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): October 11, 2019
AYTU BIOSCIENCE, INC.
(Exact
name of registrant as specified in its charter)
Delaware
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001-38247
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47-0883144
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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373 Inverness Parkway, Suite 206
Englewood, CO 80112
(Address
of principal executive offices, including Zip Code)
Registrant’s
telephone number, including area code: (720) 437-6580
N/A
(Former
name or former address, if changed since last report)
Check
the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
☐
Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c))
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common
Stock, par value $0.0001 per share
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AYTU
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The
NASDAQ Stock Market LLC
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Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of
1934 (§240.12b-2 of this chapter).
Emerging growth
company
☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
☐
Item 1.01 Entry into a Material Definitive Agreement.
On
October 11, 2019, Aytu BioScience, Inc. (the “Company”)
entered into Securities Purchase Agreements (the “Purchase
Agreement”) with two institutional accredited investors (the
“Investors”) providing for the issuance and sale by the
Company (the “Offering”) of $10.0 million of, (i)
shares of the Company’s Series F Convertible (the
“Preferred Stock”) which are convertible into shares of
common stock (the “Conversion Shares”) and (ii)
warrants (the “Warrants”) which are exercisable for
shares of common stock (the “Warrant Shares”). The
Warrants have an exercise price equal to $1.25 and contain cashless
exercise provisions. Each Warrant will be exercisable after we
obtain stockholder approval as required by applicable Nasdaq rules
(“Shareholder Approval”) and will expire five years
from the time a registration statement covering the Conversion
Shares and Warrant Shares is declared effective by the Securities
and Exchange Commission. The closing of the sale of
these securities is expected to take place on or about October 16,
2019, subject to customary closing conditions.
The
Company estimates that the net proceeds from the Offering will be
approximately $9.2 million. The net proceeds
received by the Company from the Offering will be used for general
corporate purposes, including working capital.
Shares
of Preferred Stock are non-convertible until we obtain Shareholder
Approval. After we obtain Shareholder Approval, subject to certain
ownership limitations as described below, are convertible at any
time at the option of the holder into shares of the Company’s
common stock at a conversion price of $1.00 per
share. The conversion price is subject to adjustment in
the case of stock splits, stock dividends, combinations of shares
and similar recapitalization transactions. In addition,
the Preferred Stock will be subject to anti-dilution provisions
until such time that is the earlier of, (i) the two year
anniversary date of the original issuance date and (ii) when 85% of
the Preferred Stock has been converted
Subject
to limited exceptions, holders of shares of Preferred Stock will
not have the right to convert any portion of their Preferred Stock
if the holder, together with its affiliates, would beneficially own
in excess of 4.99% (9.99% or 40% at the election of the holder with
the 40% limitation election only available to Armistice) of the
number of shares of the Company’s common stock outstanding
immediately after giving effect to its
conversion.
The
Preferred Stock and the Warrants will be issued and sold without
registration under the Securities Act of 1933 (the
“Securities Act”) in reliance on the exemptions
provided by Section 4(a)(2) of the Securities Act and/or Regulation
D promulgated thereunder and in reliance on similar exemptions
under applicable state laws. Accordingly, the Investors
may exercise those warrants and sell the underlying shares only
pursuant to an effective registration statement under the
Securities Act covering the resale of those shares, an exemption
under Rule 144 under the Securities Act or another applicable
exemption under the Securities Act. Pursuant to a
Registration Rights Agreement, dated October 11, 2019, by and
between the Company and the Investors (the “Registration
Rights Agreement”), the Company has agreed to file one or
more registration statements with the SEC covering the resale of
the Conversion Shares and the Warrant Shares
In
connection with the Offering, on October 11, 2019, the Company
entered into a Placement Agency Agreement (the “Placement
Agency Agreement”) with Ladenburg Thalmann & Co. Inc.
(the “Placement Agent”) pursuant to which the Placement
Agent agreed to act as the Company’s exclusive placement
agent for the Offering.
The
Placement Agent did not purchase or sell any securities, nor is it
required to arrange the purchase or sale of any minimum number or
dollar amount of securities. The Placement Agent agreed
to use its reasonable best efforts to arrange for the sale of all
of the securities being offered in the Offering. The
Placement Agent will be paid a cash fee equal to eight percent of
the gross proceeds received by the Company from the sale of the
securities at the closing of the Offering and will also receive
reimbursement of its expenses, which will not exceed
$65,000.
The Placement Agency Agreement and
forms of the Purchase Agreement, the certificate of designation of
preferences, rights and limitations of Series F Convertible
Preferred Stock, the Warrant and the Registration Rights Agreement,
are filed hereto as Exhibits 10.1, 10.2, 3.1, and 4.1,
respectively, to this Current Report on Form 8-K. The
foregoing summaries of the terms of these documents are subject to,
and qualified in their entirety by, such documents attached hereto,
which are incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity
Securities.
The
response to this item is included in Item 1.01, Entry into a
Material Definitive Agreement, and is incorporated herein in its
entirety.
Item 7.01
Regulation FD
Disclosure
On
October 14, 2019, Aytu issued a press release announcing the
entrance into Securities Purchase Agreements. A copy of the press
release is attached to this Current Report on Form 8-K as
Exhibit 99.1. The information contained in the
accompanying Exhibit 99.1 is being furnished pursuant to Item
7.01 of Form 8-K and shall not be deemed to be
“filed” for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or otherwise subject to the liabilities of that
section. The information contained in the press release shall not
be incorporated by reference into any filing under the Securities
Act of 1933, as amended (the “Securities Act”), or the
Exchange Act, whether made before or after the date hereof, except
as shall be expressly set forth by specific reference in such a
filing.
Item 9.01 Financial Statements and Exhibits.
(d)
The following exhibit is being filed herewith:
Exhibit
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Description
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Form of
Certificate of Designation of Preferences, Rights and Limitations
of Series F Convertible Preferred Stock
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Form of
Common Stock Purchase Warrant
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Placement
Agency Agreement, dated October 11, 2019
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Form of
Securities Purchase Agreement
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Form of
Registration Rights Agreement
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Press
Release issued by Aytu BioScience, Inc., dated October 14,
2019
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SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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AYTU
BIOSCIENCE, INC.
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Date:
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October
15, 2019
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By:
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/s/
Joshua R. Disbrow
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Joshua
R. Disbrow
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Chief
Executive Officer
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AYTU BIOSCIENCE, INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES F CONVERTIBLE PREFERRED
STOCK
PURSUANT
TO SECTION 151 OF THE
DELAWARE
GENERAL CORPORATION LAW
The
undersigned, __________ and ____________, do hereby certify
that:
1.
They are the President and Secretary, respectively, of Aytu
BioScience, Inc., a Delaware corporation (the “Corporation”).
2.
The Corporation is authorized to issue 50,000,000 shares of
preferred stock, ________ of which have been issued.
3.
The following resolutions were duly adopted by the board of
directors of the Corporation (the “Board of
Directors”):
WHEREAS,
the certificate of incorporation of the Corporation provides for a
class of its authorized stock known as preferred stock, consisting
of 50,000,000 shares, $0.0001 par value per share, issuable from
time to time in one or more series;
WHEREAS,
the Board of Directors is authorized to fix the dividend rights,
dividend rate, voting rights, conversion rights, rights and terms
of redemption and liquidation preferences of any wholly unissued
series of preferred stock and the number of shares constituting any
series and the designation thereof, of any of them;
and
WHEREAS,
it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to a series of the
preferred stock, which shall consist of, except as otherwise set
forth in the Purchase Agreement, up to ________ shares of the
preferred stock which the Corporation has the authority to issue,
as follows:
NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issuance of a series of preferred stock for cash or
exchange of other securities, rights or property and does hereby
fix and determine the rights, preferences, restrictions and other
matters relating to such series of preferred stock as
follows:
TERMS OF PREFERRED STOCK
Section 1. Definitions. Capitalized terms
used and not otherwise defined herein shall have the meanings set
forth in the Purchase Agreement. In addition, the following terms
shall have the following meanings:
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act.
“Alternate Consideration”
shall have the meaning set forth in Section 7(d).
“Beneficial Ownership
Limitation” shall have the meaning set forth in
Section 6(d).
“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
“Buy-In” shall have the
meaning set forth in Section 6(c)(iv).
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means the
Corporation’s common stock, par value $0.0001 per share, and
stock of any other class of securities into which such securities
may hereafter be reclassified or changed.
“Common Stock Equivalents”
means any securities of the Corporation or the Subsidiaries which
would entitle the holder thereof to acquire at any time Common
Stock, including, without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
“Conversion Amount” means
the sum of the Stated Value at issue.
“Conversion Date” shall
have the meaning set forth in Section 6(a).
“Conversion Price” shall
have the meaning set forth in Section 6(b).
“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of the shares of Preferred Stock in accordance with the terms
hereof.
“Conversion Shares Registration
Statement” means a registration statement that
registers the resale of all Conversion Shares of the Holders, who
shall be named as “selling stockholders” therein and
meets the requirements of the Registration Rights
Agreement.
“Effective Date” means the
date that the Conversion Shares Registration Statement filed by the
Corporation pursuant to the Registration Rights Agreement is first
declared effective by the Commission.
“Exchange
Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated
thereunder.
“Exempt Issuance” means
the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Corporation pursuant to any stock or
option plan duly adopted by a majority of the non-employee members
of the Board of Directors of the Corporation or a majority of the
members of a committee of non-employee directors established for
such purpose, (b) securities upon the exercise or exchange of or
conversion of any securities issued pursuant to the Purchase
Agreement and/or other securities exercisable or exchangeable for
or convertible into shares of Common Stock issued and outstanding
on the date of the Purchase Agreement, provided that such
securities have not been amended since the date of the Purchase
Agreement to increase the number of such securities or to decrease
the exercise price, exchange price or conversion price of any such
securities or to extend the term of such securities and (c)
securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors
of the Corporation, provided that such securities are issued as
“restricted securities” (as defined in Rule 144) and
carry no registration rights that require or permit the filing of
any registration statement in connection therewith until at least
90 days following the Effective Date, and provided that any such
issuance shall only be to a Person (or to the equityholders of a
Person) which is, itself or through its subsidiaries, an operating
company or an owner of an asset in a business synergistic with the
business of the Corporation and shall provide to the Corporation
additional benefits in addition to the investment of funds, but
shall not include a transaction in which the Corporation is issuing
securities primarily for the purpose of raising capital or to an
entity whose primary business is investing in
securities.
“Fundamental Transaction”
shall have the meaning set forth in Section 7(d).
“GAAP” means United States
generally accepted accounting principles.
“Holder” shall have the
meaning given such term in Section 2.
“Liquidation” shall have
the meaning set forth in Section 5.
“New York Courts” shall
have the meaning set forth in Section 8(d).
“Notice of Conversion”
shall have the meaning set forth in Section 6(a).
“Original Issue Date”
means the date of the first issuance of any shares of the Preferred
Stock regardless of the number of transfers of any particular
shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred
Stock.
“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Preferred Stock” shall
have the meaning set forth in Section 2.
“Purchase Agreement” means
the Securities Purchase Agreement, dated as of the Original Issue
Date, among the Corporation and the original Holders, as amended,
modified or supplemented from time to time in accordance with its
terms.
“Registration Rights
Agreement” means the Registration Rights Agreement,
dated as of the date of the Purchase Agreement, among the
Corporation and the original Holders, in the form of Exhibit B attached to the
Purchase Agreement.
“Registration Statement”
means a registration statement meeting the requirements set forth
in the Registration Rights Agreement and covering the resale of the
Underlying Shares by each Holder as provided for in the
Registration Rights Agreement.
“Securities
Act” means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
“Share Delivery Date”
shall have the meaning set forth in Section 6(c).
“Shareholder Approval”
means such approval as may be required by the applicable rules and
regulations of the Nasdaq Stock Market (or any successor entity)
from the shareholders of the Corporation with respect to the
transactions contemplated by the Transaction Documents, including
the issuance of all of the Underlying Shares in excess of 19.99% of
the issued and outstanding Common Stock on the Closing
Date.
“Stated
Value” shall have the meaning set forth in Section 2,
as the same may be increased pursuant to Section 3.
“Successor Entity” shall
have the meaning set forth in Section 7(d).
“Trading Day” means a day
on which the principal Trading Market is open for
business.
“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE
American, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market or the New York Stock Exchange (or any
successors to any of the foregoing).
“Transfer
Agent” means Issuer Direct Corporation, the current
transfer agent of the Corporation, with a mailing address of 500
Perimeter Park Dr., Suite D, Morrisville, North Carolina 27560 and
a facsimile number of 919-481-6222, and any successor transfer
agent of the Corporation.
“VWAP”
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on OTCQB or OTCQX as
applicable, (c) if the Common Stock is not then listed or quoted
for trading on OTCQB or OTCQX and if prices for the Common Stock
are then reported on the Pink Open Market (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so
reported, or (d) in all other cases, the fair market value of
a share of Common Stock as determined by an independent appraiser
selected in good faith by the Holders of a majority in interest of
the Preferred Stock then outstanding and reasonably acceptable to
the Corporation, the fees and expenses of which shall be paid by
the Corporation.
“Warrants” means,
collectively, the Common Stock purchase warrants delivered to the
Holder at the Closing in accordance with Section 2.2(a) of the
Purchase Agreement, which Warrants shall be exercisable following
Shareholder Approval and have a term of exercise equal to five (5)
years, in the form of Exhibit C attached to the
Purchase Agreement.
“Warrant Shares” means the
shares of Common Stock issuable upon exercise of the
Warrants.
Section 2. Designation, Amount and Par
Value. The series of preferred stock shall be designated as
its Series F Convertible Preferred Stock (the “Preferred Stock”) and the
number of shares so designated shall be up to 10,000 (which
shall not be subject to increase without the written consent of all
of the holders of the Preferred Stock (each, a “Holder” and collectively,
the “Holders”)). Each share of
Preferred Stock shall have a par value of $0.0001 per share and a
stated value equal to $1,000, subject to increase set forth in
Section 3 below (the “Stated
Value”).
Section 3. Dividends. Except for stock
dividends or distributions for which adjustments are to be made
pursuant to Section 7, Holders shall be entitled to receive, and
the Corporation shall pay, dividends on shares of Preferred Stock
equal (on an as-if-converted-to-Common-Stock basis, disregarding
for such purpose any conversion limitations hereunder) to and in
the same form as dividends actually paid on shares of the Common
Stock when, as and if such dividends are paid on shares of the
Common Stock. No other dividends shall be paid on shares of
Preferred Stock. The Corporation shall not pay any dividends on the
Common Stock unless the Corporation simultaneously complies with
this provision.
Section 4. Voting Rights. Except as
otherwise provided herein or as otherwise required by law, the
Preferred Stock shall have no voting rights. However, as long as
any shares of Preferred Stock are outstanding, the Corporation
shall not, without the affirmative vote of the Holders of a
majority of the then outstanding shares of the Preferred Stock, (a)
alter or change adversely the powers, preferences or rights given
to the Preferred Stock or alter or amend this Certificate of
Designation, (b) amend its certificate of incorporation or other
charter documents in any manner that adversely affects any rights
of the Holders, (c) increase the number of authorized shares of
Preferred Stock, or (d) enter into any agreement with respect to
any of the foregoing.
Section 5. Liquidation. Upon any
liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary (a “Liquidation”), the
Holders shall be entitled to receive out of the assets, whether
capital or surplus, of the Corporation the same amount that a
holder of Common Stock would receive if the Preferred Stock were
fully converted (disregarding for such purposes any conversion
limitations hereunder) to Common Stock which amounts shall be paid
pari passu with all holders of Common Stock. The Corporation shall
mail written notice of any such Liquidation, not less than 45 days
prior to the payment date stated therein, to each
Holder.
Section 6. Conversion.
a) Conversions at Option of
Holder. Prior to Shareholder
Approval, the Preferred Stock is non-convertible. Following
Shareholder Approval, each share of Preferred Stock shall be
convertible, from time to time at the option of the Holder thereof,
into that number of shares of Common Stock (subject to the
limitations set forth in Section 6(d)) determined by dividing the
Stated Value of such share of Preferred Stock by the Conversion
Price. Holders shall
effect conversions by providing the Corporation with the form of
conversion notice attached hereto as Annex A (a “Notice of Conversion”).
Each Notice of Conversion shall specify the number of shares of
Preferred Stock to be converted, the number of shares of Preferred
Stock owned prior to the conversion at issue, the number of shares
of Preferred Stock owned subsequent to the conversion at issue and
the date on which such conversion is to be effected, which date may
not be prior to the date the applicable Holder delivers by
facsimile or e-mail such Notice of Conversion to the Corporation
(such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion to
the Corporation is deemed delivered hereunder. No ink-original
Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any
Notice of Conversion form be required. The calculations and entries set
forth in the Notice of Conversion shall control in the absence of
manifest or mathematical error. To effect conversions of shares of
Preferred Stock, a Holder shall not be required to surrender the
certificate(s) representing the shares of Preferred Stock to the
Corporation unless all of the shares of Preferred Stock represented
thereby are so converted, in which case such Holder shall deliver
the certificate representing such shares of Preferred Stock
promptly following the Conversion Date at issue. Shares of
Preferred Stock converted into Common Stock or redeemed in
accordance with the terms hereof shall be canceled and shall not be
reissued.
b) Conversion Price. The
conversion price for the Preferred Stock shall equal $1.00, subject to adjustment herein (the
“Conversion
Price”).
c)
Mechanics of Conversion
i. Delivery of Conversion Shares Upon
Conversion. Not later than the earlier of (i) two (2)
Trading Days and (ii) the number of Trading Days comprising the
Standard Settlement Period (as defined below) after each Conversion
Date (the “Share
Delivery Date”), the Corporation shall deliver, or
cause to be delivered, to the converting Holder (A) Conversion
Shares which, on or after the earlier of (i) the six month
anniversary of the Original Issue Date or (ii) the Effective Date,
shall be free of restrictive legends and trading restrictions
(other than those which may then be required by the Purchase
Agreement) representing the number of Conversion Shares being
acquired upon the conversion of the Preferred Stock, and (B) a bank
check in the amount of accrued and unpaid dividends, if any. On or
after the earlier of (i) the six month anniversary of the Original
Issue Date or (ii) the Effective Date, the Corporation shall use
its best efforts to deliver the Conversion Shares required to be
delivered by the Corporation under this Section 6 electronically
through the Depository Trust Company or another established
clearing corporation performing similar functions. As used herein,
“Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of the Notice of
Conversion.
ii. Failure to Deliver Conversion
Shares. If, in the case of any Notice of Conversion, such
Conversion Shares are not delivered to or as directed by the
applicable Holder by the Share Delivery Date, the Holder shall be
entitled to elect by written notice to the Corporation at any time
on or before its receipt of such Conversion Shares, to rescind such
Conversion, in which event the Corporation shall promptly return to
the Holder any original Preferred Stock certificate delivered to
the Corporation and the Holder shall promptly return to the
Corporation the Conversion Shares issued to such Holder pursuant to
the rescinded Notice of Conversion.
iii. Obligation
Absolute; Partial Liquidated Damages. The
Corporation’s obligation to issue and deliver the Conversion
Shares upon conversion of Preferred Stock in accordance with the
terms hereof are absolute and unconditional, irrespective of any
action or inaction by a Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or
any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by such Holder or any other Person of
any obligation to the Corporation or any violation or alleged
violation of law by such Holder or any other person, and
irrespective of any other circumstance which might otherwise limit
such obligation of the Corporation to such Holder in connection
with the issuance of such Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by the Corporation of any such action
that the Corporation may have against such Holder. In the event a
Holder shall elect to convert any or all of the Stated Value of its
Preferred Stock, the Corporation may not refuse conversion based on
any claim that such Holder or anyone associated or affiliated with
such Holder has been engaged in any violation of law, agreement or
for any other reason, unless an injunction from a court, on notice
to Holder, restraining and/or enjoining conversion of all or part
of the Preferred Stock of such Holder shall have been sought and
obtained, and the Corporation posts a surety bond for the benefit
of such Holder in the amount of 150% of the Stated Value of
Preferred Stock which is subject to the injunction, which bond
shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds
of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of such injunction, the Corporation shall
issue Conversion Shares and, if applicable, cash, upon a properly
noticed conversion. If the Corporation fails to deliver to a Holder
such Conversion Shares pursuant to Section 6(c)(i) by the Share
Delivery Date applicable to such conversion, the Corporation shall
pay to such Holder, in cash, as liquidated damages and not as a
penalty, for each $5,000 of Stated Value of Preferred Stock being
converted, $50 per Trading Day (increasing to $100 per Trading Day
on the third Trading Day and increasing to $200 per Trading Day on
the sixth Trading Day after such damages begin to accrue) for each
Trading Day after the Share Delivery Date until such Conversion
Shares are delivered or Holder rescinds such conversion. Nothing
herein shall limit a Holder’s right to pursue actual damages
for the Corporation’s failure to deliver Conversion Shares
within the period specified herein and such Holder shall have the
right to pursue all remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such
rights shall not prohibit a Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable
law.
iv. Compensation for Buy-In on Failure to
Timely Deliver Conversion Shares Upon Conversion. In
addition to any other rights available to the Holder, if the
Corporation fails for any reason to deliver to a Holder the
applicable Conversion Shares by the Share Delivery Date pursuant to
Section 6(c)(i), and if after such Share Delivery Date such Holder
is required by its brokerage firm to purchase (in an open market
transaction or otherwise), or the Holder’s brokerage firm
otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Conversion Shares
which such Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”), then the
Corporation shall (A) pay in cash to such Holder (in addition to
any other remedies available to or elected by such Holder) the
amount, if any, by which (x) such Holder’s total purchase
price (including any brokerage commissions) for the Common Stock so
purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that such Holder was entitled to receive
from the conversion at issue multiplied by (2) the actual sale
price at which the sell order giving rise to such purchase
obligation was executed (including any brokerage commissions) and
(B) at the option of such Holder, either reissue (if surrendered)
the shares of Preferred Stock equal to the number of shares of
Preferred Stock submitted for conversion (in which case, such
conversion shall be deemed rescinded) or deliver to such Holder the
number of shares of Common Stock that would have been issued if the
Corporation had timely complied with its delivery requirements
under Section 6(c)(i). For example, if a Holder purchases shares of
Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of shares of
Preferred Stock with respect to which the actual sale price of the
Conversion Shares (including any brokerage commissions) giving rise
to such purchase obligation was a total of $10,000 under clause (A)
of the immediately preceding sentence, the Corporation shall be
required to pay such Holder $1,000. The Holder shall provide the
Corporation written notice indicating the amounts payable to such
Holder in respect of the Buy-In and, upon request of the
Corporation, evidence of the amount of such loss. Nothing herein
shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief with respect to the Corporation’s failure to timely
deliver the Conversion Shares upon conversion of the shares of
Preferred Stock as required pursuant to the terms
hereof.
v. Reservation of Shares Issuable Upon
Conversion. The Corporation covenants that it will at all
times reserve and keep available out of its authorized and unissued
shares of Common Stock for the sole purpose of issuance upon
conversion of the Preferred Stock as herein provided, free from
preemptive rights or any other actual contingent purchase rights of
Persons other than the Holder (and the other holders of the
Preferred Stock), not less than such aggregate number of shares of
the Common Stock as shall (subject to the terms and conditions set
forth in the Purchase Agreement) be issuable (taking into account
the adjustments and restrictions of Section 7) upon the conversion
of the then outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly authorized, validly issued, fully paid
and nonassessable and, if the Conversion Shares Registration
Statement is then effective under the Securities Act, shall be
registered for public resale in accordance with such Conversion
Shares Registration Statement (subject to such Holder’s
compliance with its obligations under the Registration Rights
Agreement).
vi. Fractional Shares. No
fractional shares or scrip representing fractional shares shall be
issued upon the conversion of the Preferred Stock. As to any
fraction of a share which the Holder would otherwise be entitled to
purchase upon such conversion, the Corporation shall round up to
the next whole share. Notwithstanding anything to the contrary
contained herein, but consistent with the provisions of this
subsection with respect to fractional Conversion Shares, nothing
shall prevent any Holder from converting fractional shares of
Preferred Stock.
vii. Transfer
Taxes and Expenses. The issuance of Conversion Shares on
conversion of this Preferred Stock shall be made without charge to
any Holder for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such Conversion
Shares, provided that the Corporation shall not be required to pay
any tax that may be payable in respect of any transfer involved in
the issuance and delivery of any such Conversion Shares upon
conversion in a name other than that of the Holders of such shares
of Preferred Stock and the Corporation shall not be required to
issue or deliver such Conversion Shares unless or until the Person
or Persons requesting the issuance thereof shall have paid to the
Corporation the amount of such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid. The
Corporation shall pay all Transfer Agent fees required for same-day
processing of any Notice of Conversion and all fees to the
Depository Trust Company (or another established clearing
corporation performing similar functions) required for same-day
electronic delivery of the Conversion Shares.
d) Beneficial
Ownership Limitation. The Corporation shall not effect
any conversion of the Preferred Stock, and a Holder shall not have
the right to convert any portion of the Preferred Stock, to the
extent that, after giving effect to the conversion set forth on the
applicable Notice of Conversion, such Holder (together with such
Holder’s Affiliates, and any Persons acting as a group
together with such Holder or any of such Holder’s Affiliates
(such Persons, “Attribution Parties”))
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by such Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon
conversion of the Preferred Stock with respect to which such
determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (i) conversion of the
remaining, unconverted Stated Value of Preferred Stock beneficially
owned by such Holder or any of its Affiliates or Attribution
Parties and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Corporation
subject to a limitation on conversion or exercise analogous to the
limitation contained herein (including, without limitation, the
Preferred Stock or the Warrants) beneficially owned by such Holder
or any of its Affiliates or Attribution Parties. Except as
set forth in the preceding sentence, for purposes of this Section
6(d), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. To the extent that the limitation contained
in this Section 6(d) applies, the determination of whether the
Preferred Stock is convertible (in relation to other securities
owned by such Holder together with any Affiliates and Attribution
Parties) and of how many shares of Preferred Stock are convertible
shall be in the sole discretion of such Holder, and the submission
of a Notice of Conversion shall be deemed to be such Holder’s
determination of whether the shares of Preferred Stock may be
converted (in relation to other securities owned by such Holder
together with any Affiliates and Attribution Parties) and how many
shares of the Preferred Stock are convertible, in each case subject
to the Beneficial Ownership Limitation. To ensure compliance with
this restriction, each Holder will be deemed to represent to the
Corporation each time it delivers a Notice of Conversion that such
Notice of Conversion has not violated the restrictions set forth in
this paragraph and the Corporation shall have no obligation to
verify or confirm the accuracy of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with
Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 6(d), in
determining the number of outstanding shares of Common Stock, a
Holder may rely on the number of outstanding shares of Common Stock
as stated in the most recent of the following: (i) the
Corporation’s most recent periodic or annual report filed
with the Commission, as the case may be, (ii) a more recent public
announcement by the Corporation or (iii) a more recent written
notice by the Corporation or the Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the
written or oral request (which may be via email) of a Holder, the
Corporation shall within one Trading Day confirm orally and in
writing to such Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Corporation, including
the Preferred Stock, by such Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% (or, upon
election by a Holder prior to the issuance of any shares of
Preferred Stock, either 9.99% or 40%1) of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock issuable upon conversion of Preferred
Stock held by the applicable Holder. A Holder, upon notice to the
Corporation, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 6(d) applicable to its
Preferred Stock provided that the Beneficial Ownership Limitation
in no event exceeds 9.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock upon conversion of this Preferred Stock
held by the Holder and the provisions of this Section 6(d) shall
continue to apply. Any such increase in the Beneficial Ownership
Limitation will not be effective until the 61st day after such
notice is delivered to the Corporation and shall only apply to such
Holder and no other Holder. The provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 6(d) to correct this
paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation
contained herein or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The
limitations contained in this paragraph shall apply to a successor
holder of Preferred Stock.
