EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT
(this
“
Agreement
”) is
dated as of February 5, 2019, by and between Aytu BioScience, Inc.,
a Delaware corporation (the “
Company
”), and Armistice Capital
Master Fund Ltd., a Cayman Islands exempted company (the
“
Holder
”).
WHEREAS:
A. The
Holder is the holder of a Promissory Note, dated November 29, 2018,
issued by the Company in the principal amount of $5,000,000 (the
“
Note
”);
and
B. The
Company and the Holder desire to enter into this Agreement,
pursuant to which, among other things, the Holder shall agree to
exchange the Note for: (1) Common Stock of the Company, (2) Series
E Convertible Preferred Stock of the Company, and (3) a Common
Stock Purchase Warrant (the “
Exchange Securities
”), and the
Company desires to issue the Exchange Securities in exchange for
the cancellation of the Note and the satisfaction of all principal
and interest owed thereunder, all on the terms and conditions set
forth in this Agreement.
NOW,
THEREFORE, in consideration of the foregoing premises and the
mutual covenants hereinafter contained, the parties hereto agree as
follows:
1.
EXCHANGE.
1.1
Exchange
. Subject
to and upon the terms and conditions set forth in this Agreement,
Holder agrees to surrender to the Company the Note and, in exchange
therefore, the Company shall issue to the Holder the following
Exchange Securities (collectively, the “
Exchange
”), which Exchange will
also be deemed to satisfy all principal and interesting owing under
the Note:
1.1.1
Common
Stock
. The Company shall issue to the Holder 3,120,064
shares of Common Stock of the Company (the “
Common Shares
”), which is the
amount that, post-exchange, would result in the Holder owning
approximately 33.3% of the outstanding Common Stock of the
Company.
1.1.2
Series
E Convertible Preferred Stock
. The Company shall issue to
the Holder 2,751,148 shares of Series E Convertible Preferred Stock
of the Company (the “
Preferred Shares
”). The Preferred
Shares shall be subject to the Certificate of Designation of
Preferences, Rights and Limitations of Series E Convertible
Preferred Stock attached hereto as Exhibit A.
1.1.3
Warrants
.
The Company shall issue to the Holder a Common Stock Purchase
Warrant, which shall be exercisable for 4,403,409 Common Shares.
The form of Common Stock Purchase Warrant is attached hereto as
Exhibit B.
1.2
Closing
. Upon
satisfaction of the conditions set forth in Sections 4, 5 and 6
herein, the Company will issue and deliver (or cause to be issued
and delivered) the Exchange Securities to the Holder, or in the
name of a custodian or nominee of the Holder, or as otherwise
requested by the Holder in writing, and the Holder will surrender
to the Company the Note.
2.
COMPANY REPRESENTATIONS AND WARRANTIES.
As a
material inducement to the Holder to enter into this Agreement, the
Company represents, warrants and covenants with and to the Holder
as follows:
2.1
Authorization and Binding
Obligation
. The Company has the requisite power and
authority to enter into and perform its obligations under this
Agreement. This Agreement has been duly executed and delivered by
the Company, and constitutes the legal, valid and binding
obligations of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or
state securities laws.
2.2
No Conflict
. The
execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby and thereby will not (i) result in a violation
of the articles of incorporation or other organizational documents
of the Company or any of its subsidiaries, any capital stock of the
Company or any of its subsidiaries or bylaws of the Company or any
of its subsidiaries, (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would
become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of
its subsidiaries is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment or decree (including
foreign, federal and state securities laws and applicable to the
Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries is bound or
affected except, in the case of clause (ii) or (iii) above, to the
extent such violations that could not reasonably be expected to
have a material adverse effect on the Company or its
subsidiaries.
3.
HOLDER’S REPRESENTATIONS AND WARRANTIES.
As a
material inducement to the Company to enter into this Agreement,
the Holder represents, warrants and covenants with and to the
Company as follows:
3.1
Ownership of the
Note
. The Holder is the legal and beneficial owner of the
Note. The Holder has continuously held the Note since its issuance
or purchase. The Holder, individually or through an affiliate, owns
the Note outright and free and clear of any options, contracts,
agreements, liens, security interests, or other
encumbrances.
