Filed
pursuant to Rule 253(g)(2)
File
No. 024-11602
Supplement No. 3 DATED JANUARY 3, 2022
(to
the Offering Circular dated December 13, 2021)
RespireRx
Pharmaceuticals Inc.
126
Valley Road, Suite C
Glen
Rock, New Jersey 07452
(201)
444-4947
This
Offering Circular Supplement No. 3 (“Supplement No. 3”) supplements
and amends the offering circular of RespireRx Pharmaceuticals, Inc.
(the “Company”) dated December 13, 2021 as previously supplemented
by Offering Circular Supplement No. 1 on December 14, 2021 and by
Offering Circular No. 2 on December 14, 2021 (the “Offering
Circular”), relating to Company’s Tier 2 offering under Regulation
A of Section 3(6) of the Securities Act of 1933, as amended, of up
to 375,000,000 shares of the Company’s common stock, par value
$0.001 per share (the “Common Stock”), at an offering price of
$0.02 per share, for a maximum offering amount of $7,500,000 (the
“Offering”). This Supplement No. 3 should be read in conjunction
with the Offering Circular and is qualified by reference to the
Offering Circular except to the extent that the information in this
Supplement No. 3 supersedes the information contained in the
Offering Circular.
Note
Purchase Agreement with Quick Capital LLC
As of
December 23, 2021 (the “Effective Date”), RespireRx Pharmaceuticals
Inc. (the “Company”) and Quick Capital, LLC (“QC”) entered into a
Note Purchase Agreement (the “NPA”) pursuant to which QC provided a
sum of $78,300 (the “Consideration”) to the Company, in return for
a Convertible Promissory Note (the “Note”) with a face amount of
$87,000 (which difference in value as compared to the Consideration
is due to an original issue discount of $8,700), and 1,553,000
commitment shares (the “Commitment Shares”). The Note matures 120
days after the issue date (“Maturity Date”) unless extended by the
Company to a date that is 180 days following the issue date. The
Note is convertible only in the event of a default as defined in
the Note. If an event of default occurs, the Note is convertible at
$0.02 per share of the Company’s common stock, par value $0.001
(“Common Stock”). Pursuant to the terms of the NPA, on the
121st day following the issue date, if any event of
default has occurred, the Company shall deliver one or more
warrants in a form attached to the NPA as Exhibit B. Such warrant
or warrants if issued, would be exercisable into 4,785,000 shares
of the Common Stock unless the Company properly extends the
Maturity Date, at which time, upon the 181st day
following the issuance of the Note, if any event of default has
occurred, the Company shall issue a warrant exercisable into
6,525,000 shares of Common Stock. The warrant or warrants if
issued, will be exercisable for five years at an exercise price of
$0.02 per share of Common Stock on a cash or cashless basis. In
addition, and to induce QC to enter into the NPA, the Company has,
pursuant to the NPA, granted to QC, piggy-back registration rights
under the Securities Act of 1933, as amended (the “Securities Act”)
with respect to the Common Stock issuable pursuant to the NPA. The
net proceeds of the Consideration, which were received by the
Company on December 23, 2021, were used and will continue to be
used for general corporate purposes, including the payment of
accrued obligations.
The
Note obligates the Company to pay on the 120th day after
the issue date, a principal amount of $87,000 together with
interest at a rate equal to 10% per annum. The interest, is
guaranteed and earned in full as of the Effective Date. Any amount
of principal or interest that is not paid by the Maturity Date
would bear interest at the rate of 24% from the Maturity Date to
the date it is paid.
The
conversion rights and warrant exercise rights become effective upon
any event of default, provided that the conversion would not result
in QC beneficially owning more than 9.99% of the Company’s then
outstanding Common Stock. The conversion price or warrant exercise
price, as applicable would be equal to $0.02, subject to equitable
adjustments for stock splits, stock dividends, combinations,
recapitalizations, extraordinary distributions and similar events.
Upon any conversion, all rights with respect to the portion of the
Note being so converted will terminate, except for the right to
receive Common Stock or other securities, cash or other assets as
provided for in the Note.
At
any time during the period beginning on the Issue Date and ending
on the date which is day immediately prior to the maturity date,
the Company shall have the right, exercisable on not less than
three (3) trading days prior written notice to the QC or other
holder, of the Note to prepay the outstanding Note (principal and
accrued interest), in full by making a payment to QC or other
holder of an amount in cash equal to 110 (10% prepayment premium),
multiplied by the sum of: (w) the then outstanding principal amount
of this Note plus (x) accrued and unpaid interest on the unpaid
principal amount of this Note. To the extent a partial prepayment
is made, the amount of principal and/or accrued but unpaid interest
deemed prepaid, shall be 90.9090% of the amount paid and $9.0909
shall be deemed the 10% prepayment premium. While any portion of
the Note is outstanding, if the Company receives cash proceeds from
a closing of an offering pursuant to Regulation A, the Company
shall, within one (1) business day of the Company’s receipt of such
proceeds, inform the holder, of such receipt, following which
holder has the right to require the Company to immediately apply
10% or any lesser portion of such proceeds to repay all or any
portion of the outstanding amounts owed under the Note. In the
event that such proceeds are received by holder prior to the
maturity date, the required prepayment shall be subject to all
prepayment terms in the Note.
The
Note requires that the Company reserve the greater of (i)
16,312,500 shares of Common Stock or (ii) one and a half times the
number of shares into which the Note may convert. The warrant
requires that the Company reserve one and a half times the number
of shares into which the Warrant is at any time
exercisable.
The
NPA includes, among other things: (1) the grant of an option to QC
to incorporate into the Note any terms applicable to a subsequent
issuance of a convertible note or security by the Company that are
more beneficial to an investor than the terms of the NPA and Note
are to QC; and (2) certain registration rights which are included
in the NPA and the right to have any shares of Common Stock issued
in connection with the conversion of the Note or exercise of the
Warrant included in any Regulation A offering statement that the
Company files with the Securities and Exchange Commission after the
issue date.
The
Note, the warrant, and the shares of Common Stock issuable upon
conversion or exercise thereof, as applicable, were offered and
sold to QC in reliance upon specific exemptions from the
registration requirements of United States federal and state
securities laws.
This
Supplement No. 3 attaches the Current Report on Form 8-K that the
Company filed with the U.S. Securities and Exchange Commission on
December 29, 2021.
Investing
in our securities involves a high degree of risk. You should review
carefully the risks and uncertainties described under the heading
“Risk Factors” beginning on page 10 of the Offering Circular, and
under similar headings in any amendments or supplements to the
Offering Circular.
Neither
the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of the Offering Circular or
this Supplement No. 1. Any representation to the contrary is a
criminal offense.
The
date of this Supplement No. 3 is January 3, 2022
UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
8-K
Current
Report
Pursuant
to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported):
December 23, 2021
RESPIRERX PHARMACEUTICALS INC.
(Exact
name of registrant as specified in its charter)
|
Delaware |
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1-16467 |
|
33-0303583 |
(State or
other jurisdiction
of incorporation) |
|
(Commission
File Number) |
|
(I.R.S
Employer
Identification No.) |
|
126 Valley Road,
Suite C
Glen Rock, New Jersey
|
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07452 |
|
(Address
of principal executive offices) |
|
(Zip
Code) |
Registrant’s
telephone number, including area code:
(201)
444-4947
(Former
name or former address, if changed since last
report.)
Check the
appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
|
☐ |
Written communications
pursuant to Rule 425 under the Securities Act (17 CFR
230.425) |
|
☐ |
Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12) |
|
☐ |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b)) |
|
☐ |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c)) |
Securities
registered pursuant to Section 12(b) of the Act:
|
Title of
each class |
|
Trading
Symbol(s) |
|
Name of each
exchange on which registered |
|
N/A |
|
N/A |
|
N/A |
Indicate by
check mark whether the registrant is an emerging growth company as
defined in Rule 405 of the Securities act of 1933 (§230.405 of this
chapter) or Rule 12b-2 of the Securities Exchange Act of 1934
(§240.12b-2 of this chapter).
Emerging
growth company
☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01
Entry into a Material Definitive Agreement.
Note Purchase Agreement with Quick
Capital LLC
On
December 31, 2021 (the “Effective Date”), RespireRx Pharmaceuticals
Inc. (the “Company”) and Quick Capital, LLC (“QC”) entered into a
Note Purchase Agreement (the “NPA”) pursuant to which QC provided a
sum of $78,300 (the “Consideration”) to the Company, in return for
a Convertible Promissory Note (the “Note”) with a face amount of
$87,000 (which difference in value as compared to the Consideration
is due to an original issue discount of $8,700), and 1,553,000
commitment shares (the “Commitment Shares”). The Note matures 120
days after the issue date (“Maturity Date”) unless extended by the
Company to a date that is 180 days following the issue date. The
Note is convertible only in the event of a default as defined in
the Note. If an event of default occurs, the Note is convertible at
$0.02 per share of the Company’s common stock, par value $0.001
(“Common Stock”). Pursuant to the terms of the NPA, on the
121st day following the issue date, if any event of
default has occurred, the Company shall deliver one or more
warrants in a form attached to the NPA as Exhibit B. Such warrant
or warrants if issued, would be exercisable into 4,785,000 shares
of the Common Stock unless the Company properly extends the
Maturity Date, at which time, upon the 181st day
following the issuance of the Note, if any event of default has
occurred, the Company shall issue a warrant exercisable into
6,525,000 shares of Common Stock. The warrant or warrants if
issued, will be exercisable for five years at an exercise price of
$0.02 per share of Common Stock on a cash or cashless basis. In
addition, and to induce QC to enter into the NPA, the Company has,
pursuant to the NPA, granted to QC, piggy-back registration rights
under the Securities Act of 1933, as amended (the “Securities Act”)
with respect to the Common Stock issuable pursuant to the NPA. The
net proceeds of the Consideration, which were received by the
Company on December 31, 2021, were used and will continue to be
used for general corporate purposes, including the payment of
accrued obligations.
The Note
obligates the Company to pay on the 120th day after the
issue date, a principal amount of $87,000 together with interest at
a rate equal to 10% per annum. The interest, is guaranteed and
earned in full as of the Effective Date. Any amount of principal or
interest that is not paid by the Maturity Date would bear interest
at the rate of 24% from the Maturity Date to the date it is
paid.
The
conversion rights and warrant exercise rights become effective upon
any event of default, provided that the conversion would not result
in QC beneficially owning more than 9.99% of the Company’s then
outstanding Common Stock. The conversion price or warrant exercise
price, as applicable would be equal to $0.02, subject to equitable
adjustments for stock splits, stock dividends, combinations,
recapitalizations, extraordinary distributions and similar events.
Upon any conversion, all rights with respect to the portion of the
Note being so converted will terminate, except for the right to
receive Common Stock or other securities, cash or other assets as
provided for in the Note.
At any
time during the period beginning on the Issue Date and ending on
the date which is day immediately prior to the maturity date, the
Company shall have the right, exercisable on not less than three
(3) trading days prior written notice to the QC or other holder, of
the Note to prepay the outstanding Note (principal and accrued
interest), in full by making a payment to QC or other holder of an
amount in cash equal to 110 (10% prepayment premium), multiplied by
the sum of: (w) the then outstanding principal amount of this Note
plus (x) accrued and unpaid interest on the unpaid principal amount
of this Note. To the extent a partial prepayment is made, the
amount of principal and/or accrued but unpaid interest deemed
prepaid, shall be 90.9090% of the amount paid and $9.0909 shall be
deemed the 10% prepayment premium. While any portion of the Note is
outstanding, if the Company receives cash proceeds from a closing
of an offering pursuant to Regulation A, the Company shall, within
one (1) business day of the Company’s receipt of such proceeds,
inform the holder, of such receipt, following which holder has the
right to require the Company to immediately apply 10% or any lesser
portion of such proceeds to repay all or any portion of the
outstanding amounts owed under the Note. In the event that such
proceeds are received by holder prior to the maturity date, the
required prepayment shall be subject to all prepayment terms in the
Note.
The Note
requires that the Company reserve the greater of (i) 16,312,500
shares of Common Stock or (ii) one and a half times the number of
shares into which the Note may convert. The warrant requires that
the Company reserve one and a half times the number of shares into
which the Warrant is at any time exercisable.
The NPA
includes, among other things: (1) the grant of an option to QC to
incorporate into the Note any terms applicable to a subsequent
issuance of a convertible note or security by the Company that are
more beneficial to an investor than the terms of the NPA and Note
are to QC; and (2) certain registration rights which are included
in the NPA and the right to have any shares of Common Stock issued
in connection with the conversion of the Note or exercise of the
Warrant included in any Regulation A offering statement that the
Company files with the Securities and Exchange Commission after the
issue date.
The Note,
the warrant, and the shares of Common Stock issuable upon
conversion or exercise thereof, as applicable, were offered and
sold to QC in reliance upon specific exemptions from the
registration requirements of United States federal and state
securities laws.
The
descriptions of the NPA, and the Note, do not purport to be
complete and are qualified in their entirety by reference to the
NPA and the Note which are included as Exhibits 99.1 and 99.2,
respectively, to this Current Report on Form 8-K and are
incorporated herein by reference.
Item 2.03
Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The
information provided in Item 1.01 of this Current Report on Form
8-K is incorporated by reference into this Item 2.03.
Item 3.02
Unregistered Sales of Equity Securities.
The
information provided in Item 1.01 of this Current Report on Form
8-K is incorporated by reference into this Item 3.02.
Item 9.01
Financial Statements and Exhibits
(d)
Exhibits.
Pursuant to
the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
| Date: December 29,
2021 |
RESPIRERX PHARMACEUTICALS
INC. |
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(Registrant) |
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By: |
/s/ Jeff
E. Margolis |
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Jeff E.
Margolis |
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SVP, CFO, Secretary and
Treasurer |
Exhibit
99.1
NOTE
PURCHASE AGREEMENT
THIS
NOTE PURCHASE AGREEMENT (this “Agreement”), dated as of
December 23, 2021, (the “Execution Date”), is entered into
by and between RESPIRERX
PHARMACEUTICALS, INC., a Delaware corporation (the
“Company”), and QUICK CAPITAL, LLC, a Wyoming limited
liability company (the “Buyer”). Each capitalized term used
herein shall have the meaning ascribed thereto in Section 10
below, or as otherwise defined herein.
WHEREAS,
the Company and the Buyer are executing and delivering this
Agreement in reliance upon an exemption from securities
registration afforded by the rules and regulations as promulgated
by the United States Securities and Exchange Commission (the
“SEC”) under the Securities Act of 1933, as amended (the
“Securities Act”); and
WHEREAS,
the Buyer desires to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement a
convertible promissory note of the Company with a maturity amount
of $87,000.00, in the form attached hereto as Exhibit A, in
an aggregate funded amount of $78,300 as set forth on the
Issuance Schedule attached hereto (such note, together with
any note(s) issued in replacement thereof or as a dividend thereon
or otherwise with respect thereto in accordance with the terms
thereof, the “Note”), convertible only upon Default into
shares (the “Conversion Shares”) of common stock, $0.001 par
value per share, of the Company (the “Common Stock”)
pursuant to the terms of the Note; and
WHEREAS,
as inducement to enter into this Agreement, and for the funding of
each Note, the Company desires to issue to the Buyer shares of
Common Stock (the “Commitment Shares”) as set forth
herein.
NOW
THEREFORE, in consideration of the mutual covenants contained
in this Agreement, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the
Company and the Buyer hereby agree as follows:
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1. |
PURCHASE
AND SALE OF SECURITIES. |
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(a) |
Closing.
On the Closing Date (as defined below), the Company shall sell and
issue to the Buyer and the Buyer shall purchase the Note in such
principal amount, and for such funding price, set forth on the
Issuance Schedule under “December 2021 Closing” (the
“Closing”), which such funding amount shall be $78,300.00
for the Closing (the “Company Funding Amount”). The date on
which Buyer funds the Note shall be the “Funding
Date.” |
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(b) |
Closing
Date. Subject to the satisfaction (or written waiver) of the
conditions set forth in Section 7 and Section 8
below, the date of the issuance and sale of the Note constituting
the Closing pursuant to this Agreement (the “Closing Date”)
shall be the Execution Date. |
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(c) |
Form
of Payment. On the Funding Date, the Buyer shall deliver the
Company Funding Amount by wire transfer of immediately available
funds, in accordance with the Company’s written wiring
instructions. |
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(d) |
Warrants.
Upon an Event of Default, as defined in the Note, and only upon an
Event of Default, the Company shall deliver one or more warrants
exercisable into shares (the “Warrant Shares”) of Common
Stock in the form attached hereto as Exhibit B (the
“Warrant”) to the Buyer as follows: |
(i) Upon
the 121st day following the issuance of the Note, if any
Event of Default (as defined in the Note) has occurred, the Company
shall issue a Warrant exercisable into 4,785,000 Warrant Shares to
the Buyer (the “120 Day Warrant”), provided that;
(ii) In
the event that the Company has properly extended the maturity date
of the Note by 60 days (to 180 days post issuance) in accordance
with the terms of the Note, the 120 Day Warrant shall not be
issued, however, upon the 181st day following the issuance of the
Note, if any Event of Default (as defined in the Note) has
occurred, the Company shall issue one or more warrants exercisable
into 6,525,000 Warrant Shares of Common Stock to the
Buyer.
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(e) |
Commitment
Shares. The Company shall be required to deliver the Commitment
Shares to the Buyer, and the Buyer shall be entitled to receive
such shares, in an aggregate amount of 1,553,000 shares of Common
Stock and as set forth on the Issuance Schedule. |
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2. |
REPRESENTATIONS
AND WARRANTIES OF THE BUYER. The Buyer represents and warrants
to the Company that: |
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(a) |
Investment
Purpose. As of the Execution Date, the Closing Date and the
Funding Date, the Buyer is purchasing the Securities for its own
account for investment only and not with a view towards the public
sale or distribution thereof, except pursuant to sales registered
or exempted from registration under the Securities Act;
provided, however, that by making the foregoing
representation and warranty, the Buyer does not agree to hold any
of the Securities for any minimum or other specific term and
reserves the right to dispose of all or any portion of the
Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities
Act. |
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(b) |
Reliance
on Exemptions. The Buyer understands that the Securities are
being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and
state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities. |
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(c) |
Information.
The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors.
The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Notwithstanding the
foregoing, the Company has not disclosed to the Buyer any material
non-public information and will not disclose such information
unless such information is disclosed to the public prior to or
promptly following such disclosure to the Buyer. Neither such
inquiries nor any other due diligence investigation conducted by
Buyer or any of its advisors or representatives shall modify, amend
or affect Buyer’s right to rely on the Company’s representations
and warranties contained in Section 3 below. |
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(d) |
Authorization;
Enforcement; Organization. This Agreement has been duly and
validly authorized by the Buyer. This Agreement has been duly
executed and delivered on behalf of the Buyer, and this Agreement
constitutes a valid and binding agreement of the Buyer enforceable
in accordance with its terms. The Buyer is a limited liability
company organized under the laws of the State of
Wyoming. |
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(e) |
Accredited
Investor Status. The Buyer is (i) an “accredited investor” as
that term is defined in Rule 501 of the General Rules and
Regulations under the Securities Act by reason of Rule 501(a)(3)
(an “Accredited Investor”), (ii) experienced in making
investments of the kind described in this Agreement and the related
documents, (iii) able, by reason of the business and financial
experience of its officers (if an entity) and professional advisors
(who are not affiliated with or compensated in any way by the
Company or any of its Affiliates or selling agents), to protect its
own interests in connection with the transactions described in this
Agreement, and the related documents, and (iv) able to afford the
entire loss of its investment in the Securities. |
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(f) |
General
Solicitation. The Buyer is not purchasing the Securities as a
result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general
advertisement. |
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3. |
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Buyer that as of the Execution Date and as of the
Closing Date and as of the Funding Date (or as of such other time
expressly specified below): |
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(a) |
Corporate
Governance Compliance: |
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(i) |
Issuance
of Commitment Shares, Note and Conversion Shares and Warrant and
Warrant Shares. The Note has been duly authorized and is being
validly issued to the Buyer. The Conversion Shares have been duly
authorized and fully reserved for issuance and, upon conversion of
the Note in accordance with its terms, will be validly issued,
fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common
Stock. The Conversion Shares shall not be subject to pre-emptive
rights or other similar rights of stockholders of the Company
(except to the extent already waived) and will not impose personal
liability upon the holder thereof, other than restrictions on
transfer provided for in the Transaction Documents and under the
Securities Act. The Warrant has been duly authorized and upon
issuance, will be validly issued to the Buyer. The Warrant Shares
have been duly authorized and fully reserved for issuance and, upon
exercise of the Warrant in accordance with its terms, will be
validly issued, fully paid and non-assessable, and free from all
taxes, liens, claims and encumbrances with respect to the issue
thereof, with the holders being entitled to all rights accorded to
a holder of Common Stock. The Warrant Shares shall not be subject
to pre-emptive rights or other similar rights of stockholders of
the Company (except to the extent already waived) and will not
impose personal liability upon the holder thereof, other than
restrictions on transfer provided for in the Transaction Documents
and under the Securities Act. The Commitment Shares have been duly
authorized and upon delivery to the Buyer shall be validly issued,
fully paid and non-assessable, and free from all taxes, Liens,
claims and encumbrances with respect to the issue thereof, with the
Buyer being entitled to all rights accorded to a holder of Common
Stock. The Commitment Shares shall not be subject to pre-emptive
rights or other similar rights of stockholders of the Company
(except to the extent already waived) and will not impose personal
liability upon the holder thereof, other than restrictions on
transfer provided for in the Transaction Documents and under the
Securities Act. |
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(ii) |
Organization
and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws
of the State of Delaware, with the requisite corporate power and
authority to own and use its properties and assets and to carry on
its business as currently conducted. Each of the Subsidiaries is an
entity duly incorporated or otherwise organized, and, to the extent
such Subsidiary is a Material Subsidiary as defined below, is
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, with the
requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Each of the Company and the Material Subsidiaries is not
in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and its
Material Subsidiaries is duly qualified to conduct business and is
in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, have or reasonably be expected to result in a Material
Adverse Effect proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification. As of
the Closing Date or the Funding Date, whichever is later, the
Company has no Material Subsidiaries. |
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(iii) |
Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and perform its obligations under this
Agreement and the other Transaction Documents. The execution and
delivery of this Agreement and the other Transaction Documents by
the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate action, and no further consent or authorization
of the Company or its Board of Directors or stockholders is
required. Each of this Agreement and the other Transaction
Documents has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application. |
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(iv) |
Capitalization.
As of the Execution Date, the authorized capital stock of the
Company is as set forth in the SEC Documents (as defined below).
Except as set forth on Schedule 3(a)(iv), the Company has
not issued any capital stock since its most recently filed SEC
Document, other than pursuant to the exercise of employee stock
options under the Company’s stock option plans, the issuance of
shares of Common Stock to employees pursuant to the Company’s
employee stock purchase plans and pursuant to the conversion and/or
exercise of Common Stock Equivalents outstanding as of the date of
the most recently filed SEC Document. Except as disclosed in the
SEC Documents, no shares are reserved for issuance pursuant to the
Company’s stock option plans, no shares are reserved for issuance
pursuant to the terms of any Common Stock Equivalents (other than
the Note and the Warrant) exercisable for, or convertible into or
exchangeable for shares of Common Stock and sufficient shares are
reserved for issuance upon conversion of the Note and upon exercise
of the Warrant (as required by the Note, the Warrant and Transfer
Agent Instruction Letter). All of such outstanding shares of
capital stock are, or upon issuance will be, duly authorized,
validly issued, fully paid and non-assessable. No shares of capital
stock of the Company are subject to pre-emptive rights or any other
similar rights of the stockholders of the Company or any liens or
encumbrances imposed through the actions or failure to act of the
Company. Except as disclosed in the SEC Documents, as of the
Execution Date, (i) there are no outstanding options, warrants,
scrip, rights to subscribe for, puts, calls, rights of first
refusal, agreements, understandings, claims or other commitments or
rights of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for any shares of capital
stock of the Company or any of its Subsidiaries, or arrangements by
which the Company or any of its Subsidiaries is or may become bound
to issue additional shares of capital stock of the Company or any
of its Subsidiaries, (ii) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the
Securities Act and (iii) there are no anti-dilution or price
adjustment provisions contained in any security issued by the
Company (or in any agreement providing rights to security holders)
that will be triggered by the issuance of the Securities. The
Company has filed in its SEC Documents true and correct copies of
the Company’s Certificate of Incorporation as in effect on the
Execution Date, the Company’s bylaws, as in effect on the Execution
Date, and the terms of all securities convertible into or
exercisable for Common Stock of the Company and the material rights
of the holders thereof in respect thereto, except as disclosed on
Schedule 3(a)(iv). The Company shall provide the Buyer a
certification of this representation signed by the Company’s Chief
Executive Officer on behalf of the Company as of the Closing
Date. |
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(v) |
No
Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents by the Company and
the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and
reservation for issuance of the Conversion Shares and the Warrant
Shares) will not (a) result in a violation of the Company’s or any
Subsidiary’s certificate or articles of incorporation, by-laws or
other organizational or charter documents, (b) conflict with, or
constitute a material default (or an event that with notice or
lapse of time or both would become a material default) under,
result in the creation of any Lien upon any of the properties or
assets of the Company or any Subsidiary, or give to others any
rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture, instrument or any “lock-up” or similar
provision of any underwriting or similar agreement to which the
Company or any Subsidiary is a party, or (c) result in a violation
of any federal, state or local law, rule, regulation, order,
judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any Subsidiary or by
which any property or asset of the Company or any Subsidiary is
bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a
Material Adverse Effect), nor is the Company otherwise in violation
of, conflict with or in default under any of the foregoing. The
business of the Company is not being conducted in violation of any
law, ordinance or regulation of any governmental entity, except for
possible violations that either singly or in the aggregate do not
and will not have a Material Adverse Effect. The Company is not
required under federal, state or local law, rule or regulation to
obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for
it to issue the Conversion Shares or the Warrant Shares or to
execute, deliver or perform any of its obligations under this
Agreement or the other Transaction Documents (other than any SEC,
FINRA or state securities filings that may be required to be made
by the Company subsequent to Closing). |
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(b) |
SEC
and Offering Compliance: |
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(i) |
SEC
Documents. The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by the Company
under the Securities Act and the Exchange Act for the Company to be
deemed fully “fully reporting” and “current” and in compliance with
the periodic and current reporting requirements of Section 13 or
15(d) of the Exchange Act, and in compliance with the Rule
144(c)(1) under the Securities Act (the foregoing materials,
including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the
“SEC Documents”). The SEC Documents comply in all material
respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and other federal laws, rules and
regulations applicable to such SEC Documents, and none of the SEC
Documents contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not
misleading. |
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(ii) |
Financial
Statements. The financial statements of the Company included in
its SEC Documents (the “Financial Statements”) comply as to
form and substance in all material respects with applicable
accounting requirements and the published rules and regulations of
the SEC as well as other applicable rules and regulations with
respect thereto. Such Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except (a) as may
be otherwise indicated in such Financial Statements or the notes
thereto or (b) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the
results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments). The Company maintains a
system of internal accounting controls appropriate for its size.
