WINT Windtree Therapeutics Inc

Delaware	001-39290	94-3171943
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

2600 Kelly Road, Suite 100, Warrington, Pennsylvania	18976
(Address of principal executive offices)	(Zip Code)

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		WINT		The Nasdaq Capital Market

Item 1.01

Entry into a Material Definitive Agreement

Item 3.03

Material Modification to Rights of Security Holders

Item 5.03

Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

Item 7.01

Regulation FDDisclosure

Item 9.01

Financial Statements and Exhibits

Exhibit No.		Document
3.1		Certificate of Designation for Series D Convertible Preferred Stock
10.1		Form of Assignment and Conditional Assumption Agreement
10.2		Purchase Agreement
10.3		First Amendment to Purchase Agreement
10.4		Second Amendment to Purchase Agreement
99.1		Press Release
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

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	Windtree Therapeutics, Inc.
	By:	/s/ Jed Latkin
	Name:	Jed Latkin
	Title:	President and Chief Executive Officer

Exhibit 3.1

 

 

 

CERTIFICATE OF DESIGNATIONS

OF RIGHTS AND PREFERENCES OF
SERIES D CONVERTIBLE PREFERRED STOCK OF
WINDTREE THERAPEUTICS, INC.

 

I, Jed Latkin, hereby certify that I am the President and Chief Executive Officer of Windtree Therapeutics, Inc. (the “Company”), a corporation organized and existing under the Delaware General Corporation Law (the “DGCL”), and further do hereby certify:

 

That pursuant to the authority expressly conferred upon the Board of Directors of the Company (the “Board”) by the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), and Section 151(g) of the DGCL, the Board on April 29, 2025 adopted the following resolution determining it desirable and in the best interests of the Company and its stockholders for the Company to create a series of five thousand (5,000) shares of preferred stock designated as “Series D Convertible Preferred Stock”, none of which shares have been issued:

 

RESOLVED, that pursuant to the authority vested in the Board this Company, in accordance with the provisions of the Certificate of Incorporation, a series of preferred stock, par value $0.001 per share, of the Company be and hereby is created pursuant to this certificate of designations (this “Certificate of Designations”), and that the designation and number of shares established pursuant hereto and the voting and other powers, preferences and relative, participating, optional or other rights of the shares of such series and the qualifications, limitations and restrictions thereof are as follows:

 

TERMS OF SERIES D CONVERTIBLE PREFERRED STOCK

 

1.    Designation and Number of Shares. There shall hereby be created and established a series of preferred stock of the Company designated as “Series D Convertible Preferred Stock” (the “Preferred Shares”). The authorized number of Preferred Shares shall be five thousand (5,000) shares. Each Preferred Share shall have a par value of $0.001. Capitalized terms not defined herein shall have the meaning as set forth in Section 34 below.

 

2.    Ranking. Except to the extent that the Required Holders (as defined in the Securities Purchase Agreement) expressly consent to the creation of Parity Stock (as defined below) or Senior Preferred Stock (as defined below) in accordance with Section 19, all shares of capital stock of the Company shall be junior in rank to all Preferred Shares with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company (such junior stock is referred to herein collectively as “Junior Stock”). The rights of all such shares of capital stock of the Company shall be subject to the rights, powers, preferences and privileges of the Preferred Shares. The Preferred Shares will rank equal to the Company’s Series C Preferred Convertible Stock (“Series C Preferred Stock”) with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company. Without limiting any other provision of this Certificate of Designations, without the prior express consent of the Required Holders, voting separately as a single class, the Company shall not hereafter authorize or issue any additional or other shares of capital stock that is (i) of senior rank to the Preferred Shares in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company (collectively, the “Senior Preferred Stock”), (ii) of pari passu rank to the Preferred Shares in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company (collectively, and together with the Series C Preferred Stock, the “Parity Stock”) or (iii) any Junior Stock having a maturity date or any other date requiring redemption or repayment of such shares of Junior Stock that is prior to the Maturity Date. In the event of the merger or consolidation of the Company with or into another corporation, the Preferred Shares shall maintain their relative rights, powers, designations, privileges and preferences provided for herein and no such merger or consolidation shall result inconsistent therewith.

 

 

3.     Dividends.

 

(a)    From and after April 29, 2025 (the “Initial Issuance Date”), each holder of a Preferred Share (each, a “Holder” and collectively, the “Holders”) shall be entitled to receive dividends (“Dividends”), which Dividends shall be computed on the basis of a 360-day year and twelve 30-day months and shall increase the Stated Value of the Preferred Shares on each Dividend Date (as defined below). Dividends shall be payable in arrears on the first Trading Day of each Fiscal Quarter (each, a “Dividend Date”) with the first Dividend Date being the first Trading Day of the initial Fiscal Quarter commencing after the Initial Issuance Date.

 

(b)    Prior to the capitalization of Dividends on a Dividend Date, Dividends on the Preferred Shares shall accrue at ten percent (10.0%) per annum (the “Dividend Rate”) and be payable by way of inclusion of the Dividends in the Conversion Amount (as defined below) on each Conversion Date (as defined below) in accordance with Section 4(c)(i) or upon any redemption in accordance with Section 13 or upon any required payment upon any Bankruptcy Triggering Event (as defined below). From and after the occurrence and during the continuance of any Triggering Event (as defined below), the Dividend Rate shall automatically be increased to eighteen percent (18.0%) per annum (the “Default Rate”). In the event that such Triggering Event is subsequently cured (and no other Triggering Event then exists (including, without limitation, for the Company’s failure to pay such Dividends at the Default Rate on the applicable Dividend Date)), the adjustment referred to in the preceding sentence shall cease to be effective as of the calendar day immediately following the date of such cure; provided that the Dividends as calculated and unpaid at such increased rate during the continuance of such Triggering Event shall continue to apply to the extent relating to the days after the occurrence of such Triggering Event through and including the date of such cure of such Triggering Event.

