UNITED STATES
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): January 25, 2016
ADAMIS PHARMACEUTICALS CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware | 0-26372 | 82-0429727 |
(State or other jurisdiction
of incorporation) |
(Commission File Number) |
(IRS Employer
Identification No.) |
11682 Camino Real, Suite 300
San Diego, CA |
92130 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (858) 997-2400
(Former name or Former Address, if Changed Since Last Report.)
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 January 26, 2016, Adamis Pharmaceuticals Corporation (the “Company”) completed a private placement financing transaction (the “Transaction”). Pursuant to a Purchase Agreement (the “Purchase Agreement”) and a registration rights agreement, we issued 1,183,432 shares of a new series of preferred stock, Series A-1 Convertible Preferred Stock (the “Series A-1 Preferred”), and warrants (“Warrants”) to purchase up to 1,183,432 shares of the Company’s Common Stock and/or Series A-1 Preferred (“Warrant Shares”), and received gross cash proceeds of approximately $5,000,000, excluding transactions costs, fees and expenses. The shares of Series A-1 Preferred and Warrants were sold in units, with each unit consisting of one share and one Warrant, at a purchase price of $4.225 per unit. The Series A-1 Preferred is convertible into shares of the Company’s Common Stock (the “conversion shares”), at an initial conversion rate of 1-for-1, at any time at the discretion of the investor. The exercise price of the Warrants is $4.10 per share, and the Warrants are exercisable for five years. The purchasers included a small number of related institutional investors. The rights, preferences, privileges, and restrictions applicable to the Series A-1 Preferred are similar to those of the Company’s Series A Preferred, which the Company issued to a small number of related institutional investors in an August 2014 private placement transaction.
The Series A-1 Preferred was established pursuant to a Certificate of Designation filed with the Delaware Secretary of State. Some of the rights, preferences, privileges, and restrictions applicable to the Series A-1 Preferred are described below.
Conversion . Each share of the Series A-1 Preferred is convertible into Common Stock at an initial conversion rate of 1-for-1. The conversion rate of the Series A-1 Preferred is subject to proportionate adjustments for stock splits, reverse stock splits and similar events, but is not subject to adjustment based on price anti-dilution provisions. The Series A-1 Preferred automatically converts into common stock upon the occurrence of certain “Fundamental Transactions” as described below.
Dividends . In addition to stock dividends or distributions for which proportionate adjustments will be made, holders of Series A-1 Preferred are entitled to receive dividends on shares of Series A-1 Preferred equal, on an as-if-converted-to-Common-Stock basis, to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends are payable on shares of Series A-1 Preferred.
Voting Rights . Except as provided in the Certificate of Designation or as otherwise required by law, the holders of Series A-1 Preferred are entitled to vote with the holders of outstanding shares of Common Stock, voting together as a single class, with respect to all matters presented to the stockholders for their action or consideration. In any such vote, each holder is entitled to a number of votes equal to the number of shares of Common Stock into which the Series A-1 Preferred held by such holder is convertible, after taking into account the Beneficial Ownership Limitation described below. The Company may not, without the consent of holders of a majority of the outstanding shares of Series A-1 Preferred, alter or change adversely the powers, preferences or rights given to the Series A-1 Preferred or alter or amend the Certificate of Designation.
Liquidation Rights . Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of Series A-1 Preferred are entitled to receive, pari passu with the holders of Common Stock, out of the assets available for distribution to stockholders an amount equal to such amount per share as would have been payable had all shares of Series A-1 Preferred been converted into Common Stock immediately before such liquidation, dissolution or winding up, without giving effect to any limitation on conversion as a result of the Beneficial Ownership Limitation.
Beneficial Ownership Limitation. The Company may not effect any conversion of the Series A-1 Preferred, and a holder does not have the right to convert any portion of the Series A-1 Preferred or exercise a Warrant held by the holder, to the extent that, after giving effect to the conversion set forth in a notice of conversion or such exercise of the Warrant, such holder would beneficially own in excess of the holder Beneficial Ownership Limitation, or such holder, together with such holder’s affiliates, and any persons acting as a group together with such holder or affiliates, would beneficially own in excess of the Affiliates Beneficial Ownership Limitation. The “holder Beneficial Ownership Limitation” is 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of the Series A-1 Preferred, or upon exercise of the Warrant, held by the applicable holder. The “affiliates Beneficial Ownership Limitation” is 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of Series A-1 Preferred, or upon exercise of the Warrant, held by the applicable holder and its affiliates (the holder Beneficial Ownership Limitation together with the affiliates Beneficial Ownership Limitation collectively referred to as the “Beneficial Ownership Limitation”). The holder has the authority to determine whether the foregoing restrictions will limit any conversion or exercise, the extent such limitation applies and to which convertible or exercisable instrument or part thereof such limitation applies. In addition, a holder may, with 61 days prior notice to the Company, or immediately upon notice from the holder to the Company at any time after the public announcement or other disclosure of a Fundamental Transaction, elect to increase or decrease or remove one or both of the holder Beneficial Ownership Limitation and the affiliates Beneficial Ownership Limitation; provided, however, that in no event may either the holder Beneficial Ownership Limitation or the affiliate Beneficial Ownership Limitation be 20.00% or greater.
Failure to Deliver Conversion Shares . If the Company fails to timely deliver shares of Common Stock upon conversion of the Series A-1 Preferred within the time period specified in the Certificate of Designation, or fails to timely deliver shares of Common Stock that are issuable upon conversion of any Warrant Shares (the “warrant conversion shares”) (generally, within three trading days after delivery of the notice of conversion), and if the holder has not exercised its Buy-In rights as described below with respect to such shares, then the Company is obligated to pay to the holder, as liquidated damages, an amount equal to $100 per business day (increasing to $200 per business day after the tenth business day) for each $10,000 of conversion shares or warrant conversion shares for which the Series A-1 Preferred is converted which are not timely delivered. If the Company makes such liquidated damages payments, it is not also obligated to make Buy-In payments with respect to the same conversion shares or warrant conversion shares.
Compensation for Buy-In on Failure to Timely Deliver Shares . If the Company fails to timely deliver the conversion shares or warrant conversion shares to the holder, and if after the required delivery date the holder is required by its broker to purchase (in an open market transaction or otherwise) or the holder or its brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the holder of the conversion shares or warrant conversion shares which the holder anticipated receiving upon such conversion or exercise (a “Buy-In”), then the Company is obligated to (A) pay in cash to the holder the amount, if any, by which (x) the holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased, minus any amounts paid to the holder by the Company as liquidated damages for late delivery of such shares, exceeds (y) the amount obtained by multiplying (1) the number of conversion shares or warrant conversion shares that the Company was required to deliver times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the holder, either reinstate the portion of the Series A-1 Preferred and equivalent number of conversion shares or warrant conversion shares for which such conversion was not honored (in which case such conversion shall be deemed rescinded) or deliver to the holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations.
Subsequent Rights Offerings; Pro Rata Distributions . If the Company grants, issues or sells any Common Stock equivalents pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then a holder of Series A-1 Preferred or Warrants will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the holder could have acquired if the holder had held the number of shares of Common Stock acquirable upon conversion of the Series A-1 Preferred or exercise of the Warrants (without regard to any limitations on conversion). If the Company declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, then a holder of Series A-1 Preferred or Warrants is entitled to participate in such distribution to the same extent as if the holder had held the number of shares of Common Stock acquirable upon complete conversion of the Series A-1 Preferred or exercise of the Warrants (without regard to any limitations on conversion).
Fundamental Transaction. If, at any time while the Series A-1 Preferred is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another person pursuant to which the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation are converted into or exchanged for shares of another corporation or entity and represent, or are converted into or exchanged for equity securities that represent, immediately following such merger or consolidation, less than a majority, by voting power, of the equity securities of (1) the surviving or resulting party or (2) if the surviving or resulting party is a wholly owned subsidiary of another party immediately following such merger or consolidation, the parent of such surviving or resulting party, (ii) the Company, directly or indirectly, effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, or (iv) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another person whereby such other person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other person or other persons making or party to, or associated or affiliated with the other persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then the Series A-1 Preferred automatically converts and the holder will receive, for each conversion share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (subject to the Beneficial Ownership Limitation), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which the Series A-1 Preferred is convertible immediately prior to such Fundamental Transaction (subject to the Beneficial Ownership Limitation). For purposes of any such conversion, the determination of the conversion ratio will be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the holder will be given the same choice as to the Alternate Consideration it receives upon automatic conversion of the Series A-1 Preferred following such Fundamental Transaction.
Warrants
Exercise . The Warrants are exercisable by means of cash. However, if at any time commencing 120 days after the initial issuance date of the Warrants there is no effective registration statement registering, or no current prospectus available for the resale of, the warrant conversion shares by the holder, then a holder may also exercise a Warrant at the holder’s election, in whole or in part, at such time by means of a net exercise of the Warrant on a cashless basis.
Adjustments to Exercise Price . The Warrants provide for proportional adjustment of the number and kind of securities purchasable upon exercise of the Warrants and the per share exercise price upon the occurrence of certain events such as stock splits, combinations, reverse stock splits and similar events.
Call Provisions . Provided (i) there is an effective registration statement that covers resale of all of the Warrant conversion shares, or (ii) all of the Warrant conversion shares may be sold pursuant to Rule 144 upon cashless exercise without restrictions including without volume limitations, each such event referred to as a Trigger Condition, the Company has the option to “call” the exercise of any or all of the Warrants, referred to as a Warrant Call, from time to time by giving a Call Notice to the holder. The Company’s right to exercise a Warrant Call commences five trading days after either of the Trigger Conditions has been in effect continuously for 15 trading days. A holder has the right to cancel the Warrant Call up until the date the called Warrant Shares are actually delivered to the holder, such date referred to as the Warrant Call Delivery Date, if the Trigger Condition relied upon for the Warrant Call ceases to apply. In addition, a Call Notice may be given not sooner than 15 trading days after the Warrant Call Delivery Date of the immediately preceding Call Notice.
We may give a Call Notice only within (i) if a holder and its affiliates beneficially own 2% or less of the outstanding Common Stock, then 10 trading days after any 20-consecutive trading day period during which the daily volume weighted average price (“VWAP”) of the Common Stock is not less than 250% of the exercise price for the Warrants in effect for 10 out of such 20-consecutive trading day period, and (ii) if holder and its affiliates beneficially own more than 2% of the outstanding Common Stock, five trading days after any 30-consecutive trading day period during which the VWAP of the Common Stock is not less than 250% of the exercise price then in effect for 25 out of such 30-consecutive trading day period. During the Call Period, the holder will exercise this Warrant and purchase the Called Warrant Shares. If the holder fails to timely exercise the Warrant for a number of Warrant Shares equal to number of called Warrant Shares during the Call Period, the Company’s sole remedy will be to cancel an amount of called Warrant Shares equal to such shortfall, with the Warrant no longer being exercisable with respect to such Warrant Shares. The “Call Period” is a period of 30 trading days following the date on which the Call Notice is deemed given and effective; the Call Period will be extended for one trading day for each trading day during the Call Period during which the VWAP of the Common Stock is less than 225% of the exercise price then in effect.
Fundamental Transactions . If, at any time while the Warrants are outstanding we engage in a Fundamental Transaction, then, upon any subsequent exercise of a Warrant, the holder will have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such transaction, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional Alternate Consideration, receivable as a result of such transaction by a holder of the number of shares of common stock for which the Warrant is exercisable immediately prior to such transaction. For purposes of any such exercise, the determination of the exercise price will be appropriately adjusted to apply to such Alternate Consideration.
If such a transaction is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended, or (3) a transaction involving a person or entity not traded on a national securities exchange or trading market, the Company or any successor entity will, at the holder’s option which shall be exercised as of the consummation of the transaction, purchase the Warrant from the holder by paying to the holder concurrently with the consummation of the transaction for each Warrant Share that would be issuable upon such exercise immediately prior to the occurrence of such transaction, the higher of (i) an amount of cash equal to the Black Scholes Value, calculated as provided in the Warrant, of the remaining unexercised portion of the Warrant on the date of the consummation of such transaction, or (ii) the positive difference between the cash per share paid in such transaction minus the then-in-effect exercise price. The Company will cause any successor entity in a transaction in which the Company is not the survivor to assume in writing all of the obligations of the Company under the Warrant and the other transaction documents prior to such transaction.
Other
Registration . Under the transaction documents, we have agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) by March 31, 2016 to register the resale of the shares of Common Stock that are issuable upon conversion of the Series A-1 Preferred and that are issuable upon conversion of the Series A-1 Warrant Shares that are issuable upon exercise of the Warrants, and to have the registration statement declared effective by May 30, 2016. The transaction documents provide for a variety of monetary penalties, which could be material, if the registration statement is not filed or declared effective by the times contemplated in the transaction documents, or does not continue to be effective and available thereafter. Each of the Company and the investors has agreed to indemnify the other party and certain affiliates against certain liabilities related to the registration statement.
Indemnification. Under the transaction documents, we agreed to indemnify, hold harmless, reimburse and defend the investors and certain related persons and entities against any claim, cost, expense, liability, obligation, loss or damage (including legal fees) of any nature, incurred by or imposed upon the investors or any such person which results from, arises out of or is based upon (i) any breach of any representation, warranty or covenant by us in any of the transaction documents, or (ii) any action instituted against such indemnified party arising out of or resulting from the execution, delivery, performance or enforcement of the transaction documents.
Net Proceeds . We expect to use the net proceeds for general corporate purposes, which may include without limitation working capital, capital expenditures, research and development expenditures, regulatory affairs expenditures, clinical trial expenditures, acquisitions of or investments in new companies, technologies or products, payment of indebtedness or obligations, and to help prepare for the anticipated launch of the Company’s epinephrine pre-filled syringe product, if the U.S. Food and Drug Administration grants marketing approval for the product. As the Company has previously disclosed, in December 2015, the Company resubmitted its New Drug Application to the FDA under Section 505(b)(2) of the Food, Drug & Cosmetic Act for marketing approval of its epinephrine pre-filled single dose syringe (PFS) product, for the emergency treatment of allergic reactions (Type I) including anaphylaxis.
Amendment to Warrants Issued in August 2014 Private Placement
The Company agreed to amend warrants previously issued to related institutional investors to purchase up to an aggregate of 1,418,439 shares of Common Stock in an August 2014 private placement transaction. The parties agreed to amend these warrants to allow such warrants to be exercisable, at the election of the holder, into either Common Stock or Series A-1 Preferred Stock. All other terms of the warrant remain unchanged.
The foregoing description of the transaction documents does not purport to be complete and is qualified in its entirety by reference to the full text of each document, which are filed as Exhibits to this Current Report on Form 8-K and are incorporated herein by reference.
On January 26, 2016, the Company issued a press release relating to the above transaction. The press release is filed as Exhibit 99.1 to this Report.
Item 3.02 | Unregistered Sales of Equity Securities. |
The information provided in response to Item 1.01 of this report is incorporated by reference into this Item 3.02. The securities were issued in a private placement under Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D under the Securities Act. Each investor represented that it was an accredited investor, as defined in Rule 501 of Regulation D, and that it was acquiring the securities for its own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the Act.
Item 3.03. | Material Modification to Rights of Security Holders. |
The information set forth in Items 1.01 and 5.03 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 3.03.
Item 5.03. | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
On January 25, 2016, the Company filed with the office of the Secretary of State of the State of Delaware a Certificate of Designation of Preferences, Rights and Limitations of Series A-1 Convertible Preferred Stock (the “Certificate of Designation”) designating 3,785,303 shares of the Company’s authorized preferred stock as Series A-1 Convertible Preferred Stock, par value $0.0001 per share (the “Series A-1 Preferred”). In connection with the transaction described in Item 1.01 above, on January 26, 2016, the Company issued an aggregate of 1,183,432 shares of Series A-1 Preferred. A summary of the material provisions of the Certificate of Designation governing the Series A Preferred is incorporated by reference from the information set forth in Item 1.01 above.
The foregoing description of the Certificate of Designation does not purport to be complete and is qualified in its entirety by reference to the Certificate of Designation, which is filed as an Exhibit to this Current Report on Form 8-K and is incorporated by reference herein.
Item 9.01. | Financial Statements and Exhibits. |
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.
ADAMIS PHARMACEUTICALS CORPORATION | ||
Dated: January 26, 2016 | By: | /s/ Robert O. Hopkins |
Name: | Robert O. Hopkins | |
Title: | Chief Financial Officer |
Adamis Pharmaceuticals Corporation 8-K
Exhibit 3.1
ADAMIS PHARMACEUTICALS CORPORATION
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES A-1 CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
The undersigned, Dennis J. Carlo, does hereby certify that:
1. Dennis J. Carlo is the President of Adamis Pharmaceuticals Corporation, a Delaware corporation (the “ Corporation ”).
2. The Corporation is authorized to issue 10,000,000 shares of preferred stock, 1,700,000 of which have been authorized for issuance.
3. The following resolutions were duly adopted by the board of directors of the Corporation (the “ Board of Directors ”):
WHEREAS, the certificate of incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, consisting of 10,000,000 shares, $0.0001 par value per share, issuable from time to time in one or more series;
WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of preferred stock and the number of shares constituting any series and the designation thereof, of any of them; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of the preferred stock, which shall consist of, except as otherwise set forth in the Purchase Agreement dated on or before the Original Issue Date (as defined below) (the “ Purchase Agreement ”), up to 3,785,303 shares of the preferred stock which the Corporation has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of preferred stock as follows:
TERMS OF PREFERRED STOCK
Section 1 . Definitions . For the purposes hereof, the following terms shall have the following meanings:
“ Affiliate ” means, as to any Person (the “ subject Person ”), any other Person (a) that directly or indirectly through one or more intermediaries controls or is controlled by, or is under direct or indirect common control with, the subject Person, (b) that directly or indirectly beneficially owns or holds ten percent (10%) or more of any class of voting equity of the subject Person, or (c) ten percent (10%) or more of the voting equity of which is directly or indirectly beneficially owned or held by the subject Person. For the purposes of this definition, “ control ” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, through representation on such Person’s board of directors or other management committee or group, by contract or otherwise.
“ Alternate Consideration ” shall have the meaning set forth in Section 7(d).
“ Beneficial Ownership Limitation ” shall have the meaning set forth in Section 6(c).
“ Business Day ” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of California are authorized or required by law or other governmental action to close.
“ Buy-In ” shall have the meaning set forth in Section 6(b)(vi).
“ Commission ” means the United States Securities and Exchange Commission.
“ Common Stock ” means the Corporation’s common stock, par value $0.0001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed.
“ Common Stock Equivalents ” means any securities of the Corporation which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any convertible debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“ Conversion Date ” shall have the meaning set forth in Section 6(a).
“ Conversion Ratio ” shall initially be equal to one (1).
“ Conversion Shares ” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Series A-1 Preferred Stock in accordance with the terms hereof.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“ Fundamental Transaction ” shall have the meaning set forth in Section 7(d).
“ Holder ” shall have the meaning given such term in Section 2.
“ Notice of Conversion ” shall have the meaning set forth in Section 6(a).
“ Original Issue Date ” means the date of the first issuance of any shares of the Series A-1 Preferred Stock regardless of the number of transfers of any particular shares of Series A-1 Preferred Stock and regardless of the number of certificates which may be issued to evidence such Series A-1 Preferred Stock.
“ Person ” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“ Series A-1 Preferred Stock ” shall have the meaning set forth in Section 2.
“ Purchase Agreement ” means the Purchase Agreement, dated as of the Original Issue Date, among the Corporation and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.
“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“ Share Delivery Date ” shall have the meaning set forth in Section 6(b).
“ Trading Day ” means a day on which the principal Trading Market is open for business.
“ Trading Market ” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).
Section 2 . Designation, Amount and Par Value . The series of preferred stock shall be designated as its Series A-1 Convertible Preferred Stock (the “ Series A-1 Preferred Stock ”) and the number of shares so designated shall be 3,785,303 (which shall not be subject to increase without the written consent of holders of a majority of the then-outstanding Series A-1 Preferred Stock, determined on an as-converted basis (each, a “ Holder ” and collectively, the “ Holders ”)). Each share of Series A-1 Preferred Stock shall have a par value of $0.0001 per share.
Section 3 . Dividends . Except for stock dividends or distributions for which adjustments are to be made pursuant to Section 7, Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of Series A-1 Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of Series A-1 Preferred Stock.