There is no transaction, arrangement, or other relationship between
the Company and an unconsolidated or other off balance sheet entity
that is not disclosed by the Company in its Financial Statements or
otherwise that would be reasonably likely to have a Material
Adverse Effect. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction
Documents, the Company confirms that neither it nor any other
Person acting on its behalf has provided the Buyer or its agents or
counsel with any information that it believes constitutes or might
constitute material, non-public information. The Company
understands and confirms that the Buyer will rely on the foregoing
representation in effecting transactions in securities of the
Company. |
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(iii) |
Acknowledgment
Regarding Buyer’s Purchase of Securities. The Company
acknowledges and agrees that the Buyer is acting solely in the
capacity of an arm’s length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby and
thereby and that the Buyer is neither (i) an officer or director of
the Company or any of its Subsidiaries, nor (ii) an “affiliate” (as
defined in Rule 144) of the Company or any of its Subsidiaries. The
Company further acknowledges that the Buyer is not acting as a
financial advisor or fiduciary of the Company or any of its
Subsidiaries (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and
thereby, and any advice given by a Buyer or any of its
representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is
merely incidental to the Buyer’s purchase of the Securities. The
Company further represents to the Buyer that the Company’s decision
to enter into the Transaction Documents has been based solely on
the independent evaluation by the Company and its
representatives. |
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(iv) |
No
Integrated Offering. Neither the Company, nor any person acting
on its or their behalf, has directly or indirectly made any offers
or sales in any security or solicited any offers to buy any
security under circumstances that would require registration under
the Securities Act of the issuance of the Securities to the Buyer.
The issuance of the Securities to the Buyer will not be integrated
with any other issuance of the Company’s securities (past, current
or future) for purposes of any stockholder approval provisions
applicable to the Company or its securities. |
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(v) |
Brokers.
Except as set forth on Schedule 3(b)(v), no broker is
entitled to a commission payable by the Company in connection with
the transactions contemplated by this transaction and the Company
has taken no action which would give rise to any claim by any
person for brokerage commissions, transaction fees or similar
payments relating to this Agreement or the transactions
contemplated hereby. Any all fees due to any brokers shall be paid
and satisfied by the Company at the Closing except as otherwise
provided in Section 1(c) of this Agreement. |
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(vi) |
Disclosure.
All information relating to or concerning the Company or any of its
Subsidiaries set forth in this Agreement and provided to the Buyer
pursuant in connection with the transactions contemplated hereby is
true and correct in all material respects and the Company has not
omitted to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances
under which they were made, not misleading. No event or
circumstance has occurred or exists with respect to the Company or
any of its Subsidiaries or its or their business, properties,
prospects, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly
announced or disclosed (assuming for this purpose that the
Company’s reports filed under the Exchange Act are being
incorporated into a qualified filing pursuant to Regulation of the
Securities Act, by the Company under the Securities
Act). |
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(vii) |
Shell
Company Status. The Company is not currently an issuer
identified in Rule 144(i)(1)(i) under the Securities Act, and, if
it was at any time previously been such an issuer, then the Company
is subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, has filed all reports and other materials
required to be filed by Section 13 or 15(d) of the Exchange Act, as
applicable during the preceding 12 months, and, as of a date at
least one year prior to the Execution Date, has filed current “Form
10 information” with the SEC (as defined in Rule 144(i)(3) of the
Securities Act) reflecting its status as an entity that is no
longer an issuer described in Rule 144(i)(1)(i) of the Securities
Act. |
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(viii) |
No
Disqualification Events. With respect to Securities to be
offered and sold hereunder in reliance on Rule 506 under the
Securities Act (“Regulation D Securities”), none of the
Company, any of its predecessors, any affiliated issuer, any
director, executive officer, other officer of the Company
participating in the offering hereunder, any beneficial owner of
20% or more of the Company’s outstanding voting equity securities,
calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected
with the Company in any capacity at the time of sale (each, an
“Issuer Covered Person” and, together, “Issuer Covered
Persons”) is subject to any of the “bad actor” disqualifying
events described in Rule 506(d)(1)(i)(viii) under the Securities
Act (each, a “Disqualification Event”), except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3). The
Company has exercised reasonable care to determine whether any
Issuer Covered Person is subject to a Disqualification Event. The
Company has complied, to the extent applicable, with its disclosure
obligations under Rule 506(e), and has furnished to the Buyers a
copy of any disclosures provided thereunder. |
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(ix) |
Other
Covered Persons. The Company is not aware of any Person (other
than any Issuer Covered Person) that has been or will be paid
(directly or indirectly) remuneration for solicitation of buyers or
potential purchasers in connection with the sale of any Regulation
D Securities. |
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(x) |
No
General Solicitation; Placement Agent. Neither the Company, nor
any of its Subsidiaries or Affiliates, nor any Person acting on its
or their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Securities. Neither the
Company nor any of its Subsidiaries has engaged any placement agent
in connection with the sale of the Securities. In the event that a
broker-dealer or other agent or advisory is engaged by the Company
subsequent to the Closing, the Company shall be responsible for the
payment of any placement agent’s fees, financial advisory fees, or
brokers’ commissions (other than for persons engaged by any Buyer
or its investment advisor) relating to or arising out of the
transactions contemplated hereby in connection with the sale of the
Securities. The Company shall pay, and hold the Buyer harmless
against, any liability, loss or expense (including, without
limitation, attorney’s fees and out-of-pocket expenses) arising in
connection with any such claim. |
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(xi) |
Investment
Company Status. The Company is not, and upon consummation of
the sale of the Securities will not be, an “investment company,” a
company controlled by an “investment company” or an “affiliated
person” of, or “promoter” or “principal underwriter” for, an
“investment company” as such terms are defined in the Investment
Company Act of 1940, as amended. |
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(xii) |
Transfer
Taxes. On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid
in connection with the sale and transfer of the Securities to be
sold to the Buyer hereunder will be, or will have been, fully paid
or provided for by the Company, and all laws imposing such taxes
will be or will have been complied with. |
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(xiii) |
Compliance
with Rule 15c2-11. On the Closing Date, and at all times that
any of the Securities remain outstanding, the Company shall
maintain as publicly available all information required by
paragraph (b) of Rule 15c2-11 of the Exchange Act (as effective on
September 26, 2021), as amended, such that brokers or dealers
attempting to publish any quotation for the Common Stock or,
directly or indirectly, to submit any such quotation for
publication, shall be able to comply with Rule
15c2-11(a). |
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(i) |
Absence
of Certain Changes. No event has occurred that would have a
Material Adverse Effect on the Company or any Subsidiary that has
not been disclosed in the SEC Documents. Without limiting the
generality of the foregoing, except as disclosed in the SEC
Documents, neither the Company nor any of its Subsidiaries has
taken any of the actions set forth on Schedule
3(c)(i). |
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(ii) |
Absence
of Litigation. Except as disclosed in the SEC Documents, there
are no actions, suits, investigations, inquiries or proceedings
pending or, to the Knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective
properties, nor has the Company received any written or oral notice
of any such action, suit, proceeding, inquiry or investigation,
which would have a Material Adverse Effect or would require
disclosure under the Securities Act or the Exchange Act. No
judgment, order, writ, injunction or decree or award has been
issued by or, to the Knowledge of the Company, requested of any
court, arbitrator or governmental agency which would have a
Material Adverse Effect. Except as disclosed in the SEC Documents
or as set forth on Schedule 3(c)(ii) there has not been, and
to the Knowledge of the Company, there is not pending or
contemplated, any investigation by the SEC involving the Company,
any Subsidiary or any current or former director or officer of the
Company or any Subsidiary. |
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(iii) |
Patents,
Copyrights, etc. The Company and the Subsidiaries own
or possess adequate rights or licenses to use all material
trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now
conducted (“Intellectual Property”). None of the Company’s
nor any Subsidiary’s Intellectual Property rights have expired or
terminated, or, by the terms and conditions thereof, could expire
or terminate within two years from the Execution Date other than by default under agreements that
grant such rights. The Company does not have any Knowledge
of any infringement by the Company and/or any Subsidiary of any
material trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks,
service mark registrations, trade secret or other similar rights of
others, or of any such development of similar or identical trade
secrets or technical information by others, and there is no claim,
action or proceeding being made or brought against, or to the
Company’s Knowledge, being threatened against, the Company and/or
any Subsidiary regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service
marks, service mark registrations, trade secret or other
infringement, which could reasonably be expected to have a Material
Adverse Effect. |
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(iv) |
Tax
Status. The Company and each of its Material Subsidiaries has
made or filed all federal and material state and foreign income and
all other material tax returns, reports and declarations required
by any jurisdiction to which it is subject (unless and only to the
extent that the Company and each of its Material Subsidiaries has
set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes
and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has
set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid
taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know
of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the
assessment or collection of any foreign, federal, state or local
tax. None of the Company’s tax returns is presently being audited
by any taxing authority. |
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(v) |
Certain
Transactions. Except as set forth in the SEC Documents, none of
the officers or directors of the Company or any Subsidiary, and to
the Knowledge of the Company, none of the employees of the Company
or any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or
such employee or, to the Knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each
case in excess of the lesser of (i) $120,000 or (ii) one percent of
the average of the Company’s total assets at year end for the last
two completed fiscal years, other than for (i) payment of salary or
consulting fees for services rendered, (ii) reimbursement for
expenses incurred on behalf of the Company or any Subsidiary and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company. |
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(vi) |
Permits;
Compliance. The Company and each of its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being
conducted (collectively, the “Company Permits”), and there
is no action pending or, to the Knowledge of the Company,
threatened regarding suspension or cancellation of any of the
Company Permits. Neither the Company nor any of its Subsidiaries is
in conflict with, or in default or violation of, any of the Company
Permits, except for any such conflicts, defaults or violations
which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Neither the Company nor
any of its Subsidiaries has received any notification with respect
to possible conflicts, defaults or violations of applicable laws,
except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have
a Material Adverse Effect. |
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(vii) |
Environmental
Matters. The Company is in compliance with all applicable
Environmental Laws in all respects except where the failure to
comply does not have and could not reasonably be expected to have a
Material Adverse Effect. For purposes of the foregoing:
“Environmental Laws” means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, the Superfund Amendments and Reauthorization Act of 1986,
the Resource Conservation and Recovery Act, the Toxic Substances
Control Act, as amended, the Clean Air Act, as amended, the Clean
Water Act, as amended, any other “Superfund” or “Superlien” law or
any other applicable federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct
concerning, the environment or any Hazardous Material. |
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(viii) |
Title
to Property. Except as disclosed in the SEC Documents, the
Company and each Subsidiary has good and marketable title in fee
simple to all real property owned by it and good and marketable
title in all personal property owned by it that is material to the
business of the Company and each Subsidiary, in each case free and
clear of all Liens and, except for Liens as do not materially
affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the
Company or any Subsidiary and Liens for the payment of federal,
state or other taxes, the payment of which is neither delinquent
nor subject to penalties. Any real property and facilities held
under lease by the Company or any Subsidiary is held under valid,
subsisting and enforceable leases with which the Company is in
compliance with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such
property and buildings by the Company or any
Subsidiary. |
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(ix) |
Internal
Accounting Controls. Except as disclosed in the SEC Documents
the Company and each of its Subsidiaries maintain a system of
internal accounting controls sufficient, in the judgment of the
Company’s board of directors, to provide reasonable assurance that
(i) transactions are executed in accordance with management’s
general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. The
Company is in compliance with all provisions of the Sarbanes-Oxley
Act of 2002, as amended, which are applicable to it. |
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(x) |
Foreign
Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any Subsidiary has, in
the course of his actions for, or on behalf of, the Company, used
any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or made any
bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee. |
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(xi) |
Solvency.
[DELETED] |
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(xii) |
Insurance.
The Company and each Material Subsidiary is insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and
each Material Subsidiary is engaged. Neither the Company, nor any
Material Subsidiary has been refused any insurance coverage sought
or applied for, and the Company has no reason to believe that it or
any Material Subsidiary will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the
earnings, business or operations of the Company, taken as a
whole. |
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(xiii) |
No
Undisclosed Events, Liabilities, Developments or Circumstances.
Except as set forth in the SEC Documents, the Company and its
Subsidiaries have no liabilities or obligations of any nature
(whether accrued, absolute, contingent, unasserted or otherwise and
whether due or to become due) other than those liabilities or
obligations that are disclosed in the Financial Statements or which
do not exceed, individually in excess of $50,000 and in the
aggregate in excess of $200,000. The reserves, if any, established
by the Company or the lack of reserves, if applicable, are
reasonable based upon facts and circumstances known by the Company
on the Execution Date and there are no loss contingencies that are
required to be accrued by the Statement of Financial Accounting
Standard No. 5 of the Financial Accounting Standards Board which
are not provided for in the Financial Statements. |
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(xiv) |
Management.
During the past five year period, no current or former officer or
director or, to the Knowledge of the Company, stockholder of the
Company or any of its Subsidiaries has been the subject of any
matter that would require disclosure under Paragraph (f) of Rule
401 of Regulation S-K that has not been publicly
disclosed. |
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(xv) |
Assets;
Title. Except as disclosed in the SEC Documents, each of the
Company and its Subsidiaries has good and valid title to, or a
valid leasehold interest in, as applicable, all of its properties
and assets, free and clear of all Liens except (i) any Lien for
taxes not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any statutory Lien
arising in the ordinary course of business by operation of law with
respect to a liability that is not yet due or delinquent, (iii) any
Lien created by operation of law, such as materialmen’s liens,
mechanics’ liens and other similar liens, arising in the ordinary
course of business with respect to a liability that is not yet due
or delinquent or that are being contested in good faith by
appropriate proceedings, and (iv) such as have been disposed of in
the ordinary course of business. To the Company’s Knowledge, all
tangible personal property owned by the Company and its
Subsidiaries has been maintained in good operating condition and
repair, except (x) for ordinary wear and tear, and (y) where such
failure would not have a Material Adverse Effect. To the Company’s
Knowledge, all assets leased by the Company or any of its
Subsidiaries are in the condition required by the terms of the
lease applicable thereto during the term of such lease and upon the
expiration thereof. To the Company’s Knowledge, the Company and its
Subsidiaries have good and marketable title in fee simple to all
real property and good and marketable title to all personal
property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects. Any real property and facilities
held under lease by the Company or any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use
made and proposed to be made of such property and buildings by the
Company and its Subsidiaries. |
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(xvi) |
Subsidiary
Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and to receive dividends and
distributions on, all equity securities of its Subsidiaries as
owned by the Company or such Subsidiary. |
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(xvii) |
Books
and Records. To the Company’s Knowledge, the books of account,
ledgers, order books, records and documents of the Company and its
Subsidiaries accurately and completely reflect all information
relating to the respective businesses of the Company and its
Subsidiaries, the nature, acquisition, maintenance, location and
collection of each of their respective assets, and the nature of
all transactions giving rise to material obligations or accounts
receivable of the Company or its Subsidiaries, as the case may be,
except where the failure to so reflect such information would not
have a Material Adverse Effect. To the Company’s Knowledge, the
minute books of the Company and its Subsidiaries contain accurate
records in all material respects of all meetings and accurately
reflect all other actions taken by the stockholders, boards of
directors and all committees of the boards of directors, and other
governing Persons of the Company and its Subsidiaries,
respectively. |
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(xviii) |
Money
Laundering. The Company and its Subsidiaries are in compliance
with, and have not previously violated, the USA PATRIOT ACT of 2001
and all other applicable U.S. and non-U.S. anti-money laundering
laws and regulations, including, but not limited to, the laws,
regulations and Executive Orders and sanctions programs
administered by the U.S. Office of Foreign Assets Control,
including, but not limited, to (i) Executive Order 13224 of
September 23, 2001 entitled, “Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or
Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any
regulations contained in 31 CFR, Subtitle B, Chapter V. |
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(i) |
Acknowledgment
of Dilution. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance
of the Conversion Shares upon conversion of the Note. The Company
further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Note is absolute and unconditional
regardless of the dilutive effect that such issuances may have on
the ownership interests of other stockholders of the Company. The
Company understands and acknowledges the potentially dilutive
effect to the Common Stock upon the issuance of the Warrant Shares
upon exercise of the Warrant. The Company further acknowledges that
its obligation to issue Warrant Shares upon exercise of the Warrant
is absolute and unconditional regardless of the dilutive effect
that such issuances may have on the ownership interests of other
stockholders of the Company. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock
upon the issuance of the Commitment Shares upon execution of this
Agreement. The Company further acknowledges that its obligation to
issue Commitment Shares upon execution of this Agreement is
absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other
stockholders of the Company. |
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(ii) |
Breach
of Representations and Warranties by the Company. If the
Company breaches any of the representations or warranties set forth
in this Section 3, and in addition to any other remedies
available to the Buyer pursuant to this Agreement, it will be
considered an Event of Default under the Note. |
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(iii) |
Absence
of Schedules. In the event that at the Closing Date, the
Company does not deliver and attach hereto any disclosure schedule
contemplated by this Agreement, the Company hereby acknowledges and
agrees that (i) each such undelivered disclosure schedule shall be
deemed to read as follows: “Nothing to Disclose”, and (ii) the
Buyer has not otherwise waived delivery of such disclosure
schedule. |
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(a) |
Best
Efforts. The parties shall use their commercially reasonable
best efforts to satisfy timely each of the conditions described in
Section 7 and 8 of this Agreement. |
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(b) |
Use
of Proceeds. The Company shall use the proceeds from the sale
of the Notes first as set forth on Schedule 4(b), and
thereafter for other general corporate purposes and shall not,
directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership, enterprise or
other person. |
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(c) |
Financial
Information. The Company agrees to send or make available the
following reports to the Buyer until the Buyer transfers, assigns,
or sells all of the Securities: (i) within ten (10) days after the
filing with the SEC, a copy of its Annual Report on Form 10-K, its
Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K;
(ii) within five (5) days after upload or filing, any filings made
in the SEC Documents, (iii) within one (1) day after release,
copies of all press releases issued by the Company or any of its
Subsidiaries relating to the transactions contemplated hereby; and
(iv) contemporaneously with the making available or giving to the
stockholders of the Company, copies of any notices or other
information the Company makes available or gives to such
stockholders. For the avoidance of doubt, filing the documents
required in (i) above via EDGAR or releasing any documents set
forth in (ii) above via a recognized wire service shall satisfy the
delivery requirements of this Section 4(c). |
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(d) |
Listing.
The Company shall work in good faith to secure the listing of the
Conversion Shares, the Commitment Shares, and the Warrant Shares
upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and, so long as the Buyer
owns any of the Securities, shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all
Conversion Shares, Commitment Shares, and all Warrant Shares from
time to time issuable upon exercise of the Note and the Warrant,
respectively. The Company will obtain and, so long as the Buyer
owns any of the Securities, maintain the listing and trading of its
Common Stock on the Trading Market and will comply in all respects
with the Company’s reporting, filing and other obligations under
the bylaws or rules of the Financial Industry Regulatory Authority
(“FINRA”) and such exchanges, as applicable. |
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(e) |
Corporate
Existence. So long as the Buyer beneficially owns any of the
Securities, the Company shall maintain its corporate existence and
shall not sell all or substantially all of the Company’s assets,
except in the event of a merger or consolidation or sale of all or
substantially all of the Company’s assets, where the surviving or
successor entity in such transaction (i) assumes the Company’s
obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed or quoted for trading on
the Trading Market. |
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(f) |
No
Integration. The Company shall not make any offers or sales of
any security (other than the Securities) under circumstances that
would require registration of the Securities being offered or sold
hereunder under the Securities Act or cause the offering of the
Securities to be integrated with any other offering of securities
by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities. |
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(g) |
Failure
to Comply with the Exchange Act. So long as the Buyer
beneficially owns any of the Securities, the Company shall comply
with the reporting requirements of the Exchange Act; and the
Company be subject to the periodic reporting and other reporting
requirements of the Exchange Act. |
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(h) |
Breach
of Covenants. If the Company breaches any of the covenants set
forth in this Section 4, then in addition to any other
remedies available to the Buyer pursuant to this Agreement, each
such breach will be considered an “Event of Default” under the
Note. |
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(i) |
Reservation
of Shares. The Company covenants that while the Note and/or
Warrant remain outstanding, the Company will reserve from its
authorized and unissued Common Stock, ond and a half times (150%)
the number of shares of Common Stock, free from pre-emptive rights,
that would be issuable upon full, unconditioned conversion of the
Note and exercise of the Warrant calculated on the basis of the
conversion price and exercise price, respectively, in effect as the
Closing Date, which such reserved amounts shall be increased by the
Company from time to time in accordance with its obligations under
such Securities. In addition to all other rights in this Agreement
and the Note, in the event that on any date (the “Reserve
Depletion Date”) the Company does not have available enough
authorized shares of Common Stock to satisfy any conversion request
regarding the Note, or exercise of the Warrant, the Company shall
first convert as much as would be permitted based on the number of
authorized and available shares of “Common Stock and then repay all
remaining outstanding amounts owed under the Note in full within
sixty (60) days of the Reserve Depletion Date. |
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(j) |
Indemnification.
Each party hereto (an “Indemnifying Party”) agrees to
indemnify and hold harmless the other party along with its
officers, directors, employees, and authorized agents, and each
Person or entity, if any, who controls such party within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act or the rules and regulations thereunder (an
“Indemnified Party”) from and against any Damages, joint or
several, and any action in respect thereof to which the Indemnified
Party becomes subject to, resulting from, arising out of or
relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement
on the part of the Indemnifying Party contained in this
Agreement. |
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(k) |
Certain
Expenses and Fees. The Company shall pay all stamp taxes and
other taxes and duties levied in connection with the delivery of
the Note to the Buyer. In addition, the Buyer shall be entitled to
withhold $3,000.00 for the Buyer’s transaction expenses from the
amounts delivered at Closing. |
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(a) |
Piggyback
Registration Rights. The Company shall include, at the request
of the Buyer, on any registration and/or offering statement filed
with the SEC after the date hereof, including without limitation on
any offering statement on Form 1-A, all Conversion Shares, all
Warrant Shares, and all Commitment Shares for resale by the Buyer.
In addition to all other remedies at law or in equity or otherwise
under this Agreement or other Transaction Documents, failure to do
so, upon Buyer request, will result in liquidated damages of
$20,000.00 pursuant to this Section 5(a), being immediately
due and payable to the Buyer at its election in the form of cash
payment. |
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(b) |
Variable
Rate Transactions. The Company covenants and agrees that it
will not, without the prior written consent of the Buyer, enter
into any equity line of credit agreement with any other party or
enter into any transaction resulting in, or with, any Variable
Security Holders, excluding the Buyer, without the Buyer’s prior
written consent, which consent may be granted or withheld in the
Buyer’s sole and absolute discretion unless the proceeds of such
transaction are used first and primarily to repay the Note in full;
provided that such arrangements evidenced by written agreements
that exist as of the Execution Date shall not be subject to the
provisions of this Section 5(b). “Variable Security
Holder” means any holder of any securities of the Company that
(A) have or may have conversion rights of any kind, contingent,
conditional or otherwise, in which the number of shares that may be
issued pursuant to such conversion right varies with the market
price of the Common Stock, and/or (B) are or may become convertible
into Common Stock (including without limitation convertible debt,
warrants or convertible preferred stock), with a conversion price
that varies with the market price of the Common Stock, even if such
security only becomes convertible following an event of default,
the passage of time, or another trigger event or
condition. |
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(c) |
Regulation
A Offering Participation. |
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(i) |
During
the twelve (12) months immediately following the Closing, with
respect to any securities offering conducted by the Company on Form
1-A, or successor/similar form, filed by the Company with the SEC
(a “Reg A+ Offering”) or any other offering of securities,
the Company agrees to, and hereby does, irrevocably grant to the
Buyer the option to purchase up to $1,000,000.00 worth of the
securities offered by the Company in the Reg A+ Offering or other
offering at the applicable prices thereunder (such grant, the
“Participation Right”). The Buyer shall hold the
Participation Right from the Execution Date until the 1 year
anniversary thereof. |
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(ii) |
[Reserved]. |
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(iii) |
[Reserved]. |
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(d) |
Participation
Rights. During the twelve (12) months immediately following the
Closing, with respect to each and any securities offering conducted
by the Company, the Company agrees to, and hereby does, irrevocably
grant to the Buyer the option to purchase up to $87,000 worth of
the securities, on a pro rata basis with other buyers or investors
with a similar right, offered in such offering at the applicable
offering prices thereunder. The effect of these participation
rights shall, at all times, be subject to 9.99% maximum beneficial
ownership percentage described in Section 1.1 of the Note and
Section 1(c) of the Warrant if such Warrant is issued. |
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(e) |
Repayment
from Proceeds. While any portion of the Note is outstanding, if
the Company receives cash proceeds from an closing of an offering
pursuant to Regulation A, Company shall, within one (1) business
day of the Company’s receipt of such proceeds, inform the Buyer of
such receipt, following which the Buyer shall have the right in its
sole discretion to require the Company to immediately apply 10% or
any lesser portion of such proceeds to repay all or any portion of
the outstanding amounts owed under the Note. In the event that such
proceeds are received by the Holder (as defined in the Note) prior
to the Maturity Date (as defined in the Note), the required
prepayment shall be subject to all prepayment terms in the
Note. |
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(f) |
Additional
Participation Rights. During the twelve (12) months immediately
following the Closing, in the event that the Company receives a
Bona Fide Offer (defined below) of capital or financing from any
third party consisting of any securities offering, including but
not limited to any debt or equity securities, then the Company
must, and irrevocably agrees, subject to Buyer’s agreement to
receive what may be material non-public information, to offer, on a
one-time basis only with respect to each Bona Fide Offer, pro rata
participation in such securities offering in order to permit Buyer
to maintain its percentage ownership in the Company, measured on a
primary share basis. The Buyer shall have the opportunity, on a pro
rata basis, to provide such capital or financing to the Company on
the same or similar terms as each respective third party’s terms,
and the Buyer may in its sole discretion determine whether the
Buyer will provide such capital or financing. Upon receipt of the
third party offer, the Company shall promptly provide notice
thereof to the Buyer (the “Offer Notice”) and provide copies
of the pending transaction documents. Should the Buyer be unwilling
or unable to provide such capital or financing to the Company
within two (2) Trading Days from the Buyer’s receipt of the Offer
Notice from the Company, then the Company may obtain such capital
or financing from the respective third party upon the exact same
terms and conditions offered by the Company to the Buyer. A
“Bona Fide Offer” is one in which the purchaser is
irrevocably and contractually bound to purchase the subject
securities from the Company, subject to the Buyer’s right of first
refusal. The effect of these participation rights shall, at all
times, be subject to 9.99% maximum beneficial ownership percentage
described in Section 1.1 of the Note and Section 1(c) of the
Warrant if such Warrant is issued. |
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(g) |
Compliance
with Rule 15c2-11. The Company take all actions to maintain as
publicly available all information required by paragraph (b) of
Rule 15c2-11 of the Exchange Act (as effective on September 26,
2021), as amended, such that brokers or dealers attempting to
publish any quotation for the Common Stock or, directly or
indirectly, to submit any such quotation for publication, shall be
able to comply with Rule 15c2-11(a). |
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(h) |
Prohibition
on Certain Transactions. The Buyer covenants and agrees that
neither it, nor any affiliate acting on its behalf or pursuant to
any understanding with it will execute any “short sales” of the
Common Stock as defined in Rule 200 of Regulation SHO under the
Exchange Act. |
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(i) |
Audit.
