NASDAQ RULE 5635(D) PROPOSAL
Background
On
October 11, 2019, we entered into Securities Purchase Agreements
(the “Purchase Agreement”) with two institutional
accredited investors (the “Investors”) providing for
the issuance and sale by the Company (the “Offering”)
of $10.0 million of, (i) shares of the Company’s Series F
Convertible Preferred Stock (the “Series F Preferred
Stock”) which are convertible into shares of common stock
(the “Conversion Shares”) and (ii) warrants (the
“PIPE Warrants”) which are exercisable for shares of
common stock (the “Warrant Shares”). The Warrants have
an exercise price equal to $1.25 and contain cashless exercise
provisions. Each Warrant will be exercisable only after we obtain
stockholder approval of this Nasdaq Marketplace Rule 5635(d)
proposal (“Stockholder Approval”) and will expire five
years from the time a registration statement covering the
Conversion Shares and the Warrant Shares is declared effective by
the SEC. Each share of Series F Preferred Stock is non-convertible
until we receive Stockholder Approval. On October 16, 2019, we
closed the Offering and received net proceeds of approximately $9.2
million. We issued to each Investor 5,000 shares of Series F
Preferred Stock with a stated value of $1,000 per share of Series F
Preferred Stock and PIPE Warrants exercisable for 5,000,000 Warrant
Shares.
Reasons for Seeking Stockholder Approval
As a
result of being listed for trading on the Nasdaq Capital Market,
issuances of our common stock are subject to the Nasdaq Stock
Market Rules, including Nasdaq Marketplace Rule 5635(d). Nasdaq
Marketplace Rule 5635(d) requires stockholder approval in
connection with a transaction other than a public offering
involving the sale, issuance, or potential issuance by the issuer
of common stock (or securities convertible into or exercisable for
common stock) equal to 20% or more of the common stock or 20% or
more of the voting power outstanding before the issuance for a
price that is less than the lower of: (i) the closing price (as
reflected on Nasdaq.com) immediately preceding the signing of the
binding agreement; or (ii) the average closing price of the common
stock (as reflected on Nasdaq.com) for the five trading days
immediately preceding the signing of the binding
agreement.
As
described above, the Series F Preferred Stock and the PIPE Warrants
are not convertible or exercisable into shares of common stock
until Stockholder Approval is received through the approval of this
Nasdaq Rule 5635(d) Proposal. However, if our stockholders approve
the convertibility of the Series F Preferred Stock and the
exercisability of the PIPE Warrants, the issuance of the Conversion
Shares and the Warrant Shares may result in us issuing 20% or more
of our common stock outstanding, or 20% or more of our voting
power.
Registration Rights
In
connection with the Offering, we entered into a registration rights
agreement in which we agreed to file with the SEC on or prior to
ninety days from October 11, 2019, a registration statement
covering the resale by the Investors of the Conversion Shares and
the Warrant Shares. We have also agreed to use our reasonable best
efforts to have the registration statement declared effective by
the SEC by the one hundred and twentieth day following October 11,
2019 (or the one hundred and fiftieth day following October 11,
2019, in the event of a full review by the SEC).
Consequences if Stockholder Approval is not obtained
If we
do not obtain approval of the Nasdaq Rule 5635(d) Proposal, the
Series F Preferred Stock will not be convertible into Conversion
Shares and the PIPE Warrants will not be exercisable into Warrant
Shares. In addition, we will be required to incur the costs of
subsequent meetings as we are obligated under the Purchase
Agreement to call a stockholder meeting every two months thereafter
to seek approval of this Nasdaq Rule 5635(d) Proposal from our
stockholders until the earlier of the date such approval is
obtained or the Series F Pereferred Stock or the PIPE Warrants are
no longer outstanding.
Potential
Adverse Effects — Dilution and Impact of the Offering on
Existing Stockholders
The
issuance of the Conversion Shares and the Warrant Shares could have
a dilutive effect on current stockholders who did not participate
in the Offering in that the percentage ownership of the Company
held by such current stockholders will decline as a result of the
issuance of. This means also that current stockholders who did not
participate in the Offering will own a smaller interest in the
Company as a result of such offerings and will therefore have less
ability to influence significant corporate decisions requiring
stockholder approval. Issuance of the Conversion Shares and the
Warrant Shares could also have a dilutive effect on book value per
share and any future earnings per share. Dilution of equity
interests could also cause prevailing market prices for our common
stock to decline.
●
If we (A) pay a
stock dividend or otherwise makes a distribution or distributions
payable in shares of our common stock with respect to the then
outstanding shares of our common stock; (B) subdivide outstanding
shares of our common stock into a larger number of shares; or (C)
combine (including by way of a reverse stock split) outstanding
shares of our common stock into a smaller number of shares, then
the conversion price shall be multiplied by a fraction of which the
numerator shall be the number of shares of our common stock
outstanding immediately before such event and of which the
denominator shall be the number of shares of our common stock
outstanding immediately after such event.
●
If (A) we effect
any merger or consolidation of the Company with or into another
person, (B) we effect any sale of all or substantially all of our
assets in one transaction or a series of related transactions, (C)
any tender offer or exchange offer is completed pursuant to which
all of the shares of our common stock is exchanged for or converted
into other securities, cash or property, or (D) we effect any
reclassification of the shares of our common stock or any
compulsory share exchange pursuant to which our common stock is
effectively converted into or exchanged for other securities, cash
or property (in any such case, a “Fundamental
Transaction”), then, upon any subsequent conversion or
exercise of the Series F Preferred Stock and the PIPE Warrants, as
applicable the holders thereof shall have the right to receive, in
lieu of the right to receive the shares of our common stock
issuable upon conversion or exercise of the Series F Preferred
Stock and the PIPE Warrants, as applicable, , the same kind and
amount of securities, cash or property as it would have been
entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of shares of our common stock.
We
anticipate that we may issue 10,000,000 Conversion Shares and
10,000,000 Warrant Shares if this proposal is
approved.
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|
Prior to Conversion
of Series F
Convertible
Preferred Stock [ ♦
]:
|
After Conversion of
Series F
Convertible
Preferred Stock and [ ♦
]:
|
|
|
Number of
Shares
of
Common Stock
Held
|
Common Stock
Ownership Interest
and Voting
Power
|
Number of
Shares
of
Common Stock
Held
|
Common Stock
Ownership Interest
and Voting
Power
|
|
|
|
|
|
|
|
Current Holders of
Common Stock (Excluding affiliates and holders of 5% or more of the
Company's common stock)
|
10,473,605
|
50.5%
|
10,473,605
|
25.7%
|
|
|
|
|
|
|
|
Current Holders of
Common Stock (Including only affiliates and holders of 5% or more
of the Company's common stock) (*)
|
10,259,447
|
41.8%
|
30,259,447
|
74.3%
|
|
|
|
|
|
|
|
Holders of Series F
Convertible Preferred Stock and PIPE Warrants (#)
(&)
|
7,871,212
|
38.0%
|
27,871,212
|
68.4%
|
|
|
|
|
|
|
|
Total
|
20,733,052
|
|
40,733,052
|
|
(*) Includes 7,871,212 shares owned by Armistice Capital, LLC prior
to the issuance of the Series F Convertible Preferred Stock, a
holder of 50% of the Series F Convertible Preferred
Stock.
(#) Represents the
7,871,212 shares of common stock owned by Armistice Capital, LLC
and is also a component of the 7,508,209 share total consisting of
affiliates and holders of 5% or more.
(&) The
40,733,052 shares consist of (i) 7,871,212 shares of common stock
currently held by Armistice Capital, LLC, (ii) 10,000,000 shares of
Common Stock upon conversion of the Series F Preferred Stock, and
(iii) the exercise of 10,000,000 Warrant Shares to purchase
10,000,000 shares of common stock.
(♦)
the above table disregards the current agreement between the
Company and Armistice Capital, LLC limiting at any given time the
ability of Armistice Capital, LLC to own more than 40% of the
outstanding common stock.
What control will Armistice have over the Company if the Conversion
Proposal is Approved?
If
the Nasdaq Rule 5635(D) Proposal is approved and Armistice
Capital, LLC (“Armistice”) converts the
shares of Series F Preferred Stock into Conversion Shares,
Armistice will own, approximately 36.2% of the outstanding shares
of common stock. As a result, while Armistice would not have de
facto voting control, Armistice will be in a position to exercise
significant influence over any vote of the Company’s
stockholders and may also have greater influence over the Company
in other matters.
Terms of Series F Preferred Stock
Conversion. Prior to Stockholder
Approval, the Preferred Stock is non-convertible. Following
Stockholder Approval, each share of Series F Preferred Stock will
be convertible at any time at the holder’s option into shares
of common stock, which conversion ratio will be subject to
adjustment for stock splits, stock dividends, distributions,
subdivisions and combinations. Notwithstanding the foregoing, the
certificate of designation further provides that we shall not
effect any conversion of the Series F Preferred Stock, with certain
exceptions, to the extent that, after giving effect to an attempted
conversion, the holder (together with its affiliates, and any
persons acting as a group together with the holder or any of its
affiliates) would beneficially own a number of shares of common
stock in excess of 9.99% or 40% with respect to Armistice of the
shares of common stock then outstanding after giving effect to such
exercise.
Fundamental Transaction. In the event
we consummate a merger or consolidation with or into another person
or other reorganization event in which our common stock is
converted or exchanged for securities, cash or other property, or
we sell, lease, license, assign, transfer, convey or otherwise
dispose of all or substantially all of our assets or we or another
person acquires 50% or more of our outstanding shares of common
stock, then following such event, the holders of the Series F
Preferred Stock will be entitled to receive upon conversion of such
Series F Preferred Stock the same kind and amount of securities,
cash or property which the holders would have received had they
converted their Series F Preferred Stock immediately prior to such
fundamental transaction. Any successor to us or surviving entity
shall assume the obligations under the Series F Preferred
Stock.
Liquidation Preference. In the event of
a liquidation, the holders of Series F Preferred Stock will be
entitled to participate on an as-converted-to-common-stock basis
with holders of our common stock in any distribution of our assets
to the holders of the common stock.
Voting Rights. With certain exceptions,
as described in the certificate of designation, the Series F
Preferred Stock will have no voting rights. However, as long as any
shares of Series F Preferred Stock remain outstanding, the
certificate of designation provides that we shall not, without the
affirmative vote of holders of a majority of the then-outstanding
shares of Series F Preferred Stock: (a) alter or change adversely
the powers, preferences or rights given to the Series F Preferred
Stock or alter or amend the certificate of designation, (b) amend
our certificate of incorporation or other charter documents in any
manner that adversely affects any rights of the holders, (c)
increase the number of authorized shares of Series F Preferred
Stock or (d) enter into any agreement with respect to any of the
foregoing.
Dividends. The certificate of
designation provides, among other things, that we shall not pay any
dividends on shares of common stock (other than dividends in the
form of our common stock) unless and until such time as it pays
dividends on each share of Series F Preferred Stock on an
as-converted basis. Other than as set forth in the previous
sentence, the certificate of designation provides that no other
dividends shall be paid on shares of Series F Preferred Stock and
that we shall pay no dividends (other than dividends in the form of
our common stock) on shares of common stock unless we
simultaneously comply with the previous sentence.
Exchange Listing. The Series F
Preferred Stock is not listed on any securities exchange or other
trading system.
The
foregoing summary of the Series F Preferred Stock does not purport
to be complete and is subject to, and qualified in its entirety by,
the full text of the Certificate of Designation of Preferences,
Rights and Limitations of Series F Convertible Preferred Stock, a
copy of which is attached as Appendix A.
Terms of PIPE Warrants
General. The PIPE Warrants entitle each
Investor to purchase 5,000,000 shares of the Company’s common
stock at an exercise price of $1.25 per share, subject to
adjustment as discussed below. The PIPE Warrants will expire on the
five-year anniversary of issuance, or earlier upon redemption or
liquidation.
Exercise. Prior to stockholder
approval, the PIPE Warrants are not exercisable. Following
stockholder approval, The PIPE Warrants may be exercised by
providing an executed notice of exercise form followed by full
payment of the exercise price or on a cashless basis, if
applicable. The Investors do not have the rights or privileges of
holders of common stock or any voting rights with respect to the
shares of common stock represented by the PIPE Warrants until such
Investor exercises the PIPE Warrant and receives its shares of
common stock. After the issuance of shares of common stock upon
exercise of the PIPE Warrants, the Investors will be entitled to
one vote for each share held of record on all matters to be voted
on by stockholders generally.
Beneficial Ownership Limitation. Each
Investor will be subject to a requirement that they will not have
the right to exercise the PIPE Warrants to the extent that, after
giving effect to such exercise, such Investor (together with its
affiliates) would beneficially own in excess of 9.99% or 40% (only
with respect to Armistice) of the shares of common stock of the
Company outstanding immediately after giving effect to such
exercise.
Anti-Dilution Protection. If the number
of outstanding shares of common stock (i) is increased by a stock
dividend payable in shares of common stock, (ii) is increased by a
split-up of shares of common stock, (iii) is decreased by a
combination of outstanding shares of common stock, or (iv) is
reclassified by the issuance of any shares of common stock of the
Company then, on the effective date of such event, the exercise
price of the Warrant will be multiplied by a fraction of which the
numerator is (x) the number of shares of common stock outstanding
immediately prior to such event and the denominator is (y) the
number of shares of common stock outstanding immediately after such
event, and the number of shares of common stock issuable upon
exercise of the Warrant will be proportionately adjusted such that
the aggregate exercise price will remain unchanged. Such adjustment
will be effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and will be effective immediately after the effective
date in the case of a subdivision, combination or
re-classification.
In
addition, if the Company, at any time while the PIPE Warrants are
outstanding and unexpired, grants, issues or sells any (i)
securities of the Company or its subsidiaries which would entitle
the holder thereof to acquire at any time common stock, including,
without limitation, any debt, preferred stock, right, option,
warrant or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder
thereof to receive, common stock, or (ii) rights to purchase stock,
warrants, securities or other property pro rata to the record
holders of any class of shares of common stock (the “Purchase
Rights”), then the Investors will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which it could have acquired if it had held the
number of shares of common stock acquirable upon complete exercise
of the PIPE Warrants immediately before the date on which a record
is taken or the record holders are determined for the grant,
issuance or sale of such Purchase Rights.
If the
Company, at any time while the PIPE Warrants are outstanding and
unexpired, declares or makes any dividend or other distribution of
assets to holders of common stock, by way of return of capital or
otherwise, at any time after the issuance of the Warrants, then the
Investors shall be entitled to participate in such distribution to
the same extent that it would have participated therein had it held
the number of shares of common stock acquirable upon complete
exercise of the Warrant immediately before the date of which a
record is taken or the record holders are determined for such
distribution.
Fundamental Transaction. In the event
of a “fundamental transaction” then, upon a subsequent
exercise of the PIPE Warrants, the Investors will have the right to
purchase and receive the same kind and amount of consideration
receivable by the stockholders of the Company in such fundamental
transaction. The Company will cause the surviving company in a
fundamental transaction to assume the obligations of the Company
under the PIPE Warrants. For purposes of the PIPE Warrants, a
“fundamental transaction” includes, subject to certain
exceptions, (i) any reclassification, reorganization or
recapitalization of the common stock of the Company, (ii) any
merger or consolidation of the Company with or into another
corporation, (iii) any sale, lease, license, assignment, transfer,
conveyance or other disposition of all or substantially all of the
Company’s assets in one or more transactions, (iv) any,
direct or indirect, purchase offer, tender offer or exchange offer
is completed pursuant to which stockholders are permitted to sell,
tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the
outstanding common stock of the Company, or (v) the Company,
directly or indirectly, in one or more related transactions
consummates a stock or share purchase agreement or other business
combination with another person whereby such other person acquires
more than 50% of the outstanding shares of common stock of the
Company.
Amendments. The PIPE Warrants provide
that the terms of the PIPE Warrants may be amended only in writing
signed by the Company and such Investor.
The
foregoing summary of the PIPE Warrants does not purport to be
complete and is subject to, and qualified in its entirety by, the
full text of the PIPE Warrants, a copy of which is attached as
Appendix
B.
No Appraisal Rights
Under
Delaware law, stockholders are not entitled to appraisal rights
with respect to this proposal and the Company will not
independently provide stockholders with any such
rights.
Interests of Directors
Steven
J. Boyd is the Chief Investment Officer and founder of Armistice
Capital, LLC. Armistice is one of the Investors and Mr. Boyd is a
member of our board of directors.
Vote Required
Approval of the
Nasdaq Rule 5635(d) Proposal requires the affirmative vote of a
majority of the total votes cast at the meeting. Abstentions and
broker non-votes, if any, are not treated as votes cast, and
therefore will have no effect on this proposal.
Recommendation
The
board of directors recommends a vote “FOR” the Nasdaq Rule 5635(d)
Proposal.