3.2
No Public Sale or
Distribution
. The Holder is acquiring the Exchange
Securities in the ordinary course of business for its own account
and not with a view toward, or for resale in connection with, the
public sale or distribution thereof; provided, however, that by
making the representations herein, the Holder does not agree to
hold any of the Exchange Securities for any minimum or other
specific term and reserves the right to dispose of the Exchange
Securities at any time in accordance with an exemption from the
registration requirements of the Securities Act of 1933, as amended
(the “
Securities
Act
”) and applicable state securities laws. The Holder
does not presently have any agreement or understanding, directly or
indirectly, with any person to distribute or transfer any interest
or grant participation rights in the Note or the Exchange
Securities.
3.3
Accredited
Investor
. The Holder is an accredited investor as defined in
Rule 501(a) of Regulation D, as amended, under the Securities
Act.
3.4
Reliance on
Exemptions
. The Holder understands that the Exchange is
being made in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of,
and the Holder’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the
Holder set forth herein in order to determine the availability of
such exemptions and the eligibility of the Holder to complete the
Exchange and to acquire its pro-rata portion of the Exchange
Securities.
3.5
Disclosure of
Information
. The Holder has had the opportunity to review
the current business prospects, financial condition and operating
history of the Company as set forth in the filings that the Company
has made with the U.S. Securities and Exchange Commission (the
“
SEC
”),
including, but not limited to, the Company’s 10-K for the
year ended June 30, 2018, which was filed by the Company with the
SEC on September 6, 2018 and such other reports filed by the
Company with the SEC since July 1, 2018. The Holder has also had
the opportunity to ask questions and receive answers from the
Company regarding the terms and conditions pertaining to its
execution of this Agreement and the Holder has received all the
information the Holder considers necessary or appropriate for
deciding whether to enter into this Agreement.
3.6
Risk
. The Holder
understands that its investment in the Exchange Securities involves
a high degree of risk. The Holder is able to bear the risk of an
investment in the Exchange Securities including, without
limitation, the risk of total loss of its investment. The Holder
has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with
respect to the Exchange.
3.7
No Governmental
Review
. The Holder understands that no United States federal
or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement in connection
with the Exchange or the fairness or suitability of the investment
in the Exchange Securities nor have such authorities passed upon or
endorsed the merits of the Exchange Securities.
3.8
Authorization and Binding
Obligation
. The Holder has the requisite power and authority
to enter into and perform its obligations under this Agreement.
This Agreement has been duly executed and delivered by the Holder,
and constitutes the legal, valid and binding obligations of the
Holder, enforceable against the Holder in accordance with its
terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or
state securities laws.
3.9
Prior Investment
Experience
. The Holder acknowledges that it has prior
investment experience, including investment in securities of the
type being exchanged, including the Note or the Exchange
Securities, and has read all of the documents furnished or made
available by the Company to it and is able to evaluate the merits
and risks of such an investment on its behalf, and that it
recognizes the highly speculative nature of this
investment.
3.10
Tax Consequences
.
The Holder acknowledges that the Company has made no representation
regarding the potential or actual tax consequences for the Holder
which will result from entering into the Agreement and from
consummation of the Exchange. The Holder acknowledges that it bears
complete responsibility for obtaining adequate tax advice regarding
this Agreement and the Exchange.
3.11
No Registration; Resale
Restrictions
. The Holder acknowledges, understands and
agrees that the Exchange Securities are being issued hereunder
pursuant to an exemption from registration under the Securities Act
and as such will not be available for resale to the public until a
registration statement has been filed under the Securities Act or
the Holder has complied with a resale exemption under the
Securities Act.
4.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES. The obligation
of each of the Company and the Holder to consummate the
transactions contemplated by this Agreement is subject to the
satisfaction on the date of closing the transactions contemplated
by this Agreement (the “
Closing Date
”) of the following
condition:
4.1
Stockholder
Approval
. The stockholders of the Company shall have
approved of the issuance of the Exchange Securities.