 

 

4.    Conversion. At any time after the Initial Issuance Date, each Preferred Share shall be convertible into validly issued, fully paid and non-assessable shares of Common Stock (as defined below), on the terms and conditions set forth in this Section 4.

 

(a)    Holder’s Conversion Right. Subject to the provisions of Section 4(d), at any time or times on or after the Initial Issuance Date, each Holder shall be entitled to convert any portion of the outstanding Preferred Shares held by such Holder into validly issued, fully paid and non-assessable shares of Common Stock in accordance with Section 4(c) at the Conversion Rate (as defined below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses (including, without limitation, fees and expenses of the Transfer Agent (as defined below)) that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Preferred Shares.

 

(b)     Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Preferred Share pursuant to Section 4(a) shall be determined by dividing (x) the Conversion Amount of such Preferred Share by (y) the Conversion Price (as defined below) (the “Conversion Rate”):

 

(i)     “Conversion Amount” means, with respect to each Preferred Share, as of the applicable date of determination, the sum of (1) the Stated Value thereof plus (2) the Additional Amount thereon and any accrued and unpaid Late Charges (as defined below in Section 27(c)) with respect to such Stated Value and Additional Amount as of such date of determination, plus (3) any other amounts owed to such Holder pursuant to this Certificate of Designations or any Transaction Document.

 

(ii)     “Conversion Price” means, with respect to each Preferred Share, as of any Conversion Date or other date of determination, $1.368, subject to adjustment as provided herein.

 

(c)        Mechanics of Conversion. The conversion of each Preferred Share shall be conducted in the following manner:

 

(i)     Optional Conversion. To convert a Preferred Share into shares of Common Stock on any date (a “Conversion Date”), a Holder shall deliver (whether via electronic mail or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of conversion of the share(s) of Preferred Shares subject to such conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company. If required by Section 4(c)(iii), within one (1) Trading Day following a conversion of any such Preferred Shares as aforesaid, such Holder shall surrender to a nationally recognized overnight delivery service for delivery to the Company the original certificates, if any, representing the Preferred Shares (the “Preferred Share Certificates”) so converted as aforesaid (or an indemnification undertaking with respect to the Preferred Shares in the case of its loss, theft or destruction as contemplated by Section 21(b)). On the date of receipt of a Conversion Notice, the Company shall transmit by electronic mail an acknowledgment of confirmation and representation as to whether such shares of Common Stock may then be resold pursuant to Rule 144 or an effective and available Registration Statement (as defined in the Registration Rights Agreement), in the form attached hereto as Exhibit II, of receipt of such Conversion Notice to such Holder and the Company’s transfer agent (the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Conversion Notice in accordance with the terms herein. On or before the first (1^st) Trading Day following each date on which the Company has received a Conversion Notice (or such earlier date as required pursuant to the 1934 Act or other applicable law, rule or regulation for the settlement of a trade initiated on the applicable Conversion Date of such shares of Common Stock issuable pursuant to such Conversion Notice) (the “Share Delivery Deadline”), the Company shall (1) provided such shares of Common Stock issuable pursuant to such Conversion Notice are eligible for resale by such Holder pursuant to Rule 144 or pursuant to an effective Registration Statement (the “Unrestricted Resale Conditions”) and the Transfer Agent is participating in The Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer Program (“FAST”), credit such aggregate number of shares of Common Stock to which such Holder shall be entitled pursuant to such conversion to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or (2) if the Transfer Agent is not participating in FAST or the Unrestricted Resale Conditions are not satisfied, upon the request of such Holder, issue and deliver (via reputable overnight courier) to the address as specified in such Conversion Notice, a certificate, registered in the name of such Holder or its designee, for the number of shares of Common Stock to which such Holder shall be entitled. If the number of Preferred Shares represented by the Preferred Share Certificate(s) submitted for conversion pursuant to Section 4(c)(iii) is greater than the number of Preferred Shares being converted, then the Company shall, as soon as practicable and in no event later than two (2) Trading Days after receipt of the Preferred Share Certificate(s) and at its own expense, issue and deliver to such Holder (or its designee) a new Preferred Share Certificate or a new Book-Entry (in either case, in accordance with Section 21(d)) representing the number of Preferred Shares not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of Preferred Shares shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date; provided, that such Holder shall be deemed to have waived any voting rights of any such shares of Common Stock during the period commencing on such Conversion Date, through, and including, such applicable Share Delivery Deadline (each, an “Conversion Period”), as necessary, such that the aggregate voting rights of any shares of Common Stock beneficially owned by such Holder and/or any Attribution Parties (as defined below), collectively, on any such date of determination shall not exceed the Maximum Percentage (as defined below) as a result of any such conversion of the Preferred Shares. Notwithstanding anything to the contrary contained in this Certificate of Designations or the Registration Rights Agreement, after the effective date of a Registration Statement and prior to a Holder’s receipt of the notice of a Grace Period (as defined in the Registration Rights Agreement), the Company shall cause the Transfer Agent to deliver unlegended shares of Common Stock to such Holder (or its designee) in connection with any sale of Registrable Securities (as defined in the Registration Rights Agreement) with respect to which such Holder has entered into a contract for sale, and delivered a copy of the prospectus included as part of the particular Registration Statement to the extent applicable, and for which such Holder has not yet settled.