The Company shall maintain an engagement with a PCAOB registered
accounting firm at all times the Securities are
outstanding. |
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(i) |
[Reserved]. |
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(ii) |
[Reserved]. |
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(iii) |
[Reserved]. |
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(iv) |
[Reserved]. |
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(v) |
[Reserved]. |
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(vi) |
[Reserved]. |
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(k) |
Breach
of Covenants. If the Company breaches any of the covenants set
forth in this Section 5, then in addition to any other
remedies available to the Buyer pursuant to this Agreement, each
such breach will be considered an “Event of Default” under the
Note. |
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6. |
Transfer Agent Instructions.
Prior to registration of the Conversion Shares and the Warrant
Shares under the Securities Act or the date on which the Conversion
Shares or the Warrant Shares may be sold pursuant to Rule 144
without any restriction as to the number of Securities as of a
particular date that can then be immediately sold, all such
certificates shall bear the restrictive legend specified in the
Note or Warrants as applicable. The Company warrants that: (i) no
stop transfer instructions will be given by the Company to its
Transfer Agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company as and to the
extent provided in this Agreement and the Note; (ii) it will not
direct its Transfer Agent not to transfer or delay, impair, and/or
hinder its Transfer Agent in transferring (or issuing)
(electronically or in certificated form) any certificate for
Conversion Shares or Warrant Shares to be issued to the Buyer upon
conversion/exercise of or otherwise pursuant to the Note or the
Warrant, respectively, as and when required by the Note, the
Warrant or this Agreement; and (iii) it will not fail to remove (or
direct its Transfer Agent not to remove or impairs, delays, and/or
hinders its Transfer Agent from removing) any restrictive legend
(or to withdraw any stop transfer instructions in respect thereof)
on any certificate for any Conversion Shares or any Warrant Shares
as contemplated by the terms of this Agreement, the Note and the
Warrant, as applicable. Nothing in this Section shall affect in any
way the Buyer’s obligations and agreement to comply with all
applicable prospectus delivery requirements, if any, upon re-sale
of the Securities. If the Buyer provides the Company (which shall
be at the cost of the Company), with (i) an opinion of counsel in
form, substance and scope customary for opinions in comparable
transactions, to the effect that a public sale or transfer of any
Securities may be made without registration under the Securities
Act and such sale or transfer is effected or (ii) the Buyer
provides reasonable assurances that the Securities can be sold
pursuant to Rule 144, the Company shall permit the transfer, and,
in the case of the Conversion Shares, the Commitment Shares, and
the Warrant Shares, promptly instruct its Transfer Agent to issue
one or more certificates, free from restrictive legend, in such
name and in such denominations as specified by the Buyer or, in the
sole discretion of the Buyer, the Company shall take all action
necessary to ensure that such Common Stock is transferred
electronically as DWAC (as defined in the Note) shares. The Company
acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyer, by vitiating the intent and
purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its
obligations under this Section may be inadequate and agrees, in the
event of a breach or threatened breach by the Company of the
provisions of this Section, that the Buyer shall be entitled, in
addition to all other available remedies, to an injunction
restraining any breach and requiring immediate transfer, without
the necessity of showing economic loss and without any bond or
other security being required. |
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7. |
CONDITIONS
PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL. The obligation
of the Company hereunder to issue and sell any Note, Warrant, and
Commitment Shares to the Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the
following conditions thereto, 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: |
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(a) |
The
Buyer shall have executed this Agreement and delivered the same to
the Company. |
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(b) |
The
Buyer shall have delivered the Company Funding Amount in accordance
with Section 1 above. |
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(c) |
The
representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to the Closing Date. |
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(d) |
No
litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement. |
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8. |
CONDITIONS
PRECEDENT TO THE BUYER’S OBLIGATION TO PURCHASE. The obligation
of the Buyer hereunder to purchase the Note and fund such Note at
the Closing is subject to the satisfaction, at or before the
Closing Date of each of the following conditions, provided that
these conditions are for the Buyer’s sole benefit and may be waived
by the Buyer at any time in its sole discretion: |
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(a) |
The
Company shall have executed this Agreement and delivered the same
to the Buyer on the Closing Date. |
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(b) |
The
Company shall have delivered to the Buyer the duly executed Note
and the Commitment Shares in accordance with Section 1 above
on the Closing Date. |
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(c) |
[Reserved]. |
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(d) |
The
Company shall have delivered to the Buyer the duly executed
Transfer Agent Instruction Letter on the Closing Date. |
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(e) |
The
Company shall have delivered a copy of its Directors’ resolutions
relating to the transactions contemplated hereby on the Closing
Date. |
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(f) |
No
litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement, as of the Closing Date. |
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(g) |
No
event shall have occurred which could reasonably be expected to
have a Material Adverse Effect on the Company including but not
limited to a change in the Exchange Act reporting status of the
Company or the failure of the Company to be timely in its Exchange
Act reporting obligations, as of the Closing Date. |
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(h) |
The
Company shall have delivered to the Buyer a copy of its certificate
of good standing with the State of Delaware dated within five (5)
days of the Closing. |
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(i) |
The
Company shall have delivered a legal opinion to the Buyer regarding
the enforceability of the Transaction Documents in form and
substance acceptable to the Buyer. |
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(j) |
The
representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of
the Execution Date and the
Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date,
which shall be true and correct in all material respects as of such
specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to
the Closing Date. The Buyer
shall have received a certificate or certificates, executed by the
chief executive officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested
by the Buyer, in the form prescribed by the Buyer. |
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9. |
GOVERNING
LAW; MISCELLANEOUS. |
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(a) |
Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wyoming without regard to
principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of Miami,
Florida, or in the federal courts located in the Southern District
of Florida. The parties to this Agreement hereby irrevocably waive
any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. The
prevailing party shall be entitled to recover from the other party
its reasonable attorney’s fees and costs. In the event that any
provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of
any other provision of any agreement. Each party hereby irrevocably
waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this
Agreement or any other Transaction Document by mailing a copy
thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect
for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
law. |
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(b) |
JURY TRIAL WAIVER. THE COMPANY AND THE BUYER HEREBY WAIVE A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY
EITHER OF THE PARTIES HERETO AGAINST THE OTHER IN RESPECT OF ANY
MATTER ARISING OUT OF OR IN CONNECTION WITH THE TRANSACTION
DOCUMENTS. |
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(c) |
Counterparts;
Signatures by Electronic Mail. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This
Agreement, once executed by a party, may be delivered to the other
party hereto by electronic mail transmission of a copy of this
Agreement bearing the signature of the party so delivering this
Agreement. |
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(d) |
Headings.
The headings of this Agreement are for convenience of reference
only and shall not form part of, or affect the interpretation of,
this Agreement. |
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(e) |
Severability.
In the event that any provision of this Agreement or of any of the
Transaction Documents is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of
any other provision hereof. |
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(f) |
Entire
Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, neither the Company
nor the Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in
writing signed by the Buyer. |
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(g) |
Notices.
All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (a) personally
served, (b) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (c) delivered by reputable air
courier service with charges prepaid, or (d) transmitted by hand
delivery, or e-mail as a PDF (with read receipt), addressed as set
forth below or to such other address as such party shall have
specified most recently by written notice given in accordance
herewith. Any notice or other communication required or permitted
to be given hereunder shall be deemed effective (i) upon hand
delivery or delivery by e-mail (with read receipt) at the address
designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to
be received) or (ii) on the second business day following the date
of mailing by express courier service or on the fifth business day
after deposited in the mail, in each case, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever
shall first occur. |
If to
the Company, to:
RESPIRERX
PHARMACEUTICALS, INC.
126
Valley Road Suite C
Glen
Rock, NJ 07452
Attn:
Jeff Eliot Margolis, CFO
E-mail:
jmargolis@respirerx.com
If to
the Buyer, to:
QUICK
CAPITAL, LLC
66
West Flagler Street, 900-#2292
Miami,
FL 33130
Attn:
Eilon D. Natan, Manager
E-mail:
eilon@quick-cap.com
Either
party hereto may from time to time change its address or e-mail for
notices under this Section 9(g) by giving at least ten (10)
days’ prior written notice of such changed address to the other
party hereto.
|
(h) |
Successors
and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or
any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, subject to
Section 2(e), the Buyer may assign its rights hereunder to
any person that purchases Securities in a private transaction from
the Buyer or to any of its “affiliates,” as that term is defined
under the Exchange Act, without the consent of the
Company. |
|
(i) |
Third
Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof
be enforced by, any other person. |
| |
|
|
|
(j) |
Survival.
The representations and warranties of the Company and the
agreements and covenants set forth in this Agreement shall survive
the Closings hereunder as well as the termination/satisfaction of
the Note for the longest period allowable under applicable law. The
Company agrees to indemnify and hold harmless the Buyer and all
their officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach by the Company of
any of its representations, warranties and covenants set forth in
this Agreement or any of its covenants and obligations under this
Agreement, including advancement of expenses as they are incurred.
The Buyer agrees to indemnify and hold harmless the Company and all
its officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach by the Buyer of any
of its representations, warranties and covenants set forth in this
Agreement or any of its covenants and obligations under this
Agreement, including advancement of expenses as they are
incurred. |
| |
|
|
|
(k) |
Further
Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby. |
| |
|
|
|
(l) |
No
Strict 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. |
|
|
(i) |
The
Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Agreement will be inadequate
and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Agreement, that the Buyer shall
be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to
an injunction or injunctions restraining, preventing or curing any
breach of this Agreement and to enforce specifically the terms and
provisions hereof, without the necessity of showing economic loss
and without any bond or other security being required. |
|
|
(ii) |
In
addition to any other remedy provided herein or in any document
executed in connection herewith, the Company shall pay the Buyer
for all costs, fees and expenses in connection with any
arbitration, litigation, contest, dispute, suit or any other action
to enforce any rights of the Buyer against the Company in
connection herewith, including, but not limited to, costs and
expenses and attorneys’ fees, and costs and time charges of counsel
to the Buyer. |
|
|
(n) |
Publicity.
The Company and the Buyer shall have the right to review a
reasonable period of time before issuance of any press releases,
SEC, Trading Market, or FINRA filings, or any other public
statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be
entitled, without the prior approval of the Buyer, to make any
press release or SEC, Trading Market or FINRA filings with respect
to such transactions as is required by applicable law and
regulations (although the Buyer shall be consulted by the Company
in connection with any such press release prior to its release and
shall be provided with a copy thereof). |
|
|
10. |
DEFINED
TERMS. As used in this Agreement, the following terms shall
have the following meanings specified or indicated (such meanings
to be equally applicable to both the singular and plural forms of
the terms defined): |
“Affiliate”
means, with respect to any Person, any other Person that, directly
or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, and
the term “control” (including the terms “controlled by” and “under
common control with”) means the possession, directly or indirectly,
of the power to direct or cause the direction of the management
policies of such Person, whether through ownership of voting
securities, by contract or otherwise.
“Common
Stock Equivalents” means any securities of the Company or the
Subsidiaries that 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.
“Damages”
shall mean any loss, claim, damage, liability, cost and expense
(including, without limitation, reasonable attorneys’ fees and
disbursements and costs and expenses of expert witnesses and
investigation).
“Exchange
Act” shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated
thereunder.
“Hazardous
Material” means and includes any hazardous, toxic or dangerous
waste, substance or material, the generation, handling, storage,
disposal, treatment or emission of which is subject to any
Environmental Law.
“Knowledge”
including the phrase “to the Company’s Knowledge” shall mean
the actual knowledge after reasonable investigation of the
Company’s officers and directors.
“Lien”
means a lien, charge, pledge, security interest, encumbrance, right
of first refusal, pre-emptive right or any other
restriction.
“Material
Adverse Effect” means any effect on the business, operations,
properties, or financial condition of the Company and/or the
Subsidiaries that is material and adverse to the Company and/or the
Subsidiaries and/or any condition, circumstance, or situation that
prohibits or otherwise materially interferes with the ability of
the Company and/or the Subsidiaries to enter into and/or perform
its obligations under any Transaction Document.
“Material
Subsidiary” means any Subsidiary with assets, liabilities or
operations that is material to the business, operations, properties
or financial condition of the Company.
“Person”
means an individual, a corporation, a partnership, an association,
a trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality
thereof.
“Securities”
means, collectively, the Note, the Conversion Shares, the Warrant,
the Warrant Shares, the Commitment Shares, and any other securities
of the Company issued in connection with or in exchange for any of
the foregoing.
“Subsidiary”
or “Subsidiaries” means any Person the Company wholly-owns
or controls, or in which the Company, directly or indirectly, owns
a majority of the voting stock or similar voting interest, in each
case that would be disclosable pursuant to Item 601(b)(21) of
Regulation S-K promulgated under the Securities Act.
“Trading
Day” shall mean a day on which the NASDAQ stock market shall be
open for business.
“Trading
Market” means the OTC-QB venture market of the OTC
Markets.
“Transaction
Documents” shall mean this Agreement, the Note, the Warrant,
the Transfer Agent Instruction Letter and all schedules and
exhibits hereto and thereto.
“Transfer
Agent” shall mean the current transfer agent of the Company,
and any successor transfer agent of the Company.
“Transfer
Agent Instruction Letter” means the letter from the Company to
the Transfer Agent in the form mutually agreed by the Buyer and the
Company.
**
signature page follows **
IN
WITNESS WHEREOF, the Buyer and the Company have caused their
respective signature page to this Note Purchase Agreement to be
duly executed as of the Execution Date.
| |
COMPANY: |
| |
|
| |
RESPIRERX
PHARMACEUTICALS, INC. |
|
|
|
|
|
|
By: |
/s/Jeff
Eliot Margolis |
| |
Name: |
Jeff
Eliot Margolis |
| |
Title: |
CFO |
| |
|
|
| |
BUYER: |
| |
|
| |
QUICK CAPITAL, LLC |
| |
|
|
|
|
By: |
/s/
Eilon D. Natan |
| |
Name: |
Eilon
D. Natan |
| |
Title: |
Manager |
** Signature Page to Note Purchase Agreement **
ISSUANCE SCHEDULE
DECEMBER 2021 CLOSING
|
(1) |
|
|
(2) |
|
|
|
(4) |
|
|
|
(5) |
|
|
Buyer |
|
|
Face
Value of Note |
|
|
|
Number
of Commitment Shares |
|
|
|
Funding
Amount |
|
|
Quick
Capital, LLC |
|
$ |
87,000 |
* |
|
|
1,553,000 |
|
|
$ |
78,300 |
** |
*The
Face Value of the Note includes an original issuance discount of
10%.
**
The Buyer has the right to withhold $3,000 from the funding amount
for payment of its transaction costs, and a 4% commission shall be
delivered to the Company’s broker at the closing on the Company’s
behalf.
DISCLOSURE SCHEDULES
Schedule 3(a)(iv)
On
December 21, 2021, the Company granted from the Company’s 2025
Stock and Option Plan, as amended, additional Common Stock Purchase
Options to Jeffrey Witkin, PhD, a consultant to the Company,
pursuant to the terms of an amendment dated December 1, 2021 to the
Company’s consulting agreement with Dr. Witkin as
follows:
|
Granted
to |
|
Grant
date |
|
Expiration
Date |
|
Vesting |
|
|
Exercise
Price |
|
|
Number of
shares of Common Stock into which Option is Exercisable |
|
|
Jeffrey
Witkin |
|
December
21, 2021 |
|
December
21, 2026 |
|
|
100%
immediately |
|
|
$ |
0.019
per share |
|
|
|
1,944,444 |
|
|
Jeffrey
Witkin |
|
December
21, 2021 |
|
December
21, 2026 |
|
|
100%
immediately |
|
|
$ |
0.019
per share |
|
|
|
50,000 |
|
|
Jeffrey
Witkin |
|
December
21, 2021 |
|
December
21, 2026 |
|
|
100%
immediately |
|
|
$ |
0.019
per share |
|
|
|
200,000 |
|
Schedule 3(b)(v)
The
Company’s broker is entitled to a payment of $3,480 for its
services in connection with the transaction contemplated by this
Agreement.
Schedule 3(c)(i)
Except as disclosed in the SEC Documents or in any schedules to the
Agreement to which this schedule is attached, neither
the Company nor any of its Subsidiaries has:
(1)
declared, set aside or paid any dividend or other distribution with
respect to any shares of capital stock of the Company or any of its
Subsidiaries or any direct or indirect redemption, purchase or
other acquisition of any such shares;
(2)
sold, assigned, pledged, encumbered, transferred or otherwise
disposed of any tangible asset of the Company or any of its
Subsidiaries (other than sales or the licensing of its products to
customers in the ordinary course of business consistent with past
practice), or sold, assigned, pledged, encumbered, transferred or
otherwise disposed of any Intellectual Property (as defined below),
other than licensing of products of the Company or its Subsidiaries
in the ordinary course of business and on a non-exclusive
basis;
(3)
entered into any licensing or other agreement with regard to the
acquisition or disposition of any Intellectual Property other than
licenses in the ordinary course of business consistent with past
practice or any amendment or consent with respect to any licensing
agreement filed or required to be filed with respect to any
governmental authority;
(4)
made capital expenditures, individually or in the aggregate, in
excess of $100,000;
(5)
incurred any obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) on the
Company’s behalf or any of its Subsidiaries, in excess of $100,000
individually, other than obligations under customer contracts,
current obligations and liabilities, in each case incurred in the
ordinary course of business and consistent with past
practice;
(6)
had any Lien on any property of the Company or any of its
Subsidiaries except as disclosed in the SEC Documents, or any
Schedule attached hereto;
(7)
made any payment, discharge, satisfaction or settlement of any
suit, action, claim, arbitration, proceeding or obligation of the
Company or any of its Subsidiaries, except in the ordinary course
of business and consistent with past practice;
(8)
effected any split, combination or reclassification of any equity
securities;
(9)
sustained any material loss, destruction or damage to any property
of the Company or any Subsidiary, whether or not
insured;
(10)
effected any acceleration or prepayment of any indebtedness for
borrowed money or the refunding of any such
indebtedness;
(11)
experienced any labor trouble involving the Company or any
Subsidiary or any material change in their personnel or the terms
and conditions of employment;
(12)
made any waiver of any valuable right, whether by contract or
otherwise;
(13)
made any loan or extension of credit to any officer or employee of
the Company;
(14)
made any change in the independent public accountants of the
Company or its Subsidiaries or any material change in the
accounting methods or accounting practices followed by the Company
or its Subsidiaries, as applicable, or any material change in
depreciation or amortization policies or rates;
(15)
experienced any resignation or termination of any officer, key
employee or group of employees of the Company or any of its
Subsidiaries;
(16)
effected any change in any compensation arrangement or agreement
with any employee, officer, director or stockholder that would
result in the aggregate compensation to such Person in such year to
exceed $100,000, other than as may be contractually
required;
(17)
effected any material increase in the compensation of employees of
the Company or its Subsidiaries (including any increase pursuant to
any written bonus, pension, profit sharing or other benefit or
compensation plan, policy or arrangement or commitment), or any
increase in any such compensation or bonus payable to any officer,
stockholder, director, consultant or agent of the Company or any of
its Subsidiaries having an annual salary or remuneration in excess
of $100,000, other than as may be contractually
required;
(18)
made any revaluation of any of their respective assets, including,
without limitation, writing down the value of capitalized inventory
or writing off notes or accounts receivable or any sale of assets
other than in the ordinary course of business;
(19)
made any acquisition or disposition of any material assets (or any
contract or arrangement therefor), or any other material
transaction by the Company or any Subsidiary otherwise than for
fair value in the ordinary course of business;
(20)
written-down the value of any asset of the Company or its
Subsidiaries or written-off as uncollectible of any accounts or
notes receivable or any portion thereof except in the ordinary
course of business and in a magnitude consistent with historical
practice;
(21)
cancelled any debts or claims or any material amendment,
termination or waiver of any rights of the Company or its
Subsidiaries; or
(22)
entered into any agreement, whether in writing or otherwise, to
take any of the actions specified in the foregoing items (1)
through (21).
SCHEDULE 4(b)
Use
of Proceeds
(1)
General working capital.
EXHIBITS
A - NOTE
NEITHER
THE ISSUANCE NOR SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES FILED PURSUANT TO THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.
|
Principal
Amount: $87,000 |
Issue
Date: December 23, 2021 |
CONVERTIBLE
PROMISSORY NOTE
FOR
VALUE RECEIVED, as of December 23, 2021 (the “Issue
Date”), RESPIRERX PHARMACEUTICALS, INC., a Delaware corporation
(hereinafter called the “Borrower” or “Company”),
hereby promises to pay to the order of Quick Capital, LLC, a
Wyoming limited liability company, or its registered assigns (the
“Holder”), the principal sum of $87,000, payable upon
the earlier of maturity or upon acceleration or upon prepayment of
this Note as set forth herein. The term “Note” and all
references thereto, as used throughout this instrument, shall mean
this instrument as originally executed, or if later amended or
supplemented, then as so amended or supplemented. A one-time
interest charge equal to 10% per annum shall accrue on this Note,
provided that upon and following any occurrence of an Event of
Default, this Note shall accrue an interest charge at a rate equal
to the lesser of 24% on the principal amount of this Note or the
maximum rate of interest under applicable law. The maturity date
of this Note shall be the date that is 120 days after the Issue
Date (the “Maturity Date”), and is the date upon which the
principal amount, as well as any accrued and unpaid interest and
other fees, shall be due and payable, provided however, that upon
10 days prior written notice delivered to the Holder before the
original Maturity Date, the Company may extend the Maturity Date to
the 180th day following the Issue Date in the Company’s
sole discretion. This Note may be prepaid in whole or in part
only as explicitly set forth herein. All payments due hereunder (to
the extent not converted into common stock of the Company, $0.001
par value per share (the “Common Stock”) in accordance with
the terms hereof) shall be made in lawful money of the United
States of America. All payments shall be made at such address as
the Holder shall hereafter give to the Borrower by written notice
made in accordance with the provisions of this Note. Whenever any
amount expressed to be due by the terms of this Note is due on any
day which is not a business day, the same shall instead be due on
the next succeeding day which is a business day and, in the case of
any interest payment date which is not the date on which this Note
is paid in full, the extension of the due date thereof shall not be
taken into account for purposes of determining the amount of
interest due on such date. As used in this Note, the term “business
day” shall mean any day other than a Saturday, Sunday or a day on
which commercial banks in the city of Miami, Florida are authorized
or required by law or executive order to remain closed. Each
capitalized term used herein, and not otherwise defined, shall have
the meaning ascribed thereto in that certain Note Purchase
Agreement dated December 23, 2021, pursuant to which this Note was
originally issued (as amended and/or restated from time to time,
the “Purchase Agreement”).
The
cash consideration delivered to the Borrower at the closing of this
Note is $71,820.00 as this Note is being issued with a ten percent
(10%) original issuance discount, with a 4% commission being issued
to the Company’s broker on the Company’s behalf at closing, and
with $3,000.00 being withheld to offset other transaction and legal
costs of the Holder.
This
Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Borrower and
will not impose personal liability upon the holder
thereof.
The
Company hereby affirms all of its obligations to the Holder under
all of the Transaction Documents and agrees and affirms as follows:
(i) that as of the Issue Date, the Company has performed, satisfied
and complied in all material respects with all the covenants,
agreements and conditions under each of the Transaction Documents
to be performed, satisfied or complied with by the Company; (ii)
that the Company shall continue to perform each and every covenant,
agreement and condition set forth in each of the Transaction
Documents and this Note, and continue to be bound by each and all
of the terms and provisions thereof and hereof; (iii) that as of
the Issue Date, no default or Event of Default has occurred or is
continuing under the Purchase Agreement, the Note or any other
Transaction Documents, and no event has occurred that, with the
passage of time, the giving of notice, or both, would constitute a
default or an Event of Default under the Purchase Agreement, the
Note or any other Transaction Documents; and (iv) that as of the
Issue Date, no event, fact, or other set of circumstances has
occurred which could reasonably be expected to have, cause, or
result in a Material Adverse Effect.
The
Company hereby acknowledges, represents, warrants and confirms to
the Holder that: (i) each of the Transaction Documents executed by
the Company are valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective
terms; and (ii) no oral representations, statements, or inducements
have been made by Holder, or any agent or representative of Holder,
with respect to this Note, the Purchase Agreement, and all other
Transaction Documents.