Section 4 . Voting Rights . Except as otherwise provided herein or as otherwise required by law, the Holders shall be entitled to vote with the holders of outstanding shares of Common Stock, voting together as a single class, with respect to any and all matters presented to the stockholders of the Corporation for their action or consideration (whether at a meeting of stockholders of the Corporation, by written action of stockholders in lieu of a meeting or otherwise). In any such vote, each Holder shall be entitled to a number of votes equal to the number of shares of Common Stock into which the Series A-1 Preferred Stock held by such Holder is convertible pursuant to Section 6 herein (and after taking into account the Beneficial Ownership Limitation set forth in Section 6(c)) as of the record date for such vote or written consent or, if there is no specified record date, as of the date of such vote or written consent. Each Holder of outstanding Series A-1 Preferred Stock shall be entitled to notice of all stockholder meetings (or requests for written consent) in accordance with the Corporation’s bylaws. In addition, as long as any shares of Series A-1 Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of Holders of a majority of the outstanding shares of Series A-1 Preferred Stock, directly or indirectly, by merger, consolidation, recapitalization or otherwise (a) alter or change adversely the powers, preferences or rights given to the Series A-1 Preferred Stock or alter or amend this Certificate of Designation or (b) enter into any agreement with respect to any of the foregoing.
Section 5 . Liquidation . Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “ Liquidation ”), the Holders shall be entitled to receive, pari passu with the holders of Common Stock of the Corporation, out of the assets, whether capital or surplus, of the Corporation an amount equal to such amount per share as would have been payable had all shares of Series A-1 Preferred Stock been converted into Common Stock pursuant to Section 6 herein (without giving effect to any limitation on conversion as a result of the Beneficial Ownership Limitation set forth in Section 6(c)) immediately prior to such liquidation, dissolution or winding up.
Section 6 . Conversion .
a) Conversions at Option of Holder . Each share of Series A-1 Preferred Stock shall be convertible, at any time and from time to time from and after the Original Issue Date at the option of the Holder thereof, into the number of shares of Common Stock (subject to the limitations set forth in Section 6(c)) equal to the Conversion Ratio. Holders shall effect conversions by providing the Corporation with a written notice of conversion (a “ Notice of Conversion ”) substantially in the form attached hereto on the Trading Day on which such Holder wishes to effect such conversion (the “ Conversion Date ”). Each Notice of Conversion shall specify the number of shares of Series A-1 Preferred Stock to be converted, the applicable Conversion Ratio, the number of shares of Common Stock to be issued, and the number of shares of Series A-1 Preferred Stock owned subsequent to the conversion at issue. The Conversion Shares shall be deemed to have been issued, and the Holder or any other person so designated to be deemed to have become a holder of record of such shares for all purposes, as of the date of delivery to the Corporation of the Notice of Conversion. To effect conversions of shares of Series A-1 Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing the shares of Series A-1 Preferred Stock to the Corporation unless all of the shares of Series A-1 Preferred Stock represented thereby are so converted, in which case such Holder shall deliver the certificate representing such shares of Series A-1 Preferred Stock promptly following the Conversion Date at issue. Conversions of less than the total amount of shares of Series A-1 Preferred Stock represented by a certificate held by Holder will have the effect of lowering the outstanding number of Series A-1 Preferred Stock held by such Holder by an amount equal to the number so converted, as if the original stock certificate(s) were cancelled and one or more new stock certificates evidencing the new number of shares of Series A-1 Preferred Stock were issued; provided, however that in such cases the Holder may request that the Corporation deliver to the Holder a certificate representing such non-converted shares of Series A-1 Preferred Stock; provided, further, that the failure of the Corporation to deliver such new certificate shall not affect the rights of the Holder to submit a further Notice of Conversion with respect to such Series A-1 Preferred Stock and, in any such case, the Holder shall be deemed to have submitted the original of such new certificate at the time that it submits such further Notice of Conversion. In the case of a dispute between the Corporation and a Holder as to the calculation of the Conversion Ratio or the number of Conversion Shares issuable upon a conversion (including without limitation the calculation of any adjustment to the Conversion Ratio pursuant to Section 7 below), the Corporation shall issue to such Holder the number of Conversion Shares that are not disputed within the time periods specified in Section 6(b) below and shall submit the disputed calculations to a certified public accounting firm of national reputation (other than the Corporation’s regularly retained accountants) within three (3) Trading Days following the Corporation’s receipt of such Holder’s Notice of Conversion. The Corporation shall cause such accountant to calculate the Conversion Ratio as provided herein and to notify the Corporation and such Holder of the results in writing no later than three (3) Trading Days following the day on which such accountant received the disputed calculations (the “ Dispute Procedure ”). Such accountant’s calculation shall be deemed conclusive absent manifest error. The fees of any such accountant shall be borne by the party whose calculations were most at variance with those of such accountant.
b) Mechanics of Conversion
i. Delivery of Conversion Shares Upon Conversion . Not later than three (3) Trading Days after each Conversion Date (the “ Share Delivery Date ”), the Corporation shall deliver, or cause to be delivered, to the converting Holder the number of Conversion Shares being acquired upon the conversion of the Series A-1 Preferred Stock. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event the Corporation shall promptly return to the Holder any original Series A-1 Preferred Stock certificate delivered to the Corporation and the Holder shall promptly return to the Corporation the Conversion Shares issued to such Holder pursuant to the rescinded Conversion Notice.
ii. Reservation of Shares Issuable Upon Conversion . The Corporation shall at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Series A-1 Preferred Stock, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Series A-1 Preferred Stock), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of the then outstanding shares of Series A-1 Preferred Stock (without giving effect to any limitation on conversion as a result of the Beneficial Ownership Limitation set forth in Section 6(c)).
iii. Fractional Shares . No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Series A-1 Preferred Stock. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Corporation shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Ratio or round up to the next whole share (after aggregating all fractional shares).
iv. Transfer Taxes and Expenses . The issuance of Conversion Shares on conversion of the Series A-1 Preferred Stock shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holders of such shares of Series A-1 Preferred Stock, and the Corporation shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid.
v. Failure to Deliver Conversion Shares . The Corporation understands that a delay in the delivery of the Conversion Shares after the Share Delivery Date could result in economic loss to the Holder. As compensation to the Holder for such loss, if (i) the Corporation fails to deliver the number of Conversion Shares to which the Holder is entitled upon the Holder’s exercise of the Series A-1 Preferred Stock within the time periods specified above and (ii) the Holder has not exercised its Buy-In rights as provided below respect to such shares, the Corporation agrees to pay (as liquidated damages and not as a penalty) to the Holder for late issuance of Conversion Shares upon exercise of the Series A-1 Preferred Stock the proportionate amount of $100 per Trading Day (increasing to $200 per Business Day after the tenth Business Day) after the Share Delivery Date for each $10,000 of Conversion Shares for which the Series A-1 Preferred Stock is exercised which are not timely delivered. For purposes of clarification, if the Corporation is obligated to make payments of liquidated damages pursuant to this Section 6(b)(v) for late issuance of Conversion Shares, then it shall not also be obligated to make Buy-In payments as described below with respect to those same Conversion Shares. The Corporation shall pay any payments incurred under this Section 6(b)(v) in immediately available funds upon demand.
vi. Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon Exercise . In addition to any other rights available to the Holder, if the Corporation fails for any reason to effect delivery of the Conversion Shares to the Holder by the Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder or its brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder anticipated receiving upon such exercise (a “ Buy-In ”), then the Corporation shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased, minus any amounts paid to the Holder by the Corporation as liquidated damages as described in Section 6(b)(v) above, exceeds (y) the amount obtained by multiplying (1) the number of Conversion Shares that the Corporation was required to deliver to the Holder in connection with the conversion at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Series A-1 Preferred Stock and equivalent number of Conversion Shares for which such conversion was not honored (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Corporation timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Corporation shall be required to pay the Holder $1,000. The Holder shall provide the Corporation written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Corporation, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver certificates representing shares of Common Stock upon exercise of Series A-1 Preferred Stock as required pursuant to the terms hereof.
c) Beneficial Ownership Limitation . The Corporation shall not effect any conversion of the Series A-1 Preferred Stock, and a Holder shall not have the right to convert any portion of the Series A-1 Preferred Stock, to the extent that, after giving effect to the conversion set forth on the applicable Notice of Conversion, such Holder would beneficially own in excess of the Holder Beneficial Ownership Limitation, or such Holder together with such Holder’s Affiliates and any Persons acting as a group together with such Holder or Affiliates would beneficially own in excess of the Affiliates Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of the Series A-1 Preferred Stock with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (i) conversion of the remaining, unconverted Series A-1 Preferred Stock beneficially owned by such Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation (including, without limitation, any Common Stock Equivalents ) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by such Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 6(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by each Holder that the Corporation is not representing to such Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 6(c) applies, the determination of whether the Series A-1 Preferred Stock is convertible (in relation to other securities owned by such Holder together with any Affiliates) and of how many shares of Series A-1 Preferred Stock are convertible shall be in the reasonable judgment of such Holder, in each case subject to the Holder Beneficial Ownership Limitation or the Affiliates Beneficial Ownership Limitation, and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. To ensure compliance with this restriction, each Holder will be deemed to represent to the Corporation each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Corporation shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Corporation’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent public announcement by the Corporation or (iii) a more recent written notice by the Corporation or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Corporation shall within one (1) Trading Day confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Corporation, including the Series A-1 Preferred Stock, by such Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Holder Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of Series A-1 Preferred Stock held by the applicable Holder. The “Affiliates Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of Series A-1 Preferred Stock held by the applicable Holder and its Affiliates. The Holder Beneficial Ownership Limitation together with the Affiliates Beneficial Ownership Limitation is collectively known as the “Beneficial Ownership Limitation.” The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(c) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of Series A-1 Preferred Stock and shall cease to apply only (x) upon sixty-one (61) days’ written notice from the Holder to the Corporation of an election to increase or decrease or remove one or both of the Holder Beneficial Ownership Limitation and the Affiliates Beneficial Ownership Limitation or (y) immediately upon written notice from the Holder to the Corporation at any time after the public announcement or other disclosure of a Fundamental Transaction (as defined in Section 7(d)); provided, however, that in no event shall either the Holder Beneficial Ownership Limitation or the Affiliate Beneficial Ownership Limitation be 20.00% or greater.
Section 7 . Certain Adjustments .
a) Stock Dividends and Stock Splits . If the Corporation, at any time while the Series A-1 Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, this Series A-1 Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the Conversion Ratio shall be divided by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
b) Subsequent Rights Offerings . In addition to any adjustments pursuant to Section 7(a) above, if at any time the Corporation grants, issues or sells any Common Stock Equivalents pro rata to the record holders of any class of shares of Common Stock (the “ Purchase Rights ”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon conversion of the Series A-1 Preferred Stock (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
c) Pro Rata Distributions . Subject to Section 3, during such time as the Series A-1 Preferred Stock is outstanding, if the Corporation declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “ Distribution ”), at any time after the issuance of the Series A-1 Preferred Stock, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete Conversion of the Series A-1 Preferred Stock (without regard to any limitations on Conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution ( provided , however , to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
d) Fundamental Transaction . If, at any time while the Series A-1 Preferred Stock is outstanding, (i) the Corporation, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person pursuant to which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation are converted into or exchanged for shares of another corporation or entity and represent, or are converted into or exchanged for equity securities that represent, immediately following such merger or consolidation, less than a majority, by voting power, of the equity securities of (1) the surviving or resulting party or (2) if the surviving or resulting party is a wholly owned subsidiary of another party immediately following such merger or consolidation, the parent of such surviving or resulting party, (ii) the Corporation, directly or indirectly, effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, or (iv) the Corporation, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “ Fundamental Transaction ”), then the Series A-1 Preferred Stock shall automatically convert and the Holder shall receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (subject to any limitation in Section 6(c) on the conversion of the Series A-1 Preferred Stock), the number of shares of Common Stock of the successor or acquiring corporation or of the Corporation, if it is the surviving corporation, and any additional consideration (the “ Alternate Consideration ”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which the Series A-1 Preferred Stock is convertible immediately prior to such Fundamental Transaction (subject to any limitation in Section 6(c) on the conversion of the Series A-1 Preferred Stock). For purposes of any such conversion, the determination of the Conversion Ratio shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon automatic conversion of the Series A-1 Preferred Stock following such Fundamental Transaction.
e) Calculations . All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.
f) Notice to Holders .
i. Notice of Adjustments to Conversion Price . Whenever the Conversion Ratio is adjusted pursuant to any provision of this Section 7, the Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Ratio after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice of Certain Events . If (A) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock (other than stock splits or reverse stock splits), any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange whereby the Common Stock is converted into other securities (other than stock splits or reverse stock splits), cash or property, or (B) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, to the extent that such information constitutes material non-public information (as determined in good faith by the Corporation) the Corporation shall follow the procedure described in Section 7.5 of the Purchase Agreement and shall deliver to the Holder, at least 10 days prior to the effective date hereinafter specified, a notice stating the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder shall remain entitled to convert the Series A-1 Preferred Stock during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
g) Adjustments . In the event that at any time, as a result of an adjustment made pursuant to this Section 8, the Holder shall, upon conversion of such Holder’s Series A-1 Preferred Stock, become entitled to receive securities or assets (other than Common Stock) then, wherever appropriate, all references herein to shares of Common Stock shall be deemed to refer to and include such shares and/or other securities or assets; and thereafter the number of such shares and/or other securities or assets shall be subject to adjustment from time to time in a manner and upon terms as nearly equivalent as practicable to the provisions of this Section 8.
Section 8 . Miscellaneous .
a) Lost or Mutilated Preferred Stock Certificate . If a Holder’s Series A-1 Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series A-1 Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.
b) Severability . If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.
c) Next Business Day . Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
d) Headings . The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.
e) Status of Converted Preferred Stock . Shares of Series A-1 Preferred Stock may only be issued pursuant to the Purchase Agreement. If any shares of Series A-1 Preferred Stock shall be converted or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series A-1 Convertible Preferred Stock.
f) Transfers . Upon notice to the Corporation (except that no such notice shall be required in the case of a pledge), a Holder may sell, transfer, assign, pledge or otherwise dispose of all or any portion of the Series A-1 Preferred Stock to any person or entity as long as such transaction is the subject of an effective registration statement under the Securities Act or is exempt from registration thereunder and otherwise is made in accordance with the terms of the Purchase Agreement. From and after the date of any such sale or transfer, the transferee thereof shall be deemed to be a Holder. Upon any such sale or transfer, the Corporation shall, promptly following the return of the certificate or certificates representing the Series A-1 Preferred Stock that are the subject of such sale or transfer, issue and deliver to such transferee a new certificate in the name of such transferee.
g) Notices . Any notice, request or other document required or permitted to be given or delivered to the Holder by the Corporation shall be delivered in accordance with the notice provisions of the Purchase Agreement.
h) Remedies . The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Certificate of Designation or any other Transaction Document (as defined in the Purchase Agreement). The Corporation agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Certificate of Designation or any other Transaction Document and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
RESOLVED, FURTHER, that the president and the secretary of the Corporation be and they hereby are authorized and directed to prepare and file this Certificate of Designation of Preferences, Rights and Limitations in accordance with the foregoing resolution and the provisions of Delaware law.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this 25th day of January 2016.
/s/ Dennis J. Carlo
Name: Dennis J. Carlo
Title: President
NOTICE OF CONVERSION
The undersigned hereby elects to convert shares of Series A-1 Preferred Stock (the “Preferred Stock”), represented by stock certificate No(s) _________________ (the “Preferred Stock Certificates”), into shares of common stock (“Common Stock”) of ADAMIS PHARMACEUTICALS CORPORATION, according to the terms and conditions of the Certificate of Designation relating to the Preferred Stock (the “Certificate of Designation”), as of the date written below. Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Certificate of Designation.
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☐ | By Delivery of Physical Certificates to the Above Address |
☐ | Through Depository Trust Corporation |
(Account _________________)
Adamis Pharmaceuticals Corporation 8-K
Exhibit 4.1
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE 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 TRANSFERRED, UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144 OR OTHER APPLICABLE EXEMPTION FROM APPLICABLE SECURITIES LAWS. THE ISSUER MAY REQUIRE AN OPINION OF COUNSEL TO THE HOLDER OF THESE SECURITIES, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER, THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
COMMON STOCK PURCHASE WARRANT
ADAMIS PHARMACEUTICALS CORPORATION
Warrant Shares: | Issue Date: January 26, 2016 |
THIS COMMON STOCK PURCHASE WARRANT (the “ Warrant ”) certifies that, for value received, _______________________ , or its assigns (the “ Holder ”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “ Issue Date ”) and on or prior to 11:59 P.M. on the five (5) year anniversary of the Issue Date or, if such day is not a Trading Day, on the next Trading Day (the “ Termination Date ”), but not thereafter, to subscribe for and purchase from Adamis Pharmaceuticals Corporation, a Delaware corporation (the “ Company ”), up to _______ shares (as subject to adjustment hereunder, the “ Warrant Shares ”) of, at the election of the Holder, either (i) Common Stock, (ii) Series A-1 Convertible Preferred Stock, par value $0.0001 par value per share (“Preferred Stock”), or (iii) a combination of Common Stock and Preferred Stock. The purchase price of one share of Common Stock or Preferred Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1 . Definitions . Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Purchase Agreement (the “ Purchase Agreement ”) or, as applicable, that certain Registration Rights Agreement (the “ Registration Rights Agreement ”) each dated as of the Issue Date and entered into by and between the Company and the initial Holder.
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Section 2 . Exercise .
a) Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Issue Date and on or before the Termination Date by facsimile delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed notice of exercise (the “ Notice of Exercise ”) in substantially the form of the Notice of Exercise Form annexed hereto. Within two (2) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. In the case of a dispute between the Company and the Holder as to the calculation of the Exercise Price or the number of Warrant Shares issuable hereunder (including, without limitation, the calculation of any adjustment pursuant to Section 3 below), the Company shall issue to the Holder the number of Warrant Shares that are not disputed within the time periods specified in Section 2(d)(i) below and shall submit the disputed calculations to a certified public accounting firm of national reputation (other than the Company’s regularly retained accountants) within three (3) Trading Days following the Company’s receipt of the Holder’s Notice of Exercise. The Company shall cause such accountant to calculate the Exercise Price and/or the number of Warrant Shares issuable hereunder and to notify the Company and the Holder of the results in writing no less than three (3) Trading Days following the day on which such accountant received the disputed calculations. Such accountant’s calculation shall be deemed conclusive absent manifest error. The fees of any such accountant shall be borne by the party whose calculations were most at variance with those of such accountant. Notwithstanding anything herein to the contrary (although the Holder may surrender the Warrant to, and receive a replacement Warrant from, the Company), the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. In the case of a partial exercise of this Warrant, the Holder may request that the Company deliver to the Holder a certificate representing such new warrant, with terms identical in all respects to this Warrant (except that such new warrant shall be exercisable into the number of Warrant Shares with respect to which this Warrant shall remain unexercised); provided, however, that the Holder shall be entitled to exercise all or any portion of such new warrant at any time following the time at which this Warrant is exercised, regardless of whether the Company has actually issued such new warrant or delivered to the Holder a certificate thereof. The Company shall deliver any objection to any Notice of Exercise Form within one (1) Trading Day of delivery of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
b) Exercise Price . The exercise price per share of the Common Stock under this Warrant shall be $4.10, subject to adjustment hereunder (the “ Exercise Price ”).
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c) Cashless Exercise . If at any time commencing 120 days after the Issue Date, there is no then effective Registration Statement registering, or no current prospectus available for, the resale of all of the Warrant Shares (assuming Holder elects all Warrant Shares to be in the form of Common Stock upon exercise) by the Holder and all of the Conversion Shares beneficially held by the Holder (in each case without giving effect any restrictions on exercise or conversion), or if the Company has not provided any certifications required to be provided by the Registration Rights Agreement regarding the availability of the Registration Statement for resales of all of the Warrant Shares and all of the Conversion Shares beneficially held by the Holder (in each case without giving effect any restrictions on exercise or conversion) that has been requested by the Holder, then this Warrant may also be exercised at the Holder’s election, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) x (X)] by (A), where:
(A) | = | the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise; | |
(B) | = | the Exercise Price of this Warrant, as adjusted hereunder; and | |
(X) | = | the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise. |
“ VWAP ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a national securities exchange or trading market (with such exchange or market including, without limitation, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, The New York Stock Exchange, Inc., the NYSE or Amex, or the OTC Bulletin Board including the OTCQX or OTCQB) (a “ Trading Market ”), the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (or other reliable source) based on a Trading Day from 9:30 a.m. (New York City time) (or such other time as the Trading Market publicly announces is the official open of trading) to 4:00 p.m. (New York City time) (or such other time as the Trading Market publicly announces is the official close of trading), (b) if no daily volume weighted average prices are reported by Bloomberg (or other reliable source), the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets LLC, or (c) in all other cases, the fair market value of a share of Common Stock as mutually determined by the Company and Holder.