 

 

(ii)     Company’s Failure to Timely Convert. If the Company shall fail, for any reason or for no reason, on or prior to the applicable Share Delivery Deadline, either (I) if the Transfer Agent is not participating in FAST or the Unrestricted Resale Conditions are not satisfied, to issue and deliver to such Holder (or its designee) a certificate for the number of shares of Common Stock to which such Holder is entitled and register such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in FAST and the Unrestricted Resale Conditions are satisfied, to credit such Holder’s or its designee’s balance account with DTC for such number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion of any Conversion Amount (as the case may be) or (II) if the Registration Statement covering the resale of the shares of Common Stock that are the subject of the Conversion Notice (the “Unavailable Conversion Shares”) is not available for the resale of such Unavailable Conversion Shares and the Company fails to promptly, but in no event later than as required pursuant to the Registration Rights Agreement (x) notify such Holder and (y) deliver the shares of Common Stock electronically without any restrictive legend by crediting such aggregate number of shares of Common Stock to which such Holder is entitled pursuant to such conversion to such Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause (II) is hereinafter referred as a “Notice Failure” and together with the event described in clause (I) above, a “Conversion Failure”), then, in addition to all other remedies available to such Holder, (X) the Company shall pay in cash to such Holder on each day after the Share Delivery Deadline that the issuance of such shares of Common Stock is not timely effected an amount equal to 2% of the product of (A) the sum of the number of shares of Common Stock not issued to such Holder on or prior to the Share Delivery Deadline and to which such Holder is entitled, multiplied by (B) any trading price of the Common Stock selected by such Holder in writing as in effect at any time during the period beginning on the applicable Conversion Date and ending on the applicable Share Delivery Deadline, and (Y) such Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have returned, as the case may be, all, or any portion, of such Preferred Shares that has not been converted pursuant to such Conversion Notice; provided that the voiding of an Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued prior to the date of such notice pursuant to this Section 4(c)(ii) or otherwise. In addition to the foregoing, if on or prior to the Share Delivery Deadline either (A) the Transfer Agent is not participating in FAST or the Unrestricted Resale Conditions are not satisfied, the Company shall fail to issue and deliver to such Holder (or its designee) a certificate and register such shares of Common Stock on the Company’s share register or, if the Transfer Agent is participating in FAST and the Unrestricted Resale Conditions are satisfied, the Transfer Agent shall fail to credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion hereunder or pursuant to the Company’s obligation pursuant to clause (ii) below or (B) a Notice Failure occurs, and if on or after such Share Delivery Deadline such Holder acquires (in an open market transaction, stock loan or otherwise) shares of Common Stock corresponding to all or any portion of the number of shares of Common Stock issuable upon such conversion that such Holder is entitled to receive from the Company and has not received from the Company in connection with such Conversion Failure or Notice Failure, as applicable (a “Buy-In”), then, in addition to all other remedies available to such Holder, the Company shall, within two (2) Business Days after receipt of such Holder’s request and in such Holder’s discretion, either: (I) pay cash to such Holder in an amount equal to such Holder’s total purchase price (including brokerage commissions, stock loan costs and other out-of-pocket expenses, if any) for the shares of Common Stock so acquired (including, without limitation, by any other Person in respect, or on behalf, of such Holder) (the “Buy-In Price”), at which point the Company’s obligation to so issue and deliver such certificate (and to issue such shares of Common Stock) or credit to the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (II) promptly honor its obligation to so issue and deliver to such Holder a certificate or certificates representing such shares of Common Stock or credit the balance account of such Holder or such Holder’s designee, as applicable, with DTC for the number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion hereunder (as the case may be) and pay cash to such Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (x) such number of shares of Common Stock multiplied by (y) the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date of the applicable Conversion Notice and ending on the date of such issuance and payment under this clause (II) (the “Buy-In Payment Amount”). 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 certificates representing shares of Common Stock (or to electronically deliver such shares of Common Stock) upon the conversion of the Preferred Shares as required pursuant to the terms hereof.

 

 

(iii)     Registration; Book-Entry. At the time of issuance of any Preferred Shares hereunder, the applicable Holder may, by written request (including by electronic-mail) to the Company, elect to receive such Preferred Shares in the form of one or more Preferred Share Certificates or in Book-Entry form. The Company (or the Transfer Agent, as custodian for the Preferred Shares) shall maintain a register (the “Register”) for the recordation of the names and addresses of the Holders of each Preferred Share and the Stated Value of the Preferred Shares and whether the Preferred Shares are held by such Holder in Preferred Share Certificates or in Book-Entry form (the “Registered Preferred Shares”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and each Holder of the Preferred Shares shall treat each Person whose name is recorded in the Register as the owner of a Preferred Share for all purposes (including, without limitation, the right to receive payments and Dividends hereunder) notwithstanding notice to the contrary. A Registered Preferred Share may be assigned, transferred or sold only by registration of such assignment or sale on the Register. Upon its receipt of a written request to assign, transfer or sell one or more Registered Preferred Shares by such Holder thereof, the Company shall record the information contained therein in the Register and issue one or more new Registered Preferred Shares in the same aggregate Stated Value as the Stated Value of the surrendered Registered Preferred Shares to the designated assignee or transferee pursuant to Section 21, provided that if the Company does not so record an assignment, transfer or sale (as the case may be) of such Registered Preferred Shares within two (2) Business Days of such a request, then the Register shall be automatically deemed updated to reflect such assignment, transfer or sale (as the case may be). Notwithstanding anything to the contrary set forth in this Section 4, following conversion of any Preferred Shares in accordance with the terms hereof, the applicable Holder shall not be required to physically surrender such Preferred Shares held in the form of a Preferred Share Certificate to the Company unless (A) the full or remaining number of Preferred Shares represented by the applicable Preferred Share Certificate are being converted (in which event such certificate(s) shall be delivered to the Company as contemplated by this Section 4(c)(iii)) or (B) such Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of Preferred Shares upon physical surrender of the applicable Preferred Share Certificate. Each Holder and the Company shall maintain records showing the Stated Value, Dividends and Late Charges converted and/or paid (as the case may be) and the dates of such conversions and/or payments (as the case may be) or shall use such other method, reasonably satisfactory to such Holder and the Company, so as not to require physical surrender of a Preferred Share Certificate upon conversion. If the Company does not update the Register to record such Stated Value, Dividends and Late Charges converted and/or paid (as the case may be) and the dates of such conversions and/or payments (as the case may be) within two (2) Business Days of such occurrence, then the Register shall be automatically deemed updated to reflect such occurrence. In the event of any dispute or discrepancy, such records of such Holder establishing the number of Preferred Shares to which the record holder is entitled shall be controlling and determinative in the absence of manifest error. A Holder and any transferee or assignee, by acceptance of a certificate, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of any Preferred Shares, the number of Preferred Shares represented by such certificate may be less than the number of Preferred Shares stated on the face thereof. Each Preferred Share Certificate shall bear the following legend:

 

ANY TRANSFEREE OR ASSIGNEE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF THE CORPORATION’S CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF SERIES D CONVERTIBLE PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 4(c)(iii) THEREOF. THE NUMBER OF SHARES OF SERIES D CONVERTIBLE PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES D CONVERTIBLE PREFERRED STOCK STATED ON THE FACE HEREOF PURSUANT TO SECTION 4(c)(iii) OF THE CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF SERIES D CONVERTIBLE PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE.

 

 

(iv)     Pro Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one Holder for the same Conversion Date and the Company can convert some, but not all, of such Preferred Shares submitted for conversion, the Company shall convert from each Holder electing to have Preferred Shares converted on such date a pro rata amount of such Holder’s Preferred Shares submitted for conversion on such date based on the number of Preferred Shares submitted for conversion on such date by such Holder relative to the aggregate number of Preferred Shares submitted for conversion on such date. In the event of a dispute as to the number of shares of Common Stock issuable to a Holder in connection with a conversion of Preferred Shares, the Company shall issue to such Holder the number of shares of Common Stock not in dispute and resolve such dispute in accordance with Section 26.

 

(d)          Limitation on Beneficial Ownership.

 

(i)     Beneficial Ownership. The Company shall not effect the conversion of any of the Preferred Shares held by a Holder, and such Holder shall not have the right to convert any of the Preferred Shares held by such Holder pursuant to the terms and conditions of this Certificate of Designations and any such conversion shall be null and void and treated as if never made, to the extent that after giving effect to such conversion, such Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the shares of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Holder and the other Attribution Parties shall include the number of shares of Common Stock held by such Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon conversion of the Preferred Shares with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted Preferred Shares beneficially owned by such Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any convertible notes, convertible preferred stock or warrants, including the Preferred Shares) beneficially owned by such Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 4(d)(i). For purposes of this Section 4(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. For purposes of determining the number of outstanding shares of Common Stock a Holder may acquire upon the conversion of such Preferred Shares without exceeding the Maximum Percentage, such Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the SEC, as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the “Reported Outstanding Share Number”). If the Company receives a Conversion Notice from a Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall notify such Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Conversion Notice would otherwise cause such Holder’s beneficial ownership, as determined pursuant to this Section 4(d)(i), to exceed the Maximum Percentage, such Holder must notify the Company of a reduced number of shares of Common Stock to be purchased pursuant to such Conversion Notice. For any reason at any time, upon the written or oral request of any Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail 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 Company, including such Preferred Shares, by such Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of Common Stock to a Holder upon conversion of such Preferred Shares results in such Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which such Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and such Holder shall not have the power to vote or to transfer the Excess Shares. Upon delivery of a written notice to the Company, any Holder may from time to time increase (with such increase not effective until the sixty-first (61^st) day after delivery of such notice) or decrease the Maximum Percentage of such Holder to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first (61^st) day after such notice is delivered to the Company and (ii) any such increase or decrease will apply only to such Holder and the other Attribution Parties and not to any other Holder that is not an Attribution Party of such Holder. For purposes of clarity, the shares of Common Stock issuable to a Holder pursuant to the terms of this Certificate of Designations in excess of the Maximum Percentage shall not be deemed to be beneficially owned by such Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to convert such Preferred Shares pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d)(i) to the extent necessary to correct this paragraph (or any portion of this paragraph) which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 4(d)(i) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be amended, modified or waived and shall apply to a successor holder of such Preferred Shares.

