EXCHANGE AGREEMENT
Exhibit 10.3
THIS EXCHANGE AGREEMENT (this
“Agreement”) is
dated as of February 5, 2019, by and between Aytu BioScience, Inc.,
a Delaware corporation (the “Company”), and Armistice Capital
Master Fund Ltd., a Cayman Islands exempted company (the
“Holder”).
WHEREAS:
A. The
Holder is the holder of a Promissory Note, dated November 29, 2018,
issued by the Company in the principal amount of $5,000,000 (the
“Note”);
and
B. The
Company and the Holder desire to enter into this Agreement,
pursuant to which, among other things, the Holder shall agree to
exchange the Note for: (1) Common Stock of the Company, (2) Series
E Convertible Preferred Stock of the Company, and (3) a Common
Stock Purchase Warrant (the “Exchange Securities”), and the
Company desires to issue the Exchange Securities in exchange for
the cancellation of the Note and the satisfaction of all principal
and interest owed thereunder, all on the terms and conditions set
forth in this Agreement.
NOW,
THEREFORE, in consideration of the foregoing premises and the
mutual covenants hereinafter contained, the parties hereto agree as
follows:
1.
EXCHANGE.
1.1
Exchange. Subject
to and upon the terms and conditions set forth in this Agreement,
Holder agrees to surrender to the Company the Note and, in exchange
therefore, the Company shall issue to the Holder the following
Exchange Securities (collectively, the “Exchange”), which Exchange will
also be deemed to satisfy all principal and interesting owing under
the Note:
1.1.1 Common
Stock. The Company shall issue to the Holder 3,120,064
shares of Common Stock of the Company (the “Common Shares”), which is the
amount that, post-exchange, would result in the Holder owning
approximately 33.3% of the outstanding Common Stock of the
Company.
1.1.2 Series
E Convertible Preferred Stock. The Company shall issue to
the Holder 2,751,148 shares of Series E Convertible Preferred Stock
of the Company (the “Preferred Shares”). The Preferred
Shares shall be subject to the Certificate of Designation of
Preferences, Rights and Limitations of Series E Convertible
Preferred Stock attached hereto as Exhibit A.
1.1.3 Warrants.
The Company shall issue to the Holder a Common Stock Purchase
Warrant, which shall be exercisable for 4,403,409 Common Shares.
The form of Common Stock Purchase Warrant is attached hereto as
Exhibit B.
1.2
Closing. Upon
satisfaction of the conditions set forth in Sections 4, 5 and 6
herein, the Company will issue and deliver (or cause to be issued
and delivered) the Exchange Securities to the Holder, or in the
name of a custodian or nominee of the Holder, or as otherwise
requested by the Holder in writing, and the Holder will surrender
to the Company the Note.
2.
COMPANY REPRESENTATIONS AND WARRANTIES.
As a
material inducement to the Holder to enter into this Agreement, the
Company represents, warrants and covenants with and to the Holder
as follows:
2.1
Authorization and Binding
Obligation. The Company has the requisite power and
authority to enter into and perform its obligations under this
Agreement. This Agreement has been duly executed and delivered by
the Company, and constitutes the legal, valid and binding
obligations of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or
state securities laws.
2.2
No Conflict. The
execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby and thereby will not (i) result in a violation
of the articles of incorporation or other organizational documents
of the Company or any of its subsidiaries, any capital stock of the
Company or any of its subsidiaries or bylaws of the Company or any
of its subsidiaries, (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would
become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of
its subsidiaries is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including
foreign, federal and state securities laws and applicable to the
Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries is bound or
affected except, in the case of clause (ii) or (iii) above, to the
extent such violations that could not reasonably be expected to
have a material adverse effect on the Company or its
subsidiaries.
3.
HOLDER’S REPRESENTATIONS AND WARRANTIES.
As a
material inducement to the Company to enter into this Agreement,
the Holder represents, warrants and covenants with and to the
Company as follows:
3.1
Ownership of the
Note. The Holder is the legal and beneficial owner of the
Note. The Holder has continuously held the Note since its issuance
or purchase. The Holder, individually or through an affiliate, owns
the Note outright and free and clear of any options, contracts,
agreements, liens, security interests, or other
encumbrances.
3.2
No Public Sale or
Distribution. The Holder is acquiring the Exchange
Securities in the ordinary course of business for its own account
and not with a view toward, or for resale in connection with, the
public sale or distribution thereof; provided, however, that by
making the representations herein, the Holder does not agree to
hold any of the Exchange Securities for any minimum or other
specific term and reserves the right to dispose of the Exchange
Securities at any time in accordance with an exemption from the
registration requirements of the Securities Act of 1933, as amended
(the “Securities
Act”) and applicable state securities laws. The Holder
does not presently have any agreement or understanding, directly or
indirectly, with any person to distribute or transfer any interest
or grant participation rights in the Note or the Exchange
Securities.
3.3
Accredited
Investor. The Holder is an accredited investor as defined in
Rule 501(a) of Regulation D, as amended, under the Securities
Act.
