CONVERTIBLE PREFERRED STOCK AND WARRANT SECURITIES PURCHASE AGREEMENT
Exhibit 10.1
CONVERTIBLE PREFERRED STOCK AND WARRANT
SECURITIES
PURCHASE AGREEMENT
This
Convertible Preferred Stock and Warrant Securities Purchase
Agreement, dated as of July 16, 2020 (this “Agreement”), is entered
into by and among AzurRx BioPharma, Inc., a Delaware corporation
(the “Company”), and the other
signatories hereto (each an “Investor” and
collectively, the “Investor”).
RECITALS
A. On
the terms and subject to the conditions set forth herein, the
Investors are willing to purchase from the Company and the Company
is willing to issue and sell to the Investors, at a purchase price
of $7,700.00 per share (the “Per Share Purchase
Price”), up to an aggregate of Seventeen Million Three
Hundred Thousand Dollars ($17,300,000) of shares (the
“Series B
Shares”) of the Company’s Series B Convertible
Preferred Stock, par value $0.0001 per share (the
“Preferred
Stock”), subject to increase to up to an aggregate of
Twenty Two Million Eight Hundred Thousand Dollars ($22,800,000), at
the sole option of the Company, to the extent of oversubscriptions,
with such shares of Preferred Stock having the relative rights,
preferences and designations set forth in the Certificate of
Designations, Preferences and Rights set forth in Exhibit A attached hereto (the
“Certificate of
Designation”);
B. Up
to an aggregate of Ten Million Dollars ($10,000,000), subject to
increase to up to an aggregate of Fifteen Million Five Hundred
Thousand Dollars ($15,500,000) at the sole option of the Company,
to the extent of oversubscriptions, of Preferred Stock will be
issued for cash consideration, (the “Cash Consideration”), and
up to an aggregate of Seven Million Three Hundred Thousand Dollars
($7,300,000) of Preferred Stock will be issued in exchange (the
“Exchange”) for
consideration (the “Exchange Consideration”
and, collectively with the Cash Consideration, as the case may be,
the “Purchase
Price”) consisting of the outstanding principal
amount, together with accrued and unpaid interest thereon through
the applicable Closing Date (as defined below), of certain Senior
Convertible Promissory Notes issued between December 20, 2019 and
January 9, 2020 (the “Promissory Notes”),
pursuant to an Exchange Addendum (the “Exchange Addendum”),
substantially in the form attached hereto as Exhibit B executed by the Company and
such Investors (the
“Exchange
Investors” and, for the avoidance of doubt, each
reference in this Agreement to the “Investors” shall
include the “Exchange Investors”);
C Each
Series B Share shall be convertible into that number of shares (the
“Conversion
Shares”) of the Company’s common stock, $0.0001
par value per share (“Common Stock”),
determined by dividing the Per Share Purchase Price by $0.77 (the
“Conversion
Price”), subject to adjustment as set forth in the
Certificate of Designation;
D. As
additional consideration for the issuance of the Series B Shares by
the Company, the Company is issuing to the Investors warrants in
substantially the form attached hereto as Exhibit C (the “Series B Warrants”),
representing the right to purchase, at an exercise price of $0.85,
subject to adjustment as set forth in the Series B Warrants, that
number of shares of Common Stock (rounded down to the nearest whole
share) (the “Warrant
Shares”) equal to 50% of the total number of
Conversion Shares issuable upon conversion of the Series B Shares
purchased pursuant to this Agreement by each Investor;
E. As
additional consideration for the Exchange, the Company is also
issuing solely to the Exchange Investors, in addition to the Series
B Warrants, additional warrants in substantially the form attached
hereto as Exhibit D (the
“Exchange
Warrants”), representing the right to purchase, at an
exercise price equal to the exercise price of the Series B
Warrants, that number of shares of Common Stock (the
“Exchange Warrant
Shares”), assuming conversion of the entire balance of
such Exchange Investor’s Promissory Note, equal to 50% of the
total number of the Note Warrant Shares (as defined in the Exchange
Addendum) issuable upon conversion of such Exchange
Investor’s Note Warrants (as defined in the Exchange
Addendum), in each case held as of the applicable Closing Date;
and
G. In
connection with the purchase of Series B Shares, Series B Warrants
and, as applicable, Exchange Warrants pursuant to this Agreement,
the parties hereto are executing and delivering a Registration
Rights Agreement, in substantially the form attached hereto as
Exhibit E (the
“Registration Rights
Agreement”), pursuant to which the Company has agreed
to register the Conversion Shares, the Warrant Shares and the
Exchange Warrant Shares under the Securities Act of 1933, as
amended (the “Securities Act”), and the
rules and regulations promulgated thereunder. This Agreement, the
Certificate of Designation, the Series B Warrants, Exchange
Addendum (if applicable), the Exchange Warrants, the Registration
Rights Agreement and the Escrow Agreement (as defined herein) are
referred to herein collectively as the “Transaction
Documents”).
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AGREEMENT
NOW, THEREFORE, in consideration of the
foregoing, and the representations, warranties, and conditions set
forth below, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Issuance and Sale of the Series B
Shares, Series B Warrants and, as applicable, Exchange
Warrants. In reliance upon the representations, warranties
and covenants of the parties set forth herein, the Company agrees
to issue, sell and deliver to each Investor, and each Investor
agrees, severally and not jointly, to purchase from the Company the
Series B Shares in the respective amounts set forth below such
Investor’s name on the signature page hereto, which Series B
Shares shall include a Series B Warrant exercisable for that number
of Warrant Shares set forth below Investor’s name on the
signature page hereto, and solely with respect to Exchange
Investors, shall include an Exchange Warrant exercisable for that
number of Exchange Warrant Shares set forth below Investor’s
name on the signature page hereto. The purchase price for the
Series B Shares, Series B Warrant and, if applicable, Exchange
Warrant, shall be equal to the aggregate amount set forth below
Investor’s name on the signature page hereto. The Company and
the Investor are executing and delivering this Agreement and
issuing the Series B Shares, Series B Warrants and, if applicable,
Exchange Warrants in accordance with, and in reliance upon, the
exemption from securities registration afforded by Section 4(2) of
the Securities Act, including Regulation D (“Regulation D”), and/or
upon such other exemption from the registration requirements of the
Securities Act as may be available with respect to any or all of
the investments to be made hereunder. The Series B Shares, the
Series B Warrants, the Exchange Warrants (solely with respect to
Exchange Investors), the Conversion Shares, the Warrant Shares and
the Exchange Warrant Shares (solely with respect to Exchange
Investors) are sometimes collectively referred to herein as the
“Securities”.
2. Closing; Delivery. Upon
confirmation that the other conditions to closing specified herein
have been satisfied or duly waived by the Investors, the Company
shall file the Certificate of Designation with the Secretary of
State of Delaware. The Company will deliver to Investors the Series
B Shares against receipt by the Company of the Purchase Price. Each
Series B Warrant and, if applicable, Exchange Warrant shall be
issued within three (3) business days following the receipt by the
Company of the Purchase Price for the Series B Shares. The closings
of the purchase and sale of the Series B Shares, Series B Warrants
and, if applicable, Exchange Warrants to be acquired by the
Investors from the Company under this Agreement (each, a
“Closing”) shall occur at
such time or times as the Company and the Placement Agent (as
defined below) may determine in their sole discretion (each a
“Closing
Date”); provided that all of the conditions set forth
in Sections 5 and 6 hereof and applicable to such Closing shall
have been fulfilled or waived in accordance herewith. At or prior
to each Closing, each Investor shall deliver its portion of the
Purchase Price by wire transfer to an escrow account designated by
the escrow agent in the Escrow Agreement substantially in the form
attached hereto as Exhibit F
(“Escrow
Agreement”), or, solely with respect to Exchange
Investors, by delivery to the Company of such Exchange
Investor’s original Promissory Note, or an indemnification
undertaking with respect to such Promissory Note in the event of
the loss, theft or destruction of such Promissory Note. The first
Closing shall be referred to as the “Initial Closing”; and the
last Closing shall be referred to as the “Final
Closing.”