______________
Section 7. Certain
Adjustments.
a) Stock Dividends and Stock
Splits. If the Corporation, at any time while this Preferred
Stock is outstanding: (i) pays a stock dividend or otherwise makes
a distribution or distributions payable in shares of Common Stock
on shares of Common Stock or any other Common Stock Equivalents
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Corporation upon conversion of, or
payment of a dividend on, this Preferred Stock), (ii) subdivides
outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues, in the event of a reclassification of shares of the
Common Stock, any shares of capital stock of the Corporation, then
the Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
any treasury shares of the Corporation) outstanding immediately
before such event, and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section 7(a) shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in
the case of a subdivision, combination or
re-classification.
b) Subsequent Equity Sales. Until
the earlier of (x) the two year anniversary of the Effective Date
and (y) such date that 85% of the Preferred Stock issued on the
Original Issue Date has been converted, if the Corporation or any
Subsidiary, as applicable sells or grants any option to purchase or
sells or grants any right to reprice, or otherwise disposes of or
issues (or announces any sale, grant or any option to purchase or
other disposition), any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock at an
effective price per share that is lower than the then Conversion
Price (such lower price, the “Base Conversion Price”
and such issuances, collectively, a “Dilutive Issuance”) (if
the holder of the Common Stock or Common Stock Equivalents so
issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price
per share that is lower than the Conversion Price, such issuance
shall be deemed to have occurred for less than the Conversion Price
on such date of the Dilutive Issuance), then simultaneously with
the consummation (or, if earlier, the announcement) of each
Dilutive Issuance the Conversion Price shall be reduced to equal
the Base Conversion Price Notwithstanding the foregoing, no adjustment will
be made under this Section 7(b) in respect of an Exempt
Issuance. If the Corporation enters into a Variable Rate
Transaction, despite the prohibition set forth in the Purchase
Agreement, the Corporation shall be deemed to have issued Common
Stock or Common Stock Equivalents at the lowest possible conversion
price at which such securities may be converted or exercised. The
Corporation shall notify the Holders in writing, no later than the
Trading Day following the issuance of any Common Stock or Common
Stock Equivalents subject to this Section 7(b), indicating therein
the applicable issuance price, or applicable reset price, exchange
price, conversion price and other pricing terms (such notice, the
“Dilutive Issuance
Notice”). For purposes of clarification, whether or
not the Corporation provides a Dilutive Issuance Notice pursuant to
this Section 7(b), upon the occurrence of any Dilutive Issuance,
the Holders are entitled to receive a number of Conversion Shares
based upon the Base Conversion Price on or after the date of such
Dilutive Issuance, regardless of whether a Holder accurately refers
to the Base Conversion Price in the Notice of
Conversion.
c) Subsequent Rights Offerings.
In addition to any adjustments
pursuant to Section 7(a) above, if at any time the Corporation
grants, issues or sells any Common Stock Equivalents or rights to
purchase stock, warrants, securities or other property pro rata to
the record holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of
Common Stock acquirable upon complete conversion of such
Holder’s Preferred Stock (without regard to any limitations
on exercise hereof, including without limitation, the Beneficial
Ownership Limitation) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights (provided, however, to
the extent that the Holder’s right to participate in any such
Purchase Right would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to
participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Common Stock as a result of such
Purchase Right to such extent) and such Purchase Right to such
extent shall be held in abeyance for the Holder until such time, if
ever, as its right thereto would not result in the Holder exceeding
the Beneficial Ownership Limitation).
d) Pro Rata Distributions. During
such time as this Preferred Stock is outstanding, if the
Corporation declares or makes any dividend or other distribution of
its assets (or rights to acquire its assets) to holders of shares
of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin
off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a “Distribution”), at any
time after the issuance of this Preferred Stock, then, in each such
case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have
participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Preferred
Stock (without regard to any limitations on conversion hereof,
including without limitation, the Beneficial Ownership Limitation)
immediately before the date of which a record is taken for such
Distribution, or, if no such record is taken, the date as of which
the record holders of shares of Common Stock are to be determined
for the participation in such Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).
e) Fundamental Transaction. If, at
any time while this Preferred Stock is outstanding, (i) the
Corporation, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Corporation
with or into another Person, (ii) the Corporation, directly or
indirectly, effects any sale, lease, license, assignment, transfer,
conveyance or other disposition of all or substantially all of its
assets in one or a series of related transactions, (iii) any,
direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Corporation or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Corporation, directly or
indirectly, in one or more related transactions effects any
reclassification, reorganization or recapitalization of the Common
Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other
securities, cash or property, or (v) the Corporation, directly or
indirectly, in one or more related transactions consummates a stock
or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such
other Person acquires more than 50% of the outstanding shares of
Common Stock (not including any shares of Common Stock held by the
other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or
share purchase agreement or other business combination) (each a
“Fundamental
Transaction”), then, upon any subsequent conversion of
this Preferred Stock, the Holder shall have the right to receive,
for each Conversion Share that would have been issuable upon such
conversion immediately prior to the occurrence of such Fundamental
Transaction (without regard to any limitation in Section 6(d) on
the conversion of this Preferred Stock), the number of shares of
Common Stock of the successor or acquiring corporation or of the
Corporation, if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Preferred
Stock is convertible immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 6(d) or
6(e) on the conversion of this Preferred Stock). For purposes of
any such conversion, the determination of the Conversion Price
shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Corporation shall apportion the
Conversion Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given
any choice as to the securities, cash or property to be received in
a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any
conversion of this Preferred Stock following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Corporation or surviving entity in
such Fundamental Transaction shall file a new Certificate of
Designation with the same terms and conditions and issue to the
Holders new preferred stock consistent with the foregoing
provisions and evidencing the Holders’ right to convert such
preferred stock into Alternate Consideration. The Corporation shall
cause any successor entity in a Fundamental Transaction in which
the Corporation is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Corporation under
this Certificate of Designation in accordance with the provisions
of this Section 7(e) pursuant to written agreements in form and
substance reasonably satisfactory to the Holder and approved by the
Holder (without unreasonable delay) prior to such Fundamental
Transaction and shall, at the option of the Holder, deliver to the
Holder in exchange for this Preferred Stock a security of the
Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Preferred Stock which is
convertible for a corresponding number of shares of capital stock
of such Successor Entity (or its parent entity) equivalent to the
shares of Common Stock acquirable and receivable upon conversion of
this Preferred Stock (without regard to any limitations on the
conversion of this Preferred Stock) prior to such Fundamental
Transaction, and with a conversion price which applies the
conversion price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common
Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock and, such number of shares of capital
stock and such conversion price being for the purpose of protecting
the economic value of this Preferred Stock immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Certificate of Designation referring to the
“Corporation” shall refer instead to the Successor
Entity), and may exercise every right and power of the Corporation
and shall assume all of the obligations of the Corporation under
this Certificate of Designation with the same effect as if such
Successor Entity had been named as the Corporation
herein.
f) Calculations. All calculations
under this Section 7 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 7, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding any treasury shares of
the Corporation) issued and outstanding.
g) Notice to the
Holders.
i. Adjustment to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to any provision
of this Section 7, the Corporation shall promptly deliver to each
Holder by facsimile or email a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
ii. Notice to Allow Conversion by
Holder. If (A) the Corporation shall declare a dividend (or
any other distribution in whatever form) on the Common Stock, (B)
the Corporation shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock, (C) the Corporation shall
authorize the granting to all holders of the Common Stock of rights
or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any
stockholders of the Corporation shall be required in connection
with any reclassification of the Common Stock, any consolidation or
merger to which the Corporation is a party, any sale or transfer of
all or substantially all of the assets of the Corporation, or any
compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property or (E) the Corporation shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Corporation, then, in each case, the Corporation shall cause
to be filed at each office or agency maintained for the purpose of
conversion of this Preferred Stock, and shall cause to be
delivered by facsimile or email to
each Holder at its last facsimile number or email address as it
shall appear upon the stock
books of the Corporation, at least twenty (20) calendar days prior
to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, redemption, rights
or warrants, or if a record is not to be taken, the date as of
which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information
regarding the Corporation or any of the Subsidiaries, the
Corporation shall simultaneously file such notice with the
Commission pursuant to a Current Report on Form 8-K. The Holder
shall remain entitled to convert the Conversion Amount of this
Preferred Stock (or any part hereof) during the 20-day period
commencing on the date of such notice through the effective date of
the event triggering such notice except as may otherwise be
expressly set forth herein.
Section 8. Miscellaneous.
a) Notices. Any and all notices or
other communications or deliveries to be provided by the Holders
hereunder including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile or
e-mail, or sent by a nationally recognized overnight courier
service, addressed to the Corporation, at the address set forth
above Attention: _________________, facsimile number
_______________, e-mail address ____________, or such other
facsimile number, e-mail address or address as the Corporation may
specify for such purposes by notice to the Holders delivered in
accordance with this Section 8. Any and all notices or other
communications or deliveries to be provided by the Corporation
hereunder shall be in writing and delivered personally, by
facsimile, e-mail, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number,
e-mail address or address of such Holder appearing on the books of
the Corporation. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number or e-mail at the
e-mail address set forth in this Section 8 prior to 5:30 p.m. (New
York City time) on any date, (ii) the next Trading Day after the
date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number or e-mail at the e-mail
address set forth in this Section on a day that is not a Trading
Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (iii) the second Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is
required to be given.
b) Absolute Obligation. Except as
expressly provided herein, no provision of this Certificate of
Designation shall alter or impair the obligation of the
Corporation, which is absolute and unconditional, to pay liquidated
damages, and accrued dividends, as applicable, on the shares of
Preferred Stock at the time, place, and rate, and in the coin or
currency, herein prescribed.
c) Lost or Mutilated Preferred Stock
Certificate. If a Holder’s Preferred Stock certificate
shall be mutilated, lost, stolen or destroyed, the Corporation
shall execute and deliver, in exchange and substitution for and
upon cancellation of a mutilated certificate, or in lieu of or in
substitution for a lost, stolen or destroyed certificate, a new
certificate for the shares of Preferred Stock so mutilated, lost,
stolen or destroyed, but only upon receipt of evidence of such
loss, theft or destruction of such certificate, and of the
ownership hereof reasonably satisfactory to the
Corporation.
d) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Certificate of Designation shall be governed
by and construed and enforced in accordance with the internal laws
of the State of Delaware without regard to the principles of
conflict of laws thereof. All legal proceedings concerning the
interpretation, enforcement and defense of the transactions
contemplated by this Certificate of Designation (whether brought
against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). The
Corporation and each Holder hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication
of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. The Corporation
and each Holder hereby irrevocably waives personal service of
process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Certificate of Designation and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
applicable law. The Corporation and each Holder hereto hereby
irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Certificate of Designation or
the transactions contemplated hereby. If the Corporation or any
Holder shall commence an action or proceeding to enforce any
provisions of this Certificate of Designation, then the prevailing
party in such action or proceeding shall be reimbursed by the other
party for its attorneys’ fees and other costs and expenses
incurred in the investigation, preparation and prosecution of such
action or proceeding.
e) Waiver. Any waiver by the
Corporation or a Holder of a breach of any provision of this
Certificate of Designation shall not operate as or be construed to
be a waiver of any other breach of such provision or of any breach
of any other provision of this Certificate of Designation or a
waiver by any other Holders. The failure of the Corporation or a
Holder to insist upon strict adherence to any term of this
Certificate of Designation on one or more occasions shall not be
considered a waiver or deprive that party (or any other Holder) of
the right thereafter to insist upon strict adherence to that term
or any other term of this Certificate of Designation on any other
occasion. Any waiver by the Corporation or a Holder must be in
writing.
f) Severability. If any provision
of this Certificate of Designation is invalid, illegal or
unenforceable, the balance of this Certificate of Designation shall
remain in effect, and if any provision is inapplicable to any
Person or circumstance, it shall nevertheless remain applicable to
all other Persons and circumstances. If it shall be found that any
interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum rate
of interest permitted under applicable law.
g) Next Business Day. Whenever any
payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day.
h) Headings. The headings
contained herein are for convenience only, do not constitute a part
of this Certificate of Designation and shall not be deemed to limit
or affect any of the provisions hereof.
i) Status of Converted or Redeemed
Preferred Stock. If any shares of Preferred Stock shall be
converted, redeemed or reacquired by the Corporation, such shares
shall resume the status of authorized but unissued shares of
preferred stock and shall no longer be designated as Series F
Convertible Preferred Stock.
*********************
RESOLVED,
FURTHER, that the Chairman, the president or any vice-president,
and the secretary or any assistant secretary, of the Corporation be
and they hereby are authorized and directed to prepare and file
this Certificate of Designation of Preferences, Rights and
Limitations in accordance with the foregoing resolution and the
provisions of Delaware law.
IN
WITNESS WHEREOF, the undersigned have executed this Certificate
this ___ day of ______________, 2019.
__________________________________________
Name:
Title:
|
__________________________________________
Name:
Title:
|
ANNEX A
NOTICE
OF CONVERSION
(TO BE
EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF
PREFERRED STOCK)
The
undersigned hereby elects to convert the number of shares of Series
F Convertible Preferred Stock indicated below into shares of common
stock, par value $0.0001 per share (the “Common Stock”), of Aytu
BioScience, Inc., a Delaware corporation (the “Corporation”), according
to the conditions hereof, as of the date written below. If shares
of Common Stock are to be issued in the name of a Person other than
the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto. No fee will be charged to the Holders
for any conversion, except for any such transfer
taxes.
Conversion
calculations:
Date to
Effect Conversion:
_____________________________________________
|
Number
of shares of Preferred Stock owned prior to Conversion:
_______________
|
Number
of shares of Preferred Stock to be Converted:
________________________
|
Stated
Value of shares of Preferred Stock to be Converted:
____________________
|
Number
of shares of Common Stock to be Issued:
___________________________
|
Applicable
Conversion
Price:____________________________________________
|
Number
of shares of Preferred Stock subsequent to Conversion:
________________
|
Address
for Delivery: ______________________
or
DWAC
Instructions:
Broker
no: _________
Account
no: ___________
|
[HOLDER
By:___________________________________
Name:
Title:
|
|
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
AYTU BIOSCIENCE, INC.
Warrant Shares:
_______
|
Initial Issuance
Date: October __, 2019
|
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, _____________ or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date
Shareholder Approval is received and effective (the
“Initial Exercise
Date”) and on or prior to 5:00 p.m. (New York City
time) on the five year anniversary of the Effective Date (the
“Termination
Date”) but not thereafter, to subscribe for and
purchase from Aytu BioScience, Inc., a Delaware corporation (the
“Company”), up to ______
shares (as subject to adjustment hereunder, the “Warrant Shares”) of
Common Stock. The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).
Section 1. Definitions. Capitalized terms
used and not otherwise defined herein shall have the meanings set
forth in that certain Securities Purchase Agreement (the
“Purchase
Agreement”), dated October _, 2019, among the Company
and the purchasers signatory thereto. In addition, the following
terms have the meanings indicated in this Section 1:
“Bid Price” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the bid price of the Common Stock for the time in
question (or the nearest preceding date) on the Trading Market on
which the Common Stock is then listed or quoted as reported by
Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York
City time) to 4:02 p.m. (New York City time)), (b) if OTCQB
or OTCQX is not a Trading Market, the volume weighted average price
of the Common Stock for such date (or the nearest preceding date)
on OTCQB or OTCQX as applicable, (c) if the Common Stock is not
then listed or quoted for trading on OTCQB or OTCQX and if prices
for the Common Stock are then reported in the “Pink
Sheets” published by OTC Markets Group, Inc. (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so
reported, or (d) in all other cases, the fair market value of
a share of Common Stock as determined by an independent appraiser
selected in good faith by the Holders of a majority in interest of
the Warrants then outstanding and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the
Company.
“Black Scholes Value”
means the value of this Warrant based on the Black-Scholes Option
Pricing Model obtained from the “OV” function on
Bloomberg determined as of the day immediately following the first
public announcement of the applicable Change of Control, or, if the
Change of Control is not publicly announced, the date the Change of
Control is consummated, for pricing purposes and reflecting (i) a
risk-free interest rate corresponding to the U.S. Treasury rate for
a period equal to the remaining term of this Warrant as of such
date of request, (ii) an expected volatility equal to the greater
of 100% and the 100 day volatility obtained from the
“HVT” function on Bloomberg (determined utilizing a 365
day annualization factor) as of the Trading Day immediately
following the earliest to occur of (A) the public disclosure of the
applicable Change of Control, (B) the consummation of the
applicable Change of Control and (C) the date on which the Holder
first became aware of the applicable Change of Control, (iii) the
underlying price per share used in such calculation shall be the
greater of (a) the highest VWAP during the five (5) Trading Days
prior to the closing of the Change of Control and (b) the sum of
the price per share being offered in cash, if any, plus the value
of any non-cash consideration, if any, being offered in such Change
of Control, (iv) a zero cost of borrow and (v) a 360 day
annualization factor.
“Change of Control” means
any Fundamental Transaction other than (i) any reorganization,
recapitalization or reclassification of the Common Stock in which
holders of the Company’s voting power immediately prior to
such reorganization, recapitalization or reclassification continue
after such reorganization, recapitalization or reclassification to
hold publicly traded securities and, directly or indirectly, are,
in all material respect, the holders of the voting power of the
surviving entity (or entities with the authority or voting power to
elect the members of the board of directors (or their equivalent if
other than a corporation) of such entity or entities) after such
reorganization, recapitalization or reclassification, (ii) pursuant
to a migratory merger effected solely for the purpose of changing
the jurisdiction of incorporation of the Company or (iii) a merger
in connection with a bona fide acquisition by the Company of any
Person in which (x) the gross consideration paid, directly or
indirectly, by the Company in such acquisition is not greater than
50% of the Company’s market capitalization as calculated on
the date of the consummation of such merger and (y) such merger
does not contemplate a change to the identity of a majority of the
board of directors of the Company. Notwithstanding anything herein
to the contrary, any transaction or series of transaction that,
directly or indirectly, results in the Company or the Successor
Entity not having Common Stock or common stock, as applicable,
registered under the 1934 Act and listed on a Trading Market shall
be deemed a Change of Control. Notwithstanding the foregoing, the
term “Change of Control” shall not include the Cerecor
Transaction or the Innovus Transaction.
“Parent Entity” of a
Person means an entity that, directly or indirectly, controls the
applicable Person, including such entity whose common stock or
equivalent equity security is quoted or listed on a Trading Market
(or, if so elected by the Holder, any other market, exchange or
quotation system), or, if there is more than one such Person or
such entity, the Person or such entity designated by the Holder or
in the absence of such designation, such Person or entity with the
largest public market capitalization as of the date of consummation
of the Change of Control.
“Successor Entity” means
one or more Person or Persons (or, if so elected by the Holder, the
Company or Parent Entity) formed by, resulting from or surviving
any Change of Control or one or more Person or Persons (or, if so
elected by the Holder, the Company or the Parent Entity) with which
such Change of Control shall have been entered into.
Section 2. Exercise.
a)
Exercise of
Warrant. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on
or after the Initial Exercise Date and on or before 5:00 p.m. (New
York City time) on the Termination Date by delivery to the Company
of a duly executed facsimile copy (or e-mail attachment) of the
Notice of Exercise in the form annexed hereto (the
“Notice of
Exercise”). Within the earlier of (i) two (2) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period (as defined in Section 2(d)(i) herein) following
the date of exercise as aforesaid, the Holder shall deliver the
aggregate Exercise Price for the shares specified in the applicable
Notice of Exercise by wire transfer or cashier’s check drawn
on a United States bank unless the cashless exercise procedure
specified in Section 2(c) below is specified in the applicable
Notice of Exercise. No ink-original Notice of Exercise shall be
required, nor shall any medallion guarantee (or other type of
guarantee or notarization) of any Notice of Exercise form be
required. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant
to the Company until the Holder has purchased all of the Warrant
Shares available hereunder and the Warrant has been exercised in
full, in which case, the Holder shall surrender this Warrant to the
Company for cancellation within three (3) Trading Days of the date
on which the final Notice of Exercise is delivered to the Company.
Partial exercises of this Warrant resulting in purchases of a
portion of the total number of Warrant Shares available hereunder
shall have the effect of lowering the outstanding number of Warrant
Shares purchasable hereunder in an amount equal to the applicable
number of Warrant Shares purchased. The Holder and the Company
shall maintain records showing the number of Warrant Shares
purchased and the date of such purchases. The Company shall deliver
any objection to any Notice of Exercise within one (1) Business Day
of receipt of such notice. The
Holder and any assignee, by acceptance of this Warrant, acknowledge
and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares
hereunder, the number of Warrant Shares available for purchase
hereunder at any given time may be less than the amount stated on
the face hereof.
b)
Exercise Price. The
exercise price per share of the Common Stock under this Warrant
shall be $1.25, subject to
adjustment hereunder (the “Exercise
Price”).
c)
Cashless
Exercise.
(i)
A “cashless
exercise” as described below, may occur after Shareholder
Approval is received and effective, if the VWAP of the Common Stock
on any Trading Day on or after the Closing Date fails to exceed the
Exercise Price in effect as of the date hereof (subject to
adjustment for any stock splits, stock dividends, stock
combinations, recapitalizations and similar events). In such event,
the aggregate number of Warrant Shares issuable in such cashless
exercise pursuant to any given Notice of Exercise electing to
effect a cashless exercise shall equal the product of (x) the
aggregate number of Warrant Shares that would be issuable upon
exercise of this Warrant in accordance with the terms of this
Warrant if such exercise were by means of a cash exercise rather
than a cashless exercise and (y) 1.00.
(ii)
In addition, if
after Shareholder Approval and the six month anniversary of the
Closing Date there is no effective registration statement
registering, or the prospectus contained therein is not available
for the resale of the Warrant Shares by the Holder, then this
Warrant may only be exercised, in whole or in part, at such time by
means of a “cashless exercise” in which the Holder
shall be entitled to receive a number of Warrant Shares equal to
the quotient obtained by dividing [(A-B) (X)] by (A),
where:
(A) =
as applicable: (i) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise if such
Notice of Exercise is (1) both executed and delivered pursuant to
Section 2(a) hereof on a day that is not a Trading Day or (2) both
executed and delivered pursuant to Section 2(a) hereof on a Trading
Day prior to the opening of “regular trading hours” (as
defined in Rule 600(b)(68) of Regulation NMS promulgated under the
federal securities laws) on such Trading Day, (ii) at the option of
the Holder, either (y) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise or (z) the
Bid Price of the Common Stock on the principal Trading Market as
reported by Bloomberg L.P. as of the time of the Holder’s
execution of the applicable Notice of Exercise if such Notice of
Exercise is executed during “regular trading hours” on
a Trading Day and is delivered within two (2) hours thereafter
(including until two (2) hours after the close of “regular
trading hours” on a Trading Day) pursuant to Section 2(a)
hereof or (iii) the VWAP on the date of the applicable Notice of
Exercise if the date of such Notice of Exercise is a Trading Day
and such Notice of Exercise is both executed and delivered pursuant
to Section 2(a) hereof after the close of “regular trading
hours” on such Trading Day;
(B) = the Exercise Price of
this Warrant, as adjusted hereunder; and
(X) =
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.
If Warrant Shares are issued in such a cashless exercise, the
parties acknowledge and agree that in accordance with Section
3(a)(9) of the Securities Act, the Warrant Shares shall take on the
characteristics of the Warrants being exercised and the holding
period of the Warrant Shares being issued may be tacked on to the
holding period of this Warrant. The Company agrees not to take any
position contrary to this Section 2(c).
Notwithstanding
anything herein to the contrary but without limiting the rights of
the Holder to receive Warrant Shares on a “cashless
exercise” and without limiting the liquidated damages
provision in section 2(d)(i) and the Buy-In provision in Section
2(d)(iv), in the event there is no effective registration statement
registering, or the prospectus contained therein is not available
for the issuance of the Warrant Shares to the Holder, under no
circumstance will the Company be required to net cash settle the
warrants.
d)
Mechanics of
Exercise.
i.