 

 

(ii)     Principal Market Regulation. The Company shall not issue any shares of Common Stock upon conversion of any Preferred Shares or otherwise pursuant to the terms of this Certificate of Designations if the issuance of such shares of Common Stock would exceed the aggregate number of shares of Common Stock which the Company may issue upon conversion of the Preferred Shares without breaching the Company’s obligations under the rules and regulations the listing rules of the Principal Market (the maximum number of shares of Common Stock which may be issued without violating such rules and regulations, including rules related to the aggregate of offerings under NASDAQ Listing Rule 5635(d), the “Exchange Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its stockholders as required by the applicable rules and regulations of the Principal Market for issuances of shares of Common Stock in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory to the Required Holders. Until such approval or such written opinion is obtained, no Holder shall be issued in the aggregate, upon conversion of any Preferred Shares, shares of Common Stock in an amount greater than the product of (i) the Exchange Cap as of the Initial Issuance Date multiplied by (ii) the quotient of (1) the aggregate number of Preferred Shares issued to such Holder on the Initial Issuance Date divided by (2) the aggregate number of Preferred Shares issued to the Holders on the Initial Issuance Date (with respect to each Holder, the “Exchange Cap Allocation”). In the event that any Holder shall sell or otherwise transfer any of such Holder’s Preferred Shares, the transferee shall be allocated a pro rata portion of such Holder’s Exchange Cap Allocation with respect to such portion of such Preferred Shares so transferred, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation so allocated to such transferee. Upon conversion in full of a holder’s Preferred Shares, the difference (if any) between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued to such holder upon such holder’s conversion in full of such Preferred Shares shall be allocated, to the respective Exchange Cap Allocations of the remaining holders of Preferred Shares on a pro rata basis in proportion to the shares of Common Stock underlying the Preferred Shares then held by each such holder of Preferred Shares. In the event that the Company is prohibited from issuing any shares of Common Stock pursuant to this Section 4(d)(ii)(the “Exchange Cap Shares”) to a Holder, the Company shall pay cash to such Holder in exchange for the redemption of such number of Preferred Shares held by such Holder that are not convertible into such Exchange Cap Shares at a price equal to the sum of (i) the product of (x) such number of Exchange Cap Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date such Holder delivers the applicable Conversion Notice with respect to such Exchange Cap Shares to the Company and ending on the date of such issuance and payment under this Section 4(d)(ii) and (ii) to the extent of any Buy-In related thereto, any Buy-In Payment Amount, any brokerage commissions and other out-of-pocket expenses, if any, of such Holder incurred in connection therewith (collectively, the “Exchange Cap Share Cancellation Amount”).

 

(e)          Alternate Conversion upon a Triggering Event.

 

(i)      General. Subject to Section 4(d), at any time after the occurrence of a Triggering Event (regardless of whether such Triggering Event has been cured, or if the Company has delivered an Triggering Event Notice (as defined below) to such applicable Holder or if such Holder has delivered an Triggering Event Redemption Notice (as defined below) to the Company or otherwise notified the Company that an Triggering Event has occurred), such Holder may, at such Holder’s option, by delivery of a Conversion Notice to the Company (the date of any such Conversion Notice, each an “Alternate Conversion Date”), convert all, or any number of Preferred Shares (such Conversion Amount of the Preferred Shares to be converted pursuant to this Section 4(e), the “Alternate Conversion Amount”) into shares of Common Stock at the Alternate Conversion Price (each, a “Alternate Conversion”).

 

 

(ii)     Mechanics of Alternate Conversion. On any Alternate Conversion Date, a Holder may voluntarily convert any Alternate Conversion Amount pursuant to Section 4(c) (with “Alternate Conversion Price” replacing “Conversion Price” for all purposes hereunder with respect to such Alternate Conversion and “Redemption Premium of the Conversion Amount” replacing “Conversion Amount” in clause (x) of the definition of Conversion Rate above with respect to such Alternate Conversion) by designating in the Conversion Notice delivered pursuant to this Section 4(e) of this Certificate of Designations that such Holder is electing to use the Alternate Conversion Price for such conversion; provided that in the event of the Conversion Floor Price Condition, on the applicable Alternate Conversion Date the Company shall also deliver to such Holder the applicable Alternate Conversion Floor Amount. Notwithstanding anything to the contrary in this Section 4(e), but subject to Section 4(d), until the Company delivers shares of Common Stock representing the applicable Alternate Conversion Amount to such Holder, such Alternate Conversion Amount may be converted by such Holder into shares of Common Stock pursuant to Section 4(c) without regard to this Section 4(e). In the event of an Alternate Conversion pursuant to this Section 4(e) of all, or any number of the Preferred Shares of a Holder, such Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for such Holder. Accordingly, any redemption premium due under this Section 4(e), together the Alternate Conversion Price used in such Alternate Conversion, as applicable, is intended by the parties to be, and shall be deemed, a reasonable estimate of, such Holder’s actual loss of its investment opportunity and not as a penalty.

 

5.            Triggering Event Redemptions.

 

(a)           Triggering Event. Each of the following events shall constitute a “Triggering Event” and each of the events in clauses (x), (xi), and (xii) below, shall constitute a “Bankruptcy Triggering Event”:

 

(i)     the failure of the applicable Registration Statement to be filed with the SEC on or prior to the date that is five (5) days after the applicable Filing Deadline (as defined in the Registration Rights Agreement) or the failure of the applicable Registration Statement to be declared effective by the SEC on or prior to the date that is five (5) days after the applicable Effectiveness Deadline (as defined in the Registration Rights Agreement);

 

(ii)     while the applicable Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of the applicable Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or such Registration Statement (or the prospectus contained therein) is unavailable to any holder of Registrable Securities for sale of all of such holder’s Registrable Securities in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of five (5) consecutive days or for more than an aggregate of ten (10) days in any 365-day period (excluding days during an Allowable Grace Period (as defined in the Registration Rights Agreement));

 

 

(iii)     the suspension (or threatened suspension) from trading or the failure (or threatened failure) of the Common Stock to be trading or listed (as applicable) on an Eligible Market for a period of five (5) consecutive Trading Days;

 