5.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. The obligation
of the Company to consummate the transactions contemplated by this
Agreement is subject to the satisfaction on the Closing Date of
each of the following conditions, provided that these conditions
are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion by providing the Holder
with prior written notice thereof:
5.1
Delivery
. The
Holder shall have delivered to the Company the Note.
5.2
No Prohibition
. No
order of any court, arbitrator, or governmental or regulatory
authority shall be in effect which purports to enjoin or restrain
any of the transactions contemplated by this
Agreement.
5.3
Representations
.
The accuracy in all material respects when made and on the Closing
Date of the representations and warranties of the Holder contained
herein (unless as of a specific date therein).
6.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE HOLDER. The obligation
of the Holder to consummate the transactions contemplated by this
Agreement is subject to the satisfaction on the Closing Date of
each of the following conditions, provided that these conditions
are for the Holder’s sole benefit and may be waived by the
Holder at any time in its sole discretion by providing the Company
with prior written notice thereof:
6.1
No Prohibition
. No
order of any court, arbitrator, or governmental or regulatory
authority shall be in effect which purports to enjoin or restrain
any of the transactions contemplated by this
Agreement.
6.2
Representations
.
The accuracy in all material 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).
6.3
Obligations
. All
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed, subject to any required stockholder
approval.
7.
COVENANTS.
7.1
No Trading
. The
Holder agrees not to directly or indirectly purchase, sell, make
any short sale of, loan or grant any option for the purchase of, or
otherwise transfer or dispose of the Company’s Common Stock
(or other securities, warrants, or other forms of convertible
securities outstanding or other rights to acquire such securities)
until the Company has filed a report with the SEC announcing this
Agreement and the transactions contemplated herein.
7.2
UCC Termination
.
The Holder agrees, promptly following the Closing Date, to file a
UCC-3 Financing Statement Amendment in the appropriate
jurisdictions to evidence the termination of the Holder’s
security interest in any collateral pursuant to the
Note.
7.3
Registration
. The
Company agrees that, within 180 days of the Closing Date, it will
register the Common Shares, the shares of Common Stock into which
the Preferred Shares are convertible and the shares of Common Stock
into which the Common Stock Purchase Warrant is
exercisable.
8.
MISCELLANEOUS.
8.1
Legends
. The Holder
acknowledges that the certificate(s) representing the shares
issuable upon the exercise of the Warrant shall each conspicuously
set forth on the face or back thereof a legend in substantially 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 AS EVIDENCED BY
A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
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.
8.2
Governing Law;
Jurisdiction; Jury Trial
. All questions concerning the
construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of
New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any
other jurisdictions) that would cause the application of the laws
of any jurisdictions other than the State of New York. Each party
hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in New York, New York 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 brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. 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 to such party at the address for such
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 manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
8.3
Counterparts
. This
Agreement may be executed simultaneously in two or more
counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will
constitute one and the same Agreement. This Agreement, to the
extent delivered by means of a facsimile machine or electronic mail
(any such delivery, an “
Electronic Delivery
”), shall be
treated in all manner and respects as an original agreement or
instrument and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered
in person. At the request of any party hereto, each other party
hereto shall re-execute original forms hereof and deliver them in
person to all other parties. No party hereto shall raise the use of
Electronic Delivery to deliver a signature or the fact that any
signature or agreement or instrument was transmitted or
communicated through the use of Electronic Delivery as a defense to
the formation of a contract, and each such party forever waives any
such defense, except to the extent such defense related to lack of
authenticity.
8.4
Headings
. The
headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this
Agreement.
8.5
Severability
. If
any provision of this Agreement is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the
invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Agreement so long
as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal
obligations of the parties or the practical realization of the
benefits that would otherwise be conferred upon the parties. The
parties will endeavor in good faith negotiations to replace the
prohibited, invalid or unenforceable provision(s) with a valid
provision(s), the effect of which comes as close as possible to
that of the prohibited, invalid or unenforceable
provision(s).