Delivery of Warrant Shares
Upon Exercise. The Company shall cause the Warrant Shares
purchased hereunder to be transmitted by the Transfer Agent to the
Holder by crediting the account of the Holder’s or its
designee’s balance account with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system
(“DWAC”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by the Holder or
(B) the Warrant Shares are eligible for resale by the Holder
without volume or manner of sale restrictions pursuant to Rule 144
(assuming cashless exercise), and otherwise by physical delivery of
a certificate, registered in the Company’s share register in
the name of the Holder or its designee, for the number of Warrant
Shares to which the Holder is entitled pursuant to such exercise to
the address specified by the Holder in the Notice of Exercise by
the date that is the earliest of (i) two (2) Trading Days after the
delivery to the Company of the Notice of Exercise, (ii) one (1)
Trading Day after delivery of the aggregate Exercise Price to the
Company and (iii) the number of Trading Days comprising the
Standard Settlement Period after the delivery to the Company of the
Notice of Exercise (such date, the “Warrant Share Delivery
Date”). Upon delivery of the Notice of Exercise, the
Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of
delivery of the Warrant Shares, provided that in each such case
payment of the aggregate Exercise Price (other than in the case of
a cashless exercise) is received within the earlier of (i) two (2)
Trading Days and (ii) the number of Trading Days comprising the
Standard Settlement Period following delivery of the Notice of
Exercise. If the Company fails for any reason to deliver to the
Holder the Warrant Shares subject to a Notice of Exercise by the
Warrant Share Delivery Date, the Company shall pay to the Holder,
in cash, as liquidated damages and not as a penalty, for each
$1,000 of Warrant Shares subject to such exercise (based on the
VWAP of the Common Stock on the date of the applicable Notice of
Exercise), $10 per Trading Day (increasing to $20 per Trading Day
on the fifth Trading Day after such liquidated damages begin to
accrue) for each Trading Day after such Warrant Share Delivery Date
until such Warrant Shares are delivered or Holder rescinds such
exercise. The Company agrees to maintain a transfer agent that is a
participant in the FAST program so long as this Warrant remains
outstanding and exercisable. As used herein, “Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of the Notice of
Exercise.
ii.
Delivery of New Warrants
Upon Exercise. If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of
the Warrant Shares, deliver to the Holder a new Warrant evidencing
the rights of the Holder to purchase the unpurchased Warrant Shares
called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
iii.
Rescission Rights.
If the Company fails to cause the Transfer Agent to transmit to the
Holder the Warrant Shares pursuant to Section 2(d)(i) by the
Warrant Share Delivery Date, then the Holder will have the right to
rescind such exercise.
iv.
Compensation for Buy-In on
Failure to Timely Deliver Warrant Shares Upon Exercise. In
addition to any other rights available to the Holder, if the
Company fails to cause the Transfer Agent to transmit to the Holder
the Warrant Shares in accordance with the provisions of Section
2(d)(i) above pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required
by its broker to purchase (in an open market transaction or
otherwise) or the Holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue by (2) the
price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number
of Warrant Shares for which such exercise was not honored (in which
case such exercise shall be deemed rescinded) or deliver to the
Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In and, upon request of the Company, evidence of the amount of
such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms
hereof.
v.
No Fractional Shares or
Scrip. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which the Holder would otherwise be entitled to
purchase upon such exercise, the Company shall, at its election,
either pay a cash adjustment in respect of such final fraction in
an amount equal to such fraction multiplied by the Exercise Price
or round up to the next whole share.
vi.
Charges, Taxes and
Expenses. Issuance of Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such Warrant
Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the
Holder or in such name or names as may be directed by the Holder;
provided,
however, that in
the event that Warrant Shares are to be issued in a name other than
the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly
executed by the Holder and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto. If required to comply with Section
2(d)(i), the Company shall pay all Transfer Agent fees required for
same-day processing of any Notice of Exercise and all fees to the
Depository Trust Company (or another established clearing
corporation performing similar functions) required for same-day
electronic delivery of the Warrant Shares.
vii.
Closing of Books.
The Company will not close its stockholder books or records in any
manner which prevents the timely exercise of this Warrant, pursuant
to the terms hereof.
e)
Holder’s Exercise
Limitations. The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2 or otherwise, to the
extent that after giving effect to such issuance after exercise as
set forth on the applicable Notice of Exercise, the Holder
(together with the Holder’s Affiliates, and any other Persons
acting as a group together with the Holder or any of the
Holder’s Affiliates (such Persons, “Attribution
Parties”)), would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For purposes of
the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates and Attribution
Parties shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of shares
of Common Stock which would be issuable upon (i) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned
by the Holder or any of its Affiliates or Attribution Parties and
(ii) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without
limitation, any other Common Stock Equivalents) subject to a
limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its
Affiliates or Attribution Parties. Except as set forth in the
preceding sentence, for purposes of this Section 2(e), beneficial
ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Holder that the Company is
not representing to the Holder that such calculation is in
compliance with Section 13(d) of the Exchange Act and the Holder is
solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained
in this Section 2(e) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by
the Holder together with any Affiliates and Attribution Parties)
and of which portion of this Warrant is exercisable shall be in the
sole discretion of the Holder, and the submission of a Notice of
Exercise shall be deemed to be the Holder’s determination of
whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates and
Attribution Parties) and of which portion of this Warrant is
exercisable, in each case subject to the Beneficial Ownership
Limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a
determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. For purposes of
this Section 2(e), in determining the number of outstanding shares
of Common Stock, a Holder may rely on the number of outstanding
shares of Common Stock as reflected in (A) the Company’s most
recent periodic or annual report filed with the Commission, as the
case may be, (B) a more recent public announcement by the Company
or (C) a more recent written notice by the Company or the Transfer
Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the
Company shall within two Trading Days confirm orally and in writing
to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this
Warrant, by the Holder or its Affiliates or Attribution Parties
since the date as of which such number of outstanding shares of
Common Stock was reported. The “Beneficial Ownership
Limitation” shall be 4.99% (or, upon election by a
Holder prior to the issuance of any Warrants, either 9.99% or
40%1) of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock issuable upon exercise of this Warrant.
The Holder, upon notice to the Company, may increase or decrease
the Beneficial Ownership Limitation provisions of this Section
2(e), provided that the Beneficial Ownership Limitation in no event
exceeds 9.99% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock upon exercise of this Warrant held by the
Holder and the provisions of this Section 2(e) shall continue to
apply. Any increase in the Beneficial Ownership Limitation will not
be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
__________________
f)
Call Provision.
Subject to the provisions of Section 2(e) and this Section 2(f),
if, after the Initial Exercise Date, (i) the VWAP for each of 30
consecutive Trading Days (the “Measurement Period,”
which 30 consecutive Trading Day period shall not have commenced
until after the Initial Exercise Date) exceeds $3.75 (subject to adjustment for forward
and reverse stock splits, recapitalizations, stock dividends and
the like after the Initial Exercise Date), (ii) the average daily
volume for such Measurement Period exceeds $600,000 per Trading Day
and (iii) the Holder is not in possession of any information that
constitutes, or might constitute, material non-public information
which was provided by the Company, any of its Subsidiaries, or any
of their officers, directors, employees, agents or Affiliates, then
the Company may, within 1 Trading Day of the end of such
Measurement Period, call for cancellation of all or any portion of
this Warrant for which a Notice of Exercise has not yet been
delivered (such right, a “Call”) for consideration
equal to $0.001 per Warrant Share. To exercise this right, the
Company must deliver to the Holder an irrevocable written notice (a
“Call
Notice”), indicating therein the portion of
unexercised portion of this Warrant to which such notice applies.
If the conditions set forth below for such Call are satisfied from
the period from the date of the Call Notice through and including
the Call Date (as defined below), then any portion of this Warrant
subject to such Call Notice for which a Notice of Exercise shall
not have been received by the Call Date will be cancelled at 6:30
p.m. (New York City time) on the tenth Trading Day after the date
the Call Notice is received by the Holder (such date and time, the
“Call
Date”). Any unexercised portion of this Warrant to
which the Call Notice does not pertain will be unaffected by such
Call Notice. In furtherance thereof, the Company covenants and
agrees that it will honor all Notices of Exercise with respect to
Warrant Shares subject to a Call Notice that are tendered through
6:30 p.m. (New York City time) on the Call Date. The parties agree
that any Notice of Exercise delivered following a Call Notice which
calls less than all of the Warrants shall first reduce to zero the
number of Warrant Shares subject to such Call Notice prior to
reducing the remaining Warrant Shares available for purchase under
this Warrant. For example, if (A) this Warrant then permits the
Holder to acquire 100 Warrant Shares, (B) a Call Notice pertains to
75 Warrant Shares, and (C) prior to 6:30 p.m. (New York City time)
on the Call Date the Holder tenders a Notice of Exercise in respect
of 50 Warrant Shares, then (x) on the Call Date the right under
this Warrant to acquire 25 Warrant Shares will be automatically
cancelled, (y) the Company, in the time and manner required under
this Warrant, will have issued and delivered to the Holder 50
Warrant Shares in respect of the exercises following receipt of the
Call Notice, and (z) the Holder may, until the Termination Date,
exercise this Warrant for 25 Warrant Shares (subject to adjustment
as herein provided and subject to subsequent Call Notices). Subject
again to the provisions of this Section 2(f), the Company may
deliver subsequent Call Notices for any portion of this Warrant for
which the Holder shall not have delivered a Notice of Exercise.
Notwithstanding anything to the contrary set forth in this Warrant,
the Company may not deliver a Call Notice or require the
cancellation of this Warrant (and any such Call Notice shall be
void), unless, from the beginning of the Measurement Period through
the Call Date, (1) the Company shall have honored in accordance
with the terms of this Warrant all Notices of Exercise delivered by
6:30 p.m. (New York City time) on the Call Date, and (2) a
registration statement shall be effective as to all Warrant Shares
and the prospectus thereunder available for use by the Company for
the resale of all such Warrant Shares by the Holder, and (3) the
Common Stock shall be listed or quoted for trading on the Trading
Market, and (4) there is a sufficient number of authorized shares
of Common Stock for issuance of all Warrant Shares, and (5) the
issuance of all Warrant Shares subject to a Call Notice shall not
cause a breach of any provision of Section 2(e) herein. The
Company’s right to call the Warrants under this Section 2(f)
shall be exercised ratably among the Holders based on each
Holder’s initial purchase of Warrants.
Section 3. Certain
Adjustments.
a)
Stock Dividends and
Splits. If the Company, at any time while this Warrant is
outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any
other equity or equity equivalent securities payable in shares of
Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon exercise of this
Warrant), (ii) subdivides outstanding shares of Common Stock into a
larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a
smaller number of shares, or (iv) issues by reclassification of
shares of the Common Stock any shares of capital stock of the
Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after
such event, and the number of shares issuable upon exercise of this
Warrant shall be proportionately adjusted such that the aggregate
Exercise Price of this Warrant shall remain unchanged. Any
adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in
the case of a subdivision, combination or
re-classification.
b)
Subsequent Rights
Offerings. In addition to any adjustments pursuant to
Section 3(a) above, if at any time the Company grants, issues or
sells any Common Stock Equivalents or rights to purchase stock,
warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date on
which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to
participate in any such Purchase Right would result in the Holder
exceeding the Beneficial Ownership Limitation, then the Holder
shall not be entitled to participate in such Purchase Right to such
extent (or beneficial ownership of such shares of Common Stock as a
result of such Purchase Right to such extent) and such Purchase
Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the
Holder exceeding the Beneficial Ownership Limitation).
c)
Pro Rata
Distributions. During such time as this Warrant is
outstanding, if the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement,
scheme of arrangement or other similar transaction) (a
“Distribution”), at any
time after the issuance of this Warrant, then, in each such case,
the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if
the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the
Holder’s right to participate in any such Distribution would
result in the Holder exceeding the Beneficial Ownership Limitation,
then the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation). To the extent that this Warrant
has not been partially or completely exercised at the time of such
Distribution, such portion of the Distribution shall be held in
abeyance for the benefit of the Holder until the Holder has
exercised this Warrant.
d)
Fundamental
Transaction. If, at any time while this Warrant is
outstanding, (i) the Company, directly or indirectly, in one or
more related transactions effects any merger or consolidation of
the Company with or into another Person, (ii) the Company, directly
or indirectly, effects any sale, lease, license, assignment,
transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii)
any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Company, directly or indirectly,
in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash
or property, or (v) the Company, directly or indirectly, in one or
more related transactions consummates a stock or share purchase
agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with another Person or group of Persons whereby
such other Person or group acquires more than 50% of the
outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other
business combination), (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the
survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under this
Warrant in accordance with the provisions of this Section 3(d)
pursuant to written agreements in form and substance reasonably
satisfactory to the Holder and approved by the Holder (without
unreasonable delay) prior to such Fundamental Transaction and
shall, at the option of the Holder, deliver to the Holder in
exchange for this Warrant a security of the Successor Entity
evidenced by a written instrument substantially similar in form and
substance to this Warrant which is exercisable for a corresponding
number of shares of capital stock of such Successor Entity (or its
parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and with an exercise price which applies
the exercise price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common
Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock, such number of shares of capital
stock and such exercise price being for the purpose of protecting
the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Warrant referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and
power of the Company and shall assume all of the obligations of the
Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein.
Notwithstanding the foregoing, in the event of a Change of Control,
at the request of the Holder delivered before the 30th day after
such Change of Control, the Company (or the Successor Entity) shall
purchase this Warrant from the Holder by paying to the Holder,
within five (5) Business Days after such request (or, if later, on
the effective date of the Change of Control), an amount equal to
the Black Scholes Value of the remaining unexercised portion of
this Warrant on the effective date of such Change of Control,
payable in cash; provided, however, that, if the Change of Control
is not within the Company’s control, including not approved
by the Company’s Board of Directors, Holder shall only be
entitled to receive from the Company or any Successor Entity, as of
the date of consummation of such Change of Control, the same type
or form of consideration (and in the same proportion), at the Black
Scholes Value of the unexercised portion of this Warrant, that is
being offered and paid to the holders of Common Stock of the
Company in connection with the Change of Control, whether that
consideration be in the form of cash, stock or any combination
thereof, or whether the holders of Common Stock are given the
choice to receive from among alternative forms of consideration in
connection with the Change of Control.
e)
Calculations. All
calculations under this Section 3 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, the number of shares of Common Stock deemed to
be issued and outstanding as of a given date shall be the sum of
the number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
f)
Notice to
Holder.
i.
Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to
any provision of this Section 3, the Company shall promptly deliver
to the Holder by facsimile or email a notice setting forth the
Exercise Price after such adjustment and any resulting adjustment
to the number of Warrant Shares and setting forth a brief statement
of the facts requiring such adjustment.
ii.
Notice to Allow Exercise
by Holder. If (A) the Company shall declare a dividend (or
any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on
or a redemption of the Common Stock, (C) the Company shall
authorize the granting to all holders of the Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock
of any class or of any rights, (D) the approval of any stockholders
of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger
to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property, or (E) the Company shall authorize
the voluntary or involuntary dissolution, liquidation or winding up
of the affairs of the Company, then, in each case, the Company
shall cause to be delivered by facsimile or email to the Holder at
its last facsimile number or email address as it shall appear upon
the Warrant Register of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, redemption,
rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled
to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided in this Warrant
constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K. The Holder shall remain entitled to
exercise this Warrant during the period commencing on the date of
such notice to the effective date of the event triggering such
notice except as may otherwise be expressly set forth
herein.
Section 4. Transfer of
Warrant.
a)
Transferability.
This Warrant and all rights hereunder are transferable, in whole or
in part, upon surrender of this Warrant at the principal office of
the Company or its designated agent, together with a written
assignment of this Warrant substantially in the form attached
hereto duly executed by the Holder or its agent or attorney and
funds sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees, as applicable,
and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, and
this Warrant shall promptly be cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly
assigned in accordance herewith, may be exercised by a new holder
for the purchase of Warrant Shares without having a new Warrant
issued.
b)
New Warrants. This
Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section
4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice. All Warrants issued on
transfers or exchanges shall be dated the original Initial Exercise
Date of this Warrant and shall be identical with this Warrant
except as to the number of Warrant Shares issuable pursuant
thereto.
c)
Warrant Register.
The Company shall register this Warrant, upon records to be
maintained by the Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the
time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be either (i) registered pursuant to an
effective registration statement under the Securities Act and
under applicable state securities or
blue sky laws or (ii) eligible for resale without volume or
manner-of-sale restrictions or current public information
requirements pursuant to Rule 144, the Company may require, as a
condition of allowing such transfer, that the Holder or transferee
of this Warrant, as the case may be, comply with the provisions of
the Purchase Agreement.
e) Representation
by the Holder. The Holder, by the acceptance hereof,
represents and warrants that it is acquiring this Warrant and, upon
any exercise hereof, will acquire the Warrant Shares issuable upon
such exercise, for its own account and not with a view to or for
distributing or reselling such Warrant Shares or any part thereof
in violation of the Securities Act or any applicable state
securities law, except pursuant to sales registered or exempted
under the Securities Act.
Section 5. Miscellaneous.
a)
No Rights as Stockholder
Until Exercise. This Warrant does not entitle the Holder to
any voting rights, dividends or other rights as a stockholder of
the Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b)
Loss, Theft, Destruction
or Mutilation of Warrant. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any
stock certificate relating to the Warrant Shares, and in case of
loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c)
Saturdays, Sundays,
Holidays, etc. If the last or appointed day for the taking
of any action or the expiration of any right required or granted
herein shall not be a Business Day, then, such action may be taken
or such right may be exercised on the next succeeding Business
Day.
d)
Authorized
Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of issuing the necessary
Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e)
Governing Law. All
questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed
and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning
the interpretations, enforcement and defense of the transactions
contemplated by this Warrant (whether brought against a party
hereto or their respective affiliates, directors, officers,
shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in
the City of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in
the City of New York, Borough of Manhattan for the adjudication of
any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or
proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Warrant and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law. If either party shall
commence an action, suit or proceeding to enforce any provisions of
this Warrant, the prevailing party in such action, suit or
proceeding shall be reimbursed by the other party for their
reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of
such action or proceeding.
f)
Restrictions. The
Holder acknowledges that the Warrant Shares acquired upon the
exercise of this Warrant, if not registered, and the Holder does
not utilize cashless exercise, will have restrictions upon resale
imposed by state and federal securities laws.
g)
Nonwaiver and
Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice the Holder’s
rights, powers or remedies. Without limiting any other provision of
this Warrant, if the Company willfully and knowingly fails to
comply with any provision of this Warrant, which results in any
material damages to the Holder, the Company shall pay to the Holder
such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys’ fees,
including those of appellate Proceedings, incurred by the Holder in
collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies
hereunder.
h)
Notices. Any and
all notices or other communications or deliveries to be provided by
the Holders hereunder including, without limitation, any Notice of
Exercise, shall be in writing and delivered personally, by
facsimile or by e-mail, or sent by a nationally recognized
overnight courier service, addressed to the Company, at 373
Inverness Parkway, Suite 206, Englewood, Colorado 80112, Attention:
Controller, facsimile number: (720) 437-6527, email address:
ecreason@aytubio.com or such other facsimile number, email address
or address as the Company may specify for such purposes by notice
to the Holders. Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile or e-mail, or sent
by a nationally recognized overnight courier service addressed to
each Holder at the facsimile number, e-mail address or address of
such Holder appearing on the books of the Company. Any notice or
other communication or deliveries hereunder shall be deemed given
and effective on the earliest of (i) the time of transmission, if
such notice or communication is delivered via facsimile at the
facsimile number or via e-mail at the e-mail address set forth in
this Section prior to 5:30 p.m. (New York City time) on any date,
(ii) the next Trading Day after the time of transmission, if such
notice or communication is delivered via facsimile at the facsimile
number or via e-mail at the e-mail address set forth in this
Section on a day that is not a Trading Day or later than 5:30 p.m.
(New York City time) on any Trading Day, (iii) the second Trading
Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (iv) upon actual receipt
by the party to whom such notice is required to be given. To the
extent that any notice provided hereunder constitutes, or contains,
material, non-public information regarding the Company or any
subsidiaries, the Company shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form
8-K.
i)
Limitation of
Liability. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant to
purchase Warrant Shares, and no enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the
Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
j)
Remedies. The
Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company
agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law
would be adequate.
k)
Successors and
Assigns. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors and permitted assigns
of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit
of any Holder from time to time of this Warrant and shall be
enforceable by the Holder or holder of Warrant Shares.
l)
Amendment. This
Warrant may be modified or amended or the provisions hereof waived
with the written consent of the Company, on the one hand, and the
Holder, on the other hand.
m)
Severability.
Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the
remaining provisions of this Warrant.
n)
Headings. The
headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
AYTU
BIOSCIENCE, INC.
By:
__________________________
Name:
_______________________
Title:
________________________
NOTICE OF EXERCISE
TO:
AYTU BIOSCIENCE, INC.
(1) The
undersigned hereby elects to purchase ________ Warrant Shares of
the Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if
any.
(2)
Payment shall take the form of (check applicable box):
[
] in lawful money of the United States; or
[
] if permitted the cancellation of such number of Warrant
Shares as is necessary, in accordance with the formula set forth in
subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection
2(c).
(3)
Please issue said Warrant Shares in the name of the undersigned or
in such other name as is specified below:
___________________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
___________________________________
____________________________________
____________________________________
[SIGNATURE
OF HOLDER]
Name of
Investing Entity:
________________________________________________________
Signature of Authorized Signatory of Investing
Entity:__________________________________
Name of
Authorized
Signatory:____________________________________________________
Title
of Authorized Signatory:
______________________________________________________
Date:_________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase
shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
Name:
|
|
|
(Please Print)
|
Address:
|
|
Phone
Number:
Email
Address:
|
(Please
Print)
______________________________________
______________________________________
|
Dated:
_______________ __, ______
|
|
Holder’s
Signature:
|
|
Holder’s
Address:
|
|
PLACEMENT AGENCY AGREEMENT
October
11, 2019
Ladenburg
Thalmann & Co. Inc.
999
Vanderbilt Beach Road, Suite 200
Naples,
Florida 34105
Ladies
and Gentlemen:
Introduction. Subject to the terms and
conditions herein (this “Agreement”), Aytu
BioScience, Inc., a Delaware corporation (the “Company”), hereby agrees
to sell up to an aggregate of $10,000,000 of securities of the
Company, including, but not limited to unregistered shares of
Series F Convertible Preferred Stock (the “Preferred Stock”), and
Common Stock Purchase Warrants (the “Warrants”) and the shares
of Common Stock issuable upon exercise of the Warrants (the
“Warrant
Shares”) (the Shares, Preferred Stock, the shares of
Common Stock underlying the Preferred Stock, the Warrants, and the
Warrant Shares, collectively, the “Securities”) directly to
various investors (each, an “Investor” and,
collectively, the “Investors”) through
Ladenburg Thalmann & Co. Inc. (the “Placement Agent”) as
placement agent. The documents executed and delivered by the
Company and the Investors in connection with the Offering (as
defined below), including, without limitation, a securities
purchase agreement(s) (the “Purchase Agreement”),
shall be collectively referred to herein as the “Transaction Documents.”
The Placement Agent may retain other brokers or dealers to act as
sub-agents or selected-dealers on its behalf in connection with the
Offering (as defined below).
The
Company hereby confirms its agreement with the Placement Agent as
follows:
Section
1. Agreement to Act as Placement
Agent.
(a) On the basis of the
representations, warranties and agreements of the Company herein
contained, and subject to all the terms and conditions of this
Agreement, the Placement Agent shall be the exclusive placement
agent in connection with the offering and sale by the Company of
the Securities, with the terms of such offering (the
“Offering”) to be subject
to market conditions and negotiations between the Company, the
Placement Agent and the prospective Investors. The Placement Agent
will act on a reasonable best efforts basis and the Company agrees
and acknowledges that there is no guarantee of the successful
placement of the Securities, or any portion thereof, in the
prospective Offering. Under no circumstances will the Placement
Agent or any of its “Affiliates” (as defined below) be
obligated to underwrite or purchase any of the Securities for its
own account or otherwise provide any financing. The Placement Agent
shall act solely as the Company’s agent and not as principal.
The Placement Agent shall have no authority to bind the Company
with respect to any prospective offer to purchase Securities and
the Company shall have the sole right to accept offers to purchase
Securities and may reject any such offer, in whole or in part.
Subject to the terms and conditions hereof, payment of the purchase
price for, and delivery of, the Securities shall be made at one or
more closings (each a “Closing” and the date on
which each Closing occurs, a “Closing Date”). As
compensation for services rendered, on each Closing Date, the
Company shall pay to the Placement Agent the fees and expenses set
forth below:
(i) A cash fee equal to
8% of the gross proceeds received by the Company from the sale of
the Securities at the closing of the Offering (the
“Closing”), subject to
reduction to 5% pursuant to the terms of the Investment Banking
Agreement (as defined below).
(ii) The
Company also agrees to reimburse Placement Agent’s expenses
(with supporting invoices/receipts) up to $65,000, which shall be
payable immediately upon (but only in the event of) a Closing of
the Offering, provided that such expense cap in no way limits or
impairs the indemnification and contribution provisions of this
Agreement.
(b) The term of the
Placement Agent's exclusive engagement will be as provided in
Section 2 of that certain Investment Banking Agreement dated June
14, 2019 between the Company and the Placement Agent (the
“Investment Banking
Agreement”). Notwithstanding anything to the contrary
contained herein, the provisions concerning confidentiality,
indemnification and contribution contained herein and the
Company’s obligations contained in the indemnification
provisions will survive any expiration or termination of this
Agreement, and the Company’s obligation to pay fees actually
earned and payable and to reimburse expenses actually incurred and
reimbursable pursuant to Section 1 hereof and which are permitted
to be reimbursed under FINRA Rule 5110(f)(2)(D)(i), will survive
any expiration or termination of this Agreement. Nothing in this
Agreement shall be construed to limit the ability of the Placement
Agent or its Affiliates to pursue, investigate, analyze, invest in,
or engage in investment banking, financial advisory or any other
business relationship with Persons (as defined below) other than
the Company. As used herein (i) “Persons” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind and (ii)
“Affiliate” means any Person that, directly or
indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person as such
terms are used in and construed under Rule 405 under the Securities
Act of 1933, as amended (the “Securities
Act”).
