Item 1.01.
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Entry into a Material Definitive Agreement.
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Warrant Exchange Agreements
On February 13, 2018, SELLAS Life Sciences Group, Inc., a Delaware corporation (the Company), and Alto Opportunity Master
Fund, SPC Segregated Master Portfolio B (Alto) entered into a Warrant Exchange Agreement (the Alto Agreement). The Company had previously issued to Alto a warrant to purchase 106,667 shares (on a post-reverse
split basis) (the Alto Warrant) of its common stock, par value $0.0001 per share (the Common Stock) pursuant to the registered offering described in the Companys prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b)(5) under the Securities Act of 1933 on February 9, 2017 (the 2017 Offering and the warrants issued in such offering, the 2017 Warrants). Pursuant to the Alto Agreement, in exchange for
Altos agreement to surrender the Alto Warrant for cancellation, the Company agreed to issue to Alto a number of shares of Common Stock equal to the quotient resulting from dividing $249,600 by the closing sale price of the Common Stock on the
closing date of the exchange. Pursuant to the Alto Agreement, on February 15, 2018, the Company issued to Alto 45,464 shares of Common Stock in exchange for the surrender and cancellation of the Alto Warrant.
The Alto Agreement also provides that if, after an Equity Conditions Measuring Period, the number of shares initially delivered to Alto is
less than the number of shares determined by the quotient of $249,600 and the adjustment price, which is defined as the average of the lowest ten weighted average prices during the Equity Conditions Measuring Period, the difference in such number of
shares of Common Stock (the
Top-up
Shares) shall be delivered to Alto. The Equity Conditions Measuring Period is the period (a) beginning on the earlier of (1) the date on
which all warrant exchange agreements for the 2017 Warrants have been publicly disclosed, the first public announcement by the Company of the material terms and conditions of a Company financing transaction has been made, and Alto and its affiliates
are otherwise not in possession of material
non-public
information regarding the Company and (2) March 15, 2018 and (b) ending ninety trading days thereafter.
If such
Top-up
Shares of Common Stock cannot be delivered due to an Equity Conditions Failure, the
Company shall pay Alto cash equal to the product of the number of
Top-up
Shares owed and the average of the daily weighted average prices during the Equity Conditions Measuring Period. An Equity
Conditions Failure will occur if the Company, among other items, fails to maintain its Common Stocks designation for quotation on the Nasdaq Capital Market, is unable to issue the
Top-up
Shares
absent a restrictive legend or does not have an effective registration statement covering the
Top-up
Shares, announces a fundamental transaction, has a daily dollar trading volume of less than $75,000 on at
least ten or more trading days during the Equity Conditions Measuring Period or on any of the three consecutive trading days prior to the end of the Equity Conditions Measuring Period, or has a weighted average price of its Common Stock of less than
$2.50 on at least ten or more trading days during the Equity Conditions Measuring Period or on any of the three consecutive trading days prior to the end of the Equity Conditions Measuring Period. The
Top-up
Shares shall be issued to Alto, or such cash shall be paid to Alto, on the first business day after the Equity Conditions Measuring Period ends.
In addition, if, during the period beginning on February 13, 2018 and ending ninety days following March 15, 2018, the Company
enters into a similar exchange agreement on terms materially different than the Alto Agreement, then the Company shall promptly provide notice to Alto of such agreement and provide a copy of such agreement, if requested. The terms of the Alto
Agreement will be deemed to have been modified in an economically and legally equivalent manner such that Alto would receive the benefit of such more favorable terms, unless Alto elects not to accept such terms by a notice delivered to the Company
within fifteen business days of receipt of the Companys notice. Further, if the Company breaches its covenant to ensure that Alto has no material
non-public
information concerning the Company by no later
than March 15, 2018, Alto shall be entitled to liquidated damages of $249,600 cash plus any and all expenses (including without limitation attorneys fees) incurred by Alto in connection with enforcing this covenant. Upon receipt of such
liquidated damages, Alto shall surrender to the Company any shares of Common Stock previously issued to Alto pursuant to the Alto Agreement
On February 13, 2018, the Company and Alto also entered into a
Leak-Out
Agreement (the Alto
Leak-Out
Agreement), which provides that beginning on March 15, 2018 and ending ninety days thereafter, Alto shall not sell,
dispose or otherwise transfer the shares of Common Stock delivered under the Alto Agreement or any other shares of Common Stock acquired by Alto following February 13, 2018 on any trading day in open market transactions in an amount of more
than 8% of the trading volume of Common Stock on any one trading day. Alto may sell or transfer the shares of Common Stock delivered under the Alto Agreement in a private transaction as long as Alto and the third party execute a
leak-out
agreement in the form of the Alto
Leak-Out
Agreement. In addition, if, during the period beginning on February 13, 2018 and ending ninety days following
March 15, 2018, the Company enters into a similar
leak-out
agreement on terms materially different than the Alto Agreement, then the Company shall promptly provide notice to Alto of such agreement and
provide a copy of such agreement, if requested. The terms of the Alto Agreement will be deemed to have been modified in an economically and legally equivalent manner such that Alto would receive the benefit of such more favorable terms, unless Alto
elects not to accept such terms by a notice delivered to the Company within fifteen business days of receipt of the Companys notice.
On
February 14, 2018, the Company entered into a Warrant Exchange Agreement (the Lincoln Park Agreement) with Lincoln Park Capital Fund LLC (Lincoln Park Capital). The Company previously issued to Lincoln Park Capital a
warrant to purchase 8,333 shares (on a post-reverse split basis) of Common Stock (the Lincoln Park Warrant) in the 2017 Offering. Pursuant to the Lincoln Park Agreement, on February 19, 2018, the Company issued to Lincoln Park
Capital 3,421 shares of Common Stock in exchange for the surrender and cancellation of the Lincoln Park Warrant.
The Companys entry
into the Alto Agreement, the Alto
Leak-Out
Agreement, and the Lincoln Park Agreement was the result of separate private negotiations between the Company and Alto and the Company and Lincoln Park Capital. These
private negotiations commenced prior to the Companys announcement of its Warrant Exchange Agreements with CVI Investments, Inc., Anson Investments Master Fund LP, Sabby Healthcare Master Fund Ltd., Sabby Volatility Warrant Master Fund Ltd. and
Hudson Bay Master Fund Ltd. on February 12, 2018.
The foregoing descriptions of the Alto Agreement, the Alto
Leak-Out
Agreement, and the Lincoln Park Agreement do not purport to be complete descriptions of all terms and conditions contained therein and are qualified in their entirety by reference to the full text of such
documents. The Company will file complete copies of the Alto Agreement, the Alto
Leak-Out
Agreement, and the Lincoln Park Agreement with its Annual Report on Form
10-K
for the year ending December 31, 2017, or by amendment to this Form
8-K.