SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 10, 2010
AMPIO PHARMACEUTICALS, INC.
(Exact name of registrant as specified in Charter)
| Delaware | 333-146542 | 26-0179592 | ||
|
(State or other jurisdiction of incorporation or organization) |
(Commission File No.) |
(IRS Employee Identification No.) |
8400 East Crescent Parkway
Suite 600
Greenwood Village, Colorado 80111
(Address of Principal Executive Offices)
(303) 418-1000
(Issuer Telephone number)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 1.01 | Entry into a Material Definitive Agreement. |
On August 11, 2010, the Company issued $430,000 in principal amount of 8% Senior Convertible Unsecured Debentures due January 31, 2011 (the “Debentures”) together with warrants. The Debentures were issued to Michael Macaluso, the Company’s Chairman of the Board, in the principal amount of $230,000, and in the principal amount of $100,000 each to Richard B. Giles and James A. Ludvik. As disclosed in Item 5.02 below, Mr. Giles joined the Company’s Board of Directors on August 11, 2010, and serves as the Chief Financial Officer of Ludvik Electric Co., which is wholly-owned by James A. Ludvik. Mr. Macaluso advanced $30,000 to the Company on August 3, 2010 against issuance of his Debenture, and transferred the remaining $200,000 to the Company on August 16, 2010. Funds paid to the Company by Messrs. Giles and Ludvik were received on August 10, 2010.
The Debentures accrue interest at the rate of 8% per annum. The Debentures are convertible into the Company’s common stock at the lower of (i) $1.75 per share, or (ii) the per-share price at which the Company issues common stock in an underwritten offering (the “Offering”). The conversion price may be adjusted pursuant to the other terms of the Debenture. The Debenture is due and payable at the earlier of one business day after the closing of the Offering or January 31, 2011. The Debenture terms specify that the Company is obligated to obtain an extension of the $400,000 in principal amount of promissory notes previously issued to DMI BioSciences, Inc., a related party, to a due date consistent with the maturity date of the Debentures, and require the Company to obtain a subordination agreement from DMI BioSciences, Inc., such that the Debentures will jointly constitute the senior unsecured indebtedness of the Company.
In conjunction with the issuance of the Debentures, the Company issued Warrants to the purchasers of the Debentures giving them the right to purchase an aggregate of 21,500 shares of the Company’s common stock at an exercise price equal to the price at which the Company sells common stock in the Offering. The warrant exercise price is subject to adjustment for stock splits, stock dividends, and the like.
The Company paid no commission in connection with the sale of the Debentures and the Warrants, and did not engage a placement agent to assist it in the sale of these unregistered securities.
In the event that the Company issues additional debentures on terms that are more favorable to the purchasers than the terms of the Debenture, the Company has agreed that it will ascribe “most favored nation” status to the Debenture holders and will conform the terms of the Debenture such that the terms are as favorable to the initial purchasers as any other debenture issued thereafter until maturity.
From and after an event of default as defined under the Debentures and for so long as the event of default is continuing, the Debentures will bear default interest at a rate of 18% per annum. Events of default include the failure to timely pay principal, material breach of a covenant, representation or warranty, an uncured suspension in trading of the Company’s common stock that remains in effect for specified time periods, the appointment of a receiver or trustee, the filing of a material judgment or bankruptcy, default under other material agreements, and failure to deliver conversion stock or a replacement debenture.
| Item 2.03. | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registration. |
The information included in Item 1.01 of this Form 8-K is hereby incorporated by reference into this Item 2.03.
| Item 3.02. | Unregistered Sales of Equity Securities. |
The information included in Item 1.01 of this Form 8-K is hereby incorporated by reference into this Item 3.02.
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| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
(b) Resignation of Director
On August 11, 2010, Bruce G. Miller resigned as a member of the Board of Directors. Mr. Miller remains the Chief Financial Officer of the Company. Mr. Miller’s resignation did not arise from any disagreement with the Company or any matter relating to the Company’s operations, policies or practices. Mr. Miller does not serve on any committees of the Company’s board of directors. A copy of Mr. Miller’s resignation letter is attached as Exhibit 99.1 to this Current Report on Form 8-K.
(d)(1)-(2) Appointment of New Director
Pursuant to the Bylaws of Ampio Pharmaceuticals, Inc. (the “Company”), the Board of Directors appointed Richard B. Giles to fill the vacancy on the Company’s Board of Directors on August 11, 2010.
There is no arrangement or understanding between Mr. Giles and any other person pursuant to which Mr. Giles was appointed as a director of the Company. Mr. Giles will be eligible to participate in all non-management director compensation plans or arrangements available to the Company’s other independent directors. Those arrangements were approved by the Board of Directors as described under (d)(5) below on August 11, 2010.
The Company has not been a party to any transaction in the last fiscal year, and is not a party to any currently proposed transaction, in which Mr. Giles or any of his immediate family members (as such term is defined in Item 404(b)(ii) of Regulation S-K) was or is a participant, or in which Mr. Giles or his immediate family members had or will have a direct or indirect material interest. Set forth below is information that has been furnished by Mr. Giles to the Company.
Richard B. Giles, age 60, currently serves as the Chief Financial Officer of Ludvik Electric Co., an electrical contractor headquartered in Lakewood, Colorado, a position he has held since 1985. Ludvik Electric is a private electrical contractor with 2009 revenues of over $100 million that has completed electrical contracting projects throughout the Western United States, Hawaii, and South Africa. As CFO and Treasurer of Ludvik Electric, Mr. Giles oversees accounting, risk management, financial planning and analysis, financial reporting, regulatory compliance, and tax-related accounting functions. He serves also as the trustee of Ludvik Electric Co.’s 401(k) plan. Prior to joining Ludvik Electric, Mr. Giles was for three years an audit partner with Higgins Meritt & Company, then a Denver, Colorado CPA firm, and during the preceding nine years he was an audit manager and a member of the audit staff of Price Waterhouse, one of the legacy firms which now comprises PricewaterhouseCoopers. While with Price Waterhouse, Mr. Giles participated in a number of public company audits, including one for a leading computer manufacturer. Mr. Giles received a B.S. degree in accounting from the University of Northern Colorado and is a Certified Public Accountant. He is also a member of the American Institute of Certified Public Accountants and the Construction Financial Management Association. Mr. Giles owns beneficially 54,009 shares of the Company’s common stock, and 25,835 shares of DMI BioSciences, Inc., less than 1% of the outstanding shares of DMI BioSciences. The Company executed a letter of intent in April 2010 to acquire DMI BioSciences, which acquisition is currently pending execution of definitive documents.
We intend to enter into our standard form of indemnification agreement with Mr. Giles. The form of indemnification agreement is filed as Exhibit 10.9 to Amendment No. 1 to our Form 8-K, filed with the Securities and Exchange Commission on March 17, 2010.
There are no family relationships between or among the executive officers or directors of the Company, including Mr. Giles. Raphael Bar-Or, a non-executive officer, is the son of David Bar-Or, our chief scientific officer.
(d)(3) Chartering of, and Appointments to, Board Committees
Pursuant to the Company’s Bylaws and contemporaneously with the appointment to the Board of Directors of Richard B. Giles, the Board of Directors authorized the adoption of charters for the Company’s Audit Committee of the Board of Directors, the Compensation Committee of the Board of Directors, and the Nominating and Governance Committee of the Board of Directors. The Company will post the charters for each of these Board committees to the Company’s web site, www.ampiopharma.com , within four business days of the adoption of the charters.
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Following the adoption of the foregoing charters for the Audit Committee, Compensation Committee, and the Nominating and Governance Committee, the Board of Directors, the Board of Directors appointed the directors identified below to chair, or to serve as members of, each such committee.
|
Audit Committee |
Compensation Committee |
Nominating and Governance Committee |
||
| Chair: Richard B. Giles |
Chair: Philip H. Coelho |
Chair: Philip H. Coelho | ||
|
Member: Michael Macaluso |
Member: Michael Macaluso | Member: Richard B. Giles | ||
|
Member: Philip H. Coelho |
Member: Richard B. Giles |
Each of the directors appointed to these Committees meets the definition of “independent director” established by the national securities exchanges and, in the case of the Audit Committee, the standards established by Rule 10A-3 of the Securities Exchange Act of 1934, as amended. In addition, the charters adopted for these committees by the Board of Directors comply with the requirements of the national securities exchanges and such related matters as are required by the federal securities laws. Following Mr. Miller’s resignation from, and the appointment of Mr. Giles to, the Board of Directors, the Company’s Board of Directors is now comprised of a majority of independent directors. Because the Company’s securities are quoted on the OTC Bulletin Board, the Company was not required to charter these Committees or to appoint independent directors to these committees.
(d)(5) Board and Committee Compensation
Contemporaneously with the changes to the membership of the Board of Directors described herein, the Board of Directors adopted and approved compensation arrangements which will apply to members of the Board and each Committee of the Board effective immediately, but which will be determined pro rata based upon time served in the 2010 calendar year by each member of the Board of Directors or the relevant Committee. Such compensation shall accrue until such time as the Company has obtained financing in the amount of $10 million or more, and may be modified subsequently as the Board then determines. Those arrangements are as follows:
| 1. | Members of the Board will receive: |
| a. | $20,000 cash retainer for the Chairman, to be paid on January 2 each year. |
| b. | $10,000 cash retainer for each non-employee director other than the Chairman, to be paid January 2 of each year. |
| c. | $10,000 restricted stock grant to each director, to be granted on the first trading day of the calendar year. |
| d. | $1,000 per meeting fee plus reimbursement of expenses for in-person attendance at meetings. |
| e. | $500 per meeting fee for telephonic or web-based attendance at meetings. |
| 2. | Members of the Audit Committee will receive: |
| a. | $20,000 cash retainer for the Chairman of the Audit Committee, to be paid on January 2 of each year. |
| b. | $12,000 cash retainer for each Audit Committee member except the Chairman, to be paid on January 2 of each year. |
| c. | $2,500 meeting fee for the Chairman of the Audit Committee for each meeting attended in- person. |
| d. | $1,500 meeting fee for the Chairman of the Audit Committee for each meeting attended telephonically or via the Internet. |
| e. | $1,500 meeting fee for members of the Audit Committee for each meeting attended in- person. |
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| f. | $1,000 meeting fee for members of the Audit Committee for each meeting attended telephonically or via the Internet. |
| 3. | Members of the Compensation Committee and the Nominating and Governance Committee will each receive ( i.e ., a separate cash retainer in the noted amount shall be paid to the Chair and members of each committee, and for each meeting of each committee, the meeting fees noted will be payable to each attending Chair or member): |
| a. | $20,000 cash retainer for the Chairman of each Committee, to be paid on January 2 of each year. |
| b. | $10,000 cash retainer for each member of each Committee, to be paid on January 2 of each year. |
| c. | $2,500 meeting fee for the Chairman of each Committee for each meeting attended in- person. |
| d. | $1,500 meeting fee for the Chairman of each Committee for each meeting attended telephonically or via the Internet. |
| e. | $1,500 meeting fee for members of each Committee for each meeting attended in- person. |
| f. | $1,000 meeting fee for members of each Committee for each meeting attended telephonically or via the Internet. |
All meeting fees are payable within two weeks of the holding of a meeting, the determination of which will rest with the Chair of the Board or the Chair of the relevant Committee.
In addition to the foregoing, the Compensation Committee of the Board of Directors on August 12, 2010 authorized the grant of incentive stock options to the following members of the Board and executive officers of the Company. The options vested immediately except as noted below, have an exercise price equal to the last quoted price of the Company’s Common Stock on August 11, 2010 ($1.01), and a term of 10 years.
|
Name |
Number of Incentive
Stock Options |
||
|
Philip H. Coelho |
220,000 | ||
|
Richard Giles |
220,000 | ||
|
Michael Macaluso |
220,000 | ||
|
Donald B. Wingerter, Jr. |
675,000 | 1 | |
|
David Bar-Or, M.D. |
700,000 | 1 | |
|
Vaughan Clift |
365,000 | 1 |
| (1) | All such options will vest in accordance with vesting schedule contained in Exhibit B to each such officer’s employment agreement dated August 12, 2010, and to be executed August 18, 2010, which are described below. |
Following the issuance of these options and another 100,000 options to the Company’s counsel, the Company has no more shares available for issuance under its option plan. The Company anticipates increasing the number of shares reserved under its option plan by an additional 1.0 to 1.5 million shares in the next 30 days by consent of the majority shareholders of the Company, as permitted under the Company’s certificate of incorporation.
(e) Executive Officer Employment Agreements and Compensation
On August 12, 2010, the Company entered into an employment agreement with Donald B. Wingerter, Jr. The Company anticipates entering into employment agreements with David Bar-Or, M.D., and Vaughan Clift, M.D. prior to August 18, 2010. We refer to Messrs. Wingerter, Bar-Or and Clift as the “Officers” or a “Officer”. The Company will file an additional Form 8-K with the executed employment agreements of Drs. Bar-Or and Clift on or before August 18, 2010. The description set forth below represents the Company’s expectations with respect to the terms of such agreements. Under the employment agreements, Messrs. Wingerter, Bar-Or and Clift will serve as Chief Executive Officer, Chief Scientific Officer, and Vice President of Scientific and Clinical Affairs, respectively, of the Company for an initial term ending July 31, 2013. The agreements provide for annual salaries of $145,000 for Mr. Wingerter, $150,000 for Dr. Bar-Or, and $120,000 for Mr. Clift, which will automatically increase to annual salaries of $275,000, $300,000 and $250,000, respectively, following the Company’s receipt of financing in the amount of $10 million or more. The Compensation Committee established the current salary levels to reflect the Company’s presently limited financial resources.
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The Officers are each entitled to receive an annual bonus each year that will be determined by the Compensation Committee of the Board of Directors based on individual achievement and company performance objectives established by the Compensation Committee. Included in those objectives for each officer are (i) obtaining a successful phase 2 clinical trial for a drug to treat diabetic retinopathy, (ii) preparation and compliance with a fiscal budget, (iii) the launch of a second clinical trial for an additional product approved by the Board of Directors, and (iv) the sale of intellectual property not selected for clinical trials by the Company at prices, and times, approved by the Board of Directors. The targeted amount of the annual bonus shall be 50% of the base salary paid to each Officer, although the actual bonus may be higher or lower.
The employment agreements provide for an immediate grant of stock options to Mr. Wingerter and Drs. Bar-Or and Clift in the amount of 675,000, 700,000 and 365,000 options, respectively. Each option is exercisable for a period of ten years at an exercise price per share equal to the quoted closing price of the Company’s common stock on August 11, 2010, the day immediately prior to the execution of the employment agreement. The options vest as follows: (i) one-third upon execution of the agreement, (ii) one-third on August 12, 2011, and (iii) one-third on August 12, 2012. The vesting of all options set forth above shall accelerate upon a “change in control” as defined in each agreement.
If the Officer’s employment is terminated at the Company’s election at any time, for reasons other than death, disability, cause (as defined in the agreement), or a voluntary resignation, or if an Officer terminates his employment for good reason (as defined in the agreement), the Officer in question shall be entitled to receive a lump sum severance payment equal to two times his base salary and of the continued payment of premiums for continuation of the Officer’s health and welfare benefits pursuant to COBRA or otherwise, for a period of two years from the date of termination, subject to earlier discontinuation if the Officer is eligible for comparable coverage from a subsequent employer. All severance payments, less applicable withholding, are subject to the Officer’s execution and delivery of a general release of the Company, its parents, subsidiaries and affiliates and each of its officers, directors, employees, agents, successors and assigns in a form acceptable to the Company, and a reaffirmation of the Officer’s continuing obligation under the Propriety Information and Inventions Agreement (or an agreement not so titled, but which pertains to the Officer’s obligations generally, without limitation, to maintain and keep confidential all proprietary and confidential information of the Company, and to assign all inventions made by the Officer to the Company, which inventions are made or conceived during the Officer’s employment).