The
following additional terms shall also apply to this
Note:
ARTICLE I
CONVERSION RIGHTS
1.1
Conversion
Right. After the occurrence of any Event of Default (as defined
herein), the Holder shall have the right at any time, and from time
to time to convert all or any part of the outstanding and unpaid
principal, interest, fees, or any other obligation owed pursuant to
this Note into fully paid and non-assessable shares of Common
Stock, as such Common Stock exists on the Issue Date, or any shares
of capital stock or other securities of the Borrower into which
such Common Stock shall hereafter be changed or reclassified at the
Default Conversion Price (as defined below), determined as provided
herein (a “Conversion”); provided, however,
that in no event shall the Holder be entitled to convert any
portion of this Note in excess of that portion of this Note upon
conversion of which the sum of (1) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other
than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of this Note or
the unexercised or unconverted portion of any other security of the
Borrower subject to a limitation on conversion or exercise
analogous to the limitations contained herein) and (2) the number
of shares of Common Stock issuable upon the Conversion of the
portion of this Note with respect to which the determination of
this proviso is being made, would result in beneficial ownership by
the Holder and its affiliates of more than 9.99% of the outstanding
shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and
Regulations 13D-G thereunder, except as otherwise provided in
clause (1) of such proviso. The number of shares of Common Stock to
be issued upon each Conversion of this Note shall be determined by
dividing the Conversion Amount (as defined below) (the numerator)
by the applicable Default Conversion Price then in effect on the
date specified in the notice of conversion (the denominator), in
the form attached hereto as Exhibit A (the “Notice of
Conversion”), delivered to the Borrower by the Holder in
accordance with Section 1.4 below; provided that the Notice
of Conversion is submitted by facsimile or e-mail (or by other
means resulting in, or reasonably expected to result in, notice) to
the Borrower before 6:00 p.m., Miami, Florida time on such
conversion date (the “Conversion Date”). The term
“Conversion Amount” means, with respect to any Conversion of
this Note, the sum of (1) the principal amount of this Note to be
converted in such Conversion plus (2) at the Holder’s
option, accrued and unpaid interest, if any, on such principal
amount at the interest rates provided in this Note to the
Conversion Date plus (3) at the Holder’s option, fees on the
amounts referred to in the immediately preceding clauses (1) and/or
(2) plus (4) at the Holder’s option, any amounts owed to the
Holder pursuant to Sections 1.3 and 1.4(g)
hereof.
1.2
Default Conversion Price. Subject to the adjustments
described herein, this Note shall be convertible into shares of
Common Stock at any time after an Event of Default in any portion
at the Default Conversion Price, in the sole discretion of the
Holder. “Default Conversion Price” means the conversion
price as determined in accordance with this Note. The Default
Conversion Price shall be automatically adjusted equitably for
stock splits, stock dividends or rights offerings by the Borrower
relating to the Borrower’s securities or the securities of any
subsidiary of the Borrower, as well as combinations,
recapitalization, reclassifications, extraordinary distributions
and similar events:
(a)
[Reserved]
(b)
[Reserved].
(c)
Default Conversion Price: The “Default Conversion
Price” shall mean $0.02 per share. “Trading Day” shall
mean any day on which the Common Stock is tradable for any period
on the OTCBB, OTCQB or on the principal securities exchange or
other securities market on which the Common Stock is then being
quoted or traded.
(d)
[Reserved].
(e)
Pro Rata Conversion; Disputes. In the event of a dispute as
to the number of shares of Common Stock issuable to the Holder in
connection with a conversion of this Note, the Borrower shall issue
to the Holder the number of shares of Common Stock not in dispute
and resolve such dispute in accordance with this Note.
1.3
Authorized Shares. The Borrower covenants that during the
period the Conversion right exists, the Borrower will reserve from
its authorized and unissued Common Stock a sufficient number of
shares, free from preemptive rights, to provide for the issuance of
Common Stock upon the full conversion of this Note issued pursuant
to the Purchase Agreement. The Borrower is required at all times to
have authorized and reserved one and a half times (150%) the number
of shares that is actually issuable upon full conversion of the
Note (based on the Conversion Price of the Note in effect from time
to time) (the “Reserved Amount”). The Reserved Amount shall
be increased from time to time in accordance with the Borrower’s
obligations pursuant to Section 4(i) of the Purchase
Agreement. The Borrower represents that upon issuance, such shares
of Common Stock will be duly and validly issued, fully paid and
non-assessable. In addition, if the Borrower shall issue any
securities or make any change to its capital structure which would
change the number of shares of Common Stock into which this Note
shall be convertible at the then current Conversion Price, the
Borrower shall at the same time make proper provision so that
thereafter there shall be a sufficient number of shares of Common
Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Note. The Borrower (i) represents
that it has irrevocably instructed its transfer agent to issue
certificates for the Common Stock issuable upon conversion of this
Note, and (ii) agrees that its issuance of this Note shall
constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute
and issue the necessary certificates for shares of Common Stock in
accordance with the terms and conditions of this Note.
Notwithstanding the foregoing, in no event shall the Reserved
Amount be lower than the initial Reserved Amount, regardless of any
prior conversions.
Borrower’s
failure to maintain or to replenish the Reserved Amount within
three (3) business days of a request of the Holder, shall be an
Event of Default under this Note.
1.4
Method of Conversion.
(a)
Mechanics of Conversion. Subject to Section 1.1, this
Note may be converted by the Holder in whole or in part at any time
from time to time on or after the Issue Date, by (i) submitting to
the Borrower a Notice of Conversion (by facsimile, e-mail or other
reasonable means of communication dispatched on the Conversion Date
prior to 6:00 p.m., Miami, Florida time) and (ii) subject to
Section 1.4(b), surrendering this Note at the principal
office of the Borrower.
(b)
Surrender of Note Upon Conversion. Notwithstanding anything
to the contrary set forth herein, upon conversion of this Note in
accordance with the terms hereof, the Holder shall not be required
to physically surrender this Note to the Borrower unless the entire
unpaid principal amount of this Note is so converted. The Holder
and the Borrower shall maintain records showing the principal
amount so converted and the dates of such conversions or shall use
such other method, reasonably satisfactory to the Holder and the
Borrower, so as not to require physical surrender of this Note upon
each such conversion. In the event of any dispute or discrepancy,
such records of the Holder shall, prima facie, be
controlling and determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Note, acknowledge
and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Note, the unpaid and
unconverted principal amount of this Note represented by this Note
may be less than the amount stated on the face hereof.
(c)
Payment of Taxes. The Borrower shall not be required to pay
any tax which may be payable in respect of any transfer involved in
the issue and delivery of shares of Common Stock or other
securities or property on conversion of this Note in a name other
than that of the Holder (or in street name), and the Borrower shall
not be required to issue or deliver any such shares or other
securities or property unless and until the person or persons
(other than the Holder or the custodian in whose street name such
shares are to be held for the Holder’s account) requesting the
issuance thereof shall have paid to the Borrower the amount of any
such tax or shall have established to the satisfaction of the
Borrower that such tax has been paid.
(d)
Delivery of Common Stock Upon Conversion. Upon receipt by
the Borrower from the Holder of a facsimile transmission or e-mail
(or other reasonable means of communication) of a Notice of
Conversion meeting the requirements for conversion as provided in
this Section 1.4, the Borrower shall issue and
deliver or cause to be issued and delivered to or upon the order of
the Holder certificates (or electronic shares via DWAC transfer, at
the option of Holder) for the Common Stock issuable upon such
conversion within three (3) business days after such receipt (the
“Deadline”) (and, solely in the case of conversion of the
entire unpaid principal amount hereof, surrender of this Note) in
accordance with the terms hereof and the Purchase
Agreement.
(e)
Obligation of Borrower to Deliver Common Stock. Upon receipt
by the Borrower of a Notice of Conversion, the Holder shall be
deemed to be the holder of record of the Common Stock issuable upon
such conversion, the outstanding principal amount and the amount of
accrued and unpaid interest on this Note shall be reduced to
reflect such conversion, and, the reserve shall be proportionately
reduced, unless the Borrower defaults on its obligations under this
Article I, all rights with respect to the portion of this
Note being so converted shall forthwith terminate except the right
to receive the Common Stock or other securities, cash or other
assets, as herein provided, on such conversion. If the Holder shall
have given a Notice of Conversion as provided herein, the
Borrower’s obligation to issue and deliver the certificates for
Common Stock shall be absolute and unconditional, irrespective of
the absence of any action by the Holder to enforce the same, any
waiver or consent with respect to any provision thereof, the
recovery of any judgment against any person or any action to
enforce the same, any failure or delay in the enforcement of any
other obligation of the Borrower to the holder of record, or any
setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder of any obligation to the
Borrower, and irrespective of any other circumstance which might
otherwise limit such obligation of the Borrower to the Holder in
connection with such conversion. The Conversion Date specified in
the Notice of Conversion shall be the Conversion Date so long as
the Notice of Conversion is received by the Borrower before 6:00
p.m., Miami, Florida time, on such date.
(f)
Delivery
of Common Stock by Electronic Transfer. In lieu of delivering
physical certificates representing the Common Stock issuable upon
conversion, provided the Borrower is participating in the
Depository Trust Company (“DTC”) Fast Automated Securities
Transfer (“FAST”) program, upon request of the Holder and
its compliance with the provisions contained in Section 1.1
and in this Section 1.4, the Borrower shall use its best
efforts to cause its transfer agent to electronically transmit the
Common Stock issuable upon conversion to the Holder by crediting
the account of Holder’s Prime Broker with DTC through its Deposit
Withdrawal At Custodian (“DWAC”) system.
(g)
Failure
to Deliver Common Stock Prior to Delivery Deadline. Without in
any way limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree
that if delivery of the Common Stock issuable upon conversion of
this Note is not delivered by the Deadline (other than a failure
due to the circumstances described in Section 1.3 above,
which failure shall be governed by such Section) the
Borrower shall pay to the Holder $1,000 per day in cash, for each
day beyond the Deadline that the Borrower fails to deliver such
Common Stock until the Borrower issues and delivers a certificate
to the Holder or credit the Holder’s balance account with DTC for
the number of shares of Common Stock to which the Holder is
entitled upon such Holder’s conversion of any Conversion Amount
(under Holder’s and Borrower’s expectation that any damages will
tack back to the Issue Date). Such cash amount shall be paid to
Holder by the fifth day of the month following the month in which
it has accrued or, at the option of the Holder (by written notice
to the Borrower by the first day of the month following the month
in which it has accrued), shall be added to the principal amount of
this Note, in which event interest shall accrue thereon in
accordance with the terms of this Note and such additional
principal amount shall be convertible into Common Stock in
accordance with the terms of this Note. The Borrower agrees that
the right to convert is a valuable right to the Holder. The damages
resulting from a failure, attempt to frustrate, interference with
such conversion right are difficult if not impossible to qualify.
Accordingly, the parties acknowledge that the liquidated damages
provision contained in this Section 1.4(g) are
justified.
(h)
Rescindment of a Notice of Conversion. If (i) the Borrower
fails to respond to Holder within one (1) business day from the
Conversion Date confirming the details of Notice of Conversion,
(ii) the Borrower fails to provide any of the shares of the
Borrower’s Common Stock requested in the Notice of Conversion
within three (3) business days from the date of receipt of the Note
of Conversion, (iii) the Holder is unable to procure a legal
opinion required to have the shares of the Borrower’s Common Stock
issued unrestricted and/or deposited to sell for any reason related
to the Borrower’s standing, (iv) the Holder is unable to deposit
the shares of the Borrower’s Common Stock requested in the Notice
of Conversion for any reason related to the Borrower’s standing,
(v) at any time after a missed Deadline, at the Holder’s sole
discretion, or (vi) if OTC Markets Group, Inc. changes the
Borrower’s designation to ‘Limited Information’ (Yield), ‘No
Information’ (Stop Sign), ‘Caveat Emptor’ (Skull & Crossbones),
‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign) or
other trading restriction on the day of or any day after the
Conversion Date, the Holder maintains the option and sole
discretion to rescind the Notice of Conversion with a “Notice of
Rescindment.”
1.5
Concerning the
Shares. The shares of Common Stock issuable upon conversion of
this Note may not be sold or transferred unless (i) such shares are
sold pursuant to an effective registration statement under the
Securities Act of 1933, as amended 1933 Act or (ii) the Borrower or
its transfer agent shall have been furnished with an opinion of
counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to
the effect that the shares to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration or
(iii) such shares are sold or transferred pursuant to Rule 144
under the 1933 Act (or a successor rule) (“Rule 144”) or
(iv) such shares are transferred to an “affiliate” (as defined
in Rule 144) of the Borrower who agrees to sell or otherwise
transfer the shares only in accordance with this Section 1.5
and who is an “accredited investor” (as defined in Rule 501(a) of
the 1933 Act). Except as otherwise provided in the Purchase
Agreement (and subject to the removal provisions set forth below),
until such time as the shares of Common Stock issuable upon
conversion of this Note have been registered under the 1933 Act or
otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can
then be immediately sold, each certificate for shares of Common
Stock issuable upon conversion of this Note that has not been so
included in an effective registration statement or that has not
been sold pursuant to an effective registration statement or an
exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
“NEITHER
THE ISSUANCE OR SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.”
The
legend set forth above shall be removed and the Borrower shall
issue to the Holder a new certificate therefore free of any
transfer legend if (i) the Borrower or its transfer agent shall
have received an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to
the effect that a public sale or transfer of such Common Stock may
be made without registration under the 1933 Act, which opinion
shall be reasonably accepted by the Company so that the sale or
transfer is effected or (ii) in the case of the Common Stock
issuable upon conversion of this Note, such security is registered
for sale by the Holder under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule
144 without any restriction as to the number of securities as of a
particular date that can then be immediately sold. Assuming Rule
144 or Regulation S is available and in the event that the Company
does not accept the opinion of counsel provided by the Holder with
respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144 or Regulation S, at the Deadline,
and the does not provide a suitable replacement opinion to the
Holder within two (2) business days, it will be considered an Event
of Default pursuant to Section 3.2 of the Note.
1.6
Effect of Certain Events.
(a)
Effect
of Merger, Consolidation, Etc. At the option of the Holder, the
sale, conveyance or disposition of all or substantially all of the
assets of the Borrower, the effectuation by the Borrower of a
transaction or series of related transactions in which more than
50% of the voting power of the Borrower is disposed of, or the
consolidation, merger or other business combination of the Borrower
with or into any other Person (as defined below) or Persons when
the Borrower is not the survivor shall either: (i) be deemed to be
an acceleration event (“Acceleration Event”) pursuant to which the
Borrower shall be required to pay to the Holder upon the
consummation of and as a condition to such transaction an amount
equal full Principal Amount and unpaid accrued interest or (ii) be
treated pursuant to Section 1.6(b) hereof. “Person”
shall mean any individual, corporation, limited liability company,
partnership, association, trust or other entity or
organization.
(b)
Adjustment
Due to Merger, Consolidation, Etc. If, at any time when this
Note is issued and outstanding and prior to conversion of the Note,
there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a
result of which shares of Common Stock of the Borrower shall be
changed into the same or a different number of shares of another
class or classes of stock or securities of the Borrower or another
entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in
connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to
receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Holder would have been
entitled to receive in such transaction had this Note been
converted in full immediately prior to such transaction (without
regard to any limitations on conversion set forth herein), and in
any such case appropriate provisions shall be made with respect to
the rights and interests of the Holder of this Note to the end that
the provisions hereof (including, without limitation, provisions
for adjustment of the Default Conversion Price and of the number of
shares issuable upon conversion of the Note) shall thereafter be
applicable, as nearly as may be practicable in relation to any
securities or assets thereafter deliverable upon the conversion
hereof. The Borrower shall not affect any transaction described in
this Section 1.6(b) unless (a) it first gives, to the extent
practicable, thirty (30) days prior written notice (but in any
event at least fifteen (15) days prior written notice) of the
record date of the special meeting of shareholders to approve, or
if there is no such record date, the consummation of, such merger,
consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets (during which time the
Holder shall be entitled to convert this Note) and (b) the
resulting successor or acquiring entity (if not the Borrower)
assumes by written instrument the obligations of this Section
1.6(d). The above provisions shall similarly apply to
successive consolidations, mergers, sales, transfers or share
exchanges.
(c)
Adjustment Due to Distribution. If the Borrower shall
declare or make any distribution of its assets (or rights to
acquire its assets) to holders of Common Stock as a dividend, stock
repurchase, by way of return of capital or otherwise (including any
dividend or distribution to the Borrower’s shareholders in cash or
shares (or rights to acquire shares) of capital stock of a
subsidiary (i.e., a spin-off)) (a “Distribution”), then the
Holder of this Note shall be entitled, upon any conversion of this
Note after the date of record for determining shareholders entitled
to such Distribution, to receive the amount of such assets which
would have been payable to the Holder with respect to the shares of
Common Stock issuable upon such conversion had such Holder been the
holder of such shares of Common Stock on the record date for the
determination of shareholders entitled to such
Distribution.
(d)
Adjustment Due to
Dilutive Issuance. If, at any time when this Note is issued and
outstanding, the Borrower issues or sells, or in accordance with
this Section 1.6(d) hereof is deemed to have issued or sold,
except for shares of Common Stock issued directly to employees with
respect to accrued and unpaid compensation and employee benefits or
in repayment of notes or advances due to such employees, or to
vendors or suppliers of the Borrower in satisfaction of amounts
owed to such vendors or suppliers (provided, however, that such
vendors or suppliers shall not have an arrangement to transfer,
sell or assign such shares of Common Stock prior to the issuance of
such shares), any shares of Common Stock for no consideration or
for a consideration per share (before deduction of reasonable
expenses or commissions or underwriting discounts or allowances in
connection therewith) less than the Conversion Price in effect on
the date of such issuance (or deemed issuance) of such shares of
Common Stock (a “Dilutive Issuance”), then immediately upon
the Dilutive Issuance, the Conversion Price will be reduced to the
amount of the consideration per share received by the Borrower in
such Dilutive Issuance, subject to the Holder’s rights under
Section 1.2 to select its Conversion Price.
The
Borrower shall be deemed to have issued or sold shares of Common
Stock if the Borrower in any manner issues or grants any warrants,
rights or options (not including rights or options associated with
employee stock option plans), whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock
(“Convertible Securities”) (such warrants, rights and
options to purchase Common Stock or Convertible Securities are
hereinafter referred to as “Options”) and the price per
share for which Common Stock is issuable upon the exercise of such
Options is less than the Conversion Price then in effect, then the
Conversion Price shall be equal to such price per share. For
purposes of the preceding sentence, the “price per share for which
Common Stock is issuable upon the exercise of such Options” is
determined by dividing (i) the total amount, if any, received or
receivable by the Borrower as consideration for the issuance or
granting of all such Options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Borrower upon the
exercise of all such Options, plus, in the case of Convertible
Securities issuable upon the exercise of such Options, the minimum
aggregate amount of additional consideration payable upon the
conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the
exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to
the Conversion Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Options or upon the
conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
Additionally,
the Borrower shall be deemed to have issued or sold shares of
Common Stock if the Borrower in any manner issues or sells any
Convertible Securities, whether or not immediately convertible
(other than where the same are issuable upon the exercise of
Options), and the price per share for which Common Stock is
issuable upon such conversion or exchange is less than the
Conversion Price then in effect, then the Conversion Price shall be
equal to such price per share. For the purposes of the preceding
sentence, the “price per share for which Common Stock is issuable
upon such conversion or exchange” is determined by dividing (i) the
total amount, if any, received or receivable by the Borrower as
consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Borrower upon the conversion
or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment
to the Conversion Price will be made upon the actual issuance of
such Common Stock upon conversion or exchange of such Convertible
Securities. Notwithstanding the forgoing, no adjustment will be
made under this Section 1.6(d) in respect of an Exempt
Issuance.
An
“Exempt Issuance” shall mean the issuance of (a) shares of Common
Stock or other securities to officers or directors of the Borrower
pursuant to any stock or option or similar equity incentive plan
duly adopted for such purpose by a majority of the non-employee
members of the Borrower’s Board of Directors or a majority of the
members of a committee of non-employee directors (“Plan”)
established for such purpose in a manner which is consistent with
the Borrower’s prior business practices, including, but not limited
to granting of such as bonuses; (b) securities pursuant to a
merger, consolidation, acquisition or similar business combination
approved by a majority of the disinterested directors of the
Borrower, provided that any such issuance shall only be to a Person
(or to the equity holders of a Person) which is, itself or through
its subsidiaries, an operating company or an owner of an asset in a
business synergistic with the business of the Borrower and shall
provide to the Borrower additional benefits in addition to, or in
lieu of, an investment of funds, but shall not include a
transaction in which the Borrower is issuing securities primarily
for the purpose of raising capital or to an entity whose primary
business is investing in securities; (c) securities issued pursuant
to any equipment loan or leasing arrangement, real property leasing
arrangement or debt financing from a bank or similar financial
institution approved by a majority of the disinterested directors
of the Borrower; and/or (d) securities issued with respect to which
the Holder waives its rights in writing under this Section
1.6(d).
(e)
Purchase Rights. If, at any time when any Notes are issued
and outstanding, the Borrower issues any Convertible Securities or
rights to purchase stock, warrants, securities or other property
(the “Purchase Rights”) pro rata to the record holders of
any class of Common Stock, then the Holder of this Note will be
entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such Holder could have
acquired if such Holder had held the number of shares of Common
Stock acquirable upon complete conversion of this Note (without
regard to any limitations on conversion contained herein)
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 Common
Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
(f)
Notice
of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price as a result of the events
described in this Section 1.6, or under Section 1.2
(regarding stock splits, combinations, etc.), the Borrower, at its
expense, shall promptly compute such adjustment or readjustment and
prepare and furnish to the Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. The Borrower shall,
upon the written request at any time of the Holder, furnish to such
Holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and
(iii) the number of shares of Common Stock and the amount, if any,
of other securities or property which at the time would be received
upon conversion of the Note.
1.7
Trading
Market Limitations. Unless permitted by the applicable rules
and regulations of the principal securities market on which the
Common Stock is then quoted, listed or traded, in no event shall
the Borrower issue upon conversion of or otherwise pursuant to this
Note more than the maximum number of shares of Common Stock that
the Borrower can issue pursuant to any rule of the principal United
States securities market on which the Common Stock is then traded
(the “Maximum Share Amount”), subject to equitable
adjustment from time to time for stock splits, stock dividends,
combinations, capital reorganizations and similar events relating
to the Common Stock occurring after the Issue Date. Once the
Maximum Share Amount has been issued, if the Borrower fails to
eliminate any prohibitions under applicable law or the rules or
regulations of any stock exchange, interdealer quotation system or
other self-regulatory organization with jurisdiction over the
Borrower or any of its securities on the Borrower’s ability to
issue shares of Common Stock in excess of the Maximum Share Amount,
in lieu of any further right to convert this Note, this will be
considered an Event of Default under Section 3.2 of the
Note.
1.8
Status
as Shareholder. Upon submission of a Notice of Conversion by a
Holder, (i) the shares covered thereby (other than the shares, if
any, which cannot be issued because their issuance would exceed
such Holder’s allocated portion of the Reserved Amount or Maximum
Share Amount) shall be deemed converted into shares of Common Stock
and (ii) the Holder’s rights as a Holder of such converted portion
of this Note shall cease and terminate, excepting only the right to
receive certificates for such shares of Common Stock and to any
remedies provided herein or otherwise available at law or in equity
to such Holder because of a failure by the Borrower to comply with
the terms of this Note. Notwithstanding the foregoing, if a Holder
has not received certificates or transmission of such shares
pursuant to Section 1.4(f) for all shares of Common Stock
prior to the tenth (10th) business day after the expiration of the
Deadline with respect to a conversion of any portion of this Note
for any reason, then (unless the Holder otherwise elects to retain
its status as a holder of Common Stock by so notifying the
Borrower) the Holder shall regain the rights of a Holder of this
Note with respect to such unconverted portions of this Note and the
Borrower shall, as soon as practicable, return such unconverted
Note to the Holder or, if this Note has not been surrendered,
adjust its records to reflect that such portion of this Note has
not been converted. In all cases, the Holder shall retain all of
its rights and remedies (including, without limitation, (i) the
right to receive Conversion default payments pursuant to Section
1.3 to the extent required thereby for such Conversion default
and any subsequent Conversion default and (ii) the right to have
the Conversion Price with respect to subsequent conversions
determined in accordance with Section 1.2) for the
Borrower’s failure to convert this Note.
1.9
Prepayment. Notwithstanding anything to the contrary
contained in this Note, the Borrower may prepay the amounts
outstanding hereunder with the consent of the Holder pursuant to
the following terms and conditions:
(a)
At any time during the period beginning on the Issue Date and
ending on the date which is day immediately prior to the Maturity
Date, the Borrower shall have the right, exercisable on not less
than three (3) Trading Days prior written notice to the Holder of
the Note to prepay the outstanding Note (principal and accrued
interest), in full by making a payment to the Holder of an amount
in cash equal to 110% 10% prepayment premium, multiplied by the sum
of: (w) the then outstanding principal amount of this Note
plus (x) accrued and unpaid interest on the unpaid principal
amount of this Note. To the extent a partial prepayment is made,
the amount of principal and/or accrued but unpaid interest deemed
prepaid, shall be 90.9090% of the amount paid and $9.0909 shall be
deemed the 10% prepayment premium.
(b)
Any notice of prepayment hereunder by the Company (an “Optional
Prepayment Notice”) shall be delivered to the Holder of the
Note at its registered addresses and shall state: (1) that the
Borrower is exercising its right to prepay the Note, and (2) the
date of prepayment which shall be not more than three (3) Trading
Days from the date of the Optional Prepayment Notice. On the date
fixed for prepayment (the “Optional Prepayment Date”), the
Borrower shall make payment of the applicable prepayment amount to
or upon the order of the Holder as specified by the Holder in
writing to the Borrower at least one (1) business day prior to the
Optional Prepayment Date. If the Borrower delivers an Optional
Prepayment Notice and fails to pay the applicable prepayment amount
due to the Holder of the Note within two (2) business days
following the Optional Prepayment Date, the Borrower shall forever
forfeit its right to prepay the Note pursuant to this Section
1.9.
ARTICLE II
CERTAIN COVENANTS
2.1
Distributions on Capital Stock. So long as the Borrower
shall have any obligation under this Note, the Borrower shall not
without the Holder’s written consent (a) pay, declare or set apart
for such payment, any dividend or other distribution (whether in
cash, property or other securities) on shares of capital stock
other than dividends on shares of Common Stock solely in the form
of additional shares of Common Stock or (b) directly or indirectly
or through any subsidiary make any other payment or distribution in
respect of its capital stock except for distributions pursuant to
any shareholders’ rights plan which is approved by a majority of
the Borrower’s disinterested directors.
