Item
1.01
|
Entry
Into a Material Definitive Agreement.
|
10%
Senior Secured Convertible Promissory Note and Warrants
On April 14, 2016, Amarantus BioScience
Holdings, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Notes SPA”) with three
institutional investors for the sale of an aggregate principal amount $1,500,000 (including 10% OID) 10% Senior Secured Convertible
Promissory Notes due April 17, 2017 (the “Senior Secured Notes”) and a warrant to purchase 1,350,000 shares of common
stock (the “Warrant”) in a private placement offering (the “Offering”). The gross proceeds to the Company
from the Offering were $1,350,000. The Company intends to use the net proceeds from the Offering to pay Lonza Walkerville for costs
associated with development of its ESS product and working capital. Chardan Capital Markets acted as a placement agent in connection
with the sale of the Senior Secured Notes and Warrants.
Pursuant to the terms of the Notes
SPA, the investors agreed to purchase additional aggregate principal amount of $1,555,556 (including 10% OID) of Senior Secured
Notes and Warrants to purchase 1,400,000 shares of the Company’s common stock on the first trading date after the registration
statement which is the subject of the registration rights agreement (discussed below) is filed, and an additional $1,388,889
(including 10% OID) of Senior Secured Notes and Warrants to purchase 1,250,000 shares of the Company’s common stock on the
61st day after such registration statement is declared effective or such earlier date as mutually agreed to among the investors,
subject to the satisfaction of customary closing conditions.
The
principal amount of the Senior Secured Notes shall accrue interest at a rate equal to 12% per annum, payable on the Maturity Date
in cash, or, at the Company’s option, in common stock or a combination thereof. At any time upon five (5) days written notice
to the Investor, the Company may prepay any portion of the principal amount of the Senior Secured Notes and any accrued and unpaid
interest at an amount equal to 120% of the then outstanding principal amount of the Senior Secured Notes and accrued interest
or 130% if a Qualified Financing (as defined in the Senior Secured Notes) has occurred.
At
any time after the issuance date of the Senior Secured Notes until all amounts due have been paid in full, the Senior Secured
Note shall be convertible, in whole or in part, into shares of common stock at the option of the holder, at any time and from
time to time. The conversion price in effect on any conversion date shall be equal to the lowest of (i) $0.40, (ii) 75% of the
lowest daily VWAP in the fifteen (15) trading days prior to the conversion date, or (iii) (A) if a Public Offering (as defined
in the Senior Secured Note) that is not a Qualified Public Offering (as defined in the Senior Secured Note) has occurred, 75%
or (B) if a Qualified Public Offering has occurred, 80% of the lowest of the (x) per share price of shares of common stock, and
(y) the lowest conversion price, exercise price or exchange price of any common stock equivalents, that are sold or issued to
the public in the Public Offering or the Qualified Public Offering, respectively.
Effective
on the closing (the “Mandatory Conversion Date”) of a Qualified Public Offering, the Qualified Public Offering Conversion
Amount (as defined in the Senior Secured Note) shall automatically (without further act or deed of the Holder or the Company)
convert (the “Mandatory Conversion”) into such number of shares of common stock as shall equal the quotient of (i)
the Qualified Public Offering Conversion Amount outstanding as of and including the Mandatory Conversion Date, divided by (ii)
a conversion price equal to the lowest of (i) the Conversion Price on the Mandatory Conversion Date, and (ii) eighty percent (80%)
of the lowest of (x) the price per share at which the Company sells shares of common stock, and (y) the lowest conversion price,
exercise price or exchange price of any common stock equivalents, if any, sold and or issued to the public in a Qualified Public
Offering, if any,
The
Senior Secured Notes contain certain customary Events of Default (including, but not limited to, default in payment of principal
or interest thereunder, breaches of covenants, agreements, representations or warranties thereunder, the occurrence of an event
of default under certain material contracts of the Company, including the transaction documents relating to the PP Offering, changes
in control of the Company, filing of bankruptcy and the entering or filing of certain monetary judgments against the Company).