3. Representations and Warranties of the
Company. Except as set forth in the Commission Documents and
subject to any exceptions set forth in schedules attached hereto,
which schedules are incorporated herein by this reference, the
Company hereby represents and warrants to each Investor
that:
(a) Organization and Standing. The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to carry on its business as
now conducted and proposed to be conducted. The Company and each
such Subsidiary (as defined in Section 3(h)) is duly qualified as a
foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary except for
any jurisdiction(s) (alone or in the aggregate) in which the
failure to be so qualified will not have a Material Adverse Effect.
For the purposes of this Agreement, “Material Adverse Effect”
means any material adverse effect on the business, operations,
properties, prospects, or financial condition of the Company and
its Subsidiaries and/or any condition, circumstance, or situation
that would prohibit or otherwise materially interfere with the
ability of the Company to perform any of its obligations under this
Agreement in any material respect.
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(b) Corporate Power. The Company
has all requisite legal and corporate power and authority to enter
into and perform this Agreement and the other Transaction
Documents, and to consummate the transactions contemplated hereby
and thereby and to issue the Securities, in accordance with the
terms hereof and thereof. This Agreement, and, upon issuance, the
Series B Warrants and Exchange Warrants will be, valid and binding
obligations of the Company, enforceable in accordance with their
respective terms, except as the same may be limited by bankruptcy,
insolvency, moratorium, and other laws of general application
affecting the enforcement of creditors’ rights.
(c) Authorization. The execution
and delivery of this Agreement, the Series B Shares, the Series B
Warrants, the Exchange Warrants, the Conversion Shares, the Warrant
Shares and the Exchange Warrant Shares by the Company and the
consummation by it of the transactions contemplated hereby and
thereby (including the issuance of the Series B Shares, the Series
B Warrants, and the Exchange Warrants, as well as the issuance and
reservation for issuance of the Conversion Shares issuable upon
conversion of the Series B Shares, the issuance and reservation for
issuance of the Warrant Shares upon exercise of the Series B
Warrants, and the issuance and reservation for issuance of the
Exchange Warrant Shares upon exercise of the Exchange Warrants)
have been duly authorized by the Company’s Board of Directors
and no further consent or authorization of the Company, its Board
of Directors, its stockholders (except for the Stockholder
Approval) or its debt holders is required. When paid for and issued
in accordance with the terms hereof, the Series B Shares (and
Conversion Shares issuable upon conversion thereof in accordance
with the Certificate of Designation) shall be validly issued and
outstanding, free and clear of all liens, encumbrances and rights
of refusal of any kind and will have the relative rights, powers
and preferences set forth in the Certificate of Designation. When
the Warrant Shares are issued and paid for in accordance with the
terms of this Agreement, such Warrant Shares will be duly
authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, free and clear of all
liens, encumbrances and rights of refusal of any kind and the
holders shall be entitled to all rights accorded to a holder of
Common Stock. When the Exchange Warrant Shares are issued and paid
for in accordance with the terms of this Agreement, such Exchange
Warrant Shares will be duly authorized by all necessary corporate
action and validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights
of refusal of any kind and the holders shall be entitled to all
rights accorded to a holder of Common Stock.
(d) Capitalization.
i. Except as set forth
on Schedule 3(d) hereto, the Company has duly and validly
authorized capital stock as set forth in the Commission Documents
and in the Certificate and as in effect as of the applicable
Closing Date. All of the outstanding shares of the Common Stock and
any other outstanding security of the Company have been duly and
validly authorized and validly issued, fully paid and
nonassessable. Except as set forth in this Agreement, no shares of
Common Stock or any other security of the Company are entitled to
preemptive rights, registration rights, rights of first refusal or
similar rights and there are no outstanding options, warrants,
scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company. The Company is not a
party to or bound by any agreement or understanding granting
registration or anti-dilution rights to any person with respect to
any of its equity or debt securities. The Company is not a party
to, and it has no knowledge of, any agreement or understanding
restricting the voting or transfer of any shares of the capital
stock of the Company. Except as disclosed below, (i) there are no
outstanding debt securities, or other form of material debt of the
Company or any of its Subsidiaries, (ii) there are no contracts,
commitments, understandings, agreements or arrangements under which
the Company or any of its Subsidiaries is required to register the
sale of any of their securities under the Securities Act, (iii)
there are no outstanding securities of the Company or any of its
Subsidiaries which contain any redemption or similar provisions,
and there are no contracts, commitments, understandings, agreements
or arrangements by which the Company or any of its Subsidiaries is
or may become bound to redeem a security of the Company or any of
its Subsidiaries, (iv) there are no securities or instruments
containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities, (v) the Company does
not have any stock appreciation rights or “phantom
stock” plans or agreements, or any similar plan or agreement
and (vi) as of the date of this Agreement, to the Company’s
and each of its Subsidiaries’ knowledge, no person or group
of related persons
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beneficially owns
(as determined pursuant to Rule 13d-3 promulgated under the
Exchange Act (as defined below)) or has the right to acquire by
agreement with or by obligation binding upon the Company,
beneficial ownership of in excess of 5% of the Common Stock. Any
person with any right to purchase securities of the Company that
would be triggered as a result of the transactions contemplated
hereby or by any of the other Transaction Documents has waived such
rights or the time for the exercise of such rights has passed,
except where failure of the Company to receive such waiver would
not have a Material Adverse Effect. There are no options, warrants
or other outstanding securities of the Company (including, without
limitation, any equity securities issued pursuant to any company
plan) the vesting of which will be accelerated by the transactions
contemplated hereby or by any of the other Transaction Documents.
None of the transactions contemplated by this Agreement or by any
of the other Transaction Documents shall cause, directly or
indirectly, the acceleration of vesting of any options issued
pursuant the Company’s stock option plans.
ii. The Conversion
Shares, the Warrant Shares, and Exchange Warrant Shares are duly
authorized and reserved for issuance and, upon conversion of the
Series B Shares, exercise of the Series B Warrants, or exercise of
the Exchange Warrants (as applicable) in accordance with their
respective terms, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and
encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of
stockholders of the Company and will not impose personal liability
upon the holder thereof.
(e) No
Conflicts. The
execution, delivery and performance by the Company of its
obligations under the Transaction Documents will not: (i) conflict
with or result in a breach of or a default under any of the terms
or provisions of, (A) the Company’s Amended and Restated
Certificate of Incorporation, as amended (the “Certificate”) or by-laws
(“Bylaws”), or (B) any
material provision of any indenture, mortgage, deed of trust or
other material agreement or instrument to which the Company is a
party or by which it or any of its material properties or assets
(including, without limitation, the Collateral) is bound, (ii)
result in a violation of any material provision of any law,
statute, rule, regulation, or any existing applicable decree,
judgment or order by any court, Federal or state regulatory body,
administrative agency, or other governmental body having
jurisdiction over the Company, or any of its material properties or
assets or (iii) result in the creation or imposition of any
material lien, charge or encumbrance upon any material property or
assets of the Company or any of its subsidiaries pursuant to the
terms of any agreement or instrument to which any of them is a
party or by which any of them may be bound or to which any of their
property or any of them is subject except, in the case of clauses
(ii) and (iii), for such violations, breaches, conflicts, defaults
or other occurrences which, individually or in the aggregate, would
not have a Material Adverse Effect.
(f) No Approvals. Except for (a)
the filing of the Certificate of Designation and (b) the filing of
a Notification Form: Listing of Additional Shares for the listing
of the Conversion Shares, the Warrant Shares and the Exchange
Warrant Shares on the Nasdaq Capital Market, and (c) the approval
of the Proposal by the Company’s stockholders as contemplated
in Section 8(i), no consent, approval or authorization of or
designation, declaration or filing with any governmental authority
on the part of the Company is required in connection with the valid
execution and delivery of the Transaction Documents.
(g) Commission Documents, Financial
Statements. The Common Stock of the Company is registered
pursuant to Section 12(b) or 12(g) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and the
Company has filed all reports, schedules, forms, statements and
other documents required to be filed by it with the Commission
pursuant to the reporting requirements of the Exchange Act (all of
the foregoing including filings incorporated by reference therein
being referred to herein as the “Commission Documents”).
At the times of their respective filings, the Form 10-Q for the
fiscal quarter ended March 31, 2020 (the “Form 10-Q”) and the Form
10-K for the fiscal year ended December 31, 2019, (the
“Form
10-K”) complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of
the Commission promulgated thereunder, and the Form 10-Q and Form
10-K did 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 light of the
circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company
included in the Commission Documents complied as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the Commission. Such financial
statements have been prepared in accordance with generally accepted
accounting principles (“GAAP”) applied on a
consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes
thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or
summary statements), and fairly present in all material respects
the financial position of the Company and its Subsidiaries as of
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 year-end audit adjustments).
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(h) Subsidiaries. Except as set
forth in Schedule
3(h) hereto, the Commission Documents set forth each
Subsidiary of the Company, showing the jurisdiction of its
incorporation or organization. For the purposes of this Agreement,
“Subsidiary” shall mean
any corporation or other entity of which at least a majority of the
securities or other ownership interest having ordinary voting power
(absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly
or indirectly by the Company and/or any of its other Subsidiaries.
All of the outstanding shares of capital stock of each Subsidiary
have been duly authorized and validly issued, and are fully paid
and nonassessable. There are no outstanding preemptive, conversion
or other rights, options, warrants or agreements granted or issued
by or binding upon any Subsidiary for the purchase or acquisition
of any shares of capital stock of any Subsidiary or any other
securities convertible into, exchangeable for or evidencing the
rights to subscribe for any shares of such capital stock. Neither
the Company nor any Subsidiary is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of the capital stock of any Subsidiary or any
convertible securities, rights, warrants or options of the type
described in the preceding sentence. Neither the Company nor any
Subsidiary is party to, nor has any knowledge of, any agreement
restricting the voting or transfer of any shares of the capital
stock of any Subsidiary.
(i) No Material Adverse Change.
Since March 31, 2020 the Company has not experienced or suffered
any Material Adverse Effect.
(j) No Undisclosed Liabilities.
Neither the Company nor any of its Subsidiaries has incurred any
liabilities, obligations, claims or losses (whether liquidated or
unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) other than those incurred in the ordinary course of
the Company’s or its Subsidiaries respective businesses or
which, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect.
(k) No Undisclosed Events or
Circumstances. Since March 31, 2020, no event or
circumstance has occurred or exists with respect to the Company or
its Subsidiaries or their respective businesses, properties,
prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly
announced or disclosed.
(l) Indebtedness. Except as set
forth on Schedule
3(l) hereto, the Commission Documents set forth all
currently outstanding secured and unsecured Indebtedness of the
Company or any Subsidiary, or Indebtedness for which the Company or
any Subsidiary has commitments. For the purposes of this Agreement,
“Indebtedness” shall mean
(a) any liabilities for borrowed money or amounts owed in excess of
$100,000 (other than trade accounts payable incurred in the
ordinary course of business), (b) 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 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 (c) the present value of any lease payments in excess
of $100,000 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.
(m) Title to Assets. Each of the
Company and the Subsidiaries has good and valid title to all of its
real and personal property reflected in the Commission Documents,
free and clear of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those that,
individually or in the aggregate, do not cause a Material Adverse
Effect. Any leases of the Company and each of its Subsidiaries are
valid and subsisting and in full force and effect.
(n) Actions Pending. There is no
action, suit, claim, investigation, arbitration, alternate dispute
resolution proceeding or other proceeding pending or, to the
knowledge of the Company, threatened against the Company or any
Subsidiary which questions the validity of this Agreement or any of
the other Transaction Documents or any of the transactions
contemplated hereby or thereby or any action taken or to be taken
pursuant hereto or thereto. There is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding
or other proceeding pending or, to the knowledge of the Company,
threatened against or involving the Company, any Subsidiary or any
of their respective properties or assets, which individually or in
the aggregate, would reasonably be expected, if adversely
determined, to have a Material Adverse Effect. There are no
outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against
the Company or any Subsidiary or any officers or directors of the
Company or Subsidiary in their capacities as such, which
individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
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(o) Compliance with Law. The
business of the Company and the Subsidiaries has been and, to the
best of the Company’s knowledge is, presently being conducted
in accordance with all applicable federal, state and local
governmental laws, rules, regulations and ordinances, except where,
individually or in the aggregate, the noncompliance therewith could
not reasonably be expected to have a Material Adverse Effect. The
Company and each of its Subsidiaries have all franchises, permits,
licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of its
business as now being conducted by it unless the failure to possess
such franchises, permits, licenses, consents and other governmental
or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material
Adverse Effect.
(p) Taxes. The Company and each of
the Subsidiaries has accurately prepared and filed all federal,
state and other tax returns required by law to be filed by it, has
paid or made provisions for the payment of all taxes shown to be
due and all additional assessments, and adequate provisions have
been and are reflected in the financial statements of the Company
and the Subsidiaries for all current taxes and other charges to
which the Company or any Subsidiary is subject and which are not
currently due and payable. None of the federal income tax returns
of the Company or any Subsidiary have been audited by the Internal
Revenue Service. The Company has no knowledge of any additional
assessments, adjustments or contingent tax liability (whether
federal or state) of any nature whatsoever, whether pending or
threatened against the Company or any Subsidiary for any period,
nor of any basis for any such assessment, adjustment or
contingency.
(q) Certain Fees. The Company has
not employed any broker or finder or incurred any liability for any
brokerage or investment banking fees, commissions, finders’
structuring fees, financial advisory fees or other similar fees in
connection with the Transaction Documents, other than pursuant to
an Engagement Agreement, dated as of May 1, 2020, by and between
the Company and Alexander Capital L.P (the “Placement
Agent”).
(r) Disclosure. To the
Company’s knowledge, neither the representations and
warranties contained in this Section 3 or the schedules hereto nor
any other documents, certificates or instruments furnished to the
Investors by or on behalf of the Company or any Subsidiary in
connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made herein
or therein, in the light of the circumstances under which they were
made herein or therein, not misleading.
(s) Intellectual Property. The
Company and the Subsidiaries own or possess the requisite licenses
or rights to use all patents, patent applications, patent rights,
inventions, know-how, trade secrets, trademarks, trademark
applications, service marks, service names, trade names and
copyrights (“Intellectual Property”)
necessary to enable them to conduct their business as now operated
(and, as presently contemplated to be operated in the future);
there is no claim or action by any person pertaining to, or
proceeding pending, or to the Company’s knowledge threatened,
which challenges the right of the Company or of a Subsidiary with
respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and, as presently
contemplated to be operated in the future); to the best of the
Company’s knowledge, the Company’s or the
Subsidiaries’ current and intended products, services and
processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts
or circumstances which might give rise to any of the foregoing. The
Company and the Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of their
Intellectual Property.
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(t) Environmental Compliance. To
the best of the Company’s knowledge, the Company and the
Subsidiaries have obtained all material approvals, authorization,
certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities, or from any
other person, that are required under any Environmental Laws.
“Environmental
Laws” shall mean all applicable laws relating to the
protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting,
controlling, investigating or remediating emissions, discharges,
releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials
or wastes, whether solid, liquid or gaseous in nature, into the
air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, material
or wastes, whether solid, liquid or gaseous in nature. To the
Company’s knowledge, the Company has all necessary
governmental approvals required under all Environmental Laws as
necessary for the Company’s business or the business of any
of its subsidiaries. Except for such instances as would not
individually or in the aggregate have a Material Adverse Effect and
to the Company’s knowledge, there are no past or present
events, conditions, circumstances, incidents, actions or omissions
relating to or in any way affecting the Company or the Subsidiaries
that violate or may violate any Environmental Law after the
applicable Closing Date or that may give rise to any environmental
liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (i) under
any Environmental Law, or (ii) based on or related to the
manufacture, processing, distribution, use, treatment, storage
(including without limitation underground storage tanks), disposal,
transport or handling, or the emission, discharge, release or
threatened release of any hazardous substance.
(u) Books and Records; Internal Accounting
Controls. The records and documents of the Company and the
Subsidiaries accurately reflect in all material respects the
information relating to the business of the Company and the
Subsidiaries, the location of their assets, and the nature of all
transactions giving rise to the obligations or accounts receivable
of the Company or any Subsidiary. The Company and each of the
Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company’s board of
directors, 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 generally accepted accounting principles 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 actions are taken with respect to any
differences.
(v) Securities Act of
1933.
i. Based in material
part upon the representations herein of the Investors, the Company
has complied and will comply with all applicable federal and state
securities laws in connection with the offer, issuance and sale of
the Securities hereunder. Neither the Company nor anyone acting on
its behalf, directly or indirectly, has or will sell, offer to sell
or solicit offers to buy any of the Securities or similar
securities to, or solicit offers with respect thereto from, or
enter into any negotiations relating thereto with, any person, or
has taken or will take any action so as to bring the issuance and
sale of any of the Securities under the registration provisions of
the Securities Act and applicable state securities laws. Neither
the Company nor any of its affiliates, nor any person acting on its
or their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the
Securities Act) in connection with the offer or sale of any of the
Securities.
ii. 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”) 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.
-7-
(w) Employees. Neither the Company
nor any Subsidiary has any collective bargaining arrangements or
agreements covering any of its employees. Neither the Company nor
any Subsidiary has any employment contract, agreement regarding
proprietary information, non-competition agreement,
non-solicitation agreement, confidentiality agreement, or any other
similar contract or restrictive covenant, relating to the right of
any officer, employee or consultant to be employed or engaged by
the Company or such Subsidiary required to be disclosed in the
Commission Documents that is not so disclosed. No officer,
consultant or key employee of the Company or any Subsidiary whose
termination, either individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect, has terminated
or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or
any Subsidiary.
(x) Transactions with Affiliates.
Except for arm’s length transactions pursuant to which the
Company or any of the Subsidiaries makes payments in the ordinary
course of business upon terms no less favorable than the Company or
any of the Subsidiaries could obtain from third parties and other
than the grant of stock options described in the Commission
Documents, none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company or
any of the Subsidiaries (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, or
otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer,
director, trustee or partner.
(y) No Integrated Offering. Except
as set forth on Schedule 3(y) hereto, 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 in any security
or solicited any offers to buy any security under circumstances
that would require registration under the Securities Act of the
issuance of the Securities to the Investors. The issuance of the
Securities to the Investors will not be integrated with any other
issuance of the Company’s securities (past, current or
future) for purposes of any stockholder approval provisions
applicable to the Company or its securities.
(z) Insurance. The Company and each
of the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in
the businesses in which the Company and the Subsidiaries are
engaged. Neither the Company nor any such 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 at a cost that would not have a Material Adverse
Effect.
(aa) Foreign
Corrupt Practices. Neither the Company, nor any of the
Subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any Subsidiary has, in
the course of his actions for, or on behalf of, the Company, used
any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or made any
bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.
(bb) Solvency.
The Company (after giving effect to the transactions contemplated
by this Agreement) is solvent (i.e., its assets have a fair market
value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and
matured) and currently the Company has no information that would
lead it to reasonably conclude that the Company would not, after
giving effect to the transaction contemplated by this Agreement,
have the ability to, nor does it intend to take any action that
would impair its ability to, pay its debts from time to time
incurred in connection therewith as such debts mature. The
Company’s financial statements for its most recent fiscal
year end and interim financial statements have been prepared
assuming the Company will continue as a going concern, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business.
(cc) No
Investment Company. The Company is not, and upon the
issuance and sale of the Securities as contemplated by this
Agreement will not be an “investment company” required
to be registered under the Investment Company Act of 1940 (an
“Investment
Company”). The Company is not controlled by an
Investment Company.
-8-
(dd) No
Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company or any of
its Subsidiaries and an unconsolidated or other off balance sheet
entity that is required to be disclosed by the Company in its
Commission Documents and is not so disclosed or that otherwise
could be reasonably likely to have a Material Adverse
Effect.
4. Representations and Warranties by
Investor. Each Investor represents and warrants
severally and not jointly, to the Company as of the time of
issuance of the Series B Shares, Series B Warrants and, if
applicable, Exchange Warrants as follows:
(a) Organization and Standing. If
Investor is an entity, Investor is duly organized, validly existing
and in good standing under the laws of its jurisdiction of
organization and has all requisite corporate or other entity power
and authority to carry on its business as now conducted and
proposed to be conducted. If Investor is an entity, the address of
its principal place of business is as set forth on the signature
page hereto, and if Investor is an individual, the address of its
principal residence is as set forth on the signature page
hereto.
(b) Power. If Investor is an
entity, Investor has all requisite legal and corporate or other
entity power and authority to enter into, execute and deliver each
of the Transaction Documents to which it is a party. Each
Transaction Document to which Investor is a party has been duly and
validly authorized, executed and delivered by Investor is the valid
and binding obligation of Investor, enforceable in accordance with
its terms, except as the same may be limited by bankruptcy,
insolvency, moratorium, and other laws of general application
affecting the enforcement of creditors’ rights.
(c) Authorization. If Investor is
an entity, all corporate or other entity and legal action on the
part of Investor, its officers, directors, managers, shareholders,
partners, or members, as applicable, necessary for the execution
and delivery of the Transaction Documents to which it is a party,
the purchase of the Series B Shares, the Series B Warrant and, if
applicable, the Exchange Warrant and the performance of
Investor’s obligations such Transaction Documents have been
taken.
(d) No Conflict; Required Filings and
Consents. Neither the execution and delivery of this
Agreement or the other Transaction Documents by Investor nor the
performance by Investor of its obligations hereunder will: (i) if
Investor is an entity, conflict with Investor’s certificate
of incorporation or bylaws, or other similar organizational
documents; (ii) violate any statute, law, ordinance, rule or
regulation, applicable to Investor or any of the properties or
assets of Investor; or (iii) violate, breach, be in conflict with
or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or permit the
termination of any provision of, or result in the termination of,
the acceleration of the maturity of, or the acceleration of the
performance of any obligation of Investor under, or result in the
creation or imposition of any lien upon any properties, assets or
business of Investor under, any material contract or any order,
judgment or decree to which Investor is a party or by which it or
any of its assets or properties is bound or encumbered except, in
the case of clauses (ii) and (iii), for such violations, breaches,
conflicts, defaults or other occurrences which, individually or in
the aggregate, would not have a material adverse effect on its
ability to perform its obligations under the Transaction
Documents.
(e) Acquisition for Investment.
Investor is purchasing the Securities solely for its own account
for the purpose of investment and not with a view to or for sale in
connection with distribution. Investor does not have a present
intention to sell any of the Securities, nor a present arrangement
(whether or not legally binding) or intention to effect any
distribution of any of the Securities to or through any person or
entity; provided,
however, that by
making the representations herein, such Investor does not agree to
hold the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in
accordance with federal and state securities laws applicable to
such disposition. Investor acknowledges that it (i) has such
knowledge and experience in financial and business matters such
that Investor is capable of evaluating the merits and risks of
Investor’s investment in the Company, (ii) is able to bear
the financial risks associated with an investment in the
Securities, (iii) has been given full access to such records of the
Company and to the officers of the Company as it has deemed
necessary or appropriate to conduct its due diligence
investigation, and (iv) has had the opportunity to ask
representatives of the Company certain questions and request
certain additional information regarding the finances, operations,
business and prospects of the Company and has had any and all such
questions and requests answered to its satisfaction.
-9-
(f) Rule 144. Investor understands
that the Securities are “restricted securities” as
defined in Rule 144, and must be held indefinitely unless such
Securities are registered under the Securities Act or an exemption
from registration is available. Investor acknowledges that such
person is familiar with Rule 144 of the rules and regulations of
the Commission, as amended, promulgated pursuant to the Securities
Act (“Rule
144”), and that such Investor has been advised that
Rule 144 permits resales only under certain circumstances. Investor
understands that to the extent that Rule 144 is not available, such
Investor will be unable to sell any Securities without either
registration under the Securities Act or the existence of another
exemption from such registration requirement.
(g) No General Solicitation. The
Investor acknowledges that the Securities were not offered to such
Investor by means of any form of general or public solicitation or
general advertising, or publicly disseminated advertisements or
sales literature, including (i) any advertisement, article, notice
or other communication published in any newspaper, magazine, or
similar media, or broadcast over television, radio or the internet,
or (ii) any seminar or meeting to which such Investor was invited
by any of the foregoing means of communications. Investor, in
making the decision to purchase the Securities, has relied upon
independent investigation made by it and has not relied on any
information or representations made by third parties.
(h) Accredited Investor. Investor
is an “accredited investor” as such term is defined in
Rule 501 of Regulation D under the Securities Act and as set forth
in Exhibit G attached hereto
and made a part hereof, and such Investor has such experience in
business and financial matters that it is capable of evaluating the
merits and risks of an investment in the Securities. Such Investor
is not required to be registered as a broker-dealer under Section
15 of the Exchange Act and such Investor is not a broker-dealer.
Investor acknowledges that an investment in the Securities is
speculative and involves a high degree of risk.
(i) Legends. It is understood that,
except as provided below, certificates evidencing the Securities
may bear the following or any similar legend:
i. “THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND, ACCORDINGLY, MAY NOT BE
TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR
SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH
SECURITIES MAY BE SOLD PURSUANT TO RULE 144, OR (III) THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL TO THE TRANSFEROR, THE SUBSTANCE
OF WHICH OPINION SHALL BE REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER
THE SECURITIES ACT OF 1933.”
ii. If required
by the authorities of any state in connection with the issuance of
sale of the Securities, the legend required by such state
authority.
(j) Prohibited Transactions. With
respect to each Investor, since the earlier of (i) such time as
such Investor was first contacted by the Company or any other
person acting on behalf of the Company regarding the transactions
contemplated hereby or (ii) thirty (30) days prior to the date
hereof, neither such Investor nor any affiliate of such Investor
which (x) had knowledge of the transactions contemplated hereby,
(y) has or shares discretion relating to such Investor’s
investments or trading or information concerning such
Investor’s investments, including in respect of the
Securities, or (z) is subject to such Investor’s review or
input concerning such affiliate’s investments or trading
(collectively, “Trading Affiliates”) has,
directly or indirectly, effected or agreed to effect any short
sale, whether or not against the box, established any “put
equivalent position” (as defined in Rule 16a-1(h) under the
▇▇▇▇ ▇▇▇) with respect to the Common Stock, granted any other right
(including, without limitation, any put or call option) with
respect to the Common Stock or with respect to any security that
includes, relates to or derived any significant part of its value
from the Common Stock or otherwise sought to hedge its position in
the Securities (each, a “Prohibited Transaction”).
Prior to the earliest to occur of (i) the termination of this
Agreement, (ii) the Effective Date (as defined in the Registration
Rights Agreement) or (iii) the Effectiveness Deadline (as defined
in the Registration Rights Agreement), each Investor shall not, and
shall cause its Trading Affiliates not to, engage, directly or
indirectly, in a Prohibited Transaction (other than any short sale,
whether or not against the box). Such Investor shall not, and shall
cause its Trading Affiliates not to, engage, directly or
indirectly, in any short sale, whether or not against the box,
prior to the earliest to occur of (i) the termination of this
Agreement or (ii) the applicable Closing Date. Each Investor
acknowledges that the representations, warranties and covenants
contained in this Section 4(j) are being made for the benefit of
the Investors as well as the Company and that each of the other
Investors shall have an independent right to assert any claims
against such Investor arising out of any breach or violation of the
provisions of this Section 4(j).
-10-
5. Conditions Precedent to the Obligation
of the Company to Close and to Sell the Securities. The
obligation hereunder of the Company to close and issue and sell the
Securities to the Investors at each Closing is subject to the
satisfaction or waiver, at or before the applicable Closing of the
conditions set forth below. These conditions are for the
Company’s sole benefit and may be waived by the Company at
any time in its sole discretion.
(a) Accuracy of the Investors’
Representations and Warranties. The representations and
warranties of each Investor, and the representations and warranties
of each Exchange Investor included in the Exchange Addendum, shall
be true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or
Material Adverse Effect, which shall be true and correct in all
respects) as of the date when made and as of the applicable Closing
Date as though made at that time, except for representations and
warranties that are expressly made as of a particular date, which
shall be true and correct in all material respects (except for
those representations and warranties that are qualified by
materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of such date.
(b) Performance by the Investors.
Each Investor shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Investors at or prior to the applicable Closing
Date.
(c) No Injunction. No statute,
rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated
by this Agreement.
(d) Delivery of Purchase Price. The
portion of the Purchase Price for the Securities attributable to
Investor shall have been delivered to the Company on the applicable
Closing Date.
(e) Delivery of Transaction
Documents. The Transaction Documents shall have been duly
executed and delivered by the Investors and, with respect to the
Escrow Agreement, the escrow agent, to the Company.
(f) Delivery of Promissory Notes.
Solely with respect to Exchange Investors, the original Promissory
Notes being exchanged for the Securities attributable to such
Exchange Investor, or an indemnification undertaking with respect
to such Promissory Note in the event of the loss, theft or
destruction of such Promissory Note, shall have been delivered to
the Company on the applicable Closing Date.
6. Conditions Precedent to the Obligation
of the Investors to Close and to Purchase the Securities.
The obligation hereunder of the Investors to purchase the
Securities and consummate the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or before
each Closing, of each of the conditions set forth below. These
conditions are for the Investors’ sole benefit and may be
waived by the Investors at any time in their sole
discretion.
(a) Accuracy of the Company’s
Representations and Warranties. Each of the representations
and warranties of the Company in this Agreement and the other
Transaction Documents shall be true and correct in all material
respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be
true and correct in all respects) as of the date when made and as
of the applicable Closing Date as though made at that time, except
for representations and warranties that are expressly made as of a
particular date, which shall be true and correct in all material
respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be
true and correct in all respects) as of such date.
(b) Performance by the Company. The
Company shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the applicable Closing
Date.
(c) No Injunction. No statute,
rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated
by this Agreement.
-11-
(d) No Proceedings or Litigation.
No action, suit or proceeding before any arbitrator or any
governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been
threatened, against the Company or any Subsidiary, or any of the
officers, directors or affiliates of the Company or any Subsidiary
seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection
with such transactions.
(e) Series B Shares. At or prior to
the Initial Closing, the Company shall have filed the Certificate
of Designation with the Secretary of State of
Delaware.
(f) Conversion Shares, Warrant Shares and
Exchange Warrant Shares. The Company shall have filed with
Nasdaq a Notification Form: Listing of Additional Shares for the
listing of the Conversion Shares, the Warrant Shares and the
Exchange Warrant Shares on the Nasdaq Capital Market.
(g) Secretary’s Certificate.
The Company shall have delivered to the Investors a
secretary’s certificate, dated as of the applicable Closing
Date, as to (i) the resolutions adopted by the Board of Directors
approving the transactions contemplated hereby, (ii) the
Certificate, (iii) the Certificate of Designation, (iv) the Bylaws,
each as in effect at the applicable Closing Date, and (v) the
authority and incumbency of the officers of the Company executing
the Transaction Documents and any other documents required to be
executed or delivered in connection therewith.
(h) Officer’s Certificate. On
the applicable Closing Date, the Company shall have delivered to
the Investors a certificate signed by an executive officer on
behalf of the Company, dated as of the applicable Closing Date,
confirming the accuracy of the Company’s representations,
warranties and covenants as of the applicable Closing Date and
confirming the compliance by the Company with the conditions
precedent set forth in paragraphs (b)-(d) of this Section 6 as of
the applicable Closing Date (provided that, with respect to the
matters in paragraphs (d) of this Section 6, such confirmation
shall be based on the knowledge of the executive officer after due
inquiry).
(i) Material Adverse Effect. No
Material Adverse Effect shall have occurred at or before the
applicable Closing Date.
(j) Registration Rights Agreement.
At the applicable Closing, the Company shall have executed and
delivered the Registration Rights Agreement.
7. Termination of Obligations to Effect
Closing; Effects.
(a) The obligations of
the Company, on the one hand, and the Investors, on the other hand,
to effect the applicable Closing shall terminate as
follows:
i. Upon the mutual
written consent of the Company and the Investors;
ii. By the Company if
any of the conditions set forth in Section 5 shall have become
incapable of fulfillment, and shall not have been waived by the
Company;
iii. By
an Investor (with respect to itself only) if any of the conditions
set forth in Section 6 shall have become incapable of fulfillment,
and shall not have been waived by the Investor; or
iv. By either the
Company or any Investor (with respect to itself only) if the
applicable Closing has not occurred on or prior to July 31,
2020;
provided,
however, that, except in the case of clause (iv) above, the party
seeking to terminate its obligation to effect the applicable
Closing shall not then be in breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or
the other Transaction Documents if such breach has resulted in the
circumstances giving rise to such party’s seeking to
terminate its obligation to effect the applicable
Closing.
-12-
(b) In the event of
termination by the Company or any Investor of its obligations to
effect the applicable Closing pursuant to this Section 7, written
notice thereof shall forthwith be given to the other Investors by
the Company and the other Investors shall have the right to
terminate their obligations to effect the applicable Closing upon
written notice to the Company and the other Investors. Nothing in
this Section 7 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions
of this Agreement or the other Transaction Documents or to impair
the right of any party to compel specific performance by any other
party of its obligations under this Agreement or the other
Transaction Documents.
8. Covenants. The Company
covenants with each Investor as follows, which covenants are for
the benefit of each Investor and their respective permitted
assignees.
(a) Securities Compliance. The
Company shall notify the Commission in accordance with its rules
and regulations, of the transactions contemplated by any of the
Transaction Documents and shall take all other necessary action and
proceedings as may be required and permitted by applicable law,
rule and regulation, for the legal and valid issuance of the
Securities to the Investors, or their respective subsequent
holders. In furtherance and in limitation of the foregoing, the
Company agrees to file a Form D with respect to the Securities as
required under Regulation D. The Company shall, on or before the
applicable Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for
sale to the Investors at the applicable closing pursuant to this
Agreement under applicable securities or “blue sky”
laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such
action so taken to the Investors on or prior to the applicable
Closing Date.
(b) Compliance with Laws. The
Company shall comply, and cause each Subsidiary to comply, with all
applicable laws, rules, regulations and orders, noncompliance with
which would be reasonably likely to have a Material Adverse
Effect.
(c) Keeping of Records and Books of
Account. The Company shall keep and cause each Subsidiary to
keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Company and its
Subsidiaries, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization,
taxes, bad debts and other purposes in connection with its business
shall be made.
(d) Other Agreements. The Company
shall not enter into any agreement in which the terms of such
agreement would restrict or impair the right or ability to perform
of the Company or any Subsidiary under any Transaction
Document.
(e) Reporting Status;
Listing.
i. So long as any
Investor beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the Commission
pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination.
ii. So long as any
Investor beneficially owns any of the Securities, the Company shall
maintain the listing and trading of its Common Stock on Nasdaq or
any equivalent replacement exchange and will comply in all respects
with the Company’s reporting, filing and other obligations
under the bylaws or rules of the Financial Industry Regulatory
Authority and such exchanges, as applicable.
-13-
(f) Disclosure of Transaction. The
Company shall file with the Commission a Current Report on Form 8-K
(the “Form
8-K”) describing the material terms of the
transactions contemplated hereby (and attaching as exhibits thereto
this Agreement, the Certificate of Designation, and any press
release) as soon as practicable following the Closing Date of the
Initial Closing but in no event more than four (4) Trading Days
following the Closing Date of the Initial Closing.
“Trading
Day” means any day during which the principal exchange
on which the Common Stock is traded shall be open for
trading.
(g) No Integration. Except as set
forth on Schedule 3(y) hereto, the Company has not and shall not
make any offers or sales of any security (other than the
Securities) under circumstances that would require registration of
the Securities being offered or sold hereunder under the Securities
Act or cause the offering of the Securities to be integrated with
any other offering of securities by the Company for the purpose of
any stockholder approval provision applicable to the Company or its
securities.
(h) Use of Proceeds. The Company
shall use the net proceeds from the sale of the Securities
hereunder for corporate and general working capital purposes,
including the Company’s clinical trials and the repayment of
Promissory Notes held by prior Investors that do not participate in
this Exchange.
(i) Proxy Statement; Stockholders
Meeting.
i. Promptly following
the Final Closing, the Company shall take all action necessary to
call a meeting of its stockholders (the “Stockholders Meeting”),
which shall occur not later than 60 days following the Final
Closing (the “Stockholders Meeting
Deadline”), for the purpose of seeking approval (the
“Stockholder
Approval”) of the Company’s stockholders, among
other things, for (w) the issuance of all Conversion Shares upon
full conversion of the Series B Preferred Stock (as defined in the
Certificate of Designation), (x) the issuance of all shares of
Common Stock issuable upon full exercise of the Series B Warrants
and the Exchange Warrants, (y) the Subsequent Financing (as defined
in the Certificate of Designation) exchange rights pursuant to
Section 8 of the Certificate of Designation and (z) the
participation of certain directors and officers of the Company as
Investors, as applicable, in the Exchange and offering of the
Securities for Cash Consideration hereunder, each in accordance
with applicable law, the Company’s Amended and Restated
Certificate of Incorporation, as amended, and Bylaws, and the
applicable requirements of the Trading Market (as defined in the
Certificate of Designation) (the “Proposals”). In
connection therewith, the Company will promptly prepare and file
with the SEC proxy materials (including a proxy statement and form
of proxy) for use at the Stockholders Meeting and, after receiving
and promptly responding to any comments of the SEC thereon, shall
promptly mail such proxy materials to the stockholders of the
Company. Each Investor shall promptly furnish in writing to the
Company such information relating to such Investor and its
investment in the Company as the Company may reasonably request for
inclusion in the Proxy Statement. The Company will comply with
Section 14(a) of the 1934 Act and the rules promulgated thereunder
in relation to any proxy statement (as amended or supplemented, the
“Proxy
Statement”) and any form of proxy to be sent to the
stockholders of the Company in connection with the Stockholders
Meeting, and the Proxy Statement shall not, on the date that the
Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to stockholders or at the time of the Stockholders
Meeting, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements
made therein not false or misleading, or omit to state any material
fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies or the
Stockholders Meeting which has become false or misleading. If the
Company should discover at any time prior to the Stockholders
Meeting, any event relating to the Company or any of its
Subsidiaries or any of their respective Affiliates, officers or
directors that is required to be set forth in a supplement or
amendment to the Proxy Statement, in addition to the Company's
obligations under the 1934 Act, the Company will promptly inform
the Investors thereof.
-14-
ii. Subject to their
fiduciary obligations under applicable law (as determined in good
faith by the Company’s Board of Directors after consultation
with the Company’s outside counsel), the Company's Board of
Directors shall recommend to the Company's stockholders that the
stockholders vote in favor of the Proposals (the “Company
Board Recommendation”) and take all commercially reasonable
action (including, without limitation, the hiring of a proxy
solicitation firm of nationally recognized standing) to solicit the
approval of the stockholders for the Proposals unless the Board of
Directors shall have modified, amended or withdrawn the Company
Board Recommendation pursuant to the provisions of the immediately
succeeding sentence. The Company covenants that the Board of
Directors of the Company shall not modify, amend or withdraw the
Company Board Recommendation unless the Board of Directors (after
consultation with the Company’s outside counsel) shall
determine in the good faith exercise of its business judgment that
maintaining the Company Board Recommendation would violate its
fiduciary duty to the Company’s stockholders. Whether or not
the Company's Board of Directors modifies, amends or withdraws the
Company Board Recommendation pursuant to the immediately preceding
sentence, the Company shall in accordance with applicable law and
the provisions of its Certificate and Bylaws, (i) take all action
necessary to convene the Stockholders Meeting as promptly as
practicable, but no later than the Stockholders Meeting Deadline,
to consider and vote upon the approval of the Proposals and (ii)
submit the Proposals at the Stockholders Meeting to the
stockholders of the Company for their approval.
iii. If
the Stockholder Approval has not been received on or prior to the
ninetieth (90th) day following the Final Closing, the Series B
Shares will be redeemed automatically as described in Section 9 of
the Certificate of Designation.
iv. Each Investor
agrees to vote all shares of capital stock of the Company that it
beneficially owns in favor of the approval of the Proposals at the
Stockholders Meeting, and at any adjournment or postponement
thereof.
9. Indemnification.
(a) General Indemnity. The Company
agrees to indemnify and hold harmless the Investors (and their
respective directors, officers, affiliates, agents, successors and
assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys’ fees, charges and
disbursements) incurred by the Investors as a result of any
inaccuracy in or breach of the representations, warranties or
covenants made by the Company herein. Each Investor severally but
not jointly agrees to indemnify and hold harmless the Company and
its directors, officers, affiliates, agents, successors and assigns
from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation,
reasonable attorneys’ fees, charges and disbursements)
incurred by the Company as result of any inaccuracy in or breach of
the representations, warranties or covenants made by such Investor
herein. The maximum aggregate liability of each Investor pursuant
to its indemnification obligations under this Section 9 shall not
exceed the portion of the Purchase Price paid by such Investor
hereunder.
-15-
(b) Indemnification Procedure. Any
party entitled to indemnification under this Section 9 (an
“indemnified party”) will give written notice to the
indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of
any party entitled to indemnification hereunder to give notice as
provided herein shall not relieve the indemnifying party of its
obligations under this Section 9 except to the extent that the
indemnifying party is actually prejudiced by such failure to give
notice. In case any action, proceeding or claim is brought against
an indemnified party in respect of which indemnification is sought
hereunder, the indemnifying party shall be entitled to participate
in and, unless in the reasonable judgment of the indemnified party
a conflict of interest between it and the indemnifying party may
exist with respect of such action, proceeding or claim, to assume
the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises
an indemnified party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such
person of its election to defend, settle or compromise, at its sole
cost and expense, any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise
compromise or pay such action or claim. In any event, unless and
until the indemnifying party elects in writing to assume and does
so assume the defense of any such claim, proceeding or action, the
indemnified party’s costs and expenses arising out of the
defense, settlement or compromise of any such action, claim or
proceeding shall be losses subject to indemnification hereunder.
The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the
indemnified party, which relates to such action or claim. The
indemnifying party shall keep the indemnified party fully apprised
at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects
to defend any such action or claim, then the indemnified party
shall be entitled to participate in such defense with counsel of
its choice at its sole cost and expense. The indemnifying party
shall not be liable for any settlement of any action, claim or
proceeding affected without its prior written consent.
Notwithstanding anything in this Section 9 to the contrary, the
indemnifying party shall not, without the indemnified party’s
prior written consent, settle or compromise any claim or consent to
entry of any judgment in respect thereof which imposes any future
obligation on the indemnified party or which does not include, as
an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability
in respect of such claim. The indemnification required by this
Section 9 shall be made by periodic payments of the amount thereof
during the course of investigation or defense, as and when bills
are received or expense, loss, damage or liability is incurred, so
long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent
jurisdiction that such party was not entitled to indemnification.
The indemnity agreements contained herein shall be in addition to
(a) any cause of action or similar rights of the indemnified party
against the indemnifying party or others, and (b) any liabilities
the indemnifying party may be subject to pursuant to the
law.
10. Miscellaneous
(a) Fees and Expenses. Each party
shall pay the fees and expenses of its advisors, 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.
(b) Confidentiality; Non-Public
Information. Investor acknowledges and agrees
that that the existence of this Agreement and the information
contained herein and in the other Transaction Documents is of a
confidential nature and shall not, without the prior written
consent of the Company, be disclosed by Investor to any person or
entity, other than Investor’s personal financial and legal
advisors for the sole purpose of evaluating an investment in the
Company, and that it shall not, without the prior written consent
of the Company, directly or indirectly, make any statements, public
announcements or release to trade publications or the press with
respect to the subject matter of this Agreement. Investor further
acknowledges and agrees that the information contained herein and
in the other documents relating to this transaction may be regarded
as material non-public information under United States federal
securities laws, and that United States federal securities laws
prohibit any person who has received material non-public
information relating to the Company from purchasing or selling
securities of the Company, or from communicating such information
to any person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell
securities of the Company. Accordingly, until such time as any such
non-public information has been adequately disseminated to the
public, Investor shall not purchase or sell any securities of the
Company, or communicate such information to any other
person.
-16-
(c) Governing Law. This Agreement
and all actions arising out of or in connection with this Agreement
shall be governed by and construed in accordance with the laws of
the State of New York, without regard to the conflicts of law
principles, which would result in the application of the
substantive law of another jurisdiction. This Agreement shall not
be interpreted or construed with any presumption against the party
causing this Agreement to be drafted.
(d) Consent to Jurisdiction; Venue.
The parties agree that venue for any dispute arising under this
Agreement will lie exclusively in the state or federal courts
located in New York, and the parties irrevocably waive any right to
raise forum non conveniens
or any other argument that New York is not the proper venue. The
parties irrevocably consent to personal jurisdiction in the state
and federal courts of the state of New York. The Company and each
Investor consent to process being served in any such suit, action
or proceeding by mailing a copy thereof 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 in this Section 10(d) shall
affect or limit any right to serve process in any other manner
permitted by law. The Company and the Investors hereby agree that
the prevailing party in any suit, action or proceeding arising out
of or relating to the Securities, this Agreement or the other
Transaction Documents, shall be entitled to reimbursement for
reasonable legal fees from the non-prevailing party. The parties
hereby waive all rights to a trial by jury.
(e) Entire Agreement. This
Agreement together with the exhibits attached hereto constitutes
the full and entire understanding and agreement between the parties
with regard to the subject matter hereof and thereof.
(f) Notices. All notices and other
communications required or permitted hereunder shall be in writing
and shall be hand delivered or sent via facsimile, overnight
courier service or mailed by certified or registered mail, postage
prepaid, return receipt requested, addressed or sent to the
addresses listed on the signature page hereto or at such other
addresses as the parties shall have furnished to each other in
writing. Notices sent via hand delivery shall be effective when
received, notices sent facsimile shall be effective upon written
confirmation of transmission (if also sent by another form of
notice permitted hereunder within 24 hours of sending the
facsimile), notices sent by overnight courier shall be effective
upon receipt, and notices mailed by certified or registered mail,
postage prepaid return receipt requested, shall be effective five
business days after deposit with the U.S. Postal
Service.
(g) Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns. After the applicable
Closing, the assignment by a party to this Agreement of any rights
hereunder shall not affect the obligations of such party under this
Agreement. The Investors may assign the Securities and its rights
under this Agreement and the other Transaction Documents and any
other rights hereto and thereto without the consent of the
Company.
(h) Amendments and Waivers. Any
term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively),
only with the written consent of the Company and the Investors
holding a majority of the Series B Shares then outstanding. Any
amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any Securities purchased under
this Agreement at the time outstanding, each future holder of all
such Securities, and the Company.
(i) Further Assurances. The parties
shall execute and deliver all such further instruments and
documents and take all such other actions as may reasonably be
required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein
contained.
(j) No Third Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns and is not
for the benefit of, nor may any provision hereof be enforced by,
any other person.
(k) Validity. If any provision of
this Agreement shall be judicially determined to be invalid,
illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or
impaired thereby.
(l) Counterparts. This Agreement
may be executed in any number of counterparts, each of which shall
be an original, but all of which together shall be deemed to
constitute one instrument.
[Remainder of Page Intentionally Left Blank]
-17-
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers
as of the date and year first written above.
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ADDRESS:
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▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
Biotechnology Incubator,
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
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By:
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
Chief
Executive Officer
|
[Signature Page to Convertible Preferred Stock and Warrant Purchase
Agreement]-
-18-
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers
as of the date and year first written above.
|
ADDRESS:
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INVESTOR:
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By:
Name:
Title:
|
|
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Aggregate
Cash Consideration::
$_________
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Aggregate
Exchange Consideration:
$_________
Number
of Series B Shares:
_________
Number
of Warrant Shares:
____________________
Number
of Exchange Warrant Shares:
____________________
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[Signature Page to Convertible Preferred Stock and Warrant Purchase
Agreement]-
-19-
EXHIBIT A
FORM OF CERTIFICATE OF DESIGNATION
-20-
EXHIBIT B
FORM OF EXCHANGE ADDENDUM
-21-
EXCHANGE ADDENDUM
This
EXCHANGE ADDENDUM (this “Addendum”) is made
effective as of July 16, 2020 (the “Execution Date”) by and
among AzurRx BioPharma, Inc., a Delaware corporation (the
“Company”) and certain
holders of the Company’s senior convertible promissory notes
whose signatures appear on the signature page attached hereto (each
a “Holder” and collectively
the “Holders”).
WHEREAS, the
Company and each Holder entered into a Note Purchase Agreement
dated between December 20, 2019 and January 9, 2020 (the
“Note Purchase
Agreement”), pursuant to which the Company issued and
sold to each Holder: (i) a Senior Convertible Promissory Note (each
a “Promissory
Note” and together, the “Promissory Notes”),
convertible into shares of the Company’s common stock, par
value $0.0001 per share (the “Common Stock”) at a
conversion price of $0.97 per share and (ii) a common stock
purchase warrant exercisable for shares of Common Stock, at $1.07
per share, equal to 50% of the total number of shares of Common
Stock issuable upon conversion of the related Promissory
Note;
WHEREAS, pursuant
to the Convertible Preferred Stock and Warrant Securities Purchase
Agreement (the “Agreement”) to which this
Addendum is a part, the Company is currently conducting a private
placement (the “Private Placement”) of
Securities (as defined in the Agreement);
WHEREAS, the
Company desires to issue to each applicable Holder, and each
applicable Holder desires to acquire from the Company, in exchange
for such Holder’s Promissory Note, that number of Securities
as is issuable pursuant to the Agreement for consideration in an
amount equal to the outstanding principal balance of such
Promissory Note, together with all accrued and unpaid interest
thereon through the applicable Closing Date (as defined in the
Agreement), upon the terms and conditions set forth herein and
therein (the “Exchange”), and pursuant
to such Exchange each applicable Holder shall be deemed an Exchange
Investor (as such term is defined in the Agreement) under the
Agreement.
NOW,
THEREFORE, in consideration of the mutual covenants contained in
this Addendum and the Agreement, and for other good and valuable
consideration the receipt and adequacy of which are hereby
acknowledged, the Company and the Holder agree as
follows:
1. Defined Terms. Capitalized
terms used but not otherwise defined herein shall have the
respective meanings ascribed thereto in the Agreement.
2. Exchange.
(a) Exchange of Promissory Note.
Subject to the terms and conditions set forth in this Addendum and
the Agreement, each applicable Holder agrees that such Holder shall
exchange such Holder’s Promissory Note for the issuance of
such number of Securities as is issuable pursuant to the Agreement
for consideration in an amount equal to the outstanding principal
balance of such Holder’s Promissory Note, together with all
accrued and unpaid interest thereon through the applicable Closing
Date.
(b) Cancellation of Promissory
Note. Each applicable Holder acknowledges and agrees that,
effective as of the applicable Closing Date, the Promissory Note
shall be deemed automatically canceled in full and of no further
force or effect and shall thereafter represent only the right to
receive the Securities.
3. Holder Representations and
Warranties. The Holder hereby represents and warrants to the
Company as follows on the Execution Date and the applicable Closing
Date:
(a) Ownership of the Promissory
Note. The Holder is the sole beneficial owner of the
Promissory Note in the aggregate principal amount set forth
opposite its name on the signature page hereto.
(b) Liens. The Promissory Note is
held by the Holder free and clear of any and all liens, claims,
pledges, hypothecations, charges, mortgages, security interests or
encumbrances of any kind.
(c) Other Agreements. Other than
this Addendum and the Agreement, the Holder is not party to or
bound by any contract, option or other arrangement or understanding
with respect to the purchase, sale, delivery, transfer, gift,
pledge, hypothecation, encumbrance, assignment or other disposition
or acquisition of (including by operation of law) the Promissory
Note (or any rights or interest of any nature whatsoever in or with
respect to the Promissory Note), or as to voting, agreeing or
consenting (or abstaining therefrom) with respect to any amendment
to or waiver of any terms of, or taking any action whatsoever with
respect to, the Promissory Note.
[signature
page follows]
-22-
IN
WITNESS WHEREOF, the Holder has caused this Addendum to be duly
executed and delivered by their proper and duly authorized officers
as of the date and year first written above.
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ADDRESS:
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INVESTOR:
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By:
Name:
Title:
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Aggregate
Principal Amount of Promissory Note:
$______________
|
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|
Accrued
and unpaid interest on Promissory Note as of the date
hereof:
$______________
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[Signature
Page to Exchange Addendum]
-23-
EXHIBIT C
FORM OF SERIES B WARRANT
-24-
EXHIBIT D
FORM OF EXCHANGE WARRANT
-25-
EXHIBIT E
FORM OF REGISTRATION RIGHTS AGREEMENT
-26-
EXHIBIT F
FORM OF ESCROW AGREEMENT
-27-
EXHIBIT G
ACCREDITED INVESTOR PAGE FOR PURCHASERS
-28-