SECURITIES PURCHASE AGREEMENT
Exhibit 10.1
This
Securities Purchase Agreement (this “Agreement”) is dated as
of December 31, 2020, between AzurRx BioPharma, Inc., a Delaware
corporation (the “Company”), and the
purchaser identified on the signature page hereto (including its
successors and assigns, the “Purchaser”).
WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to (i) an effective registration statement under the Securities Act
of 1933, as amended (the “Securities Act”) as to
the Registered Preferred Shares and (ii) pursuant to an exemption
from the registration requirements of Section 5 of the Securities
Act contained in Section 4(a)(2) thereof and Rule 506 promulgated
thereunder as to the Warrants and the Unregistered Preferred
Shares, the Company desires to issue and sell to the Purchaser, and
the Purchaser desires to purchase from the Company, securities of
the Company as more fully described in this Agreement.
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 the Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement, for
all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:
“Acquiring
Person” shall have the
meaning ascribed to such term in Section 4.5.
“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.
“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 authorized or required by
law or other governmental action to close.
“Certificate of
Designation” means the Certificate of Designation to
be filed prior to the Closing by the Company with the Secretary of
State of Delaware, in the form of Exhibit A attached
hereto.
“Closing” means the
closing of the purchase and sale of the Securities pursuant to
Section 2.1.
“Closing Date” means the
Trading 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 Purchaser’s obligations to
pay the Subscription Amount and (ii) the Company’s
obligations to deliver the Securities, in each case, have been
satisfied or waived.
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“Commission”
means the United States Securities and Exchange
Commission.
“Common Stock” means the
common stock of the Company, par value $0.0001 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.
“Company Counsel” means
Xxxxxxxxxx Xxxxxxx LLP, Xxx Xxxxxxxxxx Xxxxx, Xxxxxxxx, Xxx Xxxxxx
00000.
“Conversion Shares” means
the shares of Common Stock issuable upon conversion of the
Preferred Stock (or exercise of any Prefunded Warrants, as
applicable), in accordance with the terms of the Certificate of
Designation.
“Covered Securities” means
any shares of Common Stock underlying (x) any shares of preferred
stock issuable to First Wave Bio, Inc., as consideration for the
License Agreement (if other than the Preferred Stock), (y) any
warrants issuable to the Placement Agent, as compensation for the
placement of the Securities hereunder, and (z) any securities
issuable to holders of Series B Exchange Rights, as a result of the
transactions contemplated by this Agreement.
“Disclosure Schedules”
means the Disclosure Schedules of the Company delivered
concurrently herewith.
“Disclosure Time” means,
(i) if this Agreement is signed on a day that is not a Trading Day
or after 9:00 a.m. (New York City time) and before midnight (New
York City time) on any Trading Day, 9:01 a.m. (New York City time)
on the Trading Day immediately following the date hereof, unless
otherwise instructed as to an earlier time by the Placement Agent,
and (ii) if this Agreement is signed between midnight (New York
City time) and 9:00 a.m. (New York City time) on any Trading Day,
no later than 9:01 a.m. (New York City time) on the date hereof,
unless otherwise instructed as to an earlier time by the Placement
Agent.
“Effective Date” means the
earliest of the date that (a) the initial Resale Registration
Statement has been declared effective by the Commission, (b) all of
the Conversion Shares and Warrant Shares have been sold pursuant to
Rule 144 or may be sold 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, (c) following the one year anniversary
of the Closing Date provided that a holder of Conversion Shares or
Warrant Shares is not an Affiliate of the Company, or (d) all of
the Conversion Shares and Warrant Shares may be sold pursuant to an
exemption from registration under Section 4(a)(1) of the Securities
Act without volume or manner-of-sale restrictions and Company
Counsel has delivered to such holders a standing written
unqualified opinion that resales may then be made by such holders
of the Conversion Shares and Warrant Shares pursuant to such
exemption which opinion shall be in form and substance reasonably
acceptable to such holders.
“Evaluation Date” shall
have the meaning ascribed to such term in Section
3.1(s).
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
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“Exempt Issuance” means
the issuance of (a) shares of Common Stock or Common Stock
Equivalents 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 (“Board Approval”) for
services rendered to the Company, (b) up to 500,000 shares of Common Stock or
Common Stock Equivalents to consultants or advisors, or to their
designees, for bona fide services provided in connection with the
offer or sale of securities in a capital-raising transaction, or
directly or indirectly promoting or maintaining a market for the
Company’s securities; provided that such securities are
issued as “restricted securities” (as defined in Rule
144) and carry no registration rights that require or permit the
filing of any registration statement in connection therewith during
the prohibition period in Section 4.11(a) herein, (c) securities
upon the exercise or exchange of or conversion of any Securities
issued hereunder and/or other 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 have not been amended since the date of this Agreement
to increase the number of such securities or to decrease the
exercise price, exchange price or conversion price of such
securities (other than in connection with stock splits or
combinations) or to extend the term of such securities, (d) to
banks, equipment lessors or other financial institutions, or to
real property lessors, pursuant to a debt financing, equipment
lease financing, credit agreement, real property lease or other
commercial transaction, provided that the primary purpose thereof
is not to raise equity capital, and subject to Board Approval and
(e) securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors
of the Company, provided that such securities are issued as
“restricted securities” (as defined in Rule 144) and
carry no registration rights that require or permit the filing of
any registration statement in connection therewith during the
prohibition period in Section 4.11(a) herein, and provided that any
such issuance shall only be to a Person (or to the equityholders 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 provide to the Company
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
“FCPA” means the Foreign
Corrupt Practices Act of 1977, as amended.
“FDA” shall have the
meaning ascribed to such term in Section 3.1(kk).
“FDCA” shall have the
meaning ascribed to such term in Section 3.1(kk).
“GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).
“Xxxxxx and Xxxxx” means
Xxxxxx and Xxxxx, LLP, 00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000.
“Indebtedness” shall have
the meaning ascribed to such term in Section 3.1(bb).
“Intellectual Property
Rights” shall have the meaning ascribed to such term
in Section 3.1(p).
“Legend Removal Date”
shall have the meaning ascribed to such term in Section
4.1(e).
“Liens” means a lien,
charge pledge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
“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(n).
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“Per Preferred Purchase
Price” equals $750.00 per share of Preferred Stock,
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.
“Person” means an
individual or corporation, 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.
“Pharmaceutical Product”
shall have the meaning ascribed to such term in Section
3.1(kk).
“Placement Agent” means
X.X. Xxxxxxxxxx & Co., LLC.
“Preferred Stock” means
the Series C 9.00% Convertible Junior Preferred Stock of the
Company, par value $0.0001, issued pursuant to the term so of the
Certificate of Designation.
“Prefunded Warrants” means
any prefunded warrants issuable in lieu of Common Stock pursuant to
the Certificate of Designation, in the form of Exhibit D attached
hereto.
“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.
“Prospectus” means the
final base prospectus filed for the Shelf Registration
Statement.
“Prospectus Supplement”
means the supplement to the Prospectus complying with Rule 424(b)
of the Securities Act that is filed with the Commission and
delivered by the Company to the Purchaser at the
Closing.
“Proxy Statement” shall
have the meaning ascribed to such term in Section
4.16.
“Public Information
Failure” shall have the meaning ascribed to such term
in Section 4.2(b).
“Public Information Failure
Payments” shall have the meaning ascribed to such term
in Section 4.2(b).
“Purchaser Party” shall
have the meaning ascribed to such term in Section 4.8.
“Registered Conversion
Shares” means the Conversion Shares issuable upon
conversion of Registered Preferred Shares (or exercise of any
Registered Prefunded Warrants, as applicable).
“Registered Preferred
Shares” shall have the meaning ascribed to such term
in Section 2.1.
“Registered Prefunded
Warrants” means any Prefunded Warrants issuable in
respect of Registered Preferred Shares in accordance with the
Certificate of Designation.
“Registration Rights
Agreement” means the Registration Rights Agreement,
dated on or about the date hereof, among the Company and the
Purchaser, in the form of Exhibit B attached
hereto.
“Shelf Registration
Statement” means the effective registration statement
with Commission File No. 333-231954 which registers the sale of the
Registered Preferred Shares to the Purchaser.
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“Required Approvals” shall
have the meaning ascribed to such term in Section
3.1(e).
“Resale Registration
Statement” means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and
covering the resale by the Purchaser of the Conversion Shares and
the Warrant Shares.
“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.
“Rule 424” means Rule 424
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
Preferred Stock, the Prefunded Warrants, the Warrants, the Warrant
Shares and the Conversion Shares.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Series B Exchange Rights”
means the rights set forth in Section 8 of the Certificate of
Designations, Powers, Preferences and Rights of the Company’s
Series B Convertible Preferred Stock, par value $0.0001 per
share.
“Short Sales” means all
“short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not
be deemed to include locating and/or borrowing shares of Common Stock).
“Stockholder Approval”
means such approval as may be required from the stockholders of the
Company in accordance with applicable law, the applicable rules and
regulations of the Nasdaq Stock Market (or any successor entity),
the Company’s certificate of incorporation and bylaws and the
General Corporate Law of the State of Delaware with respect to the
transactions contemplated by the Transaction Documents, including
(x) an increase in the number of authorized shares of Common Stock
above 150,000,000 and (y) the issuance of any Underlying Shares or
other Covered Securities in excess of the Issuable Maximum (as
defined in the Certificate of Designation).
“Stockholder Meeting”
shall have the meaning ascribed to such term in Section
4.16.
“Stockholder Meeting
Deadline” shall have the meaning ascribed to such term
in Section 4.16.
“Subscription Amount”
means, as to the Purchaser, the aggregate amount to be paid for
Preferred Stock and Warrants purchased hereunder as specified below
the 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.
“Subsidiary” means any
subsidiary of the Company as set forth in the SEC Reports and
shall, where applicable, also include any direct or indirect
subsidiary of the Company formed or acquired after the date
hereof.
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“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, OTCQB or
OTCQX (or any successors to any of the foregoing).
“Transaction Documents”
means this Agreement, the Warrants, the Registration Rights
Agreement, all exhibits and schedules thereto and hereto and any
other documents or agreements executed in connection with the
transactions contemplated hereunder.
“Transfer Agent” means
Colonial Stock Transfer Company, Inc., the current transfer agent
of the Company, with a mailing address of 00 Xxxxxxxx Xxxxx,
0xx Xxxxx,
Xxxx Xxxx Xxxx, Xxxx 00000, and any successor transfer agent of the
Company.
“Underlying Shares” means,
collectively, the shares of Common Stock issued and issuable upon
conversion of the Series C Preferred Stock (or exercise of any
Unregistered Prefunded Warrants, as applicable), and upon exercise
of the Warrants.
“Unregistered Conversion
Shares” means the Conversion Shares issuable upon
conversion of the Unregistered Preferred Shares (or exercise of any
Unregistered Prefunded Warrants, as applicable).
“Unregistered Preferred
Shares” shall have the meaning ascribed to such term
in Section 2.1.
“Unregistered Prefunded
Warrants” means any Prefunded Warrants issuable in
respect of the Unregistered Preferred Shares in accordance with the
Certificate of Designation.
“Variable Rate
Transaction” shall have the meaning ascribed to such
term in Section 4.12(b). “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 OTCQB or OTCQX is not a Trading Market, the volume
weighted average price of the Common Stock for such date (or the
nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the
Common Stock is not then listed or quoted for trading on OTCQB or
OTCQX and if prices for the Common Stock are then reported on the
Pink Open Market (or a similar organization or agency succeeding to
its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the purchasers of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.
“Warrants” means the
Common Stock purchase warrants delivered to the Purchaser at the
Closing in accordance with Section 2.2(a) hereof, which Warrants
shall be exercisable immediately and have a term of exercise equal
to five and one-half years, in the form of Exhibit C attached
hereto.
“Warrant Shares” means the
shares of Common Stock issuable upon exercise of the
Warrants.
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ARTICLE II.