CONVERSION
PROPOSAL
Background
On October 10,
2019, the Company entered into the Asset Purchase Agreement with
Cerecor, whereby the Company agreed to purchase certain assets and
assume certain liabilities relating to the Products Business (the
"Acquisition"). As consideration for the Acquisition, the Company
agreed to pay aggregate consideration of approximately $32 million
to Cerecor consisting of (i) cash consideration in the amount of
$4.5 million by wire transfer of immediately available funds; (ii)
Series G Preferred Stock equal to $12.5 million; and (iii) the
Company's assumption of obligations owed by Cerecor to Deerfield
CSF, LLC totaling approximately $16.575 million, including any
guaranteed interest payments with respect thereto (i.e., interest
is due through January 2021 even if the note is paid in full prior
to its maturity).
The Acquisition
closed on October 31, 2019, at which time the Company paid to
Cerecor $4.5 million by wire transfer of immediately available
funds and issued to Cerecor 9,805,845 million shares of Series G
Preferred Stock. If we receive stockholder approval for this
Conversion Proposal, we will issue 9,805,845 million shares of
common stock upon the conversion the Series G Preferred Stock. The
Series G Preferred Stock is non-convertible until we receive
stockholder approval for this Conversion Proposal.
Reasons
for Seeking Stockholder Approval
Nasdaq Rule 5635(a)(2)
The Company's
common stock is listed on the Nasdaq Capital Market and, as such,
it is subject to the Nasdaq Marketplace Rules. Nasdaq
Marketplace Rule 5635(a)(2) requires that an issuer obtain
stockholder approval prior to the issuance of common stock in
certain circumstances, including in connection with the acquisition
of stock or assets of another company if any director, officer or
“substantial shareholder” has a 5% or greater interest
directly or indirectly in the assets to be acquired or in the
consideration to be paid in the transaction and the present or
potential issuance of common stock, or securities convertible into
or exercisable for common stock, could result in an increase in
outstanding common shares or voting power of 5% or
more.
Armistice currently
owns approximately 28% of our outstanding shares of common stock,
making Armistice a “substantial shareholder” of the
Company. Armistice also owns approximately 63% of the outstanding
shares of common stock of Cerecor. As disclosed in the
“Nasdaq Rule 5635(d) Proposal”, Steven Boyd serves as a
member of the Company's board of directors and also serves as a
member of the board of directors of Cerecor. As a result of
Armstice’s interest in Cerecor, Armistice would have indirect
interest in more than 5% of the shares of Series G Preferred Stock,
and the underlying shares of common stock, issued to Cerecor in
connection with the Acquisition, and, therefore, stockholder
approval of the issuance of the underlying shares of common stock
is required.
Nasdaq Rule 5635(d)
As a result of
being listed for trading on the Nasdaq Capital Market, issuances of
the Company's common stock are subject to the Nasdaq Stock Market
Rules, including Nasdaq Marketplace Rule 5635(d). Nasdaq
Marketplace Rule 5635(d) requires stockholder approval in
connection with a transaction other than a public offering
involving the sale, issuance, or potential issuance by the issuer
of common stock (or securities convertible into or exercisable for
common stock) equal to 20% or more of the common stock or 20% or
more of the voting power outstanding before the issuance for a
price that is less than the lower of: (i) the closing price (as
reflected on Nasdaq.com) immediately preceding the signing of the
binding agreement; or (ii) the average closing price of the common
stock (as reflected on Nasdaq.com) for the five trading days
immediately preceding the signing of the binding
agreement.
As described above,
subject to other conversion restrictions, the Series G Preferred
Stock is not convertible into shares of common stock until
stockholder approval is received through the approval of this
Conversion Proposal. If our stockholders approve the convertibility
of the Series G Preferred Stock, the issuance of the shares of
common stock upon the conversion of the Series G Preferred Stock
will
result in us issuing 20% or more of the common stock outstanding,
or 20% or more of the voting power, and therefore, we are seeking
shareholder approval of the issuance of the underlying common
stock.
Terms
of Series G Preferred Stock
Conversion. Each share of Series G
Preferred Stock, assuming approval of the Conversion Proposal, and
subject to other conversion restrictions, will be initially
convertible under certain circumstances into one share of common
stock, which conversion ratio will be subject to adjustment for
stock splits, stock dividends, distributions, subdivisions and
combinations.
Fundamental Transaction. In the event
we consummate a merger or consolidation with or into another person
or other reorganization event in which our common stock is
converted or exchanged for securities, cash or other property, or
we sell, lease, license, assign, transfer, convey or otherwise
dispose of all or substantially all of our assets or we or another
person acquires 50% or more of our outstanding shares of common
stock, then following such event, the holders of the Series G
Preferred Stock will be entitled to receive upon conversion of such
Series G Preferred Stock the same kind and amount of securities,
cash or property which the holders would have received had they
converted their Series G Preferred Stock immediately prior to such
fundamental transaction. Any successor to Aytu or surviving entity
shall assume the obligations under the Series G Preferred
Stock.
Liquidation Preference. In the event of
a liquidation, the holders of Series G Preferred Stock will be
entitled to participate on an as-converted-to-common-stock basis
with holders of our common stock in any distribution of our assets
to the holders of the common stock.
Voting Rights. With certain exceptions,
as described in the certificate of designation, the Series G
Preferred Stock will have no voting rights. However, as long as any
shares of Series G Preferred Stock remain outstanding, the
certificate of designation provides that we shall not, without the
affirmative vote of holders of a majority of the then-outstanding
shares of Series G Preferred Stock: (a) alter or change adversely
the powers, preferences or rights given to the Series G Preferred
Stock or alter or amend the certificate of designation, (b) amend
our certificate of incorporation or other charter documents in any
manner that adversely affects any rights of the holders, (c)
increase the number of authorized shares of Series G Preferred
Stock or (d) enter into any agreement with respect to any of the
foregoing.
Dividends. The certificate of
designation provides, among other things, that we shall not pay any
dividends on shares of common stock (other than dividends in the
form of our common stock) unless and until such time as we pay
dividends on each share of Series G Preferred Stock on an
as-converted basis. Other than as set forth in the previous
sentence, the certificate of designation provides that no other
dividends shall be paid on shares of Series G Preferred Stock and
that we shall pay no dividends (other than dividends in the form of
our common stock) on shares of common stock unless we
simultaneously comply with the previous
sentence.
Exchange Listing. The Series G
Preferred Stock is not listed on any securities exchange or other
trading system.
The foregoing
summary of the Series G Preferred Stock does not purport to be
complete and is subject to, and qualified in its entirety by, the
full text of the Certificate of Designation of Preferences, Rights
and Limitations of Series G Convertible Preferred Stock which is
attached hereto as Appendix D
Registration
Rights
In connection with
the Acquisition, we entered into a registration rights agreement,
providing for the registration of the shares of common stock
issuable upon conversion of the Series G Preferred Stock issued to
Cerecor under the Asset Purchase Agreement. The registration rights
agreement provides that we use our reasonable best efforts to cause
a registration statement to be declared effective as promptly as
possible following the effectiveness of our registration statements
associated with the Offering and with our announced merger with
Innovus Pharmaceuticals, Inc. and we shall use our reasonable best
efforts to keep such registration statement continuously effective
under the Securities Act until the date that all registrable
securities (as defined in the Asset Purchase Agreement) covered by
such registration statement (i) have been sold, thereunder or
pursuant to Rule 144, or (ii) may be sold without volume or
manner-of-sale restrictions pursuant to Rule 144 and without the
requirement for the Company to be in compliance with the current
public information requirement under Rule 144.
Consequences
of Not Approving this Proposal
If the Company does
not obtain stockholder approval for the Conversion Proposal,
Cerecor will not be able convert the Series G Preferred Stock into
shares of our common stock.
Consequences
of Approving the Proposal
If the Company's
stockholders approve the Conversion Proposal, Cerecor will be able
to convert the shares of Series G Preferred Stock into
approximately 9.8 million shares of common stock. If all of the outstanding shares of Series G
convertible preferred stock are converted into shares of common
stock, the relative ownership interests and voting power of the
current holders of common stock would be reduced, as described in
the following table, based shares of common stock outstanding as of
November 4, 2019:
|
|
Prior to Conversion
of Series G
Convertible
Preferred Stock:
|
After Conversion of
Series G
Convertible
Preferred Stock:
|
|
|
Number of
Shares
of
Common Stock
Held(*)
|
Common Stock
Ownership Interest
and Voting
Power(*)
|
Number of
Shares
of
Common Stock
Held
|
Common Stock
Ownership Interest
and Voting
Power
|
|
|
|
|
|
|
|
Current Holders of
Common Stock (Excluding affiliates and holders of 5% or more of the
Company's common stock)
|
10,473,605
|
50.5%
|
10,473,605
|
34.3%
|
|
|
|
|
|
|
|
Current Holders of
Common Stock (Including only affiliates and holders of 5% or more
of the Company's common stock)(*)
|
10,259,447
|
49.5%
|
10,259,447
|
33.6%
|
|
|
|
|
|
|
|
Current Holders of
Series G Convertible Preferred Stock
|
–
|
–
|
9,805,845
|
32.1%
|
|
|
|
|
|
|
|
Total
|
20,733,052
|
|
30,538,897
|
|
(*) Excludes (i)
5,000 shares of convertible preferred stock held by Armistice, and
(ii) 13,632,796 warrants held by Armistice, all of which are
subject to agreed-upon terms such that Armistice cannot hold more
than 40% of the outstanding voting common stock of the Company from
the conversion or exercise of any of these potentially dilutive
securities.
What control will Armistice have over the
Company if the Conversion Proposal is
Approved?
If the Conversion
Proposal is approved and Cerecor converts the shares of Series G
Preferred Stock into shares of common stock, Armistice will own,
directly and indirectly through its interest in Cerecor,
approximately 46.0% of the outstanding shares of common stock. As a
result, while Armistice would not have de facto voting control,
Armistice will be in a position to exercise significant influence
over any vote of the Company’s stockholders and may also have
greater influence over the Company in other matters.
Interests
of Directors and Executive Officers
In considering the
recommendation of the Company's board of directors with respect to
the Asset Agreement, the Company's stockholders should be aware
that some of its executive officers and directors have financial
interests in the acquisition that are different from, or in
addition to, those of the Company's stockholders generally. As of
the date of this preliminary proxy statement, Steven Boyd, a
director of both Aytu and Cerecor, is the Chief Investment Officer
and a director of Armistice, which is a significant shareholder of
both Aytu and Cerecor. As a significant shareholder of both
companies, Armistice will have significant influence on the outcome
of the vote of Aytu’s stockholders regarding the Conversion
Proposal and will have an indirect interest in a substantial
portion of the shares of common stock issuable upon conversion of
the Series G Preferred Stock.
No Appraisal Rights
Under Delaware law,
stockholders are not entitled to appraisal rights with respect to
this proposal and the Company will not independently provide
stockholders with any such rights.
Vote Required
Approval of the
Conversion Proposal requires the affirmative vote of a majority of
the total votes cast at the meeting. Abstentions and broker
non-votes, if any, are not treated as votes cast, and therefore
will have no effect on this proposal.
Recommendation
The board of
directors recommends a vote “FOR” the Conversion
Proposal.
Unless
marked otherwise, proxies received will be voted “FOR”
the approval of the Conversion Proposal.
AUTHORIZED
SHARE INCREASE PROPOSAL
General
Our
board of directors of directors has unanimously approved, subject
to stockholder approval, an amendment to our Certificate of
Incorporation to increase our authorized shares of common stock
from 100,000,000 up to 200,000,000 shares. The text of the form of
amendment to the Certificate of Incorporation, is set forth in
Appendix C to this
proxy statement. If approved by our stockholders, we intend to file
the amendment with the Secretary of State of Delaware as soon as
practicable following the special meeting, and the amendment will
be effective upon such filing, provided, however, that the board of
directors reserves the right to abandon the proposed amendment
notwithstanding authorization by the stockholders, and without any
further action by the stockholders, in which event the number of
our authorized shares of common stock as set forth in our
Certificate of Incorporation will continue as currently in effect.
If the proposal is not approved by our stockholders, our
Certificate of Incorporation will continue as currently in
effect.
Authorized and Outstanding Capital Stock
As of
November 4, 2019, we had 150,000,000 authorized shares of capital
stock, consisting of 100,000,000 shares designated as common stock,
$0.0001 par value per share, of which 20,733,052 shares were issued
and outstanding, and 50,000,000 designated as preferred stock,
$0.0001 par value per share, of which 410,000 shares were issued
and outstanding, included in the preferred stock amount are 5,000
restricted shares. Of the remaining 79,266,948 authorized shares of
common stock, 1,556 shares are reserved for issuance upon the
exercise of issued and outstanding options, and 26,459,663 shares
are reserved for issuance upon the exercise of issued and
outstanding warrants. Thus, as of November 4, 2019, we have an
aggregate of 47,604,271 shares of our authorized common stock
issued or reserved for future issuance.
Background and Purpose of the Amendment
Our
board of directors believes it to be in our best interest to have
sufficient additional authorized but unissued shares of common
stock available in order to provide flexibility for corporate
action in the future. Management believes that the availability of
additional authorized shares for issuance from time to time in our
board of directors’ discretion in connection with possible
future financings or for other corporate uses is critical to our
long-term success and is in the best interests of our Company and
our stockholders. Other than issuances related to, (i) the
acquisition of certain assets of Cerecor, as disclosed in the
Conversion Proposal and (ii) in connection with the merger with
Innovus Pharmaceuticals, Inc. as disclosed in our Current Report on
Form 8-K filed on September 18, 2019, we currently have no specific
understandings, arrangements or agreements with respect to any
future actions that would require us to issue a material amount of
the additional new shares of our common stock. Notwithstanding the
foregoing, we have sufficient shares for our previously announced
issuances.
Effects of the Amendment
If the
proposed amendment of our Certificate of Incorporation is approved
and implemented, the number of authorized shares of common stock of
our Company will be increased from 100,000,000 to 200,000,000. The
amendment will not change the par value of the shares of our common
stock, affect the number of shares of our common stock that are
outstanding, or affect the legal rights or privileges of holders of
existing shares of common stock. The increase will not have any
effect on the authorized or outstanding shares of preferred stock.
The increase will not have any effect on any outstanding equity
incentive awards or warrants to purchase our common
stock.
The
issuance in the future of additional authorized shares of common
stock may have the effect of diluting the earnings or loss per
share and book value per share, as well as the ownership and voting
rights of the holders of our then-outstanding shares of common
stock.
Possible Anti-Takeover Implications of the Authorized Share
Increase
We have
no intent or plan to employ the additional unissued authorized
shares as an anti-takeover device. The increase in the authorized
shares of common stock is not being recommended by our board of
directors of directors as part of an anti-takeover strategy. As
indicated above, the purpose of the increase in our authorized
shares of common stock is to ensure that we have sufficient
authorized common stock to, among other things, provide flexibility
to consummate future equity financings and other corporate
opportunities. However, our authorized but unissued shares of
common stock could (within the limits imposed by applicable law and
regulation) be issued in one or more transactions that could make a
change of control more difficult and therefore more
unlikely.
Our
board of directors did not propose the increase in our authorized
shares of common stock in response to any effort known to our board
of directors to accumulate common stock or to obtain control of our
Company by means of a merger, tender offer or solicitation in
opposition to management. Further, our board of directors does not
currently contemplate recommending the adoption of any other
amendments to our Certificate of Incorporation or the adoption of
any other arrangement that could be construed as limiting the
ability of third parties to consummate a takeover or effect a
change of control. Although this proposal to increase the
authorized number of shares of common stock has been prompted by
business and financial considerations and not by the threat of any
known or threatened hostile takeover attempt, stockholders should
be aware that approval of this proposal could facilitate future
efforts by our Company to oppose changes in control of our Company,
including transactions in which the stockholders might otherwise
receive a premium for their shares over then-current market prices
and perpetuate our Company’s management.
An
increase in the number of authorized but unissued shares of common
stock may have a potential anti-takeover effect, as our ability to
issue additional shares could be used to thwart persons, or
otherwise dilute the stock ownership of stockholders, seeking to
control our Company.
Vote Required
Approval of the
amendment to our Certificate of Incorporation to effect an increase
in the number of authorized shares of common stock from 100,000,000
to up to 200,000,000 shares requires the receipt of the affirmative
vote of a majority of the outstanding shares of common stock issued
and outstanding as of the record date. Abstentions and broker
non-votes, if any, are not treated as votes cast, and therefore
will effectively be a vote against this
proposal.
Recommendation
Our
board of directors of directors unanimously recommends that
stockholders vote FOR the
Authorized Share Increase Proposal.
ADJOURNMENT
PROPOSAL
Overview
In
order to ensure that approval of the Nasdaq 5635(d) Proposal, the
Conversion Proposal and/or the Share Increase Proposal is obtained,
the board of directors wishes to seek approval of a proposal to
adjourn the Special Meeting, if necessary, to solicit more votes in
favor of the Nasdaq 5635(d) Proposal, the Conversion Proposal
and/or the Share Increase Proposal, applicable.
Vote Required
Approval of the
Adjournment Proposal requires the affirmative vote of the holders
of a majority of the votes cast at the meeting. Abstentions and
broker non-votes, if any, are not treated as votes cast, and
therefore will have no effect on this proposal.
