangeable for equity securities
of the surviving, resulting, combined or acquiring entity in such merger,
consolidation, sale or transfer.
2.2 Upon
conversion of this Note in accordance with the terms of this Section 2, the
applicable amount of outstanding principal and accrued unpaid interest of the
Note shall be converted without any further action by the Holder and whether or
not the Note is surrendered to the Company or its transfer agent. The
Company shall not be obligated to issue certificates evidencing the shares of
the securities issuable upon such conversion unless the Note is either delivered
to the Company or its transfer agent, or the Holder notifies the Company or its
transfer agent that such Note has been lost, stolen or destroyed and executes an
agreement satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection with such Note. The Company shall, as
soon as practicable after such delivery, or such agreement and indemnification,
issue and deliver to such Holder of such Note, a certificate or certificates for
the securities to which the Holder shall be entitled. Such conversion
shall be deemed to have been made concurrently with the close of the Qualified
IPO, Sale of the Company or Reverse Merger. The person or persons
entitled to receive securities issuable upon such conversion shall be treated
for all purposes as the record holder or holders of such securities on such
date. The Company shall not issue fractional shares but shall round up the
number of shares issued to the next whole number. Any conversion
effected in accordance with this Section 2 shall be binding upon the Holder
hereof.
3. Prepayment. The
Notes may not be prepaid at any time, in whole or in part, prior to their
maturity.
4. Events of
Default. The entire unpaid principal amount under this Note
and the interest due thereon shall become and be due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived, if any one or more of the following events (herein
called “Events of Default”) shall have occurred (for any reason whatsoever and
whether such happening shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) and be continuing at the time of such
notice, that is to say:
(a) the
Company shall default in the performance of, or violate any of the covenants and
agreements contained in this Note or the Subscription Agreement executed in
connection with the Memorandum, including without limitation, the failure to pay
the Note on the Due Date;
(c) there
shall be a dissolution, termination of existence, suspension or discontinuance
of the Company’s business for a continuous period of 60 days or it ceases to
operate as going concern;
(d) if
the Company shall:
(i) admit
in writing its inability to pay its debts generally as they become
due;
(ii) file
a petition in bankruptcy or a petition to take advantage of any insolvency
act;
(iii) convey
any material portion of the assets of the Company to a trustee, mortgage or
liquidating agent or make an assignment for the benefit of
creditors;
(iv) consent
to the appointment of a receiver, trustee, custodian or similar official, for
the Company or any material portion of the property or assets of the Company;
or
(v) on
a petition in bankruptcy filed against it, be adjudicated a bankrupt;
or
(vi) file
a petition or answer seeking reorganization or arrangement under the federal
bankruptcy laws or any other applicable law or statute of the United States of
America or any State, district or territory thereof;
(e) if
a court of competent jurisdiction shall enter an order, judgment, or decree
appointing, without the consent of the Company, a receiver of the whole or any
substantial part of the Company’s assets, and such order, judgment or decree
shall not be vacated or set aside or stayed within 60 days from the date of
entry thereof;
(f) if,
under the provisions of any other law for the relief or aid of debtors, any
court of competent jurisdiction shall assume custody or control of the whole or
any substantial part of the Company’s assets and such custody or control shall
not be terminated or stayed within 60 days from the date of assumption of such
custody or control;
(g) the
Company shall default in any of its obligations under any Bridge Note or
Existing Note or any other promissory note, indenture or 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 evidenced
any indebtedness for borrowed money or money due in an amount exceeding $50,000,
whether such indebtedness now exists or shall hereafter be created and such
default shall result in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and payable;
or
(h) any
representation or warranty made by the Company in the Subscription Agreement
was, when made, untrue or misleading, the result of which is reasonably likely
to have a Material Adverse Effect.
If any
Event of Default shall have occurred and be continuing, the Holder may proceed
to protect and enforce the Holder’s rights either by suit in equity and/or by
action at law, whether for the specific performance of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note, or may proceed to enforce the payment of all sums due upon this Note or to
enforce any other legal or equitable right of the Holder.