PURCHASE AND SALE
2.1 Closing.
On the Closing Date, upon the terms and subject to the conditions
set forth herein, the Company agrees to sell, and the Purchaser
agrees to purchase, up to an aggregate of $8,000,001 of Preferred
Stock and Warrants. The Purchaser’s Subscription Amount as
set forth on the signature page hereto executed by the Purchaser
(i) with respect to any Registered Conversion Shares issuable at
Closing shall be made available for “Delivery Versus
Payment” (“DVP”) settlement with the Company or its
designees or (ii) with respect to any other Securities being
acquired hereunder, shall be delivered to the Company or its
designees, via wire transfer, immediately available funds. The
Company shall deliver to the Purchaser its respective shares of
Preferred Stock and a Warrant as determined pursuant to Section
2.2(a), and the Company and the Purchaser shall deliver the other
items set forth in Section 2.2 deliverable at the Closing. Upon
satisfaction of the covenants and conditions set forth in Sections
2.2 and 2.3, the Closing shall occur at the offices of the
Placement Agent or such other location as the parties shall
mutually agree. 5,333.3333 shares of Preferred Stock will be
registered under Securities Act pursuant to the Shelf Registration
Statement (the “Registered Preferred
Shares”), and 5,333.3333
shares of Preferred Stock (the “Unregistered Preferred
Shares”), together with
the Warrants, will be issued in a private placement pursuant to an
exemption from the registration requirements of Section 5 of the
Securities Act contained in Section 4(a)(2) thereof and Rule 506
promulgated thereunder. Unless otherwise directed by the Placement
Agent, on the Closing Date, the Company shall issue the Preferred
Stock registered in the Purchaser’s name and address in book
entry form and the Purchaser shall deliver payment therefor by wire
transfer to the Company. The Company covenants that, if
the Purchaser delivers a Notice of Conversion to convert any shares
of Preferred Stock between the date hereof and the Closing Date,
the Company shall deliver the Conversion Shares (or Prefunded
Warrants, as applicable) to the Purchaser on the Closing Date in
connection with such Notice of Conversion.
2.2 Deliveries.
(a) On or prior to the
Closing Date, the Company shall deliver or cause to be delivered to
the Purchaser the following:
(i) this Agreement duly
executed by the Company;
(ii) a
legal opinion of Company Counsel, in such form as is reasonably
satisfactory to the Purchaser and the Placement Agent;
(iii) the
Company’s wire instructions, on Company letterhead and
executed by the Chief Executive Officer or Chief Financial
Officer;
(iv) subject
to the last sentence of Section 2.1, a copy of the irrevocable
instructions to the Transfer Agent instructing the Transfer Agent
to deliver on an expedited basis, a copy of an account statement
issued by the Transfer Agent evidencing a book entry notification
in the name of the Purchaser evidencing a number of shares of
Preferred Stock equal to the Purchaser’s Subscription Amount
divided by the Per Preferred Purchase Price, registered in the name
of the Purchaser;
(v) a Warrant
registered in the name of the Purchaser to purchase such number of
shares of Common Stock equal to 100% of the Conversion Shares
issuable upon the full conversion of the Purchaser’s shares
of Preferred Stock (or exercise of any Prefunded Warrants, as
applicable), with an exercise price equal to $0.80, subject to
adjustment therein;
(vi) the
Prospectus and Prospectus Supplement (which may be delivered in
accordance with Rule 172 under the Securities Act);
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(vii) evidence
of the filing and acceptance of the Certificate of Designation from
the Secretary of State of Delaware; and
(viii) the
Registration Rights Agreement duly executed by the
Company.
(b) On or prior to the
Closing Date, the Purchaser shall deliver or cause to be delivered
to the Company, the following:
(i) this Agreement duly
executed by the Purchaser;
(ii) the
Purchaser’s Subscription Amount, which shall be made
available (A) for DVP settlement with the Company or its designees
for any Registered Conversion Shares issuable at the Closing and
(B) by wire transfer to the account specified in writing by the
Company for any other Securities issuable at Closing;
and
(iii) the
Registration Rights Agreement duly executed by the
Purchaser.
2.3 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing
are subject to the following conditions being
met:
(i) the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the Closing Date of the representations
and warranties of the Purchaser 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 the Purchaser required to
be performed at or prior to the Closing Date shall have been
performed;
(iii) the
delivery by the Purchaser of the items set forth in Section 2.2(b)
of this Agreement; and
(iv) the
delivery by First Wave Bio, Inc. to the Company of the License
Agreement by and between such parties (the “License Agreement”), duly
executed by First Wave Bio, Inc.
(c) The respective
obligations of the Purchaser hereunder in connection with the
Closing are subject to the following conditions being
met:
(i) the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the 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
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed;
(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
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(v) from the date
hereof to the Closing Date, trading in the Common Stock shall not
have been suspended by the Commission or the Company’s
principal Trading Market, 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 the 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 Disclosure Schedules, which Disclosure
Schedules shall be deemed a part hereof and shall qualify any
representation or otherwise made herein to the extent of the
disclosure contained in the corresponding section of the Disclosure
Schedules, or as set forth in the SEC Reports, the Company hereby
makes the following representations and warranties to the
Purchaser:
(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company are set forth in the
Disclosure Schedules. The Company owns, directly or indirectly, all
of the capital stock or other equity interests of each Subsidiary
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 preemptive and similar
rights to subscribe for or purchase securities. If the Company has
no subsidiaries, all other references to the Subsidiaries or any of
them in the Transaction Documents shall be
disregarded.
(b) Organization and Qualification.
The Company and each of the Subsidiaries 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 the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign
corporation 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 have
or 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, prospects or condition (financial
or otherwise) of the Company and the Subsidiaries, 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.
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(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 of this Agreement and the
other Transaction Documents to which it is a party, the issuance
and sale of the Securities and the consummation by it of the
transactions contemplated hereby and thereby do not and will not
(i) conflict with or violate any provision of the Company’s
or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, or (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, anti-dilution or similar
adjustments, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or
other instrument (evidencing a Company or Subsidiary 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 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 clauses (ii) and (iii), such as would 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 4.4 of this Agreement, (ii) the filing
with the Commission of the Prospectus Supplement, (iii)
application(s) to each applicable Trading Market for the listing of
the Conversion Shares and Warrant Shares for trading thereon in the
time and manner required thereby, (iv) the filing of Form D with
the Commission, (v) the filing of a registration statement with the
Commission pursuant to the Registration Rights Agreement, and (vi)
such filings as are required to be made under applicable state
securities laws (collectively, the “Required
Approvals”).
-10-
(f) Issuance of the Securities;
Registration. 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.
The Warrant Shares, when issued in accordance with the terms of the
Warrants, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company. The Conversion
Shares, when converted, will be issued in accordance with the
Certificate of Designation and will be validly issued, fully paid
and nonassessable, free and clear of all Liens imposed by the
Company. The Company has reserved from its duly authorized capital
stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement, the Warrants and the Certificate of
Designation. The Company has prepared and filed the Shelf
Registration Statement in conformity with the requirements of the
Securities Act, which became effective on June 25, 2019, including
the Prospectus, and such amendments and supplements thereto as may
have been required to the date of this Agreement. The Company was
at the time of the filing of the Shelf Registration Statement
eligible to use Form S-3. The Company is eligible to use Form S-3
under the Securities Act and it meets the transaction requirements
with respect to the aggregate market value of securities being sold
pursuant to the Shelf Registration Statement in this offering and
during the twelve (12) calendar months prior to this offering, as
set forth in General Instruction I.B.6 of Form S-3. The Shelf
Registration Statement is effective under the Securities Act and no
stop order preventing or suspending the effectiveness of the Shelf
Registration Statement or suspending or preventing the use of the
Prospectus has been issued by the Commission and no proceedings for
that purpose have been instituted or, to the knowledge of the
Company, are threatened by the Commission. The Company, if required
by the rules and regulations of the Commission, shall file the
Prospectus Supplement with the Commission pursuant to Rule 424(b).
At the time the Shelf Registration Statement and any amendments
thereto became effective, at the date of this Agreement and at the
Closing Date, the Shelf Registration Statement and any amendments
thereto conformed and will conform in all material respects to the
requirements of the Securities Act and did not and will not contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading; and the Prospectus and any
amendments or supplements thereto, at the time the Prospectus or
any amendment or supplement thereto was issued and at the Closing
Date, conformed and will conform in all material respects to the
requirements of the Securities Act and did not and will not contain
an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.
(g) Capitalization. The
capitalization of the Company as of the date hereof is as set forth
on Schedule 3.1(g),
which Schedule
3.1(g) shall also include the number of shares of Common
Stock owned beneficially, and of record, by Affiliates of the
Company as of the date hereof. The Company has not issued any
capital stock since its most recently
filed periodic report under the Exchange Act, other than
pursuant to the exercise of employee stock options under the
Company’s stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company’s employee
stock purchase plans and pursuant to the conversion and/or exercise
of Common Stock Equivalents outstanding as of the date of the most
recently filed periodic report under the Exchange Act. 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 a
result of the purchase and sale of the Securities or as set forth
in Schedule 3.1(g),
there are no outstanding options, 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 the
capital stock of any Subsidiary, 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 or capital stock of any
Subsidiary. Except as set forth in Schedule 3.1(g), the issuance
and sale of the Securities will not obligate the Company or any
Subsidiary to issue shares of Common Stock or other securities to
any Person (other than the Purchaser). Except as set forth in
Schedule 3.1(g),
there are no outstanding securities or instruments of the Company
or any Subsidiary with any provision that adjusts the exercise,
conversion, exchange or reset price of such security or instrument
upon an issuance of securities by the Company or any Subsidiary.
There are no outstanding securities or instruments of the Company
or any Subsidiary that contain any redemption or similar
provisions, and there are no contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may
become bound to redeem a security of the Company or such
Subsidiary. The Company does not have any stock appreciation rights
or “phantom stock” plans or agreements or any similar
plan or agreement. All of the outstanding shares of capital stock
of the Company are duly authorized, validly issued, fully paid and
nonassessable, have been issued in 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. No further approval or
authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the Securities. 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.
-11-
(h) SEC Reports; Financial
Statements. 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 two 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, together with the Prospectus and
the Prospectus Supplement, 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 in the SEC Reports or on Schedule 3.1(i), (i) there has
been no event, occurrence or development that has had or that would
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 material
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, prospects, 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 1
Trading Day prior to the date that this representation is
made.
(j) Litigation. Except as disclosed
the SEC Reports or on 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) would, 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 (in his or her capacity as such) 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 (in his or her capacity as
such). 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.
-12-
(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 would
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. 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 would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(l) Compliance.
Except as disclosed on the SEC Reports or 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
would not have or reasonably be expected to result in a Material
Adverse Effect.
(m) Environmental Laws. The Company
and its Subsidiaries (i) are in compliance with all federal, state,
local and foreign laws relating to pollution or protection of human
health or the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata), including laws
relating to emissions, discharges, releases or threatened releases
of chemicals, pollutants, contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous Materials”)
into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands, or demand letters,
injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations, issued, entered, promulgated
or approved thereunder (“Environmental Laws”);
(ii) have received all permits licenses or other approvals required
of them under applicable Environmental Laws to conduct their
respective businesses; and (iii) are in compliance with all terms
and conditions of any such permit, license or approval where in
each clause (i), (ii) and (iii), the failure to so comply would be
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.
(n) 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 as described in the SEC Reports, except where the
failure to possess such permits would 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.
-13-
(o) 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.
(p) Intellectual Property. To the
knowledge of the Company, 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 necessary or required for use in
connection with their respective businesses as described in the SEC
Reports and which the failure to so have would have a Material
Adverse Effect (collectively, the “Intellectual Property
Rights”). None of, and neither the Company nor any
Subsidiary has received a written notice 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 for which the
expiration, termination or abandonment could have a Material
Adverse Effect. 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 would
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 would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(q) Insurance. The Company and the
Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company
and the Subsidiaries are engaged, including, but not limited to,
directors and officers insurance coverage at least equal to the
aggregate Subscription Amount. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant
increase in cost.
(r) Transactions with Affiliates and
Employees. Except as set forth on Schedule 3.1(r), 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 $120,000 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.
