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): December 30, 2015

 

 

BioLargo, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

000-19709

 

65-0159115

(State or other jurisdiction

of incorporation)

 

(Commission File Number)

 

(IRS Employer

Identification No.)

 

 

3500 W. Garry Ave., Santa Ana, CA

 

92704

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (949) 643-9540

 

 

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 (17CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR 240.13e-4(c))

 

 
 

 

 

Item 3.02 Unregistered Sales of Equity Securities  

 

On December 30, 2015, our subsidiary, Clyra Medical Technologies, Inc. (“ Clyra ”), sold 9,830 shares of its Series A Preferred Stock (“ Preferred Shares ”) to Sanatio Capital, LLC (“ Sanatio ”) for $750,000. Sanatio is beneficially owned by Jack B. Strommen. This sale was made in reliance on the exemption from registration contained in Section 4(2) of the Securities Exchange Act and Regulation D promulgated thereunder as not involving a public offering of securities. As a result of the sale, Sanatio owns 40% of Clyra’s issued and outstanding shares, BioLargo owns 54%, and the remainder is owned by management.

 

The information set forth in “Item 8.01 Other Events” is incorporated herein by reference as though fully set forth.

 

Item 8.01 Other Events

 

Stock Purchase Agreement – Clyra Medical

 

On December 30, 2015, our subsidiary, Clyra Medical Technologies, Inc. (“ Clyra ”), sold 9,830 shares of its Series A Preferred Stock (“ Preferred Shares ”) to Sanatio Capital, LLC (“ Sanatio ”) for $750,000. Sanatio is beneficially owned by Jack B. Strommen. This sale was made in reliance on the exemption from registration contained in Section 4(2) of the Securities Exchange Act and Regulation D promulgated thereunder as not involving a public offering of securities. As a result of the sale, Sanatio owns 40% of Clyra’s issued and outstanding shares, BioLargo owns 54%, and the remainder is owned by management.

 

As set forth in Clyra's Amended and Restated Articles of Incorporation, Preferred Shares accrue an annual dividend of 8% for a period of five years. Although the dividends begin to accrue immediately, Clyra has no obligation to declare a dividend until a product of the company has received a premarket approval by the United States Federal Drug Administration (“ FDA ”), or for which a premarket notification pursuant to form 510(k) has been submitted and for which the FDA has given written clearance to market the product in the United States (either, “ FDA Approval ”). After FDA Approval, annually on December 20, and unless prohibited by California law governing distributions to shareholders, Clyra is required to declare and pay any accruing dividends to holders of Preferred Shares then accrued but unpaid.

 

Holders of Preferred Shares are entitled to preferential payments in the event of a liquidation, dissolution or winding up of the company, in an amount equal to any accrued and unpaid dividends. After such preference, any remaining assets are distributed pro-rata between holders of Common Stock and Preferred Shares as if the Preferred Shares had converted to Common Stock. Holders of Preferred Shares may convert the shares to common stock initially on a one-to-one basis. The conversion formula is subject to change in the event Clyra sells stock at a lower price than the price paid by Sanatio.

 

In addition to the $750,000 investment, once Clyra receives FDA Approval for a product, Sanatio has agreed to provide Clyra a $5,000,000 credit facility for operating, warehouse, inventory and costs necessary to rapidly expand sales (“ Line of Credit ”). Terms of the Line of Credit are to be negotiated in good faith, be commercially reasonable and mutually agreeable to the parties. Should Sanatio fail to provide the Line of Credit, BioLargo has the right to do so under similar terms and conditions offered to Sanatio, and neither Clyra nor any of its shareholders, affiliates, successors or assigns will have any recourse or remedies against Sanatio for failing to provide the line of credit. If either BioLargo or entity not affiliated with Sanatio provides the Line of Credit (either directly, through an affiliate, or third party), Clyra shall issue such lender a warrant to purchase an amount of Clyra common stock equal to 10% of Clyra's capital stock on a fully-diluted basis, at an exercise price equal to the fair market value of Clyra's common stock on the date of issuance, as determined by its board of directors in good faith.

 

 
 

 

 

Clyra Shareholder Agreement

 

BioLargo, Santatio, and other Clyra shareholders entered into an agreement whereby the parties agreed to elect a three-member board of directors, consisting of Clyra’s president, BioLargo’s president, and a Sanatio representative, who shall initially be Mr. Strommen. The shareholders also agreed to restrict the sale of any stock in the company unless all holders of Preferred Shares are allowed to participate in such transaction and the consideration received pursuant to such transaction is allocated among the parties thereto in the manner specified in its articles of incorporation in effect immediately prior to the sale.

 

Amendment to Clyra License Agreement

 

By agreement dated December 30, 2015, BioLargo and Clyra amended (the “Amendment”) the December 17, 2012 License Agreement (“License Agreement”) by which BioLargo licensed to Clyra the exclusive world-wide right to make, have made, use, sell, offer for sale, and import products for use within the field of human wound care (as defined in the agreement), expandable to include other medical products. The Amendment changes the events that trigger Clyra’s obligation to begin the $50,000 monthly “initial license fee” payments such that no such payments are due until both (i) a Clyra product has received FDA approval and (ii) the company has generated $4,000,000 in gross annual revenue. Additionally, the Amendment updated the licensed patents to include recently issued European patents, confirmed that the Sanatio investment transaction wasn’t a “default” under the License Agreement, and that Sanatio was made an express third party beneficiary of the agreement.

 

Investors’ Rights Agreement

 

BioLargo entered into an “investors’ rights agreements” with Sanatio and Strommen whereby BioLargo committed to file a Form S-1 or S-3 registration statement by September 15, 2016 for all registrable securities issued to investors in connection with BioLargo’s 2015 Unit Offering, and an additional 1,000,000 shares of BioLargo common stock that may be issued to Sanatio or Strommen in the future. The agreement also provides Sanatio and Strommen “piggy back” registration rights.

 

Additionally, BioLargo granted to Strommen a “right of first refusal” to purchase its holdings in Clyra should it choose to sell those holdings, and a right of “co-sale” in the event such shares are sold to a third party.

 

Strommen Consulting Agreement

 

In addition to the foregoing, Clyra entered into a consulting agreement with Beach House Consulting, LLC, through which Jack B. Strommen will be providing consulting services to the company. Mr. Strommen is a founder and leader of PD Instore (www.pdinstore.com), works with some of the world’s leading retailers, and has overseen many national ground-breaking marketing rollouts and initiatives. Mr. Strommen will be assisting the company in its sales and marketing activities once it has FDA Approval on a product, at which point the agreement provides that Mr. Strommen is to receive $23,437.50 per month for a period of four years.

 

Furnished as Exhibit 99.1 and incorporated herein by reference is a press released issued by BioLargo related to the foregoing transactions, dated January 6, 2016.

 

 
 

 

 

Item 9.01 Financial Statements and Exhibits

 

 

4.1

Amended and Restated Articles of Incorporation of Clyra Medical Technologies, Inc.

 

4.2

BioLargo, Inc. Investors’ Rights Agreement dated December 30, 2015

 

10.1

License Agreement between BioLargo, Inc., and Clyra Medical Technologies, Inc., dated December 17, 2012

 

10.2

Amendment to License Agreement between BioLargo, Inc., and Clyra Medical Technologies, Inc., dated December 30, 2015

  10.3 Consulting Agreement between Clyra Medical Technologies, Inc., and Beach House Consulting, LLC dated December 30, 2015
 

99.9

Press release dated January 6, 2016

 

 

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.

 

                 

Date: January 6, 2016

 

 

 

BIOLARGO, INC.

         
 

 

 

 

 

 

By:

 

/s/ Dennis P. Calvert

 

 

 

 

 

 

 

 

Dennis P. Calvert

 

 

 

 

 

 

 

 

President and Chief Executive Officer

 

 

 

 

Exhibit 4.1

 

CERTIFICATE OF AMENDMENT OF

 

ARTICLES OF INCORPORATION

 

 

 

 

 

The undersigned certify that:

 

 

 

 

1.

They are the president and the secretary of Clyra Medical Technologies, Inc., California corporation number C3477029.

 

 

2.

The Articles of Incorporation of this corporation are amended and restated as shown on attached Exhibit A . Exhibit A is hereby formally incorporated by reference as if fully set forth herein.

 

 

3.

The foregoing amendment of Articles of Incorporation has been duly approved by the board of directors.

 

 

4.

The foregoing amendment of Articles of Incorporation has been duly approved by the required vote of shareholders in accordance with Section 902, California Corporations Code. The total number of outstanding shares of the corporation is 9,495. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required was more than 50%.

 

 

5.

I further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of my own knowledge.

 

 

 

 

Date: December 30, 2015

/s/Dennis P. Calvert

 

 

Dennis P. Calvert, Secretary

 

 

 

 

/s/Steven V. Harrison

 

 

Steven V. Harrison, President


 
 

 

 
EXHIBIT A

 

 

AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF

CLYRA MEDICAL TECHNOLOGIES, INC.

(California corporation number C3477029)

 

ARTICLE I : The name of this corporation is Clyra Medical Technologies, Inc. (the “Corporation”).

 

ARTICLE II: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.

 

ARTICLE III : The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 28,555 shares of Common Stock (“ Common Stock ”) and (ii) 9,830 shares of Preferred Stock (“ Preferred Stock ”).

 

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

 

A.            COMMON STOCK

 

1.             General . The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

 

2.              Voting . The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of shareholders (and written actions in lieu of meetings). Every shareholder entitled to vote at an election for directors may cumulate such shareholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which such shareholder’s shares are otherwise entitled, or distribute the shareholder’s votes on the same principle among as many candidates as such shareholder desires. No shareholder, however, shall be entitled to so cumulate such shareholder’s votes unless (i) the names of such candidate or candidates have been placed in nomination prior to the voting, and (ii) the shareholder has given notice at the meeting, prior to the voting, of such shareholder’s intention to cumulate such shareholder’s votes. If any shareholder has given proper notice to cumulate votes, all shareholders may cumulate their votes for any candidates who have been properly placed in nomination. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of the Articles of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote.

 

 
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B.             PREFERRED STOCK

 

9,830 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated “ Series A Preferred Stock ” with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. Unless otherwise indicated, references to “sections” or “subsections” in this Part B of this Article III refer to sections and subsections of Part B of this Article III .

 

1.             Dividends .

 

1.1      8% Cumulative Dividends . From and after the date of the issuance of any shares of Series A Preferred Stock, and thereafter for a period of five (5) years, dividends at the rate of eight percent (8%) of the Base Amount shall accrue on such shares of Series A Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock) (the “ Accruing Dividends ”).

 

1.2      Payment . Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative and compound annually; provided , however , that except as set forth in Subsection 1.3 , Subsection 1.4 , Subsection 2.1 and Section 6 , such Accruing Dividends shall be payable only when, as, and if declared by the Board of Directors and the Corporation shall be under no obligation to pay such Accruing Dividends.

 

1.3      Annual Dividends After FDA Approval . Beginning on December 20 of the calendar year in which a product of the Corporation has received a premarket approval by the United States Federal Drug Administration (“ FDA ”), or for which a premarket notification pursuant to form 510(k) has been submitted and for which the FDA has given written clearance to market the product in the United States, and each December 20 thereafter (either, “FDA Approval”), the Corporation shall declare and, unless prohibited by California law governing distributions to shareholders, pay any Accruing Dividends then accrued but unpaid.

 

1.4      Other Dividends . The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Articles of Incorporation) the holders of the Series A Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series A Preferred Stock in an amount at least equal to the greater of (i) the amount of the aggregate Accruing Dividends then accrued on such share of Series A Preferred Stock and not previously paid and (ii) (A) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series A Preferred Stock as would equal the product of (1) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series A Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (B) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series A Preferred Stock determined by (1) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (2) multiplying such fraction by an amount equal to the Series A Original Issue Price (as defined below); provided that if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series A Preferred Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series A Preferred Stock dividend.

 

 
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The “ Base Amount ” shall mean the Series A Original Issue Price plus previously accrued but unpaid dividends on such shares.

 

The “ Series A Original Issue Price ” shall mean $76.297 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock.

 

 2.             Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales .

 

2.1      Preferential Payments to Holders of Series A Preferred Stock . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its shareholders before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of (i) any Accruing Dividends accrued but unpaid thereon, whether or not declared plus (ii) any other dividends declared but unpaid thereon (the amount payable pursuant to this sentence is hereinafter referred to as the “ Series A Liquidation Amount ”). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its shareholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1 , the holders of shares of Series A Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

 

2.2      Payments to Holders of Common Stock . In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment of all preferential amounts required to be paid to the holders of shares of Series A Preferred Stock, the remaining assets of the Corporation available for distribution to its shareholders shall be distributed among the holders of shares of Series A Preferred Stock and Common Stock, pro rata based on the number of shares held by each such holder (with the number of shares of Series A Preferred Stock calculated as if all shares of Series A Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event) .

 

2.3      Deemed Liquidation Events .

 

2.3.1      Definition . Each of the following events shall be considered a “ Deemed Liquidation Event ” unless the holders of at least a majority of the outstanding shares of Series A Preferred Stock elect otherwise by written notice sent to the Corporation at least ten (10) days prior to the effective date of any such event:

 

(a)     a merger, share exchange or consolidation in which

 

 
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(i)     the Corporation is a constituent party or

 

(ii)     a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,

 

except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or

 

(b)     the sale, lease, transfer, assignment, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole including, without limitation, the termination or assignment of that certain License Agreement by and between the Corporation and BioLargo, Inc. dated December 17, 2012, as amended), or the sale or disposition (whether by merger, share exchange, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.

