Item
1.01.
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Entry
into a Material Definitive Agreement
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On
April 30, 2020, PAVmed Inc. (the “Company”, “we”, “us” or “our”)
entered into a Securities Purchase Agreement (“SPA”) with an institutional investor (the “Investor”)
and, pursuant thereto, we simultaneously consummated the sale to the Investor of a Senior Convertible Note (the “Convertible
Note”) with an initial principal amount of $4,111,111 and a conversion price of $5.00 per share, subject to adjustment
as described below (the “Private Placement”). Maxim Group LLC (“Maxim Group”) acted as financial
advisor to the transaction.
The
Convertible Note was sold with an original issue discount of $411,111, for gross proceeds of $3,700,000. Maxim Group received
an advisory fee of $120,250, representing 3.25% of the gross proceeds. After deducting the advisory fee and our estimated expenses
associated with the Private Placement, we estimate the net proceeds were approximately $3,579,750.
As
more fully described in our Current Reports on Form 8-K filed on December 27, 2018 and November 4, 2019, we also sold senior secured
convertible notes (the “2018 Convertible Notes”) to the Investor on December 27, 2018 and Series A and Series
B senior secured convertible notes (the “2019 Convertible Notes,” and collectively with the 2018 Convertible
Notes, the “Prior Convertible Notes”) to the Investor and one of its affiliates on November 4, 2019. The Prior
Convertible Notes presently have an outstanding principal balance of $14,050,000.
SPA
The
SPA contains certain representations and warranties, covenants and indemnities customary for similar transactions. Under the SPA,
we also agreed to the following additional covenants:
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Until the later
of the date that less than $700,000 of the Convertible Note remains outstanding and the date that is six months after the
closing, we may not issue, offer, sell or grant any equity or equity-linked security at a price less than $5.00 per share,
subject to certain limited exceptions.
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So long as any of
the Convertible Note remains outstanding, we will not effect or enter an agreement to effect any variable rate transaction.
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We will hold a stockholder
meeting, by no later than July 31, 2020, to approve resolutions (the “Stockholder Resolutions”) authorizing
(i) an increase in the authorized shares of our common stock from 100 million to 150 million shares, and (ii) the issuance
of shares of our common stock under the Convertible Note (and under the Prior Convertible Note issued on November 4, 2019)
for the purposes of compliance with the stockholder approval rules of The Nasdaq Stock Market (“Nasdaq”).
We will be obligated to continue to seek stockholder approval quarterly until such approval is obtained.
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In
addition, we granted the Investor participation rights in future equity and equity-linked offerings of securities during the three
years after the closing in an amount of up to 100% of the securities being sold in such offerings.
Pursuant
to the SPA, the Investor and its affiliate also waived certain requirements contained in the transaction documents for the Prior
Convertible Notes. As a result of such waivers, we will not be required to pay any amounts to the Investor or its affiliate as
a result of (i) a registration statement covering the resale of the shares underlying the 2019 Convertible Notes not being declared
effective by February 2, 2020 or (ii) such registration statement not covering the shares underlying the Series B 2019 Convertible
Notes. In addition, in keeping with the requirements under the new Convertible Note, (a) the deadline for us to hold a stockholder
meeting to approve the Stockholder Resolutions was extended to July 31, 2020; (b) the minimum amount of available cash we are
required to maintain at the end of each fiscal quarter was reduced to $1,750,000; and (c) the requirement to complete a non-dilutive
capital raise of a minimum of $9,000,000, in immediately available and unrestricted cash, was waived.
The
SPA further provides for a voluntarily reduction in the conversion price of the 2019 Convertible Notes, as permitted pursuant
to Section 7(d) of such notes. Subject to approval of our board of directors, through May 15, 2020, the conversion price of the
2019 Convertible Notes will be reduced to $1.48 per share. The holder of the Convertible Note may not convert more than $756,757
of the 2019 Convertible Notes at the reduced conversion price.
Convertible
Note
Payment
On
the maturity date, we will pay to the noteholder an amount in cash representing all outstanding principal, accrued and unpaid
interest and accrued and unpaid late charges. The stated maturity date of the Convertible Note is April 30, 2022, but the maturity
date is subject to extension in certain limited circumstances. Except as specifically permitted by the Convertible Note, we may
not prepay any portion of the outstanding principal, accrued and unpaid interest or accrued and unpaid late charges.
Interest
The
Convertible Note accrues interest at the rate of 7.875% per annum and is payable in cash monthly on the last trading day of each
month. After the occurrence and during the continuance of an Event of Default (as defined in the Convertible Note), the Convertible
Note will accrue interest at the rate of 18.0% per annum. See “—Events of Default” below.
Conversion
The
Convertible Note is convertible, at the option of the noteholder, into shares of our common stock at an initial conversion price
of $5.00 per share. The conversion price is subject to standard adjustments in the event of any stock split, stock dividend, stock
combination, recapitalization or other similar transaction. If we enter into any agreement to issue (or issue) any variable rate
securities, the noteholder has the additional right to substitute such variable price (or formula) for the conversion price. In
connection with the occurrence of certain Events of Default, a noteholder will be entitled to convert all or any portion of the
Convertible Note at an alternate conversion price equal to the lower of (i) the conversion price then in effect, and (ii) 80%
of the market price of our common stock, as determined in accordance with the Convertible Note, but not less than the floor price
specified in the Convertible Note.