(iv)     the Company’s (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within one (1) Trading Days after the applicable Conversion Date or (B) notice, written or oral, to any holder of Preferred Shares, including, without limitation, by way of public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request for conversion of any Preferred Shares into shares of Common Stock that is requested in accordance with the provisions of this Certificate of Designations, other than pursuant to Section 4(d) hereof;

 

(v)     except to the extent the Company is in compliance with Section 11(b) below, at any time following the tenth (10th) consecutive day that a Holder’s Authorized Share Allocation (as defined in Section 11(a) below) is less than 300% of the number of shares of Common Stock that such Holder would be entitled to receive upon a conversion, in full, of all of the Preferred Shares then held by such Holder (assuming conversions at the Floor Price then in effect without regard to any limitations on conversion set forth in this Certificate of Designations;

 

(vi)     the Board fails to declare any Dividend to be capitalized on the applicable Dividend Date in accordance with Section 3;

 

(vii)     the Company’s failure to pay to any Holder any amount when and as due under this Certificate of Designations (including, without limitation, the Company’s failure to pay any redemption payments or amounts hereunder), the Securities Purchase Agreement or any other Transaction Document or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby (in each case, whether or not permitted pursuant to the DGCL), except, in the case of a failure to pay Late Charges when and as due, in each such case only if such failure remains uncured for a period of at least two (2) Trading Days;

 

(viii)     the Company fails to remove any restrictive legend on any certificate or any shares of Common Stock issued to the applicable Holder upon conversion of any Securities acquired by such Holder under the Transaction Documents as and when required by such Securities or the Securities Purchase Agreement, as applicable, unless otherwise then prohibited by applicable federal securities laws, and any such failure remains uncured for at least five (5) days;

 

(ix)     the occurrence of any default under, redemption of or acceleration prior to maturity of at least an aggregate of $500,000 of Indebtedness (as defined in the Securities Purchase Agreement) of the Company or any of its Subsidiaries;

 

 

(x)     bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third party, shall not be dismissed within thirty (30) days of their initiation;

 

(xi)     the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Company or any Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a Uniform Commercial Code foreclosure sale or any other similar action under federal, state or foreign law;

 

(xii)     the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or (ii) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law or (iii) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period of thirty (30) consecutive days;

 

 

(xiii)     a final judgment or judgments for the payment of money aggregating in excess of $500,000 are rendered against the Company and/or any of its Subsidiaries and which judgments are not, within thirty (30) days after the entry thereof, bonded, discharged, settled or stayed pending appeal, or are not discharged within thirty (30) days after the expiration of such stay; provided, however, any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $500,000 amount set forth above so long as the Company provides each Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to each Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity within thirty (30) days of the issuance of such judgment;

 

(xiv)     the Company and/or any Subsidiary, individually or in the aggregate, either (i) fails to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness in excess of $500,000 due to any third party (other than, with respect to unsecured Indebtedness only, payments contested by the Company and/or such Subsidiary (as the case may be) in good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP) or is otherwise in breach or violation of any agreement for monies owed or owing in an amount in excess of $100,000, which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist any other circumstance or event that would, with or without the passage of time or the giving of notice, result in a default or event of default under any agreement binding the Company or any Subsidiary, which default or event of default would or is likely to have a material adverse effect on the business, assets, operations (including results thereof), liabilities, properties, condition (including financial condition) or prospects of the Company or any of its Subsidiaries, individually or in the aggregate;

 

(xv)     other than as specifically set forth in another clause of this Section 5(a), the Company or any Subsidiary breaches any representation or warranty or any covenant or other term or condition of any Transaction Document, except, in the case of a breach of a covenant or other term or condition that is curable, only if such breach remains uncured for a period of two (2) consecutive Trading Days;

 

(xvi)     a false or inaccurate certification (including a false or inaccurate deemed certification) by the Company that either (A) the Equity Conditions are satisfied, (B) there has been no Equity Conditions Failure, or (C) as to whether any Triggering Event has occurred;

 

(xvii)     any breach or failure in any respect by the Company or any Subsidiary to comply with any provision of Section 16(m) of this Certificate of Designations;

 

(xviii)     any Preferred Shares remain outstanding on or after the Maturity Date;

 

(xix)     any Material Adverse Effect (as defined in the Securities Purchase Agreement) occurs;

 

 

(xx)     the Closing Bid Price of the Common Stock is less than the Floor Price then in effect for a period of three (3) consecutive Trading Days; or

 

(xxi)     any provision of any Transaction Document shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against the Company, or the validity or enforceability thereof shall be contested, directly or indirectly, by the Company or any Subsidiary, or a proceeding shall be commenced by the Company or any Subsidiary or any governmental authority having jurisdiction over any of them, seeking to establish the invalidity or unenforceability thereof or the Company or any of its Subsidiaries shall deny in writing that it has any liability or obligation purported to be created under one or more Transaction Documents.

 