-14-
(s) Xxxxxxxx-Xxxxx; Internal Accounting
Controls. The Company and the Subsidiaries are in compliance
in all material respects with any and all applicable requirements
of the Xxxxxxxx-Xxxxx 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 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. The
Company and the Subsidiaries have established disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and the Subsidiaries and designed such
disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the
Commission’s rules and forms. The Company’s certifying
officers have evaluated the effectiveness of the disclosure
controls and procedures of the Company and the Subsidiaries as of
the end of the period covered by the most recently filed periodic
report under the Exchange Act (such date, the
“Evaluation
Date”). The Company
presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on
their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the internal control over
financial reporting (as such term is defined in the Exchange Act)
of the Company and its Subsidiaries that have materially affected,
or is reasonably likely to materially affect, the internal control
over financial reporting of the Company and its
Subsidiaries.
(t) Certain Fees. Except for the
fees and expenses of the Placement Agent, no brokerage or
finder’s fees or commissions are or will be payable by the
Company or any Subsidiary 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 Purchaser 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.
(u) Private Placement. Assuming the
accuracy of the Purchaser’s representations and warranties
set forth in Section 3.2, no registration under the Securities Act
is required for the offer and sale of the Warrants, the Warrant
Shares, the Unregistered Preferred Shares, the Unregistered
Prefunded Warrants or the Unregistered Conversion Shares by the
Company to the Purchaser as contemplated hereby.
(v) 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.
(w) Registration Rights. Except as
set forth on Schedule
3.1(w), other than the Purchaser pursuant to the
Registration Rights Agreement, no Person has any right to cause the
Company or any Subsidiary to effect the registration under the
Securities Act of any securities of the Company or any
Subsidiary.
-15-
(x) 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. Except as disclosed in the SEC Reports or on
Schedule 3.1(x),
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. Except as set forth in the SEC Reports or on
Schedule 3.1(x), 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.
(y) 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 would become
applicable to the Purchaser as a result of the Purchaser 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
Purchaser’s ownership of the Securities.
(z) 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 the Purchaser or its agents or counsel with any
information that it believes constitutes or might constitute
material, non-public information. The Company understands and
confirms that the Purchaser 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 Purchaser 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 the
light of the circumstances under which they were made, not
misleading. The Company acknowledges and agrees that the Purchaser
does not make nor has made any representations or warranties with
respect to the transactions contemplated hereby other than those
specifically set forth in Section 3.2 hereof.
(aa) No
Integrated Offering. Assuming the accuracy of the
Purchaser’s 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.
-16-
(bb) Solvency.
Based on the consolidated financial condition of the Company as of
the Closing Date, 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 $100,000 (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 $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 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
Warrants, the Warrant Shares, the Unregistered Preferred Shares,
the Unregistered Prefunded Warrants or the Unregistered Conversion
Shares by any form of general solicitation or general advertising.
The Company has offered the Warrants, the Warrant Shares, the
Unregistered Preferred Shares, the Unregistered Prefunded Warrants
and the Unregistered Conversion Shares for sale only to the
Purchaser 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.
-17-
(ff) Accountants.
The Company’s accounting firm is set forth in the SEC
Reports. 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, 2020.
(gg) 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 and the Company is current with respect to any fees owed to
its accountants and lawyers which could affect the Company’s
ability to perform any of its obligations under any of the
Transaction Documents.
(hh) Acknowledgment
Regarding Purchaser’s Purchase of Securities. The
Company acknowledges and agrees that the Purchaser 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 the Purchaser is not
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 the
Purchaser or any of its respective representatives or agents in
connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Purchaser’s
purchase of the Securities. The Company further represents to the
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.
(ii) Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to
the contrary notwithstanding (except for Sections 3.2(f) and 4.14
hereof), it is understood and acknowledged by the Company that: (i)
the Purchaser has not been asked by the Company to agree, nor has
the 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 the 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) the Purchaser, and counter-parties in
“derivative” transactions to which the Purchaser is a
party, directly or indirectly, presently may have a
“short” position in the Common Stock and (iv) the
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) the Purchaser 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 Warrant Shares and Conversion
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.
(jj) 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 Placement
Agent in connection with the placement of the
Securities.
-18-
(kk) 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, 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) imposes a clinical hold on any
clinical investigation by the Company or any of its Subsidiaries,
(ii) enjoins production at any facility of the Company or any of
its Subsidiaries, (iii) enters or proposes to enter into a consent
decree of permanent injunction with the Company or any of its
Subsidiaries, or (iv) 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.
(ll) Reserved.
(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 the
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.
-19-
(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 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) No
Disqualification Events. With respect to the
Securities to be offered and sold hereunder in reliance on Rule 506
under the Securities Act, none of the Company, any of its
predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the offering
hereunder, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor 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 (each, an
“Issuer Covered
Person” and, together, “Issuer Covered Persons”)
is subject to any of the "Bad Actor" disqualifications described in
Rule 506(d)(1)(i) to (viii) under the Securities Act (a
“Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and
has furnished to the Purchaser a copy of any disclosures provided
thereunder.
(ss) Other
Covered Persons. Other than the Placement Agent, 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
Securities.
(tt) Notice
of Disqualification Events. The Company will notify the
Purchaser and the Placement Agent 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.
3.2 Representations
and Warranties of the Purchaser. The Purchaser hereby represents and warrants as
of the date hereof and as of the Closing Date to the Company as
follows:
(a) Organization;
Authority. The 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 the
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 the Purchaser. Each Transaction Document
to which it is a party has been duly executed by the Purchaser, and
when delivered by the Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of
the 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.
-20-
(b) Understandings
or Arrangements. The Purchaser
is acquiring the Securities as principal for its own account and
has no direct or indirect arrangement or understandings with any
other persons to distribute or regarding the distribution of such
Securities (this representation and warranty not limiting the
Purchaser’s right to sell the Securities pursuant to the
Shelf Registration Statement, the Resale Registration Statement or
otherwise in compliance with applicable federal and state
securities laws). The Purchaser is acquiring the Securities
hereunder in the ordinary course of its business. The Purchaser
understands that the Warrants, the Warrant Shares, the Unregistered
Preferred Shares, the Unregistered Prefunded Warrants and the
Unregistered Conversion Shares are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring such
Securities as principal for his, her or 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 the
Purchaser’s right to sell such Securities pursuant to a
registration statement or otherwise in compliance with applicable
federal and state securities laws).
(c) Purchaser
Status. At the time the
Purchaser was offered the Securities, it was, and as of the date
hereof it is, and on each date on which it exercises any Warrants,
it will be either: (i) an “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.
(d) Experience
of The Purchaser. The
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. The 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) Access
to Information. The Purchaser
acknowledges that it has had the opportunity to review the
Transaction Documents (including all exhibits and schedules
thereto) and the SEC Reports and has been afforded, (i) the
opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the
Securities and the merits and risks of investing in the Securities;
(ii) access to information about the Company and its financial
condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment;
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 the investment. The Purchaser
acknowledges and agrees that neither the Placement Agent nor any
Affiliate of the Placement Agent has provided the Purchaser with
any information or advice with respect to the Securities nor is
such information or advice necessary or desired. Neither the
Placement Agent nor any Affiliate has made or makes any
representation as to the Company or the quality of the Securities
and the Placement Agent and any Affiliate may have acquired
non-public information with respect to the Company which the
Purchaser agrees need not be provided to it. In connection
with the issuance of the Securities to the Purchaser, neither the
Placement Agent nor any of its Affiliates has acted as a financial
advisor or fiduciary to the Purchaser.
-21-
(f) Certain
Transactions and Confidentiality. Other than consummating the transactions
contemplated hereunder, the Purchaser has not, nor has any Person
acting on behalf of or pursuant to any understanding with the
Purchaser, directly or indirectly executed any purchases or sales,
including Short Sales, of the securities of the Company during
the period commencing as of the time that the Purchaser first
received a term sheet (written or oral) from the Company or any
other Person representing the Company setting forth the material
terms of the transactions contemplated hereunder and ending
immediately prior to the execution hereof. Notwithstanding the foregoing, if the Purchaser
is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of the Purchaser’s assets
and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other
portions of the Purchaser’s assets, the representation set
forth above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision
to purchase the Securities covered by this Agreement. Other than to
other Persons party to this Agreement or to the Purchaser’s
representatives, including, without limitation, its officers,
directors, partners, legal and other advisors, employees, agents
and Affiliates, the Purchaser has maintained the confidentiality of
all disclosures made to it in connection with this transaction
(including the existence and terms of this transaction).
Notwithstanding the foregoing, for the avoidance of doubt, nothing
contained herein shall constitute a representation or warranty, or
preclude any actions, with respect to locating or borrowing shares
in order to effect Short Sales or similar transactions in the
future.
(g) General
Solicitation. The Purchaser is
not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or, to the
knowledge of the Purchaser, any other general solicitation or
general advertisement.
The
Company acknowledges and agrees that the representations contained
in this Section 3.2 shall not modify, amend or affect the
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 transactions contemplated hereby. Notwithstanding the
foregoing, for the avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any
actions, with respect to locating or borrowing shares in order to
effect Short Sales or similar transactions in the
future.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Removal
of Legends.
(a) The
Warrants, the Warrant Shares, the Unregistered Preferred Shares,
the Unregistered Prefunded Warrants and the Unregistered Conversion
Shares may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Warrants,
Warrant Shares, Unregistered Preferred Shares, Unregistered
Prefunded Warrants or Unregistered Conversion Shares, other than
pursuant to an effective registration statement or Rule 144, to the
Company or to an Affiliate of the Purchaser or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require
the transferor thereof to provide to the Company 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
Warrants, Warrant Shares, Unregistered Preferred Shares,
Unregistered Prefunded Warrants or Unregistered Conversion Shares
under the Securities Act.
(b) The
Purchaser agrees to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Warrants, Warrant Shares,
Unregistered Preferred Shares, Unregistered Prefunded Warrants or
Unregistered Conversion Shares substantially in the following
form:
-22-
(c) NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
EXERCISABLE OR CONVERTIBLE HAS 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. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OR
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.
(d) The
Company acknowledges and agrees that the 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” as defined in Rule 501(a) under
the Securities Act and, if required under the terms of such
arrangement, the Purchaser may transfer pledged or secured
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 the
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including,
if the Securities are subject to registration pursuant to the
Registration Rights Agreement, 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 (as defined
in the Registration Rights Agreement)
thereunder.
(e) Certificates
evidencing the Warrant Shares and Conversion Shares shall not
contain any legend (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 Warrant Shares or Conversion Shares
pursuant to Rule 144 (assuming, in the case of Warrant Shares,
cashless exercise of the Warrants), (iii) if such Warrant Shares or
Conversion Shares are eligible for sale under Rule 144 (assuming,
in the case of Warrant Shares, cashless exercise of the Warrants),
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 to issue a legal
opinion to the Transfer Agent or the Purchaser promptly if required
by the Transfer Agent to effect the removal of the legend
hereunder, or if requested by the Purchaser, respectively. If all
or any portion of a Warrant or an Unregistered Prefunded Warrant is
exercised or the Unregistered Preferred Shares is converted at a
time when there is an effective registration statement to cover the
resale of the Warrant Shares or Unregistered Conversion Shares, or
if such Warrant Shares or Unregistered Conversion Shares may be
sold under Rule 144 (assuming, in the case of Warrants, cashless
exercise of the Warrants) 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 Warrant Shares or
Unregistered Conversion Shares, as the case may be, 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(e), the
Company will, no later than the earlier of (i) two (2) Trading Days
and (ii) the number of Trading Days comprising the Standard
Settlement Period (as defined below) following the delivery by the
Purchaser to the Company or the Transfer Agent of a certificate
representing Warrant Shares or Unregistered Conversion Shares, as
applicable, issued with a restrictive legend (such date, the
“Legend Removal
Date”), deliver or cause
to be delivered to the 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. Warrant Shares and
Unregistered Conversion 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 the Purchaser.
As used herein, “Standard Settlement
Period” means the
standard settlement period, expressed in a number of Trading Days,
on the Company’s primary Trading Market with respect to the
Common Stock as in effect on the date of delivery of a certificate
representing Warrant Shares or Unregistered Conversion Shares
issued with a restrictive legend.