8.6
Entire Agreement;
Amendments
. This Agreement supersedes all other prior oral
or written agreements between the Holder, the Company, their
affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement contains the entire
understanding of the parties with respect to the matters covered
herein and, except as specifically set forth herein, neither the
Company nor the Holder makes any representation, warranty, covenant
or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing
signed by the Company and the Holder, and any amendment to this
Agreement made in conformity with the provisions of this Section
shall be binding upon the Holder. No provision hereof may be waived
other than by an instrument in writing signed by the party against
whom enforcement is sought.
8.7
Fees and Expenses
.
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.
8.8
Notices
. To be
effective, any notice, consent, or communication required or
permitted to be given in connection with this Agreement must be in
writing and personally delivered or sent by messenger, fax,
overnight courier, electronic mail, or certified mail and when to
the Company, addressed to Aytu BioScience, Inc. 373 Inverness
Parkway, Suite 206, Englewood, Colorado 80112, email,
dgreen@aytubio.com, attention David Green, Chief Financial Officer,
or in the case of the Holder, to the Holder’s address
indicated on the Holder’s signature page, or to such other
address and/or email address and/or to the attention of such other
person as the recipient party has specified by written notice given
to each other party five (5) days prior to the effectiveness of
such change. All notices, consents, and communications are deemed
delivered and received by the receiving party (i) if personally
delivered or delivered by messenger, on the date of delivery or on
the date delivery was refused, (ii) if delivered by fax
transmission or electronic mail, upon receipt of confirmation of
the party transmitting such fax or electronic mail, or (iii) if
delivered by overnight courier or certified mail, on the date of
delivery as established by the return receipt, courier service
confirmation, or similar documentation (or the date on which the
courier or postal service, as the case may be, confirms that
acceptance of delivery was refused or undeliverable).
8.9
Successors and
Assigns
. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights
or obligations hereunder without the prior written consent of the
Holder. The Holder may not assign some or all of its rights
hereunder without the consent of the Company.
8.10
Survival of
Representations
. The representations and warranties of the
Company and the Holder contained in Sections 2 and 3, respectively,
will survive the closing of the transactions contemplated by this
Agreement.
8.11
Construction
. The
language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party. No
specific representation or warranty shall limit the generality or
applicability of a more general representation or
warranty.
[signature page follows]
IN WITNESS WHEREOF,
the Holder and the
Company have caused their respective signature pages to this
Agreement to be duly executed as of the date first written
above.
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COMPANY:
|
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AYTU BIOSCIENCE, INC.
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By:
|
/s/ Joshua R.
Disbrow
|
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Name:
|
Joshua
R. Disbrow
|
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Title:
|
Chief
Executive Officer
|
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HOLDER:
ARMISTICE CAPITAL MASTER FUND LTD.
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By:
|
/s/ Tohuan Steve
Chen
|
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Name:
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Tohuan Steve
Chen
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Title:
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Controller
of the Investment Manager
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Address for Notice to Holder, including email address:
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Address for Delivery of the Exchange Securities (if different than
the address for Notice to the Holder):
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Exhibit
A
Series
E Convertible Preferred Stock Certificate of
Designation
CERTIFICATE OF DESIGNATION
AYTU BIOSCIENCE, INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES E CONVERTIBLE PREFERRED STOCK
PURSUANT
TO SECTION 151 OF THE
DELAWARE
GENERAL CORPORATION LAW
The
undersigned, Joshua R. Disbrow and David A. Green, 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, 4,489,998 of which have been issued and are
outstanding.
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 up to 2,751,148 shares of the preferred stock which the
Corporation has the authority to issue, as follows:
NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issuance of a series of preferred stock for cash or
exchange of other securities, rights or property and does hereby
fix and determine the rights, preferences, restrictions and other
matters relating to such series of preferred stock as
follows:
TERMS OF PREFERRED STOCK
Section 1
.
Definitions
. For the purposes
hereof, the following terms shall have the following
meanings:
“
Affiliate
” means 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.
“
Exchange Act
” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“
Fundamental Transaction
”
shall have the meaning set forth in Section 7(d).
“
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.
“
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).