Conversion
Limitation and Exchange Cap
A
noteholder will not have the right to convert any portion of the Convertible Note, to the extent that, after giving effect to
such conversion, the noteholder (together with certain related parties) would beneficially own in excess of 4.99% of the shares
of our common stock outstanding immediately after giving effect to such conversion. The noteholder may from time to time increase
this limit to 9.99%, provided that any such increase will not be effective until the 61st day after delivery of a notice to us
of such increase.
In
addition, unless we obtain the approval of our stockholders as required by Nasdaq, we are prohibited from issuing any shares of
common stock upon conversion of the Convertible Note or otherwise pursuant to the terms of the Convertible Note, if the issuance
of such shares of common stock would exceed 19.99% of our outstanding shares of common stock as of April 29, 2020 or otherwise
exceed the aggregate number of shares of common stock which we may issue without breaching our obligations under the rules and
regulations of Nasdaq.
Events
of Default
The
Convertible Note includes certain customary Events of Default, including, among other things, the breach of the financial covenant
described in “—Covenants” below and the failure of Lishan Aklog, M.D., our Chairman and Chief Executive
Officer, and Dennis McGrath, our President and Chief Financial Officer, to each serve as officers of ours.
In
connection with an Event of Default, a noteholder may require us to redeem in cash any or all of the Convertible Note. The redemption
price will equal 115% of the outstanding principal of the Convertible Note to be redeemed, and accrued and unpaid interest and
unpaid late charges thereon, or (except in the case of certain Events of Default relating to bankruptcy), if greater, an amount
equal to market value of a share of our common stock multiplied by the amount to be redeemed divided by the conversion price,
as determined in accordance with the Convertible Note.
Redemption
Rights
Change
of Control. In connection with a Change of Control (as defined in the Convertible Note), a noteholder may require us to redeem
all or any portion of the Convertible Note. The redemption price will equal the greatest of (i) 115% of the outstanding principal
of the Convertible Note to be redeemed, and accrued and unpaid interest and unpaid late charges thereon, (ii) 115% of the market
value of the shares of our common stock underlying the Convertible Note, as determined in accordance with the Convertible Note,
and (iii) 115% of the aggregate cash consideration that would have been payable in respect of the shares of our common stock underlying
the Convertible Note, as determined in accordance with the Convertible Note. Such redemption may be subject to netting as described
below.
Subsequent
Placement. At any time after the earlier of the date a noteholder becomes aware of any placement by us of equity or equity-linked
securities or the date of consummation of such a placement, subject to certain limited exceptions, the noteholder will have the
right to have us redeem a portion of the Convertible Note not in excess of 100% of the net proceeds from such placement (less
any portion of such proceeds used by the Company to redeem a portion of the Prior Convertible Notes at the election of the holders
thereof). The redemption price will be 115% of the outstanding principal of the Convertible Note to be redeemed, and accrued and
unpaid interest and unpaid late charges thereon. If the noteholder is participating in any such placement, the noteholder may
apply the redemption price against the purchase price of the securities in such placement.
Holder
Optional Redemption. At any time from and after October 30, 2020, the noteholder will have the right, in its sole discretion,
to require us to redeem all, or any portion, of the Convertible Note. The redemption price will be 115% of the outstanding principal
of the Convertible Note to be redeemed, and accrued and unpaid interest and unpaid late charges thereon.
Company
Optional Redemption. At any time, we will have the right to redeem all, but not less than all, of the Convertible Note. The
redemption price will be 115% of the outstanding principal of the Convertible Note to be redeemed, and accrued and unpaid interest
and unpaid late charges thereon.
Covenants
We
will be subject to certain customary affirmative and negative covenants regarding the incurrence of indebtedness, the existence
of liens, the repayment of indebtedness, the payment of cash in respect of dividends, distributions or redemptions, and the transfer
of assets, among other matters. We also will be subject to a financial covenant that requires us to maintain available cash in
the amount of $1,750,000 at the end of each fiscal quarter.
Voting
Agreement
In
connection with the Private Placement, we entered into voting agreements (the “Voting Agreements”), each dated
as of April 30, 2020, with certain of our stockholders (each a “Stockholder”), who hold approximately 11.9%
of our common stock in the aggregate. Pursuant to the Voting Agreements, each Stockholder agreed to vote the shares of our common
stock now owned or hereafter acquired by him in favor of the Stockholder Resolutions.
Additional
Information
The
foregoing is only a summary of the material terms of the SPA, the Convertible Note, the Voting Agreements, and the other transaction
documents, and does not purport to be a complete description of the rights and obligations of the parties thereunder. The summary
of the SPA, the Convertible Note and the Voting Agreements is qualified in its entirety by reference to the forms of such agreements,
which are filed as exhibits to this Current Report.
The
foregoing summary and the exhibits hereto also are not intended to modify or supplement any disclosures about us in our reports
filed with the Securities and Exchange Commission. In particular, the agreements and the related summary are not intended to be,
and should not be relied upon, as disclosures regarding any facts and circumstances relating to the Company or any of its subsidiaries
or affiliates. The agreements contain representations and warranties by us, which were made only for purposes of the agreements
and as of specified dates. The representations, warranties and covenants in the agreements were made solely for the benefit of
the parties to the agreements; may be subject to limitations agreed upon by the contracting parties, including being subject to
confidential disclosures that may modify, qualify or create exceptions to such representations and warranties; may be made for
the purposes of allocating contractual risk between the parties to the agreements instead of establishing these matters as facts;
and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors.
In addition, information concerning the subject matter of the representations, warranties and covenants may change after the date
of the agreements, which subsequent information may or may not be fully reflected in our public disclosures.