Mr. Wingerter has served as Chief Executive Officer of the Company since December 2009, and as a member of the Board of Directors since March 2010. Dr. Bar-Or served as Chairman of the Board from April 2009 through May 2010, is continuing to serve as a member of the Board of Directors. He has served as the Company’s Chief Scientific Officer since April 2009. Dr. Clift has served as the Vice President of Scientific and Clinical Affairs since June 2009.
| Item 5.05 | Code of Business Conduct and Ethics. |
On August 14, 2010, the Company’s Board of Directors adopted and approved a Code of Business Conduct and Ethics, effective immediately. The Company will post the Code of Business Conduct and Ethics on its web site, www.ampiopharma.com , within four business days of the adoption of the Code.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
The following exhibits are furnished with this report:
| 10.1 | Form of Senior Convertible Unsecured Debenture, issued by Ampio Pharmaceuticals, Inc. to Michael Macaluso, Richard B. Giles, and James A. Ludvik. |
| 10.2 | Form of Warrant issued by Ampio Pharmaceuticals, Inc. to Michael Macaluso, Richard B. Giles, and James A. Ludvik. |
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| 10.3 | Employment Agreement, dated August 12, 2010, by and between Ampio Pharmaceuticals, Inc. and Donald B. Wingerter, Jr.† |
| 99.1 | Resignation Letter of Bruce G. Miller as a director. |
| † | to be filed by Amendment |
This Current Report on Form 8-K, including its Exhibits, may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically are identified by use of terms such as “may,” “project,” “should,” “plan,” “expect,” “anticipate,”“believe,” “estimate” and similar words, although some forward-looking statements are expressed differently. Forward-looking statements represent our management’s judgment regarding future events. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, the Company can give no assurance that such expectations will prove to be correct. All statements other than statements of historical fact included in this Current Report on Form 8-K and its Exhibits are forward-looking statements. Except as required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The Company cannot guarantee the accuracy of the forward-looking statements, and you should be aware that the Company’s actual results could differ materially from those contained in forward-looking statements due to a number of factors, including the statements under “Risk Factors” found in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 8, 2010 and any subsequent filings made by the Company with the SEC.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| AMPIO PHARMACEUTICALS, INC. | ||||||
| Dated: August 16, 2010 | By: |
/s/ Donald B. Wingerter, Jr. |
||||
| Name: | Donald B. Wingerter, Jr. | |||||
| Title: | Chief Executive Officer | |||||
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Exhibit 10.1
THIS DEBENTURE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS DEBENTURE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS DEBENTURE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENTOR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO AMPIO PHARMACEUTICALS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
UNSECURED SENIOR CONVERTIBLE DEBENTURE
FOR VALUE RECEIVED, AMPIO PHARMACEUTICALS, INC., a Delaware corporation (the “ Borrower ” or “A mpio ”), promises to pay to (the “ Holder ”) or his registered assigns or successors in interest, the sum of Thousand Dollars ($ .00)(the “ Principal Amount ”), together with any accrued and unpaid interest hereon, on January 31, 2011 if not sooner paid in accordance with the provisions below.
The following terms shall apply to this Debenture:
ARTICLE I
INTEREST, AMORTIZATION AND STATUS
1.1. Interest . This Debenture shall accrue interest at the rate of 8% per annum.
1.2. Payment . If not earlier paid by conversion, payment of the aggregate principal amount outstanding under this Debenture (the “ Principal Amount ”) shall be made on the earlier of (i) one (1) business day after the closing of the Public Offering (hereinafter defined), or (ii) January 31, 2011 (hereinafter, the “ Maturity Date ”).
1.3. Status . At the date hereof, Borrower represents and warrants to Holder that its outstanding indebtedness consists solely of $400,000 in related party notes payable (the “ RPT Notes ”). The RPT Notes are currently due on or about September 2, 2010. The Borrower will obtain an extension for the due date of the RPT Notes that will reflect the Maturity Date of this Debenture. In addition, at the time such extension is obtained, the Borrower will obtain a subordination agreement from the holder of the RPT Notes that shall subordinate the repayment of the RPT Notes to the repayment of this Debenture (and debentures issues on similar terms, as described below). Accordingly, this Debenture and any other debentures issued by the Borrower on equivalent terms hereto shall jointly consist of the senior indebtedness of Ampio.
ARTICLE II
CONVERSION REPAYMENT
2.1. Optional Conversion . Subject to the terms of this Article II, the Holder shall have the right, but not the obligation, at any time until the Maturity Date, or thereafter during an Event of Default, to convert all or any portion of the outstanding Principal Amount into fully paid and nonassessable shares of Common Stock at the Conversion Price. The shares of Common Stock to be issued upon such conversion are herein referred to as the “ Conversion Shares. ” The “ Conversion Price ” shall mean the per-share price at which Ampio’s Common Stock is sold in an underwritten public offering (the “ Public Offering ”) that is the subject of a registration statement on Form S-1 to be filed with the Securities and Exchange Commission in late August or early September 2010. The Conversion Price may be adjusted pursuant to the other terms of this Debenture.