Recommendation
The
board of directors recommends that stockholders vote
“FOR” the Adjournment Proposal.
Unless
marked otherwise, proxies received will be voted “FOR”
the approval of the Adjournment Proposal.
STOCKHOLDER COMMUNICATIONS
Stockholders may
send any communications regarding Company business to the board of
directors in care of our Corporate Secretary at our principal
executive offices located at 373 Inverness Parkway, Suite 206,
Englewood, Colorado 80112. The Secretary will forward all such
communications to the addressee.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN
ADDRESS
The SEC
has adopted rules that permit companies to deliver a single copy of
proxy materials to multiple stockholders sharing an address unless
a company has received contrary instructions from one or more of
the stockholders at that address. Upon request, we will promptly
deliver a separate copy of proxy materials to one or more
stockholders at a shared address to which a single copy of proxy
materials was delivered. Stockholders may request a separate copy
of proxy materials by contacting us either by calling (720)
437-6580 or by mailing a request to 373 Inverness Parkway, Suite
206, Englewood, Colorado 80112. Stockholders at a shared address
who receive multiple copies of proxy materials may request to
receive a single copy of proxy materials in the future in the same
manner as described above.
APPENDIX A
AYTU BIOSCIENCE, INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES F CONVERTIBLE PREFERRED
STOCK
PURSUANT
TO SECTION 151 OF THE
DELAWARE
GENERAL CORPORATION LAW
The
undersigned, Joshua R. Disbrow and David A. Green, do hereby
certify that:
1.
They are the President and Secretary, respectively, of Aytu
BioScience, Inc., a Delaware corporation (the “Corporation”).
2.
The Corporation is authorized to issue 50,000,000 shares of
preferred stock, 3,594,981 of which have been issued.
3.
The following resolutions were duly adopted by the board of
directors of the Corporation (the “Board of
Directors”):
WHEREAS,
the certificate of incorporation of the Corporation provides for a
class of its authorized stock known as preferred stock, consisting
of 50,000,000 shares, $0.0001 par value per share, issuable from
time to time in one or more series;
WHEREAS,
the Board of Directors is authorized to fix the dividend rights,
dividend rate, voting rights, conversion rights, rights and terms
of redemption and liquidation preferences of any wholly unissued
series of preferred stock and the number of shares constituting any
series and the designation thereof, of any of them;
and
WHEREAS,
it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to a series of the
preferred stock, which shall consist of, except as otherwise set
forth in the Purchase Agreement, up to 10,000 shares of the
preferred stock which the Corporation has the authority to issue,
as follows:
NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issuance of a series of preferred stock for cash or
exchange of other securities, rights or property and does hereby
fix and determine the rights, preferences, restrictions and other
matters relating to such series of preferred stock as
follows:
TERMS OF PREFERRED STOCK
Section
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in the Purchase Agreement. In addition, the
following terms shall have the following meanings:
“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act.
“Alternate Consideration”
shall have the meaning set forth in Section 7(d).
“Beneficial Ownership
Limitation” shall have the meaning set forth in
Section 6(d).
“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
“Buy-In” shall have the
meaning set forth in Section 6(c)(iv).
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means the
Corporation’s common stock, par value $0.0001 per share, and
stock of any other class of securities into which such securities
may hereafter be reclassified or changed.
“Common Stock Equivalents”
means any securities of the Corporation or the Subsidiaries which
would entitle the holder thereof to acquire at any time Common
Stock, including, without limitation, any debt, preferred stock,
rights, options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
“Conversion Amount” means
the sum of the Stated Value at issue.
“Conversion Date” shall
have the meaning set forth in Section 6(a).
“Conversion Price” shall
have the meaning set forth in Section 6(b).
“Conversion Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of the shares of Preferred Stock in accordance with the terms
hereof.
“Conversion Shares Registration
Statement” means a registration statement that
registers the resale of all Conversion Shares of the Holders, who
shall be named as “selling stockholders” therein and
meets the requirements of the Registration Rights
Agreement.
“Effective Date” means the
date that the Conversion Shares Registration Statement filed by the
Corporation pursuant to the Registration Rights Agreement is first
declared effective by the Commission.
“Exchange
Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated
thereunder.
“Exempt Issuance” means
the issuance of (a) shares of Common Stock or options to employees,
officers or directors of the Corporation pursuant to any stock or
option plan duly adopted by a majority of the non-employee members
of the Board of Directors of the Corporation or a majority of the
members of a committee of non-employee directors established for
such purpose, (b) securities upon the exercise or exchange of or
conversion of any securities issued pursuant to the Purchase
Agreement and/or other securities exercisable or exchangeable for
or convertible into shares of Common Stock issued and outstanding
on the date of the Purchase Agreement, provided that such
securities have not been amended since the date of the Purchase
Agreement to increase the number of such securities or to decrease
the exercise price, exchange price or conversion price of any such
securities or to extend the term of such securities and (c)
securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors
of the Corporation, provided that such securities are issued as
“restricted securities” (as defined in Rule 144) and
carry no registration rights that require or permit the filing of
any registration statement in connection therewith until at least
90 days following the Effective Date, and provided that any such
issuance shall only be to a Person (or to the equityholders 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 Corporation and shall provide to the Corporation
additional benefits in addition to the investment of funds, but
shall not include a transaction in which the Corporation is issuing
securities primarily for the purpose of raising capital or to an
entity whose primary business is investing in
securities.
“Fundamental Transaction”
shall have the meaning set forth in Section 7(d).
“GAAP” means United States
generally accepted accounting principles.
“Holder” shall have the
meaning given such term in Section 2.
“Liquidation” shall have
the meaning set forth in Section 5.
“New York Courts” shall
have the meaning set forth in Section 8(d).
“Notice of Conversion”
shall have the meaning set forth in Section 6(a).
“Original Issue Date”
means the date of the first issuance of any shares of the Preferred
Stock regardless of the number of transfers of any particular
shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred
Stock.
“Person” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Preferred Stock” shall
have the meaning set forth in Section 2.
“Purchase Agreement” means
the Securities Purchase Agreement, dated as of the Original Issue
Date, among the Corporation and the original Holders, as amended,
modified or supplemented from time to time in accordance with its
terms.
“Registration Rights
Agreement” means the Registration Rights Agreement,
dated as of the date of the Purchase Agreement, among the
Corporation and the original Holders, in the form of Exhibit B attached to the
Purchase Agreement.
“Registration Statement”
means a registration statement meeting the requirements set forth
in the Registration Rights Agreement and covering the resale of the
Underlying Shares by each Holder as provided for in the
Registration Rights Agreement.
“Securities
Act” means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
“Share Delivery Date”
shall have the meaning set forth in Section 6(c).
“Shareholder Approval”
means such approval as may be required by the applicable rules and
regulations of the Nasdaq Stock Market (or any successor entity)
from the shareholders of the Corporation with respect to the
transactions contemplated by the Transaction Documents, including
the issuance of all of the Underlying Shares in excess of 19.99% of
the issued and outstanding Common Stock on the Closing
Date.
“Stated
Value” shall have the meaning set forth in Section 2,
as the same may be increased pursuant to Section 3.
“Successor Entity” shall
have the meaning set forth in Section 7(d).
“Trading Day” means a day
on which the principal Trading Market is open for
business.
“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE
American, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market or the New York Stock Exchange (or any
successors to any of the foregoing).
“Transfer
Agent” means Issuer Direct Corporation, the current
transfer agent of the Corporation, with a mailing address of 500
Perimeter Park Dr., Suite D, Morrisville, North Carolina 27560 and
a facsimile number of 919-481-6222, and any successor transfer
agent of the Corporation.
“VWAP”
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on OTCQB or OTCQX as
applicable, (c) if the Common Stock is not then listed or quoted
for trading on OTCQB or OTCQX and if prices for the Common Stock
are then reported on the Pink Open Market (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so
reported, or (d) in all other cases, the fair market value of
a share of Common Stock as determined by an independent appraiser
selected in good faith by the Holders of a majority in interest of
the Preferred Stock then outstanding and reasonably acceptable to
the Corporation, the fees and expenses of which shall be paid by
the Corporation.
“Warrants” means,
collectively, the Common Stock purchase warrants delivered to the
Holder at the Closing in accordance with Section 2.2(a) of the
Purchase Agreement, which Warrants shall be exercisable following
Shareholder Approval and have a term of exercise equal to five (5)
years, in the form of Exhibit C attached to the
Purchase Agreement.
“Warrant Shares” means the
shares of Common Stock issuable upon exercise of the
Warrants.
Section
2. Designation,
Amount and Par Value. The series of preferred stock shall be
designated as its Series F Convertible Preferred Stock (the
“Preferred
Stock”) and the number of shares so designated shall
be up to 10,000 (which
shall not be subject to increase without the written consent of all
of the holders of the Preferred Stock (each, a “Holder” and collectively,
the “Holders”)). Each share of
Preferred Stock shall have a par value of $0.0001 per share and a
stated value equal to $1,000, subject to increase set forth in
Section 3 below (the “Stated
Value”).
Section
3. Dividends.
Except for stock dividends or distributions for which adjustments
are to be made pursuant to Section 7, Holders shall be entitled to
receive, and the Corporation shall pay, dividends on shares of
Preferred Stock equal (on an as-if-converted-to-Common-Stock basis,
disregarding for such purpose any conversion limitations hereunder)
to and in the same form as dividends actually paid on shares of the
Common Stock when, as and if such dividends are paid on shares of
the Common Stock. No other dividends shall be paid on shares of
Preferred Stock. The Corporation shall not pay any dividends on the
Common Stock unless the Corporation simultaneously complies with
this provision.
Section
4. Voting
Rights. Except as otherwise provided herein or as otherwise
required by law, the Preferred Stock shall have no voting rights.
However, as long as any shares of Preferred Stock are outstanding,
the Corporation shall not, without the affirmative vote of the
Holders of a majority of the then outstanding shares of the
Preferred Stock, (a) alter or change adversely the powers,
preferences or rights given to the Preferred Stock or alter or
amend this Certificate of Designation, (b) amend its certificate of
incorporation or other charter documents in any manner that
adversely affects any rights of the Holders, (c) increase the
number of authorized shares of Preferred Stock, or (d) enter into
any agreement with respect to any of the foregoing.
Section
5. Liquidation.
Upon any liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary (a “Liquidation”), the
Holders shall be entitled to receive out of the assets, whether
capital or surplus, of the Corporation the same amount that a
holder of Common Stock would receive if the Preferred Stock were
fully converted (disregarding for such purposes any conversion
limitations hereunder) to Common Stock which amounts shall be paid
pari passu with all holders of Common Stock. The Corporation shall
mail written notice of any such Liquidation, not less than 45 days
prior to the payment date stated therein, to each
Holder.
Section
6. Conversion.
a) Conversions at Option of
Holder. Prior to Shareholder
Approval, the Preferred Stock is non-convertible. Following
Shareholder Approval, each share of Preferred Stock shall be
convertible, from time to time at the option of the Holder thereof,
into that number of shares of Common Stock (subject to the
limitations set forth in Section 6(d)) determined by dividing the
Stated Value of such share of Preferred Stock by the Conversion
Price. Holders shall
effect conversions by providing the Corporation with the form of
conversion notice attached hereto as Annex A (a “Notice of Conversion”).
Each Notice of Conversion shall specify the number of shares of
Preferred Stock to be converted, the number of shares of Preferred
Stock owned prior to the conversion at issue, the number of shares
of Preferred Stock owned subsequent to the conversion at issue and
the date on which such conversion is to be effected, which date may
not be prior to the date the applicable Holder delivers by
facsimile or e-mail such Notice of Conversion to the Corporation
(such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion to
the Corporation is deemed delivered hereunder. No ink-original
Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any
Notice of Conversion form be required. The calculations and entries set
forth in the Notice of Conversion shall control in the absence of
manifest or mathematical error. To effect conversions of shares of
Preferred Stock, a Holder shall not be required to surrender the
certificate(s) representing the shares of Preferred Stock to the
Corporation unless all of the shares of Preferred Stock represented
thereby are so converted, in which case such Holder shall deliver
the certificate representing such shares of Preferred Stock
promptly following the Conversion Date at issue. Shares of
Preferred Stock converted into Common Stock or redeemed in
accordance with the terms hereof shall be canceled and shall not be
reissued.
b) Conversion Price. The
conversion price for the Preferred Stock shall equal $1.00, subject to adjustment herein (the
“Conversion
Price”).
c) Mechanics of Conversion
i. Delivery of Conversion Shares Upon
Conversion. Not later than the earlier of (i) two (2)
Trading Days and (ii) the number of Trading Days comprising the
Standard Settlement Period (as defined below) after each Conversion
Date (the “Share
Delivery Date”), the Corporation shall deliver, or
cause to be delivered, to the converting Holder (A) Conversion
Shares which, on or after the earlier of (i) the six month
anniversary of the Original Issue Date or (ii) the Effective Date,
shall be free of restrictive legends and trading restrictions
(other than those which may then be required by the Purchase
Agreement) representing the number of Conversion Shares being
acquired upon the conversion of the Preferred Stock, and (B) a bank
check in the amount of accrued and unpaid dividends, if any. On or
after the earlier of (i) the six month anniversary of the Original
Issue Date or (ii) the Effective Date, the Corporation shall use
its best efforts to deliver the Conversion Shares required to be
delivered by the Corporation under this Section 6 electronically
through the Depository Trust Company or another established
clearing corporation performing similar functions. As used herein,
“Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of the Notice of
Conversion.
ii. Failure to Deliver Conversion
Shares. If, in the case of any Notice of Conversion, such
Conversion Shares are not delivered to or as directed by the
applicable Holder by the Share Delivery Date, the Holder shall be
entitled to elect by written notice to the Corporation at any time
on or before its receipt of such Conversion Shares, to rescind such
Conversion, in which event the Corporation shall promptly return to
the Holder any original Preferred Stock certificate delivered to
the Corporation and the Holder shall promptly return to the
Corporation the Conversion Shares issued to such Holder pursuant to
the rescinded Notice of Conversion.
iii. Obligation
Absolute; Partial Liquidated Damages. The
Corporation’s obligation to issue and deliver the Conversion
Shares upon conversion of Preferred Stock in accordance with the
terms hereof are absolute and unconditional, irrespective of any
action or inaction by a Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or
any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by such Holder or any otherPerson of
any obligation to the Corporation or any violation or alleged
violation of law by such Holder or any other person, and
irrespective of any other circumstance which might otherwise limit
such obligation of the Corporation to such Holder in connection
with the issuance of such Conversion Shares;provided, however, that such delivery
shall not operate as a waiver by the Corporation of any such action
that the Corporation may have against such Holder. In the event a
Holder shall elect to convert any or all of the Stated Value of its
Preferred Stock, the Corporation may not refuse conversion based on
any claim that such Holder or anyone associated or affiliated with
such Holder has been engaged in any violation of law, agreement or
for any other reason, unless an injunction from a court, on notice
to Holder, restraining and/or enjoining conversion of all or part
of the Preferred Stock of such Holder shall have been sought and
obtained, and the Corporation posts a surety bond for the benefit
of such Holder in the amount of 150% of the Stated Value of
Preferred Stock which is subject to the injunction, which bond
shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds
of which shall be payable to such Holder to the extent it obtains
judgment. In the absence of such injunction, the Corporation shall
issue Conversion Shares and, if applicable, cash, upon a properly
noticed conversion. If the Corporation fails to deliver to a Holder
such Conversion Shares pursuant to Section 6(c)(i) by the Share
Delivery Date applicable to such conversion, the Corporation shall
pay to such Holder, in cash, as liquidated damages and not as a
penalty, for each $5,000 of Stated Value of Preferred Stock being
converted, $50 per Trading Day (increasing to $100 per Trading Day
on the third Trading Day and increasing to $200 per Trading Day on
the sixth Trading Day after such damages begin to accrue) for each
Trading Day after the Share Delivery Date until such Conversion
Shares are delivered or Holder rescinds such conversion. Nothing
herein shall limit a Holder’s right to pursue actual damages
for the Corporation’s failure to deliver Conversion Shares
within the period specified herein and such Holder shall have the
right to pursue all remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such
rights shall not prohibit a Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable
law.