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Notwithstanding anything herein to the contrary, on the Termination Date, Holder may exercise any remaining unexercised portion of this Warrant by means of a cashless exercise pursuant to this Section 2(c) by means of a notice delivered to the Company before the Termination Date. If on the Termination Date the VWAP is greater than the Exercise Price of this Warrant, as adjusted hereunder, then the Warrant shall be automatically exercised pursuant to this Section 2(c).
d) Mechanics of Exercise .
Delivery of Certificates Upon Exercise . Certificates for shares (or, if the shares are represented in uncertificated form, comparable share notices reflecting such shares) purchased hereunder shall be transmitted by the Transfer Agent (“ Transfer Agent ” means the transfer agent employed by the Company from time to time, for its Common Stock) to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“ DWAC ”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder (assuming Holder elects all Warrant Shares to be in the form of Common Stock upon exercise) or (B) this Warrant is being exercised via cashless exercise and Rule 144 is available, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading Days after the date of delivery to the Company of the Notice of Exercise (such date, the “ Warrant Share Delivery Date ”). The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date of delivery to the Company of the Notice of Exercise. Notwithstanding anything herein to the contrary, the Company shall not be required to make any cash payments or net cash settlement to the registered holder in lieu of issuance of the Warrant Shares, except as provided in Section 2(d)(iv) below. The Company understands that a delay in the delivery of the Warrant Shares (assuming Holder elects all Warrant Shares to be in the form of Common Stock upon exercise) after the Warrant Share Delivery Date could result in economic loss to the Holder. As compensation to the Holder for such loss, if (i) the Company fails to deliver the number of Warrant Shares (assuming Holder elects all Warrant Shares to be in the form of Common Stock upon exercise) to which the Holder is entitled upon the Holder’s exercise of this Warrant within the time periods specified above and (ii) the Holder has not exercised its Buy-In rights as provided below with respect to such shares, the Company agrees to pay (as liquidated damages and not as a penalty) to the Holder for late issuance of Warrant Shares upon exercise of this Warrant the proportionate amount of $100 per Trading Day (increasing to $200 per Trading Day after the tenth Trading Day) after the Warrant Share Delivery Date for each $10,000 of Exercise Price of Warrant Shares for which this Warrant is exercised which are not timely delivered. For purposes of clarification, if the Company is obligated to make payments of liquidated damages pursuant to this Section for late issuance of Warrant Shares, then it shall not also be obligated to make Buy-In payments as described below with respect to those same Warrant Shares. The Company shall pay any payments incurred under this Section in immediately available funds upon demand.
i. Delivery of New Warrants Upon Exercise . If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
ii. Revoking Exercise . In the event that the Company fails for any reason to effect delivery of the Warrant Shares to Holder by the Warrant Share Delivery Date, then Holder may, at any time prior to issuance of such Warrant Shares, revoke all or part of the relevant Warrant exercise by delivery of a notice to such effect to the Company, whereupon the Company and the Holder shall each be restored to their respective positions immediately prior to the exercise of the relevant portion of this Warrant, except that the liquidated damages described above shall be payable through the date notice of revocation is given to the Company.
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iii. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise . In addition to any other rights available to the Holder, if the Company fails for any reason to effect delivery of the Warrant Shares to Holder by the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder or its brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “ Buy-In ”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased, minus any amounts paid to the Holder by the Company as liquidated damages as described in Section 2(d)(i) above, exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
iv. No Fractional Shares or Scrip . No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
v. Charges, Taxes and Expenses . Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided , however , that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise.
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vi. Closing of Books . The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
e) Holder’s Exercise Limitations . The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, (i) the Holder would beneficially own in excess of the Holder Beneficial Ownership Limitation (as defined below) or (ii) the Holder, together with the Holder’s Affiliates and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates, would beneficially own in excess of the Affiliates Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock, hereinafter “ Common Stock Equivalents ”) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the 1934 Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the reasonable judgment of the Holder, in each case subject to the Holder Beneficial Ownership Limitation or the Affiliates Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.
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Upon the written or oral request of a Holder, the Company shall within one (1) Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “ Holder Beneficial Ownership Limitation ” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The “ Affiliates Beneficial Ownership Limitation ” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder Beneficial Ownership Limitation together with the Affiliates Beneficial Ownership Limitation is collectively known as the “ Beneficial Ownership Limitation .” The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant and shall cease to apply only (x) upon sixty-one (61) days’ written notice from the Holder to the Company of an election to increase or decrease or remove one or both of the Holder Beneficial Ownership Limitation and the Affiliate Beneficial Ownership Limitation or (y) immediately upon written notice from the Holder to the Company at any time after the public announcement or other disclosure of a Fundamental Transaction (as defined in Section 3(d)); provided, however that in no event shall either the Holder Beneficial Ownership Limitation or the Affiliate Beneficial Ownership Limitation be 20.00% or greater.
f) Call . Provided (i) there is at the time an effective registration statement which includes for resale all of the Warrant Shares (assuming Holder elects all Warrant Shares to be in the form of Common Stock upon exercise), or (ii) all of the Warrant Shares may be sold pursuant to Rule 144 upon “cashless exercise” pursuant to Section 2(c) without restrictions, including, without volume limitations (each a “ Trigger Condition ”), the Company shall have the option to “call” (the “ Warrant Call ”) the exercise of any or all of the Warrant Shares (the “ Called Warrant Shares” ) from time to time in accordance with and governed by the following:
(1) Call Notice . The Company shall exercise a Warrant Call by giving written notice of call (the “ Call Notice ”) to the Holder during the period in which the Warrant Call may be exercised. The effective date of each Call Notice (the “ Call Date ”) is the date on which notice is deemed given and effective under the notice provision of Section 5(h) of this Warrant.
(2) Call Period . The Company’s right to exercise a Warrant Call shall commence five (5) Trading Days after either of the Trigger Conditions has been in effect continuously for fifteen (15) Trading Days. The Holder shall have the right to cancel the Warrant Call up until the date the called Warrant Shares are actually delivered to the Holder (“ Warrant Call Delivery Date ”) if the Trigger Condition relied upon for the Warrant Call ceases to apply.
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(3) Call Notice Spacing . A Call Notice may be given not sooner than fifteen (15) Trading Days after the Warrant Call Delivery Date of the immediately preceding Call Notice.
(4) Exercise Price Multiple . If Holder and any affiliates together would be regarded as beneficial owners (assuming conversion of all convertible securities held by Holder and such affiliates and exercise in full of all Warrants held by such Holder and affiliates, without giving effect to any Beneficial Ownership Limitation applicable to this Warrant or such convertible securities), of more than two percent (2.0%) of the outstanding shares of Common Stock of the Company as of the Issue Date (Holder, in such circumstances referred to as a “ 2% Holder ”), then a Call Notice may be given by the Company only within five (5) Trading Days after any thirty (30) consecutive Trading Day period during which the VWAP of the Common Stock as reported for the Principal Market is not less than two hundred and fifty percent (250%) of the Exercise Price then in effect for twenty-five (25) out of such thirty (30) consecutive Trading Day period. If Holder is not a 2% Holder as of the Issue Date, then a Call Notice may be given by the Company only within ten (10) Trading Days after any twenty (20) consecutive Trading Day period during which the VWAP of the Common Stock as reported for the Principal Market is not less than two hundred and fifty percent (250%) of the Exercise Price in effective for ten (10) out of such twenty (20) consecutive Trading Day period.
(5) Compliance with Call Notice . During the Call Period, the Holder shall exercise this Warrant and purchase the Called Warrant Shares as provided herein. If the Holder fails to timely exercise the Warrant for a number of Warrant Shares equal to number of Called Warrant Shares during the Call Period, the Company’s sole remedy shall be to cancel an amount of called Warrant Shares equal to such shortfall, with the Warrant no longer being exercisable with respect to such Warrant Shares (for avoidance of doubt, such remedy shall be available if, and only if, the Trigger Condition relied upon for the Warrant Call continues to apply through the entirety of the Call Period). The “ Call Period ” shall be a period of thirty Trading Days following the Call Date, provided the Call Period will be extended for one Trading Day for each Trading Day during the Call Period during which the VWAP of the Common Stock as reported for the Principal Market is less than two hundred and twenty-five percent (225%) of the Exercise Price then in effect.
(6) Notice to Other Holders . Unless otherwise agreed to by the Holder of this Warrant, a Call Notice must be given to all other Warrant Holders in proportion to the amounts of Warrant Shares which may be purchased by such Holders in accordance with the Warrants held by each, without giving effect to the Beneficial Ownership Limitation.
Section 3 . Certain Adjustments .
a) Stock Dividends and Splits . If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions of shares of its Common Stock to the record holders of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant or pursuant to any of the other Transaction Documents), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged in the case of an exercise for Common Stock only. In the event that any adjustment of the Exercise Price required herein results in a fraction of a cent, the Exercise Price shall be rounded down to the nearest one hundredth of a cent. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.
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b) Subsequent Rights Offerings . In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents pro rata to the record holders of any class of shares of Common Stock (the “ Purchase Rights ”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including, without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
c) Pro Rata Distributions . If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security of the Company other than the Common Stock (which shall be subject to Section 3(b)) (a “ Distribution ”), then in each such case the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including, without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation). To the extent that this Warrant has not been exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant.
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d) Fundamental Transaction . If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person pursuant to which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation are converted into or exchanged for shares of another corporation or entity and represent, or are converted into or exchanged for equity securities that represent, immediately following such merger or consolidation, less than a majority, by voting power, of the equity securities of (1) the surviving or resulting party or (2) if the surviving or resulting party is a wholly owned subsidiary of another party immediately following such merger or consolidation, the parent of such surviving or resulting party, (ii) the Company, directly or indirectly, effects any sale of all or substantially all of its assets in one or a series of related transactions and the consideration is distributed to holders of Common Stock, (iii) any tender offer or exchange offer by the Company is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement) (each a “ Fundamental Transaction ”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, (without regard to the applicable of Section 2(c) nor any limitation in Section 2(e) on the exercise of this Warrant) the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “ Alternate Consideration ”) receivable by holders of Common Stock as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.
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Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the 1934 Act, or (3) a Fundamental Transaction described in clause “(i)” of the first sentence above and where, pursuant to the merger, the stockholders of the Company will receive securities of the acquiring person or entity and such securities of such person or entity are not traded on a national securities exchange or trading market (with such exchange or market, including, without limitation, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market, The New York Stock Exchange, Inc., the NYSE or Amex), the Company or any Successor Entity (as defined below) shall, at the Holder’s option which shall be exercised as of the consummation of the Fundamental Transaction, purchase this Warrant from the Holder by paying to the Holder concurrently with the consummation of the Fundamental Transaction for each Warrant Share that would be issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction (without regard to the application of Section 2(c) nor any limitation in Section 2(e) on the exercise of this Warrant), the higher of (i) an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction, or (ii) the positive difference between the cash per share paid in such Fundamental Transaction minus the then in effect Exercise Price. “Black Scholes Value” means the value of the unexercised portion of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. In the event of a Fundamental Transaction described in clause “(i)” of the first sentence above, the Company shall cause any successor entity in such a Fundamental Transaction in which the Company is not the survivor (the “ Successor Entity ”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
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e) Calculations . All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
f) Notice to Holder .
i. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. If (A) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock (other than stock splits or reverse stock splits), any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities (other than stock splits or reverse stock splits), cash or property, or (B) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, to the extent that such information constitutes material non-public information (as determined in good faith by the Company) the Company shall follow the procedure described in Section 7.5 of the Purchase Agreement and shall deliver to the Holder, at least 10 days prior to the effective date hereinafter specified, a notice stating the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice and shall not be deemed to be a material breach of this Warrant unless such failure adversely affected Holder’s rights with respect to the Warrant. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice, except as may otherwise be expressly set forth herein.
g) Adjustments . In the event that at any time, as a result of an adjustment made pursuant to this Section 3, the Holder shall, upon exercise of this Warrant, become entitled to receive securities or assets (other than Common Stock) then, wherever appropriate, all references herein to shares of Common Stock shall be deemed to refer to and include such shares and/or other securities or assets; and thereafter the number of such shares and/or other securities or assets shall be subject to adjustment from time to time in a manner and upon terms as nearly equivalent as practicable to the provisions of this Section 3. Any adjustment made herein that results in a decrease in the Exercise Price shall also effect a proportional increase in the number of shares of Common Stock into which this Warrant is exercisable.
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Section 4 . Transfer of Warrant .
a) Transferability . Subject to compliance with any applicable securities laws and the provisions of the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants . This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant, except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register . The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
Section 5 . Miscellaneous .
a) No Rights as Stockholder Until Exercise . This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).
b) Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
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c) Saturdays, Sundays, Holidays, etc . If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Trading Day, then, such action may be taken or such right may be exercised on the next succeeding Trading Day.
d) Authorized Shares .
i. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock and Preferred Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Principal Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
ii. Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
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iii. Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
e) Jurisdiction . All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.
f) Restrictions . The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered for resale or if Holder does not utilize cashless exercise and Rule 144 is available, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses . No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder, if Holder is the prevailing party in any such action.
h) Notices . Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.
i) Limitation of Liability . No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or Preferred Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies . The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns . Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
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l) Amendment . This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m) Severability . Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings . The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************
(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
ADAMIS PHARMACEUTICALS CORPORATION | ||
By: | ||
Name: | ||
Title: |
NOTICE OF EXERCISE
To: ADAMIS PHARMACEUTICALS CORPORATION
(1) The undersigned hereby elects to purchase ________ Warrant Shares (to be comprised of _________ shares of Common Stock and __________ shares of Preferred Stock) of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] [if permitted] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
(4) After giving effect to this Notice of Exercise, the undersigned will not have exceeded the Beneficial Ownership Limitation.
The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:
[SIGNATURE OF HOLDER]
Name of Investing Entity: _______________________________________________________________________
Signature of Authorized Signatory of Investing Entity : _________________________________________________
Name of Authorized Signatory: ___________________________________________________________________
Title of Authorized Signatory: ____________________________________________________________________
Date: _______________________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
ADAMIS PHARMACEUTICALS CORPORATION
FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______ |
Holder’s Signature: | |||
Holder’s Address: | |||
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
Adamis Pharmaceuticals Corporation 8-K
Exhibit 4.2
NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE 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 TRANSFERRED, UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144 OR OTHER APPLICABLE EXEMPTION FROM APPLICABLE SECURITIES LAWS. THE ISSUER MAY REQUIRE AN OPINION OF COUNSEL TO THE HOLDER OF THESE SECURITIES, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER, THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT
ADAMIS PHARMACEUTICALS CORPORATION
Warrant Shares: [REQUIRES COMPLETION] | Issue Date: August 19, 2014 |
THIS AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT (the “ Warrant ”) amends and restates in its entirety that certain Common Stock Purchase Warrant dated as of August 19, 2014 by and between Adamis Pharmaceuticals Corporation, a Delaware corporation (the “ Company ”) and [REQUIRES COMPLETION] . The Company hereby certifies that, for value received, [REQUIRES COMPLETION] or its assigns (the “ Holder ”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “ Issue Date ”) and on or prior to 11:59 P.M. on the five (5) year anniversary of the Issue Date or, if such day is not a Trading Day, on the next Trading Day (the “ Termination Date ”) but not thereafter, to subscribe for and purchase from the Company, up to [REQUIRES COMPLETION] shares (as subject to adjustment hereunder, the “ Warrant Shares ”) of, at the option of the Holder, either (i) Common Stock, (ii) Series A-1 Convertible Preferred Stock, par value $0.0001 par value per share (“Preferred Stock”), or (iii) a combination of Common Stock and Preferred Stock. The purchase price of one share of Common Stock or Preferred Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1 . Definitions . Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Purchase Agreement (the “ Purchase Agreement ”) or, as applicable, that certain Registration Rights Agreement (the “ Registration Rights Agreement ”) each dated as of the Issue Date and entered into by and between the Company and the initial Holder.
Section 2 . Exercise .
a) Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Issue Date and on or before the Termination Date by facsimile delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed notice of exercise (the “ Notice of Exercise ”) in substantially the form of the Notice of Exercise Form annexed hereto. Within two (2) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. In the case of a dispute between the Company and the Holder as to the calculation of the Exercise Price or the number of Warrant Shares issuable hereunder (including, without limitation, the calculation of any adjustment pursuant to Section 3 below), the Company shall issue to the Holder the number of Warrant Shares that are not disputed within the time periods specified in Section 2(d)(i) below and shall submit the disputed calculations to a certified public accounting firm of national reputation (other than the Company’s regularly retained accountants) within three (3) Trading Days following the Company’s receipt of the Holder’s Notice of Exercise. The Company shall cause such accountant to calculate the Exercise Price and/or the number of Warrant Shares issuable hereunder and to notify the Company and the Holder of the results in writing no less than three (3) Trading Days following the day on which such accountant received the disputed calculations. Such accountant’s calculation shall be deemed conclusive absent manifest error. The fees of any such accountant shall be borne by the party whose calculations were most at variance with those of such accountant. Notwithstanding anything herein to the contrary (although the Holder may surrender the Warrant to, and receive a replacement Warrant from, the Company), the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. In the case of a partial exercise of this Warrant, the Holder may request that the Company deliver to the Holder a certificate representing such new warrant, with terms identical in all respects to this Warrant (except that such new warrant shall be exercisable into the number of Warrant Shares with respect to which this Warrant shall remain unexercised); provided, however, that the Holder shall be entitled to exercise all or any portion of such new warrant at any time following the time at which this Warrant is exercised, regardless of whether the Company has actually issued such new warrant or delivered to the Holder a certificate thereof. The Company shall deliver any objection to any Notice of Exercise Form within one (1) Trading Day of delivery of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
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b) Exercise Price . The exercise price per share of the Common Stock under this Warrant shall be $3.40, subject to adjustment hereunder (the “ Exercise Price ”).
c) Cashless Exercise . If at any time commencing 120 days after the Issue Date, there is no then effective Registration Statement registering, or no current prospectus available for, the resale of all of the Warrant Shares (assuming Holder elects all Warrant Shares to be in the form of Common Stock upon exercise) by the Holder and all of the Conversion Shares beneficially held by the Holder (in each case without giving effect any restrictions on exercise or conversion), or if the Company has not provided any certifications required to be provided by the Registration Rights Agreement regarding the availability of the Registration Statement for resales of all of the Warrant Shares and all of the Conversion Shares beneficially held by the Holder (in each case without giving effect any restrictions on exercise or conversion) that has been requested by the Holder, then this Warrant may also be exercised at the Holder’s election, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) x (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
“ VWAP ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a national securities exchange or trading market (with such exchange or market including, without limitation, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, The New York Stock Exchange, Inc., the NYSE or Amex, or the OTC Bulletin Board including the OTCQX or OTCQB) (a “ Trading Market ”), the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (or other reliable source) based on a Trading Day from 9:30 a.m. (New York City time) (or such other time as the Trading Market publicly announces is the official open of trading) to 4:00 p.m. (New York City time) (or such other time as the Trading Market publicly announces is the official close of trading), (b) if no daily volume weighted average prices are reported by Bloomberg (or other reliable source), the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets LLC, or (c) in all other cases, the fair market value of a share of Common Stock as mutually determined by the Company and Holder.
Notwithstanding anything herein to the contrary, on the Termination Date, Holder may exercise any remaining unexercised portion of this Warrant by means of a cashless exercise pursuant to this Section 2(c) by means of a notice delivered to the Company before the Termination Date. If on the Termination Date the VWAP is greater than the Exercise Price of this Warrant, as adjusted hereunder, then the Warrant shall be automatically exercised pursuant to this Section 2(c).
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d) Mechanics of Exercise .
i. Delivery of Certificates Upon Exercise . Certificates for shares (or, if the shares are represented in uncertificated form, comparable share notices reflecting such shares) purchased hereunder shall be transmitted by the Transfer Agent (“ Transfer Agent ” means the transfer agent employed by the Company from time to time, for its Common Stock) to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“ DWAC ”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder (assuming Holder elects all Warrant Shares to be in the form of Common Stock upon exercise) or (B) this Warrant is being exercised via cashless exercise and Rule 144 is available, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading Days after the date of delivery to the Company of the Notice of Exercise (such date, the “ Warrant Share Delivery Date ”). The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date of delivery to the Company of the Notice of Exercise. Notwithstanding anything herein to the contrary, the Company shall not be required to make any cash payments or net cash settlement to the registered holder in lieu of issuance of the Warrant Shares, except as provided in Section 2(d)(iv) below. The Company understands that a delay in the delivery of the Warrant Shares (assuming Holder elects all Warrant Shares to be in the form of Common Stock upon exercise) after the Warrant Share Delivery Date could result in economic loss to the Holder. As compensation to the Holder for such loss, if (i) the Company fails to deliver the number of Warrant Shares (assuming Holder elects all Warrant Shares to be in the form of Common Stock upon exercise) to which the Holder is entitled upon the Holder’s exercise of this Warrant within the time periods specified above and (ii) the Holder has not exercised its Buy-In rights as provided below with respect to such shares, the Company agrees to pay (as liquidated damages and not as a penalty) to the Holder for late issuance of Warrant Shares upon exercise of this Warrant the proportionate amount of $100 per Trading Day (increasing to $200 per Trading Day after the tenth Trading Day) after the Warrant Share Delivery Date for each $10,000 of Exercise Price of Warrant Shares for which this Warrant is exercised which are not timely delivered. For purposes of clarification, if the Company is obligated to make payments of liquidated damages pursuant to this Section for late issuance of Warrant Shares, then it shall not also be obligated to make Buy-In payments as described below with respect to those same Warrant Shares. The Company shall pay any payments incurred under this Section in immediately available funds upon demand.
ii. Delivery of New Warrants Upon Exercise . If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
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iii. Revoking Exercise . In the event that the Company fails for any reason to effect delivery of the Warrant Shares to Holder by the Warrant Share Delivery Date, then Holder may, at any time prior to issuance of such Warrant Shares, revoke all or part of the relevant Warrant exercise by delivery of a notice to such effect to the Company, whereupon the Company and the Holder shall each be restored to their respective positions immediately prior to the exercise of the relevant portion of this Warrant, except that the liquidated damages described above shall be payable through the date notice of revocation is given to the Company.
iv. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise . In addition to any other rights available to the Holder, if the Company fails for any reason to effect delivery of the Warrant Shares to Holder by the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder or its brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “ Buy-In ”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased, minus any amounts paid to the Holder by the Company as liquidated damages as described in Section 2(d)(i) above, exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
v. No Fractional Shares or Scrip . No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
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vi. Charges, Taxes and Expenses . Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided , however , that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise.
vii. Closing of Books . The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
e) Holder’s Exercise Limitations . The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, (i) the Holder would beneficially own in excess of the Holder Beneficial Ownership Limitation (as defined below) or (ii) the Holder, together with the Holder’s Affiliates and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates, would beneficially own in excess of the Affiliates Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock, hereinafter “ Common Stock Equivalents ”) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the 1934 Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the reasonable judgment of the Holder, in each case subject to the Holder Beneficial Ownership Limitation or the Affiliates Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.
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In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one (1) Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “ Holder Beneficial Ownership Limitation ” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The “ Affiliates Beneficial Ownership Limitation ” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder Beneficial Ownership Limitation together with the Affiliates Beneficial Ownership Limitation is collectively known as the “ Beneficial Ownership Limitation .” The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant and shall cease to apply only (x) upon sixty-one (61) days’ written notice from the Holder to the Company of an election to increase or decrease or remove one or both of the Holder Beneficial Ownership Limitation and the Affiliate Beneficial Ownership Limitation or (y) immediately upon written notice from the Holder to the Company at any time after the public announcement or other disclosure of a Fundamental Transaction (as defined in Section 3(d)); provided, however that in no event shall either the Holder Beneficial Ownership Limitation or the Affiliate Beneficial Ownership Limitation be 20.00% or greater.
f) Call . Provided (i) there is at the time an effective registration statement which includes for resale all of the Warrant Shares (assuming Holder elects all Warrant Shares to be in the form of Common Stock upon exercise), or (ii) all of the Warrant Shares may be sold pursuant to Rule 144 upon “cashless exercise” pursuant to Section 2(c) without restrictions including without volume limitations (each a “ Trigger Condition ”), the Company shall have the option to “call” (the “ Warrant Call ”) the exercise of any or all of the Warrant Shares (the “ Called Warrant Shares” ) from time to time in accordance with and governed by the following:
(1) Call Notice . The Company shall exercise a Warrant Call by giving written notice of call (the “ Call Notice ”) to the Holder during the period in which the Warrant Call may be exercised. The effective date of each Call Notice (the “ Call Date ”) is the date on which notice is deemed given and effective under the notice provision of Section 5(h) of this Warrant.
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(2) Call Period . The Company’s right to exercise a Warrant Call shall commence five (5) Trading Days after either of the Trigger Conditions has been in effect continuously for fifteen (15) Trading Days. The Holder shall have the right to cancel the Warrant Call up until the date the called Warrant Shares are actually delivered to the Holder (“ Warrant Call Delivery Date ”) if the Trigger Condition relied upon for the Warrant Call ceases to apply.
(3) Call Notice Spacing . A Call Notice may be given not sooner than fifteen (15) Trading Days after the Warrant Call Delivery Date of the immediately preceding Call Notice.
(4) Exercise Price Multiple . If Holder and any affiliates together would be regarded as beneficial owners (assuming conversion of all convertible securities held by Holder and such affiliates and exercise in full of all Warrants held by such Holder and affiliates, without giving effect to any Beneficial Ownership Limitation applicable to this Warrant or such convertible securities), of more than two percent (2.0%) of the outstanding shares of Common Stock of the Company as of the Issue Date (Holder, in such circumstances referred to as a “ 2% Holder ”), then a Call Notice may be given by the Company only within five (5) Trading Days after any thirty (30) consecutive Trading Day period during which the VWAP of the Common Stock as reported for the Principal Market is not less than two hundred and fifty percent (250%) of the Exercise Price then in effect for twenty-five (25) out of such thirty (30) consecutive Trading Day period. If Holder is not a 2% Holder as of the Issue Date, then a Call Notice may be given by the Company only within ten (10) Trading Days after any twenty (20) consecutive Trading Day period during which the VWAP of the Common Stock as reported for the Principal Market is not less than two hundred and fifty percent (250%) of the Exercise Price in effective for ten (10) out of such twenty (20) consecutive Trading Day period.
(5) Compliance with Call Notice . During the Call Period, the Holder shall exercise this Warrant and purchase the Called Warrant Shares as provided herein. If the Holder fails to timely exercise the Warrant for a number of Warrant Shares equal to number of Called Warrant Shares during the Call Period, the Company’s sole remedy shall be to cancel an amount of called Warrant Shares equal to such shortfall, with the Warrant no longer being exercisable with respect to such Warrant Shares (for avoidance of doubt, such remedy shall be available if, and only if, the Trigger Condition relied upon for the Warrant Call continues to apply through the entirety of the Call Period). The “ Call Period ” shall be a period of thirty Trading Days following the Call Date, provided the Call Period will be extended for one Trading Day for each Trading Day during the Call Period during which the VWAP of the Common Stock as reported for the Principal Market is less than two hundred and twenty-five percent (225%) of the Exercise Price then in effect.
(6) Notice to Other Holders . Unless otherwise agreed to by the Holder of this Warrant, a Call Notice must be given to all other Warrant Holders in proportion to the amounts of Warrant Shares which may be purchased by such Holders in accordance with the Warrants held by each, without giving effect to the Beneficial Ownership Limitation.
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Section 3 . Certain Adjustments .
a) Stock Dividends and Splits . If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions of shares of its Common Stock to the record holders of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant or pursuant to any of the other Transaction Documents), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged in the case of an exercise for Common Stock only. In the event that any adjustment of the Exercise Price required herein results in a fraction of a cent, the Exercise Price shall be rounded down to the nearest one hundredth of a cent. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.
b) Subsequent Rights Offerings . In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents pro rata to the record holders of any class of shares of Common Stock (the “ Purchase Rights ”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
c) Pro Rata Distributions . If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security of the Company other than the Common Stock (which shall be subject to Section 3(b)) (a “ Distribution ”), then in each such case the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation). To the extent that this Warrant has not been exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant.
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d) Fundamental Transaction . If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person pursuant to which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation are converted into or exchanged for shares of another corporation or entity and represent, or are converted into or exchanged for equity securities that represent, immediately following such merger or consolidation, less than a majority, by voting power, of the equity securities of (1) the surviving or resulting party or (2) if the surviving or resulting party is a wholly owned subsidiary of another party immediately following such merger or consolidation, the parent of such surviving or resulting party, (ii) the Company, directly or indirectly, effects any sale of all or substantially all of its assets in one or a series of related transactions and the consideration is distributed to holders of Common Stock, (iii) any tender offer or exchange offer by the Company is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement) (each a “ Fundamental Transaction ”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, (without regard to the applicable of Section 2(c) nor any limitation in Section 2(e) on the exercise of this Warrant) the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “ Alternate Consideration ”) receivable by holders of Common Stock as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.
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If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the 1934 Act, or (3) a Fundamental Transaction described in clause “(i)” of the first sentence above and where, pursuant to the merger, the stockholders of the Company will receive securities of the acquiring person or entity and such securities of such person or entity are not traded on a national securities exchange or trading market (with such exchange or market including, without limitation, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market, The New York Stock Exchange, Inc., the NYSE or Amex), the Company or any Successor Entity (as defined below) shall, at the Holder’s option which shall be exercised as of the consummation of the Fundamental Transaction, purchase this Warrant from the Holder by paying to the Holder concurrently with the consummation of the Fundamental Transaction for each Warrant Share that would be issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction (without regard to the application of Section 2(c) nor any limitation in Section 2(e) on the exercise of this Warrant), the higher of (i) an amount of cash equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction, or (ii) the positive difference between the cash per share paid in such Fundamental Transaction minus the then in effect Exercise Price. “Black Scholes Value” means the value of the unexercised portion of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. In the event of a Fundamental Transaction described in clause “(i)” of the first sentence above, the Company shall cause any successor entity in such a Fundamental Transaction in which the Company is not the survivor (the “ Successor Entity ”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(d) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.
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e) Calculations . All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
f) Notice to Holder .
i. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. If (A) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock (other than stock splits or reverse stock splits), any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities (other than stock splits or reverse stock splits), cash or property, or (B) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, to the extent that such information constitutes material non-public information (as determined in good faith by the Company) the Company shall follow the procedure described in Section 7.5 of the Purchase Agreement and shall deliver to the Holder, at least 10 days prior to the effective date hereinafter specified, a notice stating the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice and shall not be deemed to be a material breach of this Warrant unless such failure adversely affected Holder’s rights with respect to the Warrant. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice, except as may otherwise be expressly set forth herein.
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g) Adjustments . In the event that at any time, as a result of an adjustment made pursuant to this Section 3, the Holder shall, upon exercise of this Warrant, become entitled to receive securities or assets (other than Common Stock) then, wherever appropriate, all references herein to shares of Common Stock shall be deemed to refer to and include such shares and/or other securities or assets; and thereafter the number of such shares and/or other securities or assets shall be subject to adjustment from time to time in a manner and upon terms as nearly equivalent as practicable to the provisions of this Section 3. Any adjustment made herein that results in a decrease in the Exercise Price shall also effect a proportional increase in the number of shares of Common Stock into which this Warrant is exercisable.
Section 4 . Transfer of Warrant .
a) Transferability . Subject to compliance with any applicable securities laws and the provisions of the Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants . This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant, except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register . The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
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Section 5 . Miscellaneous .
a) No Rights as Stockholder Until Exercise . This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).
b) Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays, etc . If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Trading Day, then, such action may be taken or such right may be exercised on the next succeeding Trading Day.
d) Authorized Shares .
i. The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock and Preferred Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Principal Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
ii. Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
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iii. Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
e) Jurisdiction . All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.
f) Restrictions . The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered for resale or if Holder does not utilize cashless exercise and Rule 144 is available, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses . No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder, if Holder is the prevailing party in any such action.
h) Notices . Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.
i) Limitation of Liability . No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or Preferred Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
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j) Remedies . The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns . Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment . This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m) Severability . Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings . The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
********************
(Signature Page Follows)
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
ADAMIS PHARMACEUTICALS CORPORATION | ||
By: | ||
Name: | ||
Title: |
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NOTICE OF EXERCISE
To: ADAMIS PHARMACEUTICALS CORPORATION
(1) The undersigned hereby elects to purchase ________ Warrant Shares (to be comprised of _________ shares of Common Stock and __________ shares of Preferred Stock) of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] [if permitted] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
(4) After giving effect to this Notice of Exercise, the undersigned will not have exceeded the Beneficial Ownership Limitation.
The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:
[SIGNATURE OF HOLDER]
Name of Investing Entity: _______________________________________________________________________
Signature of Authorized Signatory of Investing Entity : _________________________________________________
Name of Authorized Signatory: ___________________________________________________________________
Title of Authorized Signatory: ____________________________________________________________________
Date: _______________________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
ADAMIS PHARMACEUTICALS CORPORATION
FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______ |
Holder’s Signature: | |||
Holder’s Address: | |||
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
Adamis Pharmaceuticals Corporation 8-K
Exhibit 10.1
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (“ Agreement ”) is made as of January 26, 2016, by and among Adamis Pharmaceuticals Corporation, a Delaware corporation (the “ Company ”), and each entity named on the signature page of this Agreement (each an “ Investor ” and collectively, the “ Investors ”).
BACKGROUND
A. The Company and the Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Regulation D (“ Regulation D ”), as promulgated by the U.S. Securities and Exchange Commission (the “ SEC ”) under the Securities Act of 1933, as amended.
B. The Company is offering, upon the terms and conditions stated in this Agreement, up to an aggregate of (i) 1,183,432 shares (the “ Shares ”) of Series A-1 Convertible Preferred Stock, par value $0.0001 per share, convertible into a number of shares (“ Conversion Shares ”) of the Company’s Common Stock, par value $0.0001 (together with any securities into which such shares may be reclassified, the “ Common Stock ”), and (ii) Warrants in the form attached hereto as Exhibit A (the “ Warrants ”) to purchase an aggregate of 1,183,432 shares of Common Stock or Series A-1 Convertible Preferred Stock (the “ Warrant Shares ”) at an initial exercise price of $4.10 per Warrant Share. As used herein, “ Securities ” means, collectively, the Shares, Conversion Shares, the Warrants and the Warrant Shares.
C. The Shares and the Warrants are being offered as units (the “ Units ”), which each Unit consisting of (i) one Share, and (ii) one Warrant to purchase one Warrant Share, all at a per Unit price of $4.225 (the “ Per Unit Purchase Price ”). The Units will not be certificated, and the Shares and the Warrants will be issued separately.
D. The Investors wish to purchase from the Company, and the Company wishes to sell and issue to the Investors the number of Units specified on the signature page to this Agreement at the Per Unit Purchase Price.
E. Contemporaneous with the sale of the Units, the parties hereto will execute and deliver an Amended and Restated Registration Rights Agreement, in the form attached hereto as Exhibit B (the “ Registration Rights Agreement ”), pursuant to which the Company will agree to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
AGREEMENT
In consideration of the mutual promises made herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Definitions . In addition to those terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings set forth below:
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“ Affiliate ” means, as to any Person (the “ subject Person ”), any other Person (a) that directly or indirectly through one or more intermediaries controls or is controlled by, or is under direct or indirect common control with, the subject Person, (b) that directly or indirectly beneficially owns or holds ten percent (10%) or more of any class of voting equity of the subject Person, or (c) ten percent (10%) or more of the voting equity of which is directly or indirectly beneficially owned or held by the subject Person. For the purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, through representation on such Person’s board of directors or other management committee or group, by contract or otherwise.
“ Business Day ” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.
“ Certificate of Designation ” means the Certificate of Designation, substantially in the form attached hereto as Exhibit C , to be filed by the Company with the Secretary of State of Delaware, establishing and defining the rights of the Shares.
“ Certificates ” representing any of the Securities shall mean either (i) certificates representing such Securities, or (ii) if Securities are issued in uncertificated form, then comparable share notices reflecting such Securities).
“ Common Stock Equivalents ” means any securities of the Company which entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“ Company’s Knowledge ” means the knowledge of the executive officers (as defined in Rule 405 under the 1933 Act) of the Company.
“ Confidential Information ” means trade secrets, confidential information and know-how (including, but not limited to, ideas, formulae, compositions, processes, procedures and techniques, research and development information, computer program code, performance specifications, support documentation, drawings, specifications, designs, business and marketing plans, and customer and supplier lists and related information).
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder.
“ Intellectual Property ” means all of the following: (i) patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice); (ii) trademarks, service marks, trade dress, trade names, corporate names, logos, slogans and Internet domain names, together with all goodwill associated with each of the foregoing; (iii) copyrights and copyrightable works; (iv) registrations, applications and renewals for any of the foregoing; and (v) proprietary computer software (including, but not limited to, data, data bases and documentation).
“ Key Employee ” has the meaning set forth in Section 4.28.
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“ Material Adverse Effect ” means a material adverse effect (i) on the business, assets, liabilities, results of operations, or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or on the authority or ability of the Company to perform its obligations under the Transaction Documents; provided, however, that for purposes of this Agreement, “Material Adverse Effect” shall not include any effect attributable solely to the changes in the trading price of the Common Stock, or (ii) on the Investor’s rights as a holder of the Preferred Stock or under the Warrants.
“ Material Contract ” means any contract, instrument or other agreement to which the Company or any Subsidiary is a party or by which it is bound which is material to the business of the Company and its Subsidiaries, taken as a whole, including those such contracts, instruments or agreements that have been filed as exhibits to the SEC Filings pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K.
“ NASDAQ CM ” has the meaning set forth in Section 4.20.
“ Pension Plan ” means an employee benefit plan (as defined in ERISA) maintained by the Company for employees of the Company or any of its Affiliates.
“ Person ” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.
“ Registrable Securities ” means the Conversion Shares and the Warrant Shares, any other shares of Common Stock issuable pursuant to the terms of the Certificate of Designation or the Warrants, and any shares of capital stock issued or issuable from time to time (with any adjustments) in replacement of, in exchange for or otherwise in respect of the Conversion Shares or the Warrant Shares; provided , however , that “Registrable Securities” shall not include any such shares that have been sold to the public pursuant to the Registration Statement or Rule 144 or that can be publicly sold to the public without volume restrictions pursuant to Rule 144 (and giving effect to the ability to net exercise the Warrants pursuant to the provisions of the Warrants).
“ Registration Statement ” has the meaning set forth in the Registration Rights Agreement.
“ Required Investors ” means any Investor which, together with its Affiliates, beneficially owns at least a majority of the Shares then beneficially owned by the Investors.
“ Rule 144 ” means Rule 144 under the 1933 Act, or any successor provision.
“ SEC Filings ” has the meaning set forth in Section 4.7.
“ Subsidiary ” means any “significant” subsidiary of the Company, as defined in Article 1-02(w) of Regulation S-X.
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“ Trading Day ” means any day on which the NYSE MKT, the NASDAQ CM, the NASDAQ Global Market, the NASDAQ Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing) is open for business.
“ Transaction Documents ” means this Agreement, the Warrants, the Registration Rights Agreement and all other agreements, documents and other instruments executed and delivered by or on behalf of the Company or any of its officers at the Closing.
“ VWAP ” means, for any Trading Day, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a national securities exchange or trading market (with such exchange or market, including, without limitation, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, The New York Stock Exchange, Inc., the NYSE or Amex, or the OTC Bulletin Board including the OTCQX or OTCQB) (a “ Trading Market ”), the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (or other reliable source) based on a Trading Day from 9:30 a.m. (New York City time) (or such other time as the Trading Market publicly announces is the official open of trading) to 4:00 p.m. (New York City time) (or such other time as the Trading Market publicly announces is the official close of trading), (b) if no daily volume weighted average prices are reported by Bloomberg (or other reliable source), the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the “pink sheets” by OTC Markets LLC, or (c) in all other cases, the fair market value of a share of Common Stock as mutually determined by the Company and Investor.
“ 1933 Act ” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.
“ 1934 Act ” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.
2. Purchase and Sale of the Units . Subject to the terms and conditions of this Agreement, on the Closing Date, each Investor shall purchase, and the Company shall sell and issue to each Investor, the number of Units set forth opposite the Investor’s name on the signature page attached hereto at a price per Unit equal to the Per Unit Purchase Price.
3. Closing . The purchase and sale of the Units to be purchased by the Investors hereunder shall occur on the date hereof, subject to the satisfaction or waiver of the conditions specified in Section 6 hereof, or such other date and time as shall be mutually agreed to by the Company and the Required Investors (the “ Closing ”). The date on which the Closing occurs is hereinafter referred to as the “ Closing Date .” At the Closing, (i) each Investor shall cause a wire transfer in same day funds to be sent to the account of the Company as instructed in writing by the Company, in an amount equal to the product of (A) the number of Units being purchased by such Investor on the Closing Date, and (B) the Per Unit Purchase Price, and (ii) the Company shall cause to be issued and delivered to each Investor or its designee, by FedEx or other recognized overnight courier, Certificates or, if securities are issued in uncertificated form, written notice of issuance, representing the Shares and the Warrants purchased by such Investor at the Closing, registered in such name or names as such Investor may designate. The Closing shall take place at the offices of Weintraub Tobin Chediak Coleman & Grodin Law Corporation, 400 Capitol Mall, 11 th Floor, Sacramento, California 95814 or at such other location and on such other date as the Company and the Required Investors shall mutually agree.
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4. Representations and Warranties of the Company . The Company hereby represents and warrants to the Investors that, except as may be set forth in a separate written disclosure letter delivered to the Investors before the date of this Agreement (the “ Disclosure Schedule ”):
4.1. Organization, Good Standing and Qualification . Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted and to own or lease its properties. Each of the Company and its Subsidiaries is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or leasing necessary, unless the failure to so qualify has not had and could not reasonably be expected to have a Material Adverse Effect. There are no Subsidiaries that are not included in the list of the Company’s subsidiaries contained in Exhibit 22.1 to the Company’s Transition Report on Form 10-KT for the transition period ended December 31, 2014 (the “ 10-KT ”).
4.2. Authorization . The Company has full corporate power and authority and has taken all requisite action on the part of the Company, its officers, directors and stockholders necessary for (i) the authorization, execution and delivery of the Transaction Documents, (ii) the authorization of the performance of all obligations of the Company hereunder or thereunder, (iii) the authorization, issuance (or reservation for issuance) and delivery of the Securities, and (iv) to adopt and file the Certificate of Designation and perform its obligations thereunder. The Transaction Documents constitute, or when executed and delivered by the Company will constitute, the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally and to general equitable principles. The board of directors of the Company has determined, at a duly convened meeting or pursuant to a unanimous written consent, that the issuance and sale of the Securities, and the consummation of the transactions contemplated by the Certification of Designation, this Agreement and the other Transaction Documents (including, without limitation, the issuance of the Conversion Shares and the Warrant Shares), are in the best interest of the Company.
4.3. Due Execution; Enforceability . This Agreement has been and, at or prior to the Closing, each other Transaction Document to be delivered at the Closing will be, duly executed and delivered by the Company. This Agreement constitutes and, upon the execution and delivery thereof by the Company, each other Transaction Document will constitute the valid and legally binding obligation of the Company, enforceable against it in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or other similar laws of general application relating to or affecting the enforcement of creditors’ rights generally, and (ii) general principles of equity.
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4.4. Capitalization; Debt . The capitalization of the Company, including its authorized capital stock, the number of shares issued and outstanding, the number of shares issuable and reserved for issuance pursuant to the Company’s stock option plans and agreements, the number of shares issuable and reserved for issuance pursuant to securities (other than the Securities) exercisable for, or convertible into or exchangeable for any shares of Common Stock is as set forth in the SEC Filings as of the dates set forth therein. All of the issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued and are fully paid, nonassessable and free of pre-emptive rights and were issued in compliance in all respects with applicable state and federal securities law, except as would not reasonably be expected to have a Material Adverse Effect. The Company owns all outstanding shares of each Subsidiary. Except as reflected in the SEC Filings or in the Disclosure Schedule, no Person is entitled to pre-emptive rights with respect to any securities of the Company. Except as reflected in the SEC Filings or in the Disclosure Schedule, there are no outstanding warrants, options, convertible securities, or other rights, agreements or arrangements of any character under which the Company or any of its Subsidiaries is or may be obligated to issue any material amounts of equity securities of any kind. Except as reflected in the SEC Filings or in the Disclosure Schedule and, except for the Registration Rights Agreement, there are no voting agreements, buy-sell agreements, or right of first purchase agreements among the Company and any of the securityholders of the Company relating to the securities of the Company held by them. Except as reflected in the SEC Filings or in the Disclosure Schedule and, except as provided in the Registration Rights Agreement, no Person has the right to require the Company to register any securities of the Company under the 1933 Act. Except as reflected in the SEC Filings, the issuance and sale of the Securities hereunder will not obligate the Company to issue shares of Common Stock or other securities to any other Person (other than the Investors). Except as reflected in the SEC Filings, the Company does not have outstanding stockholder rights plans or “poison pill” or any similar arrangement in effect giving stockholders the right to purchase any equity interest in the Company upon the occurrence of certain events. Except as disclosed in the SEC Filings, the Company has no material indebtedness outstanding as of the date hereof.
4.5. Valid Issuance . The Shares have been duly and validly authorized and, when issued and paid for pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and shall be free and clear of all encumbrances and restrictions (other than those created by the Investors), except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws, and will be delivered in compliance with all applicable federal and state securities laws. The Warrants have been duly and validly authorized. Upon the due exercise of the Warrants or conversion of the Shares, the Warrant Shares and Conversion Shares (as the case may be) will be validly issued, fully paid and non-assessable free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and, except for those created by the Investors, and will be delivered in compliance with all applicable federal and state securities laws. The Company has reserved a sufficient number of shares of Common Stock for issuance upon conversion of the Shares and the exercise of the Warrants.
4.6. Consents . Except as reflected in the SEC Filings or in the Disclosure Schedule, t he execution, delivery and performance by the Company of the Transaction Documents and the offer, issuance and sale of the Securities require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official other than filings that have been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods.
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4.7. Delivery of SEC Filings; Business . The Company has filed with the SEC all reports, schedules, registration statements and definitive proxy statements that the Company was required to file with the SEC since April 1, 2013 (collectively, the “ SEC Filings ”). The SEC Filings are the only filings required of the Company pursuant to the 1934 Act for such period. The Company is not aware of any event occurring or expected to occur on or prior to the Closing Date (other than the transactions effected hereby and the next Quarterly Report on Form 10-Q or Annual Report on Form 10-K) that would require the filing of, or with respect to which the Company intends to file, a Current Report on Form 8-K after the Closing. The Company and its Subsidiaries are engaged in all material respects only in the business reflected in the SEC Filings, and the SEC Filings contain a complete and accurate description in all material respects of the business of the Company and its Subsidiaries, taken as a whole.
4.8. Use of Proceeds . The net proceeds of the sale of the Units hereunder shall be used by the Company for general corporate purposes, which may include without limitation working capital, capital expenditures, research and development expenditures, regulatory affairs expenditures, clinical trial expenditures, acquisitions of or investments in new companies, technologies or products, and payment of indebtedness or obligations.
4.9. No Material Adverse Change . Since September 30, 2015, except as reflected in the SEC Filings or as contemplated by the offer and sale of the Units, there has not been:
(a) any material adverse change nor any material adverse development in the business, consolidated assets, liabilities, financial condition or operating results of the Company;
(b) any change by the Company in its accounting principles, policies and methods, except as required by changes in United States generally accepted accounting principles applied on a consistent basis (“ GAAP ”) or applicable law;
(c) any declaration or payment of any dividend, or any authorization or payment of any distribution, on any of the capital stock of the Company, or any redemption or repurchase of any securities of the Company;
(d) any material damage, destruction or loss, whether or not covered by insurance, to any assets or properties of the Company or its Subsidiaries;
(e) any waiver, not in the ordinary course of business, by the Company or any Subsidiary of a material right or of a material debt owed to it;
(f) any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company or a Subsidiary, except in the ordinary course of business;
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(g) any change or amendment to the Company’s Restated Certificate of Incorporation or Bylaws, or material change to any Material Contract by which the Company or any Subsidiary is bound or to which any of their respective assets or properties is subject;
(h) any material labor difficulties or labor union organizing activities with respect to employees of the Company or any Subsidiary;
(i) any material transaction entered into by the Company or a Subsidiary other than in the ordinary course of business;
(j) the loss of the services of any Key Employee, or material change in the composition or duties of the senior management of the Company or any Subsidiary;
(k) the loss or threatened loss of any customer which has had or could reasonably be expected to have a Material Adverse Effect; or
(l) any action taken by the by the Company or a Subsidiary to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does the Company or any Subsidiary have any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any facts which would reasonably lead a creditor to do so; or
(m) any other event or condition of any character that has had or could reasonably be expected to have a Material Adverse Effect.
4.10. SEC Filings . At the time of filing thereof, the SEC Filings (including all exhibits and schedules thereto and the documents incorporated by reference therein) complied in all material respects with the requirements of the 1933 Act or 1934 Act, as applicable, and the rules and regulations promulgated thereunder, and did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. All documents required to be filed as exhibits to the SEC Filings have been filed as required.
4.11. No Conflict, Breach, Violation or Default . The execution, delivery and performance of the Transaction Documents by the Company and the issuance and sale of the Securities does not and will not (i) conflict with or result in a breach or violation of (a) any of the terms and provisions of, or constitute a default under the Company’s Restated Certificate of Incorporation or the Company’s Bylaws, both as in effect on the date hereof (true and complete copies of which have been made available to the Investors through the EDGAR system), or (b) to any statute, rule, regulation or order of any governmental agency or body or any court, domestic or foreign, having jurisdiction over the Company, any Subsidiary or any of their respective assets or properties, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any lien, encumbrance or other adverse claim upon any of the properties or assets of the Company or any Subsidiary or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any Material Contract, except, in the case of clauses (i)(b) and (ii) only, for such conflicts, breaches, violations and defaults as have not had, and could not reasonably be expected to have, a Material Adverse Effect, individually or in the aggregate.
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4.12. Tax Matters . The Company and each Subsidiary has timely prepared and filed all material tax returns required to have been filed by the Company or such Subsidiary with all appropriate governmental agencies and timely paid all taxes shown thereon or otherwise owed by it, except as could not reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal periods are adequate in all material respects, and there are no material unpaid assessments against the Company or any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of any additional taxes, penalties or interest for any fiscal period or audits by any federal, state or local taxing authority, except for any assessment which could not be reasonably expected to have a Material Adverse Effect. All material taxes and other assessments and levies that the Company or any Subsidiary is required to withhold or to collect for payment have been duly withheld and collected and paid to the proper governmental entity or third party when due. There are no material tax liens or claims pending or, to the Company’s Knowledge, threatened against the Company or any Subsidiary or any of their respective assets or property. Except as reflected in the SEC Filings, there are no outstanding tax sharing agreements or other such arrangements between the Company and any Subsidiary or other corporation or entity. The Company has not participated in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2).
4.13. Title to Properties . Except as reflected in the SEC Filings, the Company and each Subsidiary has good and marketable title to all real properties and all other properties and assets owned by it, in each case free from liens, encumbrances and defects that would materially affect the value thereof or materially interfere with the use made or currently planned to be made thereof by them; and, except as reflected in the SEC Filings, the Company and each Subsidiary holds any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or currently planned to be made thereof by them.
4.14. Certificates, Authorities and Permits . The Company and each Subsidiary possess all material certificates, authorities and permits issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authority or permit that, if determined adversely to the Company or such Subsidiary, could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate.
4.15. Labor Matters .
(a) The Company is not a party to or bound by any collective bargaining agreements or other agreements with labor organizations. The Company has not violated in any material respect any laws, regulations, orders or contract terms, affecting the collective bargaining rights of employees, labor organizations or any laws, regulations or orders affecting employment discrimination, equal opportunity employment, or employees’ health, safety, welfare, wages and hours.
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(b) (i) There are no labor disputes existing, or to the Company’s Knowledge, threatened, involving strikes, slow-downs, work stoppages, job actions, disputes, lockouts or any other disruptions of or by the Company’s employees, (ii) there are no unfair labor practices or petitions for election pending or, to the Company’s Knowledge, threatened before the National Labor Relations Board or any other federal, state or local labor commission relating to the Company’s employees, (iii) no demand for recognition or certification heretofore made by any labor organization or group of employees is pending with respect to the Company and (iv) to the Company’s Knowledge, the Company enjoys good labor and employee relations with its employees and labor organizations.
(c) The Company is, and at all times has been, in compliance in all material respects with all applicable laws respecting employment (including laws relating to classification of employees and independent contractors) and employment practices, terms and conditions of employment, wages and hours, and immigration and naturalization. There are no claims pending against the Company before the Equal Employment Opportunity Commission or any other administrative body or in any court asserting any violation of Title VII of the Civil Rights Act of 1964, the Age Discrimination Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other federal, state or local Law, statute or ordinance barring discrimination in employment.
(d) Except as reflected in the SEC Filings, the Company is not a party to, or bound by, any employment or other contract or agreement that contains any severance, termination pay or change of control liability or obligation, including, without limitation, any “excess parachute payment,” as defined in Section 280G(b) of the Internal Revenue Code.
(e) To the Company’s Knowledge, each of the Company’s employees is a Person who is either a United States citizen or a permanent resident entitled to work in the United States. To the Company’s Knowledge, the Company has no liability for the improper classification by the Company of such employees as independent contractors or leased employees prior to the Closing, except as could not reasonably be expected to have a Material Adverse Effect.
4.16. Intellectual Property . Except as reflected in the SEC Filings:
(a) All material Intellectual Property of the Company and its Subsidiaries is currently in compliance with all legal requirements (including timely filings, proofs and payments of fees) and is valid and enforceable, except as would not reasonably be expected to have a Material Adverse Effect. No Intellectual Property of the Company or its Subsidiaries which is material to the Company and necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted is involved in any cancellation, dispute or litigation, and, to the Company’s Knowledge, no such action is threatened. No patent owned by the Company or its Subsidiaries is involved in any interference, reissue, re-examination or opposition proceeding.
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(b) All of the licenses and sublicenses and consent, royalty or other agreements concerning Intellectual Property which are material to the Company and necessary for the conduct of the Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted to which the Company or any Subsidiary is a party or by which any of their assets are bound (other than generally commercially available, non-custom, off-the-shelf software application programs having a retail acquisition price of less than $10,000 per license) (collectively, “ License Agreements ”) are valid and binding obligations of the Company or its Subsidiaries that are parties thereto and, to the Company’s Knowledge, the other parties thereto, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights generally, and to the Company’s Knowledge there exists no event or condition which will result in a material violation or breach of or constitute (with or without due notice or lapse of time or both) a default by the Company or any of its Subsidiaries under any such License Agreement, in each case that would reasonably be expected to have a Material Adverse Effect.
(c) The Company and its Subsidiaries own or have the valid right to use all of the material Intellectual Property that is necessary for the conduct of the Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted and for the ownership, maintenance and operation of the Company’s and its Subsidiaries’ properties and assets, free and clear of all liens, encumbrances, adverse claims or obligations to license all such owned Intellectual Property and Confidential Information, other than licenses entered into in the ordinary course of the Company’s and its Subsidiaries’ businesses. To the Company’s Knowledge, the Company and its Subsidiaries have a valid and enforceable right to use all material third party Intellectual Property and Confidential Information used or held for use in the respective businesses of the Company and its Subsidiaries, except as would not reasonably be expected to have a Material Adverse Effect.
(d) All material licenses or other material agreements under which the Company is granted Intellectual Property are in full force and effect and, to the Company’s Knowledge, there is no material default by any other party thereto. The Company has no reason to believe that the licensors under such licenses and other agreements do not have and did not have all requisite power and authority to grant the rights to the Intellectual Property purported to be granted thereby.
(e) To the Company’s Knowledge (without having conducted any specific investigation), the conduct of the Company’s and its Subsidiaries’ businesses as currently conducted does not infringe or otherwise impair or conflict with in any material respect (collectively, “ Infringe ”) any Intellectual Property rights of any third party or any confidentiality obligation owed to a third party, except as could not reasonably be expected to have a Material Adverse Effect, and, to the Company’s Knowledge the Intellectual Property and Confidential Information of the Company and its Subsidiaries which are material to the Company and necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted are not being Infringed by any third party. There is no litigation or order pending or outstanding or, to the Company’s Knowledge, threatened or imminent, that seeks to limit or challenge or that concerns the ownership, use, validity or enforceability of any Intellectual Property or Confidential Information of the Company and its Subsidiaries and the Company’s and its Subsidiaries’ use of any Intellectual Property or Confidential Information owned by a third party, and, to the Company’s Knowledge, there is no valid basis for the same.
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(f) The consummation of the transactions contemplated hereby and by the other Transaction Documents will not result in the alteration, loss, impairment of or restriction on the Company’s or any of its Subsidiaries’ ownership or right to use any of the Intellectual Property or Confidential Information which is necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted.
(g) The Company has taken reasonable steps to protect the Company’s and its Subsidiaries’ rights in their Intellectual Property and Confidential Information. Neither the Company nor, to the Company’s Knowledge, any of its employees has any agreements or arrangements with former employers of such employees relating to any Intellectual Property of such employers, which materially interfere or conflict with the performance of such employee’s duties for the Company or result in any former employers of such employees having any rights in, or claims on, the Company’s Intellectual Property. Each current and former employee, consultant and contractor who has had access to Confidential Information which is material to the Company and necessary for the conduct of Company’s and each of its Subsidiaries’ respective businesses as currently conducted or as currently proposed to be conducted has executed an agreement or is otherwise under an obligation to maintain the confidentiality of such Confidential Information, and the Company has not received written notice that any employee, consultant or independent contractor is in violation of any agreement or in breach of any agreement or arrangement with former or present employers relating to proprietary information or assignment of inventions. Without limiting the foregoing: (i) the Company has taken reasonable security measures to guard against unauthorized disclosure or use of any of its Intellectual Property and (ii) the Company has no reason to believe that any Person (including, without limitation, any former employee or consultant of the Company) has unauthorized possession of any of its Intellectual Property, or any part thereof, or that any Person has obtained unauthorized access to any of its Intellectual Property. To the Company’s Knowledge, the Company is not making any material unlawful use of any Intellectual Property of any other Person, including, without limitation, any former employer of any past or present employees of the Company.
4.17. Environmental Matters . To the Company’s Knowledge, neither the Company nor any Subsidiary is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “ Environmental Laws ”), owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim has had or could reasonably be expected to have a Material Adverse Effect, individually or in the aggregate; and there is no pending or, to the Company’s Knowledge, threatened investigation that might lead to such a claim.
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4.18. Litigation . Except as reflected in the SEC Filings, there are no material pending actions, suits or proceedings against or affecting the Company, its Subsidiaries or any of its or their properties; and to the Company’s Knowledge, no such actions, suits or proceedings are threatened or contemplated. Except as reflected in the Company’s previous annual reports on Form 10-K and Form 10-KT, neither the Company nor any Subsidiary, nor to the Company’s Knowledge any director, officer or employee thereof, is or since April 1, 2009 has been the subject of any action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the Company’s Knowledge there is not pending or contemplated, any investigation by the SEC involving the Company or any current or former director or officer of the Company. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the 1933 Act or the 1934 Act.
4.19. Financial Statements . The financial statements included in each SEC Filing comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing (or to the extent corrected by a subsequent restatement) and present fairly, in all material respects, the consolidated financial position of the Company as of the dates shown and its consolidated results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with GAAP (except as may be disclosed therein or in the notes thereto, and, in the case of quarterly financial statements, as permitted by Form 10-Q under the 1934 Act). Except as set forth in the financial statements in the SEC Filings, the Company has no liabilities, contingent or otherwise, other than liabilities incurred in the ordinary course of business which, under GAAP, are not required to be reflected in the financial statements included in each SEC Filing and which, individually or in the aggregate, are not material to the business or financial condition of the Company.
4.20. Nasdaq Compliance . The Common Stock is registered pursuant to Section 12(g) of the 1934 Act and is listed on The NASDAQ Capital Market (the “ Nasdaq CM ”) maintained by NASDAQ Stock Market LLC (“ NASDAQ ”), and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the 1934 Act or removal from quotation of the Common Stock from the Nasdaq CM, nor has the Company received any notification that the SEC, NASDAQ or the Financial Industry Regulatory Authority, Inc. is contemplating terminating such registration or quotation.
4.21. No Directed Selling Efforts or General Solicitation . Neither the Company nor any Person acting on its behalf (i) has conducted any general solicitation or general advertising (as those terms are used in Regulation D) in connection with the transactions contemplated by this Agreement, or (ii) has, directly or indirectly, made any offers or sales of any security or the right to purchase any security, or solicited any offers to buy any security or any such right, under circumstances that would require registration of the Securities under the 1933 Act.
4.22. Private Placement . Assuming the accuracy of the representations and warranties of the Investors contained in Section 5 hereof and compliance by the Investors with the terms of the Transaction Documents, the offer and sale of the Securities to the Investors as contemplated hereby is exempt from the registration requirements of the 1933 Act.
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4.23. Questionable Payments . Neither the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of their respective current or former directors, officers, employees, agents or other Persons acting on behalf of the Company or any Subsidiary, has on behalf of the Company or any Subsidiary or in connection with their respective businesses: (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious entries on the books and records of the Company or any Subsidiary; (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature; or (f) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended.
4.24. Transactions with Affiliates . Except as reflected in the SEC Filings, none of the officers or directors of the Company and, to the Company’s Knowledge, none of the employees of the Company is presently a party to any material transaction with the Company or any Subsidiary (other than as holders of stock options and/or warrants, and for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the Company’s Knowledge, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.
4.25. Internal Controls . Except as reflected in the SEC Filings (including under Item 9A of the 10-KT), t he Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company, including the Subsidiaries, is made known to the certifying officers by others within those entities, during the period in which the Company’s most recently filed periodic report under the 1934 Act is being prepared. The Company’s certifying officers have evaluated the effectiveness of the Company’s controls and procedures as of the end of the period covered by the most recently filed periodic report under the 1934 Act (such date, the “ Evaluation Date ”). The Company presented in its most recently filed periodic report under the 1934 Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in the Company’s internal controls (as such term is defined in Item 308 of Regulation S-K) or, to the Company’s Knowledge, in other factors that could significantly affect the Company’s internal controls.
4.26. Investment Company . The Company is not required to be registered as, and is not an Affiliate of, and immediately following the Closing will not be required to register as, an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and shall conduct its business in a manner so that it will not become subject to the Investment Company Act.
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4.27. Key Employees . Each of the Company’s executive officers (as defined in Rule 405 under the 1933 Act) (each, a “ Key Employee ”) is currently serving in the capacity described in the SEC Filings. The Company has no knowledge of any fact or circumstance (including, without limitation, (i) the terms of any agreement to which such person is a party or any litigation in which such person is or may become involved, and (ii) any illness or medical condition that could reasonably be expected to result in the disability or incapacity of such person) that would limit or prevent any such person from serving in such capacity on a full-time basis in the foreseeable future, or of any intention on the part of any such person to limit or terminate his or her employment with the Company.
4.28. ERISA . The Company does not maintain or contribute to, or have any obligation under, any Pension Plan. The Company is in compliance in all material respects with the presently applicable provisions of ERISA and the United States Internal Revenue Code of 1986, as amended, except for matters that, individually or in the aggregate, have not had, and would not reasonably be expected to have, a Material Adverse Effect.
4.29. Form S-3 . The Company is eligible to register the Registrable Securities for resale by the Investors on a registration statement on Form S-3 under the 1933 Act. To the Company’s Knowledge, there exist no facts or circumstances (including, without limitation, any required approvals or waivers of any circumstances that may delay or prevent the obtaining of accountant’s consents) that could reasonably be expected to prohibit or delay the preparation, filing or effectiveness of such registration statement.
4.30. Fees . Except as reflected in the Disclosure Schedule or as contemplated by Section 9.6 hereof, the Company is not obligated to pay any compensation or other fee, cost or related expenditure to any underwriter, broker, agent or other representative in connection with the transactions contemplated by this Agreement. The Company will indemnify and hold harmless the Investors from and against any claim against the Investors by any Person alleging that, as a result of any agreement or arrangement between such Person and the Company, the Investors is obligated to pay any such compensation fee, cost or related expenditure in connection with the transactions contemplated hereby or the other Transaction Documents.
4.31. Insurance . The Company maintains insurance in such amounts and covering such losses and risks as the Company believes to be reasonably prudent in relation to the businesses in which the Company is engaged. No notice of cancellation has been received for any of such policies and the Company is in compliance with all of the terms and conditions thereof. The Company has no reason to believe that it will not be able to renew any existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue doing business as currently conducted without a significant increase in cost, other than normal increases in the industry. Without limiting the generality of the foregoing, the Company maintains directors and officers insurance in an amount deemed to be reasonable and appropriate by the Company’s board of directors.
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4.32. Transfer Taxes . No stock transfer or other taxes (other than income taxes) are required to be paid in connection with the issuance and sale of any of the Securities.
4.33. Off Balance Sheet Arrangements . There is no transaction, arrangement or other relationship between the Company or any of its Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its 1934 Act filings and is not so disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.
4.34. Embargoed Person . None of the funds or other assets of the Company shall constitute property of, or shall be beneficially owned, directly or indirectly, by any person subject to trade restrictions under United States law, including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq. , The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq. , and any Executive Orders or regulations promulgated under any such United States laws (each, an “ Embargoed Person ”), with the result that the investments evidenced by the Securities are or would be in violation of law. No Embargoed Person shall have any interest of any nature whatsoever in the Company with the result that the investments evidenced by the Securities are or would be in violation of law. None of the funds or other assets of the Company shall be derived from any unlawful activity with the result that the investments evidenced by the Securities are or would be in violation of law.
4.35. Solvency . After giving effect to the transactions contemplated by this Agreement, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing indebtedness as such indebtedness matures or is otherwise payable, and (ii) the current cash flow of the Company, together with the proceeds the Company would receive upon liquidation of its assets, after taking into account all anticipated uses of such amounts, would be sufficient to pay all indebtedness when such indebtedness is required to be paid. The Company has no knowledge of any facts or circumstances which lead it to believe that it will be required to file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction, and has no present intention to so file.
4.36. Customers . The relationships of the Company with its customers are maintained on commercially reasonable terms. To the Company’s Knowledge, no customer of the Company has any plan or intention to terminate its agreement with the Company, which termination would reasonably be expected to have a Material Adverse Effect.
4.37. Acknowledgement of Dilution . The Company acknowledges that the issuance of the Conversion Shares upon conversion of the Preferred Shares and issuance of Warrant Shares upon exercise of the Warrants may result in dilution of the outstanding shares of Common Stock. The Company further acknowledges that its obligation to issue Conversion Shares and Warrant Shares in accordance with the terms of the Certificate of Designation and Warrants, respectively, is unconditional regardless of the effect of any such dilution.
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4.38. Full Disclosure . The representations, warranties and written statements contained in this Agreement and the other Transaction Documents and in the certificates, exhibits and schedules delivered to such Investors by the Company pursuant to this Agreement and the other Transaction Documents and in connection with such Investor’s due diligence investigation of the Company, do not contain any untrue statement of a material fact, and do not omit to state a material fact required to be stated therein or necessary in order to make such representations, warranties or statements not misleading in light of the circumstances under which they were made. Neither the Company nor any Person acting on its behalf or at its direction has provided such Investor with material non-public information. The Company acknowledges that such Investor is relying on the representations, acknowledgments and agreements made by the Company in this Section and elsewhere in this Agreement in making trading and other decisions concerning the Company’s securities.
4.39. Application of Takeover Protections . The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s charter or the laws of its state of incorporation that is or could become applicable to the Investors as a result of the Investors and the Company fulfilling their respective obligations or exercising their respective rights under the Transaction Documents (as applicable), including, without limitation, as a result of the Company’s issuance of the Securities and the Investors’ ownership of the Securities.
4.40. Acknowledgement Regarding Investors’ Acquisition of Securities . The Company acknowledges and agrees that the Investors are acting solely in the capacity of an arm’s length purchaser with respect to this Agreement and the transactions contemplated by the Transaction Documents. The Company further acknowledges that the Investors are not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated by the Transaction Documents, and any advice given by the Investors or any of its representatives or agents in connection therewith is merely incidental to the Investors’ acquisition of the Securities. The Company further represents to the Investors that the Company’s decision to enter into the Transaction Documents to which it is a party has been based solely on the independent evaluation of the transactions contemplated thereby by the Company and its representatives. The Company acknowledges and agrees that the Investors have not made and does not make any representations or warranties with respect to the transactions contemplated by the Transaction Documents other than those specifically set forth in Section 5 of this Agreement.
5. Representations and Warranties of the Investors . Each Investor hereby represents and warrants to the Company that:
5.1. Organization and Existence . Such Investor is a validly existing corporation, limited partnership or limited liability company and has all requisite corporate, partnership or limited liability company power and authority to invest in the Securities pursuant to this Agreement.
5.2. Authorization . The execution, delivery and performance by such Investor of the Transaction Documents to which such Investor is a party have been duly authorized and each constitutes, or upon execution and delivery thereof by such Investor will constitute, the valid and legally binding obligation of such Investor, enforceable against such Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally.
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5.3. Purchase Entirely for Own Account . The Securities to be received by such Investor hereunder will be acquired for such Investor’s own account, not as nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the 1933 Act, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the 1933 Act without prejudice, however, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws . Nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time. Such Investor is not a broker-dealer registered with the SEC under the 1934 Act or an entity engaged in a business that would require it to be so registered.
5.4. Investment Experience . Such Investor acknowledges that it can bear the economic risk and complete loss of its investment in the Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby.
5.5. Disclosure of Information . Such Investor has had an opportunity to receive all information related to the Company requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Securities. Such Investor acknowledges receipt of copies of the SEC Filings. Neither such inquiries nor any other due diligence investigation conducted by such Investor shall modify, limit or otherwise affect such Investor’s right to rely on the Company’s representations and warranties contained in this Agreement.
5.6. Restricted Securities . Such Investor understands that the Securities are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the 1933 Act only in certain limited circumstances.
5.7. Legends . It is understood that certificates evidencing the Securities may bear the following or any similar legend (and if Securities are issued in uncertificated form, the Company may impose comparable restrictions on such uncertificated securities):
(a) “The securities represented hereby have 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, and, accordingly, may not be transferred, unless (i) such securities have been registered for sale pursuant to the Securities Act of 1933, as amended, or (ii) such securities may be sold pursuant to Rule 144 or other applicable exemption from applicable securities laws. The issuer may require an opinion of counsel to the holder of these securities, in form and substance reasonably satisfactory to the issuer, that such transfer may lawfully be made without registration under the Securities Act of 1933, as amended.”
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(b) If required by the authorities of any state in connection with the issuance of sale of the Securities, the legend required by such state authority.
5.8. Accredited Investor . Such Investor is an accredited investor as defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
5.9. Brokers and Finders . No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company, any Subsidiary or an Investor for any commission or fee pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Investor.
6. Conditions to Closing .
6.1. Conditions to the Investors’ Obligations . Each Investor’s obligation to purchase the Shares and the Warrants at the Closing is subject to the fulfillment to such Investor’s satisfaction, on or prior to the Closing Date, of the following conditions, any of which may be waived by the Investor:
(a) The representations and warranties made by the Company in Section 4 hereof qualified as to materiality shall be true and correct at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date, and, the representations and warranties made by the Company in Section 4 hereof not qualified as to materiality shall be true and correct in all material respects at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date. The Company shall have performed in all material respects all obligations and covenants herein required to be performed by it on or prior to the Closing Date.
(b) The Company shall have obtained any and all material consents, permits, approvals, registrations and waivers that are necessary for consummation of the purchase and sale of the Securities and the consummation of the other transactions contemplated by the Transaction Documents, all of which shall be in full force and effect.
(c) The Company shall have executed and delivered the Registration Rights Agreement.
(d) The Certificate of Designation shall have been filed with the Delaware Secretary of State, and delivered to such Investor written evidence of the acceptance of such filing.
(e) The Company shall have delivered to such Investor duly executed Warrants and certificates representing the Preferred Shares being purchased by such Investor at the Closing.
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(f) No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby or in the other Transaction Documents.
(g) The Company shall have delivered to such Investor a Certificate, executed on behalf of the Company by its Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in subsections (a) and (b) of this Section 6.1.
(h) The Company shall have delivered to such Investor a Certificate, executed on behalf of the Company by its Secretary, dated as of the Closing Date, certifying the resolutions adopted by the Board of Directors of the Company approving the transactions contemplated by this Agreement and the other Transaction Documents and the issuance of the Securities, certifying the current versions of the Restated Certificate of Incorporation and Bylaws of the Company and certifying as to the signatures and authority of persons signing the Transaction Documents and related documents on behalf of the Company.
(i) The Investor shall have received an opinion from Weintraub Tobin Chediak Coleman Grodin Law Corporation, the Company’s counsel, dated as of the Closing Date, in form and substance reasonably acceptable to the Required Investors and addressing such legal matters as the Required Investors may reasonably request.
(j) No stop order or suspension of trading shall have been imposed by the SEC or any other governmental or regulatory body with respect to public trading in the Common Stock.
(k) The Company shall have authorized and reserved for issuance the aggregate number of shares of Common Stock issuable upon the exercise of Warrants to be issued at the Closing.
(l) There shall be no injunction, restraining order or decree of any nature of any court or governmental authority of competent jurisdiction that is in effect that restrains or prohibits the consummation of the transaction contemplated hereby and by the other Transaction Documents.
(m) There shall not have occurred any material adverse change in the Company’s consolidated business or financial condition since the date of the Company’s most recent SEC Filing.
(n) The Common Stock shall be listed on the NASDAQ CM.
6.2. Conditions to Obligations of the Company . The Company’s obligation to sell and issue the Shares and the Warrants at the Closing is subject to the fulfillment to the satisfaction of the Company on or prior to the Closing Date of the following conditions, any of which may be waived by the Company:
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(a) The representations and warranties made by the Investors in Section 5 hereof shall be true and correct in all material respects when made, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date. The Investors shall have performed in all material respects all obligations and covenants herein required to be performed by it on or prior to the Closing Date.
(b) The Investors shall have executed and delivered the Registration Rights Agreement.
(c) The Investors shall have paid in full the purchase price for the Units purchased by the Investors hereunder.
6.3. Termination of Obligations to Effect Closing; Effects .
(a) The obligations of the Company, on the one hand, and the Investors, on the other hand, to effect the Closing shall terminate as follows:
(i) Upon the mutual written consent of the Company and the Investors;
(ii) By the Company if any of the conditions set forth in Section 6.2 shall have become incapable of fulfillment, and shall not have been waived by the Company;
(iii) By the Investors if any of the conditions set forth in Section 6.1 shall have become incapable of fulfillment, and shall not have been waived by the Investors; or
(iv) By either the Company or the Investors if the Closing has not occurred on or prior to January 31, 2016;
provided, however, that, except in the case of clause (i) above, the party seeking to terminate its obligation to effect the Closing shall not then be in breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the other Transaction Documents if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate its obligation to effect the Closing.
(b) Nothing in this Section 6.3 shall be deemed to release any party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents.
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7. Covenants and Agreements of the Company .
7.1. Reservation of Common Stock . The Company shall, on the Closing Date and at all times thereafter, reserve and keep available out of its authorized, but unissued shares of Common Stock, solely for the purpose of providing for the conversion of the Shares and exercise of the Warrants, such number of shares of Common Stock and Preferred Stock as shall from time to time equal the number of shares sufficient to permit the conversion of the Shares and the exercise of the Warrants issued pursuant to this Agreement in accordance with their respective terms (the “ Reserved Amount ”). While the Warrants are outstanding, the Company shall not reduce the Reserved Amount without obtaining prior written consent of the Investors.
7.2. No Conflicting Agreements . The Company will not take any action, enter into any agreement or make any commitment that would conflict or interfere in any material respect with the Company’s obligations to the Investors under the Transaction Documents.
7.3. Removal of Legends . The Company shall, no later than three Trading Days following the delivery by an Investor to the Company or the Company’s transfer agent (with notice to the Company) of (i) a notice that any of the Securities held by an Investor have been or will be sold pursuant to a registration statement or Rule 144 under the 1933 Act or are eligible for sale without restriction under Rule 144 or that such legend is not otherwise required, (ii) in the case of a Rule 144 transaction, a representation by such Investor and such Investor’s broker, as applicable, that the requirements of Rule 144, as applicable and if required, have been satisfied, and (iii) a legended certificate representing such Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), as directed by the Investor, either: (A) issue and deliver (or cause to be issued and delivered) to the Investor a certificate representing such Securities that is free from all restrictive and other legends; or (B) cause the Company’s transfer agent to credit the Investor’s or its designee’s account at DTC through its Deposit/Withdrawal at Custodian (DWAC) system with a number of shares of Common Stock equal to the number of Securities represented by the certificate so delivered by the Investor (the date by which such certificate is required to be delivered to the Investor or such credit is so required to be made to the account of the Investor or its designee at DTC pursuant to the foregoing is referred to herein as the “ Required Delivery Date ”). If the Company fails on or prior to the Required Delivery Date to either (i) issue and deliver (or cause to be issued and delivered) to the Investor a certificate representing the Securities that is free from all restrictive and other legends, or (ii) cause the Company’s transfer agent to credit the balance account of the Investor or its designee at DTC through its Deposit/Withdrawal at Custodian (DWAC) system with a number of shares of Common Stock equal to the number of Securities represented by the certificate delivered by the Investor pursuant hereto, then, in addition to all other remedies available to the Investor, the Company shall pay in cash to the Investor on each day after the Required Delivery Date that the issuance or credit of such shares is not timely effected an amount equal to 1.0% (increasing to 2.0% if shares are not delivered following the tenth (10) Trading Day) of the product of (A) the sum of the number of Securities not issued to the Investor on a timely basis and to which the Investor is entitled, and (B) the VWAP for the five (5) Trading Day period immediately preceding the Required Delivery Date). In addition to the foregoing, if the Company fails to so properly deliver such unlegended certificates or so properly credit the account of the Investor or its designee at DTC by the Required Delivery Date, and if on or after the Required Delivery Date the Investor purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Investor of shares of Common Stock that the Investor anticipated receiving from the Company without any restrictive legend, then the Company shall, within three Trading Days after the Investor’s request, pay cash to the Investor in an amount equal to the Investor’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased, at which point the Company’s obligation to deliver a certificate or credit such Investor’s or its designee’s account at DTC for such shares of Common Stock shall terminate and such shares shall be cancelled.
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7.4. Equal Treatment of Investors . No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement or any of the other Transaction Documents, unless the same consideration is also offered to all of the parties thereto. For clarification purposes, this provision constitutes a separate right granted to the Investors by the Company and negotiated separately by the Investors, and is intended for the Company to treat the Investors as a class and shall not in any way be construed as such Persons acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.
7.5. Non-Public Information . Upon delivery by the Company to an Investor after the Closing Date of any notice or information, in writing, electronically or otherwise, and while Securities are held by such Investor, unless the Company has in good faith determined that the matters relating to such notice or information do not constitute material, nonpublic information relating to the Company or, unless such information is delivered to such Investor pursuant to a nondisclosure agreement between the Company and such Investor whereby such Investor has agreed to maintain material nonpublic information in confidence, the Company shall within four (4) days after any such delivery publicly disclose such material, nonpublic information on a Report on Form 8-K. In the event that the Company believes that a notice or communication to an Investor contains material, nonpublic information relating to the Company, the Company shall so indicate to the Investor prior to delivery of such notice or information. In the absence of any such Company indication, the Investor shall be allowed to presume that all matters relating to such notice and information do not constitute material, nonpublic information relating to the Company. The Investor shall have five (5) days to notify the Company that Investor elects not to receive such information. In the case that Investor elects not to receive such information, the Company will not deliver such information to such Investor; provided that such failure to provide such information will not be deemed to be a default by the Company under the Transaction Documents. If the Investor does not make such an election, then the Investor agrees to maintain any material nonpublic information so disclosed by the Company in confidence.
7.6. Conduct of Business . For so long as the Warrants remain outstanding, the Company agrees that it will (i) maintain its corporate existence in good standing, (ii) comply in all material respects with all laws, rules, ordinances and regulations of all governmental authorities, (iii) maintain, keep and preserve all of its properties necessary in the proper conduct of its businesses in good repair, working order and condition (ordinary wear and tear excepted) and make all necessary repairs, renewals and replacements and improvements thereto, except where the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (iv) pay or discharge before becoming delinquent (a) all taxes, levies, assessments and governmental charges imposed on it or its income or profits or any of its property, and (b) all lawful claims for labor, material and supplies, which, if unpaid, might become a lien upon any of its property, except in each of the above instances where the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and (v) timely file with the SEC all reports required to be filed pursuant to the 1934 Act and refrain from terminating its status as an issuer required by the 1934 Act to file reports thereunder even if the 1934 Act or the rules or regulations thereunder would permit such termination.
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7.7. Use of Proceeds . The Company shall use the proceeds from the sale of the Securities as set forth in Section 4. 8; provided , however , that the Company shall not use such proceeds (i) to pay any dividend or make any distribution on any such securities, or (ii) to repay any loan made to or incurred by any Key Employee or Affiliate of the Company.
7.8. Listing . The Company (i) has, or promptly following the Closing shall, use its best efforts to include all of the Conversion Shares issuable upon conversion of the Preferred Shares and all of the Warrant Shares issuable upon exercise of the Warrants (without regard to any limitation on such conversion or exercise) for listing on the NASDAQ CM, and (ii) shall use its best efforts to maintain the designation and quotation, or listing, of the Common Stock on the NASDAQ CM following the Closing Date.
8. Survival, Indemnification and Remedies .
8.1. Survival . The representations, warranties, covenants, indemnities and agreements contained in this Agreement, in the Certificate of Designation and in the other Transaction Documents shall survive the Closing of the transactions contemplated by this Agreement.
8.2. Indemnification . In consideration of an Investor’s execution and delivery of this Agreement and acquiring the Securities hereunder and in addition to all of the Company’s other obligations under the Transaction Documents to which it is a party, subject to the provisions of this Section 8.2, the Company shall indemnify and hold harmless each Investor, each of its directors, officers, shareholders, members, partners, employees, representatives, agents and advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title), each Person, if any, who controls the Investor (within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act), and the respective directors, officers, shareholders, members, partners, employees, representatives, agents and advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding the lack of such title or any other title) of such controlling Persons (each, an “ Investor Party ”), from and against all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses (including all judgments, amounts paid in settlement, court costs, reasonable attorneys’ fees and costs of defense and investigation) (collectively, “ Damages ”) that any Investor Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents to which it is a party, or (b) any action, suit, claim or proceeding (including for these purposes a derivative action brought on behalf of the Company) instituted against such Investor Party arising out of or resulting from the execution, delivery, performance or enforcement of the Transaction Documents, other than claims for indemnification within the scope of Section 6 of the Registration Rights Agreement; provided , however , that (x) the foregoing indemnity shall not apply to any Damages to the extent, but only to the extent, that such Damages resulted directly and primarily from a breach of any of the Investor’s representations, warranties, covenants or agreements contained in this Agreement or the Registration Rights Agreement, and (y) the Company shall not be liable under this Section 8.2 to the extent, but only to the extent, that a court of competent jurisdiction shall have determined by a final judgment (from which no further appeals are available) that such Damages resulted directly and primarily from any acts or failures to act, undertaken or omitted to be taken by such Investor Party through its fraud, bad faith, gross negligence, or willful or reckless misconduct.
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An Investor Party’s right to indemnification or other remedies based upon the representations, warranties, covenants and agreements of the Company set forth in the Transaction Documents shall not in any way be affected by any investigation or knowledge of such Investor Party. Such representations, warranties, covenants and agreements shall not be affected or deemed waived by reason of the fact that an Investor Party knew or should have known that any representation or warranty might be inaccurate or that the Company failed to comply with any agreement or covenant. Any investigation by such Investor Party shall be for its own protection only and shall not affect or impair any right or remedy hereunder.
To the extent that the foregoing undertakings by the Company set forth in this Section 8.2 may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Damages which is permissible under applicable law.
8.3. Conduct of Indemnification Proceedings . Any person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification, and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person, unless (a) the indemnifying party has agreed to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person, or (c) in the reasonable judgment of any such person, a conflict of interest may exist between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person), or (d) if such Claim seeks any equitable relief or alleges any legal, regulatory or ethical violations by such person; and provided , further , that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation. It is understood and agreed that the indemnifying party shall not, in connection with any Claim in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such Investor Indemnified Persons. No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that (i) does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation, or (ii) that includes the granting of any equitable relief or the admission by the indemnified party of its officers, directors, managers, partners or Affiliates of any legal, regulatory or ethical violations.
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8.4. Remedies . Investors shall have all rights and remedies set forth in the Transaction Documents and all rights and remedies which Investors have been granted at any time under any other agreement or contract and all of the rights which Investors has under any law. The Company recognizes that in the event that it fails to perform, observe or discharge any or all of its obligations under the Transaction Documents, any remedy at law may prove to be inadequate relief to the Investors. The Company therefore agrees that the Investors shall be entitled to seek specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security.
9. Miscellaneous .
9.1. Successors and Assigns . After the Closing, each Investor may assign its rights and obligations hereunder, in connection with any private sale or transfer of Preferred Shares or Warrants in accordance with the terms hereof, as long as, as a condition precedent to such transfer, the transferee executes an acknowledgment agreeing to be bound by the applicable provisions of this Agreement, in which case the term “Investor” shall be deemed to refer to such transferee as though such transferee were an original signatory hereto. The Company may not assign its rights or obligations under this Agreement without the prior written consent of the Investors. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
9.2. Independent Nature of Investors Obligations and Rights . The obligations of the Investors under the Transaction Documents are several and not joint, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document Nothing contained herein or in any other Transaction Document, and no action taken by an Investor pursuant hereto or thereto, shall be deemed to constitute the Investors as, and the Company acknowledges that the Investors do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Investors are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by the Transaction Documents or any matters, and the Company acknowledges that the Investors are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by the Transaction Documents. The decision of each of the Investors to purchase securities pursuant to the Transaction Documents has been made by such Investors independently of any other Investors.
9.3. Counterparts; Faxes . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed via facsimile, which shall be deemed an original.
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9.4. Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
9.5. Notices . Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given as hereinafter described: (i) if given by personal delivery, then such notice shall be deemed given upon such delivery; (ii) if given by telecopier, then such notice shall be deemed given one Business Day after transmission with written confirmation of successful transmittal; (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient, or (B) three (3) days after such notice is deposited in first class mail, postage prepaid; and (iv) if given by overnight air courier, then such notice shall be deemed given one Business Day after delivery to such carrier with written confirmation of successful delivery. All notices shall be addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten (10) days’ advance written notice to the other party:
If to the Company:
Adamis Pharmaceuticals
Corporation
11682 El Camino Real, Suite 300
San Diego, CA 92130
Attention: Dennis J. Carlo, Ph.D.
Fax: (866) 893-3622
With a copy to:
Weintraub Tobin Chediak Coleman
Grodin Law Corporation
400 Capitol Mall, 11th Floor
Sacramento, CA 95814
Attention: C. Kevin Kelso, Esq.
Fax: (916) 446-1611
If to the Investor:
to the address set forth on the signature page hereto.
With a copy to:
Ropes & Gray
LLP
Prudential Tower
800 Boylston Street
Boston, MA 02199
Attention: Joel F. Freedman, Esq.
Fax: (617) 235-0375
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9.6. Expenses . The parties hereto shall pay their own costs and expenses in connection herewith, except that the Company shall pay the reasonable fees and expenses of Ropes & Gray LLP, counsel to the Investors, in connection with the transactions contemplated by this Agreement and the other Transaction Documents (including review of the Registration Statement contemplated by the Registration Rights Agreement). An estimate of the fees and expenses of Ropes & Gray, LLP may be paid by check delivered or wire transfer to Ropes & Gray, LLP at the Closing by any Investor, the amount of such check or wire transfer being deducted from the aggregate amount to be delivered by such entity at the Closing for the Securities to be purchased by it hereunder. In the event that legal proceedings are commenced by any party to this Agreement against another party to this Agreement in connection with this Agreement or the other Transaction Documents, the party that does not prevail in such proceedings shall pay the reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses incurred by the prevailing party in such proceedings.
9.7. Amendments and Waivers . Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Required Investors. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any Securities purchased under this Agreement at the time outstanding, each future holder of all such Securities, and the Company.
9.8. Publicity . Except as set forth below, no initial public release or announcement concerning the transactions contemplated hereby shall be issued by the Company or an Investor without the prior consent of the Company (in the case of a release or announcement by the Investor) or the Required Investors (in the case of a release or announcement by the Company) (which consents shall not be unreasonably withheld), except as such release or announcement may be required by law or the applicable rules or regulations of any securities exchange or securities market, in which case the Company or an Investor, as the case may be, shall allow the Required Investors or the Company, as applicable, to the extent reasonably practicable in the circumstances, reasonable time to comment on such release or announcement in advance of such issuance. No later than the fourth trading day following the execution and delivery of this Agreement, the Company will file a Current Report on Form 8-K describing the transactions contemplated by this Agreement.
9.9. Severability . Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.
9.10. Entire Agreement . This Agreement, including the Exhibits and the Schedules, and the other Transaction Documents constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.
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9.11. Further Assurances . The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.
9.12. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial . This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to the choice of law principles thereof. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the federal and state courts located in New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto by the same methods as are specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Purchase Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.
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ADAMIS PHARMACEUTICALS CORPORATION | ||
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/s/ Dennis J. Carlo
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Name: | Dennis J. Carlo, Ph.D. | |
Title: | Chief Executive Officer |
[Investor Signature Page Follows]
Investor Signature Page
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Adamis Pharmaceutical Corporation 8-K
Exhibit 10.2
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (the “ Agreement ”) is dated as of January 26, 2016 (the “ Agreement Date ”) and is entered into by and among Adamis Pharmaceuticals Corporation, a Delaware corporation (the “ Company ”), and the “ Investors ” named in that certain Purchase Agreement dated August 19, 2014 by and between the company and each of the Investors (the “ 2014 Purchase Agreement ”) and that certain Purchase Agreement dated the date hereof and entered into by and between the Company and each of the Investors (the “ 2016 Purchase Agreement ” and collectively with the 2014 Purchase Agreement, “ Purchase Agreement ”). Capitalized terms used herein have the respective meanings ascribed thereto in the Purchase Agreement, unless otherwise defined herein.
WHEREAS, as of the date hereof, the Investors own Registrable Securities of the Company;
WHEREAS, the parties desire to set forth certain registration rights applicable to the Registrable Securities;
WHEREAS, Section 7 of the Existing Registration Rights Agreement (as defined below) provides that any term thereof may be amended with the written consent of the Company and the Required Investors (each as defined in the Existing Registration Rights Agreement);
WHEREAS, the undersigned Investors constitute the Required Investors; and
WHEREAS, this Agreement amends, restates, replaces and supersedes in its entirety that certain Registration Rights Agreement, dated as of August 19, 2014, by and among the Investors and the Company (the “ Existing Registration Rights Agreement ”).
NOW, THEREFORE, in consideration of the foregoing and the mutual promises, covenants and agreements of the parties hereto, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto amend and restate the Existing Registration Rights Agreement and agree as follows:
1. Certain Definitions .
As used in this Agreement, the following terms shall have the following meanings:
“ Investors ” means the Investors identified in the Purchase Agreement and any Affiliate or permitted transferee of any Investor who is a subsequent holder of any Registrable Securities.
“ Prospectus ” means (i) the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus, and (ii) any “free writing prospectus” as defined in Rule 405 under the 1933 Act.
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“ Register ,” “ registered ” and “ registration ” refer to a registration made by preparing and filing a Registration Statement or similar document in compliance with the 1933 Act (as defined below), and the declaration or ordering of effectiveness of such Registration Statement or document.
“ Registrable Securities ” means, collectively, the (i) the Shares, (ii) the Warrant Shares, and (iii) any other securities issued or issuable with respect to or in exchange for Registrable Securities, whether by merger, charter amendment or otherwise; provided, that, a security shall cease to be a Registrable Security upon (A) sale to the public pursuant to a Registration Statement or Rule 144 under the 1933 Act, or (B) such security becoming eligible for sale without volume restrictions by the applicable Investor pursuant to Rule 144 (and, with respect to Warrant Shares, giving effect to and assuming a net exercise of the Warrant by the Investor).
“ Registration Deadline ” means the sixtieth (60 th ) calendar day following the Initial Filing Deadline.
“ Registration Statement ” means any registration statement of the Company filed under the 1933 Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement.
“ Required Investors ” means the Investors beneficially owning a majority of the Registrable Securities (without taking into account any limitations on conversion or exercise).
“ SEC ” or the “ Commission ” means the U.S. Securities and Exchange Commission.
“ Shares ” means the shares of Common Stock that are issued or issuable upon conversion of the shares of the Company’s Series A-1 Convertible Preferred Stock (“ Preferred Stock ”) that were issued pursuant to the Purchase Agreement (without taking into account any limitations on conversion).
“ Warrants ” means the Common Stock purchase warrants issued to the Investors pursuant to the Purchase Agreement.
“ Warrant Shares ” means the shares of Common Stock issued or issuable upon exercise of the Warrants (without taking into account any limitations on conversion) and shares of Common Stock issuable on the conversion of Preferred Stock issued or issuable on exercise of the Warrants.
“ 1934 Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
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2. Registration .
(a) Registration Statements .
(i) Filing of Registration Statement . As soon as reasonably practicable following the Agreement Date , but no later than March 31, 2016 (the “ Initial Filing Deadline ”), the Company shall prepare and file with the SEC one Registration Statement on Form S-3 (or, if Form S-3 is not then available to the Company, on such form of registration statement as is then available to effect a registration for resale of the Registrable Securities), covering the resale of all of the Registrable Securities, and shall use its best efforts to cause such Registration Statement to be declared effective as promptly as reasonably practicable thereafter. Subject to any SEC comments, such Registration Statement shall include the plan of distribution attached hereto as Exhibit A (or such other plan reasonably requested by the Required Investors). Such Registration Statement also shall cover, to the extent allowable under the 1933 Act and the rules promulgated thereunder (including Rule 416), such indeterminate number of additional shares of Common Stock as may become issuable due to an increase in the number of Shares or Warrant Shares resulting from changes in the conversion rate of the Preferred Stock, or the number of shares issuable upon exercise of the Warrants. Such Registration Statement may include any shares of Common Stock or other securities for the account of any other holder with registration rights pursuant to written agreements entered into with the Company before the date of this Agreement (or such shares may be registered on separate registration statements filed before or after the Registration Statement is filed), but shall not include any other shares of Common Stock or other securities without the prior written consent of the Required Investors. Except as contemplated by the preceding sentence or pursuant to registration statements filed and declared effective by the SEC before the Agreement Date, the Company shall not register additional shares of Common Stock until the Registration Statement is declared effective or, if earlier, until the Registrable Securities no longer constitute Registrable Securities. The Registration Statement (and each amendment or supplement thereto, and each request for acceleration of effectiveness thereof) shall be provided in accordance with Section 3(c) to the Investors and their counsel prior to its filing or other submission. If a Registration Statement covering the Registrable Securities as provided above is not filed with the SEC on or prior to the Initial Filing Deadline the Company will make pro rata payments to each Investor, as liquidated damages and not as a penalty, in an amount equal to one percent (1.0%) of the aggregate purchase price of the Warrants and Preferred Stock purchased by such Investor pursuant to the Purchase Agreement for each 30-day period or pro rata for any portion thereof following the Initial Filing Deadline for which no Registration Statement is filed with respect to the Registrable Securities, until such time as the Registrable Securities (giving effect to and assuming a net exercise of the Warrant by the Investor) may be sold without volume limitations pursuant to Rule 144. Any such payment shall be in addition to any other remedies available to the Investor at law or in equity, whether pursuant to the terms hereof, the Purchase Agreement, the Certificate of Designation, or otherwise. Such payments shall be made to each Investor in cash no later than three (3) Business Days after the end of each 30-day period.
(b) Expenses . The Company will pay all expenses associated with effecting the registration of the Registrable Securities, including filing and printing fees, the Company’s counsel and accounting fees and expenses, costs associated with clearing the Registrable Securities for sale under applicable state securities laws, listing fees, and reasonable fees and expenses of one counsel to the Investors, but excluding discounts, commissions, fees of underwriters, selling brokers, dealer managers or similar securities industry professionals with respect to the Registrable Securities being sold.
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(c) Effectiveness .
(i) The Company shall use best efforts to have the Registration Statement declared effective as soon as reasonably practicable after filing, but in no event later than the Registration Deadline. The Company shall respond promptly to any and all comments made by the staff of the Commission on the Registration Statement, and shall submit to the Commission, with two (2) Business Days after the Company learns that no review of the Registration Statement will be made by the staff of the Commission or that the staff of the Commission has no further comments on the Registration Statement, as the case may be, a request for acceleration of the effectiveness of the Registration Statement to a time and date not later than two (2) Business Days after the submission of such request. The Company shall notify the Investors by facsimile or e-mail as promptly as reasonably practicable, and in any event, within twenty-four (24) hours, after the Registration Statement is declared effective and shall simultaneously provide or make available to the Investors copies of any related Prospectus to be used in connection with the sale or other disposition of the securities covered thereby. If, subject to Section 2(d) hereof, (A) a Registration Statement covering the Registrable Securities is not declared effective by the SEC prior to the earlier of (i) five (5) Business Days after the SEC shall have informed the Company that no review of the Registration Statement will be made or that the SEC has no further comments on the Registration Statement, or (ii) the 60 th day after the Initial Filing Deadline (the 90 th day if the SEC reviews the Registration Statement), or (B) after the Registration Statement has been declared effective by the SEC, sales cannot be made pursuant to such Registration Statement for any reason (including, without limitation, by reason of a stop order, or the Company’s failure to update the Registration Statement), but excluding the inability of any Investor to sell the Registrable Securities covered thereby solely due to market conditions, then the Company will make pro rata payments to each Investor, as liquidated damages and not as a penalty, in an amount equal to 1.0% of the aggregate amount invested by such Investor for each 30-day period or pro rata for any portion thereof following the date by which such Registration Statement should have been effective (the “ Blackout Period ”), until such time as the Registrable Securities (giving effect to and assuming a net exercise of the Warrant by the Investor) may be sold without volume limitations pursuant to Rule 144. Any such payment shall be in addition to any other remedies available to the Investor at law or in equity, whether pursuant to the terms hereof, the Purchase Agreement, the Certificate of Designation, or otherwise. The amounts payable as liquidated damages pursuant to this paragraph shall be paid monthly within three (3) Business Days of the last day of each month following the commencement of the Blackout Period until the termination of the Blackout Period. Such payments shall be made to each Investor in cash.
(ii) For not more than sixty (60) days (which need not be consecutive days) in any twelve (12) month period, the Company may suspend the use of any Prospectus included in any Registration Statement contemplated by this Section in the event that the Company determines in good faith that such suspension is necessary to (A) delay the disclosure of material non-public information concerning the Company, the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company, or (B) amend or supplement the affected Registration Statement or the related Prospectus so that such Registration Statement or Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus in light of the circumstances under which they were made, not misleading (an “ Allowed Delay ”); provided, that the Company shall promptly (a) notify each Investor in writing of the commencement of an Allowed Delay, but shall not (without the prior written consent of an Investor) disclose to such Investor any material non-public information giving rise to an Allowed Delay, (b) advise the Investors in writing to cease all sales under the Registration Statement until the end of the Allowed Delay and (c) use commercially reasonable efforts to terminate an Allowed Delay as promptly as practicable. Notwithstanding the provisions of this Section, if an Allowed Delay is not in connection with the review by the SEC of a Registration Statement or the financial statements contained therein, such Allowed Delay shall not be for a period exceeding twenty (20) consecutive days. Although an Allowed Delay would not be a breach of this Agreement, liquidated damages would accrue during such Allowed Delay pursuant to Section 2(c)(i).
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(d) Rule 415; Cutback . If at any time the SEC takes the position that the offering of some or all of the Registrable Securities in a Registration Statement is not eligible to be made on a delayed or continuous basis under the provisions of Rule 415 under the 1933 Act or requires any Investor to be named as an “underwriter,” the Company shall use its reasonable best efforts to persuade the SEC that the offering contemplated by the Registration Statement is a valid secondary offering and not an offering “by or on behalf of the issuer” as defined in Rule 415 and that none of the Investors is an “underwriter.” The Investors shall have the right to participate or have their counsel participate in any meetings or discussions with the SEC regarding the SEC’s position and to comment or have their counsel comment on any written submission made to the SEC with respect thereto. No such written submission shall be made to the SEC to which the Investors’ counsel reasonably objects. In the event that, despite the Company’s best efforts and compliance with the terms of this Section 2(d), the SEC refuses to alter its position, the Company shall (i) remove from the Registration Statement such portion of the Registrable Securities (the “ Cut Back Shares ”), and/or (ii) agree to such restrictions and limitations on the registration and resale of the Registrable Securities as the SEC may require to assure the Company’s compliance with the requirements of Rule 415 (collectively, the “ SEC Restrictions ”). Any cut-back imposed on the Investors pursuant to this Section 2(d) shall be allocated among the Investors on a pro rata basis and shall be applied first to any Warrant Shares covered by such Registration Statement, unless the SEC Restrictions otherwise require or provide or the Investors otherwise agree. Such required cut-back would not be considered a breach of this Agreement, unless continuing past the 60th day (or the 90th day if the SEC reviews the registration statement) after such date as the Company is permitted to effect the registration of such Cut Back Shares in accordance with any SEC Restrictions (such date, the “ Restriction Termination Date ” of such Cut Back Shares), provided that liquidating damages would accrue as a result as provided in Section 2(c)(i).
3. Company Obligations . The Company will use best efforts to effect the registration of the Registrable Securities in accordance with the terms hereof, and pursuant thereto the Company will, as expeditiously as possible:
(a) use best efforts to cause such Registration Statement to become effective and to remain continuously effective (other than during an Allowed Delay) for a period that will terminate upon the earlier of (i) the date on which all Registrable Securities covered by such Registration Statement as amended from time to time, have been sold, and (iii) the date on which all Registrable Securities covered by such Registration Statement may be sold without volume restriction pursuant to Rule 144 (giving effect to and assuming a net exercise of the Warrant by the Investor) (the “ Effectiveness Period ”) and advise the Investors in writing when the Effectiveness Period has expired;
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(b) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be necessary to keep the Registration Statement effective for the Effectiveness Period and to comply with the provisions of the 1933 Act and the 1934 Act with respect to the distribution of all of the Registrable Securities covered thereby;
(c) provide copies to and permit counsel designated by the Investors to review each Registration Statement and all amendments and supplements thereto no fewer than two (2) days prior to their filing with the SEC and not file any document to which such counsel reasonably objects, provided that the Company is notified of such objection, including the substance of such objection, in writing no later than three Business Days after such counsel has been so furnished copies of such documents;
(d) furnish or otherwise make available (including via EDGAR) to the Investors and their legal counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company (but not later than two (2) Business Days after the filing date, receipt date or sending date, as the case may be) one (1) copy of any Registration Statement and any amendment thereto, each preliminary prospectus and Prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the Company to the SEC or the staff of the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other than any portion of any thereof which contains information for which the Company has sought confidential treatment), and (ii) such number of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as each Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Investor that are covered by the related Registration Statement;
(e) use best efforts to (i) prevent the issuance of any stop order or other suspension of effectiveness, and (ii) if such order is issued, obtain the withdrawal of any such order at the earliest possible moment and to notify the Investors of the issuance of such order and the resolution thereof;
(f) use best efforts to register or qualify (unless an exemption from the registration or qualification exists) or cooperate with the Investors and their counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such domestic jurisdictions as are reasonably requested by the Investors and do any and all other commercially reasonable acts or things necessary or advisable to enable the distribution in such jurisdictions of the Registrable Securities covered by the Registration Statement ; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (i) qualify to do business in any jurisdiction where it would not otherwise be required to qualify, but for this Section 3(f), (ii) subject itself to general taxation in any jurisdiction where it would not otherwise be so subject, but for this Section 3(f), or (iii) file a general consent to service of process in any such jurisdiction;
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(g) use best efforts to cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange, interdealer quotation system or other market on which similar securities issued by the Company are then listed;
(h) immediately notify the Investors, at any time prior to the end of the Effectiveness Period, upon discovery that, or upon the happening of any event as a result of which, the Prospectus includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and, subject to Section 2(c)(ii) hereof promptly prepare, file with the SEC and furnish to such holder a supplement to or an amendment of such Prospectus as may be necessary so that such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;
(i) otherwise use best efforts to comply with all applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act, including, without limitation, Rule 172 under the 1933 Act, file any final Prospectus, including any supplement or amendment thereof, with the SEC pursuant to Rule 424 under the 1933 Act, promptly inform the Investors in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Investors are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder; and
(j) with a view to making available to the Investors the benefits of Rule 144 (or its successor rule) and any other rule or regulation of the SEC that may at any time permit the Investors to sell shares of Common Stock to the public without registration, the Company covenants and agrees to: (i) make and keep public information available, as those terms are understood and defined in Rule 144, until the earlier of (A) such date as all of the Registrable Securities may be sold without restriction by the holders thereof pursuant to Rule 144 or any other rule of similar effect, or (B) such date as all of the Registrable Securities shall have been resold; (ii) file with the SEC in a timely manner all reports and other documents required of the Company under the 1934 Act; and (iii) furnish to each Investor upon request (including via EDGAR), as long as such Investor owns any Registrable Securities, (A) a written statement by the Company that it has complied with the reporting requirements of the 1934 Act, (B) a copy (or a link to a website containing the same) of the Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other information as may be reasonably requested in order to avail such Investor of any rule or regulation of the SEC that permits the selling of any such Registrable Securities without registration under Rule 144.
4. Due Diligence Review; Information . The Company shall make available, during normal business hours, for inspection and review by the Investors, advisors to and representatives of the Investors (who may or may not be affiliated with the Investors and who are reasonably acceptable to the Company), all SEC Filings (as defined in the Purchase Agreement) and other filings with the SEC, and all other corporate documents and properties of the Company as may be reasonably necessary for the purpose of such review, for the sole purpose of enabling the Investors and such representatives, advisors and underwriters and their respective accountants and attorneys to conduct initial and ongoing due diligence with respect to the accuracy of such Registration Statement.
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5. Obligations of the Investors .
(a) Each Investor shall furnish in writing to the Company such information regarding itself, the Registrable Securities and Company securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be required to effect the registration of such Registrable Securities, to respond to requests by the SEC, FINRA or any state securities commission or as may be required to be disclosed by applicable securities laws and shall execute such documents in connection with such registration as the Company may reasonably request. At least five (5) Business Days prior to the first anticipated filing date of any Registration Statement, the Company shall notify each Investor of the information the Company requires from such Investor if such Investor elects to have any of the Registrable Securities included in the Registration Statement.
(b) Each Investor agrees that, upon receipt of any notice from the Company of either (i) the commencement of an Allowed Delay pursuant to Section 2(c)(ii), or (ii) the happening of an event pursuant to Section 3(h) hereof, such Investor will use its commercially reasonable efforts to promptly discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until the Investor is advised by the Company that such dispositions may again be made. The Company may provide appropriate stop orders to enforce the provisions of this paragraph.
(c) The Company shall have no obligation to make liquidated damages payments under this Agreement to any Investor as a result of delays caused by its breach of these obligations.
6. Indemnification .
(a) Indemnification by the Company . To the extent permitted by law, the Company will indemnify and hold harmless each Investor and its officers, directors, members, employees and agents, successors and assigns, and each other person, if any, who controls, or is alleged to control, such Investor within the meaning of the 1933 Act, against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement or omission or alleged omission of any material fact contained in any Registration Statement, any preliminary Prospectus or final Prospectus, or any amendment or supplement thereof; (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Registrable Securities under the securities laws thereof (any such application, document or information herein called a “ Blue Sky Application ”); (iii) the omission or alleged omission to state in a Blue Sky Application a material fact required to be stated therein or necessary to make the statements therein not misleading; (iv) any violation by the Company or its agents of any rule or regulation promulgated under the 1933 Act applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration; or (v) any failure to register or qualify the Registrable Securities included in any such Registration Statement in any state where the Company or its agents has affirmatively undertaken or agreed in writing that the Company will undertake such registration or qualification on an Investor’s behalf pursuant to an Investor’s affirmative request under Section 3(f) hereof and will reimburse such Investor, and each such officer, director or member and each such controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided , however , that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such Investor or any such controlling person relating to such Investor in writing specifically for use in such Registration Statement or Prospectus.
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(b) Indemnification by the Investors . Each Investor who is named in such Registration Statement as a selling stockholder agrees, severally, but not jointly, to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees, stockholders and each person who controls the Company (within the meaning of the 1933 Act) against any losses, claims, damages, liabilities and expense (including reasonable attorney fees) resulting from (i) any untrue statement of a material fact or any omission of a material fact required to be stated in the Registration Statement or Prospectus or preliminary Prospectus or amendment or supplement thereto or necessary to make the statements therein not misleading, to the extent, but only to the extent that such untrue statement or omission is contained in any information furnished in writing by such Investor to the Company specifically for inclusion in such Registration Statement or Prospectus or amendment or supplement thereto, and (ii) the sale of Registrable Securities in violation of Section 5(c) hereof; provided, however, that the foregoing indemnity shall not apply to amounts paid in settlement of any loss, claim, damage, liability or expense if such settlement is effected without the consent of such Investor. In no event shall the liability of an Investor be greater in amount than the dollar amount of the net proceeds received by such Investor upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings . Any person entitled to indemnification hereunder shall (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification, and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person, unless (a) the indemnifying party has agreed to pay such fees or expenses, or (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person, or (c) in the reasonable judgment of any such person, based upon written advice of its counsel, a conflict of interest may exist between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); and provided , further , that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation. It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties. No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation.
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(d) Contribution . If for any reason the indemnification provided for in the preceding paragraphs (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless, other than as expressly specified therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the Company or by a holder of Registrable Securities. No person guilty of fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution from any person not guilty of such fraudulent misrepresentation. In no event shall the contribution obligation of a holder of Registrable Securities together with any indemnification obligations under Section 6(b) above be greater in amount than the dollar amount of the net received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.
(e) The obligations of the Company and each Investor under this Section 6 shall survive the conversion of the Preferred Stock and exercise of the Warrants in full, the completion of any offering or sale of Registrable Securities pursuant to a Registration Statement under this Agreement, or otherwise.
7. Miscellaneous .
(a) Amendments and Waivers . This Agreement may be amended only by a writing signed by the Company and the Required Investors. 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 shall have obtained the written consent to such amendment, action or omission to act, of the Required Investors.
(b) Notices . All notices and other communications provided for or permitted hereunder shall be made as set forth in Section 9.4 of the Purchase Agreement.
(c) Assignments and Transfers by Investors . The provisions of this Agreement shall be binding upon and inure to the benefit of the Investors and their respective successors and assigns. An Investor may transfer or assign, in whole or from time to time in part, to one or more persons its rights hereunder in connection with the transfer of Registrable Securities by such Investor to such person, provided that such Investor provides written notice of assignment to the Company promptly after such assignment is effected.
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(d) Assignments and Transfers by the Company . This Agreement may not be assigned by the Company (whether by operation of law or otherwise) without the prior written consent of the Required Investors, provided, however, that in the event that the Company is a party to a merger, consolidation, share exchange or similar business combination transaction, or a transaction involving the transfer or other disposition of all or substantially all of the Company’s assets to another corporation or entity, or similar transaction, the Company may assign its rights and delegate its duties hereunder to any surviving or successor corporation without the prior written consent of the Required Investors, after notice duly given by the Company to each Investor. In any such transaction in which the Common Stock is converted into the equity securities of another Person, from and after the effective time of such transaction, such Person shall, by virtue of such transaction, be deemed to have assumed the obligations of the Company hereunder, the term “ Company ” shall be deemed to refer to such Person and the term “ Registrable Securities ” shall be deemed to include the securities received by the Investors in connection with such transaction, unless such securities are otherwise freely tradable by the Investors after giving effect to such transaction.
(e) Benefits of the Agreement . The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
(f) Counterparts; Faxes . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed via facsimile, which shall be deemed an original.
(g) Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
(h) Severability . Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provisions hereof prohibited or unenforceable in any respect.
(i) Further Assurances . The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.
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(j) Entire Agreement . This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.
(k) Governing Law; Consent to Jurisdiction; Waiver of Jury Trial . This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the choice of law principles thereof. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the federal and state courts located in New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
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IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.
The Company: | ADAMIS PHARMACEUTICALS CORPORATION | |
By: | /s/ Dennis J. Carlo | |
Name: | Dennis J. Carlo | |
Title: | CEO |
[Investor Signature Page Immediately Follows]
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Counterpart Signature Page
FOR ENTITY INVESTORS : | FOR INDIVIDUAL INVESTORS : |
Signature: | |||
[Name of Entity] | Name: |
By: | |||
Name: | |||
Title: |
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EXHIBIT A
PLAN OF DISTRIBUTION
The selling stockholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling shares of common stock or interests in shares of common stock received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their shares of common stock or interests in shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.
The selling stockholders may use any one or more of the following methods when disposing of shares or interests therein:
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; | |
– | block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction; | |
– | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; | |
– | an exchange distribution in accordance with the rules of the applicable exchange; | |
– | privately negotiated transactions; | |
– | short sales effected after the date the registration statement of which this Prospectus is a part is declared effective by the SEC; | |
– | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; | |
– | broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share; | |
– | a combination of any such methods of sale; and | |
– | any other method permitted by applicable law. |
The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the 1933 Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
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In connection with the sale of our common stock or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling stockholders may also sell shares of our common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the selling stockholders from the sale of the common stock offered by them will be the purchase price of the common stock less discounts or commissions, if any. Each of the selling stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of common stock to be made directly or through agents. We will not receive any of the proceeds from this offering. Upon any exercise of the warrants by payment of cash, however, we will receive the exercise price of the warrants.
The selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the 1933 Act, provided that they meet the criteria and conform to the requirements of that rule.
The selling stockholders and any underwriters, broker-dealers or agents that participate in the sale of the common stock or interests therein may be “underwriters” within the meaning of Section 2(11) of the 1933 Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the 1933 Act. Selling stockholders who are “underwriters” within the meaning of Section 2(11) of the 1933 Act will be subject to the prospectus delivery requirements of the 1933 Act.
To the extent required, the shares of our common stock to be sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if applicable, the common stock may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the common stock may not be sold, unless it has been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.
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We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the 1934 Act may apply to sales of shares in the market and to the activities of the selling stockholders and their affiliates. In addition, to the extent applicable we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the 1933 Act. The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the 1933 Act.
We have agreed to indemnify the selling stockholders against liabilities, including liabilities under the 1933 Act and state securities laws, relating to the registration of the shares offered by this prospectus.
We have agreed with the selling stockholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier of (1) such time as all of the shares covered by this prospectus have been disposed of pursuant to and in accordance with the registration statement, or (2) the date on which all of the shares may be sold without restriction pursuant to Rule 144 of the 1933 Act.
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EXHIBIT B
SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE
The undersigned beneficial owner of common stock (the “ Registrable Securities ”) of Adamis Pharmaceuticals Corporation, a Delaware corporation (the “ Company ”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “ Commission ”) a registration statement (the “ Registration Statement ”) for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “ Securities Act ”), of the Registrable Securities, in accordance with the terms of the Amended and Restated Registration Rights Agreement (the “ Registration Rights Agreement ”) of which this document is an exhibit. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.
Certain legal consequences arise from being named as a selling securityholder in the Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Registration Statement and the related prospectus.
NOTICE
The undersigned holder (the “ Selling Securityholder ”) of Registrable Securities hereby elects to include the Registrable Securities owned by it and listed below in Item 3 (unless otherwise specified under such Item 3) in the Registration Statement. The undersigned, by signing and returning this Notice and Questionnaire, understands that it will be bound by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement.
The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate:
QUESTIONNAIRE
1. | Name : | |
(a) | Full Legal Name of Selling Securityholder: | |
(b) | Full Legal Name of Registered Holder (if not the same as (a) above) through which Registrable Securities listed in Item 3 below are held: | |
B- 1 |
(c) | Full Legal Name of Natural Control Person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the securities covered by the questionnaire): | |
2. | Address for Notices to Selling Securityholder: | |
Telephone : | |||
Fax : | |||
Contact Person : |
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5. | Beneficial Ownership of Other Securities of the Company Owned by the Selling Securityholder: | |
Except as set forth below in this Item 5, the undersigned is not the beneficial or registered owner of any securities of the Company other than the securities issuable pursuant to the Purchase Agreement and listed above in Item 3. | ||
(a) | Type and Amount of other securities beneficially owned by the Selling Securityholder: | |
6. | Relationships with the Company: | |
Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (owners of 5% of more of the equity securities of the undersigned) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years. | ||
State any exceptions here: | ||
The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein (i) that may occur subsequent to the date hereof until the effective date of the Registration Statement (other than changes in ownership), and (ii) at any time while the Registration Statement remains effective if requested by the Company in connection with the filing of a prospectus supplement or a post-effective amendment. All notices hereunder shall be made in writing at the address set forth below.
By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items 1 through 6 and the inclusion of such information in the Registration Statement and the related prospectus and any amendments or supplements thereto. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.
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IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.
Dated: | Selling Securityholder: |
By: | ||
Name: | ||
Title: |
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
[_______________________________] | ||
Attention: Chief Financial Officer | ||
Fax No.: (___) ___-____ |
B-4
Adamis Pharmaceuticals Corporation 8-K
Exhibit 99.1
Adamis Pharmaceuticals Announces Private Placement
SAN DIEGO, CA--(January 26, 2016) - Adamis Pharmaceuticals Corporation (NASDAQ: ADMP) (“Company” or “Adamis”) announced today that it has completed a private placement financing transaction pursuant to which it issued 1,183,432 shares of Series A-1 Convertible Preferred Stock to a fundamental healthcare institutional fund, and received gross cash proceeds of approximately $5,000,000. The preferred stock is convertible into common stock at a conversion ratio of 1-to-1 at the option of the investor and has no preference to the common shares. The Company also issued to the investor warrants to purchase a number of shares of common stock or Series A1 Preferred equal to the number of shares of preferred stock purchased by the investor. The shares of Series A1 Preferred and warrants were sold in units, with each unit consisting of one share and one warrant, at a purchase price of $4.225 per unit. The warrants, which are exercisable for a period of five years, have an exercise price of $4.10 per share and are callable for cash.
The Company expects to use the net proceeds from this financing for general corporate purposes, including but not limited to general operating expenses, development of its pipeline products, and anticipated expenses relating to preparations for the launch of its epinephrine pre-filled syringe (PFS). Adamis believes proceeds from this transaction, when combined with its current cash position, will provide sufficient capital to support the Company through the anticipated approval of its PFS product. Additional information about the transaction is contained in the Company's Form 8-K filing with the Securities and Exchange Commission.
About Adamis Pharmaceuticals
Adamis Pharmaceuticals Corporation is a specialty biopharmaceutical company focused on developing and commercializing products in the therapeutic areas of respiratory disease, allergy, oncology and immunology. The Company’s current specialty pharmaceutical product candidates include the Epinephrine Injection PFS syringe product for use in the emergency treatment of anaphylaxis, APC-1000 and APC-5000 for the treatment of asthma and chronic obstructive pulmonary disease, and APC-2000 for the treatment of bronchospasms.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future results of operations, including, but not limited to the following statements: the company’s beliefs concerning the timing and outcome of the FDA’s review of the company’s NDA relating to its Epinephrine PFS product candidate and the company’s ability to satisfactorily respond to the matters raised in the FDA’s Complete Response Letter relating to the Epinephrine PFS product; the company's beliefs concerning the ability of its product candidates to compete successfully in the market; the company's beliefs concerning the safety and effectiveness of its product candidates; the results of any future clinical trials that the company may conduct relating to its product candidates; the ability to fund future product development; future revenues expected from any of its product candidates, assuming that they are developed and approved for marketing by the FDA and other regulatory authorities; and the intellectual property protection that may be afforded by any patents or patent applications relating to its products and product candidates. Statements in this press release concerning future events depend on several factors beyond the company's control, including receipt of adequate funding to support these activities, the absence of unexpected developments or delays, market conditions, and the regulatory approval process. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, which may cause Adamis' actual results to be materially different from these forward-looking statements. There can be no assurances that the company will successfully complete development of the PFS product candidate, that the FDA will approve the NDA following resubmission of the NDA by the company, or that the product will be commercially successful if introduced. The company will require additional funding to commercially launch the product. Certain of these risks, uncertainties, and other factors are described in greater detail in Adamis' filings from time to time with the SEC, which Adamis strongly urges you to read and consider, all of which are available free of charge on the SEC's web site at http://www.sec.gov . Except to the extent required by law, Adamis expressly disclaims any obligation to update any forward-looking statements.
Contact Adamis
Mark Flather
Director, Investor Relations
& Corporate Communications
(858) 412-7951
mflather@adamispharma.com
Mark Gundy
External Investor Relations
(972) 240-1873
markgundy@gmail.com