(b)    Notice of a Triggering Event; Redemption Right. Upon the occurrence of a Triggering Event with respect to the Preferred Shares, the Company shall within one (1) Business Day deliver written notice thereof via electronic mail and overnight courier (with next day delivery specified) (an “Triggering Event Notice”) to each Holder. At any time after the earlier of a Holder’s receipt of a Triggering Event Notice and such Holder becoming aware of a Triggering Event, such Holder may require the Company to redeem (regardless of whether such Triggering Event has been cured) all or any of the Preferred Shares by delivering written notice thereof (the “Triggering Event Redemption Notice”) to the Company, which Triggering Event Redemption Notice shall indicate the number of the Preferred Shares such Holder is electing to redeem. Each of the Preferred Shares subject to redemption by the Company pursuant to this Section 5(b) shall be redeemed by the Company at a price equal to the greater of (i) the product of (A) the Conversion Amount to be redeemed multiplied by (B) the Redemption Premium and (ii) the product of (X) the Conversion Rate with respect to the Conversion Amount in effect at such time as such Holder delivers a Triggering Event Redemption Notice multiplied by (Y) the product of (1) the Redemption Premium multiplied by (2) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date immediately preceding such Triggering Event and ending on the date the Company makes the entire payment required to be made under this Section 5(b) (the “Triggering Event Redemption Price”). Redemptions required by this Section 5(b) shall be made in accordance with the provisions of Section 13. To the extent redemptions required by this Section 5(b) are deemed or determined by a court of competent jurisdiction to be prepayments of the Preferred Shares by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section 5(b), but subject to Section 4(d), until the Triggering Event Redemption Price (together with any Late Charges thereon) is paid in full, the Conversion Amount submitted for redemption under this Section 5(b) (together with any Late Charges thereon) may be converted, in whole or in part, by such Holder into Common Stock pursuant to the terms of this Certificate of Designations. In the event of the Company’s redemption of any of the Preferred Shares under this Section 5(b), a Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for such Holder. Accordingly, any redemption premium due under this Section 5(b) is intended by the parties to be, and shall be deemed, a reasonable estimate of such Holder’s actual loss of its investment opportunity and not as a penalty. Any redemption upon a Triggering Event shall not constitute an election of remedies by the applicable Holder or any other Holder, and all other rights and remedies of each Holder shall be preserved.

 

 

(c)    Mandatory Redemption upon Bankruptcy Triggering Event. Notwithstanding anything to the contrary herein, and notwithstanding any conversion that is then required or in process, upon any Bankruptcy Triggering Event, whether occurring prior to or following the Maturity Date, the Company shall immediately redeem, in cash, each of the Preferred Shares then outstanding at a redemption price equal to the applicable Triggering Event Redemption Price (calculated as if such Holder shall have delivered the Triggering Event Redemption Notice immediately prior to the occurrence of such Bankruptcy Triggering Event), without the requirement for any notice or demand or other action by any Holder or any other person or entity, provided that a Holder may, in its sole discretion, waive such right to receive payment upon a Bankruptcy Triggering Event, in whole or in part, and any such waiver shall not affect any other rights of such Holder or any other Holder hereunder, including any other rights in respect of such Bankruptcy Triggering Event, any right to conversion, and any right to payment of such Triggering Event Redemption Price or any other Redemption Price, as applicable.

 

6.        Rights Upon Fundamental Transactions.

 

(a)    Assumption. The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing all of the obligations of the Company under this Certificate of Designations and the other Transaction Documents in accordance with the provisions of this Section 6(a) pursuant to written agreements in form and substance satisfactory to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction, including agreements to deliver to each holder of Preferred Shares in exchange for such Preferred Shares a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Certificate of Designations, including, without limitation, having a stated value and dividend rate equal to the stated value and dividend rate of the Preferred Shares held by the Holders and having similar ranking to the Preferred Shares, and satisfactory to the Required Holders and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation whose shares of common stock are quoted on or listed for trading on an Eligible Market. Upon the occurrence of any 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 Designations and the other Transaction Documents 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 Certificate of Designations and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein and therein. In addition to the foregoing, upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to each Holder confirmation that there shall be issued upon conversion or redemption of the Preferred Shares at any time after the consummation of such Fundamental Transaction, in lieu of the shares of Common Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 7 and 18, which shall continue to be receivable thereafter)) issuable upon the conversion or redemption of the Preferred Shares prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the Successor Entity (including its Parent Entity) which each Holder would have been entitled to receive upon the happening of such Fundamental Transaction had all the Preferred Shares held by each Holder been converted immediately prior to such Fundamental Transaction (without regard to any limitations on the conversion of the Preferred Shares contained in this Certificate of Designations), as adjusted in accordance with the provisions of this Certificate of Designations. Notwithstanding the foregoing, such Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 6(a) to permit the Fundamental Transaction without the assumption of the Preferred Shares. The provisions of this Section 6 shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion or redemption of the Preferred Shares.

 

 