2.2
Restriction on Stock Repurchases. So long as the Borrower
shall have any obligation under this Note, the Borrower shall not
without the Holder’s written consent redeem, repurchase or
otherwise acquire (whether for cash or in exchange for property or
other securities or otherwise) in any one transaction or series of
related transactions any shares of capital stock of the Borrower or
any warrants, rights or options to purchase or acquire any such
shares.
2.3
[Reserved].
2.4
Sale of Assets. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not, without the
Holder’s written consent, sell, lease or otherwise dispose of any
significant portion of its assets outside the ordinary course of
business, or in an arms-length transaction or which intent has been
previously disclosed in SEC Documents as such term is defined in
the Purchase Agreement. Any consent to the disposition of any
assets may be conditioned on a specified use of the proceeds of
disposition.
2.5
Advances and Loans. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not, without the
Holder’s written consent, lend money, give credit or make advances
to any person, firm, joint venture or corporation, including,
without limitation, officers, directors, employees, subsidiaries
and affiliates of the Borrower, except loans, credits or advances
(a) in existence or committed on the Issue Date and which the
Borrower has informed Holder in writing prior to the Issue Date,
(b) made in the ordinary course of business or (c) not in excess of
$15,000.
2.6
Section 3(a)(9) or 3(a)(10) Transaction. So long as this
Note is outstanding, the Borrower shall not enter into any
transaction or arrangement structured in accordance with, based
upon, or related or pursuant to, in whole or in part, either
Section 3(a)(9) of the 1933 Act (a “3(a)(9) Transaction”) or
Section 3(a)(10) of the 1933 Act (a “3(a)(10) Transaction”).
In the event that the Borrower does enter into, or makes any
issuance of Common Stock related to a 3(a)(9) Transaction or a
3(a)(10) Transaction while this Note is outstanding, a liquidated
damages charge of 25% of the outstanding principal balance of this
Note, but not less than Fifteen Thousand Dollars ($15,000), will be
assessed and will become immediately due and payable to the Holder
at its election in the form of cash payment or addition to the
balance of this Note. Notwithstanding the forgoing, transactions
contemplated by subsection (a) of the definition of “Exempt
Issuance” in Section 1.6(d) that are considered 3(a)(9) or 3(a)(10)
Transactions will not cause a liquidated damages charge under this
Section 2.6.
2.7
Preservation of Existence, etc. The Borrower shall maintain
and preserve, and cause each of its Subsidiaries to maintain and
preserve, its existence, rights and privileges, and become or
remain, and cause each of its Subsidiaries (other than dormant
Subsidiaries that have no or minimum assets) to become or remain,
duly qualified and in good standing in each jurisdiction in which
the character of the properties owned or leased by it or in which
the transaction of its business makes such qualification
necessary.
2.8
Non-circumvention. The Borrower hereby covenants and agrees
that the Borrower will not, by amendment of its Certificate or
Articles of Incorporation or Bylaws, or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement,
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 Note, and will at all times in good faith
carry out all the provisions of this Note and take all action as
may be required to protect the rights of the Holder.
2.9
Repayment from Proceeds. While any portion of this Note is
outstanding, if the Borrower receives cash proceeds from any source
or series of related or unrelated sources, including but not
limited to, from payments from customers, the issuance of equity or
debt, the conversion of outstanding warrants of the Borrower, the
issuance of securities pursuant to an equity line of credit of the
Borrower or the sale of assets, the Borrower shall, within one (1)
business day of Borrower’s receipt of such proceeds, inform the
Holder of such receipt, following which the Holder shall have the
right in its sole discretion to require the Borrower to immediately
apply all or any portion of such proceeds to repay all or any
portion of the outstanding amounts owed under this Note,
provided that, upon the occurrence of any closings under the
Reg A+ Offering the Company shall make mandatory repayments of
amounts owed under this Note in an amount equal to 10% of the net
proceeds obtained by the Company from each such closing without
demand thereof from the Holder. Failure of the Borrower to comply
with this provision shall constitute an Event of Default. In the
event that such proceeds are received by the Holder prior to the
Maturity Date, the required prepayment shall be subject to the
terms of Section 1.9 herein.
2.10
Piggyback Registration Rights. The Company shall include,
subject to any underwriter or placement agent cutbacks, on any
registration statement or offering statement filed with the SEC,
the pro rata portion of Conversion Shares, all Warrant Shares, and
all Commitment Shares as would be the same pro rata portion
included in such registration statement of offering statement as
other holders similarly situated. In addition to all other remedies
at law or in equity or otherwise in connection with any breaches
under this Note or the other Transaction Documents, failure to do
so in compliance with this Section 2.10 will result in
liquidated damages of $20,000, being immediately due and payable to
the Holder at its election in the form of cash payment.
2.11
[Reserved].
ARTICLE III
EVENTS OF DEFAULT
The
occurrence of any of the following shall each constitute an
“Event of Default” with no right to notice or the right to
cure except as specifically stated:
3.1
Failure to Pay Principal or Interest. The Borrower fails to
pay the principal hereof or interest thereon when due on this Note,
whether at the Maturity Date, upon acceleration or
otherwise.
3.2
Conversion and the Shares. The Borrower fails to issue
shares of Common Stock to the Holder (or announces or threatens in
writing that it will not honor its obligation to do so) upon
exercise by the Holder of the Conversion rights of the Holder in
accordance with the terms of this Note, fails to transfer or cause
its transfer agent to transfer (issue) (electronically or in
certificated form) any certificate for shares of Common Stock
issued to the Holder upon conversion of or otherwise pursuant to
this Note as and when required by this Note, the Borrower directs
its transfer agent not to transfer or delays, impairs, and/or
hinders its transfer agent in transferring (or issuing)
(electronically or in certificated form) any certificate for shares
of Common Stock to be issued to the Holder upon conversion of or
otherwise pursuant to this Note as and when required by this Note,
or fails to remove (or directs its transfer agent not to remove or
impairs, delays, and/or hinders its transfer agent from removing)
any restrictive legend (or to withdraw any stop transfer
instructions in respect thereof) on any certificate for any shares
of Common Stock issued to the Holder upon conversion of or
otherwise pursuant to this Note as and when required by this Note
(or makes any written announcement, statement or threat that it
does not intend to honor the obligations described in this
paragraph) and any such failure shall continue uncured (or any
written announcement, statement or threat not to honor its
obligations shall not be rescinded in writing) for three (3)
business days after the Holder shall have delivered a Notice of
Conversion. It is an obligation of the Borrower to remain current
in its obligations to its transfer agent. It shall be an “Event of
Default” of this Note, if a conversion of this Note is delayed,
hindered or frustrated due to a balance owed by the Borrower to its
transfer agent. If at the option of the Holder, the Holder advances
any funds to the Borrower’s transfer agent in order to process a
conversion, such advanced funds shall be paid by the Borrower to
the Holder within forty-eight (48) hours of a demand from the
Holder.
3.3
Breach of Covenants. While this Note is outstanding, the
Borrower breaches any covenant or other term or condition contained
in this Note, or in any of the Transaction Documents including but
not limited to the Purchase Agreement.
3.4
Breach of Representations and Warranties. While this Note is
outstanding, any representation or warranty of the Borrower made
herein or in any agreement, statement or certificate given in
writing pursuant hereto or in connection herewith (including,
without limitation, the Purchase Agreement), shall be false or
misleading in any material respect when made.
3.5
Receiver or Trustee. While this Note is outstanding, the
Company or any Material Subsidiary (as such term is defined in the
Purchase Agreement) of the Company shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of
a receiver or trustee for it or for a substantial part of its
property or business, or such a receiver or trustee shall otherwise
be appointed.
3.6
Judgments. Any money judgment, writ or similar process,
other than those disclosed in the SEC Documents, shall be entered
or filed against the Borrower or any subsidiary of the Borrower or
any of its property or other assets for more than $50,000, and
shall remain unvacated, unbonded or unstayed for a period of twenty
(20) days unless otherwise consented to by the Holder, which
consent will not be unreasonably withheld.
3.7
Bankruptcy; Liquidation. (i) Bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings,
voluntary or involuntary, for relief under any bankruptcy law or
any law for the relief of debtors shall be instituted by or against
the Company or any Material Subsidiary, as such term is defined in
the Purchase Agreement, of the Company or the Borrower admits in
writing its inability to pay its debts generally as they mature, or
have filed against it an involuntary petition for bankruptcy; or
(ii) any dissolution, liquidation, or winding up of Borrower or any
substantial portion of its business occurs.
3.8
Delisting of Common Stock. The Borrower shall fail to
maintain the listing of the Common Stock on at least one of the
OTCBB, OTCQB, OTC Pink or an equivalent replacement exchange, the
Nasdaq Capital Market, the New York Stock Exchange, or the NYSE
American.
3.9
Failure to Comply with the Exchange Act. The Borrower shall
fail to timely comply with the reporting requirements of the 1934
Act (including but not limited to becoming delinquent in its
filings); and/or the Borrower shall cease to be subject to the
reporting requirements of the Exchange Act; and/or the Borrower
shall not have publicly available all information required by
paragraph (b) of Rule 15c2-11 of the Exchange Act (as effective on
September 26, 2021), as amended, such that brokers or dealers
attempting to publish any quotation for the Common Stock or,
directly or indirectly, to submit any such quotation for
publication, shall be able to comply with Rule
15c2-11(a).
3.10
DTC. If the Company (i) loses its ability to deliver shares
via “DWAC/FAST” electronic transfer, or (ii) loses its stats as
“DTC Eligible.”
3.11
Cessation of Operations. Any cessation of operations by
Borrower or Borrower admits it is otherwise generally unable to pay
its debts as such debts become due, provided, however, that any
disclosure of the Borrower’s ability to continue as a “going
concern” shall not be an admission that the Borrower cannot pay its
debts as they become due.
3.12
Maintenance of Assets. The failure by Borrower to maintain
any material intellectual property rights, personal, real property
or other assets which are necessary to conduct its business
(whether now or in the future) or any disposition or conveyance of
any material asset of the Borrower.
3.13
Financial Statement Restatement. The restatement of any
financial statements filed by the Borrower with the SEC for any
date or period from two years prior to the Issue Date of this Note
and until this Note is no longer outstanding, if the result of such
restatement would, by comparison to the unrestated financial
statement, have constituted a material adverse effect on the rights
of the Holder with respect to this Note or the Purchase
Agreement.
3.14
Reverse Splits. The Borrower effectuates a reverse split of
its Common Stock without twenty (20) days prior written notice to
the Holder.
3.15
Rights of Participation. The failure of the Borrower to
fully satisfy its obligations to the Holder under Section
5(c) and/or Section 5(d) of the Purchase
Agreement.
3.16
Replacement of Transfer Agent. In the event that the
Borrower proposes to replace its transfer agent, the Borrower fails
to provide, prior to the effective date of such replacement, a
fully executed Transfer Agent Instruction Letter in a form as
initially delivered pursuant to the Purchase Agreement (including
but not limited to the provision to irrevocably reserve shares of
Common Stock in the Reserved Amount) signed by the successor
transfer agent to Borrower and the Borrower.
3.17
Cessation of Trading. Any cessation of trading of the Common
Stock on at least one of the OTCBB, OTCQB, OTC Pink or an
equivalent replacement exchange, the Nasdaq Capital Market, the New
York Stock Exchange, or the NYSE American, and such cessation of
trading shall continue for a period of five consecutive (5) Trading
Days.
3.18
Cross-Default. Notwithstanding anything to the contrary
contained in this Note or the other related or companion documents,
a breach or default by the Borrower of any material covenant or
other term or condition contained in any of the Other Agreements,
other than any such breach or default which is cured by agreement
of the parties, after the passage of all applicable notice and cure
or grace periods, shall, at the option of the Holder, be considered
a default under this Note and the Other Agreements, in which event
the Holder shall be entitled (but in no event required) to apply
all rights and remedies of the Holder under the terms of this Note
and the Other Agreements by reason of a default under said Other
Agreement or hereunder. “Other Agreements” means,
collectively, all agreements and instruments between, among or by:
(1) the Borrower, and, or for the benefit of, (2) the Holder and
any affiliate of the Holder, including, without limitation,
promissory notes. Each of the loan transactions will be
cross-defaulted with each other loan transaction and with all other
existing and future debt of Borrower to the Holder.
3.19
Bid Price. The Borrower shall lose the “bid” price for its
Common Stock ($0.001 on the “Ask” with zero market makers on the
“Bid” per Level 2) and/or a market (including the OTC Pink, OTC QB
or an equivalent replacement exchange).
3.20
OTC Markets Designation. If the OTC-Markets changes the
Borrower’s designation to ‘No Information’ (Stop Sign), ‘Caveat
Emptor’ (Skull and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey
Market’ (Exclamation Mark Sign).
3.21
Inside Information. Any attempt by the Borrower or its
officers, directors, and/or affiliates to transmit, convey,
disclose, or any actual transmittal, conveyance, or disclosure by
the Borrower or its officers, directors, and/or affiliates of,
material non-public information concerning the Borrower, to the
Holder or its successors and assigns, which is not immediately
cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD
on that same date.
3.22
Unavailability of Rule 144. If, at any time on or after the
date which is six (6) months after the Issue Date, the Holder is
unable to (i) obtain a standard “144 legal opinion letter” from an
attorney reasonably acceptable to the Holder, the Holder’s
brokerage firm (and respective clearing firm), and the Borrower’s
transfer agent in order to facilitate the Holder’s conversion of
any portion of the Note into free trading shares of the Borrower’s
Common Stock pursuant to Rule 144, and (ii) thereupon deposit such
shares into the Holder’s brokerage account.
Upon the
occurrence of any Event of Default specified in Sections 3.1,
3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13,
3.14, 3.15, 3.16. 3.17, 3.18, 3.19, 3.20, 3.21, and/or
3.22 exercisable through the delivery of written notice to
the Borrower by the Holder (the “Default Notice”), the Note
shall become immediately due and payable and the Borrower shall pay
to the Holder, in full satisfaction of its obligations hereunder,
an amount equal to (i) 115% times the sum of (x) the
then outstanding principal amount of this Note plus (y)
accrued and unpaid interest on the unpaid principal amount of this
Note to the date of payment (the “Mandatory Prepayment
Date”), on the amounts referred to in clauses (x) and/or (y)
plus (z) any amounts owed to the Holder pursuant to
Sections 1.3 and 1.4(g) hereof (the then outstanding
principal amount of this Note to the date of payment plus
the amounts referred to in clauses (x), (y) and (z) shall
collectively be known as the “Default Sum”) or (ii) at the
option of the Holder, the “parity value” of the Default Sum to be
prepaid, where parity value means (a) the highest number of
shares of Common Stock issuable upon conversion of or otherwise
pursuant to such Default Sum in accordance with Article I,
treating the Trading Day immediately preceding the Mandatory
Prepayment Date as the “Conversion Date” for purposes of
determining the lowest applicable Conversion Price, unless the
Event of Default arises as a result of a breach in respect of a
specific Conversion Date (in which case such Conversion Date shall
be the Conversion Date), multiplied by (b) the highest
Closing Price (defined below) for the Common Stock during the
period beginning on the date of first occurrence of the Event of
Default and ending one day prior to the Mandatory Prepayment Date
(the “Default Amount”) and all other amounts payable
hereunder shall immediately become due and payable, all without
demand, presentment or notice, all of which hereby are expressly
waived, together with all costs, including, without limitation,
legal fees and expenses, of collection, and the Holder shall be
entitled to exercise all other rights and remedies available at law
or in equity. “Closing Price” means, for any security as of
any date, the closing bid price as reported on the OTCBB, OTCQB or
applicable trading market or exchange as reported by a reliable
reporting service designated by the Holder or, if the OTCBB is not
the principal trading market for such security, the closing bid
price of such security on the principal securities exchange or
trading market where such security is quoted, listed or
traded.
The
Holder shall have the right at any time, to require the Borrower to
immediately issue, in lieu of the Default Amount, the number of
shares of Common Stock of the Borrower equal to the Default Amount
divided by the Conversion Price then in effect, subject to the
terms of this Note. This requirement by the Borrower shall
automatically apply upon the occurrence of an Event of Default
without the need for any party to give any notice or take any other
action.
If
the Holder shall commence an action or proceeding to enforce any
provisions of this Note, including, without limitation, engaging an
attorney, then if the Holder prevails in such action, the Holder
shall be reimbursed by the Borrower for its attorneys’ fees and
other costs and expenses incurred in the investigation, preparation
and prosecution of such action or proceeding.
ARTICLE IV
MISCELLANEOUS
4.1
Failure or Indulgence Not Waiver. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or
privileges. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies
otherwise available.
4.2
Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall
be (i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or
(iv) transmitted by hand delivery, or electronic transmission by
e-mail (with read-receipt required) addressed as set forth below or
to such other address as such party shall have specified most
recently by written notice. Any notice or other communication
required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by electronic
transmission by e-mail (with read-receipt required), at the address
or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than
on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications
shall be:
If to
the Borrower, to:
RESPIRERX
PHARMACEUTICALS, INC.
126
Valley Road Suite C
Glen
Rock, NJ 07452
Attn:
Jeff Eliot Margolis, CFO
E-mail:
jmargolis@respirerx.com
If to
the Holder:
Quick
Capital, LLC
66
West Flagler Street, 900-#2292
Miami,
FL 33130
Attn:
Eilon D. Natan, Manager
E-mail:
eilon@quick-cap.com
4.3
Amendments. This Note and any provision hereof may only be
amended by an instrument in writing signed by the Borrower and the
Holder.
4.4
Assignability. This Note shall be binding upon the Borrower
and its successors and assigns, and shall inure to be the benefit
of the Holder and its successors and assigns. Neither the Borrower
nor the Holder shall assign this Note or any rights or obligations
hereunder without the prior written consent of the other.
Notwithstanding the foregoing, the Holder may assign its rights
hereunder to any “accredited investor” (as defined in Rule 501(a)
of the 1933 Act) in a private transaction from the Holder or to any
of its “affiliates”, as that term is defined under the 1934 Act,
without the consent of the Borrower. Notwithstanding anything in
this Note to the contrary, this Note may be pledged as collateral
in connection with a bonafide margin account or other lending
arrangement. The Holder and any assignee, by acceptance of this
Note, acknowledge and agree that following conversion of a portion
of this Note, the unpaid and unconverted principal amount of this
Note represented by this Note may be less than the amount stated on
the face hereof.
4.5
Cost of Collection. If default is made in the payment of
this Note, the Borrower shall pay the Holder hereof reasonable
costs of collection, including reasonable attorneys’
fees.
4.6
Governing Law. This Note shall be governed by and construed
in accordance with the laws of the State of Wyoming without regard
to principles of conflicts of laws. Any action brought by either
party against the other concerning the transactions contemplated by
this Note shall be brought only in the state courts of Miami,
Florida, or in the federal courts located in the Southern District
of Florida. The parties to this Note hereby irrevocably waive any
objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO,
AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE
OR ANY TRANSACTION CONTEMPLATED HEREBY. The prevailing party
shall be entitled to recover from the other party its reasonable
attorney’s fees and costs. In the event that any provision of this
Note or any other agreement delivered in connection herewith is
invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision of any
agreement. Each party hereby irrevocably waives personal service of
process and consents to process being served in any suit, action or
proceeding in connection with this Note or any other Transaction
Document 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 Note and agrees
that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by law.
4.7
Certain Amounts. Whenever pursuant to this Note the Borrower
is required to pay an amount in excess of the outstanding principal
amount (or the portion thereof required to be paid at that time)
plus accrued and unpaid interest, the Borrower and the Holder agree
that the actual damages to the Holder from the receipt of cash
payment on this Note may be difficult to determine and the amount
to be so paid by the Borrower represents stipulated damages and not
a penalty and is intended to compensate the Holder in part for loss
of the opportunity to convert this Note and to earn a return from
the sale of shares of Common Stock acquired upon conversion of this
Note at a price in excess of the price paid for such shares
pursuant to this Note. The Borrower and the Holder hereby agree
that such amount of stipulated damages is not plainly
disproportionate to the possible loss to the Holder from the
receipt of a cash payment without the opportunity to convert this
Note into shares of Common Stock.
4.8
Purchase Agreement and Security Agreement. By its acceptance
of this Note, each party agrees to be bound by the applicable terms
of the Purchase Agreement and the Security Agreement.
4.9
Notice of Corporate Events. Except as otherwise provided in
this Note, the Holder of this Note shall have no rights as a Holder
of Common Stock unless and only to the extent that it converts this
Note into Common Stock. The Borrower shall provide the Holder with
prior notification of any meeting of the Borrower’s shareholders
(and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Borrower of a
record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend or
other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any
other securities or property, or to receive any other right, or for
the purpose of determining shareholders who are entitled to vote in
connection with any proposed sale, lease or conveyance of all or
substantially all of the assets of the Borrower or any proposed
liquidation, dissolution or winding up of the Borrower, the
Borrower shall mail a notice to the Holder, at least twenty (20)
days prior to the record date specified therein (or thirty (30)
days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such record is to
be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and
character of such dividend, distribution, right or other event to
the extent known at such time. The Borrower shall make a public
announcement of any event requiring notification to the Holder
hereunder substantially simultaneously with the notification to the
Holder in accordance with the terms of this Section 4.9
including, but not limited to, name changes, recapitalizations,
etc. as soon as possible under law.
4.10
Usury. If it shall be found that any interest or other
amount deemed interest due hereunder violates the applicable law
governing usury, the applicable provision shall automatically be
revised to equal the maximum rate of interest or other amount
deemed interest permitted under applicable law. The Borrower
covenants (to the extent that it may lawfully do so) that it will
not seek to claim or take advantage of any usury law that would
prohibit or forgive the Borrower from paying all or a portion of
the principal or interest on this Note.
4.11
Remedies. The Borrower acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the
Holder, by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Borrower acknowledges that
the remedy at law for a breach of its obligations under this Note
will be inadequate and agrees, in the event of a breach or
threatened breach by the Borrower of the provisions of this Note,
that the Holder shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to the
penalties assessable herein, to an injunction or injunctions
restraining, preventing or curing any breach of this Note and to
enforce specifically the terms and provisions thereof, without the
necessity of showing economic loss and without any bond or other
security being required. No provision of this Note shall alter or
impair the obligation of the Borrower, which is absolute and
unconditional, to pay the principal of, and interest on, this Note
at the time, place, and rate, and in the form, herein
prescribed.
4.12
Severability. In the event that any provision of this Note
is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any provision hereof
which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision
hereof.
4.13
Dispute Resolution. In the case of a dispute as to the
determination of the Default Conversion Price, Conversion Amount,
any prepayment amount or Default Amount, Default Sum, Closing Date,
Funding Date (as such term is defined in the Purchase Agreement),
or Maturity Date, the closing bid price, or fair market value (as
the case may be) or the arithmetic calculation of the Conversion
Price or the applicable prepayment amount(s) (as the case may be),
the Borrower or the Holder shall submit the disputed determinations
or arithmetic calculations via electronic transmission by e-mail
(with read-receipt required) (i) within two (2) Trading Days after
receipt of the applicable notice giving rise to such dispute to the
Borrower or the Holder or (ii) if no notice gave rise to such
dispute, at any time after the Holder learned of the circumstances
giving rise to such dispute. If the Holder and the Borrower are
unable to agree upon such determination or calculation within two
(2) business days of such disputed determination or arithmetic
calculation (as the case may be) being submitted to the Borrower or
the Holder, then the Borrower shall, within two (2) business days,
submit via electronic transmission by e-mail (with read-receipt
required) (a) the disputed determination of the Conversion Price,
the closing bid price, the or fair market value (as the case may
be) to an independent, reputable investment bank selected by the
Borrower and approved by the Holder or (b) the disputed arithmetic
calculation of the Conversion Price, Conversion Amount, any
prepayment amount or Default Amount, Default Sum to an independent,
outside accountant selected by the Holder that is reasonably
acceptable to the Borrower. The Borrower shall cause at its expense
the investment bank or the accountant to perform the determinations
or calculations and notify the Borrower and the Holder of the
results no later than ten (10) business days from the time it
receives such disputed determinations or calculations. Such
investment bank’s or accountant’s determination or calculation
shall be binding upon all parties absent demonstrable
error.
4.14
Most Favored Nation Status. So long as this Note is
outstanding, upon any issuance by the Borrower or any of its
Subsidiaries of any security with any term more favorable to the
holder of such security or with a term (including without
limitation any Conversion Price) in favor of the holder of such
security that was not similarly provided to the Holder in this Note
(other than a future financing with the Holder), then the Borrower
shall notify the Holder of such additional or more favorable term
and such term, at Holder’s option, shall become a part of the
Transaction Documents with the Holder. The types of terms contained
in another security that may be more favorable to the holder of
such security include, but are not limited to, terms addressing
conversion discounts, prepayment rate, conversion lookback periods,
interest rates, original issue discounts, stock sale price, private
placement price per share, and warrant coverage.
***
signature page follows ***
IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by its duly authorized officer as of the Issue
Date.
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COMPANY: |
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RESPIRERX
PHARMACEUTICALS, INC. |
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By: |
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Name: |
Jeff
Eliot Margolis |
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Title: |
CFO |
Acknowledged
and Accepted by:
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HOLDER: |
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Quick
Capital, LLC |
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By: |
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| Name: |
Eilon
D. Natan |
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| Title: |
Manager |
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EXHIBIT
A
NOTICE
OF CONVERSION
The
undersigned hereby elects to convert $_________________ principal
amount of the Note (defined below) together with $________________
of accrued and unpaid interest thereto, totaling $_____________
into that number of shares of Common Stock to be issued pursuant to
the conversion of the Note (“Common Stock”) as set forth below, of
RESPIRERX PHARMACEUTICALS, INC., a Nevada corporation (the
“Borrower”), according to the conditions of the convertible note of
the Borrower dated as of _____________ ____, 2021 (the “Note”), as
of the date written below. No fee will be charged to the Holder for
any conversion, except for transfer taxes, if any.