-23-
(f) In
addition to the Purchaser’s other available remedies, the
Company shall pay to the Purchaser, in cash, (i) as partial
liquidated damages and not as a penalty, for each $1,000 of Warrant
Shares or Unregistered Conversion Shares (based on the VWAP of the
Common Stock on the date such Warrant Shares or Unregistered
Conversion Shares are submitted to the Transfer Agent) delivered
for removal of the restrictive legend and subject to Section
4.1(e), $10 per Trading Day (increasing to $20 per Trading Day five
(5) Trading Days after such damages have begun to accrue) for each
Trading Day after the Legend Removal Date until such certificate is
delivered without a legend and (ii) if the Company fails to (a)
issue and deliver (or cause to be delivered) to the Purchaser by
the Legend Removal Date a certificate representing the Warrant
Shares or Unregistered Conversion Shares so delivered to the
Company by the Purchaser that is free from all restrictive and
other legends and (b) if after the Legend Removal Date the
Purchaser purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the
Purchaser of all or any portion of the number of shares of Common
Stock, or a sale of a number of shares of Common Stock equal to all
or any portion of the number of shares of Common Stock, that the
Purchaser anticipated receiving from the Company without any
restrictive legend, then an amount equal to the excess of the
Purchaser’s total purchase price (including brokerage
commissions and other out-of-pocket expenses, if any) for the
shares of Common Stock so purchased (including brokerage
commissions and other out-of-pocket expenses, if any) (the
“Buy-In
Price”) over the product
of (A) such number of Warrant Shares or Unregistered Conversion
Shares that the Company was required to deliver to the Purchaser by
the Legend Removal Date multiplied by (B) the lowest closing sale
price of the Common Stock on any Trading Day during the period
commencing on the date of the delivery by the Purchaser to the
Company of the applicable Warrant Shares or Unregistered Conversion
Shares (as the case may be) and ending on the date of such delivery
and payment under this Section 4.1(f).
(g) The
Registered Preferred Shares, the Registered Prefunded Warrants and
the Registered Conversion Shares shall be issued free of
legends.
(h) The
Purchaser agrees with the Company that the Purchaser will sell any
Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are
sold pursuant to a Resale Registration Statement, they will be sold
in compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section
4.1 is predicated upon the Company’s reliance upon this
understanding.
4.2 Furnishing
of Information.
(a) As
long as the Purchaser owns Securities, the Company covenants 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 even if the Company is not then subject to the reporting
requirements of the Exchange Act.
(b) At any time during the period commencing from the
six (6) month anniversary of the date hereof and ending at such
time that all of the Securities (assuming cashless exercise of the
Warrants and any Prefunded Warrants, as applicable) may be sold
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 (i) shall fail for any reason
to satisfy the current public information requirement under Rule
144(c) or (ii) has ever been an issuer described in Rule
144(i)(1)(i) or becomes an issuer in the future, and the Company
shall fail to satisfy any condition set forth in Rule 144(i)(2) (a
“Public Information
Failure”) then, in
addition to the Purchaser’s other available remedies, the
Company shall pay to the Purchaser, in cash, as partial liquidated
damages and not as a penalty, by reason of any such delay in or
reduction of its ability to sell the Securities, an amount in cash
equal to two percent (2.0%) of the aggregate Subscription Amount
for the Purchaser’s Securities 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 Purchaser to transfer the Securities pursuant to
Rule 144. The payments to which the Purchaser shall be entitled
pursuant to this Section 4.2(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 the
Purchaser’s right to pursue actual damages for the Public
Information Failure, and the 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.
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4.3 Integration.
Except as set forth on Schedule
4.3, 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 unless shareholder approval is obtained
before the closing of such subsequent
transaction.
4.4 Securities
Laws Disclosure; Publicity. The
Company shall (a) by the Disclosure Time, issue a press release or
file a Current Report on Form 8-K disclosing the material terms of
the transactions contemplated hereby and of the License Agreement,
and (b) 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. From and after the
issuance of such press release, 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. In addition, effective
upon the issuance of such press release, the Company acknowledges
and agrees that any and all confidentiality or similar obligations
under any agreement, whether written or oral, between the Company,
any of its Subsidiaries or any of their respective officers,
directors, agents, employees or Affiliates on the one hand, and the
Purchaser or any of its Affiliates on the other hand, shall
terminate. The Company and the Purchaser shall consult with each
other in issuing any other press releases with respect to the
transactions contemplated hereby, and neither the Company nor the
Purchaser shall issue any such press release nor otherwise make any
such public statement without the prior consent of the Company,
with respect to any press release of the Purchaser, or without the
prior consent of the 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 the Purchaser, or include the name of the
Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of the
Purchaser, except (a) as required by federal securities law in
connection with (i) any registration statement contemplated by the
Registration Rights Agreement and (ii) 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).
4.5 Shareholder
Rights Plan. No claim will be
made or enforced by the Company or, with the consent of the
Company, any other Person, that the 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 the 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 Purchaser.
4.6 Non-Public
Information. Except with
respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, which shall be disclosed
pursuant to Section 4.4, the Company covenants and agrees that
neither it, nor any other Person acting on its behalf will provide
the Purchaser or its agents or counsel with any information that
constitutes, or the Company reasonably believes constitutes,
material non-public information, unless prior thereto the Purchaser
shall have consented to the receipt of such information and agreed
with the Company to keep such information confidential. The Company
understands and confirms that the Purchaser shall be relying on the
foregoing covenant in effecting transactions in securities of the
Company. To the extent that the Company delivers any material,
non-public information to the Purchaser without the
Purchaser’s consent, the Company hereby covenants and agrees
that the Purchaser shall not have any duty of confidentiality to
the Company, any of its Subsidiaries, or any of their respective
officers, directors, agents, employees or Affiliates, or a duty to
the Company, any of its Subsidiaries or any of their respective
officers, directors, agents, employees or Affiliates not to trade
on the basis of, such material, non-public information, provided
that the Purchaser shall remain subject to applicable law. To the
extent that any notice provided pursuant to any Transaction
Document constitutes, or contains, material, non-public information
regarding the Company or any Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K. The Company understands and confirms
that the Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the
Company.
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4.7 Use
of Proceeds. Except as set
forth on Schedule 4.7
attached hereto, the Company shall use
the net proceeds from the sale of the Securities hereunder for
working capital purposes and shall not use such proceeds: (a) for
the satisfaction of any portion of the Company’s debt (other
than payment of trade payables in the ordinary course of the
Company’s business and 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.
4.8 Indemnification
of the Purchaser.
Subject to the provisions of this
Section 4.8, the Company will indemnify and hold the 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 the 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 the 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
solely based upon a material 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 is finally judicially determined to
constitute fraud, gross negligence or willful misconduct), or (c)
in connection with any registration statement of the Company
providing for the resale by the Purchaser of the Warrant Shares or
Unregistered Conversion Shares issued and issuable upon exercise of
the Warrants or the Unregistered Prefunded Warrants or conversion
of the Unregistered Preferred Shares, as applicable, the Company
will indemnify each Purchaser Party, to the fullest extent
permitted by applicable law, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation,
reasonable attorneys’ fees) and expenses, as incurred,
arising out of or relating to (i) any untrue or alleged untrue
statement of a material fact contained in such registration
statement, any prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus,
or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any prospectus or
supplement thereto, in the light of the circumstances under which
they were made) not misleading, except to the extent, but only to
the extent, that such untrue statements or omissions are based
solely upon information regarding such Purchaser Party furnished in
writing to the Company by such Purchaser Party expressly for use
therein, or (ii) any violation or alleged violation by the Company
of the Securities Act, the Exchange Act or any state securities
law, or any rule or regulation thereunder in connection therewith.
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 (x) the employment thereof has been specifically
authorized by the Company in writing, (y) the Company has failed
after a reasonable period of time to assume such defense and to
employ counsel or (z) 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 (1) for any settlement by a Purchaser Party
effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (2) to the
extent, but only to the extent that a loss, claim, damage or
liability is attributable to any Purchaser Party’s breach of
any of the representations, warranties, covenants or agreements
made by such Purchaser Party in this Agreement or in the other
Transaction Documents. The indemnification required by this Section
4.8 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.
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4.9 Reservation
of Common Stock. As of the date
hereof, the Company has reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights,
a sufficient number of shares of Common Stock for the purpose of
enabling the Company to issue Warrant Shares pursuant to the
exercise of the Warrants and Conversion Shares pursuant to the
conversion of the Preferred Stock (or exercise of any Prefunded
Warrants, as applicable).
4.10 Listing
of Common Stock. The Company
hereby agrees to use commercially reasonable efforts to maintain
the listing or quotation of the Common Stock on the Trading Market
on which it is currently listed, and concurrently with the Closing,
the Company shall apply to list or quote all of the Warrant Shares
and Conversion Shares on such Trading Market and promptly secure
the listing of all of the Warrant Shares and Conversion Shares on
such Trading Market. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Trading
Market, it will then include in such application all of the Warrant
Shares and Conversion Shares, and will take such other action as is
necessary to cause all of the Warrant Shares and Conversion Shares
to be listed or quoted on such other Trading Market as promptly as
possible. The Company will then take all action reasonably
necessary to continue the listing and trading of its Common Stock
on a Trading Market and will comply in all respects with the
Company’s reporting, filing and other obligations under the
bylaws or rules of the Trading Market. The Company agrees to
maintain the eligibility of the Common Stock for electronic
transfer through the Depository Trust Company or another
established clearing corporation, including, without limitation, by
timely payment of fees to the Depository Trust Company or such
other established clearing corporation in connection with such
electronic transfer.
4.11 Subsequent
Equity Sales.
(a) From the date
hereof until the later of (x) 30 days after the Effective Date or
(y) the day the Company obtains the Stockholder Approval, neither
the Company nor any Subsidiary shall (i) issue, enter into any
agreement to issue or announce the issuance or proposed issuance of
any shares of Common Stock or Common Stock Equivalents or (ii) file
any registration statement or any amendment or supplement thereto,
in each case other than as contemplated pursuant to the
Registration Rights Agreement.
(b) From the date
hereof until the one-year anniversary of the date hereof, the
Company shall be prohibited from effecting or entering into an
agreement to effect any issuance by the Company or any of its
Subsidiaries of Common Stock or Common Stock Equivalents (or a
combination of units thereof) involving a Variable Rate
Transaction. “Variable Rate
Transaction” means a transaction in which the Company
(i) issues or sells any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the
right to receive, additional shares of Common Stock either (A) at a
conversion price, exercise price or exchange rate or other price
that is based upon, and/or varies with, the trading prices of or
quotations for the shares of Common Stock at any time after the
initial issuance of such debt or equity securities or (B) with a
conversion, exercise or exchange price that is subject to being
reset at some future date after the initial issuance of such debt
or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of
the Company or the market for the Common Stock or (ii) enters into,
or effects a transaction under, any agreement, including, but not
limited to, an equity line of credit, whereby the Company may issue
securities at a future determined price. The Purchaser shall be
entitled to obtain injunctive relief against the Company to
preclude any such issuance, which remedy shall be in addition to
any right to collect damages. Notwithstanding the foregoing, the
Company shall be entitled to (i) execute an at-the-market offering
program through the Placement Agent and such at-the-market offering
program shall not be deemed a Variable Rate Transaction, (ii)
following the six-month anniversary of the date hereof, make sales
of Common Stock under that certain Purchase Agreement, dated
November 13, 2019, by and between the Company and Lincoln Park
Capital Fund, LLC, as such agreement may be amended from time to
time in accordance with the terms thereof and (iii) effect any
exchanges as may be required pursuant to the Series B Exchange
Rights.
(c) Notwithstanding the
foregoing, this Section 4.11 shall not apply in respect of an
Exempt Issuance, except that no Variable Rate Transaction shall be
an Exempt Issuance.
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4.12 Reserved.
4.13 Certain
Transactions and Confidentiality. The Purchaser covenants that neither it, nor any
Affiliate acting on its behalf or pursuant to any understanding
with it will execute any purchases or sales, including Short Sales,
of any of the Company’s securities during the period
commencing with the execution of this Agreement and ending at such
time that the transactions contemplated by this Agreement are first
publicly announced pursuant to the initial press release as
described in Section 4.4. The Purchaser covenants that until
such time as the transactions contemplated by this Agreement are
publicly disclosed by the Company pursuant to the initial press
release as described in Section 4.4, the Purchaser will maintain
the confidentiality of the existence and terms of this transaction
and the information included in the Disclosure Schedules.
Notwithstanding the foregoing and notwithstanding anything
contained in this Agreement to the contrary, the Company expressly
acknowledges and agrees that (i) no Purchaser makes any
representation, warranty or covenant hereby that it will not engage
in effecting transactions in any securities of the Company after
the time that the transactions contemplated by this Agreement are
first publicly announced pursuant to the initial press release as
described in Section 4.4, (ii) no Purchaser shall be restricted or
prohibited from effecting any transactions in any securities of the
Company in accordance with applicable securities laws from and
after the time that the transactions contemplated by this Agreement
are first publicly announced pursuant to the initial press release
as described in Section 4.4 and (iii) no Purchaser shall have any
duty of confidentiality or duty not to trade in the securities of
the Company to the Company or its Subsidiaries after the issuance
of the initial press release as described in Section 4.4.
Notwithstanding the foregoing, if the Purchaser is a multi-managed
investment vehicle whereby separate portfolio managers manage
separate portions of the Purchaser’s assets and the portfolio
managers have no direct knowledge of the investment decisions made
by the portfolio managers managing other portions of the
Purchaser’s assets, the covenant set forth above shall only
apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the
Securities covered by this Agreement.
4.14 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 the 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 Purchaser at the Closing under
applicable securities or “Blue Sky” laws of the states
of the United States, and shall provide evidence of such actions
promptly upon request of the Purchaser.
4.15 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 Conversion Shares and Warrant 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 the Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the
other stockholders of the Company.
4.16 Stockholder
Approval.
(a) The Company shall
provide each stockholder entitled to vote at a special meeting of
stockholders of the Company (the “Stockholder Meeting”),
which shall be promptly called and held no later than March 31,
2020 (the “Stockholder Meeting
Deadline”), a proxy statement meeting the requirements
of Section 14 of the Securities Exchange Act of 1934, as amended,
and the related rules and regulations promulgated
thereunder (the “Proxy Statement”)
soliciting each such stockholder’s affirmative vote at the
Stockholder Meeting in favor of the Stockholder Approval, and the
Company shall use its best efforts to solicit the Stockholder
Approval from its stockholders (which efforts shall include,
without limitation, the requirement to hire a reputable proxy
solicitor) and to cause the board of directors of the Company to
recommend to the stockholders that they approve the Stockholder
Approval.
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(b) The Proxy Statement
shall be in a form reasonably acceptable to the Purchases and
accordingly, the Company shall provide the Purchaser with
reasonable opportunity to review and comment on the Proxy
Statement. The Company shall keep the Purchaser apprised of the
status of matters relating to the Proxy Statement and the
Stockholder Meeting, including promptly furnishing the Purchaser
with copies of notices or other communications related to the Proxy
Statement, the Stockholder Meeting or the transactions contemplated
hereby received by the Company from the Securities and Exchange
Commission or the Nasdaq Stock Market.
(c) If, despite the
Company's best efforts, Stockholder Approval is not obtained on or
prior to the Stockholder Meeting Deadline, the Company shall cause
an additional Stockholder Meeting to be held every three (3) months
thereafter until such Stockholder Approval is
obtained.
ARTICLE V.
MISCELLANEOUS
5.1 Termination.
This Agreement may be terminated by the Purchaser by written notice
to the other parties, if the Closing has not been consummated on or
before the fifth (5th)
Trading Day following the date hereof; provided,
however,
that no such termination will affect the right of any party to xxx
for any breach by any other party (or parties).
5.2 Fees
and Expenses. Except as
expressly set forth in the Transaction Documents to the contrary,
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 exercise notice
delivered by the Purchaser), stamp taxes and other taxes and duties
levied in connection with the delivery of any Securities to the
Purchaser.
5.3 Entire
Agreement. The Transaction
Documents, together with the exhibits and schedules thereto, the
Prospectus and the Prospectus Supplement, 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.
Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of: (a) the time of
transmission, if such notice or communication is delivered via
email attachment at the email address as set forth on the signature
pages attached hereto at or prior to 5:30 p.m. (New York City time)
on a Trading Day, (b) the next Trading Day after the time of
transmission, if such notice or communication is delivered via
email attachment at the email address as set forth on the signature
pages attached hereto on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) the
second (2nd)
Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (d) upon actual
receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set
forth on the signature pages attached hereto. To the extent that
any notice provided pursuant to any Transaction Document
constitutes, or contains material, non-public information regarding
the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K.
5.5 Amendments;
Waivers. No provision of this
Agreement may be waived, modified, supplemented or amended except
in a written instrument signed, in the case of an amendment, by the
Company and the Purchaser. 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. Any amendment effected in accordance with this
Section 5.5 shall be binding upon the Purchaser and holder of
Securities and the Company.
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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 the Purchaser (other than by merger). The
Purchaser may assign any or all of its rights under this Agreement
to any Person to whom the 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
“Purchaser.”
5.8 No
Third-Party Beneficiaries. The
Placement Agent shall be the third party beneficiary of the
representations and warranties of the Company in Section 3.1 and
the representations and warranties of the Purchaser in Section 3.2.
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 4.8 and
this Section 5.8.
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 or Proceeding, any claim that it
is not personally subject to the jurisdiction of any such court,
that such 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 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 any 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 4.8, the prevailing
party in such Action or Proceeding shall be reimbursed by the
non-prevailing party for its reasonable attorneys’ fees and
other costs and expenses incurred with the investigation,
preparation and prosecution of such Action or
Proceeding.
5.10 Survival.
The representations and warranties contained herein shall survive
the Closing and the delivery of the Securities.
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 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 “.pdf” signature page were an original
thereof.
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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 the 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 the Purchaser may 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 an exercise of a Warrant, the
Purchaser shall be required to return any shares of Common Stock
subject to any such rescinded exercise notice concurrently with the
return to the Purchaser of the aggregate exercise price paid to the
Company for such shares and the restoration of the
Purchaser’s right to acquire such shares pursuant to the
Purchaser’s Warrant (including, issuance of a replacement
warrant certificate evidencing such restored
right).
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, the
Purchaser 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 the Purchaser pursuant
to any Transaction Document or the 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 Independent
Nature of Purchaser’s Obligations and
Rights. The Purchaser has been
represented by its own separate legal counsel in its review and
negotiation of the Transaction Documents. For reasons of
administrative convenience only, the Purchaser and its respective
counsel have chosen to communicate with the Company through Xxxxxx
and Xxxxx. Xxxxxx and Xxxxx does not represent the Purchaser and
only represents the Placement Agent.
-31-
5.18 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.
5.19 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, then such action may be taken or such
right may be exercised on the next succeeding Business
Day.
5.20 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.
5.21 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.
(Signature Pages Follow)
-32-
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.
|
|
Address
for Notice:
|
|
By:
/s/ Xxxxx
Xxxxxxxxxx
Name: Xxxxx Xxxxxxxxxx
Title: Chief Executive Officer
With a
copy to (which shall not constitute notice):
|
Email:
Fax:
|
|
|
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
-33-
[PURCHASER
SIGNATURE PAGES TO AZRX 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:
______________________________________________
Address
for Notice to Purchaser:
Address
for Delivery of Securities to Purchaser (if not same as address for
notice):
Subscription
Amount: $_________________
Warrant
Shares: __________________
Registered
Preferred Shares: __________________
Unregistered
Preferred Shares: __________________
EIN
Number: _______________________
[SIGNATURE
PAGES CONTINUE]
EXHIBIT A
FORM
OF CERTIFICATE OF DESIGNATION
EXHIBIT
A CERTIFICATE OF THE DESIGNATIONS, POWERS, PREFERENCES AND
RIGHTS
OF
SERIES
C 9.00% CONVERTIBLE JUNIOR PREFERRED STOCK OF
(Pursuant to
Section 151 of the Delaware General Corporation Law)
AzurRx
BioPharma, Inc., a corporation organized and existing under the
laws of the State of Delaware (the “Company”), hereby
certifies that, pursuant to authority vested in the Board of
Directors of the Company (the “Board of Directors”) by
Article FOURTH of the Amended and Restated Certificate of
Incorporation, as amended (the “Certificate of
Incorporation”), of the Company, the following resolutions
were adopted on December 31, 2020 by the Board of Directors
pursuant to Section 151 of the Delaware General Corporation Law
(the “DGCL”), and in accordance with the provisions of
Section 103 of the DGCL, does hereby submit the
following:
WHEREAS, the
Company’s Certificate of Incorporation authorizes the
issuance of 10,000,000 shares of preferred stock, par value $0.0001
per share (the “Preferred Stock”), from time to time in
one or more classes or series;
WHEREAS, the Board
of Directors is authorized to divide the Preferred Stock into any
number of shares and to fix the designations, relative rights,
preferences and limitations of any wholly unissued series of
preferred stock; and
WHEREAS, it is the
desire of the Board of Directors, pursuant to its authority as
aforesaid, to fix the designation and number of, and determine the
designation, relative rights, preferences, and limitations relating
to a series of the Preferred Stock, which shall consist of up to
75,000.0000 shares of the Preferred Stock which the Company has the
authority to issue, as follows:
“RESOLVED
that, pursuant to authority vested in the Board of Directors of the
Company by ARTICLE FOURTH of the Company’s Certificate of
Incorporation, out of the total authorized number of 10,000,000
shares of Preferred Stock, there shall be designated a series of
75,000.0000 shares which shall be issued in and constitute a single
series to be known as “Series C 9.00% Convertible Junior
Preferred Stock” (hereinafter called the “Series C
Preferred Stock”). The Board of Directors hereby resolves
that the shares of Series C Preferred Stock shall have the
designations, relative rights, preferences and the limitations
thereof, set forth below:
TERMS
OF SERIES C PREFERRED STOCK
Section 1. Definitions. For the purposes
hereof, the following terms shall have the following
meanings:
“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 of the Securities Act.
“Alternate Consideration”
shall have the meaning set forth in Section 7(e).
“Bankruptcy Event” means
any of the following events: (a) the Company or any Significant
Subsidiary (as such term is defined in Rule 1-02(w) of Regulation
S-X) thereof commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction relating to the Company or any Significant
Subsidiary thereof, (b) there is commenced against the Company or
any Significant Subsidiary thereof any such case or proceeding that
is not dismissed within 60 days after commencement, (c) the Company
or any Significant Subsidiary thereof is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such
case or proceeding is entered, (d) the Company or any Significant
Subsidiary thereof suffers any appointment of any custodian or the
like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such
appointment, (e) the Company or any Significant Subsidiary thereof
makes a general assignment for the benefit of creditors, (f) the
Company or any Significant Subsidiary thereof calls a meeting of
its creditors with a view to arranging a composition, adjustment or
restructuring of its debts, or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the
foregoing or takes any corporate or other action for the purpose of
effecting any of the foregoing.
“Beneficial Ownership
Limitation” shall have the meaning set forth in
Section 6(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 authorized or required by
law or other governmental action to close.
“Buy-In” shall have the
meaning set forth in Section 6(d)(iv).
“Change of Control
Transaction” means the occurrence after the date
hereof of any of (a) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in
Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective
control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 50%
of the voting securities of the Company
(other
than by means of conversion or exercise of Series C Preferred Stock
and the Securities issued together with the Series C Preferred
Stock), (b) the Company merges into or consolidates with any other
Person, or any Person merges into or consolidates with the Company
and, after giving effect to such transaction, the stockholders of
the Company immediately prior to such transaction own less than 50%
of the aggregate voting power of the Company or the successor
entity of such transaction, (c) the Company sells or transfers all
or substantially all of its assets to another Person and the
stockholders of the Company immediately prior to such transaction
own less than 66% of the aggregate voting power of the acquiring
entity immediately after the transaction, (d) a replacement at one
time or within a one 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
Original Issue Date), or (e) the execution by the Company of an
agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth in clauses (a) through
(d) above.
“Closing” means the
initial closing of the purchase and sale of the Series C Preferred
Stock and the Warrants pursuant to Section 2.1 of the Initial
Purchase Agreement.
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means the
Company’s common stock, par value $0.0001 per share, and
stock of 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, rights,
options, warrants 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 Amount” means
the sum of the Stated Value at issue.
“Conversion Date” shall
have the meaning set forth in Section 6(a).
“Conversion Price” shall
have the meaning set forth in Section 6(c).
“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of the shares of Series C Preferred Stock in accordance with the
terms hereof.
“Conversion Shares Registration
Statement” means a registration statement that
registers the resale of all of the Conversion Shares by the
Holders, which shall be named as “selling stockholders”
therein, and meets the requirements of the Registration Rights
Agreement.
“Covered Securities” means
any shares of Common Stock underlying (x) any shares of preferred
stock issuable to First Wave Bio, Inc., as consideration for the
First Wave License Agreement (if other than the Series C Preferred
Stock), (y) any warrants issuable as placement agent compensation,
as a result of with the transactions contemplated by the
Transaction Documents, and (z) any securities issuable to holders
of the exchange rights set forth in Section 8 of the Series B
Certificate of Designations, as a result of the transactions
contemplated the Transaction Documents.
“Dividend Payment Date”
shall have the meaning set forth in Section 3(a).
“Effective Date” means the
date that the Conversion Shares Registration Statement filed by the
Company pursuant to the Registration Rights Agreement is first
declared effective by the Commission.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
[“First
Wave License Agreement” means the License Agreement,
dated as of December 31, 2020, by and between First Wave Bio, Inc.
and the Company, as amended, modified or supplemented from time to
time in accordance with its terms.]
[“First
Wave Purchase Agreement” means any Securities Purchase
Agreement relating to the purchase of Series C Preferred Stock to
be entered into by and between First Wave Bio, Inc. and the Company
pursuant to the terms of the First Wave License Agreement, as
amended, modified or supplemented from time to time in accordance
with its terms.]
“Fundamental Transaction”
shall have the meaning set forth in Section 7(e).
“GAAP” means United States
generally accepted accounting principles.
“Holder” shall have the
meaning given such term in Section 2.
“Initial Closing Date”
means the Trading Day on which the Investor Purchase Agreement has
been executed and delivered by the applicable parties thereto and
all conditions precedent to (i) each Holder’s obligations to
pay the Subscription Amount and (ii)
the Company’s
obligations to deliver the Series C Preferred Stock and the
Warrants have been satisfied or waived.
“Investor Purchase
Agreement” means the Securities Purchase Agreement,
dated as of December 31, 2020, by and among the Company and the
original Holders signatory thereto, as amended, modified or
supplemented from time to time in accordance with its
terms.
“Issuable Maximum” shall
have the meaning set forth in Section 6(f).
“Issue Date” means, with
respect to any Purchase Agreement, the date of first issuance of
shares of the Series C Preferred Stock pursuant to such Purchase
Agreement, regardless of the number of transfers of any particular
shares of Series C Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Series C
Preferred Stock.
“Junior Securities” means
the Common Stock and all other Common Stock Equivalents of the
Company other than those securities which are explicitly senior or
pari passu to the Series C Preferred
Stock in dividend rights or liquidation preference.
“Liquidation” shall have
the meaning set forth in Section 5.
“MFN Purchase Agreement”
means any agreement pursuant to which shares of Series B Preferred
Stock are exchanged for shares of Series C Preferred Stock in
accordance with the exchange rights set forth in Section 8 of the
Series B Certificate of Designations.
“New York Courts” shall
have the meaning set forth in Section 8(d).
“Notice of Conversion”
shall have the meaning set forth in Section 6(a).
“Original Issue Date”
means the date of the first issuance of any shares of the Series C
Preferred Stock regardless of the number of transfers of any
particular shares of Series C Preferred Stock and regardless of the
number of certificates which may be issued to evidence such Series
C Preferred Stock.
“Person” means an
individual or corporation, 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.
“Prefunded Warrant” means
a prefunded warrant or similar instrument, with a similar
Beneficial Ownership Limitation as specified in Section
6(e).
“Purchase Agreement” means
the Investor Purchase Agreement[, the First Wave Purchase
Agreement] or any MFN Purchase Agreement, as
applicable.
“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule
or
regulation
hereafter adopted by the Commission having substantially the same
effect as such Rule.
“Series B Preferred Stock”
means the Series B Convertible Preferred Stock, par value $0.001
per share, of the Company.
“Series B Certificate of
Designations” means the Certificate of Designations,
Powers, Preferences and Rights of the Series B Convertible
Preferred Stock.
“Series C Preferred Stock”
shall have the meaning set forth in Section 2.
“Securities” means the
Series C Preferred Stock, the Warrants, the Warrant Shares and the
Conversion Shares.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Senior Securities” means
the Company’s Series B Preferred Stock.
“Share Delivery Date”
shall have the meaning set forth in Section 6(c\d).
“Stated Value” shall have
the meaning set forth in Section 2, as the same may be increased
pursuant to Section 3.
“Stockholder Approval”
means such approval as may be required from the stockholders of the
Company in accordance with applicable law, the applicable rules and
regulations of the Nasdaq Stock Market (or any successor entity),
the Company’s certificate of incorporation and bylaws and the
General Corporate Law of the State of Delaware with respect to the
transactions contemplated by the Transaction Documents, including
(x) an increase in the number of authorized shares of Common Stock
above 150,000,000 and (y) the issuance of any Underlying Shares or
other Covered Securities in excess of the Issuable
Maximum.
“Subscription Amount”
shall mean, as to each Holder who is a party to the Investor
Purchase Agreement, the aggregate amount to be paid for the Series
C Preferred Stock purchased pursuant to the Investor Purchase
Agreement, as specified below such Holder’s name on the
signature page of such Purchase Agreement and next to the heading
“Subscription Amount,” in United States dollars and in
immediately available funds.
“Subsidiary” means any
subsidiary of the Company as set forth on Schedule 3.1(a) of the Investor Purchase
Agreement and shall, where applicable, also include any direct or
indirect subsidiary of the Company formed or acquired after the
date of the Investor Purchase Agreement.
“Successor Entity” shall
have the meaning set forth in Section 7(e).
“Trading Day” means a day
on which the principal Trading Market is open for
business.
“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, or the New York Stock Exchange (or any
successors to any of the foregoing).
“Transaction Documents”
means any Purchase Agreement, the Warrants, the Registration Rights
Agreement, all exhibits and schedules thereto and hereto and any
other documents or agreements executed in connection with the
transactions contemplated pursuant to any Purchase
Agreement.
“Transfer Agent” means
Colonial Stock Transfer Company, Inc., the current transfer agent
of the Company, with a mailing address of 00 Xxxxxxxx Xxxxx, 0xx
Xxxxx, Xxxx Xxxx Xxxx, Xxxx 00000, and any successor transfer agent
of the Company.
“Underlying Shares” means,
collectively, the shares of Common Stock issued and issuable upon
conversion of the Series C Preferred Stock, and upon exercise of
the Warrants.
“Warrants” means,
collectively, the Common Stock purchase warrants delivered to the
Holder at the Closing in accordance with Section 2.2(a) of the
Investor Purchase Agreement.
“Warrant Shares” means the
shares of Common Stock issuable upon exercise of the
Warrants.
Section 2. Designation, Amount and Par
Value. The series of preferred stock shall be designated as
its Series C 9.00% Convertible Junior Preferred Stock (the
“Series
C Preferred
Stock”) and the number of shares so designated shall
be up to 75,000.0000 (which shall not be subject to increase
without the written consent of all of the holders of the Series C
Preferred Stock (each, a “Holder” and collectively,
the “Holders”)). Each share of
Series C Preferred Stock shall have a par value of $0.0001 per
share and a stated value equal to $750.00, subject to increase set forth
in Section 3 below (the “Stated Value”).
Section 3.
Dividends.
a) Accrual
and Payment of Dividends. From and after its applicable
Issue Date, subject to the rights the holders of the Senior
Securities, cumulative dividends on the Series C Preferred Stock
shall accrue, whether or not declared by the Board and whether or
not there are funds legally available for the payment of dividends,
on a daily basis in arrears at the rate of 9.00% per annum on the
sum of the Stated Value thereof plus all unpaid accrued and
accumulated dividends thereon. All accrued dividends on
any
Series
C Preferred Stock shall be paid in cash only when, as and if
declared by the Board of Directors out of funds legally available
therefor or upon a Liquidation in accordance with the provisions of
Section 5; provided, that to the extent not paid on the last day of
March, June, September and December of each calendar year (each
such date, a “Dividend Payment Date”),
all accrued dividends on any share shall accumulate and compound on
the applicable Dividend Payment Date whether or not declared by the
Board of Directors and shall remain accumulated, compounding
dividends until paid pursuant hereto or converted pursuant to
Section 6. All accrued and accumulated dividends on the Series C
Preferred Stock shall be prior and in preference to any dividend on
any Junior Securities and shall be fully declared and paid before
any dividends are declared and paid, or any other distributions or
redemptions are made, on any Junior Securities, other than to (a)
declare or pay any dividend or distribution payable on the Common
Stock in shares of Common Stock or (b) repurchase Common Stock held
by employees or consultants of the Company upon termination of
their employment or services pursuant to agreements providing for
such repurchase.
b) Partial
Dividend Payments. Except as otherwise provided herein, if
at any time the Company pays less than the total amount of
dividends then accrued and accumulated with respect to the Series C
Preferred Stock, such payment shall be distributed pro rata among
the Holders thereof based upon the aggregate accrued and
accumulated but unpaid dividends on the Series C Preferred Stock
held by each such Holder.
Section 4. Voting Rights. Except as
otherwise provided herein or as otherwise required by law, the
Series C Preferred Stock shall have no voting rights. However, as
long as any shares of Series C Preferred Stock are outstanding, the
Company shall not, without the affirmative vote of the Holders of a
majority of the then outstanding shares of the Series C Preferred
Stock, (a) alter or change adversely the powers, preferences or
rights given to the Series C Preferred Stock or alter or amend this
Certificate of Designation, (b) authorize or create any class of
stock ranking as to dividends, redemption or distribution of assets
upon a Liquidation (as defined in Section 5) senior to, or
otherwise pari
passu with, the
Series C Preferred Stock, (c) amend its certificate of
incorporation or other charter documents in any manner that
adversely affects any rights of the Holders, (d) increase the
number of authorized shares of Series C Preferred Stock, or (e)
enter into any agreement with respect to any of the
foregoing.
Section 5. Liquidation. Upon any
liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary (a “Liquidation”), after
payment in full of any liquidation preference to the holders of the
Senior Securities, the Holders shall be entitled to receive out of
the assets, whether capital or surplus, of the Company an amount
equal to the Stated Value, plus any accrued and unpaid dividends
thereon and any other fees or liquidated damages then due and owing
thereon under this Certificate of Designation, for each share of
Series C Preferred Stock before any distribution or payment shall
be made to the holders of any Junior Securities, and if the assets
of the Company shall be insufficient to pay in full such amounts,
then the entire assets to be distributed to the Holders shall be
ratably distributed among
the
Holders in accordance with the respective amounts that would be
payable on such shares if all amounts payable thereon were paid in
full. A Fundamental Transaction or Change of Control Transaction
shall be deemed a Liquidation for purposed of this Section 5. The
Company shall mail written notice of any such Liquidation, not less
than 45 days prior to the payment date stated therein, to each
Holder.
Section
6.
Conversion.
a) Conversions
at Option of Holder. Each share of Series C Preferred Stock
shall be convertible, at any time and from time to time at the
option of the Holder thereof, into that number of shares of Common
Stock (subject to the limitations set forth in Section 6(e), except
to the extent the Company makes reasonable provision for the
issuance of Prefunded Warrants in lieu of Common Stock, and Section
6(f)) determined by dividing (x) the sum of (i) the Stated Value of
such share of Series C Preferred Stock and (ii) all accrued and
accumulated and unpaid dividends on such share of Series C
Preferred Stock to be converted by (y) the Conversion Price.
Holders shall effect conversions by providing the Company with the
form of conversion notice attached hereto as Annex A (a “Notice of Conversion”).