3.4
Reliance on
Exemptions. The Holder understands that the Exchange is
being made in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of,
and the Holder’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the
Holder set forth herein in order to determine the availability of
such exemptions and the eligibility of the Holder to complete the
Exchange and to acquire its pro-rata portion of the Exchange
Securities.
3.5
Disclosure of
Information. The Holder has had the opportunity to review
the current business prospects, financial condition and operating
history of the Company as set forth in the filings that the Company
has made with the U.S. Securities and Exchange Commission (the
“SEC”),
including, but not limited to, the Company’s 10-K for the
year ended June 30, 2018, which was filed by the Company with the
SEC on September 6, 2018 and such other reports filed by the
Company with the SEC since July 1, 2018. The Holder has also had
the opportunity to ask questions and receive answers from the
Company regarding the terms and conditions pertaining to its
execution of this Agreement and the Holder has received all the
information the Holder considers necessary or appropriate for
deciding whether to enter into this Agreement.
3.6
Risk. The Holder
understands that its investment in the Exchange Securities involves
a high degree of risk. The Holder is able to bear the risk of an
investment in the Exchange Securities including, without
limitation, the risk of total loss of its investment. The Holder
has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with
respect to the Exchange.
2
3.7
No Governmental
Review. The Holder understands that no United States federal
or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement in connection
with the Exchange or the fairness or suitability of the investment
in the Exchange Securities nor have such authorities passed upon or
endorsed the merits of the Exchange Securities.
3.8
Authorization and Binding
Obligation. The Holder has the requisite power and authority
to enter into and perform its obligations under this Agreement.
This Agreement has been duly executed and delivered by the Holder,
and constitutes the legal, valid and binding obligations of the
Holder, enforceable against the Holder in accordance with its
terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or
state securities laws.
3.9
Prior Investment
Experience. The Holder acknowledges that it has prior
investment experience, including investment in securities of the
type being exchanged, including the Note or the Exchange
Securities, and has read all of the documents furnished or made
available by the Company to it and is able to evaluate the merits
and risks of such an investment on its behalf, and that it
recognizes the highly speculative nature of this
investment.
3.10
Tax Consequences.
The Holder acknowledges that the Company has made no representation
regarding the potential or actual tax consequences for the Holder
which will result from entering into the Agreement and from
consummation of the Exchange. The Holder acknowledges that it bears
complete responsibility for obtaining adequate tax advice regarding
this Agreement and the Exchange.
3.11
No Registration; Resale
Restrictions. The Holder acknowledges, understands and
agrees that the Exchange Securities are being issued hereunder
pursuant to an exemption from registration under the Securities Act
and as such will not be available for resale to the public until a
registration statement has been filed under the Securities Act or
the Holder has complied with a resale exemption under the
Securities Act.
4.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES. The obligation
of each of the Company and the Holder to consummate the
transactions contemplated by this Agreement is subject to the
satisfaction on the date of closing the transactions contemplated
by this Agreement (the “Closing Date”) of the following
condition:
4.1
Stockholder
Approval. The stockholders of the Company shall have
approved of the issuance of the Exchange Securities.
5.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. The obligation
of the Company to consummate the transactions contemplated by this
Agreement is subject to the satisfaction on the Closing Date of
each of the following conditions, provided that these conditions
are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion by providing the Holder
with prior written notice thereof:
5.1
Delivery. The
Holder shall have delivered to the Company the Note.
5.2
No Prohibition. No
order of any court, arbitrator, or governmental or regulatory
authority shall be in effect which purports to enjoin or restrain
any of the transactions contemplated by this
Agreement.
5.3
Representations.
The accuracy in all material respects when made and on the Closing
Date of the representations and warranties of the Holder contained
herein (unless as of a specific date therein).
6.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE HOLDER. The obligation
of the Holder to consummate the transactions contemplated by this
Agreement is subject to the satisfaction on the Closing Date of
each of the following conditions, provided that these conditions
are for the Holder’s sole benefit and may be waived by the
Holder at any time in its sole discretion by providing the Company
with prior written notice thereof:
3
6.1
No Prohibition. No
order of any court, arbitrator, or governmental or regulatory
authority shall be in effect which purports to enjoin or restrain
any of the transactions contemplated by this
Agreement.
6.2
Representations.
The accuracy in all material 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).
6.3
Obligations. All
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed, subject to any required stockholder
approval.
7.
COVENANTS.
7.1
No Trading. The
Holder agrees not to directly or indirectly purchase, sell, make
any short sale of, loan or grant any option for the purchase of, or
otherwise transfer or dispose of the Company’s Common Stock
(or other securities, warrants, or other forms of convertible
securities outstanding or other rights to acquire such securities)
until the Company has filed a report with the SEC announcing this
Agreement and the transactions contemplated herein.
7.2
UCC Termination.
The Holder agrees, promptly following the Closing Date, to file a
UCC-3 Financing Statement Amendment in the appropriate
jurisdictions to evidence the termination of the Holder’s
security interest in any collateral pursuant to the
Note.
7.3
Registration. The
Company agrees that, within 180 days of the Closing Date, it will
register the Common Shares, the shares of Common Stock into which
the Preferred Shares are convertible and the shares of Common Stock
into which the Common Stock Purchase Warrant is
exercisable.
8.
MISCELLANEOUS.
8.1
Legends. The Holder
acknowledges that the certificate(s) representing the shares
issuable upon the exercise of the Warrant shall each conspicuously
set forth on the face or back thereof a legend in substantially the
following form:
THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY
A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
THIS SECURITY 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.
8.2
Governing Law;
Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of
New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any
other jurisdictions) that would cause the application of the laws
of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in New York, New York for the
adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein, 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 any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. 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 to such party at the address for such
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 manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
4
8.3
Counterparts. This
Agreement may be executed simultaneously in two or more
counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will
constitute one and the same Agreement. This Agreement, to the
extent delivered by means of a facsimile machine or electronic mail
(any such delivery, an “Electronic Delivery”), shall be
treated in all manner and respects as an original agreement or
instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered
in person. At the request of any party hereto, each other party
hereto shall re-execute original forms hereof and deliver them in
person to all other parties. No party hereto shall raise the use of
Electronic Delivery to deliver a signature or the fact that any
signature or agreement or instrument was transmitted or
communicated through the use of Electronic Delivery as a defense to
the formation of a contract, and each such party forever waives any
such defense, except to the extent such defense related to lack of
authenticity.
8.4
Headings. The
headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this
Agreement.
8.5
Severability. If
any provision of this Agreement is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the
invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Agreement so long
as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal
obligations of the parties or the practical realization of the
benefits that would otherwise be conferred upon the parties. The
parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable
provision(s).
8.6
Entire Agreement;
Amendments. This Agreement supersedes all other prior oral
or written agreements between the Holder, the Company, their
affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement contains the entire
understanding of the parties with respect to the matters covered
herein and, except as specifically set forth herein, neither the
Company nor the Holder makes any representation, warranty, covenant
or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing
signed by the Company and the Holder, and any amendment to this
Agreement made in conformity with the provisions of this Section
shall be binding upon the Holder. No provision hereof may be waived
other than by an instrument in writing signed by the party against
whom enforcement is sought.
8.7
Fees and Expenses.
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.
8.8
Notices. To be
effective, any notice, consent, or communication required or
permitted to be given in connection with this Agreement must be in
writing and personally delivered or sent by messenger, fax,
overnight courier, electronic mail, or certified mail and when to
the Company, addressed to Aytu BioScience, Inc. 000 Xxxxxxxxx
Xxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000, email,
xxxxxx@xxxxxxx.xxx, attention Xxxxx Xxxxx, Chief Financial Officer,
or in the case of the Holder, to the Holder’s address
indicated on the Holder’s signature page, or to such other
address and/or email address and/or to the attention of such other
person as the recipient party has specified by written notice given
to each other party five (5) days prior to the effectiveness of
such change. All notices, consents, and communications are deemed
delivered and received by the receiving party (i) if personally
delivered or delivered by messenger, on the date of delivery or on
the date delivery was refused, (ii) if delivered by fax
transmission or electronic mail, upon receipt of confirmation of
the party transmitting such fax or electronic mail, or (iii) if
delivered by overnight courier or certified mail, on the date of
delivery as established by the return receipt, courier service
confirmation, or similar documentation (or the date on which the
courier or postal service, as the case may be, confirms that
acceptance of delivery was refused or undeliverable).
8.9
Successors and
Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights
or obligations hereunder without the prior written consent of the
Holder. The Holder may not assign some or all of its rights
hereunder without the consent of the Company.
5
8.10
Survival of
Representations. The representations and warranties of the
Company and the Holder contained in Sections 2 and 3, respectively,
will survive the closing of the transactions contemplated by this
Agreement.
8.11
Construction. The
language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party. No
specific representation or warranty shall limit the generality or
applicability of a more general representation or
warranty.
[signature page follows]
6
IN WITNESS WHEREOF, the Holder and the
Company have caused their respective signature pages to this
Agreement to be duly executed as of the date first written
above.
|
|
COMPANY:
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
By:
|
/s/
Xxxxxx X. Xxxxxxx
|
|
|
Name:
|
Xxxxxx
X. Xxxxxxx
|
|
|
Title:
|
Chief
Executive Officer
|
|
|
|
|
|
|
HOLDER:
ARMISTICE CAPITAL MASTER FUND LTD.
|
|
|
|
|
|
|
|
By:
|
/s/
Tohuan Xxxxx Xxxx
|
|
|
Name:
|
Tohuan Xxxxx
Xxxx
|
|
|
Title:
|
Controller
of the Investment Manager
|
|
|
|
|
|
|
Address for Notice to Holder, including email address:
|
|
|
|
|
|
|
|
|
|
|
|
Address for Delivery of the Exchange Securities (if different than
the address for Notice to the Holder):
|
|
Exhibit
A
Series
E Convertible Preferred Stock Certificate of
Designation
CERTIFICATE OF DESIGNATION
Exhibit
B
Form of
Common Stock Purchase Warrant
COMMON STOCK PURCHASE WARRANT