 

2.3.2        Effecting a Deemed Liquidation Event .

 

(a)     The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(i) unless the agreement or plan of merger, share exchange or consolidation for such transaction (the “ Merger Agreement ”) provides that the consideration payable to the shareholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 .

 

 
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(b)     In the event of a Deemed Liquidation Event referred to in Subsection 2.3.1(a)(ii) or 2.3.1(b) , if the Corporation does not effect a dissolution of the Corporation within ninety (90) days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice to each holder of Series A Preferred Stock no later than the ninetieth (90th) day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause; (ii) to require the redemption of such shares of Series A Preferred Stock; and (iii) if the holders of at least a majority of the then outstanding shares of Series A Preferred Stock so request in a written instrument delivered to the Corporation not later than one hundred twenty (120) days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors of the Corporation), together with any other assets of the Corporation available for distribution to its shareholders, all to the extent permitted by California law governing distributions to shareholders (the “ Available Proceeds ”), on the one hundred fiftieth (150th) day after such Deemed Liquidation Event, to redeem all outstanding shares of Series A Preferred Stock at a price per share equal to the Series A Liquidation Amount. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Series A Preferred Stock, the Corporation shall ratably redeem each holder’s shares of Series A Preferred Stock to the fullest extent of such Available Proceeds, and shall redeem the remaining shares as soon as it may lawfully do so under California law governing distributions to shareholders. The provisions of Section 6 shall apply, with such necessary changes in the details thereof as are necessitated by the context, to the redemption of the Series A Preferred Stock pursuant to this Subsection 2.3.2(b) . Prior to the distribution or redemption provided for in this Subsection 2.3.2(b) , the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event.

 

2.3.3         Amount Deemed Paid or Distributed . The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, share exchange, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity.

 

2.3.4        Allocation of Escrow and Contingent Consideration . In the event of a Deemed Liquidation Event pursuant to Subsection 2.3.1(a)(i) , if any portion of the consideration payable to the shareholders of the Corporation is payable only upon satisfaction of contingencies (the “ Additional Consideration ”), the Merger Agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “ Initial Consideration ”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the shareholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1 and 2.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Subsection 2.3.4 , consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.

 

 
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3.             Voting .

 

3.1      General . On any matter presented to the shareholders of the Corporation for their action or consideration at any meeting of shareholders of the Corporation (or by written consent of shareholders in lieu of meeting), each holder of outstanding shares of Series A Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series A Preferred Stock held by such holder are convertible as of the record date for determining shareholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Articles of Incorporation, holders of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class.

 

3.2      Election of Directors . The holders of record of the shares of Series A Preferred Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation (the “ Series A Director ”) and the holders of record of the shares of Common Stock, exclusively and as a separate class, shall be entitled to elect two (2) directors of the Corporation. Any director elected as provided in the preceding sentence may be removed without cause by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such shareholders duly called for that purpose or pursuant to a written consent of shareholders. If the holders of shares of Series A Preferred Stock or Common Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors, voting exclusively and as a separate class, pursuant to the first sentence of this Subsection 3.2 , then any directorship not so filled shall remain vacant until such time as the holders of the Series A Preferred Stock or Common Stock, as the case may be, elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by shareholders of the Corporation other than by the shareholders of the Corporation that are entitled to elect a person to fill such directorship, voting exclusively and as a separate class. The holders of record of the shares of Common Stock and of any other class or series of voting stock (including the Series A Preferred Stock), exclusively and voting together as a single class, shall be entitled to elect the balance of the total number of directors of the Corporation. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director.

 

3.3      Series A Preferred Stock Protective Provisions . At any time when shares of Series A Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, share exchange, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Articles of Incorporation) the written consent or affirmative vote of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio , and of no force or effect.

 

3.3.1     liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any merger, share exchange or consolidation or any other Deemed Liquidation Event, or consent to any of the foregoing;

 

3.3.2     amend, alter or repeal any provision of the Articles of Incorporation or Bylaws of the Corporation;

 

3.3.3     create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock, or increase the authorized number of shares of Series A Preferred Stock or increase the authorized number of shares of any additional class or series of capital stock;

 

 
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3.3.4     (i) reclassify, alter or amend any existing security of the Corporation that is pari passu with the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Series A Preferred Stock in respect of any such right, preference, or privilege or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series A Preferred Stock in respect of any such right, preference or privilege;

 

3.3.5     purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Series A Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service at a price not exceeding the then-current fair market value thereof; or

 

3.3.6     increase or decrease the authorized number of directors constituting the Board of Directors.

 

4.             Optional Conversion . The holders of the Series A Preferred Stock shall have conversion rights as follows (the “ Conversion Rights ”):

 

4.1           Investor’s Right to Convert .

 

4.1.1      Conversion Ratio . Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series A Original Issue Price by the Series A Conversion Price (as defined below) in effect at the time of conversion. The “ Series A Conversion Price ” shall initially be equal to the Series A Original Issue Price. Such initial Series A Conversion Price, and the rate at which shares of Series A Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

 

4.1.2      Conversion of Dividends . Accruing Dividends and any declared but unpaid dividends shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the amount of such dividends by the Series A Conversion Price in effect at the time of conversion.

 

 
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4.1.3      Termination of Conversion Rights . In the event of a notice of redemption of any shares of Series A Preferred Stock pursuant to Section 6 , the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the last full day preceding the date fixed for redemption, unless the redemption price is not fully paid on such redemption date, in which case the Conversion Rights for such shares shall continue until such price is paid in full. In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Series A Preferred Stock.

 

4.2      Fractional Shares . No fractional shares of Common Stock shall be issued upon conversion of the Series A Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Series A Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

4.3      Mechanics of Conversion .

 

4.3.1      Notice of Conversion . In order for a holder of Series A Preferred Stock to voluntarily convert shares of Series A Preferred Stock into shares of Common Stock, such holder shall (a) provide written notice to the Corporation’s transfer agent at the office of the transfer agent for the Series A Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent) that such holder elects to convert all or any number of such holder’s shares of Series A Preferred Stock and, if applicable, any event on which such conversion is contingent and (b), if such holder’s shares are certificated, surrender the certificate or certificates for such shares of Series A Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Series A Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent). Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the shares of Common Stock to be issued. If required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such notice and, if applicable, certificates (or lost certificate affidavit and agreement) shall be the time of conversion (the “ Conversion Time ”), and the shares of Common Stock issuable upon conversion of the specified shares shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time (i) issue and deliver to such holder of Series A Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Series A Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (ii) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the shares of Series A Preferred Stock converted.

 

 
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4.3.2      Reservation of Shares . The Corporation shall at all times when the Series A Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Series A Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series A Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite shareholder approval of any necessary amendment to the Articles of Incorporation.

 

4.3.3      Effect of Conversion . All shares of Series A Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2 and to receive payment of any Accruing Dividends, all accrued dividends, whether or not declared. Any shares of Series A Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for shareholder action) as may be necessary to reduce the authorized number of shares of Series A Preferred Stock accordingly.

 

4.3.4      No Further Adjustment . Upon any such conversion, no adjustment to the Series A Conversion Price shall be made for any Accruing Dividends or declared but unpaid dividends on the Series A Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

 

4.4            Adjustments to Series A Conversion Price for Diluting Issues .

 

4.4.1      Special Definitions . For purposes of this Article III , the following definitions shall apply:

 

(a)     “ Option ” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

(b)     “ Series A Original Issue Date ” shall mean the date on which the first share of Series A Preferred Stock was issued.

 

(c)     “ Convertible Securities ” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

 

 
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(d)     “ Additional Shares of Common Stock ” shall mean all shares of Common Stock issued (or, pursuant to Subsection 4.4.3 below, deemed to be issued) by the Corporation after the Series A Original Issue Date, other than (1) the following shares of Common Stock and (2) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “ Exempted Securities ”):

 

(i)     shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on Series A Preferred Stock;

 

(ii)     shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Subsection 4.5 , 4.6 , 4.7 or 4.8 ;

 

(iii)     shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board of Directors of the Corporation, including the Series A Director,

 

(iv)     shares of Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security;

 

(v)     shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation, including the Series A Director;

 

(vi)     shares of Common Stock, Options or Convertible Securities issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors of the Corporation, including the Series A Director; or

 

(vii)     shares of Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided that such issuances are approved by the Board of Directors of the Corporation, including the Series A Director; or

 

(viii)     shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Corporation, including the Series A Director.

 

 
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4.4.2      No Adjustment of Series A Conversion Price . No adjustment in the Series A Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of at least a majority of the then outstanding shares of Series A Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.

 

4.4.3      Deemed Issue of Additional Shares of Common Stock .

 

(a)     If the Corporation at any time or from time to time after the Series A Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.

 

(b)     If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Series A Conversion Price pursuant to the terms of Subsection 4.4.4 , are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Series A Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Series A Conversion Price as would have been obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (b) shall have the effect of increasing the Series A Conversion Price to an amount which exceeds the lower of (i) the Series A Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Series A Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

 

 
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(c)     If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Series A Conversion Price pursuant to the terms of Subsection 4.4.4 (either because the consideration per share (determined pursuant to Subsection 4.4.5 ) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Series A Conversion Price then in effect, or because such Option or Convertible Security was issued before the Series A Original Issue Date), are revised after the Series A Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Subsection 4.4.3(a) ) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

 

(d)     Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Series A Conversion Price pursuant to the terms of Subsection 4.4.4 , the Series A Conversion Price shall be readjusted to such Series A Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

 

(e)     If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Series A Conversion Price provided for in this Subsection 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Subsection 4.4.3 ). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Series A Conversion Price that would result under the terms of this Subsection 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming, for purposes of calculating such adjustment to the Series A Conversion Price, that such issuance or amendment took place at the time such calculation can first be made.

 

 
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4.4.4      Adjustment of Series A Conversion Price Upon Issuance of Additional Shares of Common Stock . In the event the Corporation shall at any time after the Series A Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Subsection 4.4.3 ), without consideration or for a consideration per share less than the Series A Conversion Price in effect immediately prior to such issue, then the Series A Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest cent) determined in accordance with the following formula:

 

CP2 = CP1* (A + B) ÷ (A + C).

 

For purposes of the foregoing formula, the following definitions shall apply:

 

(a)     “ CP 2 ” shall mean the Series A Conversion Price in effect immediately after such issue of Additional Shares of Common Stock

 

(b)     “ CP 1 ” shall mean the Series A Conversion Price in effect immediately prior to such issue of Additional Shares of Common Stock;

 

(c)     “ A ” shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issue or upon conversion or exchange of Convertible Securities (including the Series A Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);

 

(d)     “ B ” shall mean the number of shares of Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and

 

(e)     “ C ” shall mean the number of such Additional Shares of Common Stock issued in such transaction.

 

4.4.5      Determination of Consideration . For purposes of this Subsection 4.4 , the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:

 

(a)      Cash and Property : Such consideration shall:

 

(i)     insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

 

(ii)     insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation; and

 

 
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(iii)     in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation.

 

(b)           Options and Convertible Securities . The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Subsection 4.4.3 , relating to Options and Convertible Securities, shall be determined by dividing:

 

(i)     The total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

 

(ii)     the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

 

4.4.6      Multiple Closing Dates . In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Series A Conversion Price pursuant to the terms of Subsection 4.4.4 , and such issuance dates occur within a period of no more than ninety (90) days from the first such issuance to the final such issuance, then, upon the final such issuance, the Series A Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

 

 
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4.5      Adjustment for Stock Splits and Combinations . If the Corporation shall at any time or from time to time after the Series A Original Issue Date effect a subdivision of the outstanding Common Stock, the Series A Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Series A Original Issue Date combine the outstanding shares of Common Stock, the Series A Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.  

   

4.6      Adjustment for Certain Dividends and Distributions . In the event the Corporation at any time or from time to time after the Series A Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Series A Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Series A Conversion Price then in effect by a fraction:

 

(1)     the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

 

(2)     the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

 

Notwithstanding the foregoing (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (b) that no such adjustment shall be made if the holders of Series A Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of Series A Preferred Stock had been converted into Common Stock on the date of such event.

 

4.7      Adjustments for Other Dividends and Distributions . In the event the Corporation at any time or from time to time after the Series A Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of Series A Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Series A Preferred Stock had been converted into Common Stock on the date of such event.

 

 
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4.8      Adjustment for Merger or Reorganization, etc . Subject to the provisions of Subsection 2.3 , if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Series A Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.4 , 4.6 or 4.7 ), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series A Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Series A Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Series A Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Series A Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series A Preferred Stock.

 

4.9      Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment of the Series A Conversion Price pursuant to this Section 4 , the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than ten (10) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series A Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Series A Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Series A Preferred Stock (but in any event not later than ten (10) days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Series A Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Series A Preferred Stock.

 

4.10      Notice of Record Date . In the event:

 

(a)     the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Series A Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(b)     of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

 

(c)     of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

 

 
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then, and in each such case, the Corporation will send or cause to be sent to the holders of the Series A Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Series A Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Series A Preferred Stock and the Common Stock. Such notice shall be sent at least ten (10) days prior to the record date or effective date for the event specified in such notice.

 

5.             Mandatory Conversion .

 

5.1      Trigger Events . Upon the closing of the sale of shares of Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $20,000,000 of gross proceeds to the Corporation (the time of such closing referred to herein as the “ Mandatory Conversion Time ”), then (i) all outstanding shares of Series A Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective conversion rate as calculated pursuant to Subsection 4.1.1 and (ii) such shares may not be reissued by the Corporation.