“
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, Ste D,
Morrisville, NC 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 in the
“Pink Sheets” published by OTC Markets, 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 Preferred Stock then outstanding and
reasonably acceptable to the Corporation, the fees and expenses of
which shall be paid by the Corporation.
Section 2
.
Designation, Amount and Par
Value
. The series of preferred stock shall be designated as
Series E Convertible Preferred Stock (the “
Preferred Stock
”) and the
number of shares so designated shall be up to 2,751,488 (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 $0.88, subject to increase set forth in
Section 3 below (the “
Stated Value
”). The
Preferred Stock will initially be issued in book-entry form. As
between the Corporation and a beneficial owner of Preferred Stock,
such beneficial owner of Preferred Stock shall have all of the
rights and remedies of a Holder hereunder.
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
. Each share of Preferred Stock shall be
convertible, at any time and from time to time from and after the
Original Issue Date at the option of the Holder thereof, into 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 $0.88,
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) the number of Conversion Shares being
acquired upon the conversion of the Preferred Stock, which
Conversion Shares, if registered with the Commission, if registered
with the Commission, shall be free of restrictive legends and
trading restrictions, and (B) a bank check in the amount of accrued
and unpaid dividends, if any. 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 Corporation’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of the Notice of Conversion.
Notwithstanding the foregoing, with respect to any Notice(s) of
Conversion delivered by 12:00 p.m. (New York City time) on the
Original Issue Date, the Corporation agrees to deliver the
Conversion Shares subject to such notice(s) by 4:00 p.m. (New York
City time) on the Original Issue Date, and the Original Issue Date
being deemed the “Share Delivery Date” with respect to
any such Notice(s) 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
is 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 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.
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) 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 40% of the number of
shares of 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 decrease the Beneficial Ownership
Limitation provisions of this Section 6(d) applicable to its
Preferred Stock. 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 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).
c)
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).
d)
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) 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(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 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.
e)
Calculations
. All
calculations under this Section 7 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 7, the number of shares of Common Stock deemed to
be issued and outstanding as of a given date shall be the sum of
the number of shares of Common Stock (excluding any treasury shares
of the Corporation) issued and outstanding.
f)
Notice to 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: Controller, facsimile number (720) 437-6527,
e-mail address ecreason@aytubio.com, 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 E
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.
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Name:
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Name:
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Title:
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Title:
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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
E 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:
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Date to
Effect Conversion:
_____________________________________________
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Number
of shares of Preferred Stock owned prior to Conversion:
_______________
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Number
of shares of Preferred Stock to be Converted:
________________________
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Stated
Value of shares of Preferred Stock to be Converted:
____________________
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Number
of shares of Common Stock to be Issued:
___________________________
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Applicable
Conversion
Price:____________________________________________
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Number
of shares of Preferred Stock subsequent to Conversion:
________________
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Address
for Delivery: ______________________
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or
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DWAC
Instructions:
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Broker
no: _________
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Account
no: ___________
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[HOLDER]
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By:
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Name:
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Title:
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Exhibit
B
Form of
Common Stock Purchase Warrant
COMMON STOCK PURCHASE WARRANT
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 AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 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:
4,403,409
|
Initial Exercise
Date: [●], 2019
|
THIS COMMON STOCK
PURCHASE WARRANT (the “
Warrant
”) certifies that,
for value received, Armistice Capital Master Fund Ltd 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
[●], 2019 (the “
Initial Exercise Date
”)
and on or prior to the close of business on the five (5) year
anniversary of the Initial Exercise Date (the “
Termination Date
”) but
not thereafter, to subscribe for and purchase from Aytu BioScience,
Inc., a Delaware corporation (the “
Company
”), up to
4,403,409 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
. In addition to the
terms defined elsewhere in this Warrant, the following terms have
the meanings indicated in this Section 1:
“
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.
“
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 on OTC 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 Warrants then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by 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.
“
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.
“
Exchange Act
” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“
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.
“
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.
“
Securities Act
” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“
Trading Day
” means a day
on which the Common Stock is traded on a Trading
Market.
