NOTE CONVERSION AGREEMENT
Exhibit 10.3
THIS NOTE CONVERSION AGREEMENT (this “Agreement”) is entered into on April 4, 2013, by and between VistaGen Therapeutics, Inc., a Nevada corporation (the “Company”), and Platinum Long Term Growth VII, LLC, a Delaware limited liability company (“Platinum”).
WHEREAS, Platinum is the holder of certain Senior Secured Convertible Promissory Notes of the Company, issued on the dates and in the principal amounts set forth on Schedule A (the “Notes”), which Notes were issued pursuant to the terms of a Note Exchange and Purchase Agreement, dated as of October 11, 2012, between the Company and Platinum (“NEPA”);
WHEREAS, in order to secure the Company’s obligations to Platinum under the terms of the Notes, the Company and Platinum entered into (i) the Amended and Restated Security Agreement, attached hereto as Exhibit A (the “Security Agreement”), pursuant to which Platinum was granted a security interest in substantially all of the Company’s assets; and (ii) a Negative Covenant, attached hereto as Exhibit B (the “Negative Covenant”), prohibiting VistaGen Therapeutics, Inc., a California corporation and wholly owned subsidiary of the Company (“VistaGen California”), and Artemis Neuroscience, Inc., a Maryland corporation and wholly owned subsidiary of VistaGen California (“Artemis) (together, the “Subsidiaries”), from incurring, among other things, certain kinds of liens or indebtedness, and from agreeing to any merger or other organizational change;
WHEREAS, in addition, the Company, the Subsidiaries and Platinum entered into the Intellectual Property and Stock Pledge Agreement, attached hereto as Exhibit C (the “IP Security Agreement”), pursuant to which Platinum was granted a security interest in (i) all intellectual property of VistaGen California, and (ii) all of the capital stock and other equity interests of VistaGen California in Artemis;
WHEREAS, the Company has agreed to sell shares of its common stock, par value $0.001 per share (“Common Stock”), in a private transaction(s) resulting in gross proceeds to the Company of $36.0 million (the “Qualified Financing”) pursuant to the agreements attached hereto as Annex A (the “QF Documents”). The Qualified Financing will result in a change in control of the Company, assuming conversion or exercise of all issued and outstanding derivative securities of the Company; and
WHEREAS, the Company has requested that Platinum convert the principal balance and all accrued but unpaid interest due and owing Platinum under the terms of the Notes (the “Outstanding Balance”) into shares of the Company’s Common Stock upon consummation of the Qualified Financing (the “Note Conversion”), and to terminate the Security Agreement, Negative Covenant and IP Security Agreement (together, the “Security Agreements”).
NOW, THEREFORE, for and in consideration of the mutual agreements set forth herein, the parties hereto agree as follows:
1. Note Conversion. Subject to the satisfaction or waiver of the conditions to closing set forth in Section 7 of this Agreement (the “Closing”), the Outstanding Balance due Platinum under the terms of the Notes shall convert into that number of shares of Common Stock equal to the Outstanding Balance on the date of Closing (the “Closing Date”), divided by $0.50 (the “Conversion Shares”).
2. Manner of Conversion/Termination of Notes. On the Closing Date, the Company shall deliver (i) to Platinum written notice of the closing of the Qualified Financing, together with evidence of the receipt by the Company of $36.0 million in gross proceeds from the Qualified Financing and the issuance of 72 million shares of Common Stock as contemplated by the QF Documents (the “QF Notice”); and (ii) to the Company’s transfer agent an irrevocable notice to issue and deliver to Platinum a certificate or certificates or other document evidencing the Conversion Shares (the “Conversion Instructions”), which Conversion Shares shall be delivered within three (3) business days of Closing. Upon receipt by Platinum of the QF Notice and Conversion Instructions, the Notes shall be deemed paid in full, including accrued interest thereon, and all rights of Platinum under the Notes shall terminate and be of no further force and effect (other than its right to receive the Conversion Shares pursuant to the Conversion Instructions).
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3. Termination of the Security Agreement, Negative Covenant and IP Security Agreement. On the Closing Date, the Security Agreements shall terminate and be of no further force and effect, and Platinum shall execute any release, termination statement, or other document reasonably requested by the Company necessary to release Platinum’s security or other interest in and to any asset of the Company and the Subsidiaries granted or issued to Platinum under the terms of the Security Agreements, including by way of example and not by limitation, Platinum’s security interest in and to any and all intellectual property of VistaGen California, as described in Schedule B.
4. Representations, Warranties and Covenants of Platinum. Platinum hereby makes the following representations and warranties to the Company, and covenants for the benefit of the Company:
(a) Platinum is a limited liability company validly existing and in good standing under the laws of the jurisdiction of its organization.
(b) This Agreement has been duly authorized, validly executed and delivered by Platinum and is a valid and binding agreement and obligation of Platinum enforceable against Platinum in accordance with its terms, subject to limitations on enforcement by general principles of equity and by bankruptcy or other laws affecting the enforcement of creditors’ rights generally, and Platinum has full power and authority to execute and deliver the Agreement and the other agreements and documents contemplated hereby and to perform its obligations hereunder and thereunder.
(c) Platinum understands that the Conversion Shares are being offered and sold to it in reliance on specific provisions of Federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of Platinum set forth herein for purposes of qualifying for exemptions from registration under the Securities Act of 1933, as amended (the “Securities Act”) and applicable state securities laws.
(d) Platinum is an “accredited investor” as defined under Rule 501 of Regulation D promulgated under the Securities Act.
(e) Platinum is and will be acquiring the Conversion Shares for Platinum’s own account, for investment purposes, and not with a view to any resale or distribution in whole or in part, in violation of the Securities Act or any applicable securities laws; provided, however, that notwithstanding the foregoing, Platinum does not covenant to hold the Conversion Shares for any minimum period of time.
(f) The offer and sale of the Conversion Shares is intended to be exempt from registration under the Securities Act, by virtue of Section 3(a)(9) and/or 4(2) thereof. Platinum understands that the Conversion Shares are “restricted securities,” as that term is defined in the Securities Act and the rules thereunder, have not been registered under the Securities Act, and that none of the Conversion Shares can be sold or transferred unless they are first registered under the Securities Act and such state and other securities laws as may be applicable or the Company receives an opinion of counsel reasonably acceptable to the Company that an exemption from registration under the Securities Act is available (and then the Conversion Shares may be sold or transferred only in compliance with such exemption and all applicable state and other securities laws).
(g) Platinum has not assigned, conveyed or otherwise transferred any interest in and to the Notes to any third party, and owns and holds, beneficially and of record, the entire right, title, and interest in and to the Notes free and clear of all rights and Encumbrances (as defined below). As used herein, “Encumbrances” shall mean any security or other property interest or right, claim, lien, pledge, option, charge, security interest, contingent or conditional sale, or other title claim or retention agreement, interest or other right or claim of third parties, whether perfected or not perfected, voluntarily incurred or arising by operation of law, and including any agreement (other than this Agreement) to grant or submit to any of the foregoing in the future.
5. Representations, Warranties and Covenants of the Company. The Company represents and warrants to Platinum, and covenants for the benefit of Platinum, as follows:
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(a) The Company has been duly incorporated and is validly existing and in good standing under the laws of the state of Nevada, with full corporate power and authority to own, lease and operate its properties and to conduct its business as currently conducted, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure to register or qualify would not have a Material Adverse Effect. For purposes of this Agreement, “Material Adverse Effect” shall mean any material adverse effect on the business, operations, properties, prospects, or financial condition of the Company and its subsidiaries and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to perform any of its obligations under this Agreement in any material respect.
(b) The Conversion Shares have been duly authorized by all necessary corporate action and, when paid for or issued in accordance with the terms hereof, the Conversion Shares shall be validly issued and outstanding, fully paid and nonassessable, free and clear of all liens, encumbrances and rights of refusal of any kind.
(c) This Agreement has been duly authorized, validly executed and delivered on behalf of the Company and is a valid and binding agreement and obligation of the Company enforceable against the Company in accordance with its terms, subject to limitations on enforcement by general principles of equity and by bankruptcy or other laws affecting the enforcement of creditors’ rights generally, and the Company has full power and authority to execute and deliver the Agreement and the other agreements and documents contemplated hereby and to perform its obligations hereunder and thereunder.
(d) The execution and delivery of the Agreement and the consummation of the transactions contemplated by this Agreement by the Company, will not (i) conflict with or result in a breach of or a default under any of the terms or provisions of, (A) the Company’s certificate of incorporation or by-laws, or (B) of any material provision of any indenture, mortgage, deed of trust or other material agreement or instrument to which the Company is a party or by which it or any of its material properties or assets is bound, (ii) result in a violation of any provision of any law, statute, rule, regulation, or any existing applicable decree, judgment or order by any court, Federal or state regulatory body, administrative agency, or other governmental body having jurisdiction over the Company, or any of its material properties or assets or (iii) result in the creation or imposition of any material lien, charge or encumbrance upon any material property or assets of the Company or any of its subsidiaries pursuant to the terms of any agreement or instrument to which any of them is a party or by which any of them may be bound or to which any of their property or any of them is subject except in the case of clauses (i)(B), (ii) or (iii) for any such conflicts, breaches, or defaults or any liens, charges, or encumbrances which would not have a Material Adverse Effect.