iv. Compensation for Buy-In on Failure to
Timely Deliver Conversion Shares Upon Conversion. In
addition to any other rights available to the Holder, if the
Corporation fails for any reason to deliver to a Holder the
applicable Conversion Shares by the Share Delivery Date pursuant to
Section 6(c)(i), and if after such Share Delivery Date such Holder
is required by its brokerage firm to purchase (in an open market
transaction or otherwise), or the Holder’s brokerage firm
otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by such Holder of the Conversion Shares
which such Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”), then the
Corporation shall (A) pay in cash to such Holder (in addition to
any other remedies available to or elected by such Holder) the
amount, if any, by which (x) such Holder’s total purchase
price (including any brokerage commissions) for the Common Stock so
purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that such Holder was entitled to receive
from the conversion at issue multiplied by (2) the actual sale
price at which the sell order giving rise to such purchase
obligation was executed (including any brokerage commissions) and
(B) at the option of such Holder, either reissue (if surrendered)
the shares of Preferred Stock equal to the number of shares of
Preferred Stock submitted for conversion (in which case, such
conversion shall be deemed rescinded) or deliver to such Holder the
number of shares of Common Stock that would have been issued if the
Corporation had timely complied with its delivery requirements
under Section 6(c)(i). For example, if a Holder purchases shares of
Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of shares of
Preferred Stock with respect to which the actual sale price of the
Conversion Shares (including any brokerage commissions) giving rise
to such purchase obligation was a total of $10,000 under clause (A)
of the immediately preceding sentence, the Corporation shall be
required to pay such Holder $1,000. The Holder shall provide the
Corporation written notice indicating the amounts payable to such
Holder in respect of the Buy-In and, upon request of the
Corporation, evidence of the amount of such loss. Nothing herein
shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief with respect to the Corporation’s failure to timely
deliver the Conversion Shares upon conversion of the shares of
Preferred Stock as required pursuant to the terms
hereof.
v. Reservation of Shares Issuable Upon
Conversion. The Corporation covenants that it will at all
times reserve and keep available out of its authorized and unissued
shares of Common Stock for the sole purpose of issuance upon
conversion of the Preferred Stock as herein provided, free from
preemptive rights or any other actual contingent purchase rights of
Persons other than the Holder (and the other holders of the
Preferred Stock), not less than such aggregate number of shares of
the Common Stock as shall (subject to the terms and conditions set
forth in the Purchase Agreement) be issuable (taking into account
the adjustments and restrictions of Section 7) upon the conversion
of the then outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly authorized, validly issued, fully paid
and nonassessable and, if the Conversion Shares Registration
Statement is then effective under the Securities Act, shall be
registered for public resale in accordance with such Conversion
Shares Registration Statement (subject to such Holder’s
compliance with its obligations under the Registration Rights
Agreement).
vi. Fractional Shares. No
fractional shares or scrip representing fractional shares shall be
issued upon the conversion of the Preferred Stock. As to any
fraction of a share which the Holder would otherwise be entitled to
purchase upon such conversion, the Corporation shall round up to
the next whole share. Notwithstanding anything to the contrary
contained herein, but consistent with the provisions of this
subsection with respect to fractional Conversion Shares, nothing
shall prevent any Holder from converting fractional shares of
Preferred Stock.
vii. Transfer
Taxes and Expenses. The issuance of Conversion Shares on
conversion of this Preferred Stock shall be made without charge to
any Holder for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such Conversion
Shares, provided that the Corporation shall not be required to pay
any tax that may be payable in respect of any transfer involved in
the issuance and delivery of any such Conversion Shares upon
conversion in a name other than that of the Holders of such shares
of Preferred Stock and the Corporation shall not be required to
issue or deliver such Conversion Shares unless or until the Person
or Persons requesting the issuance thereof shall have paid to the
Corporation the amount of such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid. The
Corporation shall pay all Transfer Agent fees required for same-day
processing of any Notice of Conversion and all fees to the
Depository Trust Company (or another established clearing
corporation performing similar functions) required for same-day
electronic delivery of the Conversion Shares.
d) Beneficial Ownership
Limitation. The
Corporation shall not effect any conversion of the Preferred Stock,
and a Holder shall not have the right to convert any portion of the
Preferred Stock, to the extent that, after giving effect to the
conversion set forth on the applicable Notice of Conversion, such
Holder (together with such Holder’s Affiliates, and any
Persons acting as a group together with such Holder or any of such
Holder’s Affiliates (such Persons, “Attribution Parties”))
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by such Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon
conversion of the Preferred Stock with respect to which such
determination is being made, but shall exclude the number of shares
of Common Stock which are issuable upon (i) conversion of the
remaining, unconverted Stated Value of Preferred Stock beneficially
owned by such Holder or any of its Affiliates or Attribution
Parties and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Corporation
subject to a limitation on conversion or exercise analogous to the
limitation contained herein (including, without limitation, the
Preferred Stock or the Warrants) beneficially owned by such Holder
or any of its Affiliates or Attribution Parties. Except as
set forth in the preceding sentence, for purposes of this Section
6(d), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. To the extent that the limitation contained
in this Section 6(d) applies, the determination of whether the
Preferred Stock is convertible (in relation to other securities
owned by such Holder together with any Affiliates and Attribution
Parties) and of how many shares of Preferred Stock are convertible
shall be in the sole discretion of such Holder, and the submission
of a Notice of Conversion shall be deemed to be such Holder’s
determination of whether the shares of Preferred Stock may be
converted (in relation to other securities owned by such Holder
together with any Affiliates and Attribution Parties) and how many
shares of the Preferred Stock are convertible, in each case subject
to the Beneficial Ownership Limitation. To ensure compliance with
this restriction, each Holder will be deemed to represent to the
Corporation each time it delivers a Notice of Conversion that such
Notice of Conversion has not violated the restrictions set forth in
this paragraph and the Corporation shall have no obligation to
verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall
be determined in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder. For purposes
of this Section 6(d), in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as stated in the most recent of
the following: (i) the Corporation’s most recent periodic or
annual report filed with the Commission, as the case may be, (ii) a
more recent public announcement by the Corporation or (iii) a more
recent written notice by the Corporation or the Transfer Agent
setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request (which may be
via email) of a Holder, the Corporation shall within one Trading
Day confirm orally and in writing to such Holder the number of
shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of
the Corporation, including the Preferred Stock, by such Holder or
its Affiliates or Attribution Parties since the date as of which
such number of outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% (or, upon
election by a Holder prior to the issuance of any shares of
Preferred Stock, either 9.99% or 40%1) of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock issuable upon conversion of Preferred
Stock held by the applicable Holder. A Holder, upon notice to the
Corporation, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 6(d) applicable to its
Preferred Stock provided that the Beneficial Ownership Limitation
in no event exceeds 9.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock upon conversion of this Preferred Stock
held by the Holder and the provisions of this Section 6(d) shall
continue to apply. Any such increase in the Beneficial Ownership
Limitation will not be effective until the 61st day after such
notice is delivered to the Corporation and shall only apply to such
Holder and no other Holder. The provisions of this paragraph shall
be construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 6(d) to correct this
paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation
contained herein or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The limitations
contained in this paragraph shall apply to a successor holder of
Preferred Stock.
Section
7. Certain
Adjustments.
a) Stock Dividends and Stock
Splits. If the Corporation, at any time while this Preferred
Stock is outstanding: (i) pays a stock dividend or otherwise makes
a distribution or distributions payable in shares of Common Stock
on shares of Common Stock or any other Common Stock Equivalents
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Corporation upon conversion of, or
payment of a dividend on, this Preferred Stock), (ii) subdivides
outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues, in the event of a reclassification of shares of the
Common Stock, any shares of capital stock of the Corporation, then
the Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
any treasury shares of the Corporation) outstanding immediately
before such event, and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this Section 7(a) shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in
the case of a subdivision, combination or
re-classification.
b) Subsequent Equity Sales. Until
the earlier of (x) the two year anniversary of the Effective Date
and (y) such date that 85% of the Preferred Stock issued on the
Original Issue Date has been converted, if the Corporation or any
Subsidiary, as applicable sells or grants any option to purchase or
sells or grants any right to reprice, or otherwise disposes of or
issues (or announces any sale, grant or any option to purchase or
other disposition), any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock at an
effective price per share that is lower than the then Conversion
Price (such lower price, the “Base Conversion Price”
and such issuances, collectively, a “Dilutive Issuance”) (if
the holder of the Common Stock or Common Stock Equivalents so
issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price
per share that is lower than the Conversion Price, such issuance
shall be deemed to have occurred for less than the Conversion Price
on such date of the Dilutive Issuance), then simultaneously with
the consummation (or, if earlier, the announcement) of each
Dilutive Issuance the Conversion Price shall be reduced to equal
the Base Conversion Price Notwithstanding the foregoing, no adjustment will
be made under this Section 7(b) in respect of an Exempt
Issuance. If the Corporation enters into a Variable Rate
Transaction, despite the prohibition set forth in the Purchase
Agreement, the Corporation shall be deemed to have issued Common
Stock or Common Stock Equivalents at the lowest possible conversion
price at which such securities may be converted or exercised. The
Corporation shall notify the Holders in writing, no later than the
Trading Day following the issuance of any Common Stock or Common
Stock Equivalents subject to this Section 7(b), indicating therein
the applicable issuance price, or applicable reset price, exchange
price, conversion price and other pricing terms (such notice, the
“Dilutive Issuance
Notice”). For purposes of clarification, whether or
not the Corporation provides a Dilutive Issuance Notice pursuant to
this Section 7(b), upon the occurrence of any Dilutive Issuance,
the Holders are entitled to receive a number of Conversion Shares
based upon the Base Conversion Price on or after the date of such
Dilutive Issuance, regardless of whether a Holder accurately refers
to the Base Conversion Price in the Notice of
Conversion.
_____________________________________________
c) Subsequent Rights Offerings.
In addition to any adjustments
pursuant to Section 7(a) above, if at any time the Corporation
grants, issues or sells any Common Stock Equivalents or rights to
purchase stock, warrants, securities or other property pro rata to
the record holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of
Common Stock acquirable upon complete conversion of such
Holder’s Preferred Stock (without regard to any limitations
on exercise hereof, including without limitation, the Beneficial
Ownership Limitation) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights (provided, however, to
the extent that the Holder’s right to participate in any such
Purchase Right would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to
participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Common Stock as a result of such
Purchase Right to such extent) and such Purchase Right to such
extent shall be held in abeyance for the Holder until such time, if
ever, as its right thereto would not result in the Holder exceeding
the Beneficial Ownership Limitation).
d) Pro Rata Distributions. During
such time as this Preferred Stock is outstanding, if the
Corporation declares or makes any dividend or other distribution of
its assets (or rights to acquire its assets) to holders of shares
of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin
off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a “Distribution”), at any
time after the issuance of this Preferred Stock, then, in each such
case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have
participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Preferred
Stock (without regard to any limitations on conversion hereof,
including without limitation, the Beneficial Ownership Limitation)
immediately before the date of which a record is taken for such
Distribution, or, if no such record is taken, the date as of which
the record holders of shares of Common Stock are to be determined
for the participation in such Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).
e) Fundamental Transaction. If, at
any time while this Preferred Stock is outstanding, (i) the
Corporation, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Corporation
with or into another Person, (ii) the Corporation, directly or
indirectly, effects any sale, lease, license, assignment, transfer,
conveyance or other disposition of all or substantially all of its
assets in one or a series of related transactions, (iii) any,
direct or indirect, purchase offer, tender offer or exchange offer
(whether by the Corporation or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Corporation, directly or
indirectly, in one or more related transactions effects any
reclassification, reorganization or recapitalization of the Common
Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other
securities, cash or property, or (v) the Corporation, directly or
indirectly, in one or more related transactions consummates a stock
or share purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such
other Person acquires more than 50% of the outstanding shares of
Common Stock (not including any shares of Common Stock held by the
other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock or
share purchase agreement or other business combination) (each a
“Fundamental
Transaction”), then, upon any subsequent conversion of
this Preferred Stock, the Holder shall have the right to receive,
for each Conversion Share that would have been issuable upon such
conversion immediately prior to the occurrence of such Fundamental
Transaction (without regard to any limitation in Section 6(d) on
the conversion of this Preferred Stock), the number of shares of
Common Stock of the successor or acquiring corporation or of the
Corporation, if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Preferred
Stock is convertible immediately prior to such Fundamental
Transaction (without regard to any limitation in Section 6(d) or
6(e) on the conversion of this Preferred Stock). For purposes of
any such conversion, the determination of the Conversion Price
shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such
Fundamental Transaction, and the Corporation shall apportion the
Conversion Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of
the Alternate Consideration. If holders of Common Stock are given
any choice as to the securities, cash or property to be received in
a Fundamental Transaction, then the Holder shall be given the same
choice as to the Alternate Consideration it receives upon any
conversion of this Preferred Stock following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Corporation or surviving entity in
such Fundamental Transaction shall file a new Certificate of
Designation with the same terms and conditions and issue to the
Holders new preferred stock consistent with the foregoing
provisions and evidencing the Holders’ right to convert such
preferred stock into Alternate Consideration. The Corporation shall
cause any successor entity in a Fundamental Transaction in which
the Corporation is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Corporation under
this Certificate of Designation in accordance with the provisions
of this Section 7(e) pursuant to written agreements in form and
substance reasonably satisfactory to the Holder and approved by the
Holder (without unreasonable delay) prior to such Fundamental
Transaction and shall, at the option of the Holder, deliver to the
Holder in exchange for this Preferred Stock a security of the
Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Preferred Stock which is
convertible for a corresponding number of shares of capital stock
of such Successor Entity (or its parent entity) equivalent to the
shares of Common Stock acquirable and receivable upon conversion of
this Preferred Stock (without regard to any limitations on the
conversion of this Preferred Stock) prior to such Fundamental
Transaction, and with a conversion price which applies the
conversion price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common
Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock and, such number of shares of capital
stock and such conversion price being for the purpose of protecting
the economic value of this Preferred Stock immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Certificate of Designation referring to the
“Corporation” shall refer instead to the Successor
Entity), and may exercise every right and power of the Corporation
and shall assume all of the obligations of the Corporation under
this Certificate of Designation with the same effect as if such
Successor Entity had been named as the Corporation
herein.
f) Calculations. All calculations
under this Section 7 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 7, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding any treasury shares of
the Corporation) issued and outstanding.
g) Notice to the
Holders.
i. Adjustment to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to any provision
of this Section 7, the Corporation shall promptly deliver to each
Holder by facsimile or email a notice setting forth the Conversion
Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
ii. Notice to Allow Conversion by
Holder. If (A) the Corporation shall declare a dividend (or
any other distribution in whatever form) on the Common Stock, (B)
the Corporation shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock, (C) the Corporation shall
authorize the granting to all holders of the Common Stock of rights
or warrants to subscribe for or purchase any shares of capital
stock of any class or of any rights, (D) the approval of any
stockholders of the Corporation shall be required in connection
with any reclassification of the Common Stock, any consolidation or
merger to which the Corporation is a party, any sale or transfer of
all or substantially all of the assets of the Corporation, or any
compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property or (E) the Corporation shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Corporation, then, in each case, the Corporation shall cause
to be filed at each office or agency maintained for the purpose of
conversion of this Preferred Stock, and shall cause to be
delivered by facsimile or email to
each Holder at its last facsimile number or email address as it
shall appear upon the stock
books of the Corporation, at least twenty (20) calendar days prior
to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, redemption, rights
or warrants, or if a record is not to be taken, the date as of
which the holders of the Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information
regarding the Corporation or any of the Subsidiaries, the
Corporation shall simultaneously file such notice with the
Commission pursuant to a Current Report on Form 8-K. The Holder
shall remain entitled to convert the Conversion Amount of this
Preferred Stock (or any part hereof) during the 20-day period
commencing on the date of such notice through the effective date of
the event triggering such notice except as may otherwise be
expressly set forth herein.
Section
8.