Box
Checked as to applicable instructions:
|
|
[ ] |
The
Borrower shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the
undersigned or its nominee with DTC through its Deposit Withdrawal
At Custodian system (“DWAC Transfer”). |
Name
of DTC Prime Broker:
____________________________________________________________
Account
Number:
___________________________________________________________________
|
|
[ ] |
The
undersigned hereby requests that the Borrower issue a certificate
or certificates for the number of shares of Common Stock set forth
below (which numbers are based on the Holder’s calculation attached
hereto) in the name(s) specified immediately below or, if
additional space is necessary, on an attachment hereto: |
Name:
[NAME]______________________________________________________________________
Address:
[ADDRESS]_________________________________________________________________
Date
of Conversion:_________________________________________
Applicable
Conversion Price:
$_________________________________
Number
of Shares of Common Stock to be Issued
Pursuant
to Conversion of the
Notes:____________________________
Amount
of Principal Balance Due remaining
Under
the Note after this
conversion:____________________________
Accrued
and unpaid interest
remaining:__________________________
[HOLDER]
By:
________________________________________
Name:
[NAME]_______________________________
Title:
[TITLE]________________________________
Date:
[DATE]________________________________
B – FORM OF WARRANT
NEITHER
THIS SECURITY NOR THE SECURITIES AS TO WHICH THIS SECURITY MAY BE
EXERCISED 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.
FORM
OF COMMON STOCK PURCHASE WARRANT
RESPIRERX
PHARMACEUTICALS, INC.
Warrant
Shares: 4,785,000
Date
of Issuance:
[ ]
[__], 202[ ] (the “Issuance Date”)
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies
that, for value received (in connection with the funding of that
certain convertible promissory note dated
[ ] [__], 202[ ], in the original
principal amount of $87,000 issued by the Company (as defined
below) to the Lender (as defined below) (the “Note”), Quick
Capital, LLC, a Wyoming limited liability company (the
“Lender” and including any permitted and registered assigns,
the “Holder”), is entitled, upon the terms and subject to
the limitations on exercise and the conditions hereinafter set
forth, at any time during the Exercise Period, to purchase from
RESPIRERX PHARMACEUTICALS, INC., a Delaware corporation (the
“Company”), up to 4,785,000 shares of Common Stock (as
defined below) (the “Warrant Shares”) at the Exercise Price
per share then in effect. The number of Warrant Shares for which
this Warrant may be exercised is subject to adjustment in
accordance with the terms hereof. This Warrant is issued by the
Company as of the Issuance Date pursuant to the note purchase
agreement dated [ ] [__], 202[ ], between
the Company and the Lender (the “Purchase
Agreement”).
Capitalized
terms used in this Warrant shall have the meanings set forth in the
Purchase Agreement unless otherwise defined in the body of this
Warrant or in Section 12 below. For purposes of this
Warrant, the term “Exercise Price” shall mean) $0.02 per
share subject to adjustment as provided herein (including but not
limited to cashless exercise), and the term “Exercise
Period” shall mean the period commencing on the Issuance Date
and ending on 5:00 p.m. eastern standard time on the five-year
anniversary of such date.
1.
EXERCISE OF WARRANT.
(a)
Mechanics of Exercise. Subject to the terms and conditions
hereof, the rights represented by this Warrant may be exercised in
whole or in part at any time or times during the Exercise Period by
delivery of a written notice, in the form attached hereto as
Exhibit A (the “Exercise Notice”), of the Holder’s
election to exercise this Warrant. The Holder shall not be required
to deliver the original Warrant in order to effect an exercise
hereunder. 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 exercised. On or before the
second Trading Day (the “Warrant Share Delivery Date”)
following the date on which the Company shall have received the
Exercise Notice, which Exercise Notice must be received by the
Company prior to 11 a.m., Miami, Florida time to count as received
on such date, and upon receipt by the Company of payment to the
Company of an amount equal to the applicable Exercise Price
multiplied by the number of Warrant Shares as to which all or a
portion of this Warrant is being exercised (the “Aggregate
Exercise Price” and together with the Exercise Notice, the
“Exercise Delivery Documents”) in cash or by wire transfer
of immediately available funds (or by cashless exercise if
permitted under the terms of this Warrant, in which case there
shall be no Aggregate Exercise Price provided), the Company shall
(or direct its transfer agent to) issue and dispatch by overnight
courier to the address as specified in the Exercise Notice, a
certificate, registered in the Company’s share register in the name
of the Holder or its designee, for the number of shares of Common
Stock to which the Holder is entitled pursuant to such exercise.
Upon delivery of the Exercise Delivery Documents, 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
certificates evidencing such Warrant Shares. If this Warrant is
submitted in connection with any partial exercise and the number of
Warrant Shares represented by this Warrant is greater than the
number of Warrant Shares being exercised, then the Company shall as
soon as practicable and in no event later than three business days
after any exercise and at its own expense, issue a new Warrant (in
accordance with Section 6) representing the right to
purchase the number of Warrant Shares purchasable immediately prior
to such exercise under this Warrant, less the number of Warrant
Shares with respect to which this Warrant is exercised, provided
that, the Holder may elect to keep this Warrant subject to an
applicable downward adjustment of exercisable shares in lieu of the
issuance of a new Warrant.
If
the Company fails to cause its transfer agent to transmit to the
Holder the respective shares of Common Stock by the respective
Warrant Share Delivery Date, then the Holder will have the right to
rescind such exercise in Holder’s sole discretion, and such failure
shall be deemed an “Event of Default” under the Note. Without in
any way limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree
that if delivery of the Common Stock issuable upon conversion of
this Warrant is not delivered by the Warrant Share Delivery Date
the Company shall pay to the Holder $500 per day, for each day
beyond the Warrant Share Delivery Date that the Company fails to
deliver such Common Stock (unless such failure results from war,
acts of terrorism, an epidemic, or natural disaster). Such amount
shall be paid to Holder in cash by the fifth day of the month
following the month in which it has accrued. The Company agrees
that the right to exercise the Warrant is a valuable right to the
Holder. The damages resulting from a failure, attempt to frustrate,
interference with such exercise right are difficult if not
impossible to qualify. Accordingly, the parties acknowledge that
the liquidated damages provision contained in this Section
1(a) are justified.
At
any time during the Exercise Period, the Holder may elect to
receive Warrant Shares pursuant to a cashless exercise, in lieu of
a cash exercise, equal to the value of this Warrant determined in
the manner described below (or of any portion thereof remaining
unexercised) by surrender of this Warrant and a Notice of Exercise,
in which event the Company shall issue to Holder a number of shares
of Common Stock computed using the following formula:
X =
Y (A-B)
A
|
Where |
X
= |
the
number of Shares to be issued to Holder. |
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Y
= |
the
number of Warrant Shares that the Holder elects to exercise under
this Warrant (at the date of such calculation). |
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A
= |
the
Market Price (at the date of such calculation). |
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B
= |
Exercise
Price (as adjusted to the date of such calculation). |
(b)
No Fractional Shares. No fractional shares shall be issued
upon the exercise of this Warrant as a consequence of any
adjustment pursuant hereto. All Warrant Shares (including
fractions) issuable upon exercise of this Warrant may be aggregated
for purposes of determining whether the exercise would result in
the issuance of any fractional share. If, after aggregation, the
exercise would result in the issuance of a fractional share, the
Company shall, in lieu of issuance of any fractional share, deliver
to the Holder otherwise entitled to such fraction, a full Warrant
Share.
(c)
Holder’s Exercise Limitations. The Company shall not affect
any exercise of this Warrant, and a Holder shall not have the right
to exercise any portion of this Warrant, to the extent that after
giving effect to issuance of Warrant Shares upon exercise as set
forth on the applicable Notice of Exercise, the Holder (together
with the Holder’s Affiliates (as such term is defined under the
Exchange Act), and any other persons acting as a group together
with the Holder or any of the Holder’s Affiliates), 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 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 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. Except as set forth
in the preceding sentence, for purposes of this paragraph (d),
beneficial ownership shall be calculated in accordance with Section
13(d) of the Exchange Act, 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 paragraph applies, the determination of whether
this Warrant is exercisable (in relation to other securities owned
by the Holder together with any affiliates) 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 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.
For
purposes of this Section 1(c), 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 SEC,
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 its
transfer agent setting forth the number of shares of Common Stock
outstanding. Upon the request of a Holder, the Company shall within
two Trading Days confirm 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 since the
date as of which such number of outstanding shares of Common Stock
was reported. The “Beneficial Ownership Limitation” shall be
9.99% 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 limitations
contained in this paragraph shall apply to a successor Holder of
this Warrant.
2.
ADJUSTMENTS. The Exercise Price and the number of Warrant
Shares shall be adjusted from time to time as follows:
(a)
Distribution of Assets. 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 or other similar transaction) (a
“Distribution”), at any time after the issuance of this
Warrant, then, in each such case:
(i)
any Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders
of shares of Common Stock entitled to receive the Distribution
shall be reduced, effective as of the close of business on such
record date, to a price determined by multiplying such Exercise
Price by a fraction (i) the numerator of which shall be the Closing
Sale Price of the shares of Common Stock on the Trading Day
immediately preceding such record date minus the value of the
Distribution (as determined in good faith by the Company’s Board of
Directors) applicable to one share of Common Stock, and (ii) the
denominator of which shall be the Closing Sale Price of the shares
of Common Stock on the Trading Day immediately preceding such
record date; and
(ii)
the number of Warrant Shares shall be increased to a number of
shares equal to the number of shares of Common Stock obtainable
immediately prior to the close of business on the record date fixed
for the determination of holders of shares of Common Stock entitled
to receive the Distribution multiplied by the reciprocal of the
fraction set forth in the immediately preceding clause (i);
provided, however, that in the event that the Distribution is of
shares of common stock of a company (other than the Company) whose
common stock is traded on a national securities exchange or a
national automated quotation system (“Other Shares of Common
Stock”), then the Holder may elect to receive a warrant to
purchase Other Shares of Common Stock in lieu of an increase in the
number of Warrant Shares, the terms of which shall be identical to
those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Shares of Common
Stock that would have been payable to the Holder pursuant to the
Distribution had the Holder exercised this Warrant immediately
prior to such record date and with an aggregate exercise price
equal to the product of the amount by which the exercise price of
this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding clause (i) and
the number of Warrant Shares calculated in accordance with the
first part of this clause (ii).
(b)
Stock Splits. If the Company, at any time while this Warrant
is outstanding: (i) subdivides outstanding shares of Common Stock
into a larger number of shares, or (ii) combines (including by way
of reverse stock split) outstanding shares of Common Stock into a
smaller number of shares, 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 2(b) shall become effective immediately after the
effective date in the case of a subdivision or
combination.
(c)Anti-Dilution;
Adjustments to Exercise Price. [RESERVED].
3.
FUNDAMENTAL TRANSACTIONS. If, at any time while this Warrant
is outstanding, (i) the Company effects any merger of the Company
with or into another entity and the Company is not the surviving
entity (such surviving entity, the “Successor Entity”), (ii)
the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (iii) any tender
offer or exchange offer (whether by the Company or by another
individual or entity, and approved by the Company) is completed
pursuant to which holders of Common Stock are permitted to tender
or exchange their shares of Common Stock for other securities, cash
or property and the holders of at least 50% of the Common Stock
accept such offer, or (iv) the Company effects any reclassification
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 (other than as a result of a
subdivision or combination of shares of Common Stock) (in any such
case, a “Fundamental Transaction”), then, upon any
subsequent exercise of this Warrant, the Holder shall have the
right to receive the number of shares of Common Stock of the
Successor Entity or of the Company and any additional consideration
(the “Alternate Consideration”) receivable upon or as a
result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a holder of the number of
shares of Common Stock for which this Warrant is exercisable
immediately prior to such event (disregarding any limitation on
exercise contained herein solely for the purpose of such
determination). 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, 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. To the extent necessary to effectuate the foregoing
provisions, any Successor Entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder’s right to exercise
such warrant into Alternate Consideration.
4.
NON-CIRCUMVENTION. The Company covenants and agrees that it
will not, by amendment of its certificate of incorporation, bylaws
or through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, 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,
and will at all times in good faith carry out all the provisions of
this Warrant and take all action as may be required to protect the
rights of the Holder as set forth in this Warrant against
impairment . Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the
Exercise Price then in effect, (ii) shall take all such actions as
may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable shares of
Common Stock upon the exercise of this Warrant, and (iii) shall,
for so long as this Warrant is outstanding, have authorized and
reserved, free from preemptive rights, one and a half times the
number of shares of Common Stock issuable under the Warrant, or as
otherwise required under the Purchase Agreement, to provide for the
exercise of the rights represented by this Warrant (without regard
to any limitations on exercise).
5.
WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, this Warrant, in and of itself, shall
not entitle the Holder to any voting rights or other rights as a
stockholder of the Company. In addition, nothing contained in this
Warrant shall be construed as imposing any liabilities on the
Holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the
Company.
6.
REISSUANCE.
(a)
Lost, Stolen or Mutilated Warrant. If this Warrant is lost,
stolen, mutilated or destroyed, the Company will, on such terms as
to indemnity or otherwise as it may reasonably impose (which shall,
in the case of a mutilated Warrant, include the surrender thereof),
issue a new Warrant of like denomination and tenor as this Warrant
so lost, stolen, mutilated or destroyed.
(b)
Issuance of New Warrants. Whenever the Company is required
to issue a new Warrant pursuant to the terms of this Warrant, such
new Warrant shall be of like tenor with this Warrant, and shall
have an issuance date, as indicated on the face of such new Warrant
which is the same as the Issuance Date.
7.
TRANSFER.
(a)
Notice of Transfer. The Holder agrees to give written notice
to the Company before transferring this Warrant or transferring any
Warrant Shares of such Holder’s intention to do so, describing
briefly the manner of any proposed transfer. Promptly upon
receiving such written notice, the Company shall present copies
thereof to the Company’s counsel. If the proposed transfer may be
effected without registration or qualification (under any federal
or state securities laws) as evidenced by an opinion of counsel to
Holder, the Company, as promptly as practicable, shall notify the
Holder thereof, whereupon the Holder shall be entitled to transfer
this Warrant or to dispose of Warrant Shares received upon the
previous exercise of this Warrant, all in accordance with the terms
of the notice delivered by the Holder to the Company; provided,
however, that an appropriate legend may be endorsed on this Warrant
or the certificates for such Warrant Shares respecting restrictions
upon transfer thereof necessary or advisable in the opinion of
counsel and satisfactory to the Company to prevent further
transfers which would be in violation of Section 5 of the
Securities Act and applicable state securities laws; and provided
further that the prospective transferee or purchaser shall execute
the Assignment of Warrant attached hereto as Exhibit B and
such other documents and make such representations, warranties, and
agreements as may be required solely to comply with the exemptions
relied upon by the Company for the transfer or disposition of the
Warrant or Warrant Shares.
(b)
If the proposed transfer or disposition of this Warrant or such
Warrant Shares described in the written notice given pursuant to
this Section 7 may not be effected without registration or
qualification of this Warrant or such Warrant Shares, the Holder
will limit its activities in respect to such transfer or
disposition as are permitted by law.
(c)
Any transferee of all or a portion of this Warrant shall succeed to
the rights and benefits of the initial Holder of this Warrant under
the Purchase Agreement (registration rights, expenses, and
indemnity).
8.
NOTICES. Whenever notice is required to be given under this
Warrant, unless otherwise provided herein, such notice shall be
given in accordance with the notice provisions contained in the
Purchase Agreement. The Company shall provide the Holder with
prompt written notice (i) immediately upon any adjustment of the
Exercise Price, setting forth in reasonable detail, the calculation
of such adjustment and (ii) at least 20 days prior to the date on
which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the shares of Common
Stock, (B) with respect to any grants, issuances or sales of any
stock or other securities directly or indirectly convertible into
or exercisable or exchangeable for shares of Common Stock or other
property, pro rata to the holders of shares of Common Stock or (C)
for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided in each case that
such information shall be made known to the public prior to or in
conjunction with such notice being provided to the
Holder.
9.
AMENDMENT AND WAIVER. The terms of this Warrant may be
amended or waived (either generally or in a particular instance and
either retroactively or prospectively) only with the written
consent of the Company and the Holder.
10.
GOVERNING LAW; DISPUTE RESOLUTION. This Warrant shall be
governed by and construed in accordance with the laws of the State
of Wyoming without regard to principles of conflicts of laws. Any
action brought by either party against the other concerning the
transactions contemplated by this Warrant shall be brought only in
the state courts of Miami, Florida, or in the federal courts
located in the Southern District of Florida. The parties to this
Warrant hereby irrevocably waive any objection to jurisdiction and
venue of any action instituted hereunder and shall not assert any
defense based on lack of jurisdiction or venue or based upon forum
non conveniens. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR
ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED
HEREBY. The prevailing party shall be entitled to recover from
the other party its reasonable attorney’s fees and costs. In the
event that any provision of this Warrant or any other agreement
delivered in connection herewith is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of
any other provision of any agreement. Each party hereby irrevocably
waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this
Warrant or any other Transaction Document by mailing a copy thereof
via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for
notices to it under this Warrant and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
law.
11.
ACCEPTANCE. Receipt of this Warrant by the Holder shall
constitute acceptance of and agreement to all of the terms and
conditions contained herein.
12.
CERTAIN DEFINITIONS. For purposes of this Warrant, the
following terms shall have the following meanings:
(a)
“Closing Sale Price” means, for any security as of any date,
(i) the last closing trade price for such security on the Trading
Market, as reported by the Trading Market, or, if the Trading
Market begins to operate on an extended hours basis and does not
designate the closing trade price, then the last trade price of
such security prior to 4:00 p.m., Miami, Florida time, as reported
by the Trading Market, or (ii) if the foregoing does not apply, the
last trade price of such security in the over-the-counter market
for such security as reported by the Trading Market, or (iii) if no
last trade price is reported for such security by the Trading
Market, the average of the bid and ask prices of any market makers
for such security as reported by the Trading Market. If the Closing
Sale Price cannot be calculated for a security on a particular date
on any of the foregoing bases, the Closing Sale Price of such
security on such date shall be the fair market value as mutually
determined by the Company and the Holder. All such determinations
to be appropriately adjusted for any stock dividend, stock split,
stock combination or other similar transaction during the
applicable calculation period.
(b)
“Common Stock” means the Company’s common stock, par value
$0.001 per share, and any other class of securities into which such
securities may hereafter be reclassified or changed.
(c)
“Common Stock Equivalents” means any securities of the
Company that 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.
(d)
“Market Price” means the highest closing price of the Common
Stock during the twenty (20) Trading Days prior to the date of the
respective Exercise Notice.
(e)
“OTC Markets” means OTCQX, OTCQB and the OTC
Pink.
(f)
“Trading Day” means (i) any day on which the Common Stock is
listed or quoted and traded on its Trading Market, (ii) if the
Common Stock is not then listed or quoted and traded on any
national securities exchange, then a day on which trading occurs on
any over-the-counter markets, or (iii) if trading does not occur on
the over-the-counter markets, any business day.
(g)
“Trading Market” means the OTC Markets or any equivalent
principal securities exchange or other securities market on which
the Common Stock is being traded or quoted.
**
signature page follows **
IN
WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the Issuance Date set forth above.
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RESPIRERX
PHARMACEUTICALS, INC. |
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By: |
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Name: |
Jeff
Eliot Margolis |
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Title: |
CFO |
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Agreed
& Accepted: |
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Quick Capital, LLC |
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By: |
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Name: |
Eilon
D. Natan |
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Title: |
Managing
Partner |
EXHIBIT
A
EXERCISE
NOTICE
(To
be executed by the registered holder to exercise this Common Stock
Purchase Warrant)
The Undersigned holder
hereby exercises the right to purchase _________________ of the
shares of Common Stock (“Warrant Shares”) of RESPIRERX
PHARMACEUTICALS, INC., a Delaware corporation (the “Company”),
evidenced by the attached copy of the Common Stock Purchase Warrant
(the “Warrant”). Capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth in the
Warrant.
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1. |
Form
of Exercise Price. The Holder intends that payment of the
Exercise Price shall be made as (check one): |
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☐ |
a
cash exercise with respect to _________________ Warrant Shares;
or |
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☐ |
by
cashless exercise pursuant to the Warrant (calculation schedule
attached). |
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2. |
Payment
of Exercise Price. If cash exercise is selected above, the
holder shall pay the applicable Aggregate Exercise Price in the sum
of $___________________ to the Company in accordance with the terms
of the Warrant. |
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| 3. |
Delivery
of Warrant Shares. The Company shall deliver to the holder
__________________ Warrant Shares in accordance with the terms of
the Warrant or as mutually agreed by the Holder and the
Company. |
Date:________________________
(Print
Name of Registered Holder)
By:
_________________________________________
Name:______________________________________
Title:________________________________________
EXHIBIT
B
ASSIGNMENT
OF WARRANT
(To
be signed only upon authorized transfer of the Warrant)
For Value Received, the
undersigned hereby sells, assigns, and transfers unto
____________________ the right to purchase _______________ shares
of common stock of RESPIRERX PHARMACEUTICALS, INC. , to which the
within Common Stock Purchase Warrant relates and appoints
____________________, as attorney-in-fact, to transfer said right
on the books of RESPIRERX PHARMACEUTICALS, INC. with full power of
substitution and re-substitution in the premises. By accepting such
transfer, the transferee has agreed to be bound in all respects by
the terms and conditions of the within Warrant.
Date:
____________________________________
(Signature)
*
____________________________________
(Name)
____________________________________
(Address)
____________________________________
(Social
Security or Tax Identification No.)
* The
signature on this Assignment of Warrant must correspond to the name
as written upon the face of the Common Stock Purchase Warrant in
every particular without alteration or enlargement or any change
whatsoever. When signing on behalf of a corporation, partnership,
trust or other entity, please indicate your position(s) and
title(s) with such entity.
Exhibit
99.2
NEITHER
THE ISSUANCE NOR SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES FILED PURSUANT TO THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.
|
Principal Amount: $87,000 |
Issue
Date: December 23, 2021 |
CONVERTIBLE
PROMISSORY NOTE
FOR
VALUE RECEIVED, as of December 23, 2021 (the “Issue
Date”), RESPIRERX PHARMACEUTICALS, INC., a Delaware corporation
(hereinafter called the “Borrower” or “Company”),
hereby promises to pay to the order of Quick Capital, LLC, a
Wyoming limited liability company, or its registered assigns (the
“Holder”), the principal sum of $87,000, payable upon
the earlier of maturity or upon acceleration or upon prepayment of
this Note as set forth herein. The term “Note” and all
references thereto, as used throughout this instrument, shall mean
this instrument as originally executed, or if later amended or
supplemented, then as so amended or supplemented. A one-time
interest charge equal to 10% per annum shall accrue on this Note,
provided that upon and following any occurrence of an Event of
Default, this Note shall accrue an interest charge at a rate equal
to the lesser of 24% on the principal amount of this Note or the
maximum rate of interest under applicable law. The maturity date
of this Note shall be the date that is 120 days after the Issue
Date (the “Maturity Date”), and is the date upon which the
principal amount, as well as any accrued and unpaid interest and
other fees, shall be due and payable, provided however, that upon
10 days prior written notice delivered to the Holder before the
original Maturity Date, the Company may extend the Maturity Date to
the 180th day following the Issue Date in the Company’s
sole discretion. This Note may be prepaid in whole or in part
only as explicitly set forth herein. All payments due hereunder (to
the extent not converted into common stock of the Company, $0.001
par value per share (the “Common Stock”) in accordance with
the terms hereof) shall be made in lawful money of the United
States of America. All payments shall be made at such address as
the Holder shall hereafter give to the Borrower by written notice
made in accordance with the provisions of this Note. Whenever any
amount expressed to be due by the terms of this Note is due on any
day which is not a business day, the same shall instead be due on
the next succeeding day which is a business day and, in the case of
any interest payment date which is not the date on which this Note
is paid in full, the extension of the due date thereof shall not be
taken into account for purposes of determining the amount of
interest due on such date. As used in this Note, the term “business
day” shall mean any day other than a Saturday, Sunday or a day on
which commercial banks in the city of Miami, Florida are authorized
or required by law or executive order to remain closed. Each
capitalized term used herein, and not otherwise defined, shall have
the meaning ascribed thereto in that certain Note Purchase
Agreement dated December 23, 2021, pursuant to which this Note was
originally issued (as amended and/or restated from time to time,
the “Purchase Agreement”).
The
cash consideration delivered to the Borrower at the closing of this
Note is $71,820.00 as this Note is being issued with a ten percent
(10%) original issuance discount, with a 4% commission being issued
to the Company’s broker on the Company’s behalf at closing, and
with $3,000.00 being withheld to offset other transaction and legal
costs of the Holder.
This
Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Borrower and
will not impose personal liability upon the holder
thereof.
The
Company hereby affirms all of its obligations to the Holder under
all of the Transaction Documents and agrees and affirms as follows:
(i) that as of the Issue Date, the Company has performed, satisfied
and complied in all material respects with all the covenants,
agreements and conditions under each of the Transaction Documents
to be performed, satisfied or complied with by the Company; (ii)
that the Company shall continue to perform each and every covenant,
agreement and condition set forth in each of the Transaction
Documents and this Note, and continue to be bound by each and all
of the terms and provisions thereof and hereof; (iii) that as of
the Issue Date, no default or Event of Default has occurred or is
continuing under the Purchase Agreement, the Note or any other
Transaction Documents, and no event has occurred that, with the
passage of time, the giving of notice, or both, would constitute a
default or an Event of Default under the Purchase Agreement, the
Note or any other Transaction Documents; and (iv) that as of the
Issue Date, no event, fact, or other set of circumstances has
occurred which could reasonably be expected to have, cause, or
result in a Material Adverse Effect.
The
Company hereby acknowledges, represents, warrants and confirms to
the Holder that: (i) each of the Transaction Documents executed by
the Company are valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective
terms; and (ii) no oral representations, statements, or inducements
have been made by Holder, or any agent or representative of Holder,
with respect to this Note, the Purchase Agreement, and all other
Transaction Documents.