Section
2. Representations, Warranties and Covenants of
the Company. The Company hereby represents, warrants and
covenants to the Placement Agent as of the date hereof, and as of
each Closing Date, as follows:
(a) Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and the Transaction Documents and otherwise to carry out
its obligations hereunder and thereunder. The execution and
delivery of each of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby and
thereby and under the Transaction Documents have been duly
authorized by all necessary action on the part of the Company and
no further action is required by the Company, the Company’s
Board of Directors (the “Board of Directors”) or
the Company’s stockholders in connection therewith other than
in connection with the Required Approvals (as defined in the
Purchase Agreement). This Agreement has been duly executed by the
Company and, when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms,
except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable
law.
(b) No Conflicts. The execution,
delivery and performance by the Company of this Agreement and the
transactions contemplated pursuant to the Transaction Documents,
the issuance and sale of the Securities and the consummation by it
of the transactions contemplated hereby and thereby to which it is
a party do not and will not (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time
or both would become a default) under, result in the creation of
any Lien (as defined in the Purchase Agreement) upon any of the
properties or assets of the Company or any Subsidiary, or give to
others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or
by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset
of the Company or a Subsidiary is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to result in a Material Adverse Effect (as
defined in the Purchase Agreement).
(c) Certificates. Any certificate
signed by an officer of the Company and delivered to
the Placement Agent or to counsel for the Placement Agent
shall be deemed to be a representation and warranty by the Company
to the Placement Agent as to the matters set forth
therein.
(d) Reliance.
The Company acknowledges that the Placement Agent will rely
upon the accuracy and truthfulness of the foregoing representations
and warranties and hereby consents to such reliance.
(e) FINRA Affiliations. There are
no affiliations with any FINRA member firm that is participating in
the Registered Offering among the Company’s officers or
directors.
(f) Private
Placement. Assuming the accuracy of the Investors’
representations and warranties set forth in Purchase Agreement, no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Investors as
contemplated in the Transaction Documents. The issuance and sale of
the Securities pursuant to the Transaction Documents does not
contravene the rules and regulations of the Trading
Market.
(g) No
General Solicitation. Neither the Company nor any Person
acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only
to the Investors and certain other “accredited
investors” within the meaning of Rule 501 under the
Securities Act,
(h) No
Disqualification Events. With respect to the
Securities to be offered and sold pursuant to the Transaction
Documents in reliance on Rule 506 under the Securities Act, none of
the Company, any of its predecessors, any affiliated issuer, any
director, executive officer, other officer of the Company
participating in the offering hereunder, any beneficial owner of
20% or more of the Company’s outstanding voting equity
securities, calculated on the basis of voting power, nor any
promoter (as that term is defined in Rule 405 under the Securities
Act) connected with the Company in any capacity at the time of sale
(each, an “Issuer
Covered Person” and, together, “Issuer Covered Persons”)
is subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act
(a “Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and
has furnished to the Investors a copy of any disclosures provided
thereunder.
(i) Other
Covered Persons. Other than the Placement Agent, the Company
is not aware of any person that has been or will be paid (directly
or indirectly) remuneration for solicitation of purchasers in
connection with the sale of the Securities
(j) Notice
of Disqualification Events. The Company will notify the
Placement Agent in writing, prior to the Closing Date of (i) any
Disqualification Event relating to any Issuer Covered Person and
(ii) any event that would, with the passage of time, reasonably be
expected to become a Disqualification Event relating to any Issuer
Covered Person.
(k) Representations
and Warranties Incorporated by Reference. Each of the
representations and warranties (together with any related
disclosure schedules thereto) made by the Company to the Investors
in the Purchase Agreement is hereby incorporated herein by
reference (as though fully restated herein) and is hereby made to,
and in favor of, the Placement Agent.
Section
3. Delivery and Payment. Each Closing shall
occur at the offices of Ellenoff Grossman & Schole LLP, 1345
Avenue of the Americas, New York, New York 10105
(“Placement Agent
Counsel”) (or at such other place as shall be agreed
upon by the Placement Agent and the Company). Subject to the terms
and conditions hereof, at each Closing payment of the purchase
price for the Securities sold on such Closing Date shall be made by
Federal Funds wire transfer, against delivery of such Securities,
and such Securities shall be registered in such name or names and
shall be in such denominations, as the Placement Agent may request
at least one business day before the time of purchase (as defined
below).
Deliveries of the
documents with respect to the purchase of the Securities, if any,
shall be made at the offices of Placement Agent Counsel. All
actions taken at a Closing shall be deemed to have occurred
simultaneously.
Section
4. Covenants and Agreements of the Company.
The Company further covenants and agrees with the Placement Agent
as follows:
(a) Securities Laws Disclosure;
Publicity. The Company shall (a) by 9:00 a.m. (New York City
time) on the Trading Day immediately following the date hereof,
issue a press release disclosing the material terms of the
transactions contemplated hereby, and (b) file a Current Report on
Form 8-K, including the Transaction Documents as exhibits thereto,
with the Commission within the time required by the Exchange
Act.
(b) Form D; Blue Sky Filings. The
Company agrees to timely file a Form D with respect to the
Securities as required under Regulation D and to provide a copy
thereof upon request of the Placement Agent. The Company shall take
such action as the Company shall reasonably determine is necessary
in order to obtain an exemption for, or to qualify the Securities
for, sale to the Investors under applicable securities or
“Blue Sky” laws of the states of the United States and
shall provide evidence of such actions upon request of the
Placement Agent.
(c) Integration. The Company shall
not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of
the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities or that
would be integrated with the offer or sale of the Securities for
purposes of the rules and regulations of any Trading Market such
that it would require shareholder approval prior to the closing of
such other transaction unless shareholder approval is obtained
before the closing of such subsequent transaction.
(d) Use of Proceeds. The Company
shall use the net proceeds from the sale of the Securities pursuant
to the Transaction Documents for working capital purposes and shall
not use such proceeds: (a) for the satisfaction of any portion of
the Company’s debt (other than payment of trade payables in
the ordinary course of the Company’s business and prior
practices), (b) for the redemption of any Common Stock or Common
Stock Equivalents, (c) for the settlement of any outstanding
litigation or (d) in violation of FCPA or OFAC
regulations.
(e) Periodic Reporting Obligations.
Until such date that no Investors hold any Securities, the Company
shall duly file, on a timely basis, with the Commission and the
Trading Market all reports and documents required to be filed under
the Exchange Act within the time periods and in the manner required
by the Exchange Act.
(f) Additional
Documents. The
Company will enter into any subscription, purchase or other
customary agreements as the Placement Agent or the Investors deem
necessary or appropriate to consummate the Offering, all of which
will be in form and substance reasonably acceptable to the
Placement Agent and the Investors. The Company agrees that the
Placement Agent may rely upon, and is a third party beneficiary of,
the representations and warranties, and applicable covenants, set
forth in any such purchase, subscription or other agreement with
Investors in the Offering.
(g) Transfer Agent. The Company
will maintain, at its expense, a registrar and transfer agent for
the Common Stock.
(h) No Manipulation of
Price. The
Company will not take, directly or indirectly, any action designed
to cause or result in, or that has constituted or might reasonably
be expected to constitute, the stabilization or manipulation of the
price of any securities of the Company.
(i) Acknowledgment. The Company
acknowledges that any advice given by the Placement Agent to the
Company is solely for the benefit and use of the Board of Directors
of the Company and may not be used, reproduced, disseminated,
quoted or referred to, without the Placement Agent's prior written
consent.
(j) Announcement of Offering. The
Company acknowledges and agrees that the Placement Agent may,
subsequent to the Closing, make public its involvement with the
Offering.
(k) Reliance on Others. The Company
confirms that it will rely on its own counsel and accountants for
legal and accounting advice.
(l) Research Matters. By entering into this
Agreement, the Placement Agent does not provide any promise, either
explicitly or implicitly, of favorable or continued research
coverage of the Company and the Company hereby acknowledges and
agrees that the Placement Agent’s selection as a placement
agent for the Offering was in no way conditioned, explicitly or
implicitly, on the Placement Agent providing favorable or any
research coverage of the Company. In accordance with FINRA Rule
2711(e), the parties acknowledge and agree that the Placement Agent
has not directly or indirectly offered
favorable research, a specific rating or a specific price target,
or threatened to change research, a rating or a price target, to
the Company or inducement for the receipt of business or
compensation.
Section
5. Conditions of the Obligations of the Placement
Agent. The obligations of the Placement Agent hereunder
shall be subject to the accuracy of the representations and
warranties on the part of the Company set forth in Section 2
hereof, in each case as of the date hereof and as of each Closing
Date as though then made, to the timely performance by each of the
Company of its covenants and other obligations hereunder on and as
of such dates, and to each of the following additional
conditions:
(a) Corporate Proceedings. All
corporate proceedings and other legal matters in connection with
this Agreement, the Transaction Documents, and the sale and
delivery of the Securities, shall have been completed or resolved
in a manner reasonably satisfactory to the Placement Agent's
counsel, and such counsel shall have been furnished with such
papers and information as it may reasonably have requested to
enable such counsel to pass upon the matters referred to in this
Section 5.
(b) No Material Adverse Effect.
Subsequent to the execution and delivery of this Agreement and
prior to each Closing Date, in the Placement Agent's sole judgment
after consultation with the Company, there shall not have occurred
any Material Adverse Effect (as defined in the Purchase Agreement)
or development involving a prospective material adverse change in
the condition or the business activities, financial or otherwise,
of the Company from the latest dates as of which such condition is
set forth in the Transaction Documents.
(c) Opinion of Counsel for the
Company. The Placement Agent shall have received on each
Closing Date the favorable opinion of legal counsel to the Company,
dated as of such Closing Date, addressed to the Placement Agent and
in form and substance satisfactory to the Placement
Agent.
(d) Officers’ Certificate.
The Placement Agent shall have received on each Closing Date a
certificate of the Company, dated as of such Closing Date, signed
by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and the Placement Agent shall be
satisfied that, the signers of such certificate have reviewed this
Agreement and the Transaction Documents and to the further effect
that:
(i) The representations
and warranties of the Company in this Agreement are true and
correct, as if made on and as of such Closing Date, and the Company
has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to
such Closing Date;
(ii) Subsequent
to the respective dates as of which information is given in the SEC
Reports and the Transaction Documents, there has not been: (a) any
Material Adverse Effect; (b) any transaction that is material to
the Company and the Subsidiaries taken as a whole, except
transactions entered into in the ordinary course of business; (c)
any obligation, direct or contingent, that is material to the
Company and the Subsidiaries taken as a whole, incurred by the
Company or any Subsidiary, except obligations incurred in the
ordinary course of business; (d) any material change in the capital
stock (except changes thereto resulting from the exercise of
outstanding stock options or warrants) or outstanding indebtedness
of the Company or any Subsidiary; (e) any dividend or distribution
of any kind declared, paid or made on the capital stock of the
Company; or (f) any loss or damage (whether or not insured) to the
property of the Company or any Subsidiary which has been sustained
or will have been sustained which has a Material Adverse
Effect.
(e) Stock Exchange Listing. The
Common Stock shall be registered under the Exchange Act and shall
be listed on the Trading Market, and the Company shall not have
taken any action designed to terminate, or likely to have the
effect of terminating, the registration of the Common Stock
under the Exchange Act or delisting or suspending from trading the
Common Stock from the Trading Market, nor shall the Company have
received any information suggesting that the Commission or the
Trading Market is contemplating terminating such registration or
listing.
(f) Lock-Up Agreements. On the
Closing Date, the Placement Agent shall have received the executed
lock-up agreement, in the form attached hereto as Exhibit A, from each of the
directors and officers of the Company and certain shareholders set
forth on Exhibit B
hereto.
(g) Additional Documents. On or
before each Closing Date, the Placement Agent and counsel for the
Placement Agent shall have received such information and documents
as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Securities as contemplated
herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the
conditions or agreements, herein contained.
If any
condition specified in this Section 5 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the
Placement Agent by notice to the Company at any time on or prior to
a Closing Date, which termination shall be without liability on the
part of any party to any other party, except that Section 6
(Payment of Expenses), Section 7 (Indemnification and Contribution)
and Section 8 (Representations and Indemnities to Survive Delivery)
shall at all times be effective and shall survive such
termination.
Section
6. Payment of Expenses. The Company agrees
to pay all costs, fees and expenses incurred by the Company in
connection with the performance of its obligations hereunder and in
connection with the transactions contemplated hereby, including,
without limitation: (i) all expenses incident to the issuance,
delivery and qualification of the Securities (including all
printing and engraving costs); (ii) all fees and expenses of the
registrar and transfer agent of the Common Stock; (iii) all
necessary issue, transfer and other stamp taxes in connection with
the issuance and sale of the Securities; (iv) all fees and
expenses of the Company’s counsel, independent public or
certified public accountants and other advisors; (v) the fees and
expenses associated with including the Shares and Warrant Shares on
the Trading Market; (vi) all costs and expenses incident to the
travel and accommodation of the Company’s and the Placement
Agent's employees on the “roadshow,” if any; and
(vii) all other fees, costs and expenses of the Company related to
the Offering.
Section
7. Indemnification and Contribution. The
Company agrees to indemnify the Placement Agent in accordance with
the provisions of Exhibit
A to the Investment Banking Agreement, which is incorporated
by reference herein and made a part hereof.
Section
8. Representations and Indemnities to Survive
Delivery. The respective indemnities, agreements,
representations, warranties and other statements of the Company or
any person controlling the Company, of its officers, and of the
Placement Agent set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any
investigation made by or on behalf of the Placement Agent, the
Company, or any of its or their partners, officers or directors or
any controlling person, as the case may be, and will survive
delivery of and payment for the Securities sold hereunder and any
termination of this Agreement. A successor to a Placement Agent, or
to the Company, its directors or officers or any person controlling
the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this
Agreement.
Section
9. Notices. All communications hereunder
shall be in writing and shall be mailed, hand delivered, telecopied
or e-mailed and confirmed to the parties hereto as
follows:
If to
the Placement Agent to the address set forth above, attention:
General Counsel, facsimile: (305) 572-4220
With a copy to:
Ellenoff
Grossman & Schole LLP
1345
Avenue of the Americas, 11th Floor
New
York, New York 10105
E-Mail:
capmkts@egsllp.com
Attention:
Michael Nertney
If to
the Company:
373
Inverness Parkway, Suite 206
Englewood,
Colorado 80112
E-Mail:
josh.disbrow@aytubio.com
Attention:
Joshua Disbrow, CEO
With a copy to:
Any
party hereto may change the address for receipt of communications
by giving written notice to the others.
Section
10. Successors. This Agreement will inure to
the benefit of and be binding upon the parties hereto, and to the
benefit of the employees, officers and directors and controlling
persons referred to in Section 7 hereof, and to their respective
successors, and personal representative, and no other person will
have any right or obligation hereunder.
Section
11. Partial Unenforceability. The invalidity
or unenforceability of any section, paragraph or provision of this
Agreement shall not affect the validity or enforceability of any
other section, paragraph or provision hereof. If any Section,
paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to
be made such minor changes (and only such minor changes) as are
necessary to make it valid and enforceable.
Section
12. Governing Law Provisions. This Agreement
shall be deemed to have been made and delivered in New York City
and both this Agreement and the transactions contemplated hereby
shall be governed as to validity, interpretation, construction,
effect and in all other respects by the internal laws of the State
of New York, without regard to the conflict of laws principles
thereof. Each of the Placement Agent and the Company: (i) agrees
that any legal suit, action or proceeding arising out of or
relating to this Agreement and/or the transactions contemplated
hereby shall be instituted exclusively in New York Supreme Court,
County of New York, or in the United States District Court for the
Southern District of New York, (ii) waives any objection which it
may have or hereafter to the venue of any such suit, action or
proceeding, and (iii) irrevocably consents to the jurisdiction of
the New York Supreme Court, County of New York, and the United
States District Court for the Southern District of New York in any
such suit, action or proceeding. Each of the Placement Agent and
the Company further agrees to accept and acknowledge service of any
and all process which may be served in any such suit, action or
proceeding in the New York Supreme Court, County of New York, or in
the United States District Court for the Southern District of New
York and agrees that service of process upon the Company mailed by
certified mail to the Company’s address shall be deemed in
every respect effective service of process upon the Company, in any
such suit, action or proceeding, and service of process upon the
Placement Agent mailed by certified mail to the Placement
Agent’s address shall be deemed in every respect effective
service process upon the Placement Agent, in any such suit, action
or proceeding. Notwithstanding any provision of this Agreement to
the contrary, the Company agrees that neither the Placement Agent
nor its affiliates, and the respective officers, directors,
employees, agents and representatives of the Placement Agent, its
affiliates and each other person, if any, controlling the Placement
Agent or any of its affiliates, shall have any liability (whether
direct or indirect, in contract or tort or otherwise) to the
Company for or in connection with the engagement and transaction
described herein except for any such liability for losses, claims,
damages or liabilities incurred by us that are finally judicially
determined to have resulted from the willful misconduct or gross
negligence of such individuals or entities. If either party shall
commence an action or proceeding to enforce any provision of this
Agreement, then the prevailing party in such action or proceeding
shall be reimbursed by the other party for its reasonable
attorney’s fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such action or
proceeding.
Section
13. General Provisions.
(a) This
Agreement constitutes the entire agreement of the parties to this
Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. Notwithstanding anything
herein to the contrary, the Investment Banking Agreement between
the Company and the Placement Agent, shall continue to be effective
and the terms therein shall continue to survive and be enforceable
by the Placement Agent in accordance with its terms, including,
without limitation, Section 5(b) and Section 6 therein with respect
to future offerings. This Agreement may be executed in two or more
counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement may not be amended or modified unless in
writing by all of the parties hereto, and no condition herein
(express or implied) may be waived unless waived in writing by each
party whom the condition is meant to benefit. Section headings
herein are for the convenience of the parties only and shall not
affect the construction or interpretation of this
Agreement.
(b) The
Company acknowledges that in connection with the offering of the
Securities: (i) the Placement Agent has acted at arms length, are
not agents of, and owe no fiduciary duties to the Company or any
other person, (ii) the Placement Agent owes the Company only those
duties and obligations set forth in this Agreement and (iii) the
Placement Agent may have interests that differ from those of the
Company. The Company waives to the full extent permitted by
applicable law any claims it may have against the Placement Agent
arising from an alleged breach of fiduciary duty in connection with
the offering of the Securities
[The
remainder of this page has been intentionally left
blank.]
If the
foregoing is in accordance with your understanding of our
agreement, please sign below whereupon this instrument, along with
all counterparts hereof, shall become a binding agreement in
accordance with its terms.
Very
truly yours,
AYTU BIOSCIENCE, INC.,
a
Delaware corporation
By:
Name:
Title:
The
foregoing Placement Agency Agreement is hereby confirmed and
accepted as of the date first above written.
LADENBURG THALMANN & CO. INC.
Name:
Title:
Exhibit B – Lock-Up Parties
SECURITIES
PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”) is dated as
of October 11, 2019, between Aytu BioScience, Inc., a Delaware
corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “Purchaser” and
collectively the “Purchasers”).
WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and Rule 506 promulgated thereunder, the
Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the
Company, securities of the Company as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Company
and each Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement, for
all purposes of this Agreement, (a) capitalized terms that are not
otherwise defined herein have the meanings given to such terms in
the Certificate of Designation (as defined herein), and (b) the
following terms have the meanings set forth in this Section
1.1:
“Acquiring
Person” shall have the
meaning ascribed to such term in Section 4.5.
“Action” shall have the
meaning ascribed to such term in Section 3.1(j).
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under
Rule 405 under the Securities Act.
“Board of Directors” means
the board of directors of the Company.
“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
“Cerecor Transaction”
means the Company’s acquisition of certain assets of Cerecor,
Inc. (“Cerecor”) pursuant to an
Asset Purchase Agreement dated October 10, 2019, the material terms
of which are described on Schedule A hereto.
“Certificate of
Designation” means the Certificate of Designation to
be filed prior to the Closing by the Company with the Secretary of
State of Delaware, defining the rights, preferences and privileges
of the Series F Preferred Stock in the form of Exhibit A attached
hereto.
“Closing” means the
closing of the purchase and sale of the Securities pursuant to
Section 2.1.
“Closing Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to
pay the Subscription Amount and (ii) the Company’s
obligations to deliver the Securities, in each case, have been
satisfied or waived, but in no event later than the third
(3rd)
Trading Day following the date hereof.
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means the
common stock of the Company, par value $0.0001 per share, and any
other class of securities into which such securities may hereafter
be reclassified or changed.
“Common Stock Equivalents”
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible
into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Stock.
“Company Counsel” means
Dorsey & Whitney LLP, with offices located at 111 South Main
Street, 21st Floor, Salt Lake
City, Utah 84111.
“Conversion
Price” shall have the meaning ascribed to such term in
the Certificate of Designation.
“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of the shares of Preferred Stock in accordance with the terms
hereof.
“Disclosure Schedules”
means the Disclosure Schedules of the Company delivered
concurrently herewith.
“Disclosure Time” means,
(i) if this Agreement is signed on a day that is not a Trading Day
or after 9:00 a.m. (New York City time) and before midnight (New
York City time) on any Trading Day, 9:01 a.m. (New York City time)
on the Trading Day immediately following the date hereof, unless
otherwise instructed as to an earlier time by the Placement Agent,
and (ii) if this Agreement is signed between midnight (New York
City time) and 9:00 a.m. (New York City time) on any Trading Day,
no later than 9:01 a.m. (New York City time) on the date hereof,
unless otherwise instructed as to an earlier time by the Placement
Agent.
“Effective Date” means the
earliest of the date that (a) the initial Registration Statement
has been declared effective by the Commission, (b) all of the
Conversion Shares and Warrant Shares have been sold pursuant to
Rule 144 or may be sold pursuant to Rule 144 without the
requirement for the Company to be in compliance with the current
public information required under Rule 144 and without volume or
manner-of-sale restrictions, (c) following the one year anniversary
of the Closing Date provided that a holder of Conversion Shares or
Warrant Shares is not an Affiliate of the Company, or (d) all of
the Conversion Shares and Warrant Shares may be sold pursuant to an
exemption from registration under Section 4(a)(1) of the Securities
Act without volume or manner-of-sale restrictions and Company
Counsel has delivered to such holders a standing written
unqualified opinion that resales may then be made by such holders
of the Conversion Shares and Warrant Shares pursuant to such
exemption which opinion shall be in form and substance reasonably
acceptable to such holders.
“EGS” means Ellenoff
Grossman & Schole LLP, with offices located at 1345 Avenue of
the Americas, New York, New York 10105-0302.
“Escrow Agent” means
Signature Bank, a New York State chartered bank, with offices at
261 Madison Avenue, New York, New York 10016.
“Escrow Agreement” means
the escrow agreement entered into prior to the date hereof, by and
among the Company, the Escrow Agent and the Placement Agent,
pursuant to which the Purchasers shall deposit Subscription Amounts
with the Escrow Agent to be applied to the transactions
contemplated hereunder.
“Evaluation Date” shall
have the meaning ascribed to such term in Section
3.1(s).
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“Exempt Issuance” means
the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Company pursuant to any stock or
option plan duly adopted for such purpose, by a majority of the
non-employee members of the Board of Directors or a majority of the
members of a committee of non-employee directors established for
such purpose for services rendered to the Company, (b) securities
upon the exercise or exchange of or conversion of any Securities
issued hereunder and/or other securities exercisable or
exchangeable for or convertible into shares of Common Stock issued
and outstanding on the date of this Agreement, provided that such
securities have not been amended since the date of this Agreement
to increase the number of such securities or to decrease the
exercise price, exchange price or conversion price of such
securities (other than in connection with stock splits or
combinations) or to extend the term of such securities, (c)
securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors
of the Company, provided that, such securities are issued as
“restricted securities” (as defined in Rule 144) and
carry no registration rights that require or permit the filing of
any registration statement in connection therewith during the
prohibition period in Section 4.11(a) herein, and provided that any
such issuance shall only be to a Person (or to the equityholders of
a Person) which is, itself or through its subsidiaries, an
operating company or an owner of an asset in a business synergistic
with the business of the Company and shall provide to the Company
additional benefits in addition to the investment of funds, but
shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an
entity whose primary business is investing in securities, (d) up to
9,000,000 shares issued in
connection with the Innovus Transaction, and (e) up to 12,500,000 shares issued pursuant to the
Cerecor Transaction, provided that, such shares are issued as
“restricted securities” (as defined in Rule 144) and
carry no registration rights that require or permit the filing of
any registration statement in connection therewith prior to the
earlier of (i) the six (6) month anniversary of the effective date
of the Registration Statement, and (ii) the one (1) year
anniversary of the Closing Date.
“FCPA” means the Foreign
Corrupt Practices Act of 1977, as amended.
“FDA” shall have the
meaning ascribed to such term in Section 3.1(hh).
“FDCA” shall have the
meaning ascribed to such term in Section 3.1(hh).
“GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).
“Indebtedness” shall have
the meaning ascribed to such term in Section 3.1(aa).
“Innovus Transaction”
means the merger between the Company and Innovus Pharmaceuticals,
Inc. pursuant to a Merger Agreement dated September 12,
2019.
“Intellectual Property
Rights” shall have the meaning ascribed to such term
in Section 3.1(p).
“Legend Removal Date”
shall have the meaning ascribed to such term in Section
4.1(c).
“Liens” means a lien,
charge, pledge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
“Material Adverse Effect”
shall have the meaning assigned to such term in Section
3.1(b).
“Material Permits” shall
have the meaning ascribed to such term in Section
3.1(n).
“Person”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Pharmaceutical Product”
shall have the meaning ascribed to such term in Section
3.1(hh).
“Placement Agent” means
Ladenburg Thalmann & Co. Inc.
“Preferred Stock” means
the up to 10,000 shares of the Company’s Series F Convertible
Preferred Stock issued hereunder having the rights, preferences and
privileges set forth in the Certificate of
Designation.
“Proceeding”
means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
“Public Information
Failure” shall have the meaning ascribed to such term
in Section 4.2(b).
“Public Information Failure
Payments” shall have the meaning ascribed to such term
in Section 4.2(b).
“Purchaser Party” shall
have the meaning ascribed to such term in Section 4.8.
“Registration Rights
Agreement” means the Registration Rights Agreement,
dated on or about the date hereof, among the Company and the
Purchasers, in the form of Exhibit D attached
hereto.
“Registration Statement”
means a registration statement meeting the requirements set forth
in the Registration Rights Agreement and covering the resale by the
Purchasers of the Conversion Shares and the Warrant
Shares.
“Required
Approvals” shall have the meaning ascribed to such
term in Section 3.1(e).
“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“Rule 424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“SEC Reports” shall have
the meaning ascribed to such term in Section 3.1(h).
“Securities” means the
Preferred Stock, the Warrants and the Underlying
Shares.
“Securities
Act” means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
“Shareholder Approval”
means such approval as may be required by the applicable rules and
regulations of the Nasdaq Stock Market (or any successor entity)
from the shareholders of the Company with respect to the
transactions contemplated by the Transaction Documents, including
the issuance of all of the Underlying Shares in excess of 19.99% of
the issued and outstanding Common Stock on the Closing
Date.
“Short
Sales” means all “short sales” as defined
in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include
locating and/or borrowing shares of
Common Stock).
“Stated Value” means
$1,000 per share of Series D
Preferred.
“Subscription
Amount” means, as to each Purchaser, the aggregate
amount to be paid for the Securities being purchased hereunder as
specified below such Purchaser’s name on the signature page
of this Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately
available funds.
“Subsidiary” means any
subsidiary of the Company as set forth on Schedule 3.1(a), and shall,
where applicable, also include any direct or indirect subsidiary of
the Company formed or acquired after the date hereof.
“Trading Day” means a day
on which the principal Trading Market is open for
trading.
“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE
American, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market or the New York Stock Exchange (or any
successors to any of the foregoing).
“Transaction Documents”
means this Agreement, the Registration Rights Agreement, the
Certificate of Designation, the Warrants, all exhibits and
schedules thereto and hereto and any other documents or agreements
executed in connection with the transactions contemplated
hereunder.
“Transfer Agent” means
Issuer Direct Corporation, the current transfer agent of the
Company, with a mailing address of 500 Perimeter Park Dr., Suite D,
Morrisville, North Carolina 27560 and a facsimile number of
919-481-6222, and any successor transfer agent of the
Company.
“Underlying
Shares” means, collectively, the Conversion Shares and
the Warrant Shares.
“VWAP” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)),
(b) if OTCQB or OTCQX is not a Trading Market, the volume
weighted average price of the Common Stock for such date (or the
nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the
Common Stock is not then listed or quoted for trading on OTCQB or
OTCQX and if prices for the Common Stock are then reported on the
Pink Open Market (or a similar organization or agency succeeding to
its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Purchasers of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the Company.
“Warrants” means,
collectively, the Common Stock purchase warrants delivered to the
Purchasers at the Closing in accordance with Section 2.2(a) hereof,
which Warrants shall be exercisable following Shareholder Approval
and have a term of exercise expiring five years from the Effective
Date, in the form of Exhibit B attached
hereto.
“Warrant Shares” means the
shares of Common Stock issuable upon exercise of the
Warrants.
ARTICLE II.
PURCHASE
AND SALE
2.1 Closing.
On the Closing Date, upon the terms and subject to the conditions
set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company
agrees to sell, and the Purchasers, severally and not jointly,
agree to purchase, up to an aggregate of $10,000,000.00
of Securities. Unless otherwise
directed by the Placement Agent, each Purchaser shall deliver, via
wire transfer, immediately available funds equal to its
Subscription Amount to the Escrow Agent, and the Company shall
deliver to each Purchaser its respective shares of Preferred Stock
and Warrants, as determined pursuant to Section 2.2(a), and the
Company and each Purchaser shall deliver the other items set forth
in Section 2.2 deliverable at the Closing. Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the
Closing shall occur at the offices of EGS or such other location as
the parties shall mutually agree.
2.2 Deliveries.
(a) On
or prior to the Closing Date, the Company shall deliver or cause to
be delivered to each Purchaser the following:
(i) this Agreement duly
executed by the Company;
(ii) a
legal opinion of Company Counsel, substantially in the form of
Exhibit C attached
hereto;
(iii) the
Company shall have provided each Purchaser with the Escrow Account
wire instructions, on Company letterhead and executed by the Chief
Executive Officer or Chief Financial Officer;
(iv) a
certificate evidencing a number of shares of Preferred Stock equal
to such Purchaser’s Subscription Amount divided by the Stated
Value, registered in the name of such Purchaser, which certificates
may be delivered to each Purchaser within three (3) Business Day of
the Closing, and evidence of the filing and acceptance of the
Certificate of Designation from the Secretary of State of
Delaware;
(v) a Warrant
registered in the name of each such Purchaser to purchase up to a
number of shares of Common Stock equal to 100% of the number of
Conversion Shares underlying the Preferred Stock initially issuable
on the Closing Date, purchased by such Purchaser with an exercise
price equal to $1.25,
subject to adjustment therein; and
(vi) the
Registration Rights Agreement duly executed by the
Company.
(b) On or prior to the
Closing Date, each Purchaser shall deliver or cause to be delivered
to the Company or the Escrow Agent, as applicable, the
following:
(i) this Agreement duly
executed by such Purchaser;
(ii) to
the Escrow Agent, such Purchaser’s Subscription Amount by
wire transfer to the account specified in writing by the Company;
and
(iii) the
Registration Rights Agreement duly executed by such
Purchaser.
2.3 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing
are subject to the following conditions being
met:
(i) the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) on the Closing Date of the representations and warranties
of the Purchasers contained herein (unless as of a specific date
therein in which case they shall be accurate as of such
date);
(ii) all
obligations, covenants and agreements of each Purchaser required to
be performed at or prior to the Closing Date shall have been
performed; and
(iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement.
(b) The respective
obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being
met:
(i) the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the Closing Date of the representations
and warranties of the Company contained herein (unless as of a
specific date therein in which case they shall be accurate as of
such date);
(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed;
(iii) the
delivery of a lock-up agreement, in the form attached hereto as
Exhibit E, duly
executed by Cerecor;
(iv) the
delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
(v) there shall have
been no Material Adverse Effect with respect to the Company since
the date hereof; and
(vi) from
the date hereof to the Closing Date, trading in the Common Stock
shall not have been suspended by the Commission or the
Company’s principal Trading Market, and, at any time prior to
the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades
are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each
case, in the reasonable judgment of such Purchaser, makes it
impracticable or inadvisable to purchase the Securities at the
Closing.
ARTICLE III.
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company.
Except as set forth in the Disclosure Schedules, which Disclosure
Schedules shall be deemed a part hereof and shall qualify any
representation or otherwise made herein to the extent of the
disclosure contained in the corresponding section of the Disclosure
Schedules, the Company hereby makes the following representations
and warranties to each Purchaser:
(a) Subsidiaries.
All of the direct and indirect subsidiaries of the Company are set
forth on Schedule
3.1(a). The Company owns,
directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any Liens, and all
of the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights to subscribe for or
purchase securities. If the Company has no subsidiaries, all other
references to the Subsidiaries or any of them in the Transaction
Documents shall be disregarded.
(b) Organization
and Qualification. The Company and each of the Subsidiaries
is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation or organization, with the requisite power and
authority to own and use its properties and assets and to carry on
its business as currently conducted. Neither the Company nor any
Subsidiary is in violation nor default of any of the provisions of
its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and
the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, could not have or reasonably be expected to result in:
(i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse
effect on the results of operations, assets, business, prospects or
condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect
on the Company’s ability to perform in any material respect
on a timely basis its obligations under any Transaction Document
(any of (i), (ii) or (iii), a “Material Adverse Effect”)
and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
(c) Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and
no further action is required by the Company, the Board of
Directors or the Company’s stockholders in connection
herewith or therewith other than in connection with the Required
Approvals. This Agreement and each other Transaction Document to
which it is a party has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(d) No Conflicts. The execution,
delivery and performance by the Company of this Agreement and the
other Transaction Documents to which it is a party, the issuance
and sale of the Securities and the consummation by it of the
transactions contemplated hereby and thereby do not and will not
(i) conflict with or violate any provision of the Company’s
or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under,
result in the creation of any Lien upon any of the properties or
assets of the Company or any Subsidiary, or give to others any
rights of termination, amendment, anti-dilution or similar
adjustments, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or
other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) subject to
the Required Approvals, conflict with or result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which
the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset
of the Company or a Subsidiary is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to result in a Material Adverse
Effect.
(e) Filings, Consents and
Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than: (i) the filings
required pursuant to Section 4.4 of this Agreement, (ii) the filing
with the Commission pursuant to the Registration Rights Agreement,
(iii) the notice and/or application(s) to each applicable Trading
Market for the issuance and sale of the Securities and the listing
of the and the Underlying shares for trading thereon in the time
and manner required thereby (iv) the filing of Form D with the
Commission and such filings as are required to be made under
applicable state securities laws and (v) the Shareholder Approval
(collectively, the “Required
Approvals”).
(f) Issuance of the Securities;
Registration. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company
other than restrictions on transfer provided for in the Transaction
Documents. The Underlying Shares, when issued in accordance with
the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all Liens imposed
by the Company other than restrictions on transfer provided for in
the Transaction Documents. The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common
Stock issuable pursuant to this Agreement, the Certificate of
Designation, and the Warrants.
(g) Capitalization. The
capitalization of the Company as of the date hereof is as set forth
on Schedule 3.1(g),
which Schedule
3.1(g) shall also include the number of shares of Common
Stock owned beneficially, and of record, by Affiliates of the
Company as of the date hereof. Except as set forth on Schedule 3.1(g), the Company
has not issued any capital stock since its most recently filed
periodic report under the Exchange Act, other than pursuant to the
exercise of employee stock options under the Company’s stock
option plans, the issuance of shares of Common Stock to employees
pursuant to the Company’s employee stock purchase plans and
pursuant to the conversion and/or exercise of Common Stock
Equivalents outstanding as of the date of the most recently filed
periodic report under the Exchange Act. No Person has any right of
first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by
the Transaction Documents. Except as a result of the purchase and
sale of the Securities, there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common
Stock or the capital stock of any Subsidiary, or contracts,
commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of
Common Stock or Common Stock Equivalents or capital stock of any
Subsidiary. The issuance and sale of the Securities will not
obligate the Company or any Subsidiary to issue shares of Common
Stock or other securities to any Person (other than the
Purchasers). There are no outstanding securities or instruments of
the Company or any Subsidiary with any provision that adjusts the
exercise, conversion, exchange or reset price of such security or
instrument upon an issuance of securities by the Company or any
Subsidiary. Except as set forth on Schedule 3.1(g), there are no
outstanding securities or instruments of the Company or any
Subsidiary that contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements
by which the Company or any Subsidiary is or may become bound to
redeem a security of the Company or such Subsidiary. The Company
does not have any stock appreciation rights or “phantom
stock” plans or agreements or any similar plan or agreement.
All of the outstanding shares of capital stock of the Company are
duly authorized, validly issued, fully paid and nonassessable, have
been issued in compliance with all federal and state securities
laws, and none of such outstanding shares was issued in violation
of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any
stockholder, the Board of Directors or others is required for the
issuance and sale of the Securities. Except as set forth on
Schedule 3.1(g),
there are no stockholders agreements, voting agreements or other
similar agreements with respect to the Company’s capital
stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s
stockholders.
(h) SEC Reports; Financial
Statements. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the
Company under the Securities Act and the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company
was required by law or regulation to file such material) (the
foregoing materials, including the exhibits thereto and documents
incorporated by reference therein being collectively referred to
herein as the “SEC
Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports
prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act,
as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Company has never
been an issuer subject to Rule 144(i) under the Securities Act. The
financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Material Changes; Undisclosed Events,
Liabilities or Developments. Since the date of the latest
audited financial statements included within the SEC Reports,
except as set forth on Schedule 3.1(i), (i) there has
been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or disclosed
in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared
or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the
Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the
Commission any request for confidential treatment of information.
Except for the issuance of the Securities contemplated by this
Agreement or as set forth on Schedule 3.1(i), no event,
liability, fact, circumstance, occurrence or development has
occurred or exists or is reasonably expected to occur or exist with
respect to the Company or its Subsidiaries or their respective
businesses, prospects, properties, operations, assets or financial
condition that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is
made or deemed made that has not been publicly disclosed at least 1
Trading Day prior to the date that this representation is
made.
(j) Litigation. Except as set forth
on Schedule 3.1(j),
there is no action, suit, inquiry, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an
“Action”) which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has
not been, and to the knowledge of the Company, there is not pending
or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or
the Securities Act.
(k) Labor Relations. No labor
dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company, which could
reasonably be expected to result in a Material Adverse Effect. None
of the Company’s or its Subsidiaries’ employees is a
member of a union that relates to such employee’s
relationship with the Company or such Subsidiary, and neither the
Company nor any of its Subsidiaries is a party to a collective
bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the
knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition
agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment
of each such executive officer does not subject the Company or any
of its Subsidiaries to any liability with respect to any of the
foregoing matters. The Company and its Subsidiaries are in
compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms
and conditions of employment and wages and hours, except where the
failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(l) Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority or (iii) is or has been
in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material
Adverse Effect.
(m) Environmental
Laws. The Company and its Subsidiaries (i) are in compliance
with all federal, state, local and foreign laws relating to
pollution or protection of human health or the environment
(including ambient air, surface water, groundwater, land surface or
subsurface strata), including laws relating to emissions,
discharges, releases or threatened releases of chemicals,
pollutants, contaminants, or toxic or hazardous substances or
wastes (collectively, “Hazardous Materials”)
into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands, or demand letters,
injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations, issued, entered, promulgated
or approved thereunder (“Environmental Laws”);
(ii) have received all permits licenses or other approvals required
of them under applicable Environmental Laws to conduct their
respective businesses; and (iii) are in compliance with all terms
and conditions of any such permit, license or approval where in
each clause (i), (ii) and (iii), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect.
(n) Regulatory Permits. The Company
and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective
businesses as described in the SEC Reports, except where the
failure to possess such permits could not reasonably be expected to
result in a Material Adverse Effect (“Material Permits”), and
neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any
Material Permit.
(o) Title to Assets. The Company
and the Subsidiaries have good and marketable title in fee simple
to all real property owned by them and good and marketable title in
all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and
clear of all Liens, except for (i) Liens as do not materially
affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the
Company and the Subsidiaries and (ii) Liens for the payment of
federal, state or other taxes, for which appropriate reserves have
been made therefor in accordance with GAAP and, the payment of
which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and
enforceable leases with which the Company and the Subsidiaries are
in compliance.
(p) Intellectual Property. The
Company and the Subsidiaries have, or have rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights
necessary or required for use in connection with their respective
businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the
“Intellectual
Property Rights”). None of, and neither the Company
nor any Subsidiary has received a notice (written or otherwise)
that any of, the Intellectual Property Rights has expired,
terminated or been abandoned, or is expected to expire or terminate
or be abandoned, within two (2) years from the date of this
Agreement. Neither the Company nor any Subsidiary has received,
since the date of the latest audited financial statements included
within the SEC Reports, a written notice of a claim or otherwise
has any knowledge that the Intellectual Property Rights violate or
infringe upon the rights of any Person, except as could not have or
reasonably be expected to not have a Material Adverse Effect. To
the knowledge of the Company, all such Intellectual Property Rights
are enforceable and there is no existing infringement by another
Person of any of the Intellectual Property Rights. The Company and
its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(q) Insurance. The Company and the
Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company
and the Subsidiaries are engaged, including, but not limited to,
directors and officers insurance coverage at least equal to the
aggregate Subscription Amount. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant
increase in cost.
(r) Transactions With Affiliates and
Employees. Except as set forth on Schedule 3.1(r), none of the
officers or directors of the Company or any Subsidiary and, to the
knowledge of the Company, none of the employees of the Company or
any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from,
providing for the borrowing of money from or lending of money to or
otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.
(s) Sarbanes-Oxley; Internal Accounting
Controls. The Company and the Subsidiaries are in compliance
with any and all applicable requirements of the Sarbanes-Oxley Act
of 2002 that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the Commission
thereunder that are effective as of the date hereof and as of the
Closing Date. The Company and the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable
assurance that: (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The
Company and the Subsidiaries have established disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and the Subsidiaries and designed such
disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the
Commission’s rules and forms. The Company’s certifying
officers have evaluated the effectiveness of the disclosure
controls and procedures of the Company and the Subsidiaries as of
the end of the period covered by the most recently filed periodic
report under the Exchange Act (such date, the “Evaluation Date”). The
Company presented in its most recently filed periodic report under
the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the internal control
over financial reporting (as such term is defined in the Exchange
Act) of the Company and its Subsidiaries that have materially
affected, or is reasonably likely to materially affect, the
internal control over financial reporting of the Company and its
Subsidiaries.
(t) Certain Fees. No brokerage or
finder’s fees or commissions are or will be payable by the
Company or any Subsidiary to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the
Transaction Documents. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions
contemplated by the Transaction Documents.
(u) Investment Company. The Company
is not, and immediately after receipt of payment for the Securities
will not be, required to register as an “investment
company,” as defined in the Investment Company Act of 1940,
as amended.
(v) Private Placement. Assuming the
accuracy of the Purchasers’ representations and warranties
set forth in Section 3.2, no registration under the Securities Act
is required for the offer and sale of the Securities by the Company
to the Purchasers as contemplated hereby. The issuance and sale of
the Securities hereunder does not contravene the rules and
regulations of the Trading Market.
(w) Registration Rights. Except as
set forth on Schedule
3.1(w), and other than each of the Purchasers, no Person has
any right to cause the Company or any Subsidiary to effect the
registration under the Securities Act of any securities of the
Company or any Subsidiary.
(x) Listing and Maintenance
Requirements. The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to
have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such
registration. The Company has not, in the 12 months preceding the
date hereof, received notice from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements. The Common Stock is currently eligible for electronic
transfer through the Depository Trust Company or another
established clearing corporation and the Company is current in
payment of the fees to the Depository Trust Company (or such other
established clearing corporation) in connection with such
electronic transfer.
(y) Application of Takeover
Protections. The Company and the Board of Directors have
taken all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become
applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a
result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.
(z) Disclosure. Except with respect
to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms
that neither it nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any
information that it believes constitutes or might constitute
material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the
Company. All of the disclosure furnished by or on behalf of the
Company to the Purchasers regarding the Company and its
Subsidiaries, their respective businesses and the transactions
contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading. The press releases disseminated by the Company during
the twelve months preceding the date of this Agreement taken as a
whole do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of
the circumstances under which they were made and when made, not
misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically
set forth in Section 3.2 hereof.
(aa) No Integrated Offering.
Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any
of its Affiliates, nor any Person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of
(i) the Securities Act which would require the registration of any
such securities under the Securities Act, or (ii) any applicable
shareholder approval provisions of any Trading Market on which any
of the securities of the Company are listed or
designated.
(bb) Solvency.
Based on the consolidated financial condition of the Company as of
the Closing Date, after giving effect to the receipt by the Company
of the proceeds from the sale of the Securities hereunder, (i) the
fair saleable value of the Company’s assets exceeds the
amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the
Company’s assets do not constitute unreasonably small capital
to carry on its business as now conducted and as proposed to be
conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the
Company, consolidated and projected capital requirements and
capital availability thereof, and (iii) the current cash flow of
the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its liabilities when such amounts are
required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in
respect of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the
Closing Date. Schedule
3.1(bb) sets forth as of the date hereof all outstanding
secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has
commitments. For the purposes of this Agreement,
“Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than trade accounts payable incurred in
the ordinary course of business), (y) all guaranties, endorsements
and other contingent obligations in respect of indebtedness of
others, whether or not the same are or should be reflected in the
Company’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (z) the present value of any lease payments
in excess of $50,000 due under leases required to be capitalized in
accordance with GAAP. Neither the Company nor any Subsidiary is in
default with respect to any Indebtedness.
(cc) Tax
Status. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and its Subsidiaries each (i)
has made or filed all United States federal, state and local income
and all foreign income and franchise tax returns, reports and
declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due
on such returns, reports and declarations and (iii) has set aside
on its books provision reasonably adequate for the payment of all
material taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company or of any
Subsidiary know of no basis for any such claim.
(dd) Foreign
Corrupt Practices. Neither the Company nor any Subsidiary,
nor to the knowledge of the Company or any Subsidiary, any agent or
other person acting on behalf of the Company or any Subsidiary, has
(i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company or any Subsidiary (or made by any
person acting on its behalf of which the Company is aware) which is
in violation of law, or (iv) violated in any material respect any
provision of FCPA.
(ee) Accountants.
The Company’s accounting firm is set forth on Schedule 3.1(ee) of the
Disclosure Schedules. To the knowledge and belief of the Company,
such accounting firm (i) is a registered public accounting firm as
required by the Exchange Act and (ii) shall express its opinion
with respect to the financial statements to be included in the
Company’s Annual Report for the fiscal year ending June 30,
2020.
(ff) No
General Solicitation. Neither the Company nor any Person
acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only
to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the
Securities Act.
(gg) Acknowledgment
Regarding Purchasers’ Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm’s length purchaser
with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities. The
Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.
(hh) Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein
to the contrary notwithstanding (except for Sections 3.2(f) and
4.13 hereof), it is understood and acknowledged by the Company
that: (i) none of the Purchasers has been asked by the Company to
agree, nor has any Purchaser agreed, to desist from purchasing or
selling, long and/or short, securities of the Company, or
“derivative” securities based on securities issued by
the Company or to hold the Securities for any specified term; (ii)
past or future open market or other transactions by any Purchaser,
specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing
of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded
securities; (iii) any Purchaser, and counter-parties in
“derivative” transactions to which any such Purchaser
is a party, directly or indirectly, presently may have a
“short” position in the Common Stock, and (iv) each
Purchaser shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any
“derivative” transaction. The Company further
understands and acknowledges that (y) one or more Purchasers may
engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation,
during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and
(z) such hedging activities (if any) could reduce the value of the
existing stockholders' equity interests in the Company at and after
the time that the hedging activities are being conducted. The
Company acknowledges that such aforementioned hedging activities do
not constitute a breach of any of the Transaction
Documents.
(ii) Regulation
M Compliance. The Company has not, and to its
knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or
agreed to pay to any Person any compensation for soliciting another
to purchase any other securities of the Company, other than, in the
case of clauses (ii) and (iii), compensation paid to the
Company’s placement agent in connection with the placement of
the Securities.
(jj) FDA.
As to each product subject to the jurisdiction of the U.S. Food and
Drug Administration (“FDA”) under the Federal
Food, Drug and Cosmetic Act, as amended, and the regulations
thereunder (“FDCA”) that is
manufactured, packaged, labeled, tested, distributed, sold, and/or
marketed by the Company or any of its Subsidiaries (each such
product, a “Pharmaceutical Product”),
such Pharmaceutical Product is being manufactured, packaged,
labeled, tested, distributed, sold and/or marketed by the Company
in compliance with all applicable requirements under FDCA and
similar laws, rules and regulations relating to registration,
investigational use, premarket clearance, licensure, or application
approval, good manufacturing practices, good laboratory practices,
good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the
failure to be in compliance would not have a Material Adverse
Effect. There is no pending, completed or, to the Company's
knowledge, threatened, action (including any lawsuit, arbitration,
or legal or administrative or regulatory proceeding, charge,
complaint, or investigation) against the Company or any of its
Subsidiaries, and none of the Company or any of its Subsidiaries
has received any notice, warning letter or other communication from
the FDA or any other governmental entity, which (i) contests the
premarket clearance, licensure, registration, or approval of, the
uses of, the distribution of, the manufacturing or packaging of,
the testing of, the sale of, or the labeling and promotion of any
Pharmaceutical Product, (ii) withdraws its approval of, requests
the recall, suspension, or seizure of, or withdraws or orders the
withdrawal of advertising or sales promotional materials relating
to, any Pharmaceutical Product, (iii) imposes a clinical hold on
any clinical investigation by the Company or any of its
Subsidiaries, (iv) enjoins production at any facility of the
Company or any of its Subsidiaries, (v) enters or proposes to enter
into a consent decree of permanent injunction with the Company or
any of its Subsidiaries, or (vi) otherwise alleges any violation of
any laws, rules or regulations by the Company or any of its
Subsidiaries, and which, either individually or in the aggregate,
would have a Material Adverse Effect. The properties, business and
operations of the Company have been and are being conducted in all
material respects in accordance with all applicable laws, rules and
regulations of the FDA. The Company has not been informed by
the FDA that the FDA will prohibit the marketing, sale, license or
use in the United States of any product proposed to be developed,
produced or marketed by the Company nor has the FDA expressed any
concern as to approving or clearing for marketing any product being
developed or proposed to be developed by the Company.
(kk) Stock
Option Plans. Each stock option granted by the Company under
the Company’s stock option plan was granted (i) in accordance
with the terms of the Company’s stock option plan and (ii)
with an exercise price at least equal to the fair market value of
the Common Stock on the date such stock option would be considered
granted under GAAP and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The
Company has not knowingly granted, and there is no and has been no
Company policy or practice to knowingly grant, stock options prior
to, or otherwise knowingly coordinate the grant of stock options
with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their
financial results or prospects.
(ll) Office
of Foreign Assets Control. Neither the Company nor any
Subsidiary nor, to the Company's knowledge, any director, officer,
agent, employee or affiliate of the Company or any Subsidiary is
currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department
(“OFAC”).
(mm) U.S.
Real Property Holding Corporation. The Company is not and
has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as
amended, and the Company shall so certify upon Purchaser’s
request.
(nn) Bank
Holding Company Act. Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation
by the Board of Governors of the Federal Reserve System (the
“Federal
Reserve”). Neither the Company nor any of its
Subsidiaries or Affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of
any class of voting securities or twenty-five percent or more of
the total equity of a bank or any entity that is subject to the
BHCA and to regulation by the Federal Reserve. Neither the Company
nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal
Reserve.
(oo) Form
S-3 Eligibility. The Company is eligible to register the
resale of the Securities for resale by the Purchaser on Form S-3
promulgated under the Securities Act.
(pp) Money
Laundering. The operations of the Company and its
Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, applicable money laundering statutes and applicable rules
and regulations thereunder (collectively, the “Money Laundering Laws”),
and no Action or Proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company
or any Subsidiary with respect to the Money Laundering Laws is
pending or, to the knowledge of the Company or any Subsidiary,
threatened.
(qq) No
Disqualification Events. With respect to the
Securities to be offered and sold hereunder in reliance on Rule 506
under the Securities Act, none of the Company, any of its
predecessors, any affiliated issuer, any director, executive
officer, other officer of the Company participating in the offering
hereunder, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is
defined in Rule 405 under the Securities Act) connected with the
Company in any capacity at the time of sale (each, an
“Issuer Covered
Person” and, together, “Issuer Covered Persons”)
is subject to any of the "Bad Actor" disqualifications described in
Rule 506(d)(1)(i) to (viii) under the Securities Act (a
“Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and
has furnished to the Purchasers a copy of any disclosures provided
thereunder.
(rr) Other
Covered Persons. Other than the Placement Agent, the Company
is not aware of any person (other than any Issuer Covered Person)
that has been or will be paid (directly or indirectly) remuneration
for solicitation of purchasers in connection with the sale of any
Securities.
(ss) Notice
of Disqualification Events. The Company will notify the
Purchasers and the Placement Agent in writing, prior to the Closing
Date of (i) any Disqualification Event relating to any Issuer
Covered Person and (ii) any event that would, with the passage of
time, become a Disqualification Event relating to any Issuer
Covered Person.
3.2 Representations
and Warranties of the Purchasers. Each Purchaser, for itself and for no other
Purchaser, hereby represents and warrants as of the date hereof and
as of the Closing Date to the Company as follows (unless as of a
specific date therein, in which case they shall be accurate as of
such date):
(a) Organization;
Authority. Such Purchaser is
either an individual or an entity duly incorporated or formed,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with full right,
corporate, partnership, limited liability company or similar power
and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and
delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction
Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as
applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited
by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by
applicable law.
(b) Own
Account. Such Purchaser
understands that the Securities are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to
or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute
or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Purchaser’s
right to sell the Securities pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its
business.
(c) Purchaser
Status. At the time such
Purchaser was offered the Securities, it was, and as of the date
hereof it is, and on each date on which it exercises any Warrants
or converts any shares of Preferred Stock, it will be an
“accredited investor” as defined in Rule 501(a)(1),
(a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act.
(d) Purchaser
Status. At the time such
Purchaser was offered the Securities, it was, and as of the date
hereof it is, and on each date on which it exercises any Warrants
or converts Preferred Stock, it will be an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act.
(e) General
Solicitation. Such Purchaser is
not, to such Purchaser’s knowledge, purchasing the Securities
as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or, to the knowledge of such Purchaser,
any other general solicitation or general
advertisement.
(f) Access to
Information. Such Purchaser
acknowledges that it has had the opportunity to review the
Transaction Documents (including all exhibits and schedules
thereto) and the SEC Reports and has been afforded, (i) the
opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the
Securities and the merits and risks of investing in the Securities;
(ii) access to information about the Company and its financial
condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information
that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment
decision with respect to the investment. Such Purchaser
acknowledges and agrees that neither the Placement Agent nor any
Affiliate of the Placement Agent have provided such Purchaser with
any information or advice with respect to the Securities nor is
such information or advice necessary or desired. Neither the
Placement Agent nor any Affiliate have made or makes any
representation as to the Company or the quality of the Securities
and the Placement Agent and any Affiliate may have acquired
non-public information with respect to the Company which such
Purchaser agrees need not be provided to it. In connection
with the issuance of the Securities to such Purchaser, neither the
Placement Agent nor any of their Affiliates has acted as a
financial advisor or fiduciary to such
Purchaser.
(g) Certain
Transactions and Confidentiality. Other than consummating the transactions
contemplated hereunder, such Purchaser has not, nor has any Person
acting on behalf of or pursuant to any understanding with such
Purchaser, directly or indirectly executed any purchases or sales,
including Short Sales, of the securities of the Company during
the period commencing as of the time that such Purchaser first
received a term sheet (written or oral) from the Company or any
other Person representing the Company setting forth the material
terms of the transactions contemplated hereunder and ending
immediately prior to the execution hereof. Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed
investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the representation set forth above
shall only apply with respect to the portion of assets managed by
the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement. Other than to other
Persons party to this Agreement or to such Purchaser’s
representatives, including, without limitation, its officers,
directors, partners, legal and other advisors, employees, agents
and Affiliates, such Purchaser has maintained the confidentiality
of all disclosures made to it in connection with this transaction
(including the existence and terms of this transaction).
Notwithstanding the foregoing, for the avoidance of doubt, nothing
contained herein shall constitute a representation or warranty, or
preclude any actions, with respect to locating or borrowing shares
in order to effect Short Sales or similar transactions in the
future.
The
Company acknowledges and agrees that the representations contained
in this Section 3.2 shall not modify, amend or affect such
Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transactions contemplated hereby. Notwithstanding the
foregoing, for the avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any
actions, with respect to locating or borrowing shares in order to
effect Short Sales or similar transactions in the
future.
ARTICLE IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The Securities may
only be disposed of in compliance with state and federal securities
laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to the
Company or to an Affiliate of a Purchaser or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require
the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms
of this Agreement and the Registration Rights Agreement and shall
have the rights and obligations of a Purchaser under this Agreement
and the Registration Rights Agreement.
(b) The Purchasers
agree to the imprinting, so long as is required by this Section
4.1, of a legend on any of the Securities in the following
form:
THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
The
Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are
subject to registration pursuant to the Registration Rights
Agreement, the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend
the list of Selling Stockholders (as defined in the Registration
Rights Agreement) thereunder.
(c) Certificates
evidencing the Conversion Shares and Warrant Shares shall not
contain any legend (including the legend set forth in Section
4.1(b) hereof), (i) while a registration statement (including the
Registration Statement) covering the resale of such security is
effective under the Securities Act, (ii) following any sale of such
Underlying Shares pursuant to Rule 144 (assuming cashless exercise
of the Warrants), (iii) if such Underlying Shares are eligible for
sale under Rule 144 (assuming cashless exercise of the Warrants),
without the requirement for the Company to be in compliance with
the current public information required under Rule 144 as to such
Underlying Shares and without volume or manner-of-sale
restrictions, or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Transfer Agent or the Purchaser promptly after the
Effective Date if required by the Transfer Agent to effect the
removal of the legend hereunder, or if requested by a Purchaser,
respectively. If all or any portion of Preferred Stock is converted
or a Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Conversion Share
or Warrant Shares, as applicable, or if such Conversion Shares or
Warrant Shares may be sold under Rule 144 and the Company is then
in compliance with the current public information required under
Rule 144 (assuming cashless exercise of the Warrants), or if the
Underlying Shares may be sold under Rule 144 without the
requirement for the Company to be in compliance with the current
public information required under Rule 144 as to such Underlying
Shares or if such legend is not otherwise required under applicable
requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission) then such Underlying Shares shall be issued free of all
legends. The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section
4.1(c), it will, no later than the earlier of (i) two (2) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period (as defined below) following the delivery by a
Purchaser to the Company or the Transfer Agent of a certificate
representing Underlying Shares, as the case may be, issued with a
restrictive legend (such date, the “Legend Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and
other legends. The Company may not make any notation on its records
or give instructions to the Transfer Agent that enlarge the
restrictions on transfer set forth in this Section 4. Certificates
for Securities subject to legend removal hereunder shall be
transmitted by the Transfer Agent to the Purchaser by crediting the
account of the Purchaser’s prime broker with the Depository
Trust Company System as directed by such Purchaser. As used herein,
“Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of a certificate representing
Underlying Shares issued with a restrictive legend.
(d) In addition to such
Purchaser’s other available remedies, the Company shall pay
to a Purchaser, in cash, (i) as partial liquidated damages and not
as a penalty, for each $1,000 of Underlying Shares (based on the
VWAP of the Common Stock on the date such Securities are submitted
to the Transfer Agent) delivered for removal of the restrictive
legend and subject to Section 4.1(c), $10 per Trading Day
(increasing to $20 per Trading Day five (5) Trading Days after such
damages have begun to accrue) for each Trading Day after the Legend
Removal Date until such certificate is delivered without a legend
and (ii) if the Company fails to (a) issue and deliver (or cause to
be delivered) to a Purchaser by the Legend Removal Date a
certificate representing the Securities so delivered to the Company
by such Purchaser that is free from all restrictive and other
legends and (b) if after the Legend Removal Date such Purchaser
purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by such Purchaser
of all or any portion of the number of shares of Common Stock, or a
sale of a number of shares of Common Stock equal to all or any
portion of the number of shares of Common Stock that such Purchaser
anticipated receiving from the Company without any restrictive
legend, then, an amount equal to the excess of such
Purchaser’s total purchase price (including brokerage
commissions and other out-of-pocket expenses, if any) for the
shares of Common Stock so purchased (including brokerage
commissions and other out-of-pocket expenses, if any) (the
“Buy-In
Price”) over the product of (A) such number of
Underlying Shares that the Company was required to deliver to such
Purchaser by the Legend Removal Date multiplied by (B) the lowest
closing sale price of the Common Stock on any Trading Day during
the period commencing on the date of the delivery by such Purchaser
to the Company of the applicable Underlying Shares (as the case may
be) and ending on the date of such delivery and payment under this
clause (ii).
(e) Each Purchaser,
severally and not jointly with the other Purchasers, agrees with
the Company that such Purchaser will sell any Securities pursuant
to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an
exemption therefrom, and that if Securities are sold pursuant to a
Registration Statement, they will be sold in compliance with the
plan of distribution set forth therein, and acknowledges that the
removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the
Company’s reliance upon this understanding.
4.2 Furnishing
of Information; Public Information.
(a) If the Common Stock
is not registered under Section 12(b) or 12(g) of the Exchange Act
on the date hereof, the Company agrees to cause the Common Stock to
be registered under Section 12(g) of the Exchange Act on or before
the 60th
calendar day following the date hereof. Until the earliest of the
time that (i) no Purchaser owns Securities or (ii) the Warrants
have expired, the Company covenants to maintain the registration of
the Common Stock under Section 12(b) or 12(g) of the Exchange Act
and to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange
Act even if the Company is not then subject to the reporting
requirements of the Exchange Act.
(b) At any time during
the period commencing from the six (6) month anniversary of the
date hereof and ending at such time that all of the Securities may
be sold without the requirement for the Company to be in compliance
with Rule 144(c)(1) and otherwise without restriction or limitation
pursuant to Rule 144, if the Company (i) shall fail for any reason
to satisfy the current public information requirement under Rule
144(c) or (ii) has ever been an issuer described in Rule
144(i)(1)(i) or becomes an issuer in the future, and the Company
shall fail to satisfy any condition set forth in Rule 144(i)(2) (a
“Public Information
Failure”) then, in addition to such Purchaser’s
other available remedies, the Company shall pay to a Purchaser, in
cash, as partial liquidated damages and not as a penalty, by reason
of any such delay in or reduction of its ability to sell the
Securities, an amount in cash equal to two percent (2.0%) of the
aggregate Subscription Amount of such Purchaser’s Securities
on the day of a Public Information Failure and on every thirtieth
(30th) day
(pro rated for periods totaling less than thirty days) thereafter
until the earlier of (a) the date such Public Information Failure
is cured and (b) such time that such public information is no
longer required for the Purchasers to transfer the Underlying
Shares pursuant to Rule 144. The payments to which a
Purchaser shall be entitled pursuant to this Section 4.2(b) are
referred to herein as “Public Information Failure
Payments.” Public Information
Failure Payments shall
be paid on the earlier of (i) the last day of the calendar month
during which such Public Information Failure Payments are incurred and (ii) the
third (3rd) Business Day after
the event or failure giving rise to the Public Information
Failure Payments is
cured. In the event the Company fails to make Public
Information Failure Payments in a timely manner, such
Public Information Failure Payments shall bear interest at
the rate of 1.5% per month (prorated for partial months) until paid
in full. Nothing herein shall limit such Purchaser’s right to
pursue actual damages for the Public Information Failure, and such
Purchaser shall have the right to pursue all remedies available to
it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief.
4.3 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities
or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is
obtained before the closing of such subsequent
transaction.
4.4 Securities
Laws Disclosure; Publicity. The
Company shall (a) by the Disclosure Time, issue a press release
disclosing the material terms of the transactions contemplated
hereby, and (b) file a Current Report on Form 8-K, including the
Transaction Documents as exhibits thereto, with the Commission
within the time required by the Exchange Act. From and after the
issuance of such press release, the Company represents to the
Purchasers that it shall have publicly disclosed all material,
non-public information delivered to any of the Purchasers by the
Company or any of its Subsidiaries, or any of their respective
officers, directors, employees or agents in connection with the
transactions contemplated by the Transaction Documents. In
addition, effective upon the issuance of such press release, the
Company acknowledges and agrees that any and all confidentiality or
similar obligations under any agreement, whether written or oral,
between the Company, any of its Subsidiaries or any of their
respective officers, directors, agents, employees or Affiliates on
the one hand, and any of the Purchasers or any of their Affiliates
on the other hand, shall terminate. The Company and each Purchaser
shall consult with each other in issuing any other press releases
with respect to the transactions contemplated hereby, and neither
the Company nor any Purchaser shall issue any such press release
nor otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any
Purchaser, or without the prior consent of each Purchaser, with
respect to any press release of the Company, which consent shall
not unreasonably be withheld or delayed, except if such disclosure
is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public
statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission
or any regulatory agency or Trading Market, without the prior
written consent of such Purchaser, except (a) as required by
federal securities law in connection with (i) any registration
statement contemplated by the Registration Rights Agreement and
(ii) the filing of final Transaction Documents with the Commission
and (b) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company
shall provide the Purchasers with prior notice of such disclosure
permitted under this clause (b).
4.5 Shareholder
Rights Plan. No claim will be
made or enforced by the Company or, with the consent of the
Company, any other Person, that any Purchaser is an
“Acquiring
Person” under any control
share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or similar anti-takeover
plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or under any other agreement
between the Company and the Purchasers.
4.6 Non-Public
Information. Except with
respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, which shall be disclosed
pursuant to Section 4.4, the Company covenants and agrees that
neither it, nor any other Person acting on its behalf will provide
any Purchaser or its agents or counsel with any information that
constitutes, or the Company reasonably believes constitutes,
material non-public information, unless prior thereto such
Purchaser shall have consented to the receipt of such information
and agreed with the Company to keep such information confidential.
The Company understands and confirms that each Purchaser shall be
relying on the foregoing covenant in effecting transactions in
securities of the Company. To the extent that the Company delivers
any material, non-public information to a Purchaser without such
Purchaser’s consent, the Company hereby covenants and agrees
that such Purchaser shall not have any duty of confidentiality to
the Company, any of its Subsidiaries, or any of their respective
officers, directors, agents, employees or Affiliates, or a duty to
the Company, any of its Subsidiaries or any of their respective
officers, directors, agents, employees or Affiliates not to trade
on the basis of, such material, non-public information, provided
that the Purchaser shall remain subject to applicable law. To the
extent that any notice provided pursuant to any Transaction
Document constitutes, or contains, material, non-public information
regarding the Company or any Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K. The Company understands and confirms
that each Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the
Company.
4.7 Use of
Proceeds. Except as set forth
on Schedule 4.7
attached hereto, the Company shall use
the net proceeds from the sale of the Securities hereunder for
working capital purposes and shall not use such proceeds: (a) for
the satisfaction of any portion of the Company’s debt (other
than payment of trade payables in the ordinary course of the
Company’s business and prior practices), (b) for the
redemption of any Common Stock or Common Stock Equivalents, (c) for
the settlement of any outstanding litigation or (d) in violation of
FCPA or OFAC regulations.
4.8 Indemnification
of Purchasers. Subject to the
provisions of this Section 4.8, the Company will indemnify and hold
each Purchaser and its directors, officers, shareholders, members,
partners, employees and agents (and any other Persons with a
functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each
Person who controls such Purchaser (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, shareholders, agents, members, partners or
employees (and any other Persons with a functionally equivalent
role of a Person holding such titles notwithstanding a lack of such
title or any other title) of such controlling persons (each, a
“Purchaser
Party”) harmless from any
and all losses, liabilities, obligations, claims, contingencies,
damages, costs and expenses, including all judgments, amounts paid
in settlements, court costs and reasonable attorneys’ fees
and costs of investigation that any such Purchaser Party may suffer
or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the
Company in this Agreement or in the other Transaction Documents or
(b) any action instituted against the Purchaser Parties in any
capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such
Purchaser Party, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is
solely based upon a material breach of such Purchaser Party’s
representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party
may have with any such stockholder or any violations by such
Purchaser Party of state or federal securities laws or any conduct
by such Purchaser Party which is finally judicially determined to
constitute fraud, gross negligence or willful misconduct). If any
action shall be brought against any Purchaser Party in respect of
which indemnity may be sought pursuant to this Agreement, such
Purchaser Party shall promptly notify the Company in writing, and
the Company shall have the right to assume the defense thereof with
counsel of its own choosing reasonably acceptable to the Purchaser
Party. Any Purchaser Party shall have the right to employ separate
counsel in any such action and participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense
of such Purchaser Party except to the extent that (i) the
employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period
of time to assume such defense and to employ counsel or (iii) in
such action there is, in the reasonable opinion of counsel, a
material conflict on any material issue between the position of the
Company and the position of such Purchaser Party, in which case the
Company shall be responsible for the reasonable fees and expenses
of no more than one such separate counsel. The Company will not be
liable to any Purchaser Party under this Agreement (y) for any
settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (z) to the extent, but only to
the extent that a loss, claim, damage or liability is attributable
to any Purchaser Party’s breach of any of the
representations, warranties, covenants or agreements made by such
Purchaser Party in this Agreement or in the other Transaction
Documents. The indemnification
required by this Section 4.8 shall be made by periodic payments of
the amount thereof during the course of the investigation or
defense, as and when bills are received or are incurred. The
indemnity agreements contained herein shall be in addition to any
cause of action or similar right of any Purchaser Party against the
Company or others and any liabilities the Company may be subject to
pursuant to law.
4.9 Reservation
of Common Stock. As of the date
hereof, the Company has reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights,
a sufficient number of shares of Common Stock for the purpose of
enabling the Company to issue Warrant Shares pursuant to any
exercise of the Warrants, and Conversion Shares pursuant to any
conversion of the Preferred Stock.
4.10 Listing
of Common Stock. The Company
hereby agrees to use best efforts to maintain the listing or
quotation of the Common Stock on the Trading Market on which it is
currently listed, and concurrently with the Closing, the Company
shall apply to list or quote all of the Underlying Shares on such
Trading Market and promptly secure the listing of all of the
Underlying Shares on such Trading Market. The Company further
agrees, if the Company applies to have the Common Stock traded on
any other Trading Market, it will then include in such application
all of the Underlying Shares, and will take such other action as is
necessary to cause all of the Underlying Shares to be listed or
quoted on such other Trading Market as promptly as possible. The
Company will then take all action reasonably necessary to continue
the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the
Trading Market. The Company agrees to maintain the eligibility of
the Common Stock for electronic transfer through the Depository
Trust Company or another established clearing corporation,
including, without limitation, by timely payment of fees to the
Depository Trust Company or such other established clearing
corporation in connection with such electronic transfer. In
addition, the Company shall hold a special meeting of shareholders
(which may also be at the annual meeting of shareholders) on or
before December 15, 2019 for the purpose of obtaining Shareholder
Approval, with the recommendation of the Company’s Board of
Directors that such proposal be approved, and the Company shall
solicit proxies from its shareholders in connection therewith in
the same manner as all other management proposals in such proxy
statement and all management-appointed proxyholders shall vote
their proxies in favor of such proposal. The Company shall use its
reasonable best efforts to obtain such Shareholder Approval. If the
Company does not obtain Shareholder Approval at the first meeting,
the Company shall call a meeting every two months thereafter to
seek Shareholder Approval until the earlier of the date Shareholder
Approval is obtained or the Preferred Stock is no longer
outstanding.
4.11 Subsequent
Equity Sales.
(a) From
the date hereof until ninety (90) days after the Effective Date,
neither the Company nor any Subsidiary shall issue, enter into any
agreement to issue or announce the issuance or proposed issuance of
any shares of Common Stock or Common Stock
Equivalents.
(b) Unless Shareholder
Approval has been obtained and deemed effective, neither the
Company nor any Subsidiary shall make any issuance whatsoever of
Common Stock or Common Stock Equivalents. Any Purchaser shall be
entitled to obtain injunctive relief against the Company to
preclude any such issuance, which remedy shall be in addition to
any right to collect damages. Notwithstanding the foregoing, this
provision shall not apply to Common Stock Equivalents issued in
connection with the Cerecor Transaction.
(c) Notwithstanding the
foregoing, Section 4.11(a) shall not apply in respect of an Exempt
Issuance.
4.12 Equal
Treatment of Purchasers. No
consideration (including any modification of any Transaction
Document) shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of the
Transaction Documents unless the same consideration is also offered
to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right
granted to each Purchaser by the Company and negotiated separately
by each Purchaser, and is intended for the Company to treat the
Purchasers as a class and shall not in any way be construed as the
Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or
otherwise.
4.13 Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with
the other Purchasers, covenants that neither it nor any Affiliate
acting on its behalf or pursuant to any understanding with it will
execute any purchases or sales, including Short Sales of any of the
Company’s securities during the period commencing with the
execution of this Agreement and ending at such time that the
transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in
Section 4.4. Each Purchaser, severally and not jointly with
the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed
by the Company pursuant to the initial press release as described
in Section 4.4, such Purchaser will maintain the confidentiality of
the existence and terms of this transaction and the information
included in the Disclosure Schedules. Notwithstanding the
foregoing and notwithstanding anything contained in this Agreement
to the contrary, the Company expressly acknowledges and agrees that
(i) no Purchaser makes any representation, warranty or covenant
hereby that it will not engage in effecting transactions in any
securities of the Company after the time that the transactions
contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.4,
(ii) no Purchaser shall be restricted or prohibited from effecting
any transactions in any securities of the Company in accordance
with applicable securities laws from and after the time that the
transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in
Section 4.4 and (iii) no Purchaser shall have any duty of
confidentiality or duty not to trade in the securities of the
Company to the Company or its Subsidiaries after the issuance of
the initial press release as described in Section 4.4.
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser’s assets
and the portfolio managers have no direct knowledge of the
investment decisions made by the portfolio managers managing other
portions of such Purchaser’s assets, the covenant set forth
above shall only apply with respect to the portion of assets
managed by the portfolio manager that made the investment decision
to purchase the Securities covered by this
Agreement.
4.14 Form
D; Blue Sky Filings. The
Company agrees to timely file a Form D with respect to the
Securities as required under Regulation D and to provide a copy
thereof, promptly upon request of any Purchaser. The Company shall
take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to the Purchasers at the Closing under
applicable securities or “Blue Sky” laws of the states
of the United States, and shall provide evidence of such actions
promptly upon request of any Purchaser.
4.15 Conversion
and Exercise Procedures. Each
of the form of Notice of Exercise included in the Warrants and the
form of Notice of Conversion included in the Certificate of
Designation set forth the totality of the procedures required of
the Purchasers in order to exercise the Warrants or convert the
Preferred Stock. Without limiting the preceding sentences, no
ink-original Notice of Exercise or Notice of Conversion shall be
required, nor shall any medallion guarantee (or other type of
guarantee or notarization) of any Notice of Exercise or Notice of
Conversion form be required in order to exercise the Warrants or
convert the Preferred Stock. No additional legal opinion, other
information or instructions shall be required of the Purchasers to
exercise their Warrants or convert their Preferred Stock. The
Company shall honor exercises of the Warrants and conversions of
the Preferred Stock and shall deliver Underlying Shares in
accordance with the terms, conditions and time periods set forth in
the Transaction Documents.
4.16 Acknowledgment
of Dilution. The Company
acknowledges that the issuance of the Securities may result in
dilution of the outstanding shares of Common Stock, which dilution
may be substantial under certain market conditions. The Company
further acknowledges that its obligations under the Transaction
Documents, including, without limitation, its obligation to issue
the Underlying Shares pursuant to the Transaction Documents, are
unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any
such dilution or any claim the Company may have against any
Purchaser and regardless of the dilutive effect that such issuance
may have on the ownership of the other stockholders of the
Company.
ARTICLE V.
MISCELLANEOUS
5.1 Termination.
This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before the fifth
(5th)
Trading Day following the date hereof; provided,
however,
that no such termination will affect the right of any party to sue
for any breach by any other party (or parties).
5.2 Fees
and Expenses. Except as
expressly set forth in the Transaction Documents to the contrary,
each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement.
The Company shall pay all Transfer Agent fees (including, without
limitation, any fees required for same-day processing of any
instruction letter delivered by the Company and any conversion or
exercise notice delivered by a Purchaser), stamp taxes and other
taxes and duties levied in connection with the delivery of any
Securities to the Purchasers.
5.3 Entire
Agreement. The Transaction
Documents, together with the exhibits and schedules thereto,
contain the entire understanding of the parties with respect to the
subject matter hereof and thereof and supersede all prior
agreements and understandings, oral or written, with respect to
such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.
5.4 Notices.
Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of: (a) the time of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number or email attachment at the email
address as set forth on the signature pages attached hereto at or
prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the
next Trading Day after the time of transmission, if such notice or
communication is delivered via facsimile at the facsimile number or
email attachment at the email address as set forth on the signature
pages attached hereto on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) the
second (2nd)
Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (d) upon actual
receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as set
forth on the signature pages attached hereto. To the extent that
any notice provided pursuant to any Transaction Document
constitutes, or contains, material, non-public information
regarding the Company or any Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K.
5.5 Amendments;
Waivers. No provision of this
Agreement may be waived, modified, supplemented or amended except
in a written instrument signed, in the case of an amendment, by the
Company and Purchasers which purchased at least 50.1% in interest
of the Securities based on the initial Subscription Amounts
hereunder or, in the case of a waiver, by the party against whom
enforcement of any such waived provision is sought, provided that
if any amendment, modification or waiver disproportionately and
adversely impacts a Purchaser (or group of Purchasers), the consent
of such disproportionately impacted Purchaser (or group of
Purchasers) shall also be required. No waiver of any default with
respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future
or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner
impair the exercise of any such right. Any proposed amendment or
waiver that disproportionately, materially and adversely affects
the rights and obligations of any Purchaser relative to the
comparable rights and obligations of the other Purchasers shall
require the prior written consent of such adversely affected
Purchaser. Any amendment effected in accordance with this Section
5.5 shall be binding upon each Purchaser and holder of Securities
and the Company.
5.6 Headings.
The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.7 Successors
and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign
this Agreement or any rights or obligations hereunder without the
prior written consent of each Purchaser (other than by merger). Any
Purchaser may assign any or all of its rights under this Agreement
to any Person to whom such Purchaser assigns or transfers any
Securities, provided that such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the
“Purchasers.”
5.8 No
Third-Party Beneficiaries. The
Placement Agent shall be a third party beneficiary of the
representations and warranties of the Company in Section 3.1 and
the representations and warranties of the Purchasers in Section
3.2. This Agreement is intended for the benefit of the parties
hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8
and this Section 5.8.
5.9 Governing
Law. All questions concerning
the construction, validity, enforcement and interpretation of the
Transaction Documents shall be governed by and construed and
enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof.
Each party agrees that all legal Proceedings concerning the
interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, partners, members,
employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough
of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any
of the Transaction Documents), and hereby irrevocably waives, and
agrees not to assert in any Action or Proceeding, any claim that it
is not personally subject to the jurisdiction of any such court,
that such Action or Proceeding is improper or is an inconvenient
venue for such Proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in
any such Action or Proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence
of delivery) to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
law. If any party shall commence an Action or Proceeding to enforce
any provisions of the Transaction Documents, then, in addition to
the obligations of the Company under Section 4.8, the prevailing
party in such Action or Proceeding shall be reimbursed by the
non-prevailing party for its reasonable attorneys’ fees and
other costs and expenses incurred with the investigation,
preparation and prosecution of such Action or
Proceeding.
5.10 Survival.
The representations and warranties contained herein shall survive
the Closing and the delivery of the Securities.
5.11 Execution.
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or
“.pdf” signature page were an original
thereof.
5.12 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
5.13 Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) any of the other Transaction
Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does
not timely perform its related obligations within the periods
therein provided, then such Purchaser may rescind or withdraw, in
its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and rights;
provided,
however,
that, in the case of a rescission of a conversion of Preferred
Stock or exercise of a Warrant, the applicable Purchaser shall be
required to return any shares of Common Stock subject to any such
rescinded conversion or exercise notice concurrently with the
return to such Purchaser of the aggregate exercise price paid to
the Company for such shares and the restoration of such
Purchaser’s right to acquire such shares pursuant to such
Purchaser’s Warrant (including, issuance of a replacement
warrant certificate evidencing such restored
right).
5.14 Replacement
of Securities. If any
certificate or instrument evidencing any Securities is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft
or destruction. The applicant for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party
costs (including customary indemnity) associated with the issuance
of such replacement Securities.
5.15 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any Action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
5.16 Payment
Set Aside. To the extent that
the Company makes a payment or payments to any Purchaser pursuant
to any Transaction Document or a Purchaser enforces or exercises
its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
5.17 Independent
Nature of Purchasers’ Obligations and
Rights. The obligations of each
Purchaser under any Transaction Document are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall
be responsible in any way for the performance or non-performance of
the obligations of any other Purchaser under any Transaction
Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Purchaser pursuant hereto or
thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce
its rights including, without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it
shall not be necessary for any other Purchaser to be joined as an
additional party in any Proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in its
review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, each Purchaser and its respective
counsel have chosen to communicate with the Company through EGS.
EGS does not represent any of the Purchasers and only represents
the Placement Agent. The Company has elected to provide all
Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or
requested to do so by any of the Purchasers. It is expressly
understood and agreed that each provision contained in this
Agreement and in each other Transaction Document is between the
Company and a Purchaser, solely, and not between the Company and
the Purchasers collectively and not between and among the
Purchasers.
5.18 Liquidated
Damages. The Company’s
obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of
the Company and shall not terminate until all unpaid partial
liquidated damages and other amounts have been paid notwithstanding
the fact that the instrument or security pursuant to which such
partial liquidated damages or other amounts are due and payable
shall have been canceled.
5.19 Saturdays,
Sundays, Holidays,
etc. If
the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall not be a
Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.
5.20 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto. In addition, each
and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the
date of this Agreement.
5.21 WAIVER
OF JURY TRIAL.
IN ANY
ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY
PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW,
HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY
WAIVES FOREVER TRIAL BY JURY.
(Signature Pages Follow)
IN
WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
AYTU BIOSCIENCE, INC.
|
Address
for Notice:
373
Inverness Parkway, Suite 306
Attn:
David Green
Englewood,
CO 81112
E-Mail:
dgreen@aytubio.com
Fax:
|
By:__________________________________________
Name:
Title:
With a
copy to (which shall not constitute notice):
|
E-Mail:
Fax:
|
Dorsey
& Whitney LLP
Attn:
Nolan Taylor
111
South Main Street, 21st Floor
Salt
Lake City, UT 84111
|
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
[PURCHASER
SIGNATURE PAGES TO AYTU SECURITIES PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
Name of
Purchaser:
________________________________________________________
Signature of Authorized Signatory of
Purchaser: _________________________________
Name of
Authorized Signatory:
_______________________________________________
Title
of Authorized Signatory:
________________________________________________
Email
Address of Authorized Signatory:
_________________________________________
Facsimile Number of
Authorized Signatory:
__________________________________________
Address
for Notice to Purchaser:
Address
for Delivery of Securities to Purchaser (if not same as address for
notice):
Subscription
Amount: $_________________
Warrant
Shares: _________________
EIN
Number: ____________________
REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this “Agreement”) is made and
entered into as of October 11, 2019, between Aytu BioScience, Inc.,
a Delaware corporation (the “Company”), and each of
the several purchasers signatory hereto (each such purchaser, a
“Purchaser” and,
collectively, the “Purchasers”).
This
Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof, between the Company and each Purchaser
(the “Purchase
Agreement”).
The
Company and each Purchaser hereby agrees as follows:
Capitalized
terms used and not otherwise defined herein that are defined in the
Purchase Agreement shall have the meanings given such terms in the
Purchase Agreement. As used in this Agreement, the following
terms shall have the following meanings:
“Advice”
shall have the meaning set forth in Section 6(d).
“Effectiveness Date”
means, with respect to the Initial Registration Statement required
to be filed hereunder, the 120th calendar day
following the date hereof (or, in the event of a “full
review” by the Commission, the 150th calendar day
following the date hereof) and with respect to any additional
Registration Statements which may be required pursuant to Section
2(c) or Section 3(c), the 120th calendar day
following the date on which an additional Registration Statement is
required to be filed hereunder (or, in the event of a “full
review” by the Commission, the 150th calendar day
following the date such additional Registration Statement is
required to be filed hereunder); provided, however, that in the event the
Company is notified by the Commission that one or more of the above
Registration Statements will not be reviewed or is no longer
subject to further review and comments, the Effectiveness Date as
to such Registration Statement shall be the fifth Trading Day
following the date on which the Company is so notified if such date
precedes the dates otherwise required above, provided, further, if
such Effectiveness Date falls on a day that is not a Trading Day,
then the Effectiveness Date shall be the next succeeding Trading
Day.
“Effectiveness Period”
shall have the meaning set forth in Section 2(a).
“Event” shall have the
meaning set forth in Section 2(d).
“Event Date” shall have
the meaning set forth in Section 2(d).
“Filing Date” means, with
respect to the Initial Registration Statement required hereunder,
the 90th
calendar day following the date hereof and, with respect to any
additional Registration Statements which may be required pursuant
to Section 2(c) or Section 3(c), the earliest practical date on
which the Company is permitted by SEC Guidance to file such
additional Registration Statement related to the Registrable
Securities.
“Holder” or
“Holders” means the holder
or holders, as the case may be, from time to time of Registrable
Securities.
“Indemnified Party” shall
have the meaning set forth in Section 5(c).
“Indemnifying Party” shall
have the meaning set forth in Section 5(c).
“Initial Registration
Statement” means the initial Registration Statement
filed pursuant to this Agreement.
“Losses” shall have the
meaning set forth in Section 5(a).
“Plan of Distribution”
shall have the meaning set forth in Section 2(a).
“Prospectus” means the
prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated by
the Commission pursuant to the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities
covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments,
and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Registrable Securities”
means, as of any date of determination, (a) all shares of Common
Stock then issued and issuable upon conversion in full of the
Preferred Stock (assuming on such date the shares of Preferred
Stock are converted in full without regard to any conversion
limitations therein), (b) all Warrant Shares then issued and
issuable upon exercise of the Warrants (assuming on such date the
Warrants are exercised in full without regard to any exercise
limitations therein), (c) any additional shares of Common Stock
issued and issuable in connection with any anti-dilution provisions
in the Preferred Stock or (without giving effect to any limitations
on conversion set forth in the Certificate of Designation) and (d)
any securities issued or then issuable upon any stock split,
dividend or other distribution, recapitalization or similar event
with respect to the foregoing; provided, however, that any such
Registrable Securities shall cease to be Registrable Securities
(and the Company shall not be required to maintain the
effectiveness of any, or file another, Registration Statement
hereunder with respect thereto) for so long as (a) a Registration
Statement with respect to the sale of such Registrable Securities
is declared effective by the Commission under the Securities Act
and such Registrable Securities have been disposed of by the Holder
in accordance with such effective Registration Statement, (b) such
Registrable Securities have been previously sold in accordance with
Rule 144, or (c) such securities become eligible for resale without
volume or manner-of-sale restrictions and without current public
information pursuant to Rule 144 as set forth in a written opinion
letter to such effect, addressed, delivered and acceptable to the
Transfer Agent and the affected Holders (assuming that such
securities and any securities issuable upon exercise, conversion or
exchange of which, or as a dividend upon which, such securities
were issued or are issuable, were at no time held by any Affiliate
of the Company.
“Registration Statement”
means any registration statement required to be filed hereunder
pursuant to Section 2(a) and any additional registration statements
contemplated by Section 2(c) or Section 3(c), including (in each
case) the Prospectus, amendments and supplements to any such
registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference
in any such registration statement.
“Rule
415” means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended or
interpreted from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.
“Rule 424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“Selling Stockholder
Questionnaire” shall have the meaning set forth in
Section 3(a).
“SEC Guidance” means (i)
any publicly-available written or oral guidance of the Commission
staff, or any comments, requirements or requests of the Commission
staff and (ii) the Securities Act.
(a) On or prior to each
Filing Date, the Company shall prepare and file with the Commission
a Registration Statement covering the resale of all of the
Registrable Securities that are not then registered on an effective
Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415. Each Registration Statement filed
hereunder shall be on Form S-3 (except if the Company is not then
eligible to register for resale the Registrable Securities on Form
S-3, in which case such registration shall be on another
appropriate form in accordance herewith, subject to the provisions
of Section 2(e)) and shall contain (unless otherwise directed by at
least 85% in interest of the Holders) substantially the
“Plan of
Distribution” attached hereto as Annex A and substantially the
“Selling
Stockholder” section attached hereto as Annex B; provided, however, that no Holder shall
be required to be named as an “underwriter” without
such Holder’s express prior written consent. Subject to the
terms of this Agreement, the Company shall use its best efforts to
cause a Registration Statement filed under this Agreement
(including, without limitation, under Section 3(c)) to be declared
effective under the Securities Act as promptly as possible after
the filing thereof, but in any event no later than the applicable
Effectiveness Date, and shall use its best efforts to keep such
Registration Statement continuously effective under the Securities
Act until the date that all Registrable Securities covered by such
Registration Statement (i) have been sold, thereunder or pursuant
to Rule 144, or (ii) may be sold without volume or manner-of-sale
restrictions pursuant to Rule 144 and without the requirement for
the Company to be in compliance with the current public information
requirement under Rule 144, as determined by the counsel to the
Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Transfer Agent and the affected
Holders (the “Effectiveness Period”).
The Company shall telephonically request effectiveness of a
Registration Statement as of 5:00 p.m. (New York City time) on a
Trading Day. The Company shall immediately notify the Holders via
facsimile or by e-mail of the effectiveness of a Registration
Statement on the same Trading Day that the Company telephonically
confirms effectiveness with the Commission, which shall be the date
requested for effectiveness of such Registration Statement. The
Company shall, by 9:30 a.m. (New York City time) on the Trading Day
after the effective date of such Registration Statement, file a
final Prospectus with the Commission as required by Rule 424.
Failure to so notify the Holder within one (1) Trading Day of such
notification of effectiveness or failure to file a final Prospectus
as foresaid shall be deemed an Event under Section
2(d).
(b) Notwithstanding
the registration obligations set forth in Section 2(a), if the
Commission informs the Company that all of the Registrable
Securities cannot, as a result of the application of Rule 415, be
registered for resale as a secondary offering on a single
registration statement, the Company agrees to promptly inform each
of the Holders thereof and use its commercially reasonable efforts
to file amendments to the Initial Registration Statement as
required by the Commission, covering the maximum number of
Registrable Securities permitted to be registered by the
Commission, on Form S-3 or such other form available to register
for resale the Registrable Securities as a secondary offering,
subject to the provisions of Section 2(e); with respect to filing
on Form S-3 or other appropriate form, and subject to the
provisions of Section 2(d) with respect to the payment of
liquidated damages; provided, however, that prior to filing
such amendment, the Company shall be obligated to use diligent
efforts to advocate with the Commission for the registration of all
of the Registrable Securities in accordance with the SEC Guidance,
including without limitation, Compliance and Disclosure
Interpretation 612.09.
(c) Notwithstanding
any other provision of this Agreement and subject to the payment of
liquidated damages pursuant to Section 2(d), if the Commission or
any SEC Guidance sets forth a limitation on the number of
Registrable Securities permitted to be registered on a particular
Registration Statement as a secondary offering (and notwithstanding
that the Company used diligent efforts to advocate with the
Commission for the registration of all or a greater portion of
Registrable Securities), unless otherwise directed in writing by a
Holder as to its Registrable Securities, the number of Registrable
Securities to be registered on such Registration Statement will be
reduced as follows:
a.
First, the Company
shall reduce or eliminate any securities to be included other than
Registrable Securities;
b.
Second, the
Company shall reduce Registrable Securities represented by Warrant
Shares (applied, in the case that some Warrant Shares may be
registered, to the Holders on a pro rata basis based on the total
number of unregistered Warrant Shares held by such Holders);
and
c.
Third, the Company
shall reduce Registrable Securities represented by Conversion
Shares (applied, in the case that some Conversion Shares may be
registered, to the Holders on a pro rata basis based on the total
number of unregistered Conversion Shares held by such
Holders).
In the
event of a cutback hereunder, the Company shall give the Holder at
least five (5) Trading Days prior written notice along with the
calculations as to such Holder’s allotment. In the event the
Company amends the Initial Registration Statement in accordance
with the foregoing, the Company will use its best efforts to file
with the Commission, as promptly as allowed by Commission or SEC
Guidance provided to the Company or to registrants of securities in
general, one or more registration statements on Form S-3 or such
other form available to register for resale those Registrable
Securities that were not registered for resale on the Initial
Registration Statement, as amended.
(d) If: (i) the Initial
Registration Statement is not filed on or prior to its Filing Date
(if the Company files the Initial Registration Statement without
affording the Holders the opportunity to review and comment on the
same as required by Section 3(a) herein, the Company shall be
deemed to have not satisfied this clause (i)), or (ii) the Company
fails to file with the Commission a request for acceleration of a
Registration Statement in accordance with Rule 461 promulgated by
the Commission pursuant to the Securities Act, within five Trading
Days of the date that the Company is notified (orally or in
writing, whichever is earlier) by the Commission that such
Registration Statement will not be “reviewed” or will
not be subject to further review, or (iii) prior to the effective
date of a Registration Statement, the Company fails to file a
pre-effective amendment and otherwise respond in writing to
comments made by the Commission in respect of such Registration
Statement within ten (10) calendar days after the receipt of
comments by or notice from the Commission that such amendment is
required in order for such Registration Statement to be declared
effective, or (iv) a Registration Statement registering for resale
all of the Registrable Securities is not declared effective by the
Commission by the Effectiveness Date of the Initial Registration
Statement, or (v) after the effective date of a Registration
Statement, such Registration Statement ceases for any reason to
remain continuously effective as to all Registrable Securities
included in such Registration Statement, or the Holders are
otherwise not permitted to utilize the Prospectus therein to resell
such Registrable Securities, for more than ten (10) consecutive
calendar days or more than an aggregate of fifteen (15) calendar
days (which need not be consecutive calendar days) during any
12-month period (any such failure or breach being referred to as an
“Event”, and for purposes
of clauses (i) and (iv), the date on which such Event occurs, and
for purpose of clause (ii) the date on which such five (5) Trading
Day period is exceeded, and for purpose of clause (iii) the date
which such ten (10) calendar day period is exceeded, and for
purpose of clause (v) the date on which such ten (10) or fifteen
(15) calendar day period, as applicable, is exceeded being referred
to as “Event
Date”), then, in addition to any other rights the
Holders may have hereunder or under applicable law, on each such
Event Date and on each monthly anniversary of each such Event Date
(if the applicable Event shall not have been cured by such date)
until the applicable Event is cured, the Company shall pay to each
Holder an amount in cash, as partial liquidated damages and not as
a penalty, equal to the product of 2.0% multiplied by the aggregate
Subscription Amount paid by such Holder pursuant to the Purchase
Agreement. If the Company fails to pay any partial liquidated
damages pursuant to this Section in full within seven days after
the date payable, the Company will pay interest thereon at a rate
of 18% per annum (or such lesser maximum amount that is permitted
to be paid by applicable law) to the Holder, accruing daily from
the date such partial liquidated damages are due until such
amounts, plus all such interest thereon, are paid in full. The
partial liquidated damages pursuant to the terms hereof shall apply
on a daily pro rata basis for any portion of a month prior to the
cure of an Event.
(e) If Form S-3 is not
available for the registration of the resale of Registrable
Securities hereunder, the Company shall (i) register the resale of
the Registrable Securities on another appropriate form and (ii)
undertake to register the Registrable Securities on Form S-3 as
soon as such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statement then in
effect until such time as a Registration Statement on Form S-3
covering the Registrable Securities has been declared effective by
the Commission.
(f) Notwithstanding
anything to the contrary contained herein, in no event shall the
Company be permitted to name any Holder or affiliate of a Holder as
any Underwriter without the prior written consent of such
Holder.
3.
Registration
Procedures.
In
connection with the Company’s registration obligations
hereunder, the Company shall:
(a) Not less than five
(5) Trading Days prior to the filing of each Registration Statement
and not less than one (1) Trading Day prior to the filing of any
related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish
to each Holder copies of all such documents proposed to be filed,
which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such
Holders, and (ii) cause its officers and directors, counsel and
independent registered public accountants to respond to such
inquiries as shall be necessary, in the reasonable opinion of
respective counsel to each Holder, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company
shall not file a Registration Statement or any such Prospectus or
any amendments or supplements thereto to which the Holders of a
majority of the Registrable Securities shall reasonably object in
good faith, provided that, the Company is notified of such
objection in writing no later than five (5) Trading Days after the
Holders have been so furnished copies of a Registration Statement
or one (1) Trading Day after the Holders have been so furnished
copies of any related Prospectus or amendments or supplements
thereto. Each Holder agrees to furnish to the Company a completed
questionnaire in the form attached to this Agreement as
Annex B (a
“Selling Stockholder
Questionnaire”) on a date that is not less than two
(2) Trading Days prior to the Filing Date or by the end of the
fourth (4th) Trading Day
following the date on which such Holder receives draft materials in
accordance with this Section.
(b) (i) Prepare and
file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep a Registration
Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable
Securities, (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement (subject to the
terms of this Agreement), and, as so supplemented or amended, to be
filed pursuant to Rule 424, (iii) respond as promptly as reasonably
possible to any comments received from the Commission with respect
to a Registration Statement or any amendment thereto and provide as
promptly as reasonably possible to the Holders true and complete
copies of all correspondence from and to the Commission relating to
a Registration Statement (provided that, the Company shall excise
any information contained therein which would constitute material
non-public information regarding the Company or any of its
Subsidiaries), and (iv) comply in all material respects with the
applicable provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities
covered by a Registration Statement during the applicable period in
accordance (subject to the terms of this Agreement) with the
intended methods of disposition by the Holders thereof set forth in
such Registration Statement as so amended or in such Prospectus as
so supplemented.
(c) If during the
Effectiveness Period, the number of Registrable Securities at any
time exceeds 100% of the number of shares of Common Stock then
registered in a Registration Statement, then the Company shall file
as soon as reasonably practicable, but in any case prior to the
applicable Filing Date, an additional Registration Statement
covering the resale by the Holders of not less than the number of
such Registrable Securities.
(d) Notify the Holders
of Registrable Securities to be sold (which notice shall, pursuant
to clauses (iii) through (vi) hereof, be accompanied by an
instruction to suspend the use of the Prospectus until the
requisite changes have been made) as promptly as reasonably
possible (and, in the case of (i)(A) below, not less than one (1)
Trading Day prior to such filing) and (if requested by any such
Person) confirm such notice in writing no later than one (1)
Trading Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to a Registration
Statement is proposed to be filed, (B) when the Commission notifies
the Company whether there will be a “review” of such
Registration Statement and whenever the Commission comments in
writing on such Registration Statement, and (C) with respect to a
Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the Commission or
any other federal or state governmental authority for amendments or
supplements to a Registration Statement or Prospectus or for
additional information, (iii) of the issuance by the Commission or
any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement covering
any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose, (iv) of the receipt by the Company of
any notification with respect to the suspension of the
qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any Proceeding for such purpose, (v)
of the occurrence of any event or passage of time that makes the
financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in a
Registration Statement or Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to a Registration
Statement, Prospectus or other documents so that, in the case of a
Registration Statement or the Prospectus, as the case may be, it
will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (vi) of the occurrence or
existence of any pending corporate development with respect to the
Company that the Company believes may be material and that, in the
determination of the Company, makes it not in the best interest of
the Company to allow continued availability of a Registration
Statement or Prospectus; provided, however, that in no event shall
any such notice contain any information which would constitute
material, non-public information regarding the Company or any of
its Subsidiaries.
(e) Use its best
efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order stopping or suspending the
effectiveness of a Registration Statement, or (ii) any suspension
of the qualification (or exemption from qualification) of any of
the Registrable Securities for sale in any jurisdiction, at the
earliest practicable moment.
(f) Furnish to each
Holder, without charge, at least one conformed copy of each such
Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference to the extent
requested by such Person, and all exhibits to the extent requested
by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such
documents with the Commission, provided that any such item which is
available on the EDGAR system (or successor thereto) need not be
furnished in physical form.
(g) Subject to the
terms of this Agreement, the Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of
the selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment
or supplement thereto, except after the giving of any notice
pursuant to Section 3(d).
(h) Prior to any
resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the
selling Holders in connection with the registration or
qualification (or exemption from the Registration or qualification)
of such Registrable Securities for the resale by the Holder under
the securities or Blue Sky laws of such jurisdictions within the
United States as any Holder reasonably requests in writing, to keep
each registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all
other acts or things reasonably necessary to enable the disposition
in such jurisdictions of the Registrable Securities covered by each
Registration Statement, provided that the Company shall not be
required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so
subject or file a general consent to service of process in any such
jurisdiction.
(i) If requested by a
Holder, cooperate with such Holder to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the
extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holder may
request.
(j) Upon the occurrence
of any event contemplated by Section 3(d), as promptly as
reasonably possible under the circumstances taking into account the
Company’s good faith assessment of any adverse consequences
to the Company and its stockholders of the premature disclosure of
such event, prepare a supplement or amendment, including a
post-effective amendment, to a Registration Statement or a
supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, neither a
Registration Statement nor such Prospectus will contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies the Holders in accordance
with clauses (iii) through (vi) of Section 3(d) above to suspend
the use of any Prospectus until the requisite changes to such
Prospectus have been made, then the Holders shall suspend use of
such Prospectus. The Company will use its best efforts to ensure
that the use of the Prospectus may be resumed as promptly as is
practicable. The Company shall be entitled to exercise its right
under this Section 3(j) to suspend the availability of a
Registration Statement and Prospectus, subject to the payment of
partial liquidated damages otherwise required pursuant to Section
2(d), for a period not to exceed 60 calendar days (which need not
be consecutive days) in any 12-month period.
(k) Otherwise use
commercially reasonable efforts to comply with all applicable rules
and regulations of the Commission under the Securities Act and the
Exchange Act, including, without limitation, Rule 172 under the
Securities Act, file any final Prospectus, including any supplement
or amendment thereof, with the Commission pursuant to Rule 424
under the Securities Act, promptly inform the Holders in writing
if, at any time during the Effectiveness Period, the Company does
not satisfy the conditions specified in Rule 172 and, as a result
thereof, the Holders are required to deliver a Prospectus in
connection with any disposition of Registrable Securities and take
such other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities hereunder.
(l) The Company shall
use its best efforts to maintain eligibility for use of Form S-3
(or any successor form thereto) for the registration of the resale
of Registrable Securities.
(m) The Company may
require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially
owned by such Holder and, if required by the Commission, the
natural persons thereof that have voting and dispositive control
over the shares. During any periods that the Company is unable to
meet its obligations hereunder with respect to the registration of
the Registrable Securities solely because any Holder fails to
furnish such information within three Trading Days of the
Company’s request, any liquidated damages that are accruing
at such time as to such Holder only shall be tolled and any Event
that may otherwise occur solely because of such delay shall be
suspended as to such Holder only, until such information is
delivered to the Company.
4.