 

5.2      Procedural Requirements . All holders of record of shares of Series A Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Series A Preferred Stock pursuant to this Section 5 . Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Series A Preferred Stock in certificated form shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Series A Preferred Stock converted pursuant to Subsection 5.1 , including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender any certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2 . As soon as practicable after the Mandatory Conversion Time and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Series A Preferred Stock, the Corporation shall (a) issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and (b) pay cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Series A Preferred Stock converted. Such converted Series A Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for shareholder action) as may be necessary to reduce the authorized number of shares of Series A Preferred Stock accordingly.

 

 
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6.              Redemption .

 

6.1      Voluntary Redemption . Unless prohibited by California law governing distributions to shareholders, at any time, the Corporation may redeem all, but not less than all, of the Series A Preferred Stock for the following consideration: (i) an amount of cash equal to the Series A Original Issue Price per share, plus any Accruing Dividends accrued but unpaid thereon, whether or not declared, plus with any other dividends declared but unpaid thereon in cash, plus (ii) issuing that number of shares of Common Stock the Series A Preferred Stock is then convertible into pursuant to Section 4.4 (the “ Redemption Payment ”). The date of such redemption shall be referred to as the “ Redemption Date .” On the Redemption Date, the Corporation shall redeem, on a pro rata basis in accordance with the number of shares of Series A Preferred Stock owned by each holder, all outstanding shares of Series A Preferred Stock. If on the Redemption Date, California law governing distributions to shareholders prevents the Corporation from redeeming all shares of Series A Preferred Stock to be redeemed, the Corporation’s exercise of its redemption rights shall be invalid, the Series A Preferred Stock shall continue to remain issued and outstanding.

 

6.2      Redemption Notice . The Corporation shall send written notice of a redemption under Section 6.1 (the “ Redemption Notice ”) to each holder of record of Series A Preferred Stock not less than forty (40) days prior to each Redemption Date. Each Redemption Notice shall state:

 

(a)     the number of shares of Series A Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date specified in the Redemption Notice;

 

(b)     the Redemption Date and the Redemption Payment;

 

(c)     the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Subsection 4.1 ); and

 

(d)     for holders of shares in certificated form, that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Series A Preferred Stock to be redeemed.

 

6.3      Surrender of Certificates; Payment . On or before the applicable Redemption Date, each holder of shares of Series A Preferred Stock to be redeemed on such Redemption Date, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4 , shall, if a holder of shares in certificated form, surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Payment for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Series A Preferred Stock represented by a certificate are redeemed, a new certificate, instrument, or book entry representing the unredeemed shares of Series A Preferred Stock shall promptly be issued to such holder.

 

 
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6.4      Rights Subsequent to Redemption . If the Redemption Notice shall have been duly given, and if on the applicable Redemption Date(s) the Redemption Payment payable upon redemption of the shares of Series A Preferred Stock to be redeemed on such Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that any certificates evidencing any of the shares of Series A Preferred Stock so called for redemption shall not have been surrendered, dividends with respect to such shares of Series A Preferred Stock shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Payment without interest upon surrender of any such certificate or certificates therefor.

 

7.              Redeemed or Otherwise Acquired Shares . Any shares of Series A Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Series A Preferred Stock following redemption.

 

8.             Waiver . Any of the rights, powers, preferences and other terms of the Series A Preferred Stock set forth herein may be waived on behalf of all holders of Series A Preferred Stock by the affirmative written consent or vote of the holders of at least a majority of the shares of Series A Preferred Stock then outstanding.

 

9.             Notices . Any notice required or permitted by the provisions of this Article III to be given to a holder of shares of Series A Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the California Corporations Code, and shall be deemed sent upon such mailing or electronic transmission.

 

ARTICLE I V: Subject to any additional vote required by the Articles of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

 

ARTICLE V: For purposes of Section 500 of the California Corporations Code (to the extent applicable), in connection with any repurchase of shares of Common Stock permitted under these Articles of Incorporation from employees, officers, directors or consultants of the Corporation in connection with a termination of employment or services pursuant to agreements or arrangements approved by the Board of Directors (in addition to any other consent required under these Articles of Incorporation), such repurchase may be made without regard to any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined in Section 500 of the California Corporations Code). Accordingly, for purposes of making any calculation under California Corporations Code Section 500 in connection with such repurchase, the amount of any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined therein) shall be deemed to be zero (0).

 

 
20

 

 

ARTICLE VI: To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director. If the California Corporations Code or any other law of the State of California is amended after approval by the shareholders of this Article VI to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the California Corporations Code as so amended. Any repeal or modification of the foregoing provisions of this Article VI by the shareholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

 

ARTICLE VII : To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which California Corporations Code permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of shareholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by the California Corporations Code. Any amendment, repeal or modification of the foregoing provisions of this Article VII shall not adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification.

 

 

 

11334474v2

 

 

 

21

Exhibit 4.2

 

biolargo, inc. INVESTORS’ RIGHTS AGREEMENT

 

THIS BIOLARGO, INC. INVESTORS’ RIGHTS AGREEMENT (this “ Agreement ”), is made as of the 30 th day of December, 2015, by and among BioLargo, Inc., a Delaware corporation (the “ Company ”), Jack B. Strommen (“ Strommen ”), and Sanatio Capital, LLC, a Minnesota limited liability company (“ Sanatio ”) (each of Strommen and Sanatio may be referred to in this Agreement as an “ Investor ”).

 

RECITALS

 

WHEREAS , the Company is the majority shareholder of Clyra Medical Technologies, Inc., a California corporation (“ Clyra ”);

 

WHEREAS , the Company and Clyra are parties to that certain License Agreement dated December 17, 2012, as amended, pursuant to which Clyra obtained certain rights to commercialize technologies owned by the Company in exchange for royalties and other payments to the Company (the “ License Agreement ”);

 

WHEREAS , Strommen previously purchased $1,000,000 of the Company’s units of convertible notes and warrants to purchase shares of the Company’s common stock pursuant to the Company’s private placement memorandum dated January 15, 2015 (the “2015 Private Placement);

 

WHEREAS , Clyra and Sanatio (an affiliate of Strommen) are parties to the Stock Purchase Agreement of even date herewith whereby Sanatio will purchase $750,000 of shares of Clyra’s Series A Preferred Shares, which investment proceeds will be used by Clyra to fund research and regulatory approval of products to be commercialized under the License Agreement (the “ Purchase Agreement ”); and

 

WHEREAS , in order to induce Sanatio to enter into the Purchase Agreement and to invest funds in Clyra pursuant to the Purchase Agreement, the Investors and the Company hereby agree that this Agreement shall govern the rights of the Investors to cause the Company to register shares of Common Stock owned by or issuable to the Investors and such other rights set forth in this Agreement.

 

NOW, THEREFORE , the parties hereby agree as follows:

 

1.              Definitions . For purposes of this Agreement:

 

1.1     “ Affiliate ” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

 

1.2     “ Common Stock ” means shares of the Company’s common stock, par value $0.00067 per share.

 

1.3     “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

 
 

 

 

1.4      “ Excluded Registration ” means (i) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

 

1.5      “ Form S-1 ” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

 

1.6      “ Form S-3 ” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.

 

1.7      “ Holder ” means any holder of Registrable Securities who is a party to this Agreement.

 

1.8      “ Immediate Family Member ” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including, adoptive relationships, of a natural person referred to herein.

 

1.9      “ Person ” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

 

1.10    “ Registrable Securities ” means (i) the Common Stock currently issuable or issued to Investors; (ii) any Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company, currently held by Investors or acquired by the Investors after the date hereof; (iii) any Common Stock issuable in connection with payment of dividends on or redemption of shares of the Series A Preferred Stock of Clyra Medical Technologies, Inc.; and (iv) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (i) , (ii) and (ii i ) above; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Subsection 5 .1 .

 

1.11    “ Registrable Securities then outstanding ” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.

 

1.12    “ SEC ” means the Securities and Exchange Commission.

 

 
 

 

 

1.13    “ SEC Rule 144 ” means Rule 144 promulgated by the SEC under the Securities Act.

 

1.14    “ SEC Rule 145 ” means Rule 145 promulgated by the SEC under the Securities Act.

 

1.15    “ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

1.16    “ Selling Expenses ” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Subsection 2.5 .

 

2.              Registration Rights . The Company covenants and agrees as follows:

 

2.1           Demand Registration .

 

(a)      Form S-1 Demand . On or before September 15, 2016, the Company shall file a Form S -1 or Form S-3 registration statement under the Securities Act covering all Registrable Securities issued or issuable to Investors in connection with the 2015 Private Placement and an additional 1,000,000 shares of Common Stock that may be issued to Investors in the future, and use its best efforts to cause such registration statement to become effective as promptly as possible . The Company may include shares of Common Stock owned by or issuable to other investors in the Company’s 2015 Private Placement. A registration shall not be counted as “effected” for purposes of this Subsection 2.1 until such time as the applicable registration statement has been declared effective by the SEC.

 

(b)     Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Subsection 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than sixty (60) days; provided , however , that the Company shall not register any securities for its own account or that of any other stockholder during such period other than pursuant to an Excluded Registration.

 

2.2           Piggy-Back Registration . If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its Common Stock under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Subsection 2.3 , cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Subsection 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Subsection 2.5 .

 

 
 

 

 

2.3           Obligations of the Company . Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible.

 

2.4           Furnish Information . It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.

 

2.5           Expenses of Registration . All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2 , including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements of one counsel for the selling Holders (“ Selling Holder Counsel ”), shall be borne and paid by the Company. All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

 

2.6           Reports Under Exchange Act . With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:

 

(a)     make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144;

 

(b)     use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

 

(c)     furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144, the Securities Act, and the Exchange Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); and (ii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).

 

3.              Right of First Refusal and Co-Sale .

 

3.1           Right of First Refusal .

 

(a)      Grant . Subject to the terms of this Section 3 , Company hereby grants to Strommen a Right of First Refusal to purchase all or any portion of Clyra Stock that Company may propose to transfer in a Proposed Transfer, at the same price and on the same terms and conditions as those offered to the Prospective Transferee.

 

 
 

 

 

(b)      Notice . Company shall deliver a Proposed Transfer Notice to Strommen and each Investor not later than forty-five (45) days prior to the consummation of such Proposed Transfer. Such Proposed Transfer Notice shall contain the material terms and conditions (including price and form of consideration) of the Proposed Transfer and the intended date of the Proposed Transfer. To exercise his Right of First Refusal under this Section 3 , Strommen must deliver an acceptance notice to the Company within fifteen (15) days after delivery of the Proposed Transfer Notice.

 

(c)      Forfeiture of Rights . Notwithstanding the foregoing, if the total number of shares of Transfer Stock that Strommen has agreed to purchase in the acceptance notice is less than the total number of shares of Transfer Stock, then Strommen shall be deemed to have forfeited any right to purchase such Transfer Stock, and the Company shall be free to sell the Transfer Stock to the Prospective Transferee on terms and conditions substantially similar to (and in no event more favorable than) the terms and conditions set forth in the Proposed Transfer Notice, it being understood and agreed that such sale shall be consummated within forty-five (45) days after receipt of the Proposed Transfer Notice by Strommen and, if such sale is not consummated within such forty-five (45) day period, such sale shall again become subject to the Right of First Refusal on the terms set forth herein.

 

(d)      Consideration; Closing . The closing of the purchase of Transfer Stock by the Company and Strommen shall take place, and all payments from Strommen shall have been delivered to the Company by the later of (i) the date specified in the Proposed Transfer Notice as the intended date of the Proposed Transfer; and (ii) forty-five (45) days after delivery of the Proposed Transfer Notice.

 

3.2           Right of Co-Sale .

 

(a)      Exercise of Right . If any Transfer Stock subject to a Proposed Transfer is not purchased pursuant to Subsection 3 .1 above and thereafter is to be sold to a Prospective Transferee, each Investor may elect to exercise its Right of Co-Sale and participate on a pro rata basis in the Proposed Transfer as set forth in Subsection 3 .2(b) below and, subject to Subsection 3 .2(d) , otherwise on the same terms and conditions specified in the Proposed Transfer Notice. Each Investor who desires to exercise its Right of Co-Sale (each, a “ Participating Investor ”) must give the Company written notice to that effect within fifteen (15) days after the deadline for delivery of the Proposed Transfer Notice described above, and upon giving such notice such Participating Investor shall be deemed to have effectively exercised the Right of Co-Sale.

 

(b)      Shares Includable . Each Participating Investor may include in the Proposed Transfer all or any part of such Participating Investor’s Clyra Stock equal to the product obtained by multiplying (i) the aggregate number of shares of Transfer Stock subject to the Proposed Transfer by (ii) a fraction, the numerator of which is the number of shares of Clyra Stock owned by such Participating Investor immediately before consummation of the Proposed Transfer and the denominator of which is the total number of shares of Clyra Stock owned, in the aggregate, by all Participating Investors immediately prior to the consummation of the Proposed Transfer, plus the number of shares of Transfer Stock held by the Company. To the extent one (1) or more of the Participating Investors exercise such right of participation in accordance with the terms and conditions set forth herein, the number of shares of Transfer Stock that the Company may sell in the Proposed Transfer shall be correspondingly reduced.

 

(c)      Purchase and Sale Agreement . The Participating Investors and the Company agree that the terms and conditions of any Proposed Transfer in accordance with Subsection 3 .2 will be memorialized in, and governed by, a written purchase and sale agreement with the Prospective Transferee (the “ Purchase and Sale Agreement ”) with customary terms and provisions for such a transaction, and the Participating Investors and the Company further covenant and agree to enter into such Purchase and Sale Agreement as a condition precedent to any sale or other transfer in accordance with this Subsection 3 .2 .

 

 
 

 

 

(d)      Allocation of Consideration .