2.2. Mechanics of Holder’s Conversion . This Debenture may be converted by the Holder in part or in full from time to time after the Issue Date, by submitting to the Borrower a Notice of Conversion (by facsimile or other reasonable means of communication dispatched on the Conversion Date prior to 2:00 p.m., Denver, Colorado time). On each Conversion Date (as hereinafter defined) and in accordance with its Notice of Conversion, the Holder shall make the appropriate reduction to the Principal Amount as entered in its records and shall provide written notice thereof to the Borrower on the Conversion Date. Each date on which a Notice of Conversion is delivered or telecopied to Borrower in accordance with the provisions hereof shall be deemed a Conversion Date (the “ Conversion Date ”). A form of Notice of Conversion to be employed by the Holder is annexed hereto as Exhibit A . Borrower shall provide irrevocable written instructions to the transfer agent accompanied by an opinion of counsel to Borrower and shall cause the transfer agent to transmit the certificates representing the Conversion Shares to the Holder by physical delivery or crediting the account of the Holder’s designated broker with the Depository Trust Corporation (“ DTC ”) through its Deposit Withdrawal Agent Commission (“ DWAC ”) system within five (5) business days after receipt by Borrower of the Notice of Conversion (the “ Delivery Date ”). In the case of the exercise of the conversion rights set forth herein, the conversion privilege shall be deemed to have been exercised and the Conversion Shares issuable upon such conversion shall be deemed to have been issued upon the date of receipt by Borrower of the Notice of Conversion. The Holder shall be treated for all purposes as the record holder of such Common Stock, unless the Holder provides Borrower written instructions to the contrary.
2.3. Determination and Adjustment of Conversion Shares and Conversion Price .
(a) The number of Conversion Shares to be issued upon each conversion of this Debenture shall be determined by dividing that portion of the principal to be converted by the then applicable Conversion Price.
(b) The Conversion Price and number and kind of shares or other securities to be issued upon conversion shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows: If the Borrower at any time on or after the issuance date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Conversion Shares will be proportionately increased. If the Borrower at any time on or after the issuance date combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased and the number of Conversion Shares will be proportionately decreased. Any adjustment under this Section 2.3(b) shall become effective at the close of business on the date the subdivision or combination becomes effective. Notwithstanding the foregoing and any other terms of this Debenture , the issuance of shares of Ampio Common Stock (i) in the Public Offering and (ii) in connection with the acquisition of DMI BioSciences, Inc., and the issuance of additional debentures with terms identical to the terms hereof, shall not be events which shall require any adjustment in the Conversion Price or the Conversion Shares in this Debenture
(c) As described in subparagraph (b) above, the Borrower may issue additional debentures on terms identical to those set forth herein. If for any reason the Borrower issues additional debentures on terms that are more favorable to the holder(s) thereof than the terms of this Debenture are to the Holder, the Borrower agrees that it will ascribe “most favored nation” status to the Holder and will conform the terms of this Debenture such that the terms hereof are as favorable to the Holder as any other debenture issued to any other holder prior to the Public Offering.
2.4. Authorized Shares . The Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Conversion Shares upon the full conversion of this Debenture, with such reservation remaining in effect at all time until this Debenture is repaid in full by conversion or payment. The Borrower represents that upon issuance, such Conversion Shares will be duly and validly issued, fully paid and non-assessable shares of Ampio Common Stock with such rights and attributes as are pari passu to the rights and attributes of Ampio Common Stock presently outstanding and to be issued in the Public Offering. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of Conversion Shares into which this Debenture shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved for conversion of this Debenture. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Debenture, and (ii) agrees that its issuance of this Debenture shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Debenture.
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2.5. Issuance of New Debenture . Upon any partial conversion of this Debenture, a new Debenture containing the same date and provisions of this Debenture shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Debenture and interest which shall not have been converted or paid. Subject to the provisions of Article III, the Borrower will pay no costs, fees or any other consideration to the Holder for the production and issuance of a new Debenture.
2.6 Status of Conversion Shares . The Conversion Shares issued on any conversion under this Debenture shall be restricted stock. Accordingly, such Conversion Shares shall be salable by the Holder in accordance with the provisions of Rule 144 or other available exemption from Section 5 of the Securities Act of 1933, as amended, in accordance with the terms of such exemption. In connection with the Public Offering, Ampio will agree with the underwriters thereof to timely file all required reports under the Securities Exchange Act of 1934, as amended, in order to ensure that the current public information requirement of Rule 144 is met by the Borrower.
ARTICLE III
EVENTS OF DEFAULT
The occurrence of any of the following events set forth in Sections 3.1 through 3.9, inclusive, shall be an “ Event of Default ”:
3.1. Failure to Pay Principal . Borrower fails to pay principal, and such failure shall continue for a period of five (5) days following the date upon which such payment was due.
3.2. Breach of Covenant . Borrower breaches any covenant or other term or condition of this Debenture in any material respect and such breach, if subject to cure, continues for a period of five (5) days after the occurrence thereof and notice of breach being furnished to Borrower by Holder.
3.3. Breach of Representations and Warranties . Borrower shall have breached in any material respect any representation or warranty of Borrower made herein, and such breach continues for a period of five (5) days after the occurrence thereof and notice of breach being furnished to Borrow by Holder.
3.4. Stop Trade . An SEC stop trade order or Principal Market trading suspension of the Common Stock shall be in effect for five (5) consecutive days or five (5) days during a period of 10 consecutive days, excluding in all cases a suspension of all trading on a Principal Market, provided that Borrower shall not have been able to cure such trading suspension within 30 days of the notice thereof. For purposes hereof, the “ Principal Market ” for the Common Stock is the OTC Bulletin Board.
3.5. Receiver or Trustee . The Borrower or any of its Subsidiaries shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
3.6. Judgments . Any money judgment, writ or similar final process shall be entered or filed against the Borrower or any of its Subsidiaries or any of their respective property or other assets for more than $500,000 in the aggregate, which shall remain unvacated, unbonded or unstayed for a period of thirty (30) days.