The
following additional terms shall also apply to this
Note:
ARTICLE I
CONVERSION
RIGHTS
1.1 Conversion
Right. After the occurrence of any Event of Default (as defined
herein), the Holder shall have the right at any time, and from time
to time to convert all or any part of the outstanding and unpaid
principal, interest, fees, or any other obligation owed pursuant to
this Note into fully paid and non-assessable shares of Common
Stock, as such Common Stock exists on the Issue Date, or any shares
of capital stock or other securities of the Borrower into which
such Common Stock shall hereafter be changed or reclassified at the
Default Conversion Price (as defined below), determined as provided
herein (a “Conversion”); provided, however,
that in no event shall the Holder be entitled to convert any
portion of this Note in excess of that portion of this Note upon
conversion of which the sum of (1) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other
than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of this Note or
the unexercised or unconverted portion of any other security of the
Borrower subject to a limitation on conversion or exercise
analogous to the limitations contained herein) and (2) the number
of shares of Common Stock issuable upon the Conversion of the
portion of this Note with respect to which the determination of
this proviso is being made, would result in beneficial ownership by
the Holder and its affiliates of more than 9.99% of the outstanding
shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and
Regulations 13D-G thereunder, except as otherwise provided in
clause (1) of such proviso. The number of shares of Common Stock to
be issued upon each Conversion of this Note shall be determined by
dividing the Conversion Amount (as defined below) (the numerator)
by the applicable Default Conversion Price then in effect on the
date specified in the notice of conversion (the denominator), in
the form attached hereto as Exhibit A (the “Notice of
Conversion”), delivered to the Borrower by the Holder in
accordance with Section 1.4 below; provided that the Notice
of Conversion is submitted by facsimile or e-mail (or by other
means resulting in, or reasonably expected to result in, notice) to
the Borrower before 6:00 p.m., Miami, Florida time on such
conversion date (the “Conversion Date”). The term
“Conversion Amount” means, with respect to any Conversion of
this Note, the sum of (1) the principal amount of this Note to be
converted in such Conversion plus (2) at the Holder’s
option, accrued and unpaid interest, if any, on such principal
amount at the interest rates provided in this Note to the
Conversion Date plus (3) at the Holder’s option, fees on the
amounts referred to in the immediately preceding clauses (1) and/or
(2) plus (4) at the Holder’s option, any amounts owed to the
Holder pursuant to Sections 1.3 and 1.4(g)
hereof.
1.2 Default
Conversion Price. Subject to the adjustments described herein,
this Note shall be convertible into shares of Common Stock at any
time after an Event of Default in any portion at the Default
Conversion Price, in the sole discretion of the Holder. “Default
Conversion Price” means the conversion price as determined
in accordance with this Note. The Default Conversion Price shall be
automatically adjusted equitably for stock splits, stock dividends
or rights offerings by the Borrower relating to the Borrower’s
securities or the securities of any subsidiary of the Borrower, as
well as combinations, recapitalization, reclassifications,
extraordinary distributions and similar events:
(a) [Reserved]
(b) [Reserved].
(c) Default
Conversion Price: The “Default Conversion Price” shall
mean $0.02 per share. “Trading Day” shall mean any day on
which the Common Stock is tradable for any period on the OTCBB,
OTCQB or on the principal securities exchange or other securities
market on which the Common Stock is then being quoted or
traded.
(d) [Reserved].
(e) Pro
Rata Conversion; Disputes. In the event of a dispute as to the
number of shares of Common Stock issuable to the Holder in
connection with a conversion of this Note, the Borrower shall issue
to the Holder the number of shares of Common Stock not in dispute
and resolve such dispute in accordance with this Note.
1.3 Authorized
Shares. The Borrower covenants that during the period the
Conversion right exists, the Borrower will reserve from its
authorized and unissued Common Stock a sufficient number of shares,
free from preemptive rights, to provide for the issuance of Common
Stock upon the full conversion of this Note issued pursuant to the
Purchase Agreement. The Borrower is required at all times to have
authorized and reserved one and a half times (150%) the number of
shares that is actually issuable upon full conversion of the Note
(based on the Conversion Price of the Note in effect from time to
time) (the “Reserved Amount”). The Reserved Amount shall be
increased from time to time in accordance with the Borrower’s
obligations pursuant to Section 4(i) of the Purchase
Agreement. The Borrower represents that upon issuance, such shares
of Common Stock will be duly and validly issued, fully paid and
non-assessable. In addition, if the Borrower shall issue any
securities or make any change to its capital structure which would
change the number of shares of Common Stock into which this Note
shall be convertible at the then current Conversion Price, the
Borrower shall at the same time make proper provision so that
thereafter there shall be a sufficient number of shares of Common
Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Note. The Borrower (i) represents
that it has irrevocably instructed its transfer agent to issue
certificates for the Common Stock issuable upon conversion of this
Note, and (ii) agrees that its issuance of this Note shall
constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute
and issue the necessary certificates for shares of Common Stock in
accordance with the terms and conditions of this Note.
Notwithstanding the foregoing, in no event shall the Reserved
Amount be lower than the initial Reserved Amount, regardless of any
prior conversions.
Borrower’s
failure to maintain or to replenish the Reserved Amount within
three (3) business days of a request of the Holder, shall be an
Event of Default under this Note.
1.4 Method
of Conversion.
(a) Mechanics
of Conversion. Subject to Section 1.1, this Note may be
converted by the Holder in whole or in part at any time from time
to time on or after the Issue Date, by (i) submitting to the
Borrower a Notice of Conversion (by facsimile, e-mail or other
reasonable means of communication dispatched on the Conversion Date
prior to 6:00 p.m., Miami, Florida time) and (ii) subject to
Section 1.4(b), surrendering this Note at the principal
office of the Borrower.
(b) Surrender
of Note Upon Conversion. Notwithstanding anything to the
contrary set forth herein, upon conversion of this Note in
accordance with the terms hereof, the Holder shall not be required
to physically surrender this Note to the Borrower unless the entire
unpaid principal amount of this Note is so converted. The Holder
and the Borrower shall maintain records showing the principal
amount so converted and the dates of such conversions or shall use
such other method, reasonably satisfactory to the Holder and the
Borrower, so as not to require physical surrender of this Note upon
each such conversion. In the event of any dispute or discrepancy,
such records of the Holder shall, prima facie, be
controlling and determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Note, acknowledge
and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Note, the unpaid and
unconverted principal amount of this Note represented by this Note
may be less than the amount stated on the face hereof.
(c) Payment
of Taxes. The Borrower shall not be required to pay any tax
which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock or other securities or
property on conversion of this Note in a name other than that of
the Holder (or in street name), and the Borrower shall not be
required to issue or deliver any such shares or other securities or
property unless and until the person or persons (other than the
Holder or the custodian in whose street name such shares are to be
held for the Holder’s account) requesting the issuance thereof
shall have paid to the Borrower the amount of any such tax or shall
have established to the satisfaction of the Borrower that such tax
has been paid.
(d) Delivery
of Common Stock Upon Conversion. Upon receipt by the Borrower
from the Holder of a facsimile transmission or e-mail (or other
reasonable means of communication) of a Notice of Conversion
meeting the requirements for conversion as provided in this
Section 1.4, the Borrower shall issue and deliver or cause
to be issued and delivered to or upon the order of the Holder
certificates (or electronic shares via DWAC transfer, at the option
of Holder) for the Common Stock issuable upon such conversion
within three (3) business days after such receipt (the
“Deadline”) (and, solely in the case of conversion of the
entire unpaid principal amount hereof, surrender of this Note) in
accordance with the terms hereof and the Purchase
Agreement.
(e) Obligation
of Borrower to Deliver Common Stock. Upon receipt by the
Borrower of a Notice of Conversion, the Holder shall be deemed to
be the holder of record of the Common Stock issuable upon such
conversion, the outstanding principal amount and the amount of
accrued and unpaid interest on this Note shall be reduced to
reflect such conversion, and, the reserve shall be proportionately
reduced, unless the Borrower defaults on its obligations under this
Article I, all rights with respect to the portion of this
Note being so converted shall forthwith terminate except the right
to receive the Common Stock or other securities, cash or other
assets, as herein provided, on such conversion. If the Holder shall
have given a Notice of Conversion as provided herein, the
Borrower’s obligation to issue and deliver the certificates for
Common Stock shall be absolute and unconditional, irrespective of
the absence of any action by the Holder to enforce the same, any
waiver or consent with respect to any provision thereof, the
recovery of any judgment against any person or any action to
enforce the same, any failure or delay in the enforcement of any
other obligation of the Borrower to the holder of record, or any
setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder of any obligation to the
Borrower, and irrespective of any other circumstance which might
otherwise limit such obligation of the Borrower to the Holder in
connection with such conversion. The Conversion Date specified in
the Notice of Conversion shall be the Conversion Date so long as
the Notice of Conversion is received by the Borrower before 6:00
p.m., Miami, Florida time, on such date.
(f) Delivery
of Common Stock by Electronic Transfer. In lieu of delivering
physical certificates representing the Common Stock issuable upon
conversion, provided the Borrower is participating in the
Depository Trust Company (“DTC”) Fast Automated Securities
Transfer (“FAST”) program, upon request of the Holder and
its compliance with the provisions contained in Section 1.1
and in this Section 1.4, the Borrower shall use its best
efforts to cause its transfer agent to electronically transmit the
Common Stock issuable upon conversion to the Holder by crediting
the account of Holder’s Prime Broker with DTC through its Deposit
Withdrawal At Custodian (“DWAC”) system.
(g) Failure
to Deliver Common Stock Prior to Delivery Deadline. Without in
any way limiting the Holder’s right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree
that if delivery of the Common Stock issuable upon conversion of
this Note is not delivered by the Deadline (other than a failure
due to the circumstances described in Section 1.3 above,
which failure shall be governed by such Section) the
Borrower shall pay to the Holder $1,000 per day in cash, for each
day beyond the Deadline that the Borrower fails to deliver such
Common Stock until the Borrower issues and delivers a certificate
to the Holder or credit the Holder’s balance account with DTC for
the number of shares of Common Stock to which the Holder is
entitled upon such Holder’s conversion of any Conversion Amount
(under Holder’s and Borrower’s expectation that any damages will
tack back to the Issue Date). Such cash amount shall be paid to
Holder by the fifth day of the month following the month in which
it has accrued or, at the option of the Holder (by written notice
to the Borrower by the first day of the month following the month
in which it has accrued), shall be added to the principal amount of
this Note, in which event interest shall accrue thereon in
accordance with the terms of this Note and such additional
principal amount shall be convertible into Common Stock in
accordance with the terms of this Note. The Borrower agrees that
the right to convert is a valuable right to the Holder. The damages
resulting from a failure, attempt to frustrate, interference with
such conversion right are difficult if not impossible to qualify.
Accordingly, the parties acknowledge that the liquidated damages
provision contained in this Section 1.4(g) are
justified.
(h) Rescindment
of a Notice of Conversion. If (i) the Borrower fails to respond
to Holder within one (1) business day from the Conversion Date
confirming the details of Notice of Conversion, (ii) the Borrower
fails to provide any of the shares of the Borrower’s Common Stock
requested in the Notice of Conversion within three (3) business
days from the date of receipt of the Note of Conversion, (iii) the
Holder is unable to procure a legal opinion required to have the
shares of the Borrower’s Common Stock issued unrestricted and/or
deposited to sell for any reason related to the Borrower’s
standing, (iv) the Holder is unable to deposit the shares of the
Borrower’s Common Stock requested in the Notice of Conversion for
any reason related to the Borrower’s standing, (v) at any time
after a missed Deadline, at the Holder’s sole discretion, or (vi)
if OTC Markets Group, Inc. changes the Borrower’s designation to
‘Limited Information’ (Yield), ‘No Information’ (Stop Sign),
‘Caveat Emptor’ (Skull & Crossbones), ‘OTC’, ‘Other OTC’ or
‘Grey Market’ (Exclamation Mark Sign) or other trading restriction
on the day of or any day after the Conversion Date, the Holder
maintains the option and sole discretion to rescind the Notice of
Conversion with a “Notice of Rescindment.”
1.5 Concerning
the Shares. The shares of Common Stock issuable upon conversion
of this Note may not be sold or transferred unless (i) such shares
are sold pursuant to an effective registration statement under the
Securities Act of 1933, as amended 1933 Act or (ii) the Borrower or
its transfer agent shall have been furnished with an opinion of
counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to
the effect that the shares to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration or
(iii) such shares are sold or transferred pursuant to Rule 144
under the 1933 Act (or a successor rule) (“Rule 144”) or
(iv) such shares are transferred to an “affiliate” (as defined in
Rule 144) of the Borrower who agrees to sell or otherwise transfer
the shares only in accordance with this Section 1.5 and who
is an “accredited investor” (as defined in Rule 501(a) of the 1933
Act). Except as otherwise provided in the Purchase Agreement (and
subject to the removal provisions set forth below), until such time
as the shares of Common Stock issuable upon conversion of this Note
have been registered under the 1933 Act or otherwise may be sold
pursuant to Rule 144 without any restriction as to the number of
securities as of a particular date that can then be immediately
sold, each certificate for shares of Common Stock issuable upon
conversion of this Note that has not been so included in an
effective registration statement or that has not been sold pursuant
to an effective registration statement or an exemption that permits
removal of the legend, shall bear a legend substantially in the
following form, as appropriate:
“NEITHER
THE ISSUANCE OR SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.”
The
legend set forth above shall be removed and the Borrower shall
issue to the Holder a new certificate therefore free of any
transfer legend if (i) the Borrower or its transfer agent shall
have received an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to
the effect that a public sale or transfer of such Common Stock may
be made without registration under the 1933 Act, which opinion
shall be reasonably accepted by the Company so that the sale or
transfer is effected or (ii) in the case of the Common Stock
issuable upon conversion of this Note, such security is registered
for sale by the Holder under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule
144 without any restriction as to the number of securities as of a
particular date that can then be immediately sold. Assuming Rule
144 or Regulation S is available and in the event that the Company
does not accept the opinion of counsel provided by the Holder with
respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144 or Regulation S, at the Deadline,
and the does not provide a suitable replacement opinion to the
Holder within two (2) business days, it will be considered an Event
of Default pursuant to Section 3.2 of the Note.
1.6 Effect
of Certain Events.
(a) Effect
of Merger, Consolidation, Etc. At the option of the Holder, the
sale, conveyance or disposition of all or substantially all of the
assets of the Borrower, the effectuation by the Borrower of a
transaction or series of related transactions in which more than
50% of the voting power of the Borrower is disposed of, or the
consolidation, merger or other business combination of the Borrower
with or into any other Person (as defined below) or Persons when
the Borrower is not the survivor shall either: (i) be deemed to be
an acceleration event (“Acceleration Event”) pursuant to which the
Borrower shall be required to pay to the Holder upon the
consummation of and as a condition to such transaction an amount
equal full Principal Amount and unpaid accrued interest or (ii) be
treated pursuant to Section 1.6(b) hereof. “Person”
shall mean any individual, corporation, limited liability company,
partnership, association, trust or other entity or
organization.
(b) Adjustment
Due to Merger, Consolidation, Etc. If, at any time when this
Note is issued and outstanding and prior to conversion of the Note,
there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a
result of which shares of Common Stock of the Borrower shall be
changed into the same or a different number of shares of another
class or classes of stock or securities of the Borrower or another
entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in
connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to
receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Holder would have been
entitled to receive in such transaction had this Note been
converted in full immediately prior to such transaction (without
regard to any limitations on conversion set forth herein), and in
any such case appropriate provisions shall be made with respect to
the rights and interests of the Holder of this Note to the end that
the provisions hereof (including, without limitation, provisions
for adjustment of the Default Conversion Price and of the number of
shares issuable upon conversion of the Note) shall thereafter be
applicable, as nearly as may be practicable in relation to any
securities or assets thereafter deliverable upon the conversion
hereof. The Borrower shall not affect any transaction described in
this Section 1.6(b) unless (a) it first gives, to the extent
practicable, thirty (30) days prior written notice (but in any
event at least fifteen (15) days prior written notice) of the
record date of the special meeting of shareholders to approve, or
if there is no such record date, the consummation of, such merger,
consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets (during which time the
Holder shall be entitled to convert this Note) and (b) the
resulting successor or acquiring entity (if not the Borrower)
assumes by written instrument the obligations of this Section
1.6(d). The above provisions shall similarly apply to
successive consolidations, mergers, sales, transfers or share
exchanges.
(c) Adjustment
Due to Distribution. If the Borrower shall declare or make any
distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a dividend, stock repurchase, by way of
return of capital or otherwise (including any dividend or
distribution to the Borrower’s shareholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a “Distribution”), then the Holder of this Note
shall be entitled, upon any conversion of this Note after the date
of record for determining shareholders entitled to such
Distribution, to receive the amount of such assets which would have
been payable to the Holder with respect to the shares of Common
Stock issuable upon such conversion had such Holder been the holder
of such shares of Common Stock on the record date for the
determination of shareholders entitled to such
Distribution.
(d) Adjustment
Due to Dilutive Issuance. If, at any time when this Note is
issued and outstanding, the Borrower issues or sells, or in
accordance with this Section 1.6(d) hereof is deemed to have
issued or sold, except for shares of Common Stock issued directly
to employees with respect to accrued and unpaid compensation and
employee benefits or in repayment of notes or advances due to such
employees, or to vendors or suppliers of the Borrower in
satisfaction of amounts owed to such vendors or suppliers
(provided, however, that such vendors or suppliers shall not have
an arrangement to transfer, sell or assign such shares of Common
Stock prior to the issuance of such shares), any shares of Common
Stock for no consideration or for a consideration per share (before
deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the
Conversion Price in effect on the date of such issuance (or deemed
issuance) of such shares of Common Stock (a “Dilutive
Issuance”), then immediately upon the Dilutive Issuance, the
Conversion Price will be reduced to the amount of the consideration
per share received by the Borrower in such Dilutive Issuance,
subject to the Holder’s rights under Section 1.2 to select
its Conversion Price.
The
Borrower shall be deemed to have issued or sold shares of Common
Stock if the Borrower in any manner issues or grants any warrants,
rights or options (not including rights or options associated with
employee stock option plans), whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock
(“Convertible Securities”) (such warrants, rights and
options to purchase Common Stock or Convertible Securities are
hereinafter referred to as “Options”) and the price per
share for which Common Stock is issuable upon the exercise of such
Options is less than the Conversion Price then in effect, then the
Conversion Price shall be equal to such price per share. For
purposes of the preceding sentence, the “price per share for which
Common Stock is issuable upon the exercise of such Options” is
determined by dividing (i) the total amount, if any, received or
receivable by the Borrower as consideration for the issuance or
granting of all such Options, plus the minimum aggregate amount of
additional consideration, if any, payable to the Borrower upon the
exercise of all such Options, plus, in the case of Convertible
Securities issuable upon the exercise of such Options, the minimum
aggregate amount of additional consideration payable upon the
conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the
exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to
the Conversion Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Options or upon the
conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
Additionally,
the Borrower shall be deemed to have issued or sold shares of
Common Stock if the Borrower in any manner issues or sells any
Convertible Securities, whether or not immediately convertible
(other than where the same are issuable upon the exercise of
Options), and the price per share for which Common Stock is
issuable upon such conversion or exchange is less than the
Conversion Price then in effect, then the Conversion Price shall be
equal to such price per share. For the purposes of the preceding
sentence, the “price per share for which Common Stock is issuable
upon such conversion or exchange” is determined by dividing (i) the
total amount, if any, received or receivable by the Borrower as
consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Borrower upon the conversion
or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment
to the Conversion Price will be made upon the actual issuance of
such Common Stock upon conversion or exchange of such Convertible
Securities. Notwithstanding the forgoing, no adjustment will be
made under this Section 1.6(d) in respect of an Exempt
Issuance.
An
“Exempt Issuance” shall mean the issuance of (a) shares of Common
Stock or other securities to officers or directors of the Borrower
pursuant to any stock or option or similar equity incentive plan
duly adopted for such purpose by a majority of the non-employee
members of the Borrower’s Board of Directors or a majority of the
members of a committee of non-employee directors (“Plan”)
established for such purpose in a manner which is consistent with
the Borrower’s prior business practices, including, but not limited
to granting of such as bonuses; (b) securities pursuant to a
merger, consolidation, acquisition or similar business combination
approved by a majority of the disinterested directors of the
Borrower, provided that any such issuance shall only be to a Person
(or to the equity holders of a Person) which is, itself or through
its subsidiaries, an operating company or an owner of an asset in a
business synergistic with the business of the Borrower and shall
provide to the Borrower additional benefits in addition to, or in
lieu of, an investment of funds, but shall not include a
transaction in which the Borrower is issuing securities primarily
for the purpose of raising capital or to an entity whose primary
business is investing in securities; (c) securities issued pursuant
to any equipment loan or leasing arrangement, real property leasing
arrangement or debt financing from a bank or similar financial
institution approved by a majority of the disinterested directors
of the Borrower; and/or (d) securities issued with respect to which
the Holder waives its rights in writing under this Section
1.6(d).
(e) Purchase
Rights. If, at any time when any Notes are issued and
outstanding, the Borrower issues any Convertible Securities or
rights to purchase stock, warrants, securities or other property
(the “Purchase Rights”) pro rata to the record holders of
any class of Common Stock, then the Holder of this Note will be
entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such Holder could have
acquired if such Holder had held the number of shares of Common
Stock acquirable upon complete conversion of this Note (without
regard to any limitations on conversion contained herein)
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 Common
Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
(f) Notice
of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price as a result of the events
described in this Section 1.6, or under Section 1.2
(regarding stock splits, combinations, etc.), the Borrower, at its
expense, shall promptly compute such adjustment or readjustment and
prepare and furnish to the Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. The Borrower shall,
upon the written request at any time of the Holder, furnish to such
Holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and
(iii) the number of shares of Common Stock and the amount, if any,
of other securities or property which at the time would be received
upon conversion of the Note.
1.7 Trading
Market Limitations. Unless permitted by the applicable rules
and regulations of the principal securities market on which the
Common Stock is then quoted, listed or traded, in no event shall
the Borrower issue upon conversion of or otherwise pursuant to this
Note more than the maximum number of shares of Common Stock that
the Borrower can issue pursuant to any rule of the principal United
States securities market on which the Common Stock is then traded
(the “Maximum Share Amount”), subject to equitable
adjustment from time to time for stock splits, stock dividends,
combinations, capital reorganizations and similar events relating
to the Common Stock occurring after the Issue Date. Once the
Maximum Share Amount has been issued, if the Borrower fails to
eliminate any prohibitions under applicable law or the rules or
regulations of any stock exchange, interdealer quotation system or
other self-regulatory organization with jurisdiction over the
Borrower or any of its securities on the Borrower’s ability to
issue shares of Common Stock in excess of the Maximum Share Amount,
in lieu of any further right to convert this Note, this will be
considered an Event of Default under Section 3.2 of the
Note.
1.8 Status
as Shareholder. Upon submission of a Notice of Conversion by a
Holder, (i) the shares covered thereby (other than the shares, if
any, which cannot be issued because their issuance would exceed
such Holder’s allocated portion of the Reserved Amount or Maximum
Share Amount) shall be deemed converted into shares of Common Stock
and (ii) the Holder’s rights as a Holder of such converted portion
of this Note shall cease and terminate, excepting only the right to
receive certificates for such shares of Common Stock and to any
remedies provided herein or otherwise available at law or in equity
to such Holder because of a failure by the Borrower to comply with
the terms of this Note. Notwithstanding the foregoing, if a Holder
has not received certificates or transmission of such shares
pursuant to Section 1.4(f) for all shares of Common Stock
prior to the tenth (10th) business day after the expiration of the
Deadline with respect to a conversion of any portion of this Note
for any reason, then (unless the Holder otherwise elects to retain
its status as a holder of Common Stock by so notifying the
Borrower) the Holder shall regain the rights of a Holder of this
Note with respect to such unconverted portions of this Note and the
Borrower shall, as soon as practicable, return such unconverted
Note to the Holder or, if this Note has not been surrendered,
adjust its records to reflect that such portion of this Note has
not been converted. In all cases, the Holder shall retain all of
its rights and remedies (including, without limitation, (i) the
right to receive Conversion default payments pursuant to Section
1.3 to the extent required thereby for such Conversion default
and any subsequent Conversion default and (ii) the right to have
the Conversion Price with respect to subsequent conversions
determined in accordance with Section 1.2) for the
Borrower’s failure to convert this Note.
1.9 Prepayment.
Notwithstanding anything to the contrary contained in this Note,
the Borrower may prepay the amounts outstanding hereunder with the
consent of the Holder pursuant to the following terms and
conditions:
(a) At
any time during the period beginning on the Issue Date and ending
on the date which is day immediately prior to the Maturity Date,
the Borrower shall have the right, exercisable on not less than
three (3) Trading Days prior written notice to the Holder of the
Note to prepay the outstanding Note (principal and accrued
interest), in full by making a payment to the Holder of an amount
in cash equal to 110% 10% prepayment premium, multiplied by the sum
of: (w) the then outstanding principal amount of this Note
plus (x) accrued and unpaid interest on the unpaid principal
amount of this Note. To the extent a partial prepayment is made,
the amount of principal and/or accrued but unpaid interest deemed
prepaid, shall be 90.9090% of the amount paid and $9.0909 shall be
deemed the 10% prepayment premium.
(b) Any
notice of prepayment hereunder by the Company (an “Optional
Prepayment Notice”) shall be delivered to the Holder of the
Note at its registered addresses and shall state: (1) that the
Borrower is exercising its right to prepay the Note, and (2) the
date of prepayment which shall be not more than three (3) Trading
Days from the date of the Optional Prepayment Notice. On the date
fixed for prepayment (the “Optional Prepayment Date”), the
Borrower shall make payment of the applicable prepayment amount to
or upon the order of the Holder as specified by the Holder in
writing to the Borrower at least one (1) business day prior to the
Optional Prepayment Date. If the Borrower delivers an Optional
Prepayment Notice and fails to pay the applicable prepayment amount
due to the Holder of the Note within two (2) business days
following the Optional Prepayment Date, the Borrower shall forever
forfeit its right to prepay the Note pursuant to this Section
1.9.
ARTICLE II
CERTAIN
COVENANTS
2.1 Distributions
on Capital Stock. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not without the
Holder’s written consent (a) pay, declare or set apart for such
payment, any dividend or other distribution (whether in cash,
property or other securities) on shares of capital stock other than
dividends on shares of Common Stock solely in the form of
additional shares of Common Stock or (b) directly or indirectly or
through any subsidiary make any other payment or distribution in
respect of its capital stock except for distributions pursuant to
any shareholders’ rights plan which is approved by a majority of
the Borrower’s disinterested directors.
2.2 Restriction
on Stock Repurchases. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not without the
Holder’s written consent redeem, repurchase or otherwise acquire
(whether for cash or in exchange for property or other securities
or otherwise) in any one transaction or series of related
transactions any shares of capital stock of the Borrower or any
warrants, rights or options to purchase or acquire any such
shares.
2.3 [Reserved].
2.4 Sale
of Assets. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder’s
written consent, sell, lease or otherwise dispose of any
significant portion of its assets outside the ordinary course of
business, or in an arms-length transaction or which intent has been
previously disclosed in SEC Documents as such term is defined in
the Purchase Agreement. Any consent to the disposition of any
assets may be conditioned on a specified use of the proceeds of
disposition.