Each Notice of Conversion shall specify the number of shares of
Series C Preferred Stock to be converted, the number of shares of
Series C Preferred Stock owned prior to the conversion at issue,
the number of shares of Series C Preferred Stock owned subsequent
to the conversion at issue and the date on which such conversion is
to be effected, which date may not be prior to the date the
applicable Holder delivers such Notice of Conversion to the Company
pursuant to Section
8(a) (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 to
the Company is deemed delivered hereunder. No ink-original Notice
of Conversion shall be required, nor shall any medallion guarantee
(or other type of guarantee or notarization) of any Notice of
Conversion form be required. The calculations and entries set forth
in the Notice of Conversion shall control in the absence of
manifest or mathematical error. To effect conversions of shares of
Series C Preferred Stock, a Holder shall not be required to
surrender the certificate(s) representing the shares of Series C
Preferred Stock to the Company unless all of the shares of Series C
Preferred Stock represented thereby are so converted, in which case
such Holder shall deliver the certificate representing such shares
of Series C Preferred Stock promptly following the Conversion Date
at issue. Shares of Series C Preferred Stock converted into Common
Stock (or Prefunded Warrants, as applicable) or redeemed in
accordance with the terms hereof shall be canceled and shall not be
reissued.
b) Conversions
at Option of Company. Each share of Series C Preferred Stock
shall be convertible, at any time and from time to time at the
option of the Company, into that number of shares of Common Stock
(subject to the limitations set forth in Section 6(e), except to
the extent the Company makes reasonable provision for the issuance
of Prefunded Warrants in lieu of Common Stock, and Section 6(f))
determined by dividing (x) the sum of (i) the Stated Value of such
share of Series C Preferred Stock and (ii) all accrued and
accumulated and unpaid dividends on such share
of
Series C Preferred Stock to be converted by (y) the Conversion
Price. The Company shall send each Holder written notice of such
event and of the date of effectiveness thereof. Promptly after
receipt of such notice, each Holder shall surrender any certificate
or certificates representing such shares of Series C Preferred
Stock to the Company at its principal office (or such other office
or agency of the Company as the Company may designate by notice in
writing to the holder or holders of the Series C Preferred Stock),
together with a properly completed statement of the name or names
(with address), subject to compliance with applicable laws to the
extent such designation shall involve a transfer, in which the
certificate or certificates for shares of Common Stock (or
Prefunded Warrants, as applicable) shall be issued, at any time
during its usual business hours, as of the date set forth in such
notice.
c) Conversion
Price. The conversion price for the Series C Preferred Stock
shall equal $0.75, subject
to adjustment herein (the “Conversion
Price”).
d)
Mechanics of
Conversion.
i. Delivery
of Conversion Shares Upon Conversion. Not later than the
earlier of (i) two (2) Trading Days and (ii) the number of Trading
Days comprising the Standard Settlement Period (as defined below)
after each Conversion Date (the “Share Delivery Date”),
the Company shall deliver, or cause to be delivered, to the
converting Holder the number of Conversion Shares being acquired
upon the conversion of the Series C Preferred Stock which, if (A)
there is an effective registration statement permitting the
issuance of the Conversion Shares to or resale of the Conversion
Shares by such Holder or (B) the Conversion Shares are eligible for
resale by the Holder without volume or manner-of-sale limitations
pursuant to Rule 144, shall be free of restrictive legends and
trading restrictions (other than those which may then be required
by any Purchase Agreement). If (A) there is an effective
registration statement permitting the issuance of the Conversion
Shares to or resale of the Conversion Shares by such Holder
following a conversion of Series C Preferred Stock or (B) the
Conversion Shares issuable upon a conversion of Series C Preferred
Stock are eligible for resale by the Holder without volume or
manner-of-sale limitations pursuant to Rule 144, the Company shall
deliver the Conversion Shares required to be delivered by the
Company under this Section 6 electronically through the Depository
Trust Company or another established clearing corporation
performing similar functions. As used herein, “Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of the Notice of
Conversion.
ii. Failure
to Deliver Conversion Shares. If, in the case of any Notice
of Conversion, such Conversion Shares are not delivered to or as
directed by the applicable Holder by the Share Delivery Date, the
Holder shall be entitled to elect by written notice to the Company
at any time on or before its receipt of such
Conversion Shares,
to rescind such Conversion, in which event the Company shall
promptly return to the Holder any original Series C Preferred Stock
certificate delivered to the Company and the Holder shall promptly
return to the Company the Conversion Shares issued to such Holder
pursuant to the rescinded Conversion Notice.
iii. Obligation
Absolute; Partial Liquidated Damages. The Company’s
obligation to issue and deliver the Conversion Shares upon
conversion of Series C Preferred Stock in accordance with the terms
hereof are absolute and unconditional, irrespective of any action
or inaction by a 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 such Holder or any other Person of any
obligation to the Company or any violation or alleged violation of
law by such Holder or any other person, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Company to such Holder in connection with the issuance of such
Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by the Company of any such action
that the Company may have against such Holder. In the event a
Holder shall elect to convert any or all of the Stated Value of its
Series C Preferred Stock, the Corporation may not refuse conversion
based on any claim that such Holder or any one associated or
affiliated with such 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 the Series C Preferred Stock of such Holder shall
have been sought and obtained, and the Corporation posts a surety
bond for the benefit of such Holder in the amount of 150% of the
Stated Value of Series C Preferred Stock 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 such Holder to the extent it
obtains judgment. In the absence of such injunction, the
Corporation shall issue Conversion Shares upon a properly noticed
conversion. If the Company fails to deliver to a Holder such
Conversion Shares pursuant to Section 6(d)(i) by the Share Delivery
Date applicable to such conversion, the Company shall pay to such
Holder, in cash, as liquidated damages and not as a penalty, for
each $5,000 of Stated Value of Series C Preferred Stock being
converted, $50 per Trading Day (increasing to $100 per Trading Day
on the third Trading Day and increasing to $200 per Trading Day on
the sixth Trading Day after such damages begin to accrue) for each
Trading Day after the Share Delivery Date until such Conversion
Shares are delivered or Holder rescinds such conversion. Nothing
herein shall limit a Holder’s right to pursue actual damages
for the Company’s failure to deliver Conversion Shares within
the period specified herein and such 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 a Holder from
seeking
to enforce damages pursuant to any other Section hereof or under
applicable law.
iv. Compensation
for Buy-In on Failure to Timely Deliver Conversion Shares Upon
Conversion. In addition to any other rights available to the
Holder, if the Company fails for any reason to deliver to a Holder
the applicable Conversion Shares by the Share Delivery Date
pursuant to Section 6(d)(i), and if after such Share Delivery Date
such Holder is required by its brokerage firm to purchase (in an
open market transaction or otherwise), or the Holder’s
brokerage firm otherwise purchases, shares of Common Stock to
deliver in satisfaction of a sale by such Holder of the Conversion
Shares which such Holder was entitled to receive upon the
conversion relating to such Share Delivery Date (a
“Buy-In”), then the
Company shall (A) pay in cash to such Holder (in addition to any
other remedies available to or elected by such Holder) the amount,
if any, by which (x) such 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 such 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 such Holder, either reissue (if surrendered)
the shares of Series C Preferred Stock equal to the number of
shares of Series C Preferred Stock submitted for conversion (in
which case, such conversion shall be deemed rescinded) or deliver
to such Holder the number of shares of Common Stock that would have
been issued if the Company had timely complied with its delivery
requirements under Section 6(d)(i). For example, if a Holder
purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy- In with respect to an attempted conversion
of shares of Series C Preferred Stock with respect to which the
actual sale price of the Conversion Shares (including any brokerage
commissions) giving rise to such purchase obligation was a total
of
$10,000
under clause (A) of the immediately preceding sentence, the Company
shall be required to pay such Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable
to such Holder in respect of the Buy-In and, upon request of the
Company, evidence of the amount of such loss. Nothing herein shall
limit a Holder’s right to pursue any other remedies available
to it hereunder, at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver the
Conversion Shares upon conversion of the shares of Series C
Preferred Stock as required pursuant to the terms
hereof.
v. Reservation
of Shares Issuable Upon Conversion. The Company 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 the Series C Preferred Stock, free
from preemptive rights or any other actual contingent purchase
rights of Persons other than the Holder (and the other holders of
the Series C Preferred Stock), not less than such
aggregate
number
of shares of the Common Stock as shall (subject to the terms and
conditions set forth in any Purchase Agreement) be issuable (taking
into account the adjustments and restrictions of Sections 6(f) and
7) upon the conversion of the then outstanding shares of Series C
Preferred Stock, including all accrued and accumulated dividends.
The Company covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly authorized, validly issued,
fully paid and nonassessable.
vi. Fractional
Shares. No fractional shares or scrip representing
fractional shares of Common Stock (or Prefunded Warrants to
purchase fractional shares of Common Stock, as applicable) shall be
issued upon the conversion of the Series C Preferred Stock. As to
any fraction of a share of Common Stock which the Holder would
otherwise be entitled to purchase upon such conversion, the Company
shall at its election, either pay a cash adjustment in respect of
such final fraction in an amount equal to such fraction multiplied
by the Conversion Price or round up to the next whole
share.
vii. Transfer
Taxes and Expenses. The issuance of Conversion Shares on
conversion of this Series C Preferred Stock shall be made without
charge to any Holder for any documentary stamp or similar taxes
that may be payable in respect of the issue or delivery of such
Conversion Shares, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such Conversion Shares
upon conversion in a name other than that of the Holders of such
shares of Series C Preferred Stock and the Company shall not be
required to issue or deliver such Conversion Shares unless or until
the Person or Persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has
been paid. The Company shall pay all Transfer Agent fees required
for same-day processing of any Notice of Conversion and all fees to
the Depository Trust Company (or another established clearing
corporation performing similar functions) required for same-day
electronic delivery of the Conversion Shares.
e) Beneficial
Ownership Limitation. The Company shall not effect any
conversion of the Series C Preferred Stock, and a Holder shall not
have the right to convert any portion of the Series C Preferred
Stock, to the extent that, after giving effect to the conversion
set forth on the applicable Notice of Conversion, such Holder
(together with such Holder’s Affiliates, and any Persons
acting as a group together with such Holder or any of such
Holder’s Affiliates (such Persons, “Attribution Parties”))
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 such Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon
conversion of the Series C Preferred Stock 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 Series C Preferred Stock beneficially owned
by such Holder or any of its Affiliates or Attribution Parties and
(ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company subject to a
limitation on conversion or exercise analogous to the limitation
contained herein (including, without limitation, the Series C
Preferred Stock or the Warrants) beneficially owned by such Holder
or any of its Affiliates or Attribution Parties. Except as set
forth in the preceding sentence, for purposes of this Section 6(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 6(e) applies, the determination of whether the Series C
Preferred Stock is convertible (in relation to other securities
owned by such Holder together with any Affiliates and Attribution
Parties) and of how many shares of Series C Preferred Stock are
convertible shall be in the sole discretion of such Holder, and the
submission of a Notice of Conversion shall be deemed to be such
Holder’s determination of whether the shares of Series C
Preferred Stock may be converted (in relation to other securities
owned by such Holder together with any Affiliates and Attribution
Parties) and how many shares of the Series C Preferred Stock are
convertible, in each case subject to the Beneficial Ownership
Limitation. To ensure compliance with this restriction, each Holder
will be deemed to represent to the Company each time it delivers a
Notice of Conversion that such Notice of Conversion has not
violated the restrictions set forth in this paragraph and the
Company shall have no obligation to verify or confirm the accuracy
of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. For purposes of this Section 6(e), in
determining the number of outstanding shares of Common Stock, a
Holder may rely on the number of outstanding shares of Common Stock
as stated in the most recent of the following: (i) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (ii) a more recent public
announcement by the Company or (iii) a more recent written notice
by the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within two Trading Days
confirm orally and in writing to such Holder the number of shares
of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including the Series C Preferred Stock, by such Holder or its
Affiliates or Attribution Parties since the date as of which such
number of outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% 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 Series C Preferred Stock held by the applicable
Holder. A Holder, upon notice to the Company, may increase or
decrease the Beneficial Ownership Limitation provisions of this
Section 6(e) applicable to its Series C Preferred Stock 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 Series C Preferred Stock held by the Holder and
the provisions of this Section 6(e) shall continue
to
apply. Any such increase in the Beneficial Ownership Limitation
will not be effective until the 61st day after such notice is
delivered to the Company and shall only apply to such Holder and no
other Holder. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity
with the terms of this Section 6(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 Series C Preferred
Stock.
f) Issuance
Limitations. Notwithstanding anything herein to the
contrary, except to the extent the Company has previously obtained
effective Stockholder Approval, the Company may not issue, upon
conversion of the Series C Preferred Stock, a number of shares of
Common Stock (or Prefunded Warrants covering a number of shares of
Common Stock, as applicable) which would exceed 6,186,966 shares of
Common Stock in the aggregate, subject to adjustment for forward
and reverse stock splits, recapitalizations and the like (such
number of shares, the “Issuable
Maximum”).