(e) The delivery and issuance of the Conversion Shares in accordance with the terms of and in reliance on the accuracy of Platinum’s representations and warranties set forth in this Agreement will be exempt from the registration requirements of the Securities Act.
(f) No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Company is required in connection with the valid execution and delivery of this Agreement or the offer, sale or issuance of the Conversion Shares or the consummation of any other transaction contemplated by this Agreement.
(g) The Company has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and delivery of the Conversion Shares hereunder.
(h) The Company shall cause its Common Stock to continue to be registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”), and not take any action or file any document (whether or not permitted by the Securities Act or the rules promulgated thereunder) to terminate or suspend its reporting and filing obligations under the Exchange Act and the Securities Act, except as permitted herein. The Company will take all action necessary to continue the listing or trading of its Common Stock on the OTC Bulletin Board or other exchange or market on which the Common Stock is trading.
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(i) In the event that the Conversion Shares are sold in a manner that complies with an exemption from registration, the Company shall promptly cause its counsel (at its expense) to issue to the transfer agent an opinion permitting removal of the legend (indefinitely if pursuant to Rule 144(k) of the Securities Act (or its successor provisions, including any provision that permits unlimited resales after the relevant holding period set forth in Rule 144), or to permit sales of the Conversion Shares if pursuant to the other provisions of Rule 144 of the Securities Act).
6. Warrant Adjustments. The Parties agree and acknowledge that (i) the issuance of the QF Securities, and (ii) the grant to certain officers and directors of the Company of ten-year warrants to purchase an aggregate of 3.0 million shares of the Company’s Common Stock at an exercise price of $0.64 per share (the “Option Issuance”), shall trigger adjustments to the exercise price and number of warrant shares under (i) Article IV of the common stock purchase warrants issued to Platinum pursuant the NEPA (the “NEPA Warrants”), and (ii) the Series A Exchange Warrants (as defined in the NEPA) that may be issued to Platinum upon consummation of a Series A Exchange (as defined in the NEPA) (together, the “Warrant Adjustments”). Notwithstanding the above, and the provisions requiring Warrant Adjustments in the NEPA Warrants and the Series A Exchange Warrants, the Parties agree and acknowledge that the exercise price of the NEPA Warrants and the Series A Exchange Warrants shall be reduced to $0.50 per share as a result of the issuance of any Common Stock pursuant to the QF Documents, and no other Warrant Adjustments shall be made as a result of the issuance of the QF Securities pursuant to the QF Documents or the Option Issuance, including without limitation, any adjustment to the number of Shares of Common Stock issuable upon exercise of the NEPA Warrants and the Series A Exchange Warrants. The Parties further agree and acknowledge that, as a result of the foregoing, to the extent of any conflict between the terms and conditions of the NEPA Warrants and Series A Exchange Warrants, and the terms and conditions set forth in this Section 6, the terms of this Section 6 shall control.
7. Conditions Precedent to the Obligation of the Company to Consummate the Note Conversion. The obligation hereunder of the Company to issue and deliver the Conversion Shares to Platinum and consummate the Note Conversion is subject to the satisfaction or waiver, at or before the Closing Date, of each of the conditions set forth below. These conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion.
(a) Platinum shall have executed and delivered this Agreement.
(b) Platinum shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Platinum at or prior to the Closing Date.
(c) The representations and warranties of Platinum shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date.
8. Conditions Precedent to the Obligation of Platinum to Consummate the Note Conversion. The obligation hereunder of Platinum to surrender the Notes, accept the Conversion Shares and consummate the Note Conversion is subject to the satisfaction or waiver, at or before the Closing Date, of each of the conditions set forth below. These conditions are for Platinum’s sole benefit and may be waived by Platinum at any time in its sole discretion.
(a) The Company shall have executed and delivered this Agreement.
(b) The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.
(c) Each of the representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that speak as of a particular date, which shall be true and correct in all material respects as of such date.
(d) No statute, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement at or prior to the Closing Date.
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(e) As of the Closing Date, no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, shall be pending against or affecting the Company, or any of its properties, which questions the validity of the Agreement or the transactions contemplated thereby or any action taken or to be taken pursuant thereto. As of the Closing Date, no action, suit, claim or proceeding before or by any court or governmental agency or body, domestic or foreign, shall be pending against or affecting the Company, or any of its properties, which, if adversely determined, is reasonably likely to result in a Material Adverse Effect.