Registration
Expenses. All fees and expenses incident to the performance
of or compliance with, this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold
pursuant to a Registration Statement. The fees and expenses
referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses of the Company’s
counsel and independent registered public accountants) (A) with
respect to filings made with the Commission, (B) with respect to
filings required to be made with any Trading Market on which the
Common Stock is then listed for trading, and (C) in compliance with
applicable state securities or Blue Sky laws reasonably agreed to
by the Company in writing (including, without limitation, fees and
disbursements of counsel for the Company in connection with Blue
Sky qualifications or exemptions of the Registrable Securities),
(ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if
the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement. In
addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without
limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual
audit and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as
required hereunder. In no event shall the Company be responsible
for any broker or similar commissions of any Holder or, except to
the extent provided for in the Transaction Documents, any legal
fees or other costs of the Holders.
(a) Indemnification by the Company.
The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Holder, the officers,
directors, members, partners, agents, brokers (including brokers
who offer and sell Registrable Securities as principal as a result
of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees (and any other Persons
with a functionally equivalent role of a Person holding such
titles, notwithstanding a lack of such title or any other title) of
each of them, each Person who controls any such Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, members, stockholders,
partners, agents and employees (and any other Persons with a
functionally equivalent role of a Person holding such titles,
notwithstanding a lack of such title or any other title) of each
such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation,
reasonable attorneys’ fees) and expenses (collectively,
“Losses”), as incurred,
arising out of or relating to (1) any untrue or alleged untrue
statement of a material fact contained in a Registration Statement,
any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or supplement
thereto, in light of the circumstances under which they were made)
not misleading or (2) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act or any state
securities law, or any rule or regulation thereunder, in connection
with the performance of its obligations under this Agreement,
except to the extent, but only to the extent, that (i) such untrue
statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information
relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in a
Registration Statement, such Prospectus or in any amendment or
supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose) or (ii) in the case of an
occurrence of an event of the type specified in Section
3(d)(iii)-(vi), the use by such Holder of an outdated, defective or
otherwise unavailable Prospectus after the Company has notified
such Holder in writing that the Prospectus is outdated, defective
or otherwise unavailable for use by such Holder and prior to the
receipt by such Holder of the Advice contemplated in Section 6(d).
The Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding arising from or in connection
with the transactions contemplated by this Agreement of which the
Company is aware. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such
indemnified person and shall survive the transfer of any
Registrable Securities by any of the Holders in accordance with
Section 6(h).
(b) Indemnification by Holders.
Each Holder shall, severally and not jointly, indemnify and hold
harmless the Company, its directors, officers, agents and
employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable
law, from and against all Losses, as incurred, to the extent
arising out of or based solely upon: any untrue or alleged untrue
statement of a material fact contained in any Registration
Statement, any Prospectus, or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements
therein (in the case of any Prospectus or supplement thereto, in
light of the circumstances under which they were made) not
misleading (i) to the extent, but only to the extent, that such
untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company expressly for
inclusion in such Registration Statement or such Prospectus or (ii)
to the extent, but only to the extent, that such information
relates to such Holder’s information provided in the Selling
Stockholder Questionnaire or the proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in
writing by such Holder expressly for use in a Registration
Statement (it being understood that the Holder has approved Annex A
hereto for this purpose), such Prospectus or in any amendment or
supplement thereto. In no event shall the liability of a selling
Holder be greater in amount than the dollar amount of the proceeds
(net of all expenses paid by such Holder in connection with any
claim relating to this Section 5 and the amount of any damages such
Holder has otherwise been required to pay by reason of such untrue
statement or omission) received by such Holder upon the sale of the
Registrable Securities included in the Registration Statement
giving rise to such indemnification obligation.
(c) Conduct of Indemnification
Proceedings. If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an
“Indemnified
Party”), such Indemnified Party shall promptly notify
the Person from whom indemnity is sought (the “Indemnifying Party”) in
writing, and the Indemnifying Party shall have the right to assume
the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees
and expenses incurred in connection with defense thereof, provided
that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have materially and
adversely prejudiced the Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party or Parties unless: (1) the Indemnifying
Party has agreed in writing to pay such fees and expenses, (2) the
Indemnifying Party shall have failed promptly to assume the defense
of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding, or (3) the named
parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and
counsel to the Indemnified Party shall reasonably believe that a
material conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense
thereof and the reasonable fees and expenses of no more than one
separate counsel shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld or
delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a
party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
Subject
to the terms of this Agreement, all reasonable fees and expenses of
the Indemnified Party (including reasonable fees and expenses to
the extent incurred in connection with investigating or preparing
to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred,
within ten Trading Days of written notice thereof to the
Indemnifying Party, provided that the Indemnified Party shall
promptly reimburse the Indemnifying Party for that portion of such
fees and expenses applicable to such actions for which such
Indemnified Party is finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or
further review) not to be entitled to indemnification
hereunder.
(d) Contribution. If the
indemnification under Section 5(a) or 5(b) is unavailable to an
Indemnified Party or insufficient to hold an Indemnified Party
harmless for any Losses, then each Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party,
in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party and Indemnified Party in connection with
the actions, statements or omissions that resulted in such Losses
as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party
shall be determined by reference to, among other things, whether
any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information
supplied by, such Indemnifying Party or Indemnified Party, and the
parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any
Losses shall be deemed to include, subject to the limitations set
forth in this Agreement, any reasonable attorneys’ or other
fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for
such fees or expenses if the indemnification provided for in this
Section was available to such party in accordance with its
terms.
The
parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the
immediately preceding paragraph. In no event shall the contribution
obligation of a Holder of Registrable Securities be greater in
amount than the dollar amount of the proceeds (net of all expenses
paid by such Holder in connection with any claim relating to this
Section 5 and the amount of any damages such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the
sale of the Registrable Securities giving rise to such contribution
obligation.
The
indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
(a) Remedies. In the event of a
breach by the Company or by a Holder of any of their respective
obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery
of damages, shall be entitled to specific performance of its rights
under this Agreement. Each of the Company and each Holder agrees
that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the
event of any action for specific performance in respect of such
breach, it shall not assert or shall waive the defense that a
remedy at law would be adequate.
(b) No Piggyback on Registrations;
Prohibition on Filing Other Registration Statements. Except
as set forth on Schedule
6(b) attached hereto. The Company shall not file any other
registration statements until all Registrable Securities are
registered pursuant to a Registration Statement that is declared
effective by the Commission, provided that this Section 6(b) shall
not prohibit the Company from filing amendments to registration
statements filed prior to the date of this Agreement.
Notwithstanding the foregoing, this Section 6(b) shall not apply to
registration statements filed with respect to the
InnovusTransaction.
(c) [RESERVED]
(d) Discontinued Disposition. By
its acquisition of Registrable Securities, each Holder agrees that,
upon receipt of a notice from the Company of the occurrence of any
event of the kind described in Section 3(d)(iii) through (vi), such
Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until it is advised in
writing (the “Advice”) by the Company
that the use of the applicable Prospectus (as it may have been
supplemented or amended) may be resumed. The Company will use its
best efforts to ensure that the use of the Prospectus may be
resumed as promptly as is practicable. The Company agrees and
acknowledges that any periods during which the Holder is required
to discontinue the disposition of the Registrable Securities
hereunder shall be subject to the provisions of Section
2(d).
(e) Piggy-Back Registrations. If,
at any time during the Effectiveness Period, there is not an
effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act
of any of its equity securities, other than on Form S-4 or Form S-8
(each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with the Company’s stock
option or other employee benefit plans, then the Company shall
deliver to each Holder a written notice of such determination and,
if within fifteen days after the date of the delivery of such
notice, any such Holder shall so request in writing, the Company
shall include in such registration statement all or any part of
such Registrable Securities such Holder requests to be registered;
provided,
however, that the
Company shall not be required to register any Registrable
Securities pursuant to this Section 6(e) that are eligible for
resale pursuant to Rule 144 (without volume restrictions or current
public information requirements) promulgated by the Commission
pursuant to the Securities Act or that are the subject of a then
effective Registration Statement that is available for resales or
other dispositions by such Holder.
(f) Amendments and Waivers. The
provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers
or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the
Company and the Holders of 50.1% or more of the then outstanding
Registrable Securities (for purposes of clarification, this
includes any Registrable Securities issuable upon exercise or
conversion of any Security), provided that, if any amendment,
modification or waiver disproportionately and adversely impacts a
Holder (or group of Holders), the consent of such
disproportionately impacted Holder (or group of Holders) shall be
required. If a Registration Statement does not register all of the
Registrable Securities pursuant to a waiver or amendment done in
compliance with the previous sentence, then the number of
Registrable Securities to be registered for each Holder shall be
reduced pro rata among all Holders and each Holder shall have the
right to designate which of its Registrable Securities shall be
omitted from such Registration Statement. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof
with respect to a matter that relates exclusively to the rights of
a Holder or some Holders and that does not directly or indirectly
affect the rights of other Holders may be given only by such Holder
or Holders of all of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of
this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the first sentence of this
Section 6(f). No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any
provision of this Agreement unless the same consideration also is
offered to all of the parties to this Agreement.
(g) Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be delivered as set forth in the Purchase
Agreement.
(h) Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of each of the parties and shall
inure to the benefit of each Holder. The Company may not assign
(except by merger) its rights or obligations hereunder without the
prior written consent of all of the Holders of the then outstanding
Registrable Securities. Each Holder may assign their respective
rights hereunder in the manner and to the Persons as permitted
under Section 5.7 of the Purchase Agreement.
(i) No Inconsistent Agreements.
Neither the Company nor any of its Subsidiaries has entered, as of
the date hereof, nor shall the Company or any of its Subsidiaries,
on or after the date of this Agreement, enter into any agreement
with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as set forth
on Schedule 6(i),
neither the Company nor any of its Subsidiaries has previously
entered into any agreement granting any registration rights with
respect to any of its securities to any Person that have not been
satisfied in full.
(j) Execution and Counterparts.
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or
“.pdf” signature page were an original
thereof.
(k) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Agreement shall be determined in accordance
with the provisions of the Purchase Agreement.
(l) Cumulative Remedies. The
remedies provided herein are cumulative and not exclusive of any
other remedies provided by law.
(m) Severability. If any term,
provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(n) Headings. The headings in this
Agreement are for convenience only, do not constitute a part of the
Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
(o) Independent Nature of Holders’
Obligations and Rights. The obligations of each Holder
hereunder are several and not joint with the obligations of any
other Holder hereunder, and no Holder shall be responsible in any
way for the performance of the obligations of any other Holder
hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any
Holder pursuant hereto or thereto, shall be deemed to constitute
the Holders as a partnership, an association, a joint venture or
any other kind of group or entity, or create a presumption that the
Holders are in any way acting in concert or as a group or entity
with respect to such obligations or the transactions contemplated
by this Agreement or any other matters, and the Company
acknowledges that the Holders are not acting in concert or as a
group, and the Company shall not assert any such claim, with
respect to such obligations or transactions. Each Holder shall be
entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall
not be necessary for any other Holder to be joined as an additional
party in any proceeding for such purpose. The use of a single
agreement with respect to the obligations of the Company contained
was solely in the control of the Company, not the action or
decision of any Holder, and was done solely for the convenience of
the Company and not because it was required or requested to do so
by any Holder. It is expressly understood and agreed that each
provision contained in this Agreement is between the Company and a
Holder, solely, and not between the Company and the Holders
collectively and not between and among Holders.
********************
(Signature Pages Follow)
IN
WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
AYTU BIOSCIENCE, INC.
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By:__________________________________________
Name:
Title:
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[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
[SIGNATURE PAGE OF
HOLDERS TO AYTU RRA]
Name of
Holder: __________________________
Signature of Authorized Signatory of
Holder: __________________________
Name of
Authorized Signatory: _________________________
Title
of Authorized Signatory: __________________________
[SIGNATURE PAGES
CONTINUE]
Annex A
Plan of Distribution
Each
Selling Stockholder (the “Selling Stockholders”) of
the securities and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of
their securities covered hereby on the principal Trading Market or
any other stock exchange, market or trading facility on which the
securities are traded or in private transactions. These sales may
be at fixed or negotiated prices. A Selling Stockholder may use any
one or more of the following methods when selling
securities:
●
ordinary brokerage
transactions and transactions in which the broker-dealer solicits
purchasers;
●
block trades in
which the broker-dealer will attempt to sell the securities as
agent but may position and resell a portion of the block as
principal to facilitate the transaction;
●
purchases by a
broker-dealer as principal and resale by the broker-dealer for its
account;
●
an exchange
distribution in accordance with the rules of the applicable
exchange;
●
privately
negotiated transactions;
●
settlement of short
sales;
●
in transactions
through broker-dealers that agree with the Selling Stockholders to
sell a specified number of such securities at a stipulated price
per security;
●
through the writing
or settlement of options or other hedging transactions, whether
through an options exchange or otherwise;
●
a combination of
any such methods of sale; or
●
any other method
permitted pursuant to applicable law.
The
Selling Stockholders may also sell securities under Rule 144 or any
other exemption from registration under the Securities Act of 1933,
as amended (the “Securities Act”), if
available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any
broker-dealer acts as agent for the purchaser of securities, from
the purchaser) in amounts to be negotiated, but, except as set
forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in
compliance with FINRA Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with FINRA
IM-2440.
In
connection with the sale of the securities or interests therein,
the Selling Stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn
engage in short sales of the securities in the course of hedging
the positions they assume. The Selling Stockholders may also sell
securities short and deliver these securities to close out their
short positions, or loan or pledge the securities to broker-dealers
that in turn may sell these securities. The Selling Stockholders
may also enter into option or other transactions with
broker-dealers or other financial institutions or create one or
more derivative securities which require the delivery to such
broker-dealer or other financial institution of securities offered
by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction).
The
Selling Stockholders and any broker-dealers or agents that are
involved in selling the securities may be deemed to be
“underwriters” within the meaning of the Securities Act
in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the
resale of the securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
Each Selling Stockholder has informed the Company that it does not
have any written or oral agreement or understanding, directly or
indirectly, with any person to distribute the
securities.
The
Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the securities. The
Company has agreed to indemnify the Selling Stockholders against
certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
We
agreed to keep this prospectus effective until the earlier of (i)
the date on which the securities may be resold by the Selling
Stockholders without registration and without regard to any volume
or manner-of-sale limitations by reason of Rule 144, without the
requirement for the Company to be in compliance with the current
public information under Rule 144 under the Securities Act or any
other rule of similar effect or (ii) all of the securities have
been sold pursuant to this prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale
securities will be sold only through registered or licensed brokers
or dealers if required under applicable state securities laws. In
addition, in certain states, the resale securities covered hereby
may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied
with.
Under
applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale securities may not
simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined
in Regulation M, prior to the commencement of the distribution. In
addition, the Selling Stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of
purchases and sales of the common stock by the Selling Stockholders
or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or
prior to the time of the sale (including by compliance with Rule
172 under the Securities Act).
SELLING SHAREHOLDERS
The
common stock being offered by the selling shareholders are those
previously issued to the selling shareholders, and those issuable
to the selling shareholders, upon exercise of the warrants. For
additional information regarding the issuances of those shares of
common stock and warrants, see “Private Placement of Shares
of Common Stock and Warrants” above. We are registering the
shares of common stock in order to permit the selling shareholders
to offer the shares for resale from time to time. Except for the
ownership of the shares of common stock and the warrants, the
selling shareholders have not had any material relationship with us
within the past three years.
The
table below lists the selling shareholders and other information
regarding the beneficial ownership of the shares of common stock by
each of the selling shareholders. The second column lists the
number of shares of common stock beneficially owned by each selling
shareholder, based on its ownership of the shares of common stock
and warrants, as of ________, 2019, assuming exercise of the
warrants held by the selling shareholders on that date, without
regard to any limitations on exercises.
The
third column lists the shares of common stock being offered by this
prospectus by the selling shareholders.
In
accordance with the terms of a registration rights agreement with
the selling shareholders, this prospectus generally covers the
resale of the sum of (i) the number of shares of common stock
issued to the selling shareholders in the “Private Placement
of Shares of Common Stock and Warrants” described above and
(ii) the maximum number of shares of common stock issuable upon
exercise of the related warrants, determined as if the outstanding
warrants were exercised in full as of the trading day immediately
preceding the date this registration statement was initially filed
with the SEC, each as of the trading day immediately preceding the
applicable date of determination and all subject to adjustment as
provided in the registration right agreement, without regard to any
limitations on the exercise of the warrants. The fourth column assumes the sale
of all of the shares offered by the selling shareholders pursuant
to this prospectus.
Under
the terms of the warrants, a selling shareholder may not exercise
the warrants to the extent such exercise would cause such selling
shareholder, together with its affiliates and attribution parties,
to beneficially own a number of shares of common stock which would
exceed [4.99]% of our then outstanding common stock following such
exercise, excluding for purposes of such determination shares of
common stock issuable upon exercise of the warrants which have not
been exercised. The number of shares in the second column does not
reflect this limitation. The selling shareholders may sell all,
some or none of their shares in this offering. See "Plan of
Distribution."
Name of Selling Shareholder
|
Number of shares of Common Stock Owned Prior to
Offering
|
Maximum Number of shares of Common Stock to be Sold Pursuant to
this Prospectus
|
Number of shares of Common Stock Owned After Offering
|
Annex
C
AYTU BIOSCIENCE, INC.
Selling Stockholder Notice and Questionnaire
The
undersigned beneficial owner of common stock (the
“Registrable
Securities”) of Aytu BioScience, Inc., a Delaware
corporation (the “Company”), understands
that the Company has filed or intends to file with the Securities
and Exchange Commission (the “Commission”) a
registration statement (the “Registration Statement”)
for the registration and resale under Rule 415 of the Securities
Act of 1933, as amended (the “Securities Act”), of the
Registrable Securities, in accordance with the terms of the
Registration Rights Agreement (the “Registration Rights
Agreement”) to which this document is annexed. A copy
of the Registration Rights Agreement is available from the Company
upon request at the address set forth below. All capitalized terms
not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.
Certain
legal consequences arise from being named as a selling stockholder
in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable
Securities are advised to consult their own securities law counsel
regarding the consequences of being named or not being named as a
selling stockholder in the Registration Statement and the related
prospectus.
NOTICE
The
undersigned beneficial owner (the “Selling Stockholder”) of
Registrable Securities hereby elects to include the Registrable
Securities owned by it in the Registration Statement.
The
undersigned hereby provides the following information to the
Company and represents and warrants that such information is
accurate:
QUESTIONNAIRE
1. Name.
(a)
Full Legal Name of
Selling Stockholder
(b)
Full Legal Name of
Registered Holder (if not the same as (a) above) through which
Registrable Securities are held:
(c)
Full Legal Name of
Natural Control Person (which means a natural person who directly
or indirectly alone or with others has power to vote or dispose of
the securities covered by this Questionnaire):
2.
Address for Notices to Selling Stockholder:
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|
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Telephone:
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Fax:
|
Contact
Person:
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3.
Broker-Dealer Status:
(a)
Are you a
broker-dealer?
(b)
If
“yes” to Section 3(a), did you receive your Registrable
Securities as compensation for investment banking services to the
Company?
Note:
If “no”
to Section 3(b), the Commission’s staff has indicated that
you should be identified as an underwriter in the Registration
Statement.
(c)
Are you an
affiliate of a broker-dealer?
(d)
If you are an
affiliate of a broker-dealer, do you certify that you purchased the
Registrable Securities in the ordinary course of business, and at
the time of the purchase of the Registrable Securities to be
resold, you had no agreements or understandings, directly or
indirectly, with any person to distribute the Registrable
Securities?
Note:
If “no”
to Section 3(d), the Commission’s staff has indicated that
you should be identified as an underwriter in the Registration
Statement.
4.
Beneficial Ownership of Securities of the Company Owned by the
Selling Stockholder.
Except as set forth below in this Item 4, the undersigned is not
the beneficial or registered owner of any securities of the Company
other than the securities issuable pursuant to the Purchase
Agreement.
(a)
Type and Amount of
other securities beneficially owned by the Selling
Stockholder:
5.
Relationships with the Company:
Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners
of 5% of more of the equity securities of the undersigned) has held
any position or office or has had any other material relationship
with the Company (or its predecessors or affiliates) during the
past three years.
State any
exceptions here:
The
undersigned agrees to promptly notify the Company of any material
inaccuracies or changes in the information provided herein that may
occur subsequent to the date hereof at any time while the
Registration Statement remains effective; provided, that the
undersigned shall not be required to notify the Company of any
changes to the number of securities held or owned by the
undersigned or its affiliates.
By
signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 5
and the inclusion of such information in the Registration Statement
and the related prospectus and any
amendments or supplements thereto. The undersigned
understands that such information will be relied upon by the
Company in connection with the preparation or amendment of the
Registration Statement and the related prospectus and any
amendments or supplements thereto.
IN
WITNESS WHEREOF the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered
either in person or by its duly authorized agent.
Date:
______________________________
|
Beneficial
Owner: __________________________
By:
_______________________________________
|
PLEASE FAX A COPY (OR EMAIL A .PDF COPY) OF THE COMPLETED AND
EXECUTED NOTICE AND QUESTIONNAIRE TO:
Aytu BioScience Announces $10 Million Private
Placement
Armistice
Capital and Altium Capital jointly participated in
financing
ENGLEWOOD, CO / ACCESSWIRE / October 14, 2019 / Aytu
BioScience, Inc. (NASDAQ: AYTU), a specialty pharmaceutical company
focused on global commercialization of novel products addressing
significant medical needs, is pleased to announce that it has
entered into definitive agreements with two institutional investors
for the purchase and sale in a private placement of $10 Million of
Series F Convertible Preferred Stock and warrants to purchase
common stock. Institutional investors Altium Capital and Armistice
Capital jointly participated in the financing.
Armistice
Capital is a global, long/short, value-oriented and event-driven
hedge fund focused primarily on the health care and consumer
sectors with over $1 billion in assets. Armistice invests
predominantly in equities and seeks to maximize the opportunity set
of investment candidates allowing for the selection of unique,
concentrated bets to generate uncorrelated investment returns.
Steven Boyd, Chief Investment Officer, founded Armistice Capital in
2012. Mr. Boyd is a member of the Board of Directors of Aytu
BioScience.
Altium
Capital is a private investment fund founded by CEO Jacob Gottlieb.
Through deep, fundamental research, Altium’s team of doctors,
scientists and investment professionals seeks to identify growth
and development stage public companies with disruptive science and
technology. Altium frequently partners with portfolio companies as
they raise capital to fund the next stage of
development.
Following
the closing of this offering, the Company’s pro forma cash
balance as of September 30, 2019 would have been approximately
$17.3 million.
The stock purchase agreement
includes the purchase of shares of convertible preferred stock that
will be sold at a purchase price of $1,000 per share and
convertible into 1,000 shares of common stock at $1 per share, and
accompanying warrants to purchase up to one share of common stock
for each share of common stock convertible from the preferred
stock, with an exercise price of $1.25 per share and exercisable
following shareholder approval. The private placement is expected
to result in total gross proceeds of $10 million. The warrants will
have a term of exercise expiring five years from the effective
date.
Ladenburg
Thalmann & Co. Inc., a subsidiary of Ladenburg Thalmann
Financial Services Inc. (NYSE American: LTS), acted as the
exclusive placement agent in connection with the
offering.
The
preferred stock, the common stock convertible from the preferred
stock, the accompanying warrants and the common stock issuable upon
exercise of the warrants will not be registered under the
Securities Act of 1933, as amended (the “Securities
Act”) or any state securities laws and, unless so registered,
may not be offered or sold in the United States except pursuant to
an applicable exemption from the registration requirements of the
Securities Act and applicable state securities laws. The securities
will be offered only to institutional accredited investors in
accordance with Section 4(a)(2) under the Securities Act and Rule
506(b) promulgated thereunder.
About Aytu BioScience, Inc.
Aytu
BioScience is a commercial-stage specialty pharmaceutical company
focused on global commercialization of novel products addressing
significant medical needs. The company currently markets
Natesto®, the only FDA-approved nasal formulation of
testosterone for men with hypogonadism (low testosterone, or "Low
T"). Aytu also has exclusive U.S. and Canadian rights to
ZolpiMist™, an FDA-approved, commercial-stage prescription
sleep aid indicated for the short-term treatment of insomnia
characterized by difficulties with sleep initiation. Aytu recently
acquired exclusive U.S. commercial rights to Tuzistra® XR, the
only FDA-approved 12-hour codeine-based antitussive syrup. Tuzistra
XR is a prescription antitussive consisting of codeine polistirex
and chlorpheniramine polistirex in an extended-release oral
suspension. Additionally, Aytu is developing MiOXSYS®, a
novel, rapid semen analysis system with the potential to become a
standard of care for the diagnosis and management of male
infertility caused by oxidative stress. MiOXSYS is commercialized
outside of the U.S. where it is a CE Marked, Health Canada cleared,
Australian TGA approved, Mexican COFEPRAS approved product, and
Aytu is planning U.S.-based clinical trials in pursuit of 510k de
novo medical device clearance by the FDA. Aytu's strategy is to
continue building its portfolio of revenue-generating products,
leveraging its focused commercial team and expertise to build
leading brands within large therapeutic markets. For more
information visit aytubio.com.
Forward-Looking Statements
This
press release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, or the
Exchange Act. All statements other than statements of historical
facts contained in this presentation, are forward-looking
statements. Forward looking statements are generally written in the
future tense and/or are preceded by words such as ''may,''
''will,'' ''should,'' ''forecast,'' ''could,'' ''expect,''
''suggest,'' ''believe,'' ''estimate,'' ''continue,''
''anticipate,'' ''intend,'' ''plan,'' "prospects" or similar words,
or the negatives of such terms or other variations on such terms or
comparable terminology. These statements are just predictions and
are subject to risks and uncertainties that could cause the actual
events or results to differ materially. These risks and
uncertainties include, among others: risks relating to gaining
market acceptance of our products, obtaining reimbursement by
third-party payors, the potential future commercialization of our
product candidates, the anticipated start dates, durations and
completion dates, as well as the potential future results, of our
ongoing and future clinical trials, the anticipated designs of our
future clinical trials, anticipated future regulatory submissions
and events, our anticipated future cash position and future events
under our current and potential future collaboration. We also refer
you to the risks described in ''Risk Factors'' in Part I, Item 1A
of the Company's Annual Report on Form 10-K and in the other
reports and documents we file with the Securities and Exchange
Commission from time to time.