 

(1)     Subject to Subsection 3 .2(d)(ii) , the aggregate consideration payable to the Participating Investors and the Company shall be allocated based on the number of shares of Clyra Stock sold to the Prospective Transferee by each Participating Investor and the Company as provided in Subsection 3 .2(b) , provided that if a Participating Investor wishes to sell Preferred Stock, the price set forth in the Proposed Transfer Notice shall be appropriately adjusted based on the conversion ratio of the Preferred Stock into Common Stock.

 

(2)     In the event that the Proposed Transfer constitutes a Change of Control, the terms of the Purchase and Sale Agreement shall provide that the aggregate consideration from such transfer shall be allocated to the Participating Investors and the Company in accordance with Sections 2.1 and 2.2 of Article IV(B) of the Restated Articles as if (A) such transfer were a Deemed Liquidation Event (as defined in the Restated Articles), and (B) the Clyra Stock sold in accordance with the Purchase and Sale Agreement were the only Clyra Stock outstanding. In the event that a portion of the aggregate consideration payable to the Participating Investor(s) and Company is placed into escrow, the Purchase and Sale Agreement shall provide that (x) the portion of such consideration that is not placed in escrow (the “ Initial Consideration ”) shall be allocated in accordance with Sections 2.1 and 2.2 of Article IV(B) of the Restated Articles as if the Initial Consideration were the only consideration payable in connection with such transfer, and (y) any additional consideration which becomes payable to the Participating Investor(s) and Company upon release from escrow shall be allocated in accordance with Sections 2.1 and 2.2 of Article IV(B) of the Restated Articles after taking into account the previous payment of the Initial Consideration as part of the same transfer.

 

(e)      Additional Compliance . If any Proposed Transfer is not consummated within sixty (60) days after receipt of the Proposed Transfer Notice by Strommen, the Company may not sell any Transfer Stock unless it first complies in full with each provision of this Section 3 . The exercise or election not to exercise any right by any Investor hereunder shall not adversely affect its right to participate in any other sales of Transfer Stock subject to this Subsection 3 .2 .

 

3.3           Effect of Failure to Comply .

 

(a)      Equitable Relief . The parties hereto unconditionally and irrevocably agree that any non-breaching party hereto shall be entitled to seek protective orders, injunctive relief and other remedies available at law or in equity (including, without limitation, seeking specific performance or the rescission of purchases, sales and other transfers of Transfer Stock not made in strict compliance with this Agreement).

 

3.4            Definitions . For purposes of this Section 3 , the following terms have the following definitions:

 

(a)     “ Change of Control ” means a transaction or series of related transactions in which a person, or a group of related persons, acquires from shareholders of Clyra shares representing more than fifty percent (50%) of the outstanding voting power of Clyra.

 

(b)     “ Clyra Stock ” means shares of Common Stock or Preferred Stock of Clyra Medical Technologies, Inc., a California corporation.

 

 
 

 

 

(c)     “ Common Stock ” means the Common Stock of Clyra Medical Technologies, Inc., a California corporation.

 

(d)     “ Preferred Stock ” mean Preferred Stock of Clyra Medical Technologies, Inc., a California corporation.

 

(e)     “ Proposed Transfer ” means any assignment or sale for value or any other like transfer of any Transfer Stock (or any interest therein) proposed by the Company.

 

(f)     “ Prospective Transferee ” means any Person to whom the Company proposes to make a Proposed Transfer.

 

(g)     “ Proposed Transfer Notice ” means written notice from the Company setting forth the terms and conditions of a Proposed Transfer.

 

(h)     “ Right of Co-Sale ” means the right, but not an obligation, of an Investor to participate in a Proposed Transfer on the terms and conditions specified in the Proposed Transfer Notice.

 

(i)      “ Right of First Refusal ” means the right, but not an obligation, of Strommen, or his or assigns, to purchase some or all of the Transfer Stock with respect to a Proposed Transfer, on the terms and conditions specified in the Proposed Transfer Notice.

 

(j)      “ Transfer Stock ” means shares of Clyra Stock owned by the Company.    

 

4.             Clyra License Agreement . To induce Sanatio to invest in Clyra, the Company makes the following covenants.

 

4.1           Waiving Payment of Initial License Fees . Until such time as Clyra is generating $4,000,000 in gross revenues, the Company shall waive Clyra’s payment of the Initial License Fees pursuant to the License Agreement.

 

4.2           Waiving Events of Default . For such period of time as Sanatio or its Affiliates own Shares of Clyra’s Series A Preferred Stock, the Company shall waive any and all Events of Default (as defined in the License Agreement) under the License Agreement.

 

4.3           Waiving Change In Control as an Event of Default . For such period of time as Sanatio or its Affiliates own Series A Preferred Stock or not less than 1,000 shares of Clyra’s Common Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such Common Stock after the date hereof), the Company shall waive any Event of Default triggered by a Change in Control (as defined in the License Agreement) under the License Agreement.4.4      Assignee Must Assume Protective Covenants . For such period of time as Sanatio or its Affiliates own Series A Preferred Stock or not less than 1,000 shares of Clyra’s Common Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such Common Stock after the date hereof), the Company shall not assign the License Agreement unless such assignee expressly assumes in writing the covenants set forth in this Section 4 .; provided, such assumption shall not relieve the Company of such obligations.

 

4.4           Assignee Must Assume Protective Covenants . For such period of time as Sanatio or its Affiliates own Series A Preferred Stock or not less than 1,000 shares of Clyra’s Common Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such Common Stock after the date hereof), the Company shall not assign the License Agreement unless such assignee expressly assumes in writing the covenants set forth in this Section 4 .; provided, such assumption shall not relieve the Company of such obligations.

 

 
 

 

 

5.             Miscellaneous .

 

5.1           Successors and Assigns . The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (i) is an Affiliate of a Holder; (ii) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members; or (iii) after such transfer, holds at least 1,000,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations, and other recapitalizations); provided , however , that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Subsection 2.11 . For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate or stockholder of a Holder; (2) who is a Holder’s Immediate Family Member; or (3) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees 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 permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

 

5.2            Governing Law . This Agreement shall be governed by the internal law of the State of California.

 

5.3          Counterparts . This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com, www.echosign.adobe.com, etc.) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

5.4           Titles and Subtitles . The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

 

5.5           Notices . All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Subsection 5 .5 .

 

 
 

 

 

5.6           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, Sanatio and the holders of a majority of the Registrable Securities then outstanding; provided that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver. Any amendment, termination, or waiver effected in accordance with this Subsection 5 .6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

 

5.7           Severability . In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

 

5.8           Aggregation of Stock . All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.

 

5.9           Entire Agreement . This Agreement constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.

 

5.10         Dispute Resolution . The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of California and to the jurisdiction of the United States District Court for the Central District of California for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of California or the United States District Court for the Central District of California, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.

 

WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

 

 
 

 

 

Each of the parties to this Agreement consents to personal jurisdiction for any equitable action sought in the U.S. District Court for the Central District of California or any court of the State of California having subject matter jurisdiction.

 

5.11         Delays or Omissions . No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

[Remainder of Page Intentionally Left Blank]

 

 

 

 

 

11253121v7

 

 
 

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

 

BIOLARGO, INC.

 

 

 

/s/Dennis P. Calvert

 

 

 

Dennis P. Calvert, President

 

 

 

 

 

 

 

STROMMEN:

 

 

 

/s/ Jack B. Strommen

 

 

 

Jack B. Strommen

 

 

 

 

 

SANATIO CAPITAL, LLC

 

 

 

/s/ Jack B. Strommen

 

 

 

Jack B. Strommen, Manager

 

 

 

 

 

 

 

 

 

INVESTORS:

 

 

 

 

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

[SIGNATURE PAGE TO BIOLARGO INVESTORS’ RIGHTS AGREEMENT]

 

Exhibit 10.1

 

LICENSE AGREEMENT

 

This License Agreement (the “Agreement”) is made this 17 th day of December, 2012, by and between BioLargo, Inc., a Delaware corporation and its wholly owned subsidiary BioLargo Life Technologies, Inc., a California corporation, having a principal place of business at 16150 Heron Avenue, La Mirada, California (collectively referred to as “BioLargo”), and Clyra Medical Technologies, Inc., a California corporation having a principal place of business at 16150 Heron Avenue, La Mirada, California (“Clyra”). Each of BioLargo and Clyra is a “Party”, and are collectively referred to herein as the “Parties”.

 

RECITALS

 

WHEREAS , BioLargo has developed a proprietary iodine technology protected under certain patents that disclose and claim significant and commercially viable inventions which Clyra desires to make, use, sell and sublicense in the medical field; and

 

WHEREAS , the parties desire to set forth their rights and obligations under an arrangement whereby BioLargo licenses to Clyra its technology in the advanced wound care industry, which can be expanded to other medical products;

 

NOW, THEREFORE , for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and for the mutual covenants contained in this Agreement, the Parties hereby agree as follows:

 

1.             Definitions .

 

a.      Bankruptcy Act means Title 11 of the United States Code, as now or hereafter in effect or any successor statute.

 

b.      Effective Date means the date first written above.

 

c.      Field of Use means the commercial field of human “Wound Care” (“Wound Care” is defined below) in the medical, dental and ophthalmologic fields of prescription based products. “Field of Use” does NOT include products or processes intended for use on surfaces (e.g., disinfection of a hospital floor or other a hard surface) or other devices usable in a medical setting (e.g., disinfection of a metal instrument used to treat a patient). “Field of Use” does NOT include over-the-counter products available without a prescription;

 

d.      Licensed Processes means any method, process, modality, procedure, practice, or course of action within the Field of Use covered by a claim of Patent Rights,

 

e.      Licensed Products means any article, kit, equipment, system, method, apparatus or unit within the Field of Use covered by a claim of Patent Rights.

 

f.      Licensee means Clyra Medical Technologies, Inc., California corporation number C3477029, originally formed as “BioLargo Medical Group, Inc.”

 

 
 

 

 

g.      Licensor means BioLargo, Inc., a Delaware corporation and its wholly owned subsidiary BioLargo Life Technologies, Inc., a California corporation.

   

h.      Net Sales Revenue means gross sales revenue less any taxes, returns, allowances, quantity discounts, freight, and insurance when the same are actually paid or allowed.

 

i.      Expanded Fields of Use means the following fields of use for which Licensee has first option to exploit prescribed products (not products sold without prescription over-the-counter) upon the execution of a license agreement based on commercially reasonable terms:

 

 i.

 

Ostomy care

 

ii.

 

Continence care

 

iii.

 

Bowel care

 

iv.

 

Tube fasteners

 

v.

 

Dermatology: acne, antifungals

 

vi.

 

Burn care: washes, cleansers, ointments, dressings, garments

 

vii.

 

Biologics

 

viii.

 

Surgical: sutures, skin prep, scrubs, garments

 

ix.

 

Hemostatic Agents

 

x.

 

Acute: commoditized products (e.g. impregnated gauze, band aids, IV kits, PIC line preps)

 

xi.

 

Coatings: implants, stents, sutures, catheters

 

xii.

 

Oral/Dental/Periodontics : mouthwash and rinse, hydration for patients

 

xiii.

 

Ophthalmologic: eye wash, eye drops, etc.

 

j.      Patent Rights means:

 

i.

 

The following U.S. Patent Numbers (“U.S. Patents”), and corresponding patents and applications in other countries:

 

 

8,021,610: Systems providing antimicrobial activity to an environment

 

 

7,943,158: Absorbent systems providing antimicrobial activity

 

 

7,867,510: Material having antimicrobial activity when wet

 

 
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6,328,929: Method of delivering disinfectant in an absorbent substrate

 

 

6,146,725: Absorbent composition

 

 

And, such other patents or patent applications developed by BioLargo and applicable to the Fields of Use, which may be amended to this agreement from time to time by mutual agreement of the parties.

 

k.      Wound Care means articles, compositions, and methods for medical treatment to treat a condition comprising damage to a human patient, the condition including substantive traumatic or non-traumatic breach of the derma. Such medical treatment may include extended application of an article of manufacture (wraps, bandages, bandaids and appliqués) over the epidermis, or wipes or direct application of medication such as liquid, ointment, spray, cream or paste. As non-limiting examples of traumatic damage are cuts, scrapes, punctures, incisions and other intentional or accidental penetration damage through the epidermis. As non-limiting examples of non-traumatic damage are treatment, prophylaxis or prevention of sores, topical infections, insect bites, sub-epidermal infections, boils, and lesions (in the absence of a previous wound at the site). “Wound Care” includes surgical damage to tissues and organs during surgical or other medical procedures as well as from accidental damage to tissues and organs. Surgical and medical procedures, and traumatic events, also include care of the mouth, gums, eyes, optical system and all other organs and tissues. “Wound Care” does NOT include products intended for the treatment of animals.

 

2.             Grant of License .

 

a.     Upon full, complete and indefeasible payment of the Initial License Fee (defined in Paragraph 3.a below), subject to the loss of exclusivity pursuant to Paragraph Error! Reference source not found. , and unless otherwise terminated pursuant to Paragraph 9 below, Licensor grants to Licensee a world-wide, exclusive, non-assignable, royalty-bearing license (the “License”) under the Patent Rights in the Field of Use, to make, have made, use, sell, offer for sale, and import Licensed Products for use within the Field of Use and to practice Licensed Processes in the Field of Use. In addition, so long as Licensee is current on its payment of the Initial License Fee, Licensee has first option to expand the Field of Use to the “expanded fields of use” defined above upon commercially reasonable terms to be negotiated at the time of option.