(f) On or before April 30, 2013, the Company shall have fully consummated the Qualified Financing on the terms set forth in the QF Documents attached hereto as Annex A, issuing 72 million shares of Common Stock thereunder, and delivered to Platinum the QF Notice and Conversion Instructions.
9. Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without giving effect conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. Each of the Parties consents to the exclusive jurisdiction of the Federal courts whose districts encompass any part of the State of New York in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. Each Party waives its right to a trial by jury. Each Party to this Agreement irrevocably consents to the service of process in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such Party at its address set forth herein. Nothing herein shall affect the right of any Party to serve process in any other manner permitted by law.
10. Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, express overnight courier, registered first class mail, or telecopier (provided that any notice sent by telecopier shall be confirmed by other means pursuant to this Section 10), initially to the address set forth below, and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 10.
if to the Company:
000 Xxxxxx Xxxxx Xxxx., Xxxxx Xx. 0
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Tel. No.: (650) 244-9990 ext. 224
Fax No.: (000) 000-0000
with a copy to:
Disclosure Law Group
000 Xxxx Xxxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esquire
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
if to Platinum:
Platinum Long Term Growth VII, LLC
000 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx, M.D.
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
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with a copy to:
Xxxxx Xxxxxxxx & Xxxxxxx, PLC
00 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. XxXxxxxxx, Esquire
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when receipt is acknowledged, if telecopied; or when actually received or refused if sent by other means.
11. Disclosure of Transaction. The Company shall file with the Securities and Exchange Commission a Current Report on Form 8-K (the “Form 8-K”) describing the material terms of the transactions contemplated hereby as soon as practicable following the Closing Date but in no event more than two (2) business days following the Closing Date.
12. Entire Agreement. This Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter hereof and supersedes all prior and/or contemporaneous oral or written proposals or agreements relating thereto all of which are merged herein. This Agreement may not be amended or any provision hereof waived in whole or in part, except by a written amendment signed by both of the Parties.
13. Counterparts. This Agreement may be executed by facsimile signature and in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
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IN WITNESS WHEREOF the parties have signed this instrument as of the date first set forth above.
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ADDRESS:
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000 Xxxxxx Xxxxx Xxxx., Xxxxx Xx. 0
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
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By: /s/ Xxxxx X. Xxxxx
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| Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
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ADDRESS:
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PLATINUM LONG TERM GROWTH VII, LLC
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000 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
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By: /s/ Xxxxxxx Xxxxxxxx
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| Name: Xxxxxxx Xxxxxxxx
Title: Portfolio Manager
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ANNEX A
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SCHEDULE A
SENIOR SECURED CONVERTIBLE PROMISSORY NOTES ISSUED TO PLATINUM
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Date of Issuance
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Principal Amount
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October 11, 2012
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$ | 1,272,577.27 | ||
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October 11, 2012
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$ | 500,000.00 | ||
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October 19, 2012
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$ | 500,000.00 | ||
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February 22, 2013
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$ | 250,000.00 | ||
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March 12, 2013
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$ | 750,000.00 | ||
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Total
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$ | 3,272,577.27 | ||
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SCHEDULE B
All of the “Collateral” under and as defined in that certain Intellectual Property and Security Agreement by and between Vistagen Therapeutics, Inc., a California corporation, and Platinum Long Term Growth VII, LLC, dated as of October 11, 2012, including, but not limited to, the following:
Patents:
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Country
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Title
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Application Number Filing Date
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Publication Number Publication Date
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Patent
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Inventors /Assignees
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Status
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US
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Toxicity Typing Using Liver Stem Cells
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11/445,733 06/01/2006
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8,143,009
03/27/12
2007/0111195 05/17/2007
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09/881,526 06/14/2001
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Inventor:
Xxxxxxxxx, X.X.
Assignee:
VistaGen Inc.
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Issued
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US
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Toxicity Typing Using Liver Stem Cells
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13/401,623
02/21/12
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11/445,733 06/01/2006
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Inventor:
Xxxxxxxxx, X.X.
Assignee:
VistaGen Inc.
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Pending
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US
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Pancreatic Endocrine Progenitor Cells Derived From Pluripotent Stem Cells
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12/464,005 05/11/2009
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2009/0280096 11/12/2009
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61/052,155 05/09/2008
61/061,070 06/12/2008
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Inventor:
Kubo, A., Bonham, K, Xxxxx, X. Xxxxxxxxx, H.R.
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Pending
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Trademarks:
VISTAGEN US, Switzerland, Europe
VistaGen Therapeutics – use trademark, not registered, XX
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XXXXXXX X
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XXXXXXX X
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EXHIBIT C