Miscellaneous.
a) Notices. Any and all notices or
other communications or deliveries to be provided by the Holders
hereunder including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile or
e-mail, or sent by a nationally recognized overnight courier
service, addressed to the Corporation, at the address set forth
above Attention: Controller, facsimile number (720)
437-6527, e-mail address btowne@aytubio.com, or such other
facsimile number, e-mail address or address as the Corporation may
specify for such purposes by notice to the Holders delivered in
accordance with this Section 8. Any and all notices or other
communications or deliveries to be provided by the Corporation
hereunder shall be in writing and delivered personally, by
facsimile, e-mail, or sent by a nationally recognized overnight
courier service addressed to each Holder at the facsimile number,
e-mail address or address of such Holder appearing on the books of
the Corporation. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number or e-mail at the
e-mail address set forth in this Section 8 prior to 5:30 p.m. (New
York City time) on any date, (ii) the next Trading Day after the
date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number or e-mail at the e-mail
address set forth in this Section on a day that is not a Trading
Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (iii) the second Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is
required to be given.
b) Absolute Obligation. Except as
expressly provided herein, no provision of this Certificate of
Designation shall alter or impair the obligation of the
Corporation, which is absolute and unconditional, to pay liquidated
damages, and accrued dividends, as applicable, on the shares of
Preferred Stock at the time, place, and rate, and in the coin or
currency, herein prescribed.
c) Lost or Mutilated Preferred Stock
Certificate. If a Holder’s Preferred Stock certificate
shall be mutilated, lost, stolen or destroyed, the Corporation
shall execute and deliver, in exchange and substitution for and
upon cancellation of a mutilated certificate, or in lieu of or in
substitution for a lost, stolen or destroyed certificate, a new
certificate for the shares of Preferred Stock so mutilated, lost,
stolen or destroyed, but only upon receipt of evidence of such
loss, theft or destruction of such certificate, and of the
ownership hereof reasonably satisfactory to the
Corporation.
d) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Certificate of Designation shall be governed
by and construed and enforced in accordance with the internal laws
of the State of Delaware without regard to the principles of
conflict of laws thereof. All legal proceedings concerning the
interpretation, enforcement and defense of the transactions
contemplated by this Certificate of Designation (whether brought
against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). The
Corporation and each Holder hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication
of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. The Corporation
and each Holder hereby irrevocably waives personal service of
process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Certificate of Designation and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
applicable law. The Corporation and each Holder hereto hereby
irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Certificate of Designation or
the transactions contemplated hereby. If the Corporation or any
Holder shall commence an action or proceeding to enforce any
provisions of this Certificate of Designation, then the prevailing
party in such action or proceeding shall be reimbursed by the other
party for its attorneys’ fees and other costs and expenses
incurred in the investigation, preparation and prosecution of such
action or proceeding.
e) Waiver. Any waiver by the
Corporation or a Holder of a breach of any provision of this
Certificate of Designation shall not operate as or be construed to
be a waiver of any other breach of such provision or of any breach
of any other provision of this Certificate of Designation or a
waiver by any other Holders. The failure of the Corporation or a
Holder to insist upon strict adherence to any term of this
Certificate of Designation on one or more occasions shall not be
considered a waiver or deprive that party (or any other Holder) of
the right thereafter to insist upon strict adherence to that term
or any other term of this Certificate of Designation on any other
occasion. Any waiver by the Corporation or a Holder must be in
writing.
f) Severability. If any provision
of this Certificate of Designation is invalid, illegal or
unenforceable, the balance of this Certificate of Designation shall
remain in effect, and if any provision is inapplicable to any
Person or circumstance, it shall nevertheless remain applicable to
all other Persons and circumstances. If it shall be found that any
interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum rate
of interest permitted under applicable law.
g) Next Business Day. Whenever any
payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day.
h) Headings. The headings
contained herein are for convenience only, do not constitute a part
of this Certificate of Designation and shall not be deemed to limit
or affect any of the provisions hereof.
i) Status of Converted or Redeemed
Preferred Stock. If any shares of Preferred Stock shall be
converted, redeemed or reacquired by the Corporation, such shares
shall resume the status of authorized but unissued shares of
preferred stock and shall no longer be designated as Series F
Convertible Preferred Stock.
*********************
RESOLVED,
FURTHER, that the Chairman, the president or any vice-president,
and the secretary or any assistant secretary, of the Corporation be
and they hereby are authorized and directed to prepare and file
this Certificate of Designation of Preferences, Rights and
Limitations in accordance with the foregoing resolution and the
provisions of Delaware law.
IN
WITNESS WHEREOF, the undersigned have executed this Certificate
this 15th
day of October, 2019.
|
__________________________________________
Name:
Joshua Disbrow
Title:
Chief Executive Officer
|
__________________________________________
Name:
David Green
Title:
Chief Financial Officer
|
ANNEX A
NOTICE
OF CONVERSION
(TO BE
EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF
PREFERRED STOCK)
The
undersigned hereby elects to convert the number of shares of Series
F Convertible Preferred Stock indicated below into shares of common
stock, par value $0.0001 per share (the “Common Stock”), of Aytu
BioScience, Inc., a Delaware corporation (the “Corporation”), according
to the conditions hereof, as of the date written below. If shares
of Common Stock are to be issued in the name of a Person other than
the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto. No fee will be charged to the Holders
for any conversion, except for any such transfer
taxes.
Conversion
calculations:
|
Date to
Effect Conversion:
_____________________________________________
|
|
Number
of shares of Preferred Stock owned prior to Conversion:
_______________
|
|
Number
of shares of Preferred Stock to be Converted:
________________________
|
|
Stated
Value of shares of Preferred Stock to be Converted:
____________________
|
|
Number
of shares of Common Stock to be Issued:
___________________________
|
|
Applicable
Conversion
Price:____________________________________________
|
|
Number
of shares of Preferred Stock subsequent to Conversion:
________________
|
|
Address
for Delivery: ______________________
or
DWAC
Instructions:
Broker
no: _________
Account
no: ___________
|
|
[HOLDER
By:___________________________________
Name:
Title:
|
APPENDIX B
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
AYTU BIOSCIENCE, INC.
|
Warrant Shares:
5,000,000
|
Initial Issuance
Date: October 16, 2019
|
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, _________________ or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date
Shareholder Approval is received and effective (the
“Initial Exercise
Date”) and on or prior to 5:00 p.m. (New York City
time) on the five year anniversary of the Effective Date (the
“Termination
Date”) but not thereafter, to subscribe for and
purchase from Aytu BioScience, Inc., a Delaware corporation (the
“Company”), up to
5,000,000 shares (as subject to adjustment hereunder, the
“Warrant
Shares”) of Common Stock. The purchase price of one
share of Common Stock under this Warrant shall be equal to the
Exercise Price, as defined in Section 2(b).
Section 1. Definitions. Capitalized terms
used and not otherwise defined herein shall have the meanings set
forth in that certain Securities Purchase Agreement (the
“Purchase
Agreement”), dated October 11, 2019, among the Company
and the purchasers signatory thereto. In addition, the following
terms have the meanings indicated in this Section 1:
“Bid Price” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the bid price of the Common Stock for the time in
question (or the nearest preceding date) on the Trading Market on
which the Common Stock is then listed or quoted as reported by
Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York
City time) to 4:02 p.m. (New York City time)), (b) if OTCQB
or OTCQX is not a Trading Market, the volume weighted average price
of the Common Stock for such date (or the nearest preceding date)
on OTCQB or OTCQX as applicable, (c) if the Common Stock is not
then listed or quoted for trading on OTCQB or OTCQX and if prices
for the Common Stock are then reported in the “Pink
Sheets” published by OTC Markets Group, Inc. (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so
reported, or (d) in all other cases, the fair market value of
a share of Common Stock as determined by an independent appraiser
selected in good faith by the Holders of a majority in interest of
the Warrants then outstanding and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the
Company.
“Black Scholes Value”
means the value of this Warrant based on the Black-Scholes Option
Pricing Model obtained from the “OV” function on
Bloomberg determined as of the day immediately following the first
public announcement of the applicable Change of Control, or, if the
Change of Control is not publicly announced, the date the Change of
Control is consummated, for pricing purposes and reflecting (i) a
risk-free interest rate corresponding to the U.S. Treasury rate for
a period equal to the remaining term of this Warrant as of such
date of request, (ii) an expected volatility equal to the greater
of 100% and the 100 day volatility obtained from the
“HVT” function on Bloomberg (determined utilizing a 365
day annualization factor) as of the Trading Day immediately
following the earliest to occur of (A) the public disclosure of the
applicable Change of Control, (B) the consummation of the
applicable Change of Control and (C) the date on which the Holder
first became aware of the applicable Change of Control, (iii) the
underlying price per share used in such calculation shall be the
greater of (a) the highest VWAP during the five (5) Trading Days
prior to the closing of the Change of Control and (b) the sum of
the price per share being offered in cash, if any, plus the value
of any non-cash consideration, if any, being offered in such Change
of Control, (iv) a zero cost of borrow and (v) a 360 day
annualization factor.
“Change of Control” means
any Fundamental Transaction other than (i) any reorganization,
recapitalization or reclassification of the Common Stock in which
holders of the Company’s voting power immediately prior to
such reorganization, recapitalization or reclassification continue
after such reorganization, recapitalization or reclassification to
hold publicly traded securities and, directly or indirectly, are,
in all material respect, the holders of the voting power of the
surviving entity (or entities with the authority or voting power to
elect the members of the board of directors (or their equivalent if
other than a corporation) of such entity or entities) after such
reorganization, recapitalization or reclassification, (ii) pursuant
to a migratory merger effected solely for the purpose of changing
the jurisdiction of incorporation of the Company or (iii) a merger
in connection with a bona fide acquisition by the Company of any
Person in which (x) the gross consideration paid, directly or
indirectly, by the Company in such acquisition is not greater than
50% of the Company’s market capitalization as calculated on
the date of the consummation of such merger and (y) such merger
does not contemplate a change to the identity of a majority of the
board of directors of the Company. Notwithstanding anything herein
to the contrary, any transaction or series of transaction that,
directly or indirectly, results in the Company or the Successor
Entity not having Common Stock or common stock, as applicable,
registered under the 1934 Act and listed on a Trading Market shall
be deemed a Change of Control. Notwithstanding the foregoing, the
term “Change of Control” shall not include the Cerecor
Transaction or the Innovus Transaction.
“Parent Entity” of a
Person means an entity that, directly or indirectly, controls the
applicable Person, including such entity whose common stock or
equivalent equity security is quoted or listed on a Trading Market
(or, if so elected by the Holder, any other market, exchange or
quotation system), or, if there is more than one such Person or
such entity, the Person or such entity designated by the Holder or
in the absence of such designation, such Person or entity with the
largest public market capitalization as of the date of consummation
of the Change of Control.
“Successor Entity” means
one or more Person or Persons (or, if so elected by the Holder, the
Company or Parent Entity) formed by, resulting from or surviving
any Change of Control or one or more Person or Persons (or, if so
elected by the Holder, the Company or the Parent Entity) with which
such Change of Control shall have been entered into.
Section 2. Exercise.
a)
Exercise of
Warrant. Exercise of the purchase rights represented by this
Warrant may be made, in whole or in part, at any time or times on
or after the Initial Exercise Date and on or before 5:00 p.m. (New
York City time) on the Termination Date by delivery to the Company
of a duly executed facsimile copy (or e-mail attachment) of the
Notice of Exercise in the form annexed hereto (the
“Notice of
Exercise”). Within the earlier of (i) two (2) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period (as defined in Section 2(d)(i) herein) following
the date of exercise as aforesaid, the Holder shall deliver the
aggregate Exercise Price for the shares specified in the applicable
Notice of Exercise by wire transfer or cashier’s check drawn
on a United States bank unless the cashless exercise procedure
specified in Section 2(c) below is specified in the applicable
Notice of Exercise. No ink-original Notice of Exercise shall be
required, nor shall any medallion guarantee (or other type of
guarantee or notarization) of anyNotice of Exercise form be
required. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant
to the Company until the Holder has purchased all of the Warrant
Shares available hereunder and the Warrant has been exercised in
full, in which case, the Holder shall surrender this Warrant to the
Company for cancellation within three (3) Trading Days of the date
on which the final Notice of Exercise is delivered to the Company.
Partial exercises of this Warrant resulting in purchases of a
portion of the total number of Warrant Shares available hereunder
shall have the effect of lowering the outstanding number of Warrant
Shares purchasable hereunder in an amount equal to the applicable
number of Warrant Shares purchased. The Holder and the Company
shall maintain records showing the number of Warrant Shares
purchased and the date of such purchases. The Company shall deliver
any objection to any Notice of Exercise within one (1) Business Day
of receipt of such notice. The
Holder and any assignee, by acceptance of this Warrant, acknowledge
and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares
hereunder, the number of Warrant Shares available for purchase
hereunder at any given time may be less than the amount stated on
the face hereof.
b)
Exercise Price. The
exercise price per share of the Common Stock under this Warrant
shall be $1.25, subject to
adjustment hereunder (the “Exercise
Price”).
c)
Cashless
Exercise.
(i)
A “cashless
exercise” as described below, may occur after Shareholder
Approval is received and effective, if the VWAP of the Common Stock
on any Trading Day on or after the Closing Date fails to exceed the
Exercise Price in effect as of the date hereof (subject to
adjustment for any stock splits, stock dividends, stock
combinations, recapitalizations and similar events). In such event,
the aggregate number of Warrant Shares issuable in such cashless
exercise pursuant to any given Notice of Exercise electing to
effect a cashless exercise shall equal the product of (x) the
aggregate number of Warrant Shares that would be issuable upon
exercise of this Warrant in accordance with the terms of this
Warrant if such exercise were by means of a cash exercise rather
than a cashless exercise and (y) 1.00.
(ii)
In addition, if
after Shareholder Approval and the six month anniversary of the
Closing Date there is no effective registration statement
registering, or the prospectus contained therein is not available
for the resale of the Warrant Shares by the Holder, then this
Warrant may only be exercised, in whole or in part, at such time by
means of a “cashless exercise” in which the Holder
shall be entitled to receive a number of Warrant Shares equal to
the quotient obtained by dividing [(A-B) (X)] by (A),
where:
(A) =
as applicable: (i) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise if such
Notice of Exercise is (1) both executed and delivered pursuant to
Section 2(a) hereof on a day that is not a Trading Day or (2) both
executed and delivered pursuant to Section 2(a) hereof on a Trading
Day prior to the opening of “regular trading hours” (as
defined in Rule 600(b)(68) of Regulation NMS promulgated under the
federal securities laws) on such Trading Day, (ii) at the option of
the Holder, either (y) the VWAP on the Trading Day immediately
preceding the date of the applicable Notice of Exercise or (z) the
Bid Price of the Common Stock on the principal Trading Market as
reported by Bloomberg L.P. as of the time of the Holder’s
execution of the applicable Notice of Exercise if such Notice of
Exercise is executed during “regular trading hours” on
a Trading Day and is delivered within two (2) hours thereafter
(including until two (2) hours after the close of “regular
trading hours” on a Trading Day) pursuant to Section 2(a)
hereof or (iii) the VWAP on the date of the applicable Notice of
Exercise if the date of such Notice of Exercise is a Trading Day
and such Notice of Exercise is both executed and delivered pursuant
to Section 2(a) hereof after the close of “regular trading
hours” on such Trading Day;
(B) = the Exercise Price of
this Warrant, as adjusted hereunder; and
(X) =
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.
If Warrant Shares are issued in such a cashless exercise, the
parties acknowledge and agree that in accordance with Section
3(a)(9) of the Securities Act, the Warrant Shares shall take on the
characteristics of the Warrants being exercised and the holding
period of the Warrant Shares being issued may be tacked on to the
holding period of this Warrant. The Company agrees not to take any
position contrary to this Section 2(c).
Notwithstanding
anything herein to the contrary but without limiting the rights of
the Holder to receive Warrant Shares on a “cashless
exercise” and without limiting the liquidated damages
provision in section 2(d)(i) and the Buy-In provision in Section
2(d)(iv), in the event there is no effective registration statement
registering, or the prospectus contained therein is not available
for the issuance of the Warrant Shares to the Holder, under no
circumstance will the Company be required to net cash settle the
warrants.
d)
Mechanics of
Exercise.
i.
Delivery of Warrant Shares
Upon Exercise. The Company shall cause the Warrant Shares
purchased hereunder to be transmitted by the Transfer Agent to the
Holder by crediting the account of the Holder’s or its
designee’s balance account with The Depository Trust Company
through its Deposit or Withdrawal at Custodian system
(“DWAC”) if the Company is
then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by the Holder or
(B) the Warrant Shares are eligible for resale by the Holder
without volume or manner of sale restrictions pursuant to Rule 144
(assuming cashless exercise), and otherwise by physical delivery of
a certificate, registered in the Company’s share register in
the name of the Holder or its designee, for the number of Warrant
Shares to which the Holder is entitled pursuant to such exercise to
the address specified by the Holder in the Notice of Exercise by
the date that is the earliest of (i) two (2) Trading Days after the
delivery to the Company of the Notice of Exercise, (ii) one (1)
Trading Day after delivery of the aggregate Exercise Price to the
Company and (iii) the number of Trading Days comprising the
Standard Settlement Period after the delivery to the Company of the
Notice of Exercise (such date, the “Warrant Share Delivery
Date”). Upon delivery of the Notice of Exercise, the
Holder shall be deemed for all corporate purposes to have become
the holder of record of the Warrant Shares with respect to which
this Warrant has been exercised, irrespective of the date of
delivery of the Warrant Shares, provided that in each such case
payment of the aggregate Exercise Price (other than in the case of
a cashless exercise) is received within the earlier of (i) two (2)
Trading Days and (ii) the number of Trading Days comprising the
Standard Settlement Period following delivery of the Notice of
Exercise. If the Company fails for any reason to deliver to the
Holder the Warrant Shares subject to a Noticeof Exercise by the
Warrant Share Delivery Date, the Company shall pay to the Holder,
in cash, as liquidated damages and not as a penalty, for each
$1,000 of Warrant Shares subject to such exercise (based on the
VWAP of the Common Stock on the date of the applicable Notice of
Exercise), $10 per Trading Day (increasing to $20 per Trading Day
on the fifth Trading Day after such liquidated damages begin to
accrue) for each Trading Day after such Warrant Share Delivery Date
until such Warrant Shares are delivered or Holder rescinds such
exercise. The Company agrees to maintain a transfer agent that is a
participant in the FAST program so long as this Warrant remains
outstanding and exercisable. As used herein, “Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of the Notice of
Exercise.
ii.
Delivery of New Warrants
Upon Exercise. If this Warrant shall have been exercised in
part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of
the Warrant Shares, deliver to the Holder a new Warrant evidencing
the rights of the Holder to purchase the unpurchased Warrant Shares
called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.
iii.
Rescission Rights.
If the Company fails to cause the Transfer Agent to transmit to the
Holder the Warrant Shares pursuant to Section 2(d)(i) by the
Warrant Share Delivery Date, then the Holder will have the right to
rescind such exercise.
iv.