 

b.      Limitations . This grant of license rights is subject to the following limitations:

 

i.     the rights granted herein are granted only to the extent defined and described herein within the Field of Use and for such time period that Licensee is in compliance with the terms and conditions set forth herein;

 

ii.     no right or license is granted or implied to the Licensee or any person claiming through the Licensee under any patent or patent application other than those specifically identified as the Patent Rights;

 

 
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iii.     the Licensor reserves to itself all intellectual property rights that are not expressly granted by this Agreement; and

 

iv.     nothing herein should be construed to grant the Licensee the right to register or claim any trademark or trade name confusingly similar in sound, appearance or meaning to those claimed or registered by Licensor.

 

c.      Research and Development . During the Term, Licensee shall have the right, in consultation with Licensor, to conduct research and development activities, and pursue regulatory approval, clinical trials, and all other work necessary to develop and commercialize Licensed Products within the Field of Use. In connection with the rights and obligations of Licensee hereunder, Licensor shall make appropriate personnel available for reasonable telephone and other informal consultations, but shall not, among other things, obligate Licensor personnel to travel, spend a minimum number of hours or engage technical personnel in research or clinical projects, all of which services (“Additional Services”) may be requested by Licensee and shall be subject of further negotiation by the parties including provisions for appropriate consideration therefor.

 

d.      Reporting . Commencing three months after the Effective Date, and every three months thereafter during the term hereof, Licensee shall submit to Licensor reports detailing all research, development and other activities, including a summary of expenditures on research and development activities, conducted by Licensee concerning or in any manner related to the Patent Rights, Licensed Products or Licensed Processes hereunder during the preceding three-month period. Licensor shall have the right, upon reasonable prior notice, to inspect and audit Licensee’s records concerning the subject matter of each such quarterly report.

 

e.      Sublicensing . Subject to Licensor’s written approval, such approval to be in Licensor’s sole and absolute discretion, Licensee may enter into an agreement with a third party granting the third party any of the rights granted to Licensee pursuant to this Agreement within the Field of Use, including without limitation pre-license or product development agreements, or agreements to sublicense the Patent Rights within the Field of Use (each, a “Sublicense Agreement”).

 

3.             Royalty and Payments . In consideration of the License granted to Licensee in Section 2.a, Licensee shall pay to Licensor each of the following royalties and payments:

 

a.      Initial License Fee . After the “trigger events” defined below, Licensee shall pay to Licensor $50,000 per month (the “Initial License Fee”) pursuant to a promissory note (the “Promissory Note”, attached hereto as Exhibit A) in the face amount of $6,979,039, bearing interest at the rate of six percent, and amortized over twenty years. The monthly payments shall be paid in good and immediately collectible funds. The Initial License Fee is fully earned by Licensor when made, is non-refundable and shall not be credited to royalties or any other fees due pursuant to this Agreement.

 

i.      Trigger Events . The Promissory Note shall not require payments from Licensee, and no interest on the Note shall accrue, until one of the following conditions are met: (i) Licensee has raised $3,500,000 cash from debt, equity, or other investments; or (ii) Licensee has generated revenues from any source (e.g., the sale of products or sublicense royalties), and in such case, the Promissory Note shall allow Licensee to pay the lesser of 20% of its gross revenues or $50,000, at Licensee’s choice.

 

 
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b.      Royalty . Starting the Effective Date and continuing until the end of the Term, Licensee shall pay to Licensor an ongoing royalty (the “Royalty”) at the rate of six percent (6%) of Licensee’s Net Sales Revenue from Licensed Products or Licensed Processes, paid quarterly in arrears within thirty days after the end of each calendar quarter. Each Royalty payment shall be paid in good and immediately collectible funds.

 

c.      Sublicensing Fees . Licensee shall pay to Licensor fifty percent (50%) of any economic benefit or value (including, but not limited to, monies, stock, options, property, equity, milestone payments and royalties) received by Licensee, or any affiliate of Licensee, from any party (each, a “Sublicensing Fee”), arising out of in or connection with the rights granted in this Agreement, or pursuant to any Sublicense Agreement, excluding monies generated through the sale of the Licensee’s debt or equity securities. Each Sublicensing Fee shall be paid in good and immediately collectible funds, and paid in arrears within thirty days after the receipt of any such Sublicensing Fee.

 

4.              License Term . Subject to early termination pursuant to Section 9, this License Agreement will expire the earlier of (i) the expiration of the last to expire of the Patent Rights, or (ii) on the tenth anniversary of the Effective Date, unless such period is extended in writing by Licensee for up to two additional five year periods, provided that Licensee has committed an Event of Default.

 

5.             Reporting .

 

a.     Licensee shall keep full and accurate books of account showing the amount of Royalties and Sublicense Fees due pursuant to this Agreement. These books of account shall be kept at Licensee’s place of business, and shall be made available to Licensor at reasonable times for inspection by an independent certified public account retained by Licensor and shall be kept and made available to Licensor for the later of (i) the end of the Term, including any extensions thereof, or (ii) three years following the end of the calendar year to which they pertain.

 

b.      Royalty Report . Not later than thirty (30) days after the beginning of each calendar quarter of each year (a “Reporting Period”), Licensee shall deliver to Licensor a true and accurate report (a “Royalty Report”), giving particulars of the business conducted by Licensee during the preceding Reporting Period as are relevant to an accounting for Royalties and Sublicense Fees due under this Agreement. The Royalty Report shall include at least the following: (i) the quantity of Licensed Products sold by Licensee; (ii) the revenues arising from sales of Licensed Products; (iii) the calculated Royalty due to Licensor; (iv) revenues generated by any Sublicense Agreements, identifying the sublicensee, the amount, and the basis of the calculations; and (v) any other revenues received from third parties. Simultaneously with the delivery of each Royalty Report, Licensee shall pay to Licensor the applicable Royalty and Sublicense Fee due, as set forth in Paragraph 3 above.

 

 
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c.     Not later than 60 days following the end of each fiscal year, Licensee agrees to provide Licensor, at Licensee’s sole expense, a report from an independent certified public accountant which attests to the accuracy of Licensee’s information, computations and the Royalty and Sublicense Fees due for each Reporting Period during the previous fiscal year.

 

d.      Audit Rights . Licensor shall be entitled, upon no less than five (5) days written notice to Licensee and during business hours at Licensee’s office or such other place as Licensee shall designate within the state of California, to inspect and examine those books and records of Licensee relating to the determination of Royalties or Sublicense Fees set forth in any Royalty Report. The inspection of Licensee’s records shall be performed by a national public accounting firm (a “Qualified Firm”). The examination must be conducted within ten (10) days of such books and records being made available to Licensor (“Examination Period”). The Qualified Firm shall prepare a report indicating the results of the review (the “Audit Report”). If the Audit Report discloses that the amount of Royalties or Sublicense Fees reported to Licensor was incorrect, Licensee shall pay to Licensor the deficiency, unless Licensee disputes the Report within thirty (30) days after the receipt of the Report by Licensee. If Licensee disputes the Report within this thirty (30) day period, Licensee and Licensor shall agree upon another of the national independent accounting firms to review and verify the Royalties and Sublicense Fees, and provide the results thereof to Licensee and Licensor (the “Reconciliation Audit”) and the determination as set forth in the Reconciliation Audit shall be binding upon Licensee and Licensor. All costs and expenses of the auditor generating the Report shall be paid by Licensor unless the audit shows that Licensee understated Royalties or Sublicense Fees in the Royalty Report by more than five percent (5%), in which case Licensee shall pay the cost and expenses of such audit. Notwithstanding the foregoing, in the event the Reconciliation Audit is performed, Licensee and Licensor shall each pay on-half (1/2) of the cost of the Reconciliation Audit. The exercise by Licensor of its audit rights hereunder shall not relieve Licensee of its obligations to pay prior to the request for and inspection and examination of Licensee’s books and records or permit Licensor the right to audit any other sums with the exception of the amounts set forth in this Royalty Report. If Licensor does not elect to exercise its rights to audit during the Audit Period, and/or does not elect to examine the books and records during the Examination Period, then Licensee’s Royalty Report shall conclusively be deemed to be correct and Licensor shall be bound by Licensee's determination. Additionally, Licensor agrees and acknowledges that the audit right as set forth herein and the review of books and records shall be confidential and, with the exception of Licensor’s auditors, Licensor may not disclose or discuss the audit or the results of the audit to any other parties.

 

6.             IP Ownership .

 

a.     Ownership of all inventions and discoveries relating to, derivative of, or enhancements or improvements of any of the claims embodied in any to the Patent Rights, the Licensed Products or the Licensed Processes, whether discovered or developed in connection with any of the research and development activities conducted hereunder, or otherwise, shall remain with Licensor. Licensee shall cause each and every one of its officers, employees, independent contractors, subcontractors and other individuals or entities engaged in, having access to, contact with or otherwise employed in any manner with the Licensed Products, Licensed obtain executed nondisclosure and assignment agreements in form and substance as Licensor should from time to time deem necessary or desirable to secure to and for Licensor all right, title and interest in and to each and all of the rights detailed in the preceding sentence and each of such nondisclosure and assignment agreements shall require such officers, employees, independent contractors, subcontractors and other individuals and entities to execute and deliver to Licensor all documents and instruments as Licensor should from time to time deem necessary or desirable to vest all rights therein and thereto exclusively in Licensor.

 

 
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b.     Licensor shall have the sole and exclusive right, discretion and authority to assert Patent Rights against any third party. Licensor shall have the sole and exclusive right to select counsel and control and direct the assertion of all rights and the prosecution of all actions. Should Licensor elect to enforce Patent Rights against a third party in the Field of Use, which election shall be made by Licensor in its sole and absolute discretion, Licensee shall be obligated to pay fifty percent (50%) of all costs associated with the litigation or other similar proceeding, unless otherwise agreed to in writing. Licensor and Licensee shall share all awards in any such proceedings in an amount based upon the Parties pro-rata contribution to the expenses and costs of any such proceeding.

 

7.             Marking of Patent Rights . All Licensed Products, including those produced pursuant to the rights granted in any Sublicense Agreement, shall bear a trademark designated by Licensor, and appropriate patent marking, such as “Patent Pending” or reference to specific issued U.S. Patents covering the Licensed Products, pursuant to and in conformance with the guidelines issued from time to time by Licensor. Licensee shall consult with and obtain the written approval of Licensor with respect to any such patent marking. Licensee shall impose the patent marking obligations of this Section 7 on all sublicensees.

 

8.              Insurance Requirements . Licensee shall maintain, at Licensee’s expense, during the period that any Licensed Product is made, used, sold or otherwise made available to others pursuant to this Agreement, comprehensive liability insurance, including product liability insurance, with a reputable and financially secure insurance carrier(s) to cover the activities of Licensee and its sublicensees, if any, contemplated by this Agreement, for minimum limits of five million dollars ($5,000,000.00) per occurrence. Such insurance shall name Licensor as an additional insured. Licensee shall furnish a Certificate of Insurance, upon request, evidencing coverage of five million dollars ($5,000,000.00) with thirty (30) days of written notice of cancellation or material change to Licensor. Licensee’s insurance shall be written to cover claims incurred, discovered, manifested, or made during the term, or after the expiration, of this Agreement. Licensee shall at all times comply, through insurance or self-insurance, with all statutory workers’ compensation and employers’ liability requirements covering any and all employees with respect to activities performed under this Agreement. All such liability insurance policies shall be written as primary policies not contributing with and not in excess of coverage which Licensor may carry.

 

9.             Events of Default and Termination .

 

a.     This Agreement shall terminate automatically in the event that Licensee files a petition, or has a petition filed against it, under any laws relating to insolvency, including, without limitation, any filing under any provision of the Bankruptcy Act; or enters into any voluntary arrangement for the benefit of its creditors; or appoints, or has appointed on its behalf, a receiver, liquidator or trustee of its property or assets.

 

 
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b.    The following shall be considered an “Event of Default”:

 

i.     Licensee’s failure to timely pay to Licensor during a particular Reporting Period an amount equal to at least the sum of the Royalty and Sublicensing Fees due for such Reporting Period;

 

ii.     Licensee’s failure to timely deliver to Licensor the Report due for a Reporting Period;

 

iii.     Licensee’s breach or default of the terms of the Promissory Note related to the Initial Licensee Fee.

 

iv.     Licensee’s assignment of this Agreement in violation of the terms set forth in Section 15.l below.

 

v.     Licensor’s grant of a license to a third party in the Field of Use during the Term, provided that Licensee has not breached one or more provisions of this Agreement, or otherwise committed an Event of Default;

 

vi.     Licensor’s failure to pay any necessary fees for the continuation of the U.S. Patents, or any patents granted pursuant to the U.S. Patent Applications; and

 

vii.     A Change in Control of Licensee, which occurs without the prior written consent of Licensor. Change in Control of Licensee shall be deemed to have occurred if:

 

(a)     any “person” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other than Licensee, any trustee or other fiduciary holding securities under any of Licensee’s employee benefit plan, or any entity owned, directly or indirectly, by Licensee’s shareholders (or other equity owners if Licensee is not a corporation at such time) in substantially the same proportions as their ownership of the Company's voting securities), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act, or any successor rule or regulation thereto as in effect from time to time), directly or indirectly, of Licensee’s securities representing 50% or more of the combined voting power of Licensee’s then outstanding securities;

 

(b)     a tender offer (for which a filing has been made with the Securities and Exchange Commission which purports to comply with the requirements of Section 14(d) of the Exchange Act and the rules thereunder) is made for the stock of Licensee, upon the first to occur of (A) any time during the offer when the person (as defined in clause (i) above) making the offer owns or has accepted for payment securities of Licensee representing 25% or more of the combined voting power of Licensee’s then outstanding securities or (B) three business days before the offer is to terminate unless the offer is withdrawn first, if the person making the offer could own, by the terms of the offer plus any voting securities owned by such person, securities representing 50% or more of the combined voting power of Licensee’s outstanding securities when the offer terminates;

 

 
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(c)     during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors (or Board of Managing Members or similar if Licensee is not a corporation), and any new director or managing member (other than a director or managing member designated by a person who has entered into an agreement with Licensee to effect a transaction described in clause (a), (b), (c) or (d) of this Section 9.b.vii) whose election by the Board of Directors or Board of Managing Members or nomination for election by Licensee’s shareholders or members was approved by a vote of at least two-thirds of the directors or managing members then still in office who either were directors or managing members at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board of Directors or Board of Managing Members;

 

(d)     Licensee’s shareholders (or other equity owners if Licensee is not a corporation) approve a merger or consolidation of Licensee with any other corporation or other business entity, other than a merger or consolidation that would result in Licensee’s voting securities outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of voting securities of Licensee or such surviving entity outstanding immediately after such merger or consolidation; or

 

(e)     Licensee’s shareholders (or other equity owners if Licensee is not a corporation) approve a plan of complete liquidation of Licensor or an agreement for the sale or disposition by Licensee of all or substantially all of Licensee’s assets.