Section
7.
Certain
Adjustments.
a) Stock
Dividends and Stock Splits. If the Company, at any time
while this Series C Preferred Stock 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
other Common Stock Equivalents (which, for avoidance of doubt,
shall not include any shares of Common Stock issued by the Company
upon conversion of, or payment of a dividend on, this Series C
Preferred Stock), (ii) subdivides outstanding shares of Common
Stock into a larger number of shares, (iii) combines (including by
way of a reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of
capital stock of the Company, then the 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 the
Company) outstanding immediately before such event, and of which
the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made
pursuant to this Section 7(a) 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) [Intentionally
Omitted].
c) Subsequent
Rights Offerings. In addition to any adjustments pursuant to
Section 7(a) above, if at any time the Company grants, issues or
sells any Common Stock Equivalents or rights to purchase stock,
warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the
“Purchase
Rights”), then
each
Holder of Series C Preferred Stock 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 such Holder’s Series C Preferred Stock
(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 Series C
Preferred Stock is outstanding, if the Company declares or makes
any dividend or other distribution of its assets (or rights to
acquire its assets) to holders of shares of Common Stock, by way of
return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction)
(a “Distribution”), at any
time after the issuance of this Series C Preferred Stock, 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 conversion of this Series C
Preferred Stock (without regard to any limitations on conversion
hereof, including without limitation, the Beneficial Ownership
Limitation) immediately before the date of which a record is taken
for such Distribution, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be
determined for the participation in such Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).
e) Fundamental
Transaction. If, at any time while this Series C Preferred
Stock is outstanding, (i) the Company, directly or indirectly, in
one or more related transactions effects any merger or
consolidation of the Company with or into another Person, (ii) the
Company, directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or
substantially all of its
assets
in one or a series of related transactions, (iii) any, direct or
indirect, purchase offer, tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to sell, tender or exchange
their shares for other securities, cash or property and has been
accepted by the holders of 50% or more of the outstanding Common
Stock, (iv) the Company, directly or indirectly, in one or more
related transactions effects any reclassification, reorganization
or recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires
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 Series C Preferred Stock, the Holders 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 6(e) and Section 6(f) on the conversion of this Series C
Preferred Stock), the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the
surviving corporation, and any additional consideration (the
“Alternate
Consideration”) receivable as a result of such
Fundamental Transaction by a holder of the number of shares of
Common Stock for which this Series C Preferred Stock is convertible
immediately prior to such Fundamental Transaction (without regard
to any limitation in Section 6(e) and Section 6(f) on the
conversion of this Series C Preferred Stock). 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 share of Common Stock in such Fundamental Transaction, and
the Company shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental
Transaction, then the Holders shall be given the same choice as to
the Alternate Consideration it receives upon any conversion of this
Series C Preferred Stock following such Fundamental Transaction. To
the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental
Transaction shall file a new Certificate of Designation with the
same terms and conditions and issue to the Holders new preferred
stock consistent with the foregoing provisions and evidencing the
Holders’ right to convert such preferred stock into Alternate
Consideration. The Company shall cause any successor entity in a
Fundamental Transaction in which the Company is not the survivor
(the “Successor
Entity”) to assume in writing all of the obligations
of the Company under this Certificate of Designation and the other
Transaction Documents in accordance with the provisions of this
Section 7(e) pursuant to written agreements in form and
substance
reasonably
satisfactory to the Holders and approved by the Holders (without
unreasonable delay) prior to such Fundamental Transaction and
shall, at the option of the holder of this Series C Preferred
Stock, deliver to the Holders in exchange for this Series C
Preferred Stock a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to
this Series C Preferred Stock 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 Series C
Preferred Stock (without regard to any limitations on the
conversion of this Series C Preferred Stock) 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 Series C Preferred Stock immediately
prior to the consummation of such Fundamental Transaction), and
which is reasonably satisfactory in form and substance to the
Holders. 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 Certificate of Designation and the other
Transaction Documents referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the
obligations of the Company under this Certificate of Designation
and the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein.
f) Calculations.
All calculations under this Section 7 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 7, the number of shares of Common Stock
deemed to be issued and outstanding as of a given date shall be the
sum of the number of shares of Common Stock (excluding any treasury
shares of the Company) issued and outstanding.
g) Notice
to the Holders.
i. Adjustment
to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 7, the Company
shall promptly deliver to each Holder a notice pursuant to
Section 8(a)
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) the Company shall
declare a dividend (or any other distribution in whatever form) on
the Common Stock, (B) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common Stock,
(C) the Company shall authorize the granting to all holders of the
Common Stock of rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any rights, (D) the
approval of any stockholders of the Company shall be required in
connection with any reclassification of the Common Stock, any
consolidation or merger to which the
Company
is a party, any sale or transfer of all or substantially all of the
assets of the Company, or any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or property
or (E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Company, then, in each case, the Company shall cause to be filed at
each office or agency maintained for the purpose of conversion of
this Series C Preferred Stock, and shall cause to be delivered by
to each Holder at its last e-mail address or address as it shall
appear upon the stock books of the Company, at least twenty (20)
calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock
of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided that the failure to
deliver such notice or any defect therein or in the delivery
thereof shall not affect the validity of the corporate action
required to be specified in such notice. To the extent that any
notice provided hereunder constitutes, or contains, material,
non-public information regarding the Company or any of the
Subsidiaries, the Company shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form 8-K. The
Holder shall remain entitled to convert the Conversion Amount of
this Series C Preferred Stock (or any part hereof) during the
20-day period commencing on the date of such notice through the
effective date of the event triggering such notice except as may
otherwise be expressly set forth herein.
Section 8.
Miscellaneous.
a) Notices.
Any and all notices or other communications or deliveries to be
provided by the Holders hereunder including, without limitation,
any Notice of Conversion, shall be in writing and delivered
personally or by e-mail attachment, or sent by a nationally
recognized overnight courier service, addressed to the Company, at
the address set forth above Attention: , e-mail
address , or
such other e-mail address or address as the Company may specify for
such purposes by notice to the Holders delivered in accordance with
this Section 8. Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by or e-mail attachment, or sent
by a nationally recognized overnight courier service addressed to
each Holder at the e-mail address or address of such Holder
appearing on the books of the Company, or if no such e-mail address
or address appears on the books of the Company, at the principal
place of
business of such
Holder, as set forth in the Purchase Agreement applicable to such
Holder. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via
e-mail attachment at the e-mail address set forth in this Section
prior to 5:30 p.m. (New York City time) on any date, (ii) the next
Trading Day after the date of transmission, if such notice or
communication is delivered via e-mail attachment at the e-mail
address set forth in this Section on a day that is not a Trading
Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (iii) the second Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is
required to be given.
b) Absolute
Obligation. Except as expressly provided herein, no
provision of this Certificate of Designation shall alter or impair
the obligation of the Company, which is absolute and unconditional,
to pay liquidated damages, accrued dividends and accrued interest,
as applicable, on the shares of Series C Preferred Stock at the
time, place, and rate, and in the coin or currency, herein
prescribed.
c) Lost
or Mutilated Preferred Stock Certificate. If a
Holder’s Series C Preferred Stock certificate shall be
mutilated, lost, stolen or destroyed, the Company shall execute and
deliver, in exchange and substitution for and upon cancellation of
a mutilated certificate, or in lieu of or in substitution for a
lost, stolen or destroyed certificate, a new certificate for the
shares of Series C Preferred Stock so mutilated, lost, stolen or
destroyed, but only upon receipt of evidence of such loss, theft or
destruction of such certificate, and of the ownership hereof
reasonably satisfactory to the Company.
d) Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of this Certificate of Designation
shall be governed by and construed and enforced in accordance with
the internal laws of the State of Delaware, 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 this Certificate of
Designation and any of the Transaction Documents (whether brought
against a party hereto or its respective Affiliates, directors,
officers, stockholders, 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 this Certificate of Designation 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 Certificate of
Designation 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 Certificate of
Designation or the transactions contemplated hereby. If any party
shall commence an action or proceeding to enforce any provisions of
this Certificate of Designation, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its
attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or
proceeding.
e) Waiver.
Any waiver by the Company or a Holder of a breach of any provision
of this Certificate of Designation 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 Certificate of
Designation or a waiver by any other Holders. The failure of the
Company or a Holder to insist upon strict adherence to any term of
this Certificate of Designation on one or more occasions shall not
be considered a waiver or deprive that party (or any other Holder)
of the right thereafter to insist upon strict adherence to that
term or any other term of this Certificate of Designation on any
other occasion. Any waiver by the Company or a Holder must be in
writing.
f) Severability.
If any provision of this Certificate of Designation is invalid,
illegal or unenforceable, the balance of this Certificate of
Designation shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it
shall be found that any interest or other amount deemed interest
due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under
applicable law.
g) 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.
h) Headings.
The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designation and shall not
be deemed to limit or affect any of the provisions
hereof.
i) Status
of Converted or Redeemed Preferred Stock. If any shares of
Series C Preferred Stock shall be converted, redeemed or reacquired
by the Company, such shares shall resume the status of authorized
but unissued shares of preferred stock and shall no longer be
designated as Series C 9.00% Convertible Junior Preferred
Stock.
j) Fractional Shares. Series C
Preferred Stock may not be issued in fractional shares or scrip
representing fractional shares of more than four decimal places. As
to any fraction of a share of Series C Preferred Stock to be issued
pursuant to any provision hereof, the Company shall at its
election, either pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the
Stated Value or round up to the next ten-thousandth of a
share.
*********************
RESOLVED, FURTHER,
that the Chairman, the president or any vice-president, and the
secretary or any assistant secretary, of the Company be and they
hereby are authorized and directed to prepare and file this
Certificate of Designation of Preferences, Rights and Limitations
in accordance with the foregoing resolution and the provisions of
Delaware law.
IN
WITNESS WHEREOF, the undersigned have executed this Certificate
this day of December, 2020.
|
Name:
Title:
|
Name:
Title:
|
ANNEX A
NOTICE
OF CONVERSION
(TO BE
EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF
Series C PREFERRED STOCK)
The
undersigned hereby elects to convert the number of shares of Series
C 9.00% Convertible Junior Preferred Stock indicated below into
shares of common stock, par value $0.0001 per share (the
“Common
Stock”), of AzurRx BioPharma, Inc., a Delaware
corporation (the “Company”), according to
the conditions hereof, as of the date written below. If shares of
Common Stock are to be issued in the name of a Person other than
the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such
certificates and opinions as may be required by the Company in
accordance with the applicable Purchase Agreement. No fee will be
charged to any Holder for any conversion, except for any such
transfer taxes.
Conversion
calculations:
|
Date to
Effect Conversion:
|
|
Number
of shares of Series C Preferred Stock owned prior to Conversion:
_
|
|
Number
of shares of Series C Preferred Stock to be Converted:
|
|
Stated
Value of shares of Series C Preferred Stock to be Converted:
|
|
Number
of shares of Common Stock to be Issued:
|
|
Applicable
Conversion
Price:
|
|
Number
of shares of Preferred Stock subsequent to Conversion:
|
|
Address
for Delivery: or
DWAC
Instructions: Broker no: Account no: _
|
|
[HOLDER]
By:
Name:
Title:
|
EXHIBIT B
FORM
OF REGISTRATION RIGHTS AGREEMENT
[See
Attached]
EXHIBIT C
FORM
OF COMMON STOCK PURCHASE WARRANT
[See
Attached]
EXHIBIT D-1
FORM
OF REGISTERED PREFUNDED WARRANT
[See
Attached]
EXHIBIT D-2
FORM
OF UNREGISTERED PREFUNDED WARRANT
[See
Attached]