Upon the occurrence of any such Event of Default the outstanding principal amount of the Senior Secured Notes, plus accrued but
unpaid interest, liquidated damages, and other amounts owing in respect thereof through the date of acceleration, shall become,
at the Investor’s election, immediately due and payable in cash. Upon any Event of Default that results in acceleration
of the Senior Secured Notes, the interest rate on the Senior Secured Notes shall accrue at an interest rate equal to the lesser
of 24% per annum or the maximum rate permitted under applicable law.
The Warrant issued in the Offering is exercisable on
or prior to the close of business on the five-year anniversary of the issuance date at an exercise price of $0.40 per share. The
Warrant may be exercised on a cashless basis in the event there is no effective registration statement covering the shares of
common stock issuable upon exercise.
In
connection with the issuance of the Senior Secured Notes and Warrants, the Company entered into a Security Agreement and a Intellectual
Property Security Agreement with the investor (the “Security Agreement”) pursuant to which the Company agreed to grant
a security interest in all of its assets to the investor in order to secure the prompt payment, performance and discharge in full
of all of the Company’s obligations under the Senior Secured Notes.
In
addition, each of the Company’s wholly owned subsidiaries entered into a Subsidiary Guarantee, pursuant to which each of
the subsidiaries, jointly and severally, agreed to guarantee the obligations of the Company under the Senior Secured Notes.
In addition, the Company and certain
of its investors agreed to a lock-up and leak-out agreements pursuant to which the investors agreed to certain trading restrictions
with respect to its holdings of preferred stock and convertible notes of the Company. The lock-up agreements remain in force until
$67.5 million of aggregate trading volume, calculated from the date that a registration statement underlying the shares of the
Senior Secured Notes has been declared effective by the Securities and Exchange Commission. The leak-out restrictions, restrict
certain investors to ranges of trading to no more than 2.5% to 15% of the average daily volume of the Company’s common stock.
The leak out agreements remain in force until $67.5 million of aggregate trading volume, calculated from the date that a registration
statement underlying the shares of the Senior Secured Notes has been declared effective by the Securities and Exchange Commission.
In partial consideration of the investors’ agreeing to the trading restrictions, the Company agreed to amendments of the
terms of the Series E and Series H Preferred in order to provide additional voting rights for those investors at its upcoming
annual meeting of shareholders.
The
Company entered into a Registration Rights Agreement with the investors in which it agreed to register the shares of common stock
issuable upon conversion or as interest under the Senior Secured Notes and the shares of common stock issuable upon exercise of
the Warrants which registration shall be filed within 10 days. The Company agreed to use its best efforts to have
the Registration Statement declared effective within 45 days of filing. The Company is required to pay partial liquidated damages
in cash of 2% of the subscription amount paid by each holder if: (i) the Company fails to file a request for acceleration of the
registration Statement within five trading days of the date that the Company is notified that such Registration Statement will
not be “reviewed” or will not be subject to further review, or (ii) the Company fails to file a pre-effective amendment
and otherwise respond in writing to comments within ten (10) calendar days after the receipt of comments, or (iii) the registration
statement is not declared effective within 45 days of filing, or (iv) after the effective date of, such Registration Statement
ceases for any reason to remain continuously effective. If the Company fails to pay any partial liquidated damages in full within
seven days after the date payable, the Company will pay interest thereon at a rate of 18% per annum.
In connection with the Offering, the
Company also agreed that at its annual meeting of shareholders to be held on or before June 6, 2016, to seek the approval of its
shareholders to increase its authorized common stock and effect a reverse stock split.
The
foregoing summary of the terms of the Notes SPA, Senior Secured Notes, Security Agreement, Intellectual Security Agreement, Subsidiary
Guarantee, Registration Rights Agreement and Warrant is subject to, and qualified in its entirety by, such documents, which are
filed as exhibits hereto.