3.7. Bankruptcy . Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any of its Subsidiaries, which proceedings are not dismissed within thirty (30) days of filing.
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3.8. Default Under Other Material Agreements . The occurrence of an Event of Default under any other material agreement to which the Borrower is party that evidences indebtedness of at least $500,000.
3.9. Failure to Deliver Conversion Stock or Replacement Debenture . Borrower’s failure to timely deliver Conversion Stock to the Holder pursuant to and in the form required by this Debenture, if such failure to timely deliver Conversion Stock shall not be cured within five (5) business days or, if Borrower is required to issue a replacement Debenture to Holder, Borrower shall fail to deliver such replacement Debenture within seven (7) business days.
ARTICLE IV
DEFAULT PROVISIONS
4.1. Default Interest Rate . Following the occurrence and during the continuance of an Event of Default, interest on this Debenture shall automatically be instated at a rate of 18% per annum, retroactive (and to be effective) as of the date of issuance of this Debenture, which interest shall be payable in cash or Conversion Stock, at the option of the Borrower.
4.2. Conversion Privileges During Default . The conversion privileges set forth in Article II shall remain in full force and effect from the date hereof and until this Debenture is paid in full, including in the occurrence of an Event of Default.
4.3. Cumulative Remedies . The remedies under this Debenture shall be cumulative.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower represents and warrants to the Holder as of the date hereof as follows:
Section 5.1 Organization . Ampio is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own its properties and carry on its business as now being conducted.
Section 5.2 Authority; Enforceability . Ampio has the requisite corporate power and authority to execute and deliver this Agreement and to carry out its obligations hereunder. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Ampio and no other corporate proceedings on the part of Ampio are necessary to authorize this Agreement or to consummate the transactions so contemplated. This Agreement has been duly executed and delivered by Ampio and constitutes a valid and binding obligation of Ampio, enforceable against Ampio in accordance with its terms, except as (a) enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, moratorium or similar laws from time to time in effect affecting creditors’ rights generally, and (b) the availability of equitable remedies may be limited by equitable principles of general applicability.
Section 5.3 Third Party Consents . No consent, authorization, order or approval of, or filing or registration with, any governmental authority or other person is required for the execution and delivery of this Agreement or the consummation by Ampio of any of the transactions contemplated hereby.
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Section 5.4 No Other Representations or Warranties . Except as set forth above in this Article V and in Section 1.3 hereof, no other representations or warranties, express or implied, are made in this Agreement by Ampio.
ARTICLE VI
MISCELLANEOUS
6.1. Failure or Indulgence Not Waiver . No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
6.2. Notices . Any notice herein required or permitted to be given shall be in writing, addressed to the receiving party at the address noted below, and sent by U.S. mail or by confirmed facsimile transmission, to:
in the case of the Holder:
in the case of the Borrower:
Donald B. Wingerter, Jr., Chief Executive Officer
Ampio Pharmaceuticals, Inc.
8400 East Crescent Parkway, Suite 600
Greenwood Village, Colorado 80111
Facsimile: (303) 418-1001
with a copy to:
Robert W. Walter, Esq.
Richardson & Patel, LLP
Colorado location: 9660 East Prentice Circle
Greenwood Village, Colorado 80111
Facsimile: (720)221-8162
6.3. Amendment Provision . The term “ Debenture ” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented, and any successor instrument as it may be amended or supplemented.
6.4. Assignability . This Debenture shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may not be assigned by the Holder without the prior written consent of the Borrower, which consent will not be unreasonably withheld by Borrower.
6.5. Cost of Collection . If default is made in the payment of this Debenture, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys’, expert witness and arbitration fees. If an Event of Default occurs, then this Section 6.5 shall prevail over Section 6.6 with respect to responsibility for all costs and fees in the event the Holder initiates a collection action.
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6.6. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial . This Debenture shall be governed by, and construed in accordance with, the internal laws of the State of Colorado, without regard to principles of conflicts of law. HOLDER AND BORROWER WAIVE ANY RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS DEBENTURE OR ANY TRANSACTION CONTEMPLATED HEREIN, INCLUDING CLAIMS BASED ON CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER COMMON LAW OR STATUTORY BASES. Each party hereby submits to the exclusive jurisdiction of the state and federal courts located in the County of Denver, State of Colorado. If the jury waiver set forth in this Section is not enforceable, then any dispute, controversy or claim arising out of or relating to this Debenture or any of the transactions contemplated herein will be finally settled by binding arbitration in Denver, Colorado in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association by one arbitrator appointed in accordance with said rules. The arbitrator shall apply Colorado law to the resolution of any dispute, without reference to rules of conflicts of law or rules of statutory arbitration. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Notwithstanding the foregoing, the parties may apply to any court of competent jurisdiction for preliminary or interim equitable relief, or to compel arbitration in accordance with this paragraph. The expenses of the arbitration, including the arbitrator’s fees and expert witness fees, incurred by the parties to the arbitration, may be awarded to the prevailing party, in the discretion of the arbitrator, or may be apportioned between the parties in any manner deemed appropriate by the arbitrator. Unless and until the arbitrator decides that one party is to pay for all (or a share) of such expenses, both parties shall share equally in the payment of the arbitrator’s fees as and when billed by the arbitrator.
6.7. Maximum Payments . Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by Borrower to the Holder and thus refunded to the Borrower.