Compensation for Buy-In on
Failure to Timely Deliver Warrant Shares Upon Exercise. In
addition to any other rights available to the Holder, if the
Company fails to cause the Transfer Agent to transmit to the Holder
the Warrant Shares in accordance with the provisions of Section
2(d)(i) above pursuant to an exercise on or before the Warrant
Share Delivery Date, and if after such date the Holder is required
by its broker to purchase (in an open market transaction or
otherwise) or the Holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Warrant Shares which the Holder
anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by
which (x) the Holder’s total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (1) the
number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue by (2) the
price at which the sell order giving rise to such purchase
obligation was executed, and (B) at the option of the Holder,
either reinstate the portion of the Warrant and equivalent number
of Warrant Shares for which such exercise was not honored (in which
case such exercise shall be deemed rescinded) or deliver to the
Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of
Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder
$1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In and, upon request of the Company, evidence of the amount of
such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver shares of Common Stock
upon exercise of the Warrant as required pursuant to the terms
hereof.
v.
No Fractional Shares or
Scrip. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which the Holder would otherwise be entitled to
purchase upon such exercise, the Company shall, at its election,
either pay a cash adjustment in respect of such final fraction in
an amount equal to such fraction multiplied by the Exercise Price
or round up to the next whole share.
vi.
Charges, Taxes and
Expenses. Issuance of Warrant Shares shall be made without
charge to the Holder for any issue or transfer tax or other
incidental expense in respect of the issuance of such Warrant
Shares, all of which taxes and expenses shall be paid by the
Company, and such Warrant Shares shall be issued in the name of the
Holder or in such name or names as may be directed by the
Holder;provided,
however, that in
the event that Warrant Shares are to be issued in a name other than
the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly
executed by the Holder and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto. If required to comply with Section
2(d)(i), the Company shall pay all Transfer Agent fees required for
same-day processing of any Notice of Exercise and all fees to the
Depository Trust Company (or another established clearing
corporation performing similar functions) required for same-day
electronic delivery of the Warrant Shares.
vii.
Closing of Books.
The Company will not close its stockholder books or records in any
manner which prevents the timely exercise of this Warrant, pursuant
to the terms hereof.
e)
Holder’s Exercise
Limitations. The Company shall not effect any exercise of
this Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2 or otherwise, to the
extent that after giving effect to such issuance after exercise as
set forth on the applicable Notice of Exercise, the Holder
(together with the Holder’s Affiliates, and any other Persons
acting as a group together with the Holder or any of the
Holder’s Affiliates (such Persons, “Attribution
Parties”)), would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For purposes of
the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates and Attribution
Parties shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of shares
of Common Stock which would be issuable upon (i) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned
by the Holder or any of its Affiliates or Attribution Parties and
(ii) exercise or conversion of the unexercised or nonconverted
portion of any other securities of the Company (including, without
limitation, any other Common Stock Equivalents) subject to a
limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its
Affiliates or Attribution Parties. Except as set forth in the
preceding sentence, for purposes of this Section 2(e), beneficial
ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Holder that the Company is
not representing to the Holder that such calculation is in
compliance with Section 13(d) of the Exchange Act and the Holder is
solely responsible for any schedules required to be filed in
accordance therewith. To the extent that the limitation contained
in this Section 2(e) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by
the Holder together with any Affiliates and Attribution Parties)
and of which portion of this Warrant is exercisable shall be in the
sole discretion of the Holder, and the submission of a Notice of
Exercise shall be deemed to be the Holder’s determination of
whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates and
Attribution Parties) and of which portion of this Warrant is
exercisable, in each case subject to the Beneficial Ownership
Limitation, and the Company shall have no obligation to verify or
confirmthe accuracy of such determination. In addition, a
determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. For purposes of
this Section 2(e), in determining the number of outstanding shares
of Common Stock, a Holder may rely on the number of outstanding
shares of Common Stock as reflected in (A) the Company’s most
recent periodic or annual report filed with the Commission, as the
case may be, (B) a more recent public announcement by the Company
or (C) a more recent written notice by the Company or the Transfer
Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the
Company shall within two Trading Days confirm orally and in writing
to the Holder the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this
Warrant, by the Holder or its Affiliates or Attribution Parties
since the date as of which such number of outstanding shares of
Common Stock was reported. The “Beneficial Ownership
Limitation” shall be 40% of the number of shares of
the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon exercise of this
Warrant. The Holder, upon notice to the Company, may increase or
decrease the Beneficial Ownership Limitation provisions of this
Section 2(e), provided that the Beneficial Ownership Limitation in
no event exceeds 40% of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock upon exercise of this Warrant held by the
Holder and the provisions of this Section 2(e) shall continue to
apply. Any increase in the Beneficial Ownership Limitation will not
be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
f)
Call Provision.
Subject to the provisions of Section 2(e) and this Section 2(f),
if, after the Initial Exercise Date, (i) the VWAP for each of 30
consecutive Trading Days (the “Measurement Period,”
which 30 consecutive Trading Day period shall not have commenced
until after the Initial Exercise Date) exceeds $3.75 (subject to adjustment for forward
and reverse stock splits, recapitalizations, stock dividends and
the like after the Initial Exercise Date), (ii) the average daily
volume for such Measurement Period exceeds $600,000 per Trading Day
and (iii) the Holder is not in possession of any information that
constitutes, or might constitute, material non-public information
which was provided by the Company, any of its Subsidiaries, or any
of their officers, directors, employees, agents or Affiliates, then
the Company may, within 1 Trading Day of the end of such
Measurement Period, call for cancellation of all or any portion of
this Warrant for which a Notice of Exercise has not yet been
delivered (such right, a “Call”) for consideration
equal to $0.001 per Warrant Share. To exercise this right, the
Company must deliver to the Holder an irrevocable written notice (a
“Call
Notice”), indicating therein the portion of
unexercised portion of this Warrant to which such notice applies.
If the conditions set forth below for such Call are satisfied from
the period from the date of the Call Notice through and including
the Call Date (as defined below), then any portion of this Warrant
subject to such Call Notice for which a Notice of Exercise shall
not have been received by the Call Date will be cancelled at 6:30
p.m. (New York City time) on the tenth Trading Day after the date
the Call Notice is received by the Holder (such date and time, the
“Call
Date”). Any unexercised portion of this Warrant to
which the Call Notice does not pertain will be unaffected by such
Call Notice. In furtherance thereof, the Company covenants and
agrees that it will honor all Notices of Exercise with respect to
Warrant Shares subject to a Call Notice that are tendered through
6:30 p.m. (New York City time) on the Call Date. The parties agree
that any Notice of Exercise delivered following a Call Notice which
calls less than all of the Warrants shall first reduce to zero the
number of Warrant Shares subject to such Call Notice prior to
reducing the remaining Warrant Shares available for purchase under
this Warrant. For example, if (A) this Warrant then permits the
Holder to acquire 100 Warrant Shares, (B) a Call Notice pertains to
75 WarrantShares, and (C) prior to 6:30 p.m. (New York City time)
on the Call Date the Holder tenders a Notice of Exercise in respect
of 50 Warrant Shares, then (x) on the Call Date the right under
this Warrant to acquire 25 Warrant Shares will be automatically
cancelled, (y) the Company, in the time and manner required under
this Warrant, will have issued and delivered to the Holder 50
Warrant Shares in respect of the exercises following receipt of the
Call Notice, and (z) the Holder may, until the Termination Date,
exercise this Warrant for 25 Warrant Shares (subject to adjustment
as herein provided and subject to subsequent Call Notices). Subject
again to the provisions of this Section 2(f), the Company may
deliver subsequent Call Notices for any portion of this Warrant for
which the Holder shall not have delivered a Notice of Exercise.
Notwithstanding anything to the contrary set forth in this Warrant,
the Company may not deliver a Call Notice or require the
cancellation of this Warrant (and any such Call Noticeshall be
void), unless, from the beginning of the Measurement Period through
the Call Date, (1) the Company shall have honored in accordance
with the terms of this Warrant all Notices of Exercise delivered by
6:30 p.m. (New York City time) on the Call Date, and (2) a
registration statement shall be effective as to all Warrant Shares
and the prospectus thereunder available for use by the Company for
the resale of all such Warrant Shares by the Holder, and (3) the
Common Stock shall be listed or quoted for trading on the Trading
Market, and (4) there is a sufficient number of authorized shares
of Common Stock for issuance of all Warrant Shares, and (5) the
issuance of all Warrant Shares subject to a Call Notice shall not
cause a breach of any provision of Section 2(e) herein. The
Company’s right to call the Warrants under this Section 2(f)
shall be exercised ratably among the Holders based on each
Holder’s initial purchase of Warrants.
Section 3. Certain
Adjustments.
a)
Stock Dividends and
Splits. If the Company, at any time while this Warrant is
outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any
other equity or equity equivalent securities payable in shares of
Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon exercise of this
Warrant), (ii) subdivides outstanding shares of Common Stock into a
larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a
smaller number of shares, or (iv) issues by reclassification of
shares of the Common Stock any shares of capital stock of the
Company, then in each case the Exercise Price shall be multiplied
by a fractionof which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after
such event, and the number of shares issuable upon exercise of this
Warrant shall be proportionately adjusted such that the aggregate
Exercise Price of this Warrant shall remain unchanged. Any
adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in
the case of a subdivision, combination or
re-classification.
b)
Subsequent Rights
Offerings. In addition to any adjustments pursuant to
Section 3(a) above, if at any time the Company grants, issues or
sells any Common Stock Equivalents or rights to purchase stock,
warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon
complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date on
which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights
(provided, however, to the extent that the Holder’s right to
participate in any such Purchase Right would result in the Holder
exceeding the Beneficial Ownership Limitation, then the Holder
shall not be entitled to participate in such Purchase Right to such
extent (or beneficial ownership of such shares of Common Stock as a
result of such Purchase Right to such extent) and such Purchase
Right to such extent shall be held in abeyance for the Holder until
such time, if ever, as its right thereto would not result in the
Holder exceeding the Beneficial Ownership Limitation).
c)
Pro Rata
Distributions. During such time as this Warrant is
outstanding, if the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets)
to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property or options by way of a
dividend, spin off, reclassification, corporate rearrangement,
scheme of arrangement or other similar transaction) (a
“Distribution”), at any
time after the issuance of this Warrant, then, in each such case,
the Holder shall be entitled to participate in such Distribution to
the same extent that the Holder would have participated therein if
the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the
Holder’s right to participate in any such Distribution would
result in the Holder exceeding the Beneficial Ownership Limitation,
then the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation). To the extent that this Warrant
has not been partially or completely exercised at the time of such
Distribution, such portion of the Distribution shall be held in
abeyance for the benefit of the Holder until the Holder has
exercised this Warrant.
d)
Fundamental
Transaction. If, at any time while this Warrant is
outstanding, (i) the Company, directly or indirectly, in one or
more related transactions effects any merger or consolidation of
the Company with or into another Person, (ii) the Company, directly
or indirectly, effects any sale, lease, license, assignment,
transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii)
any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the
outstanding Common Stock, (iv) the Company, directly or indirectly,
in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash
or property, or (v) the Company, directly or indirectly, in one or
more related transactions consummates a stock or share purchase
agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with another Person or group of Persons whereby
such other Person or group acquires more than 50% ofthe outstanding
shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business
combination), (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction. The Company shall cause any successor
entity in a Fundamental Transaction in which the Company is not the
survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under this
Warrant in accordance with the provisions of this Section 3(d)
pursuant to written agreements in form and substance reasonably
satisfactory to the Holder and approved by the Holder (without
unreasonable delay) prior to such Fundamental Transaction and
shall, at the option of the Holder, deliver to the Holder in
exchange for this Warrant a security of the Successor Entity
evidenced by a written instrument substantially similar in form and
substance to this Warrant which is exercisable for a corresponding
number of shares of capital stock of such Successor Entity (or its
parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any
limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and with an exercise price which applies
the exercise price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common
Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock, such number of shares of capital
stock and such exercise price being for the purpose of protecting
the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Warrant referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and
power of the Company and shall assume all of the obligations of the
Company under this Warrant with the same effect as if such
Successor Entity had been named as the Company herein.
Notwithstanding the foregoing, in the event of a Change of Control,
at the request of the Holder delivered before the 30th day after
such Change of Control, the Company (or the Successor Entity) shall
purchase this Warrant from the Holder by paying to the Holder,
within five (5) Business Days after such request (or, if later, on
the effective date of the Change of Control), an amount equal to
the Black Scholes Value of the remaining unexercised portion of
this Warrant on the effective date of such Change of Control,
payable in cash; provided, however, that, if the Change of Control
is not within the Company’s control, including not approved
by the Company’s Board of Directors, Holder shall only be
entitled to receive from the Company or any Successor Entity, as of
the date of consummation of such Change of Control, the same type
or form of consideration (and in the same proportion), at the Black
Scholes Value of the unexercised portion of this Warrant, that is
being offered and paid to the holders of Common Stock of the
Company in connection with the Change of Control, whether that
consideration be in the form of cash, stock or any combination
thereof, or whether the holders of Common Stock are given the
choice to receive from among alternative forms of consideration in
connection with the Change of Control.
e)
Calculations. All
calculations under this Section 3 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, the number of shares of Common Stock deemed to
be issued and outstanding as of a given date shall be the sum of
the number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
f)
Notice to
Holder.
i.
Adjustment to Exercise
Price. Whenever the Exercise Price is adjusted pursuant to
any provision of this Section 3, the Company shall promptly deliver
to the Holder by facsimile or email a notice setting forth the
Exercise Price after such adjustment and any resulting adjustment
to the number of Warrant Shares and setting forth a brief statement
of the facts requiring such adjustment.
ii.
Notice to Allow Exercise
by Holder. If (A) the Company shall declare a dividend (or
any other distribution in whatever form) on the Common Stock, (B)
the Company shall declare a special nonrecurring cash dividend on
or a redemption of the Common Stock, (C) the Company shall
authorize the granting to all holders of the Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock
of any class or of any rights, (D) the approval of any stockholders
of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger
to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or any compulsory
share exchange whereby the Common Stock is converted into other
securities, cash or property, or (E) the Company shall authorize
the voluntary or involuntary dissolution, liquidation or winding up
of the affairs of the Company, then, in each case, the Company
shall cause to be delivered by facsimile or email to the Holder at
its last facsimile number or email address as it shall appear upon
the Warrant Register of the Company, at least 20 calendar days
prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to
betaken for the purpose of such dividend, distribution, redemption,
rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled
to such dividend, distributions, redemption, rights or warrants are
to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or
anydefect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided in this Warrant
constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K. The Holder shall remain entitled to
exercise this Warrant during the period commencing on the date of
such notice to the effective date of the event triggering such
notice except as may otherwise be expressly set forth
herein.
Section 4. Transfer of
Warrant.
a)
Transferability.
This Warrant and all rights hereunder are transferable, in whole or
in part, upon surrender of this Warrant at the principal office of
the Company or its designated agent, together with a written
assignment of this Warrant substantially in the form attached
hereto duly executed by the Holder or its agent or attorney and
funds sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees, as applicable,
and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, and
this Warrant shall promptly be cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly
assigned in accordance herewith, may be exercised by a new holder
for the purchase of Warrant Shares without having a new Warrant
issued.
b)
New Warrants. This
Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with Section
4(a), as to any transfer which may be involved in such division or
combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice. All Warrants issued on
transfers or exchanges shall be dated the original Initial Exercise
Date of this Warrant and shall be identical with this Warrant
except as to the number of Warrant Shares issuable pursuant
thereto.
c)
Warrant Register.
The Company shall register this Warrant, upon records to be
maintained by the Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the
time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be either (i) registered pursuant to an
effective registration
statement under the
Securities Act and under
applicable state securities or blue sky laws or (ii) eligible for
resale without volume or manner-of-sale restrictions or current
public information requirements pursuant to Rule 144, the Company
may require, as a condition of allowing such transfer, that the
Holder or transferee of this Warrant, as the case may be, comply
with the provisions of the Purchase Agreement.
e) Representation
by the Holder. The Holder, by the acceptance hereof,
represents and warrants that it is acquiring this Warrant and, upon
any exercise hereof, will acquire the Warrant Shares issuable upon
such exercise, for its own account and not with a view to or for
distributing or reselling such Warrant Shares or any part thereof
in violation of the Securities Act or any applicable state
securities law, except pursuant to sales registered or exempted
under the Securities Act.