“
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, the New York Stock Exchange, OTCQB or
OTCQX (or any successors to any of the foregoing).
Transfer Agent
” means
Issuer Direct Corporation, with a mailing address of 500 Perimeter
Park Dr, Ste D, Morrisville, NC 27560 and a facsimile number of
919-481-6222, and any successor transfer agent of the
Company.
“
Warrants
” means this
Warrant and other Common Stock Purchase Warrants issued by the
Company pursuant to an Exchange Agreement between the Company and
the Holder dated as of February 5, 2019.
Section 2
.
Exercise
.
a) Subject to the
limitations set forth in this Section, 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 close of business 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) 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 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) Trading 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
$1.00, subject to adjustment hereunder (the “
Exercise
Price
”).
c)
Cashless Exercise
. If after six
months from the Initial Exercise Date there is no effective
registration statement registering, or the prospectus contained
therein is not available for the resale of the Warrant Shares to
the Holder, then this Warrant may also 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)(64) 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 registered characteristics of the Warrants
being exercised. 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.
“
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 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.
Notwithstanding
anything herein to the contrary, on the Termination Date, this
Warrant shall be automatically exercised via cashless exercise
pursuant to this Section 2(c).
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 Holder or (B)
this Warrant is being exercised via 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 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 times (2) the price
at which the sell order giving rise to such purchase obligation was
executed, and (B) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant Shares for
which such exercise was not honored (in which case such exercise
shall be deemed rescinded) or deliver to the Holder the number of
shares of Common Stock that would have been issued had the Company
timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having
a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted exercise of shares of Common Stock with an aggregate
sale price giving rise to such purchase obligation of $10,000,
under clause (A) of the immediately preceding sentence the Company
shall be required to pay the Holder $1,000. The Holder shall
provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the
Company, evidence of the amount of such loss. Nothing herein shall
limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with
respect to the Company's failure to timely deliver 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
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto. The Company shall pay all Transfer Agent fees
required for same-day processing of any Notice of Exercise 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, non-exercised 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 non-converted 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 40% 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 decrease the Beneficial Ownership Limitation provisions of this
Section 2(e). 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.
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).
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
and the other Transaction Documents in accordance with the
provisions of this Section 3(d) pursuant to written agreements in
form and substance reasonably satisfactory to the Holder and
approved by the Holder (which approval shall not be unreasonably
withheld or delayed) prior to such Fundamental Transaction and
shall, at the option of the Holder, deliver to the Holder in
exchange for this Warrant a security of the Successor Entity
evidenced by a written instrument substantially similar in form and
substance to this Warrant which is exercisable for a corresponding
number of shares of capital stock of such Successor Entity (or its
parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and with an exercise price which applies
the exercise price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common
Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock, such number of shares of capital
stock and such exercise price being for the purpose of protecting
the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Warrant and the other Transaction Documents referring to the
“Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall
assume all of the obligations of the Company under this Warrant and
the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein.
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 the Holder delivers an assignment form to the Company
assigning this Warrant 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.
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
non-assessable 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
non-assessable 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 conflict of laws
thereof. Each party agrees that all legal Proceedings concerning
the interpretation, enforcement and defense of this Warrant shall
be commenced in the state and federal courts sitting in the City of
New York, Borough of Manhattan (the “
New York Courts
”). Each
party hereto 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 (including with respect to
the enforcement of any provision hereunder), 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. Each party 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 Warrant. If any party shall
commence an action or Proceeding to enforce any provisions of this
Warrant, 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.
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: Chief Executive Officer,
facsimile number: (720) 437-6527, email address:
Josh.Disbrow@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 sent by a
nationally recognized overnight courier service addressed to each
Holder at the facsimile number 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
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 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.
i)
Reserved
.
j)
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.
k)
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.
l)
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.
m)
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 or
the beneficial owner of this Warrant, on the other
hand.
n)
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.
o)
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 [●], 2019.
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) Tax ID Number:
_______________________
(4) 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:
(Please
Print)
Phone
Number:
Email
Address:
Dated:
_____________________ __, ______
Holder's
Signature:
Holder's
Address: