Item
1.01.
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Entry
into a Material Definitive Agreement
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On August 5, 2020, PAVmed Inc.
(the “Company”, “we”, “us” or “our”) entered into
a Securities Purchase Agreement (“SPA”) with an institutional investor (the
“Investor”), and pursuant to the SPA, on August 6, 2020, the Company sold to the Investor a
Senior Secured Convertible Note (the “Convertible Note”) with an initial principal amount of
$7,750,000 and a conversion price of $5.00 per share, subject to adjustment as described below (the “Private
Placement”). The Convertible Note was sold with an original issue discount of $750,000, for net
proceeds of $7,000,000.
The
Investor and its affiliates also hold (i) Series A and Series B senior secured convertible notes (the “November 2019
Notes”) issued by us on November 4, 2019, as more fully described in our current report on Form 8-K of even date, and
(ii) a senior convertible note (the “April 2020 Note,” and collectively with the November 2019 Notes, the “Prior
Notes”) issued by us on April 30, 2020, as more fully described in our current report on Form 8-K dated May 1, 2020.
The Prior Notes presently have an outstanding principal balance of $12,415,975.
SPA
The
SPA contains certain representations and warranties, covenants and indemnities customary for similar transactions. The SPA also
includes the following additional covenants:
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Until
the date that is six months after the closing, we may not issue, offer, sell or grant any equity or equity-linked security
at a price less than $5.00 per share, subject to certain limited exceptions.
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So
long as any of the Convertible Note remains outstanding, we will not effect or enter an agreement to effect any variable rate
transaction.
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In
addition, we granted the Investor participation rights in future equity and equity-linked offerings of our securities during the
three years after the closing in an amount of up to 50% (but, when combined with similar rights under the Prior Notes, not in
excess of 100%) of the securities being sold in such offerings.
Convertible
Note
Payment
On
the maturity date, we will pay to the noteholder an amount in cash representing all outstanding principal, accrued and unpaid
interest and accrued and unpaid late charges. The stated maturity date of the Convertible Note will be August 5, 2022,
but the maturity date will be subject to extension in certain limited circumstances. Except as specifically permitted by the Convertible
Note, we will not be permitted to prepay any portion of the outstanding principal, accrued and unpaid interest or accrued and
unpaid late charges.
Interest
The
Convertible Note will accrue interest at the rate of 7.875% per annum and will be payable in cash monthly on the last trading
day of each month. After the occurrence and during the continuance of an Event of Default (as defined in the Convertible Note),
the Convertible Note will accrue interest at the rate of 18.0% per annum. See “—Events of Default” below.
Conversion
The
Convertible Note will be convertible, at the option of the noteholder, into shares of our common stock at an initial fixed conversion
price of $5.00 per share. The conversion price will be subject to standard adjustments in the event of any stock split, stock
dividend, stock combination, recapitalization or other similar transaction. If we enter into any agreement to issue (or issue)
any variable rate securities, the noteholder will have the additional right to substitute such variable price (or formula) for
the conversion price. In connection with the occurrence of certain Events of Default, the noteholder will be entitled to convert
all or any portion of the Convertible Note at an alternate conversion price equal to the lower of (i) the conversion price then
in effect, and (ii) 80% of the market price of our common stock, as determined in accordance with the Convertible Note, but not
less than the floor price specified in the Convertible Note.
Conversion
Limitation and Exchange Cap
The
noteholder will not have the right to convert any portion of the Convertible Note, to the extent that, after giving effect to
such conversion, the noteholder (together with certain related parties) would beneficially own in excess of 4.99% of the shares
of our common stock outstanding immediately after giving effect to such conversion. The noteholder may from time to time increase
this limit to 9.99%, provided that any such increase will not be effective until the 61st day after delivery of a notice
to us of such increase.
In
addition, unless we obtain the approval of our stockholders as required by Nasdaq, we will be prohibited from issuing any shares
of common stock upon conversion of the Convertible Note or otherwise pursuant to the terms of the Convertible Note, if the issuance
of such shares of common stock would exceed 19.99% of our outstanding shares of common stock as of August 4, 2020 (the
day before we executed the SPA) or otherwise exceed the aggregate number of shares of common stock which we may issue without
breaching our obligations under the rules and regulations of Nasdaq.
Events
of Default
The
Convertible Note will include certain customary Events of Default, including, among other things, the breach of the financial
covenant described in “—Covenants” below, the failure of Lishan Aklog, M.D., our Chairman and Chief Executive
Officer, and Dennis McGrath, our President and Chief Financial Officer, to each serve as officers of ours, and the failure to
maintain an effective shelf registration statement covering the offer and sale of a specified dollar amount of securities.
In
connection with an Event of Default, the noteholder will be able to require us to redeem in cash any or all of the Convertible
Note. The redemption price will equal 115% of the outstanding principal of the Convertible Note to be redeemed, and accrued and
unpaid interest and unpaid late charges thereon, or (except in the case of certain Events of Default relating to bankruptcy),
if greater, an amount equal to market value of a share of our common stock multiplied by the amount to be redeemed divided by
the conversion price, as determined in accordance with the Convertible Note.
Redemption
Rights
Change
of Control. In connection with a Change of Control (as defined in the Convertible Note), the noteholder will be able to require
us to redeem all or any portion of the Convertible Note. The redemption price will equal the greatest of (i) 115% of the outstanding
principal of the Convertible Note to be redeemed, and accrued and unpaid interest and unpaid late charges thereon, (ii) 115% of
the market value of the shares of our common stock underlying the Convertible Note, as determined in accordance with the Convertible
Note, and (iii) 115% of the aggregate cash consideration that would have been payable in respect of the shares of our common stock
underlying the Convertible Note, as determined in accordance with the Convertible Note.
Subsequent
Placement. At any time after the earlier of the date the noteholder becomes aware of any placement by us of equity or equity-linked
securities or the date of consummation of such a placement, subject to certain limited exceptions, the noteholder will have the
right to have us redeem a portion of the Convertible Note not in excess of 100% of the net proceeds from such placement (less
any portion of such proceeds used by the Company to redeem a portion of the Prior Notes at the election of the holders thereof).
The redemption price will be 115% of the outstanding principal of the Convertible Note to be redeemed, and accrued and unpaid
interest and unpaid late charges thereon. If the noteholder is participating in any such placement, the noteholder will be able
to apply the redemption price against the purchase price of the securities in such placement.
Holder
Optional Redemption. At any time from and after October 30, 2020, the noteholder will have the right, in its sole discretion,
to require us to redeem all, or any portion, of the Convertible Note. The redemption price will be 115% of the outstanding principal
of the Convertible Note to be redeemed, and accrued and unpaid interest and unpaid late charges thereon.
Company
Optional Redemption. At any time, we will have the right to redeem all, but not less than all, of the Convertible Note. The
redemption price will be 115% of the outstanding principal of the Convertible Note to be redeemed, and accrued and unpaid interest
and unpaid late charges thereon.
Covenants
We
will be subject to certain customary affirmative and negative covenants regarding the incurrence of indebtedness, the existence
of liens, the repayment of indebtedness, the payment of cash in respect of dividends, distributions or redemptions, and the transfer
of assets, among other matters. We also will be subject to a financial covenant that requires us to maintain available cash in
the amount of $2,000,000 at the end of each fiscal quarter.
Security
Interest
The
Convertible Notes (and the November 2019 Notes) are secured by a first priority security interest in all of our assets and the
assets of our current and future Significant Subsidiaries (as defined in the SPA), which as of the closing date was solely Lucid
Diagnostics, Inc., our majority owned subsidiary (“Lucid Diagnostics”), as evidenced by an amended and restated
security agreement (the “Amended and Restated Security Agreement”) and an amended and restated guarantee by
Lucid Diagnostics of the obligations underlying the Convertible Notes (the “Amended and Restated Guaranty”).
Additional
Information
The
foregoing is only a summary of the material terms of the SPA, the Convertible Note, the Amended and Restated Security Agreement,
the Amended and Restated Guaranty and the other transaction documents, and does not purport to be a complete description of the
rights and obligations of the parties thereunder. The summary of the SPA, the Convertible Note, the Amended and Restated Security
Agreement and the Amended and Restated Guaranty is qualified in its entirety by reference to the forms of such agreements, which
are filed as exhibits to this Current Report.
The
foregoing summary and the exhibits hereto also are not intended to modify or supplement any disclosures about us in our reports
filed with the Securities and Exchange Commission. In particular, the agreements and the related summary are not intended to be,
and should not be relied upon, as disclosures regarding any facts and circumstances relating to the Company or any of its subsidiaries
or affiliates. The agreements contain representations and warranties by us, which were made only for purposes of that agreements
and as of specified dates. The representations, warranties and covenants in the agreements were made solely for the benefit of
the parties to the agreements; may be subject to limitations agreed upon by the contracting parties, including being subject to
confidential disclosures that may modify, qualify or create exceptions to such representations and warranties; may be made for
the purposes of allocating contractual risk between the parties to the agreements instead of establishing these matters as facts;
and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors.
In addition, information concerning the subject matter of the representations, warranties and covenants may change after the date
of the agreements, which subsequent information may or may not be fully reflected in our public disclosures.