Section 5. Miscellaneous.
a)
No Rights as Stockholder
Until Exercise. This Warrant does not entitle the Holder to
any voting rights, dividends or other rights as a stockholder of
the Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b)
Loss, Theft, Destruction
or Mutilation of Warrant. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any
stock certificate relating to the Warrant Shares, and in case of
loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c)
Saturdays, Sundays,
Holidays, etc. If the last or appointed day for the taking
of any action or the expiration of any right required or granted
herein shall not be a Business Day, then, such action may be taken
or such right may be exercised on the next succeeding Business
Day.
d)
Authorized
Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of issuing the necessary
Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoidthe observance or performance of any
of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder asset forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e)
Governing Law. All
questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed
and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning
the interpretations, enforcement and defense of the transactions
contemplated by this Warrant (whether brought against a party
hereto or their respective affiliates, directors, officers,
shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in
the City of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in
the City of New York, Borough of Manhattan for the adjudication of
any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or
proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof 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. If either party shall
commence an action, suit or proceeding to enforce any provisions of
this Warrant, the prevailing party in such action, suit or
proceeding shall be reimbursed by the other party for their
reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of
such action or proceeding.
f)
Restrictions. The
Holder acknowledges that the Warrant Shares acquired upon the
exercise of this Warrant, if not registered, and the Holder does
not utilize cashless exercise, will have restrictions upon resale
imposed by state and federal securities laws.
g)
Nonwaiver and
Expenses. No course of dealing or any delay or failure to
exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice the Holder’s
rights, powers or remedies. Without limiting any other provision of
this Warrant, if the Company willfully and knowingly fails to
comply with any provision of this Warrant, which results in any
material damages to the Holder, the Company shall pay to the Holder
such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys’ fees,
including those of appellate Proceedings, incurred by the Holder in
collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies
hereunder.
h)
Notices. Any and
all notices or other communications or deliveries to be provided by
the Holders hereunder including, without limitation, any Notice of
Exercise, shall be in writing and delivered personally, by
facsimile or by e-mail, or sent by a nationally recognized
overnight courier service, addressed to the Company, at 373
Inverness Parkway, Suite 206, Englewood, Colorado 80112, Attention:
Controller, facsimile number: (720) 437-6527, email address:
ecreason@aytubio.com or such other facsimile number, email address
or address as the Company may specify for such purposes by notice
to the Holders. Any and all notices or other communications or
deliveries to be provided by the Company hereunder shall be in
writing and delivered personally, by facsimile or e-mail, or sent
by a nationally recognized overnight courier service addressed to
each Holder at the facsimile number, e-mail address or address of
such Holder appearing on the books of the Company. Any notice or
other communication or deliveries hereunder shall be deemed given
and effective on the earliest of (i) the time of transmission, if
such notice or communication is delivered via facsimile at the
facsimile number or via e-mail at the e-mail address set forth in
this Section prior to 5:30 p.m. (New York City time) on any date,
(ii) the next Trading Day after the time of transmission, if such
notice or communication is delivered via facsimile at the facsimile
number or via e-mail at the e-mail address set forth in this
Section on a day that is not a Trading Day or later than 5:30 p.m.
(New York City time) on any Trading Day, (iii) the second Trading
Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (iv) upon actual receipt
by the party to whom such notice is required to be given. To the
extent that any notice provided hereunder constitutes, or contains,
material, non-public information regarding the Company or any
subsidiaries, the Company shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form
8-K.
i)
Limitation of
Liability. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant to
purchase Warrant Shares, and no enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of the
Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
j)
Remedies. The
Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company
agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of
this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law
would be adequate.
k)
Successors and
Assigns. Subject to applicable securities laws, this Warrant
and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors and permitted assigns
of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit
of any Holder from time to time of this Warrant and shall be
enforceable by the Holder or holder of Warrant Shares.
l)
Amendment. This
Warrant may be modified or amended or the provisions hereof waived
with the written consent of the Company, on the one hand, and the
Holder, on the other hand.
m)
Severability.
Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the
remaining provisions of this Warrant.
n)
Headings. The
headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
AYTU
BIOSCIENCE, INC.
By:
__________________________
Name:
Title:
NOTICE OF EXERCISE
TO:
AYTU BIOSCIENCE, INC.
(1) The
undersigned hereby elects to purchase ________ Warrant Shares of
the Company pursuant to the terms of the attached Warrant (only if
exercised in full), and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if
any.
(2)
Payment shall take the form of (check applicable box):
[
] in lawful money of the United States; or
[
] if permitted the cancellation of such number of Warrant
Shares as is necessary, in accordance with the formula set forth in
subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection
2(c).
(3)
Please issue said Warrant Shares in the name of the undersigned or
in such other name as is specified below:
___________________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
___________________________________
____________________________________
____________________________________
[SIGNATURE
OF HOLDER]
Name of
Investing Entity:
________________________________________________________
Signature of Authorized Signatory of Investing
Entity:__________________________________
Name of
Authorized
Signatory:____________________________________________________
Title
of Authorized Signatory:
______________________________________________________
Date:_________________________________________________________________________
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase
shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
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Name:
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Address:
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Phone
Number:
Email
Address:
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______________________________________
______________________________________
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Dated:
_______________ __, ______
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Holder’s
Signature:
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Holder’s
Address:
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Appendix
C
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AYTU BIOSCIENCE, INC.
Aytu
BioScience, Inc., a corporation organized and existing under and by
virtue of the provisions of the General Corporation Law of the
State of Delaware (the “General Corporation
Law”),
DOES
HEREBY CERTIFY:
FIRST:
The name of the corporation is Aytu BioScience, Inc. and that this
corporation was originally incorporated pursuant to the General
Corporation Law on June 8, 2015 under the name Aytu BioScience,
Inc. This Certificate of Amendment as duly adopted in accordance
with the provisions of Section 242 of the General Corporation
Law.
SECOND:
That the first section of Article IV entitled “Capital
Stock” of the Certificate of Incorporation of this
corporation shall be deleted in its entirety and replaced with the
following:
“CAPITAL
STOCK”
The
total number of shares of capital stock which the Corporation shall
have authority to issue is Two Hundred Fifty Million (250,000,000),
of which (i) Two Hundred Million (200,000,000) shares shall be a
class designated as common stock, par value $0.0001 per share (the
“Common Stock”), and (ii) Fifty Million (50,000,000)
shares shall be a class designated as undesignated preferred stock,
par value $0.0001 per share (the “Undesignated Preferred
Stock”).
Except
as otherwise provided in any certificate of designations of any
series of Undesignated Preferred Stock, the number of authorized
shares of the class of Common Stock or Undesignated Preferred Stock
may from time to time be increased or decreased (but not below the
number of shares of such class outstanding) by the affirmative vote
of the holders of a majority in voting power of the outstanding
shares of capital stock of the Corporation irrespective of the
provisions of Section 242(b)(2) of the DGCL.
The
powers, preferences and rights of, and the qualifications,
limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set forth below in,
this Article IV.
THIRD:
That said Certificate of Amendment, which amends the provisions of
this corporation’s Certificate of Incorporation, has been
duly adopted by the Board of Directors and stockholders of the
Corporation in accordance with Section 242 of the General
Corporation Law.
IN
WITNESS WHEREOF, this Certificate of Amendment of Certificate of
Incorporation has been executed by a duly authorized officer of
this corporation on this __ day of ____ 2019.
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Joshua
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Appendix
D
AYTU BIOSCIENCE, INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES G CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 151 OF THE DELAWARE GENERAL CORPORATION
LAW
The
undersigned, Joshua R. Disbrow and David A. Green, do hereby
certify that:
1. They are the Chairman and Chief Executive Officer,
and the Chief Financial Officer, Secretary, and Treasurer,
respectively, of Aytu BioScience, Inc., a Delaware corporation (the
“Corporation”).
2. The Corporation is authorized to issue 50,000,000
shares of preferred stock, 410,000 of which have been
issued.
3. The following resolutions were duly adopted by the
board of directors of the Corporation (the
“Board of
Directors”):
WHEREAS,
the certificate of incorporation of the Corporation provides for a
class of its authorized stock known as preferred stock, consisting
of 50,000,000 shares, $0.0001 par value per share, issuable from
time to time in one or more series;
WHEREAS,
the Board of Directors is authorized to fix the dividend rights,
dividend rate, voting rights, conversion rights, rights and terms
of redemption and liquidation preferences of any wholly unissued
series of preferred stock and the number of shares constituting any
series and the designation thereof, of any of them;
and
WHEREAS,
it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to a series of the
preferred stock, which shall consist of up to 9,805,845 shares of
the preferred stock which the Corporation has the authority to
issue, as follows:
NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issuance of a series of preferred stock for cash or
exchange of other securities, rights or property and does hereby
fix and determine the rights, preferences, restrictions and other
matters relating to such series of preferred stock as
follows:
TERMS OF PREFERRED STOCK
Section
1. Definitions.
For the purposes hereof, the following terms shall have the
following
meanings:
“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act.
“Business
Day” means any day except
any Saturday, any Sunday, any day which is a federal legal holiday
in the United States or any day on which banking institutions in
the State of New York are authorized or required by law or other
governmental action to close.
“Commission”
means the United States Securities and Exchange
Commission.
“Common
Stock” means the
Corporation’s common stock, par value $0.0001 per share, and
stock of any other class of securities into which such securities
may hereafter be reclassified or changed.
“Common Stock
Equivalents” means any
securities of the Corporation or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common
Stock.
“Conversion
Date” shall have the
meaning set forth in Section 6(a). “Conversion
Ratio” shall have the
meaning set forth in Section 6(b).
“Conversion
Shares” means,
collectively, the shares of Common Stock issuable upon conversion
of the shares of Preferred Stock in accordance with the terms
hereof.
“Delaware
Courts” shall have the
meaning set forth in Section 8(d).
“Exchange
Act” means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder. “Fundamental
Transaction” shall have
the meaning set forth in Section 7(c).
“GAAP”
means United States generally accepted accounting principles.
“Holder”
shall have the meaning given such term in Section 2.
“Liquidation”
shall have the meaning set forth in Section 5.
“Notice of
Conversion” shall have
the meaning set forth in Section 6(a).
“Original Issue
Date” means the date of
the first issuance of any shares of the Preferred Stock regardless
of the number of transfers of any particular shares of Preferred
Stock and regardless of the number of certificates which may be
issued to evidence such Preferred Stock.
“Person”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any
kind.
“Preferred
Stock” shall have the
meaning set forth in Section 2.
“Purchase
Agreement” means the
Asset Purchase Agreement, dated as of the Original Issue Date,
among the Corporation and the original Holder, as amended, modified
or supplemented from time to time in accordance with its
terms.
“Securities
Act” means the Securities
Act of 1933, as amended, and the rules and regulations promulgated
thereunder. “Share Delivery
Date” shall have the
meaning set forth in Section 6(c).
“Shareholder
Approval” means such
approval as required by the applicable Nasdaq Stock Market Rules by
the shareholders of the Corporation with respect to the conversion
of all Preferred Stock and the issuance of all of the shares of
Common Stock issuable upon conversion of the Preferred Stock, as
set forth in the Purchase Agreement.
“Trading
Day” means a day on which
the principal Trading Market is open for
business.
“Trading
Market” means any of the
following markets or exchanges on which the Common Stock is listed
or quoted for trading on the date in question: the NYSE American,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market or the New York Stock Exchange (or any
successors to any of the foregoing).
“Transfer
Agent” means Issuer
Direct Corporation, the current transfer agent of the Corporation
with a mailing address of 500 Perimeter Park Drive, Suite D,
Morrisville, NC 27560 and a facsimile number of (919) 481-6222, and
any successor transfer agent of the
Corporation.
Section
2. Designation, Amount
and Par Value. The series of
preferred stock shall be designated as Series G Convertible
Preferred Stock (the “Preferred
Stock”) and the number of
shares so designated shall be up to 9,805,845 (which shall not be
subject to increase without the written consent of all of the
holders of the Preferred Stock (each, a “Holder”
and collectively, the “Holders”)).
Each share of Preferred Stock shall have a par value
of $0.0001
per share. The Preferred Stock will initially be issued in
book-entry form. As between the Corporation and a beneficial owner
of Preferred Stock, such beneficial owner of Preferred Stock shall
have all of the rights and remedies of a Holder
hereunder.
Section
3. Dividends.
Except for stock dividends or distributions for which adjustments
are to be made pursuant to Section 7, Holders shall be entitled to
receive, and the Corporation shall pay, dividends on shares of
Preferred Stock equal (on an as-if-converted-to-Common-Stock basis,
disregarding for such purpose any conversion limitations hereunder)
to and in the same form as dividends actually paid on shares of the
Common Stock when, as and if such dividends are paid on shares of
the Common Stock. No other dividends shall be paid on shares of
Preferred Stock. The Corporation shall not pay any dividends on the
Common Stock unless the Corporation simultaneously complies with
this provision.
Section
4. Voting
Rights. Except as otherwise
provided herein or as otherwise required by law, the Preferred
Stock shall have no voting rights. However, as long as any shares
of Preferred Stock are outstanding, the Corporation shall not,
without the affirmative vote of the Holders of a majority of the
then outstanding shares of the Preferred Stock, (a) alter or change
adversely the powers, preferences or rights given to the Preferred
Stock (including by the designation, authorization, or issuance of
any shares of preferred stock of the Corporation that purports to
be pari passu with, or senior in rights or preferences to, the
Preferred Stock) or alter or amend this Certificate of Designation,
(b) amend its certificate of incorporation or other charter
documents in any manner that adversely affects any rights of the
Holders, (c) increase the number of authorized shares of Preferred
Stock, or (d) enter into any agreement with respect to any of the
foregoing. Holders of shares of Common Stock acquired upon the
conversion of shares of Preferred Stock shall be entitled to the
same voting rights as each other holder of Common
Stock.
Section
5. Liquidation.
Upon any liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary (a “Liquidation”),
the Holders shall be entitled to receive out of the assets, whether
capital or surplus, of the Corporation the same amount that a
holder of Common Stock would receive if the Preferred Stock were
fully converted to Common Stock, which amounts shall be paid pari
passu with all holders of Common Stock. The Corporation shall mail
written notice of any such Liquidation, not less than 45 days prior
to the payment date stated therein, to each
Holder.
Section
6. Conversion.
(a) Conversion
of Preferred Stock. Prior to
Shareholder Approval, the Preferred Stock is non- convertible. As
of 5:00 p.m. Eastern time on the date of the Shareholder Approval,
each share of the Preferred Stock shall be convertible, at the
option of the Holder and solely in connection with either (i)
distribution of the underlying shares of Common Stock issuable upon
conversion to Holder’s shareholders or (ii) sale of the
underlying shares of Common Stock issuable upon conversion in open
market broker transactions or private sales to unaffiliated third
parties, into that number of shares of Common Stock determined by
multiplying the number of shares of Preferred Stock held by each
Holder by the Conversion Ratio. Holders shall effect conversion by
providing the Corporation with the form of conversion notice
attached hereto as Annex A
(a “Notice of
Conversion”). Each Notice
of Conversion shall specify the number of shares of Preferred Stock
to be converted, the number of shares of Preferred Stock owned
prior to the conversion at issue, the number of shares of Preferred
Stock owned subsequent to the conversion at issue and the date on
which such conversion is to be effected, which date may not be
prior to the date the applicable Holder delivers by facsimile or
e-mail such Notice of Conversion to the Corporation (such date, the
“Conversion
Date”). If no Conversion
Date is specified in a Notice of Conversion, the Conversion Date
shall be the date that such Notice of Conversion to the Corporation
is deemed delivered hereunder. No ink-original Notice of Conversion
shall be required, nor shall any medallion guarantee (or other type
of guarantee or notarization) of any Notice of Conversion form be
required. The calculations and entries set forth in the Notice of
Conversion shall control in the absence of manifest or mathematical
error. To effect conversions of shares of Preferred Stock, a Holder
shall not be required to surrender the certificate(s) representing
the shares of Preferred Stock to the Corporation unless all of the
shares of Preferred Stock represented thereby are so converted, in
which case such Holder shall deliver the certificate representing
such shares of Preferred Stock promptly following the Conversion
Date at issue. Shares of Preferred Stock converted into Common
Stock or redeemed in accordance with the terms hereof shall be
canceled and shall not be reissued. Immediately following any
conversion, the rights of the Holders of any converted Preferred
Stock shall cease and the Persons entitled to receive Common Stock
upon the conversion of Preferred Stock shall be treated for all
purposes as having become the owners of such Common
Stock.
(b) Conversion
Ratio. Each share of Preferred
Stock shall convert, without the payment of additional
consideration by the Holder, on a one for one basis into shares of
Common Stock, subject to adjustment herein (the
“Conversion
Ratio”).
(c)
Mechanics of Conversion
i. Delivery
of Conversion Shares Upon Conversion. Promptly following the Conversion Date, but not
later than the earlier of (i) two (2) Trading Days and (ii) the
number of Trading Days comprising the Standard Settlement Period
(as defined below) after the Conversion Date (the
“Share Delivery
Date”), the Corporation
shall deliver, or cause to be delivered, to the converting Holder
of Preferred Stock (A) the number of Conversion Shares to be issued
upon the conversion of the Preferred Stock, which Conversion
Shares, on or after the earlier of (i) the six month anniversary of
the Original Issue Date or (ii) the date a registration statement
covering the resale of such shares by the Holder is declared
effective by the Commission, shall be free of restrictive legends
and trading restrictions (other than those which may then be
required by the Purchase Agreement), and (B) a bank check in the
amount of accrued and unpaid dividends, if any. When delivering the
Conversion Shares as provided herein, the Corporation shall use
commercially reasonable efforts to deliver the Conversion Shares
required to be delivered by the Corporation under this Section 6
electronically through the Depository Trust Company or another
established clearing corporation performing similar functions,
unless otherwise agreed to with the Holders. As used herein,
“Standard Settlement Period” means the standard
settlement period, expressed in a number of Trading Days, on the
Corporation’s primary Trading Market with respect to the
Common Stock as in effect on the Conversion Date. As used herein,
“Standard
Settlement
Period”
means the standard settlement period, expressed in a number of
Trading Days, on the Corporation’s primary Trading Market
with respect to the Common Stock as in effect on the date of
delivery of the Notice of Conversion.
ii.