2.5 Advances
and Loans. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder’s
written consent, lend money, give credit or make advances to any
person, firm, joint venture or corporation, including, without
limitation, officers, directors, employees, subsidiaries and
affiliates of the Borrower, except loans, credits or advances (a)
in existence or committed on the Issue Date and which the Borrower
has informed Holder in writing prior to the Issue Date, (b) made in
the ordinary course of business or (c) not in excess of
$15,000.
2.6 Section
3(a)(9) or 3(a)(10) Transaction. So long as this Note is
outstanding, the Borrower shall not enter into any transaction or
arrangement structured in accordance with, based upon, or related
or pursuant to, in whole or in part, either Section 3(a)(9) of the
1933 Act (a “3(a)(9) Transaction”) or Section 3(a)(10) of
the 1933 Act (a “3(a)(10) Transaction”). In the event that
the Borrower does enter into, or makes any issuance of Common Stock
related to a 3(a)(9) Transaction or a 3(a)(10) Transaction while
this Note is outstanding, a liquidated damages charge of 25% of the
outstanding principal balance of this Note, but not less than
Fifteen Thousand Dollars ($15,000), will be assessed and will
become immediately due and payable to the Holder at its election in
the form of cash payment or addition to the balance of this Note.
Notwithstanding the forgoing, transactions contemplated by
subsection (a) of the definition of “Exempt Issuance” in Section
1.6(d) that are considered 3(a)(9) or 3(a)(10) Transactions will
not cause a liquidated damages charge under this Section
2.6.
2.7 Preservation
of Existence, etc. The Borrower shall maintain and preserve,
and cause each of its Subsidiaries to maintain and preserve, its
existence, rights and privileges, and become or remain, and cause
each of its Subsidiaries (other than dormant Subsidiaries that have
no or minimum assets) to become or remain, duly qualified and in
good standing in each jurisdiction in which the character of the
properties owned or leased by it or in which the transaction of its
business makes such qualification necessary.
2.8 Non-circumvention.
The Borrower hereby covenants and agrees that the Borrower will
not, by amendment of its Certificate or Articles of Incorporation
or Bylaws, or through any reorganization, transfer of assets,
consolidation, merger, scheme of arrangement, 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
Note, and will at all times in good faith carry out all the
provisions of this Note and take all action as may be required to
protect the rights of the Holder.
2.9 Repayment
from Proceeds. While any portion of this Note is outstanding,
if the Borrower receives cash proceeds from any source or series of
related or unrelated sources, including but not limited to, from
payments from customers, the issuance of equity or debt, the
conversion of outstanding warrants of the Borrower, the issuance of
securities pursuant to an equity line of credit of the Borrower or
the sale of assets, the Borrower shall, within one (1) business day
of Borrower’s receipt of such proceeds, inform the Holder of such
receipt, following which the Holder shall have the right in its
sole discretion to require the Borrower to immediately apply all or
any portion of such proceeds to repay all or any portion of the
outstanding amounts owed under this Note, provided that,
upon the occurrence of any closings under the Reg A+ Offering the
Company shall make mandatory repayments of amounts owed under this
Note in an amount equal to 10% of the net proceeds obtained by the
Company from each such closing without demand thereof from the
Holder. Failure of the Borrower to comply with this provision shall
constitute an Event of Default. In the event that such proceeds are
received by the Holder prior to the Maturity Date, the required
prepayment shall be subject to the terms of Section 1.9
herein.
2.10 Piggyback
Registration Rights. The Company shall include, subject to any
underwriter or placement agent cutbacks, on any registration
statement or offering statement filed with the SEC, the pro rata
portion of Conversion Shares, all Warrant Shares, and all
Commitment Shares as would be the same pro rata portion included in
such registration statement of offering statement as other holders
similarly situated. In addition to all other remedies at law or in
equity or otherwise in connection with any breaches under this Note
or the other Transaction Documents, failure to do so in compliance
with this Section 2.10 will result in liquidated damages of
$20,000, being immediately due and payable to the Holder at its
election in the form of cash payment.
2.11 [Reserved].
ARTICLE III
EVENTS
OF DEFAULT
The
occurrence of any of the following shall each constitute an
“Event of Default” with no right to notice or the right to
cure except as specifically stated:
3.1 Failure
to Pay Principal or Interest. The Borrower fails to pay the
principal hereof or interest thereon when due on this Note, whether
at the Maturity Date, upon acceleration or otherwise.
3.2 Conversion
and the Shares. The Borrower fails to issue shares of Common
Stock to the Holder (or announces or threatens in writing that it
will not honor its obligation to do so) upon exercise by the Holder
of the Conversion rights of the Holder in accordance with the terms
of this Note, fails to transfer or cause its transfer agent to
transfer (issue) (electronically or in certificated form) any
certificate for shares of Common Stock issued to the Holder upon
conversion of or otherwise pursuant to this Note as and when
required by this Note, the Borrower directs its transfer agent not
to transfer or delays, impairs, and/or hinders its transfer agent
in transferring (or issuing) (electronically or in certificated
form) any certificate for shares of Common Stock to be issued to
the Holder upon conversion of or otherwise pursuant to this Note as
and when required by this Note, or fails to remove (or directs its
transfer agent not to remove or impairs, delays, and/or hinders its
transfer agent from removing) any restrictive legend (or to
withdraw any stop transfer instructions in respect thereof) on any
certificate for any shares of Common Stock issued to the Holder
upon conversion of or otherwise pursuant to this Note as and when
required by this Note (or makes any written announcement, statement
or threat that it does not intend to honor the obligations
described in this paragraph) and any such failure shall continue
uncured (or any written announcement, statement or threat not to
honor its obligations shall not be rescinded in writing) for three
(3) business days after the Holder shall have delivered a Notice of
Conversion. It is an obligation of the Borrower to remain current
in its obligations to its transfer agent. It shall be an “Event of
Default” of this Note, if a conversion of this Note is delayed,
hindered or frustrated due to a balance owed by the Borrower to its
transfer agent. If at the option of the Holder, the Holder advances
any funds to the Borrower’s transfer agent in order to process a
conversion, such advanced funds shall be paid by the Borrower to
the Holder within forty-eight (48) hours of a demand from the
Holder.
3.3 Breach
of Covenants. While this Note is outstanding, the Borrower
breaches any covenant or other term or condition contained in this
Note, or in any of the Transaction Documents including but not
limited to the Purchase Agreement.
3.4 Breach
of Representations and Warranties. While this Note is
outstanding, any representation or warranty of the Borrower made
herein or in any agreement, statement or certificate given in
writing pursuant hereto or in connection herewith (including,
without limitation, the Purchase Agreement), shall be false or
misleading in any material respect when made.
3.5 Receiver
or Trustee. While this Note is outstanding, the Company or any
Material Subsidiary (as such term is defined in the Purchase
Agreement) of the Company shall make an assignment for the benefit
of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its
property or business, or such a receiver or trustee shall otherwise
be appointed.
3.6 Judgments.
Any money judgment, writ or similar process, other than those
disclosed in the SEC Documents, shall be entered or filed against
the Borrower or any subsidiary of the Borrower or any of its
property or other assets for more than $50,000, and shall remain
unvacated, unbonded or unstayed for a period of twenty (20) days
unless otherwise consented to by the Holder, which consent will not
be unreasonably withheld.
3.7 Bankruptcy;
Liquidation. (i) Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings, voluntary or
involuntary, for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company or
any Material Subsidiary, as such term is defined in the Purchase
Agreement, of the Company or the Borrower admits in writing its
inability to pay its debts generally as they mature, or have filed
against it an involuntary petition for bankruptcy; or (ii) any
dissolution, liquidation, or winding up of Borrower or any
substantial portion of its business occurs.
3.8 Delisting
of Common Stock. The Borrower shall fail to maintain the
listing of the Common Stock on at least one of the OTCBB, OTCQB,
OTC Pink or an equivalent replacement exchange, the Nasdaq Capital
Market, the New York Stock Exchange, or the NYSE
American.
3.9 Failure
to Comply with the Exchange Act. The Borrower shall fail to
timely comply with the reporting requirements of the 1934 Act
(including but not limited to becoming delinquent in its filings);
and/or the Borrower shall cease to be subject to the reporting
requirements of the Exchange Act; and/or the Borrower shall not
have publicly available all information required by paragraph (b)
of Rule 15c2-11 of the Exchange Act (as effective on September 26,
2021), as amended, such that brokers or dealers attempting to
publish any quotation for the Common Stock or, directly or
indirectly, to submit any such quotation for publication, shall be
able to comply with Rule 15c2-11(a).
3.10 DTC
. If the Company (i) loses its ability to deliver shares via
“DWAC/FAST” electronic transfer, or (ii) loses its stats as “DTC
Eligible.”
3.11 Cessation
of Operations. Any cessation of operations by Borrower or
Borrower admits it is otherwise generally unable to pay its debts
as such debts become due, provided, however, that any disclosure of
the Borrower’s ability to continue as a “going concern” shall not
be an admission that the Borrower cannot pay its debts as they
become due.
3.12 Maintenance
of Assets. The failure by Borrower to maintain any material
intellectual property rights, personal, real property or other
assets which are necessary to conduct its business (whether now or
in the future) or any disposition or conveyance of any material
asset of the Borrower.
3.13 Financial
Statement Restatement. The restatement of any financial
statements filed by the Borrower with the SEC for any date or
period from two years prior to the Issue Date of this Note and
until this Note is no longer outstanding, if the result of such
restatement would, by comparison to the unrestated financial
statement, have constituted a material adverse effect on the rights
of the Holder with respect to this Note or the Purchase
Agreement.
3.14 Reverse
Splits. The Borrower effectuates a reverse split of its Common
Stock without twenty (20) days prior written notice to the
Holder.
3.15 Rights
of Participation. The failure of the Borrower to fully satisfy
its obligations to the Holder under Section 5(c) and/or
Section 5(d) of the Purchase Agreement.
3.16 Replacement
of Transfer Agent. In the event that the Borrower proposes to
replace its transfer agent, the Borrower fails to provide, prior to
the effective date of such replacement, a fully executed Transfer
Agent Instruction Letter in a form as initially delivered pursuant
to the Purchase Agreement (including but not limited to the
provision to irrevocably reserve shares of Common Stock in the
Reserved Amount) signed by the successor transfer agent to Borrower
and the Borrower.
3.17 Cessation
of Trading. Any cessation of trading of the Common Stock on at
least one of the OTCBB, OTCQB, OTC Pink or an equivalent
replacement exchange, the Nasdaq Capital Market, the New York Stock
Exchange, or the NYSE American, and such cessation of trading shall
continue for a period of five consecutive (5) Trading
Days.
3.18 Cross-Default.
Notwithstanding anything to the contrary contained in this Note or
the other related or companion documents, a breach or default by
the Borrower of any material covenant or other term or condition
contained in any of the Other Agreements, other than any such
breach or default which is cured by agreement of the parties, after
the passage of all applicable notice and cure or grace periods,
shall, at the option of the Holder, be considered a default under
this Note and the Other Agreements, in which event the Holder shall
be entitled (but in no event required) to apply all rights and
remedies of the Holder under the terms of this Note and the Other
Agreements by reason of a default under said Other Agreement or
hereunder. “Other Agreements” means, collectively, all
agreements and instruments between, among or by: (1) the Borrower,
and, or for the benefit of, (2) the Holder and any affiliate of the
Holder, including, without limitation, promissory notes. Each of
the loan transactions will be cross-defaulted with each other loan
transaction and with all other existing and future debt of Borrower
to the Holder.
3.19 Bid
Price. The Borrower shall lose the “bid” price for its Common
Stock ($0.001 on the “Ask” with zero market makers on the “Bid” per
Level 2) and/or a market (including the OTC Pink, OTC QB or an
equivalent replacement exchange).
3.20 OTC
Markets Designation. If the OTC-Markets changes the Borrower’s
designation to ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull
and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey Market’
(Exclamation Mark Sign).
3.21 Inside
Information. Any attempt by the Borrower or its officers,
directors, and/or affiliates to transmit, convey, disclose, or any
actual transmittal, conveyance, or disclosure by the Borrower or
its officers, directors, and/or affiliates of, material non-public
information concerning the Borrower, to the Holder or its
successors and assigns, which is not immediately cured by
Borrower’s filing of a Form 8-K pursuant to Regulation FD on that
same date.
3.22 Unavailability
of Rule 144. If, at any time on or after the date which is six
(6) months after the Issue Date, the Holder is unable to (i) obtain
a standard “144 legal opinion letter” from an attorney reasonably
acceptable to the Holder, the Holder’s brokerage firm (and
respective clearing firm), and the Borrower’s transfer agent in
order to facilitate the Holder’s conversion of any portion of the
Note into free trading shares of the Borrower’s Common Stock
pursuant to Rule 144, and (ii) thereupon deposit such shares into
the Holder’s brokerage account.
Upon
the occurrence of any Event of Default specified in Sections
3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12,
3.13, 3.14, 3.15, 3.16. 3.17, 3.18, 3.19, 3.20, 3.21, and/or
3.22 exercisable through the delivery of written notice to
the Borrower by the Holder (the “Default Notice”), the Note
shall become immediately due and payable and the Borrower shall pay
to the Holder, in full satisfaction of its obligations hereunder,
an amount equal to (i) 115% times the sum of (x) the
then outstanding principal amount of this Note plus (y)
accrued and unpaid interest on the unpaid principal amount of this
Note to the date of payment (the “Mandatory Prepayment
Date”), on the amounts referred to in clauses (x) and/or (y)
plus (z) any amounts owed to the Holder pursuant to
Sections 1.3 and 1.4(g) hereof (the then outstanding
principal amount of this Note to the date of payment plus
the amounts referred to in clauses (x), (y) and (z) shall
collectively be known as the “Default Sum”) or (ii) at the
option of the Holder, the “parity value” of the Default Sum to be
prepaid, where parity value means (a) the highest number of shares
of Common Stock issuable upon conversion of or otherwise pursuant
to such Default Sum in accordance with Article I, treating
the Trading Day immediately preceding the Mandatory Prepayment Date
as the “Conversion Date” for purposes of determining the lowest
applicable Conversion Price, unless the Event of Default arises as
a result of a breach in respect of a specific Conversion Date (in
which case such Conversion Date shall be the Conversion Date),
multiplied by (b) the highest Closing Price (defined below)
for the Common Stock during the period beginning on the date of
first occurrence of the Event of Default and ending one day prior
to the Mandatory Prepayment Date (the “Default Amount”) and
all other amounts payable hereunder shall immediately become due
and payable, all without demand, presentment or notice, all of
which hereby are expressly waived, together with all costs,
including, without limitation, legal fees and expenses, of
collection, and the Holder shall be entitled to exercise all other
rights and remedies available at law or in equity. “Closing
Price” means, for any security as of any date, the closing bid
price as reported on the OTCBB, OTCQB or applicable trading market
or exchange as reported by a reliable reporting service designated
by the Holder or, if the OTCBB is not the principal trading market
for such security, the closing bid price of such security on the
principal securities exchange or trading market where such security
is quoted, listed or traded.
The
Holder shall have the right at any time, to require the Borrower to
immediately issue, in lieu of the Default Amount, the number of
shares of Common Stock of the Borrower equal to the Default Amount
divided by the Conversion Price then in effect, subject to the
terms of this Note. This requirement by the Borrower shall
automatically apply upon the occurrence of an Event of Default
without the need for any party to give any notice or take any other
action.
If
the Holder shall commence an action or proceeding to enforce any
provisions of this Note, including, without limitation, engaging an
attorney, then if the Holder prevails in such action, the Holder
shall be reimbursed by the Borrower for its attorneys’ fees and
other costs and expenses incurred in the investigation, preparation
and prosecution of such action or proceeding.
ARTICLE IV
MISCELLANEOUS
4.1 Failure
or Indulgence Not Waiver. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or
privileges. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies
otherwise available.
4.2 Notices.
All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally
served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable
air courier service with charges prepaid, or (iv) transmitted by
hand delivery, or electronic transmission by e-mail (with
read-receipt required) addressed as set forth below or to such
other address as such party shall have specified most recently by
written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon
hand delivery or delivery by electronic transmission by e-mail
(with read-receipt required), at the address or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If to
the Borrower, to:
RESPIRERX
PHARMACEUTICALS, INC.
126
Valley Road Suite C
Glen
Rock, NJ 07452
Attn:
Jeff Eliot Margolis, CFO
E-mail:
jmargolis@respirerx.com
If to
the Holder:
Quick
Capital, LLC
66
West Flagler Street, 900-#2292
Miami,
FL 33130
Attn:
Eilon D. Natan, Manager
E-mail:
eilon@quick-cap.com
4.3 Amendments.
This Note and any provision hereof may only be amended by an
instrument in writing signed by the Borrower and the
Holder.
4.4 Assignability.
This Note shall be binding upon the Borrower and its successors and
assigns, and shall inure to be the benefit of the Holder and its
successors and assigns. Neither the Borrower nor the Holder shall
assign this Note or any rights or obligations hereunder without the
prior written consent of the other. Notwithstanding the foregoing,
the Holder may assign its rights hereunder to any “accredited
investor” (as defined in Rule 501(a) of the 1933 Act) in a private
transaction from the Holder or to any of its “affiliates”, as that
term is defined under the 1934 Act, without the consent of the
Borrower. Notwithstanding anything in this Note to the contrary,
this Note may be pledged as collateral in connection with a
bonafide margin account or other lending arrangement. The Holder
and any assignee, by acceptance of this Note, acknowledge and agree
that following conversion of a portion of this Note, the unpaid and
unconverted principal amount of this Note represented by this Note
may be less than the amount stated on the face hereof.
4.5 Cost
of Collection. If default is made in the payment of this Note,
the Borrower shall pay the Holder hereof reasonable costs of
collection, including reasonable attorneys’ fees.
4.6 Governing
Law. This Note shall be governed by and construed in accordance
with the laws of the State of Wyoming without regard to principles
of conflicts of laws. Any action brought by either party against
the other concerning the transactions contemplated by this Note
shall be brought only in the state courts of Miami, Florida, or in
the federal courts located in the Southern District of Florida. The
parties to this Note hereby irrevocably waive any objection to
jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or
based upon forum non conveniens. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY
TRANSACTION CONTEMPLATED HEREBY. The prevailing party shall be
entitled to recover from the other party its reasonable attorney’s
fees and costs. In the event that any provision of this Note or any
other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any such provision which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process
and consents to process being served in any suit, action or
proceeding in connection with this Note or any other Transaction
Document 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 Note and agrees
that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by law.
4.7 Certain
Amounts. Whenever pursuant to this Note the Borrower is
required to pay an amount in excess of the outstanding principal
amount (or the portion thereof required to be paid at that time)
plus accrued and unpaid interest, the Borrower and the Holder agree
that the actual damages to the Holder from the receipt of cash
payment on this Note may be difficult to determine and the amount
to be so paid by the Borrower represents stipulated damages and not
a penalty and is intended to compensate the Holder in part for loss
of the opportunity to convert this Note and to earn a return from
the sale of shares of Common Stock acquired upon conversion of this
Note at a price in excess of the price paid for such shares
pursuant to this Note. The Borrower and the Holder hereby agree
that such amount of stipulated damages is not plainly
disproportionate to the possible loss to the Holder from the
receipt of a cash payment without the opportunity to convert this
Note into shares of Common Stock.
4.8 Purchase
Agreement and Security Agreement. By its acceptance of this
Note, each party agrees to be bound by the applicable terms of the
Purchase Agreement and the Security Agreement.
4.9 Notice
of Corporate Events. Except as otherwise provided in this Note,
the Holder of this Note shall have no rights as a Holder of Common
Stock unless and only to the extent that it converts this Note into
Common Stock. The Borrower shall provide the Holder with prior
notification of any meeting of the Borrower’s shareholders (and
copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Borrower of a
record of its shareholders for the purpose of determining
shareholders who are entitled to receive payment of any dividend or
other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any
other securities or property, or to receive any other right, or for
the purpose of determining shareholders who are entitled to vote in
connection with any proposed sale, lease or conveyance of all or
substantially all of the assets of the Borrower or any proposed
liquidation, dissolution or winding up of the Borrower, the
Borrower shall mail a notice to the Holder, at least twenty (20)
days prior to the record date specified therein (or thirty (30)
days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such record is to
be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and
character of such dividend, distribution, right or other event to
the extent known at such time. The Borrower shall make a public
announcement of any event requiring notification to the Holder
hereunder substantially simultaneously with the notification to the
Holder in accordance with the terms of this Section 4.9
including, but not limited to, name changes, recapitalizations,
etc. as soon as possible under law.
4.10 Usury.
If it shall be found that any interest or other amount deemed
interest due hereunder violates the applicable law governing usury,
the applicable provision shall automatically be revised to equal
the maximum rate of interest or other amount deemed interest
permitted under applicable law. The Borrower covenants (to the
extent that it may lawfully do so) that it will not seek to claim
or take advantage of any usury law that would prohibit or forgive
the Borrower from paying all or a portion of the principal or
interest on this Note.
4.11 Remedies.
The Borrower acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby.
Accordingly, the Borrower acknowledges that the remedy at law for a
breach of its obligations under this Note will be inadequate and
agrees, in the event of a breach or threatened breach by the
Borrower of the provisions of this Note, that the Holder shall be
entitled, in addition to all other available remedies at law or in
equity, and in addition to the penalties assessable herein, to an
injunction or injunctions restraining, preventing or curing any
breach of this Note and to enforce specifically the terms and
provisions thereof, without the necessity of showing economic loss
and without any bond or other security being required. No provision
of this Note shall alter or impair the obligation of the Borrower,
which is absolute and unconditional, to pay the principal of, and
interest on, this Note at the time, place, and rate, and in the
form, herein prescribed.
4.12 Severability.
In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision
hereof.
4.13 Dispute
Resolution. In the case of a dispute as to the determination of
the Default Conversion Price, Conversion Amount, any prepayment
amount or Default Amount, Default Sum, Closing Date, Funding Date
(as such term is defined in the Purchase Agreement), or Maturity
Date, the closing bid price, or fair market value (as the case may
be) or the arithmetic calculation of the Conversion Price or the
applicable prepayment amount(s) (as the case may be), the Borrower
or the Holder shall submit the disputed determinations or
arithmetic calculations via electronic transmission by e-mail (with
read-receipt required) (i) within two (2) Trading Days after
receipt of the applicable notice giving rise to such dispute to the
Borrower or the Holder or (ii) if no notice gave rise to such
dispute, at any time after the Holder learned of the circumstances
giving rise to such dispute. If the Holder and the Borrower are
unable to agree upon such determination or calculation within two
(2) business days of such disputed determination or arithmetic
calculation (as the case may be) being submitted to the Borrower or
the Holder, then the Borrower shall, within two (2) business days,
submit via electronic transmission by e-mail (with read-receipt
required) (a) the disputed determination of the Conversion Price,
the closing bid price, the or fair market value (as the case may
be) to an independent, reputable investment bank selected by the
Borrower and approved by the Holder or (b) the disputed arithmetic
calculation of the Conversion Price, Conversion Amount, any
prepayment amount or Default Amount, Default Sum to an independent,
outside accountant selected by the Holder that is reasonably
acceptable to the Borrower. The Borrower shall cause at its expense
the investment bank or the accountant to perform the determinations
or calculations and notify the Borrower and the Holder of the
results no later than ten (10) business days from the time it
receives such disputed determinations or calculations. Such
investment bank’s or accountant’s determination or calculation
shall be binding upon all parties absent demonstrable
error.
4.14 Most
Favored Nation Status. So long as this Note is outstanding,
upon any issuance by the Borrower or any of its Subsidiaries of any
security with any term more favorable to the holder of such
security or with a term (including without limitation any
Conversion Price) in favor of the holder of such security that was
not similarly provided to the Holder in this Note (other than a
future financing with the Holder), then the Borrower shall notify
the Holder of such additional or more favorable term and such term,
at Holder’s option, shall become a part of the Transaction
Documents with the Holder. The types of terms contained in another
security that may be more favorable to the holder of such security
include, but are not limited to, terms addressing conversion
discounts, prepayment rate, conversion lookback periods, interest
rates, original issue discounts, stock sale price, private
placement price per share, and warrant coverage.
***
signature page follows ***
IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by its duly authorized officer as of the Issue
Date.
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COMPANY: |
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RESPIRERX
PHARMACEUTICALS, INC. |
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By: |
/s/
Jeff Eliot Margolis |
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Name: |
Jeff
Eliot Margolis |
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Title: |
CFO |
|
Acknowledged
and Accepted by: |
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|
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HOLDER: |
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Quick
Capital, LLC |
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By: |
/s/
Eilon D. Natan |
|
| Name: |
Eilon
D. Natan |
|
| Title: |
Manager |
|
EXHIBIT
A
NOTICE
OF CONVERSION
The
undersigned hereby elects to convert $_________________ principal
amount of the Note (defined below) together with $________________
of accrued and unpaid interest thereto, totaling $_____________
into that number of shares of Common Stock to be issued pursuant to
the conversion of the Note (“Common Stock”) as set forth below, of
RESPIRERX PHARMACEUTICALS, INC., a Nevada corporation (the
“Borrower”), according to the conditions of the convertible note of
the Borrower dated as of _____________ ____, 2021 (the “Note”), as
of the date written below. No fee will be charged to the Holder for
any conversion, except for transfer taxes, if any.
Box
Checked as to applicable instructions:
| |
[ ] |
The Borrower shall
electronically transmit the Common Stock issuable pursuant to this
Notice of Conversion to the account of the undersigned or its
nominee with DTC through its Deposit Withdrawal At Custodian system
(“DWAC Transfer”). |
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Name of DTC Prime Broker: |
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Account Number: |
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[ ] |
The undersigned hereby
requests that the Borrower issue a certificate or certificates for
the number of shares of Common Stock set forth below (which numbers
are based on the Holder’s calculation attached hereto) in the
name(s) specified immediately below or, if additional space is
necessary, on an attachment hereto: |
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Name: |
[NAME] |
|
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Address: |
[ADDRESS] |
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Date of Conversion: |
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Applicable Conversion Price: $ |
|
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Number of Shares of Common Stock to be
Issued |
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Pursuant to Conversion of the Notes: |
|
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Amount of Principal Balance Due
remaining |
|
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Under the Note after this conversion: |
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Accrued and unpaid interest remaining: |
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[HOLDER] |
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By: |
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Name: |
[NAME] |
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Title: |
[TITLE] |
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Date: |
[DATE] |
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RespireRx Pharmaceuticals (QB) (USOTC:RSPI)
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