 

c.     Upon any breach or default by either Party in the performance or observance of any of its obligations under this Agreement, including without limitation an Event of Default, the non-breaching Party may, at its sole option, terminate this Agreement by giving 15 days’ notice (the “Grace Period”) to the breaching Party. The termination shall become effective at the end of the Grace Period, unless before the completion of the Grace Period the breaching Party shall cure the breach or default in full; provided, however, that if a breaching Party has breached this Agreement three times within any 24-month period, the non-breaching Party may terminate this Agreement immediately without providing any Grace Period to the breaching Party.

 

10.           Obligations and Rights Upon Termination .

 

a.     Upon termination of this Agreement for any reason, Licensee shall:

 

i.     promptly return to Licensor all technical writings, business writings, materials, samples, data, drafts, proposals, sales information, business information and all other materials transferred and created during the term of this Agreement, retaining a confidential copy of this Agreement, and cause one or more of its officers to execute a certification, under penalty of perjury, that all such items have been returned;

 

ii.     immediately stop all business, sales, marketing, publication, public disclosure, research and development on technology within Patent Rights, including joint Patent Rights; and          

 

 
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iii.     immediately terminate or assign to Licensor all of Licensee’s right, title and interest in, to or under any agreements pursuant to which a third party is given rights relating to Licensed Products, the Licensed Processes or Patent Rights, including without limitation Sublicense Agreements. By signing this Agreement, Licensee irrevocably designates and appoints Licensor, as its true and lawful attorney in fact, in its name, place and stead, to make, execute, sign and file such instruments, documents or certificates which may from time to time be required to effective any such termination or assignment. The power of attorney granted hereby shall be irrevocable and is coupled with an interest in favor of Licensor;

 

b.     Upon termination of this Agreement, Licensor shall have no obligation to refund any payment or fee made to it or received by it under any provision of this Agreement, regardless of purpose.

 

11.           Representations and Warranties of Licensor . Licensor represents and warrants to Licensee as follows:

 

a.     Licensor is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to own, lease and operate its property and to carry on its business as now being conducted.

 

b.     Licensor has full power and authority to enter into, execute and deliver this Agreement and perform its obligations hereunder. This Agreement has been duly authorized by all necessary corporate action of Licensor. This Agreement has been duly executed and delivered by Licensor and, assuming this Agreement is duly executed and delivered by Licensee, constitutes a valid and legally binding obligation of Licensor enforceable against Licensor in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws relating to or affecting creditors’ rights generally, or the availability of equitable remedies.

 

c.     The execution and delivery by Licensor of this Agreement do not, and compliance by Licensor with the provisions of this Agreement will not, conflict with or result in a breach or default under any of the terms, conditions or provisions of any contract to which Licensor is a party or otherwise bound.

 

d.     EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, LICENSOR, ITS DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS, AGENTS, CONSULTANTS AND AFFILIATES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND VALIDITY OF THE CLAIMS OF ANY PATENTS ON THE TECHNOLOGY ISSUED OR PENDING, OR FREEDOM OF A PRODUCT THAT EMBODIES TECHNOLOGY FROM INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. IN NO EVENT SHALL LICENSOR, ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES, AND AFFILIATES BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING BUT NOT LIMITED TO ECONOMIC DAMAGE OR INJURY TO PROPERTY AND LOST PROFITS, WHETHER LICENSOR SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF THE FOREGOING. LICENSOR REPRESENTS AND WARRANTS IN RESPECT TO THE PATENT RIGHTS THAT IT HAS LEGAL RIGHT TO EXTEND THE RIGHTS TO LICENSEE, AND THAT IT HAS NOT MADE AND WILL NOT MAKE ANY COMMITMENTS TO OTHERS INCONSISTENT WITH OR IN DEROGATION OF SUCH RIGHTS.

 

 
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12.           Representations and Warranties of Licensee . Licensee represents and warrants to Licensor as follows:

 

a.     Licensor is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to own, lease and operate its property and to carry on its business as now being conducted.

 

b.     Licensee has full power and authority to enter into, execute and deliver this Agreement and perform its obligations hereunder. This Agreement has been duly authorized by all necessary corporate action of Licensee. This Agreement has been duly executed and delivered by Licensee and, assuming this Agreement is duly executed and delivered by Licensor, constitutes a valid and legally binding obligation of Licensee enforceable against Licensee in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws relating to or affecting creditors’ rights generally, or the availability of equitable remedies.

 

c.     The execution and delivery by Licensee of this Agreement do not, and compliance by Licensee with the provisions of this Agreement will not, conflict with or result in a breach or default under any of the terms, conditions or provisions of any contract to which Licensee is a party or otherwise bound.

 

13.           Confidentiality . From time to time, so long as this Agreement should be in force or effect, Licensee shall execute a non-disclosure agreement in form and substance as Licensor should from time to time deem necessary or desirable. Licensee shall cause each and every one of its officers, employees, independent contractors, subcontractors and other individuals or entities engaged in, having access to, contact with or otherwise employed in any manner with the Licensed Products, to execute non-disclosure and assignment agreements in form and substance as Licensor should from time to time deem necessary or desirable.

 

14.            Indemni fication .

 

a.     Licensee Indemnification. Licensee shall indemnify, save and hold harmless Licensor and each of its officers, directors, employees, agents and affiliates, and each of their successors and assigns (collectively, the “Licensor Indemnified Parties”) from and against any and all costs, losses, claims, liabilities, fines, penalties, consequential damages (other than lost profits) whatsoever, including but not limited to death or injury to person or damage to property, and expenses (including interest which may be imposed in connection therewith, court costs and actual attorneys’ and expert witness fees and disbursements of counsel) (collectively, “Damages”) incurred in connection with, arising directly or indirectly out of, resulting from or incident to (i) Licensee’s exercise of any of its rights or conduct of any activities granted hereunder, (ii) the commercial sale and/or use, clinical or otherwise, of Patent Rights, Licensed Products or Licensed Processes by Licensee, its sublicensees, or any customers of any of them in any manner whatsoever; (iii) the performance, non-performance, or harmful effects of the sale, manufacture, or use of the Licensed Products, including without limitation product liability claims; or (iv) third party patent infringement claims stemming from Licensee’s use of any Patent Rights, Licensed Products or Licensed Processes.

 

 
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b.     Licensor Indemnification. Licensor shall defend, indemnify and hold Licensee harmless from and against any damages, claims, lawsuits, causes of action, liabilities, costs, obligations and expenses (including reasonable attorneys’ fees and court costs) arising solely out of any claim or allegation (whether or not proven) by any third party that the Patent Rights and intellectual property licensed to Licensee pursuant to this Agreement infringes upon or violates a valid intellectual property right or represents a misappropriation of a trade secret of a third party.

 

c.     If a claim for Damages (a “Claim”) is to be made by a Party entitled to indemnification hereunder (an “Indemnified Party”) against the indemnifying Party (the “Indemnifying Party”), the Indemnified Party shall give written notice (a “Claim Notice”) to the Indemnifying Party, which notice shall specify whether the Claim arises as a result of a claim by a person against the Indemnified Party (a “Third Party Claim”) or whether the Claim does not so arise (a “Direct Claim”), and shall also specify (to the extent that the information is available) the factual basis for the Claim and the amount of the Damages, if known. If the Claim is a Third Party Claim, the Indemnified Party shall provide the Claim Notice as soon as practicable after such Party becomes aware of any fact, condition or event which may give rise to Damages for which indemnification may be sought under this Section 14. If any lawsuit or enforcement action is filed against any Indemnified Party, written notice thereof shall be given to the Indemnifying Party as promptly as practicable (and in any event within 15 calendar days after the service of the citation or summons). The failure of any Indemnified Party to give timely notice hereunder shall not affect rights to indemnification hereunder, except to the extent that the Indemnifying Party has been damaged by such failure.

 

15.           General Provisions .

 

a.      Notices . All Notices, requests and other communications that a Party is required or elects to deliver shall be in writing and shall be delivered personally, or by facsimile, or by a recognized overnight courier service, to the other Party at its address set forth below or to such other address as such Party may designate by notice given pursuant to this Section:

 

 If to Licensor:

 

BioLargo, Inc.

 

 

16150 Heron Avenue

 

 

La Mirada, CA 90638

 

 

Attn: Dennis P. Calvert

 

 

 

 If to Licensee:

 

Clyra Medical Technologies, Inc.

 

 

16150 Heron Avenue

 

 

La Mirada, CA 90638

 

 

Attn: Steven V. Harrison, President

 

 
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All such notices, requests and other communications will: (i) if delivered personally to the address as provided in this Section 15.a, be deemed given upon delivery; (ii) if delivered by facsimile transmission to the facsimile number as provided for in this Section 15.a, be deemed given upon facsimile confirmation; and (iii) if delivered by messenger or courier to the address as provided in this Section 15.a, be deemed given on the earlier of the first business day following the date sent by such messenger or courier upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice is to be delivered pursuant to this Section 15.a. A Party from time to time may change its address, facsimile number or other information for the purpose of notices to that Party by giving notice specifying such change to the other Parties hereto.

 

b.      Publicity . Neither Party shall issue any public announcement regarding this Agreement, or which contains the name of the other Party, without giving prior reasonable notice to the other Party, and receiving written approval thereon; provided, however, that (i) Licensor may withhold its approval in its sole and absolute discretion and (ii) written approval from Licensee shall not be required for any disclosures that are required or which counsel advises Licensor are required by applicable law, including without limitation Federal securities laws, in which instance, Licensor shall so notify Licensee as reasonably promptly as commercially possible.

 

c.      Entire Agreement . This Agreement contains the sole and entire agreement and understanding of the Parties with respect to the entire subject matter of this Agreement, and any and all prior discussions, negotiations, commitments and understandings, whether oral or otherwise, related to the subject matter of this Agreement are hereby merged herein.

 

d.      Waiver and Amendment . No provision of this Agreement may be waived unless in writing signed by all the Parties to this Agreement, and waiver of any one provision of this Agreement shall not be deemed to be a waiver of any other provision. This Agreement may be amended only by a written agreement executed by all the Parties to this Agreement.

 

e.      Governing Law . This Agreement has been made and entered into in the State of California and shall be construed in accordance with the laws of the State of California without giving effect to the principles of conflicts of law thereof.

 

f.      Severability. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be or become prohibited or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

g.      Captions. The various captions of this Agreement are for reference only and shall not be considered or referred to in resolving questions of interpretation of this Agreement.

 

h.      Costs and Attorneys Fees. If any action, suit, arbitration or other proceeding is instituted to remedy, prevent or obtain relief from a default in the performance by any party to this Agreement of its obligations under this Agreement, the prevailing party shall recover all of such party’s attorneys’ fees incurred in each and every such action, suit, arbitration or other proceeding, including any and all appeals or petitions therefrom. As used in this Section 15.h, attorneys’ fees shall be deemed to mean the full and actual costs of any legal services actually performed in connection with the matters involved calculated on the basis of the usual fee charged by the attorney performing such services and shall not be limited to “reasonable attorneys’ fees” as defined in any statute or rule of court.

 

 
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i.      Rights Cumulative. No right granted to the Parties under this Agreement on default or breach is intended to be in full or complete satisfaction of any damages arising out of such default or breach, and each and every right under this Agreement, or under any other document or instrument delivered hereunder, or allowed by law or equity, shall be cumulative and may be exercised from time to time.

 

j.      Judicial Interpretation. Should any provision of this Agreement require judicial interpretation, it is agreed that a court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against any person by reason of the rule of construction that a document is to be construed more strictly against the person who itself or through its agent prepared the same, it being agreed that all Parties have participated in the preparation of this Agreement.

 

k.      Force Majeure. If any Party to this Agreement is delayed in the performance of any of its obligations under this Agreement or is prevented from performing any such obligations due to causes or events beyond its control, including, without limitation, acts of God, fire, flood, war, terrorism, earthquake, strike or other labor problem, injunction or other legal restraint, present or future law, governmental order, rule or regulation, then such delay or nonperformance shall be excused and the time for performance thereof shall be extended to include the period of such delay or nonperformance.

 

l.      Assignment and Transfers . Except as otherwise expressly provided herein, Licensee may not assign or delegate either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of Licensor. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

 

m.      Counterparts . This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that all Parties need not sign the same counterpart

 

IN WITNESS WHEREOF, the Parties have executed this License Agreement as of the date set forth above.

 

Licensor

Biolargo, Inc.

BioLargo Life Technologies, Inc.

 

Licensee

Clyra Medical Technologies, Inc.

     
/s/Dennis P. Calvert   /s/Steven V. Harrison

 

 

 

By: Dennis P. Calvert, President

 

By: Steven V. Harrison, President

 

 
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Exhibit A

 

Promissory Note

PROMISSORY NOTE

 

In consideration of the rights granted to Clyra Medical Technologies, Inc. as set forth in that certain license agreement (“ License Agreement ”) by and between BioLargo, Inc., a Delaware corporation and its wholly owned subsidiary BioLargo Life Technologies, Inc., a California corporation (collectively referred to as “BioLargo”), and Clyra Medical Technologies, Inc., a California corporation (“ Clyra ”), dated December 17, 2012, Clyra promises to pay to the order of BioLargo, Inc., six million nine hundred seventy-nine thousand thirty nine dollars ($6,979,039) (the “Principal Amount”), payable in two hundred forty (240) equal monthly payments of $50,000, on or before twenty (20) years from the Trigger Date set forth below (the “Maturity Date”), or at an earlier date as provided herein.

 

Clyra agrees to pay interest on the unpaid Principal Amount at the following annual rates: (i) before the Maturity Date, whether by acceleration or otherwise, at the rate per annum equal to six percent (6%); (ii) after the Maturity Date, whether by acceleration or otherwise, until paid, at a rate per annum equal to twelve percent (12%). Payments of both principal and interest are to be made in immediately available funds in lawful money of the United States of America.

 

Accrual of interest shall commence as of the “Trigger Date”. “Trigger Date” shall mean the date upon which Clyra receives an aggregate $3,500,000 or more cash capital investment, or its gross monthly revenues exceed $100,000. In such case that its gross monthly revenues exceed $100,000, but is less than $250,000, Clyra may elect to pay twenty percent (20%) of its gross revenues on a monthly basis, rather than the required monthly payment of $50,000, and in which case doing so shall not be an “event of default” under this Note.

 

This note is subject to the following additional provisions:

 

1.     Prepayment. The unpaid Principal Amount of this note, or any accrued and unpaid interest, may be prepaid at any time prior to the Maturity Date.

 

2.     No provision of this Note shall alter or impair the obligation of Clyra, which is absolute and unconditional, upon an Event of Default (as defined below), to pay the principal of, and interest on this Note at the place, time, and rate, and in the coin or currency herein prescribed.

 

3.     Events of Default. Each of the following occurrences is hereby defined as an “Event of Default”:

 

a.      Nonpayment . Clyra shall fail to make any payment of principal, interest, or other amounts payable hereunder when and as due; or

 

b.      Noncompliance with Note . Clyra shall fail to comply in any material respect with any provision hereof, which failure does not otherwise constitute an Event of Default, and such failure shall continue for fifteen (15) days after the occurrence of such failure; or

 

c.      Noncompliance with License Agreement . Clyra shall fail to comply in any material respect with any provision of the License Agreement, and such failure shall continue for fifteen (15) days after the occurrence of such failure; or

 

 

 

 

d.      Bankruptcy . Any bankruptcy, insolvency, reorganization, arrangement, readjustment, liquidation, dissolution, or similar proceeding, domestic or foreign, is instituted by or against Clyra or any of its subsidiaries, or Clyra or any of its subsidiaries shall take any step toward, or to authorize, such a proceeding; or

 

e.      Insolvency . Clyra shall make a general assignment for the benefit of its creditors, shall enter into any composition or similar agreement, or shall suspend the transaction of all or a substantial portion of its usual business.

 

4.     If one or more “Events of Default” shall occur, then, or at any time thereafter, and in each and every such case, unless such Event of Default shall have been waived in writing by BioLargo (which waiver shall not be deemed to be a waiver of any subsequent default) or cured as provided herein, at the option of BioLargo, and in BioLargo's sole discretion, BioLargo may elect to consider this Note (and all interest through such date) immediately due and payable. In order to so elect, BioLargo must deliver written notice of the election and the amount due to Clyra via certified mail, return receipt requested, at Clyra’s address as set forth herein (or any other address provided to BioLargo), and thereafter Clyra shall have fifteen business days upon receipt to cure the Event of Default, pay the Note, or, if so requested by BioLargo, convert the amount due on the Note pursuant to the conversion formula set forth above. It is agreed that in the event of such action, such Holder shall be entitled to receive all reasonable fees, costs and expenses incurred, including without limitation such reasonable fees and expenses of attorneys. The parties acknowledge that a change in control of Clyra shall not be deemed to be an Event of Default as set forth herein.

 

5.     In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.

 

6.     This Note and all other notes in this series may be subordinated to up to $10 million of additional debt financing that Clyra may incur prior to the Maturity Date.

 

IN WITNESS WHEREOF, Clyra has caused this Note to be duly executed by an officer thereunto duly authorized.

 

 

CLYRA MEDICAL TECHNOLOGIES , INC.

 

 

 

 

 

 

 

/s/ Steven V. Harrison

 

 

By

 

 

 

 

Name: Steven V. Harrison, President

 

 

ACCEPTED:  

 

 

 

 

/s/Dennis P. Calvert

 

Signature:

 

 

 

By: Dennis P. Calvert, President

 

 

On behalf of BioLargo, Inc.

 

 

 

-2-

Exhibit 10.2

 

AMENDMENT TO LICENSE AGREEMENT

 

 

THIS AMENDMENT TO LICENSE AGREEMENT (“ Amendment ”) is made and entered into as of this December 30, 2015 by and between BIOLARGO, INC., a Delaware corporation, and its wholly owned subsidiary BioLargo Life Technologies, Inc., a California corporation (collectively, “ Licensor ”), and CLYRA MEDICAL TECHNOLOGIES, INC., a California corporation (“ Licensee ”), with respect to the following:

 

r e c i t a l s :

 

A.     Licensor and Licensee are parties to that certain License Agreement dated December 17, 2012 (“ License Agreement ”).

 

B.     Licensee and Sanatio Capital, LLC (“ Investor ”) are parties to that certain Stock Purchase Agreement (“ Purchase Agreement ”) of even date herewith pursuant to which Investor purchased 40% of the issued and outstanding shares of Licensee’s capital stock.

 

C.     Licensee is a majority owned subsidiary of Licensor, and Investor’s investment in Licensee will provide Licensor with a material benefit.

 

D.     Pursuant to the Purchase Agreement, Investor requires that Licensor and Licensee amend the License Agreement to delay payment of the Initial License Fee until such time as Licensee has reached a certain threshhold, as further set forth herein.

 

E.     Capitalized terms used but not otherwise defined herein shall have the meaning given to such terms in the License Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree to amend, modify and supplement the License Agreement as follows:

 

1. Royalty and Payments . Section 3.a.i is hereby amended and restated in its entirety as follows:

 

“i. Trigger Events . The Promissory Note shall not require payments from Licensee, and no interest on the Note shall accrue, until both of the following conditions are met: (i) a product of Licensee has received pre-market approval by the United States Federal Drug Administration (“ FDA ”), or for which a premarket notification pursuant to form 510(k) has been submitted and for which the FDA has given written clearance to market the product in the United States; and (ii) Licensee has generated $4,000,000 in gross annual revenue. ”

 

 
 

 

 

3.  Events of Default and Termination . Notwithstanding anything in the License Agreement to the contrary, the issuance of shares of Licensee’s Series A Preferred Stock to Investor and the subsequent issuance of capital stock pursuant to the terms and conditions of the Series A Preferred Stock, and the exercise of Investor’s rights to appoint directors to Licensee’s board of directors, shall not constitute a Change in Control of Licensee or an Event of Default.

 

4.      Revised Patents Rights Definition . The definition of Patent Rights set forth in Section 1.j.i shall hereafter include European patent number 2 081 605, to be marked as “Euro Pat No: 2 081 605 DE FR GB”.

 

5.      Revised Granting Paragraph . The first sentence of Section 2.a, is restated to read in its entirety as follows:

 

“In consideration of the license fees and royalties to be paid by Licensee hereunder, and unless otherwise terminated pursuant to Section 9 below, Licensor grants to Licensee a world-wide, exclusive, non-assignable, royalty-bearing license (the “License”) under the Patent Rights in the Field of Use, to make, have made, use, sell, offer for sale, and import Licensed Products for use within the Field of Use and to practice Licensed Processes in the Field of Use.”

 

6.      Revised License Term . Section 4 is hereby amended to insert the word “not” into the final phrase such that it reads: “…provided that Licensee has not committed an Event of Default.”

 

7.      Third Party Beneficiary . Investor is an intended third party beneficiary of this Amendment.

 

8.      Miscellaneous .

 

a.      Effect of Amendment . Except to the extent the License Agreement is modified by this Amendment, the remaining terms and conditions of the License Agreement shall remain unmodified and in full force and effect. In the event of any conflict between the terms and conditions of the License Agreement and the terms and conditions of this Amendment, the terms and conditions of this Amendment shall prevail and control.

 

b.      Entire Agreement . The License Agreement, together with this Amendment, embodies the entire understanding between the parties hereto with respect to its subject matter and can be changed only by an instrument in writing signed by the parties hereto.

 

c.      Counterparts . This Amendment may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

d.      Governing Law . The parties hereto expressly agree that this Amendment shall be governed by, interpreted under, and construed and enforced in accordance with the laws of the jurisdiction identified in the License Agreement.

 

[Signature Page Follows]

 

 

11316721v1

 
 

 

 

IN WITNESS WHEREOF, the Parties have executed this Amendment to License Agreement as of the date set forth above.

 

Licensor

Biolargo, Inc.

BioLargo Life Technologies, Inc.

 

/s/ Dennis P. Calvert

 

 

Licensee

Clyra Medical Technologies, Inc.

 

 

/s/Steven V. Harrison

By: Dennis P. Calvert, President

 

By: Steven V. Harrison, President

 

Exhibit 10.3

 

CONSULTING AGREEMENT

 

THIS CONSULTING AGREEMENT (“ Agreement ”) is entered into as of the 30 th day of December, 2015 (the “ Effective Date ”), by and between Beach House Consulting, LLC, a Minnesota limited liability company (“ Consultant ”) and Clyra Medical Technologies, Inc., a California corporation (“ Client ”). Consultant and Client are individually referred to herein as a “ Party ” and collectively as the “ Parties .”

 

RECITALS:

 

WHEREAS, Consultant, among other things, provides consulting services; and

 

WHEREAS, Client wishes to engage Consultant as an independent contractor to perform consulting services according to the terms and conditions of this Agreement.

 

AGREEMENT:

 

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants and obligations herein, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

1.      Services . During the Term (as defined below), Consultant shall, from time to time on an ad hoc basis, provide to Client professional services related to business strategy, marketing strategy, go to market strategies, brand and image development strategies, packing design and such other services agreed to by the Parties (“ Services ”). It is understood that Consultant will not be required to perform Services on a full time basis, or to perform a specific quantity of Services. Consultant and its Personnel (as defined below) may perform services for other parties during the Term.

 

2.      Oversight . The Services shall be subject to Client’s review and acceptance, which shall not be unreasonably withheld. Client’s sole remedy for unsatisfactory Services will be for Consultant to re-perform such Services to Client’s reasonable satisfaction. Client’s chief executive officer will be the primary contact for Client and will provide general work direction and prioritization of Consultant’s Services. At least once per month, Consultant will meet with Client’s chief executive officer (which may occur by conference call) to review interim results, current activities, and seek guidance/feedback.

 

3.      Independent Contractor . It is understood and agreed that Consultant will provide the Services as an “independent contractor” as that term is defined by the U.S. Internal Revenue Code. Consultant and Consultant’s officers, employees and contractors (collectively, “ Personnel ”) will not be considered an employee of Client within the meaning or the applications of any federal, state or local laws or regulations including, but not limited to, laws or regulations covering unemployment insurance, worker’s compensation, industrial accident, labor or taxes of any kind. It is also understood and agreed that Consultant and its Personnel will not be considered an employee of Client within the meaning or application of Client’s employee fringe benefit programs for the purpose of vacations, holidays, 401(k) or retirement, group life insurance, accidental death, medical, hospitalization, or surgical benefits. Accordingly, Consultant shall have the sole responsibility for paying all such taxes and other amounts due under applicable laws and regulations, and all amounts due for fringe benefits, in respect to Consultant and its Personnel. The Services shall be performed by Consultant without direct supervision by Client and Client shall not exercise control or direction of Consultant as to the means and methods for accomplishing mutually agreed upon results. Consultant and its Personnel will not have any authority, express or implied, to commit or obligate Client in any manner. This Agreement will not render Consultant or any its Personnel a partner, agent of, or joint venturer with Client for any purpose. Client will issue Consultant an IRS Form 1099-MISC annually.

 

 
 

 

   

4.      Term . The term of this Agreement will begin on the Effective Date and will continue in full force and effect for a period of forty-eight (48) months following the calendar month in which Client has obtained FDA Approval (the “ Term ”), unless earlier terminated as set forth herein. For purposes of this Agreement, the term “ FDA Approval ” means a product of Client has received a premarket approval by the United States Federal Drug Administration (“ FDA ”), or for which a premarket notification pursuant to form 510(k) has been submitted and for which the FDA has given written clearance to market the product in the United States.

 

5.      Termination . Notwithstanding Section 4, this Agreement may be terminated prior to the end of the Term as follows:

 

a.     This Agreement may be terminated upon thirty (30) days’ advance written notice by Consultant .

 

b.     This Agreement may be terminated by Client if Consultant materially breaches, and fails to cure after thirty (30) days’ written notice thereof: (i) any of its obligations in this Agreement, or (ii) Consultant breaches applicable law in a manner that harms Client.

 

c.     This Agreement may be terminated immediately by either Party if the other Party (i) makes a general assignment for the benefit of its creditors, (ii) authorizes, initiates, consents to or becomes the subject of any proceeding for a moratorium or relief under the United States Bankruptcy Code or any similar state law that is not dismissed within thirty (30) days or otherwise is the subject of a stay of enforcement against it of creditors’ remedies generally, (iii) is unable to pay its debts in the ordinary course of business as they become due, or (iv) terminates its business or otherwise ceases to function as a going concern.

 

6.      Fees . Prior to obtaining FDA Approval, Client shall reimburse Consultant for all reasonable out of pocket expenses hereunder, but shall not be obligated to pay fees for Services. Beginning on the first day of the month following the month in which Client has received FDA Approval, Client shall pay $23,437.50 per month for Services rendered (and previously rendered), plus all of Consultant’s reasonable and pre-approved out of pocket expenses related to the Services provided for Client hereunder. Fees, charges and other amounts payable to Consultant hereunder do not include any sales, use, excise, value added or other applicable taxes, payment of which shall be the sole responsibility of Client (excluding any applicable taxes based on Consultant’s net income). In the event any amount owed to Consultant is not paid when due, Consultant may at its sole discretion and without being in breach or otherwise limiting its remedies, suspend furnishing any further Services. Client shall pay Consultant for all of Consultant’s costs and expenses, including but not limited to reasonable attorneys’ fees, in connection with collection or pursuit of any monies owed to Consultant by Client under this Agreement. The payments due under this Agreement shall accelerate in the event Client generates $4,000,000 in gross annual revenues.

 

7.      Work for Hire . All original works of authorship created by Consultant while performing its duties hereunder for Client (“ Work Product ”) shall be considered a specially commissioned “work made for hire” under United States copyright law. To the extent any such original work of authorship does not qualify as a “work made for hire” under United States copyright law, Consultant shall, and hereby does, assign all of its right, title, and interest in and to the same to Consultant. To the extent Consultant incorporates any of its Pre-Existing Works into the Work Product, Consultant hereby grants Client a non-exclusive, perpetual, world-wide, royalty-free right and license to copy, display and prepare derivative works of such Pre-Existing Works so incorporated. Notwithstanding any provision in this Agreement to the contrary, Consultant retains ownership of its works of authorship that: (i) were created prior to the Effective Date, (ii) for which no equipment, supplies, facility or trade secret information of Client were used and which were developed independent of this Agreement, (iii) do not relate directly to the business of Client or to Client’s actual or demonstrably anticipated research or development, or (iv) do not result from any work or Services performed by Consultant for Client (collectively, “ Pre-Existing Works ”).

 

 
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8.      Due Diligence . The Work Product may include creative works that, once delivered to Client, will be used by Client in media, formats, methods and purposes not known to or anticipated by Consultant. The Parties agree that the Services performed by Consultant and the fees paid by Client do not include legal due diligence with respect to the scope of Client’s legal rights to use the Work Product, including without limitation, trademark searches and applicable talent fees. Accordingly, Client shall be solely responsible for conducting due diligence prior to its publication or commercial use of the Work Product, and Client shall be responsible for making all applicable registrations and other necessary actions to perfect its ownership of and rights therein.

 

9.      Confidentiality . Consultant acknowledges that during the engagement it will have access to and become acquainted with various trade secrets, inventions, business plans, financial information, processes, information, records and specifications owned by or licensed to Client and/or used by Client in connection with the operation of its business including, without limitation, Client’s product development, production methods and technologies (“ Confidential Information ”). Consultant agrees that it will not use or disclose any Confidential Information either during the Term of this Agreement or at any time thereafter, except in performance of its duties to Client. All Confidential Information, whether prepared by Consultant or otherwise coming into its possession, shall remain the exclusive property of Client. Consultant shall not retain any copies of Confidential Information without Client’s prior written permission. Upon the expiration or earlier termination of this Agreement, or whenever requested by Client, Consultant shall immediately deliver to Client all physical media containing Confidential Information in its possession or under its control. Notwithstanding the foregoing, information of Client shall not be considered “Confidential Information” if it: (i) is or becomes public knowledge other than through an act or omission of Consultant; (ii) was already known to Consultant at the time of its disclosure; (iii) is lawfully obtained by Consultant from a third party; or (iv) is independently developed by Consultant without use of or reliance on the Confidential Information of Client. This Agreement shall not prevent Consultant’s disclosure of Client’s Confidential Information in response to a valid order of a court or other governmental body provided that Client shall first have given prompt written notice to Client.

 

10.     Indemnification . It is the intent of the Parties that all risk of claims by third parties against Consultant is assumed by Client. Accordingly, Client shall defend, indemnify and hold harmless Consultant, its members, managers, officers, Personnel, and their respective insurers, successors and assigns for any claim, cross-claim, third-party claim, counterclaim for contribution, assertion of claim, loss, cost, fees (including attorney’s fees), expenses or other damages arising out of or resulting from: (i) Consultant’s performance of its duties under this Agreement and (ii) any claims of any nature whatsoever by third parties relating to actions or inactions of Consultant or its Personnel in performance of Consultant’s duties hereunder. Notwithstanding the foregoing, Client need not indemnify Consultant to the extent such claims are directly attributable to Consultant’s willful misconduct or gross negligence in performance of its duties hereunder as determined by a court of competent jurisdiction.

 

11.     L imited Warranty . Consultant warrants that: (i) the Services will be performed in a professional manner, in compliance with applicable law and in material accordance with this Agreement, and (ii) the Work Product will be original and, to the knowledge of Consultant, Client’s use of the Work Product in the format and medium delivered by Consultant, without modification, will not infringe upon any third party’s intellectual property rights. Consultant makes no other representations or warranties, express or implied, as to any matter whatsoever in connection with the Services performed under this Agreement or the Work Product provided, and hereby disclaims the implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. No oral information or advice given by any of Consultant’s Personnel will create a warranty.

 

 
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12.     L imitation of Liability . Consultant’s total liability to Client under this Agreement shall be limited to an amount equal to the fees that Client has actually paid to Consultant hereunder in the previous twelve (12) months (exclusive of expense reimbursement). In no event shall Consultant be liable for punitive damages, indirect damages, special damages, incidental damages, consequential damages or for damages resulting from loss of profits, loss of data, or interruption of business regardless of the form of action (whether in contract, tort, negligence, strict liability, statutory liability or otherwise) and regardless of whether Consultant was made aware of the possibility of such damages or losses.

 

13.     General Provisions .

 

a.      Assignment . Neither Party may assign this Agreement or transfer any rights or obligations under this Agreement (including, without limitation, by operation of law in connection with a merger) without the other Party’s prior written consent.

 

b.      Survival . Notwithstanding the expiration or termination of this Agreement for any reason, the Parties hereto shall be required to carry out all provisions of this Agreement which contemplate performance subsequent to such termination and any such termination shall not affect any liability or other obligation which shall have accrued prior to such termination. Without limiting the foregoing, Sections 6-13 of this Agreement shall survive the termination or expiration of this Agreement.

 

c.      Severability . In case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal, or unenforceable in any respect by a court of law, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and this Agreement shall be construed as if such provision(s) had never been contained herein unless it would be inequitable and inconsistent with the purpose of the Agreement to continue to do so provided that such provision(s) shall be curtailed, limited or eliminated only to the extent necessary to remove the invalidity, illegality or unenforceability.

 

d.      Waiver . No waiver by a Party of any breach by the other Party of any of the provisions of this Agreement shall be deemed a waiver of any preceding or succeeding breach of the same or any other provisions hereof. No such waiver shall be effective unless in writing and then only to the extent expressly set forth in writing.

 

e.      Entire Agreement . This Agreement contains the entire agreement between the Parties with respect to such subject matter and supersedes all prior or contemporaneous agreements, discussions or representations, oral or written with respect to such subject matter.

 

f.      Governing Law; Venue . This Agreement is governed by California law without regard to conflicts of laws principles thereof and the laws of the United States. The Parties agree that any action at law or equity arising out of or relating to this Agreement shall be filed only in the state or federal courts located in Los Angeles County, California. The Parties hereby consent to and submit to the personal and subject matter jurisdiction of said courts and waive any claim that such forum is inconvenient.

 

g.      Attorneys’ Fees . The prevailing Party in any dispute related to this Agreement is entitled to recovery of its reasonable legal fees and expenses incurred in such dispute.

 

 
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h.      Headings . The section headings and captions of this Agreement are for the purpose of reference only and shall not in any way limit or affect the meaning or interpretation of any of the terms hereof.

 

i.      No Third Party Beneficiaries . There are no third party beneficiaries to this Agreement.

 

j.      Force Majeure . If Consultant is prevented, hindered, or delayed in the performance or observance of any of its obligations or duties hereunder by reason of any circumstance beyond its reasonable control, including but not limited to power outages, Internet interruption, computer viruses, strikes, work slowdowns, labor unrest, fire, flood, blizzards, natural disasters, acts of God, riots or civil disorder, Consultant shall be excused from performance of its obligations and duties hereunder for as long as such circumstances continue.

 

k.      Interpretation . The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of this Agreement.

 

l.      Counterparts . This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

[Signature Page Follows]

 

 
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IN WITNESS WHEREOF the undersigned have executed this Consulting Agreement as of the day and year first written above.

 

 

CONSULTANT:

 

 

CLIENT:

 

             
 BEACH HOUSE CONSULTING, LLC      Clyra Medical Technologies, Inc  
         
 

/s/ Jack B. Strommen

 

 

 

/s/ Steven V. Harrison

 

By:

 

 

 

By:

 

 

 

Jack B. Strommen, Manager

 

 

 

Steven V. Harrison, President

 

 

 

 

 

[Signature Page to Consulting Agreement]

Exhibit 99.9

 

BioLargo Secures Financing for its Advanced Wound Care Products Targeting FDA Application, Approval and Commercialization through its Subsidiary Clyra Medical Technologies

 

SANTA ANA, CA--( January 6, 2016) - BioLargo , Inc. (OTCQB: BLGO) subsidiary Clyra Medical Technologies, Inc. has successfully concluded a financing from Sanatio Capital LLC for $750,000 in equity and a forward commitment to provide a $5,000,000 operating line of credit, to support the FDA approval and commercial launch of Clyra’s advanced wound care products.

 

Clyra Medical Technologies holds the exclusive license to commercialize BioLargo’s technology in the Advanced Wound Care industry. Sanatio has purchased 40% of the issued and outstanding shares of Clyra in exchange for its investment and its commitment to fund the operating line of credit. Details of the transaction are described in the Form 8-K filed by BioLargo, Inc., with the SEC and can be viewed here: click here 

 

Dennis P. Calvert, President & CEO of BioLargo commented, “This is another important milestone for BioLargo and Clyra as we continue to advance our mission to Make Life Better with our sustainable, disruptive, patent-protected technologies. We believe our Clyra products represent a technical advancement in the way wounds can be better managed to promote healing and that they will reduce human suffering around the world.”

 

Steve Harrison, President of Clyra Medical Technologies commented, “We believe that this financing will provide the capital needed to help Clyra secure the appropriate regulatory approvals and launch what we believe will become a game changer for the Advanced Wound Care industry. This segment is a $6 billion market and we believe we will be able to offer better technical solution to this market”.

 

About Sanatio Capital

 

Sanatio Capital was created around the goal of identifying and supporting game-changing, high-impact technology. This vision is driven forward by powerful management teams focused on addressing challenges facing humanity and relieving human suffering around the world by creating innovative products. The company was founded by the Strommen family, the founders and leaders of PD Instore. With 75+ years of experience in product development, they bring product expertise and a network of relationships to leading retail companies around the world, helping 'big brands dream big.'

 

 
 

 

 

About BioLargo

 

BioLargo, Inc. (BLGO ) makes life better by delivering sustainable technology-based products that help solve some of the most widespread problems threatening the world's supply of water, food, agriculture, healthcare and energy. More information can be found about the company and its subsidiaries at www.BioLargo.com . Its subsidiary BioLargo Water, Inc. (www.BioLargoWater.com ) showcases the Advanced Oxidation Systems, including its AOS Filter -- a product in development specifically designed to eliminate common, troublesome, and dangerous (toxic) contaminants in water in a fraction of the time and cost of current technologies. It is the winner of the Technology Star award by New Technology Magazine for its breakthrough innovation for the oil industry and is named the Technology Innovation Leader in the water treatment market by Frost & Sullivan. BioLargo also owns a 50% interest in the Isan System, which was honored with a "Top 50 Water Company for the 21st Century" award by the Artemis Project now being commercialized under a license to Clarion Water, Inc. BioLargo’s subsidiary Odor-No-More Inc., features award-winning products serving the pet, equine, military supply and consumer markets, including the Nature's Best Solution® and Deodorall® brands (www.OdorNoMore.com ). BioLargo’s subsidiary Clyra Medical Technologies, Inc. (www.ClyraMedical.com ) focuses on advanced wound care management and is preparing to make FDA 510(k) applications in 2016.

 

Safe Harbor Statement

The statements contained herein, which are not historical, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, including, but not limited to, the risks and uncertainties included in BioLargo's current and future filings with the Securities and Exchange Commission, including those set forth in BioLargo’s Annual Report on Form 10-K for the year ended December 31, 2014.

Company contact: 
Dennis Calvert 
President 
BioLargo, Inc. 
949-643-9540 x1