Obligation Absolute;
Partial Liquidated Damages. The
Corporation’s obligation to issue and deliver the Conversion
Shares upon conversion of Preferred Stock in accordance with the
terms hereof are absolute and unconditional, irrespective of any
action or inaction by a Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or
any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by such Holder or any other Person of
any obligation to the Corporation or any violation or alleged
violation of law by such Holder or any other person, and
irrespective of any other circumstance which might otherwise limit
such obligation of the Corporation to such Holder in connection
with the issuance of such Conversion Shares;provided,
however,
that such delivery shall not operate as a waiver by the Corporation
of any such action that the Corporation may have against such
Holder. Nothing herein shall limit a Holder’s right to pursue
actual damages for the Corporation’s failure to deliver
Conversion Shares within the period specified herein and such
Holder shall have the right to pursue all remedies available to it
hereunder, at law or in equity including, without limitation, a
decree of specific
performance, injunctive relief, or both specific performance and
injunctive relief. The exercise of any such rights shall not
prohibit a Holder from seeking to enforce damages pursuant to any
other Section hereof or under applicable law.
iii.
Reservation of Shares
Issuable Upon Conversion. The
Corporation covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock
for the sole purpose of issuance upon conversion of the Preferred
Stock as herein provided, free from preemptive rights or any other
actual contingent purchase rights of Persons other than the Holder
(and the other holders of the Preferred Stock), not less than such
aggregate number of shares of the Common Stock as shall be issuable
(taking into account the adjustments and restrictions of Section 7)
upon the conversion of the then outstanding shares of Preferred
Stock. The Corporation covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly authorized,
validly issued, fully paid and nonassessable.
iv.
Fractional
Shares. No fractional shares or
scrip representing fractional shares shall be issued upon the
conversion of the Preferred Stock. As to any fraction of a share
which the Holder would otherwise be entitled to purchase upon such
conversion, the Corporation shall round up to the next whole
share.
v. Transfer
Taxes and Expenses. The
issuance of Conversion Shares on conversion of this Preferred Stock
shall be made without charge to any Holder for any documentary
stamp or similar taxes that may be payable in respect of the issue
or delivery of such Conversion Shares. The Corporation shall pay
all transfer agent fees required for same-day processing and all
fees to the Depository Trust Company (or another established
clearing corporation performing similar functions) required for
same-day electronic delivery of the Conversion
Shares.
Section
7. Certain
Adjustments.
(a)
Stock Dividends and
Stock Splits. If the
Corporation, at any time while this Preferred Stock is outstanding:
(i) pays a stock dividend or otherwise makes a distribution or
distributions payable in shares of Common Stock on shares of Common
Stock or any other Common Stock Equivalents (which, for avoidance
of doubt, shall not include any shares of Common Stock issued by
the Corporation upon conversion of, or payment of a dividend on,
this Preferred Stock), (ii) subdivides outstanding shares of Common
Stock into a larger number of shares, (iii) combines (including by
way of a reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of
capital stock of the Corporation, then the Conversion Ratio shall
be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding immediately after such
event, and of which the denominator shall be the number of shares
of Common Stock (excluding any treasury shares of the Corporation)
outstanding immediately before such event. Any adjustment made
pursuant to this Section 7(a) shall become effective immediately
after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
(b)
Pro Rata
Distributions. During such time
as this Preferred Stock is outstanding, if the Corporation declares
or makes any dividend or other distribution of its assets (or
rights to acquire its assets) to holders of shares of Common Stock,
by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities,
property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or
other similar transaction) (a “Distribution”),
at any time after the issuance of this Preferred Stock, then, in
each such case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have
participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Preferred
Stock immediately before the date of which a record is taken for
such Distribution, or, if no such record is taken, the date as of
which the record holders of shares of Common Stock are to be
determined for the participation in such
Distribution.
(c)
Fundamental
Transaction. If, at any time
while this Preferred Stock is outstanding, (i) the Corporation,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Corporation with or into another
Person, (ii) the Corporation, directly or indirectly, effects any
sale, lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Corporation or another Person) is completed pursuant to which
holders of Common Stock are permitted to sell, tender or exchange
their shares for other securities, cash or property and has been
accepted by the holders of 50% or more of the outstanding Common
Stock, (iv) the Corporation, directly or indirectly, in one or more
related transactions effects any reclassification, reorganization
or recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Corporation, directly or indirectly, in one or more
related transactions consummates a stock or share purchase
agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with another Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock
(not including any shares of Common Stock held by the other Person
or other Persons making or party to, or associated or affiliated
with the other Persons making or party to, such stock or share
purchase agreement or other business combination) (each a
“Fundamental
Transaction”), then each
Holder shall automatically receive, for each Conversion Share that
would have been issuable upon such conversion immediately prior to
the occurrence of such Fundamental Transaction, the same
consideration receivable as a result of such Fundamental
Transaction by a holder of the number of shares of Common Stock for
which the Preferred Stock is convertible immediately prior to such
Fundamental Transaction.
(d)
Calculations.
All calculations under this Section 7 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be. For
purposes of this Section 7, the number of shares of Common Stock
deemed to be issued and outstanding as of a given date shall be the
sum of the number of shares of Common Stock (excluding any treasury
shares of the Corporation) issued and
outstanding.
(e)
Notice to
the Holders.
i.
Adjustment to
Conversion Ratio. Whenever the
Conversion Ratio is adjusted pursuant to any provision of this
Section 7, the Corporation shall promptly deliver to each Holder by
facsimile or email a notice setting forth the Conversion Ratio
after such adjustment and setting forth a brief statement of the
facts requiring such adjustment.
ii.
Notice to Allow
Conversion by Holder. If (A)
the Corporation shall declare a dividend (or any other distribution
in whatever form) on the Common Stock, (B) the Corporation shall
declare a special nonrecurring cash dividend on or a redemption of
the Common Stock, (C) the Corporation shall authorize the granting
to all holders of the Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Corporation shall be required in connectionwith any
reclassification of the Common Stock, any consolidation or merger
to which the Corporation is a party, any sale or transfer of all or
substantially all of the assets of the Corporation, or any
compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property or (E) the Corporation
shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation, then,
in each case, the Corporation shall cause to be filed at each
office or agency maintained for the purpose of conversion of this
Preferred Stock, and shall cause to be delivered by facsimile or
email to each Holder at its last facsimile number or email address
as it shall appear upon the stock books of the Corporation, at
least twenty (20) calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date
on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock
of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined
or (y)
the date on which such reclassification, consolidation, merger,
sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange, provided that the failure to
deliver such notice or any defect therein or in the delivery
thereof shall not affect the validity of the corporate action
required to be specified in such notice. To the extent that any
notice provided hereunder constitutes, or contains, material,
non-public information regarding the Corporation, the Corporation
shall simultaneously file such notice with the Commission pursuant
to a Current Report on Form 8-K.
Section
8. Miscellaneous.
(a)
Notices.
Any and all notices or other communications or deliveries to be
provided by the Holders hereunder shall be in writing and delivered
personally, by facsimile or e-mail, or sent by a nationally
recognized overnight courier service, addressed to the Corporation,
at the following address: 373 Inverness Parkway, Suite 206,
Englewood, Colorado 80112, Attention: Controller, facsimile number
(720) 437-6527, e-mail address btowne@aytubio.com, or such other facsimile number, e-mail address or
address as the Corporation may specify for such purposes by notice
to the Holders delivered in accordance with this
Section 8.
Any and all notices or other communications or deliveries to be
provided by the Corporation hereunder shall be in writing and
delivered personally, by facsimile, e-mail, or sent by a nationally
recognized overnight courier service addressed to each Holder at
the facsimile number, e- mail address or address of such Holder
appearing on the books of the Corporation and the Transfer Agent.
Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number or e-mail at the e-mail address
set forth in this Section 8 prior to 5:30 p.m. (New York City time)
on any date, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number or e-mail at the e-mail address
set forth in this Section on a day that is not a Trading Day or
later than 5:30 p.m. (New York City time) on any Trading Day, (iii)
the second Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service, or (iv) upon
actual receipt by the party to whom such notice is required to be
given.
(b)
Absolute
Obligation. Except as expressly
provided herein, no provision of this Certificate of Designation
shall alter or impair the obligation of the Corporation, which is
absolute and unconditional, to pay liquidated damages, and accrued
dividends, as applicable, on the shares of Preferred Stock at the
time, place, and rate, and in the coin or currency, herein
prescribed.
(c)
Lost or Mutilated
Preferred Stock Certificate. If
a Holder’s Preferred Stock certificate shall be mutilated,
lost, stolen or destroyed, the Corporation shall execute and
deliver, in exchange and substitution for and upon cancellation of
a mutilated certificate, or in lieu of or in substitution for a
lost, stolen or destroyed certificate, a new certificate for the
shares of Preferred Stock so mutilated, lost, stolen or destroyed,
but only upon receipt of evidence of such loss, theft or
destruction of such certificate, and of the ownership thereof
reasonably satisfactory to the Corporation.
(d) Governing
Law. All questions concerning
the construction, validity, enforcement and interpretation of this
Certificate of Designation shall be governed by and construed and
enforced in accordance with the internal laws of the State of
Delaware without regard to the principles of conflict of laws
thereof. All legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by this
Certificate of Designation (whether brought against a party hereto
or its respective Affiliates, directors, officers, shareholders,
employees or agents) shall be commenced in the Court of Chancery of
the State ofDelaware or, to the extent such court does not have
subject matter jurisdiction, the United States District Court for
the District of Delaware or, to the extent that neither of the
foregoing courts has jurisdiction, the Superior Court of the State
of Delaware in Wilmington, Delaware (the “Delaware
Courts”). The Corporation
and each Holder hereby irrevocably submits to the exclusive
jurisdiction of the Delaware Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of
such Delaware Courts, or such Delaware Courts are improper or
inconvenient venue for such proceeding. The Corporation and each
Holder hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such
party at the address in effect for notices to it under this
Certificate of Designation and agrees that such service shall
constitute good and sufficient service
of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by applicable law. The Corporation and each Holder
hereto hereby irrevocably waives, to the fullest extent permitted
by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Certificate of
Designation or the transactions contemplated hereby. If the
Corporation or any Holder shall commence an action or proceeding to
enforce any provisions of this Certificate of Designation, then the
prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys’ fees and other costs
and expenses incurred in the investigation, preparation and
prosecution of such action or proceeding.
(e) Waiver.
Any waiver by the Corporation or a Holder of a breach of any
provision of this Certificate of Designation shall not operate as
or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this
Certificate of Designation or a waiver by any other Holders. The
failure of the Corporation or a Holder to insist upon strict
adherence to any term of this Certificate of Designation on one or
more occasions shall not be considered a waiver or deprive that
party (or any other Holder) of the right thereafter to insist upon
strict adherence to that term or any other term of this Certificate
of Designation on any other occasion. Any waiver by the Corporation
or a Holder must be in writing.
(f) Severability.
If any provision of this Certificate of Designation is invalid,
illegal or unenforceable, the balance of this Certificate of
Designation shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it
shall be found that any interest or other amount deemed interest
due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under
applicable law.
(g) Next
Business Day. Whenever any
payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day.
(h) Headings.
The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designation and shall not
be deemed to limit or affect any of the provisions
hereof.
(i) Status
of Converted or Redeemed Preferred Stock. If any shares of Preferred Stock shall be
converted, redeemed or reacquired by the Corporation, such shares
shall resume the status of authorized but unissued shares of
preferred stock and shall no longer be designated as Series G
Convertible Preferred Stock.
*********************
RESOLVED,
FURTHER, that the Chairman, the president or any vice-president,
and the secretary or any assistant secretary, of the Corporation be
and they hereby are authorized and directed to prepare and file
this Certificate of Designation of Preferences, Rights and
Limitations in accordance with the foregoing resolution and the
provisions of Delaware law.
[Remainder of Page
Intentionally Left Blank]
IN
WITNESS WHEREOF, the undersigned have executed this Certificate
this 30th day of October, 2019.
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/s/
Joshua R.Disbrow
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/s/
David A. Green
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Name:
Joshua R. Disbrow
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Name:
David A. Green
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Title:
Chairman and Chief Executive Officer
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Title:
Chief Financial Officer, Secretary, and Treasurer
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ANNEX A
NOTICE
OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES
OF PREFERRED STOCK)
The undersigned hereby elects to convert the
number of shares of Series G Convertible Preferred Stock indicated
below into shares of common stock, par value $0.0001 per share (the
“Common
Stock”), of Aytu
BioScience, Inc., a Delaware corporation (the
“Corporation”),
according to the conditions hereof, as of the date written below.
If shares of Common Stock are to be issued in the name of a Person
other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto. No fee will be charged to the
Holders for any conversion, except for any such transfer
taxes.
Conversion
calculations:
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Date to
Effect Conversion:
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Number
of shares of Preferred Stock owned prior to Conversion:
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Number
of shares of Preferred Stock to be Converted:
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Stated
Value of shares of Preferred Stock to be Converted:
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Number
of shares of Common Stock to be Issued:
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Applicable
Conversion Price:
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Number
of shares of Preferred Stock subsequent to Conversion:
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Address
for Delivery:
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or
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DWAC
Instructions:
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Broker
no:
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Account
no:
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[HOLDER]
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By:
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Name:
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Title:
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SPECIAL
MEETING OF STOCKHOLDERS OF
AYTU BIOSCIENCE, INC.
DECEMBER 13, 2019
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INTERNET - Access “www.proxyvote.com”
and follow the on-screen instructions. Have your proxy card
available when you access the web page.
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TELEPHONE - Call
toll-free 1-800-579-1639 in
the United States from any touch-tone telephone and follow the
instructions. Have your proxy card available when you
call.
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COMPANY NUMBER
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Vote
online/phone until 11:59 PM EDT the day before the
meeting.
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ACCOUNT NUMBER
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MAIL - Sign, date and
mail your proxy card in the envelope provided as soon as
possible.
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IN PERSON - You may
vote your shares in person by attending the Special
Meeting.
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IMPORTANT NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL FOR THE
SPECIAL MEETING:
The
Notice of Special Meeting of Stockholders and Proxy Statement are
available at www.proxyvote.com.
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↓ Please
detach along perforated line and mail in the envelope provided IF
you are not voting via telephone or the
Internet. ↓
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
PROPOSALS 1, 2, 3 AND 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS
SHOWN HERE ☒
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1.
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To
approve, for purposes of complying with Nasdaq Marketplace Rule
Listing Rule 5635(d), the convertibility of the Company’s
Series F convertible preferred stock, par value $0.0001 per share,
and (ii) the exercisability of certain warrants (the “PIPE
Warrants”), in each case, issued in a private placement
offering that closed October 16, 2019 (such proposal referred to
herein as the “Nasdaq Rule 5635(d)
Proposal”).
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FOR
☐
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AGAINST
☐
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ABSTAIN
☐
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2.
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Approve, in accordance with Nasdaq Marketplace Rules 5635(a)(2) and
5635(d), the convertibility of the Company’s Series G
convertible preferred stock, par value $0.0001 per share to be
issued to Cerecor Inc. (“Cerecor”), pursuant to that
certain Asset Purchase Agreement between the Company and Cerecor
dated October 10, 2019, pursuant to which Company acquired from
Cerecor the assets and business operations of Cerecor associated
with certain of Cerecor’s prescription products (the
“Products Business”) and assumed certain liabilities
associated with the Products Business (such proposal referred to
herein as the “Conversion Proposal”);
and
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FOR
☐
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AGAINST
☐
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ABSTAIN
☐
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3.
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To
approve an amendment to our Certificate of Incorporation to
increase the number of our authorized shares of common stock, par
value $0.0001 per share, from 100,000,000 to 200,000,000 shares of
common stock (“Authorized Share Increase
Proposal”)
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AGAINST
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4.
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The
adjournment of the Special Meeting, if necessary, to continue to
solicit votes for the Nasdaq Rule 5635(d) Proposal and/or the
Authorized Share Increase Proposal.
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FOR
☐
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AGAINST
☐
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ABSTAIN
☐
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To
change the address on your account, please check the box at right
and indicate your new address in the address space above. Please
note that changes to the registered name(s) on the
account may not be submitted via this method. ☐
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Signature of Shareholder
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Date:
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Signature of Shareholder
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Date:
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Note: Please sign exactly as your name or names appear on
this Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized
person.
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