5. Attorney’s
Fees. If the indebtedness represented by this Note or any part
thereof is collected in bankruptcy, receivership or other judicial proceedings
or if this Note is placed in the hands of attorneys for collection after
default, the Company agrees to pay, in addition to the principal and interest
payable hereunder, reasonable attorneys’ fees and costs incurred by
Xxxxxx.
6. Notices. Any
notice, other communication or payment required or permitted hereunder shall be
in writing and shall be deemed to have been given upon delivery to the address
provided pursuant to the Purchase Agreement. In the case of notice to
either party, copies should be sent to X. Xxxxx Xxxxxxxx, Esq., Xxxxxx Xxxxxxx
Xxxxx & Xxxxxx LLP, 0000 Xxxx Xxxxx Xxxxx Xxxxx
000, Xxxxxxx, XX 00000-0000. The Company shall notify the Holder in
writing at least five (5) days prior to the closing of a Qualified IPO, Sale of
the Company or Reverse Merger.
7. Notice of Proposed
Transfers. Prior to any proposed transfer of this Note or the
Common Stock, unless there is in effect a registration statement under the
Securities Act, covering the proposed transfer, the holder hereof shall give
written notice to the Company of such holder’s intention to effect such
transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail, and shall, if the
Company so requests, be accompanied by an unqualified written opinion of legal
counsel, who shall be reasonably satisfactory to the Company, addressed to the
Company and reasonably satisfactory in form and substance to the Company’s
counsel, to the effect that the proposed transfer of the Note or Common Stock
may be effected without registration under the Securities Act; provided,
however, no such opinion of counsel shall be necessary for a transfer without
consideration by a Holder to any affiliate of such Xxxxxx, or a transfer by a
Holder which is a partnership to a partner of such partnership or a retired
partner of such partnership who retires after the date hereof, or to the estate
of any such partner or retired partner or the transfer by gift, will or
intestate succession of any partner to his spouse or lineal descendants or
ancestors, if the transferee agrees in writing to be subject to the terms hereof
to the same extent as if such transferee were the original Holder
hereunder. Each certificate evidencing Common Stock or the Note
transferred as above provided shall bear an appropriate restrictive legend,
except that the Note or certificate shall not bear such restrictive legend if in
the opinion of counsel for the Company such legend is not required in order to
establish compliance with any provisions of the Securities Act.
8. Acceleration. This
Note shall become immediately due and payable if (i) the Company commences any
proceeding in bankruptcy or for dissolution, liquidation, winding-up,
composition or other relief under state or federal bankruptcy laws; or (ii)
there is any material breach of any material covenant, warranty, representation
or other term or condition of this Note or the Purchase Agreement at any time
which is not cured within the time periods permitted therein, or if no cure
period is provided therein, within sixty (60) days after the date on which the
Company receives notice of such breach.
9. No Dilution or
Impairment. The Company will not, by amendment of its
Certificate of Incorporation or Bylaws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Note, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Holder of this
Note against dilution or other impairment.
10. Waivers. The
Company hereby waives presentment, demand for performance, notice of
non-performance, protest, notice of protest and notice of
dishonor. No delay on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or any other right. This Note
is being delivered in and shall be construed in accordance with the laws of the
State of Delaware, without regard to the conflicts of laws provisions
thereof.
11. No Stockholder
Rights. Nothing contained in this Note shall be construed as
conferring upon the Holder or any other person the right to vote or to consent
or to receive notice as a stockholder of the Company.
12. Amendment. Any
term of this Note may be amended with the written consent of the Company and the
holders of not less than sixty-six and two-thirds percent (66⅔%) of the then
outstanding principal amount of the Notes, even without the consent of the
Holder hereof. Any amendment effected in accordance with this Section
12 shall be binding upon each holder of any Note, each future holder of all such
Notes, and the Company; provided, however, that no
special consideration or inducement may be given to any such holder in
connection with such consent that is not given ratably to all such holders, and
that such amendment must apply to all such holders ratably in accordance with
the principal amount of their then outstanding Notes. The Company
shall promptly give notice to all holders of outstanding Notes of any amendment
effected in accordance with this Section 12.
[SIGNATURE
PAGE FOLLOWS]
ISSUED as
of the date first above written.
|
VENTRUS
BIOSCIENCES, INC.
|
|||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