6.8. Independent Legal Advice . All parties acknowledge and represent that: (a) they have read this Debenture; (b) they clearly understand this Debenture and each of its terms; (c) they fully and unconditionally consent to the terms of this Debenture; (d) all parties have had the benefit and advice of counsel of their own selection, and the Holder has not relied upon the advice or counsel of Richardson & Patel, LLP, counsel to the Borrower, with respect to this Debenture; (e) they have executed this Debenture, freely, with knowledge, and without influence or duress; (f) they have not relied upon any other representations, either written or oral, express or implied, made to them by any person, except as is specifically set forth herein; and (g) the consideration received by them has been actual, adequate, sufficient, and received.
6.9. Construction . Each party acknowledges that it or its own independent legal counsel participated in the preparation of this Debenture and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Debenture to favor either party against the other.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF , Borrower has caused this Convertible Debenture to be signed in its name effective as of this day of August, 2010.
| AMPIO PHARMACEUTICALS, INC. | ||
| By: |
/s/ |
|
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Name: Donald B. Wingerter, Jr. Title: Chief Executive Officer |
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EXHIBIT A
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert all or part of the Debenture into Common Stock)
[Name and Address of Holder]
The undersigned hereby converts $ of the principal under the Unsecured Senior Convertible Debenture issued by AMPIO PHARMACEUTICALS, INC. (“Borrower”) dated as of August , 2010 by delivery of shares of Common Stock of Borrower on and subject to the conditions set forth in Article II of such Debenture.
| 1. | Date of Conversion |
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| 2. | Shares To Be Delivered: |
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| By: |
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| Name: | ||
| Title: |
8
Exhibit 10.2
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION, ACCOMPANIED BY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES ACQUIRABLE UNDER THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS INVOLVING THE SHARES REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
W ARRANT T O P URCHASE C OMMON S TOCK
A MPIO P HARMACEUTICALS , I NC .
| Warrant No.: | [ ] | |
| Issuance Date: | [ ] (“ Issuance Date ”) | |
| Warrant Shares: | [ ] | |
| Exercise Price: | TBD* |
| * | To be determined in accordance with provisions below. |
Ampio Pharmaceuticals, Inc. a Delaware corporation (the “ Company ” or “ Ampio ”) , hereby certifies that for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, , the registered holder hereof or his permitted assigns (the “ Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at a per-share exercise price equal to the selling price per share of the Common Stock in the Public Offering (the “ Exercise Price ”), subject to adjustment as provided below, upon surrender of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “ Warrant ”), at any time or times on or after the date hereof, but not after 11:59 p.m., Mountain Time, on December 31, 2013 (the “ Expiration Date ”), the number of fully paid nonassessable shares of Common Stock (the “ Warrant Shares ”) which shall upon initial issuance of this Warrant equal 5% of the principal amount of the debenture issued by the Company to the Holder contemporaneously herewith (the “ Debenture ”). Capitalized terms used in this Warrant that are not defined herein shall have the same meanings as set forth in the Debenture. This Warrant may be one of a series of warrants to purchase Common Stock (the “ Warrants ”) issued to the Holder and other holders of debentures of like tenor.
1. EXERCISE OF WARRANT.
(a) Warrant Shares . This Warrant shall be exercisable for up to shares of Common Stock until the Expiration Date, determined as described above. Merely by way of example, if the Debenture issued to the Holder is in the principal amount of $200,000, then the number of Warrants Shares issuable on exercise of this Warrant will be 10,000 Warrant Shares (i.e ., $200,000 x 5%).
(b) Mechanics of Exercise . Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(g)), this Warrant may be exercised by the Holder on any day on or after the pricing and effectiveness of the Public Offering, in whole or in part, by (i) delivery of a written notice, in the form attached hereto as Exhibit A (the “ Exercise Notice ”), of the Holder’s election to exercise this Warrant and (ii) payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the “ Aggregate Exercise Price ”) in cash or by wire transfer of immediately available funds. The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. On or before the first Business Day following the date on which the Company has received each of the Exercise Notice and the Aggregate Exercise Price (the “ Exercise Delivery Documents ”), the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of the Exercise Delivery Documents to the Holder and the Company’s transfer agent (the “ Transfer Agent ”). On or before the third Business Day following the date on which the Company has received all of the Exercise Delivery Documents (the “ Share Delivery Date ”), the Company shall cause the Transfer Agent to issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise or, alternatively, the Company shall cause the Transfer Agent to credit the account of the Holder’s designated broker with DTC through the DWAC system. Upon delivery of the Exercise Notice and Aggregate Exercise Price referred to in clause (ii) above, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares. If this Warrant is submitted in connection with any exercise pursuant to this Section 1(b) and the number of Warrant Shares represented by this Warrant is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three Business Days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. This Warrant may not be exercised for less than 100 shares (as appropriately adjusted for stock splits, combinations and similar events). No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number. The Company shall pay any and all taxes which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant.
(c) Exercise Price . For purposes of this Warrant, “ Exercise Price ” means the per-share price equal to the per-share price of the Common Stock sold in the Public Offering, subject to adjustment as provided herein. If for any reason the Public Offering is not completed on or before March 31, 2011, then the Exercise Price will thereafter be set at a price equal to the lowest closing price of the Company’s Common Stock, as reported by the OTC Bulletin Board, in the period commencing April 1, 2011 and ending May 31, 2011.
(d) Disputes . In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 12.
2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES . The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:
(a) Adjustment upon Subdivision or Combination of Common Stock . If the Company at any time on or after the Issuance Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased. If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(a) shall become effective at the close of business on the date the subdivision or combination becomes effective.
3. NONCIRCUMVENTION . The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the Warrants, a sufficient number of shares of Common Stock as shall from time to time be necessary to effect the exercise of the Warrants then outstanding (without regard to any limitations on exercise).
4. WARRANT HOLDER NOT DEEMED A SHAREHOLDER . Except as otherwise specifically provided herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 4, the Company shall provide the Holder with copies of the same notices and other information given to the shareholders of the Company generally, contemporaneously with the giving thereof to the shareholders.
5. REISSUANCE OF WARRANTS .
(a) Transfer of Warrant . If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 5(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 5(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred. Applicable transfer taxes, if any, shall be paid by the Holder. If the Holder proposes to transfer this Warrant to multiple Persons or entities, the Company shall have the right to condition any such transfers on the receipt of a legal opinion from counsel to the Holder that such transfers are in compliance with the provisions of the Securities Act of 1933, as amended.
(b) Lost, Stolen or Mutilated Warrant . Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 5(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants . This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 5(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, that no Warrants for fractional shares of Common Stock shall be given.
(d) Issuance of New Warrants . Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 5(a) or Section 5(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.
6. NOTICES . Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 6.2 of the Debenture. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen days prior to the date on which the Company closes its books or takes a record with respect to any dividend or distribution upon the shares of Common Stock.
7. AMENDMENT AND WAIVER . Except as otherwise provided herein, the provisions of this Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder to such action or performance. No such amendment shall be effective to the extent that it applies to less than all of the holders of the Warrants then outstanding.
8. GOVERNING LAW . This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Colorado without regard to the choice of law principles thereof.
9. CONSTRUCTION; HEADINGS . This Warrant shall be deemed to be jointly drafted by the Company and all the Holder and shall not be construed against any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.
10. DISPUTE RESOLUTION . In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within two Business Days of receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder, or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent manifest error.
11. TRANSFER . This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company, except as may otherwise be prohibited by U.S. or other applicable securities laws.
12. CERTAIN DEFINITIONS . For purposes of this Warrant, the following terms shall have the following meanings:
(a) “ Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in the State of Colorado are authorized or required by law to remain closed.
(b) “ Common Stock ” means (i) the Company’s shares of Common Stock, par value $0.0001 per share, and (ii) any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.
(c) “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
13. REGISTRATION RIGHTS . If the Company at any time proposes to register any of its Common Stock under the Securities Act of 1933, as amended (“ 1933 Act ”) for sale to the public, whether for its own account or for the account of other security holders or both, except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Common Stock for sale to the public, provided such shares are not otherwise registered for resale by the Holder pursuant to an effective registration statement, the Company will cause the common stock issuable to the Holder hereunder (the “ Registrable Warrant Shares ”) to be included with the securities to be covered by the registration statement proposed to be filed by the Company. In the event that any registration pursuant to this Section 13 shall be, in whole or in part, an underwritten public offering of common stock of the Company, the number of shares of Registrable Warrant Shares to be included in such an underwriting may be reduced by the managing underwriter if and to the extent that the Company and the underwriter shall reasonably be of the opinion that such inclusion would adversely affect the marketing of the securities by the Company therein. Notwithstanding the foregoing provisions, the Company may withdraw or delay or suffer a delay of any registration statement referred to in this Section 13 without thereby incurring any liability to the Holder due to such withdrawal or delay. These registration rights shall not encompass or apply to registration of the Registrable Warrant Shares in the Public Offering.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.
| AMPIO PHARMACEUTICALS, INC | ||
| By: |
|
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| Donald B. Wingerter, Jr. | ||
| Chief Executive Officer | ||
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
OF
AMPIO PHARMACEUTICALS, INC.
The undersigned holder hereby exercises the right to purchase of the shares of Common Stock (“ Warrant Shares ”) of Ampio Pharmaceuticals, Inc. a Delaware corporation (the “ Company ”), evidenced by the attached Warrant to Purchase Common Stock (the “ Warrant ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Exercise Price . The Holder hereby elects to exercise the Warrant to purchase Warrant Shares for an aggregate cash exercise price of $ , and a copy of documents evidencing the payment of such amount to the Company is included with this Exercise Notice.
2. Delivery of Warrant Shares . The Company shall deliver the foregoing Warrant Shares to the Holder in accordance with the terms of the Warrant.
Date: ,
Name of Registered Holder
| By: | ||
| Name: | ||
| Title: |
ACKNOWLEDGMENT
The Company hereby acknowledges this Exercise Notice and hereby directs [ Insert Name of Transfer Agent ] to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated from the Company and acknowledged and agreed to by [ Insert Name of Transfer Agent ].
| AMPIO PHARMACEUTICALS, INC. | ||
| By: | ||
| Name: | ||
| Title: | ||
Exhibit 99.1
Bruce G. Miller
c/o Ampio Pharmaceuticals, Inc.
3400 East Crescent Parkway
Suite 600
Greenwood Village, Colorado 80111
August 11, 2010
Board of Directors
Ampio Pharmaceuticals, Inc.
6400 East Crescent Parkway
Suite 600
Greenwood Village, Colorado 80111
Re: Resignation as Member of the Board of Directors of Ampio Pharmaceuticals, Inc.
Gentlemen,
This letter will memorialize my resignation, effective today, as a member of the Board of Directors of Ampio Pharmaceuticals, Inc. (the “Company”).
| Very Truly Yours, | ||
|
/s/ Bruce G. Miller |
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| Bruce G. Miller | ||