(b)    Notice of a Change of Control Redemption Right. No sooner than twenty (20) Trading Days nor later than ten (10) Trading Days prior to the consummation of a Change of Control (the “Change of Control Date”), but not prior to the public announcement of such Change of Control, the Company shall deliver written notice thereof via electronic mail and overnight courier to each Holder (a “Change of Control Notice”). At any time during the period beginning after a Holder’s receipt of a Change of Control Notice or such Holder becoming aware of a Change of Control if a Change of Control Notice is not delivered to such Holder in accordance with the immediately preceding sentence (as applicable) and ending on twenty (20) Trading Days after the later of (A) the date of consummation of such Change of Control or (B) the date of receipt of such Change of Control Notice or (C) the date of the announcement of such Change of Control, such Holder may require the Company to redeem all or any portion of such Holder’s Preferred Shares by delivering written notice thereof (“Change of Control Redemption Notice”) to the Company, which Change of Control Redemption Notice shall indicate the number of Preferred Shares such Holder is electing to have the Company redeem. Each Preferred Share subject to redemption pursuant to this Section 6(b) shall be redeemed by the Company in cash at a price equal to the greatest of (i) the product of (w) the Change of Control Redemption Premium multiplied by (y) the Conversion Amount of the Preferred Shares being redeemed, (ii) the product of (x) the Change of Control Redemption Premium multiplied by (y) the product of (A) the Conversion Amount of the Preferred Shares being redeemed multiplied by (B) the quotient determined by dividing (I) the greatest Closing Sale Price of the shares of Common Stock during the period beginning on the date immediately preceding the earlier to occur of (1) the consummation of the applicable Change of Control and (2) the public announcement of such Change of Control and ending on the date such Holder delivers the Change of Control Redemption Notice by (II) the Conversion Price then in effect and (iii) the product of (y) the Change of Control Redemption Premium multiplied by (z) the product of (A) the Conversion Amount of the Preferred Shares being redeemed multiplied by (B) the quotient of (I) the aggregate cash consideration and the aggregate cash value of any non-cash consideration per share of Common Stock to be paid to such holders of the shares of Common Stock upon consummation of such Change of Control (any such non-cash consideration constituting publicly-traded securities shall be valued at the highest of the Closing Sale Price of such securities as of the Trading Day immediately prior to the consummation of such Change of Control, the Closing Sale Price of such securities on the Trading Day immediately following the public announcement of such proposed Change of Control and the Closing Sale Price of such securities on the Trading Day immediately prior to the public announcement of such proposed Change of Control) divided by (II) the Conversion Price then in effect (the “Change of Control Redemption Price”). Redemptions required by this Section 6(b) shall have priority to payments to all other stockholders of the Company in connection with such Change of Control. To the extent redemptions required by this Section 6(b) are deemed or determined by a court of competent jurisdiction to be prepayments of the Preferred Shares by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in this Section 6(b), but subject to Section 4(d), until the applicable Change of Control Redemption Price (together with any Late Charges thereon) is paid in full to the applicable Holder, the Preferred Shares submitted by such Holder for redemption under this Section 6(b) may be converted, in whole or in part, by such Holder into Common Stock pursuant to Section 4 or in the event the Conversion Date is after the consummation of such Change of Control, stock or equity interests of the Successor Entity substantially equivalent to the Company’s shares of Common Stock pursuant to Section 6(a). In the event of the Company’s redemption of any of the Preferred Shares under this Section 6(b), such Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for a Holder. Accordingly, any redemption premium due under this Section 6(b) is intended by the parties to be, and shall be deemed, a reasonable estimate of such Holder’s actual loss of its investment opportunity and not as a penalty. The Company shall make payment of the applicable Change of Control Redemption Price concurrently with the consummation of such Change of Control if a Change of Control Redemption Notice is received prior to the consummation of such Change of Control and within two (2) Trading Days after the Company’s receipt of such notice otherwise (the “Change of Control Redemption Date”). Redemptions required by this Section 6 shall be made in accordance with the provisions of Section 13.

 

 

7.            Rights Upon Issuance of Purchase Rights and Other Corporate Events.

 

(a)    Purchase Rights. In addition to any adjustments pursuant to Section 8 and Section 18 below, if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of any class of Common Stock (the “Purchase Rights”), then each Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of all the Preferred Shares (without taking into account any limitations or restrictions on the convertibility of the Preferred Shares and assuming for such purpose that all the Preferred Shares were converted at the Alternate Conversion Price as of the applicable record date) held by such Holder immediately prior to 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 such Holder’s right to participate in any such Purchase Right would result in such Holder and the other Attribution Parties exceeding the Maximum Percentage, then such Holder shall not be entitled to participate in such Purchase Right to such extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Purchase Right (and beneficial ownership) to such extent of any such excess)) and such Purchase Right to such extent shall be held in abeyance (and, if such Purchase Right has an expiration date, maturity date or other similar provision, such term shall be extended by such number of days held in abeyance, if applicable) for the benefit of such Holder until such time or times, if ever, as its right thereto would not result in such Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times such Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right held similarly in abeyance (and, if such Purchase Right has an expiration date, maturity date or other similar provision, such term shall be extended by such number of days held in abeyance, if applicable)) to the same extent as if there had been no such limitation.

 

(b)    Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to ensure that each Holder will thereafter have the right, at such Holder’s option, to receive upon a conversion of all the Preferred Shares held by such Holder (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which such Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by such Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of the Preferred Shares set forth in this Certificate of Designations) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as such Holder would have been entitled to receive had the Preferred Shares held by such Holder initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant the preceding sentence shall be in a form and substance satisfactory to the Required Holders. The provisions of this Section 7 shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of the Preferred Shares set forth in this Certificate of Designations.

 

 

8.             Rights Upon Issuance of Other Securities.

 

(a)    Adjustment of Conversion Price upon Issuance of Common Stock. If and whenever on or after the Subscription Date the Company grants, issues or sells (or enters into any agreement to grant, issue or sell), or in accordance with this Section 8(a) is deemed to have granted, issued or sold, any shares of Common Stock (including the granting, issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Excluded Securities granted, issued or sold or deemed to have been granted, issued or sold) for a consideration per share (the “New Issuance Price”) less than a price equal to the Conversion Price in effect immediately prior to such granting, issuance or sale or deemed granting, issuance or sale (such Conversion Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, (I) if prior to such time after the Issuance Date that the Company has consummated one or more Subsequent Placements (as defined in the Securities Purchase Agreement) with net cash proceeds to the Company, in the aggregate, of at least $4 million (such time of consummation, the “Weighted Average Trigger Time”), the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price (including, for the avoidance of doubt, for any Subsequent Placement that results in such Weighted Average Trigger Time) or (II) if after such Weighted Average Trigger Time, the Conversion Price then in effect shall be reduced to an amount equal to the product of (A) the Applicable Price and (B) the quotient determined by dividing (1) the sum of (I) the product derived by multiplying the Applicable Price by the number of shares of Common Stock Deemed Outstanding immediately prior to such Dilutive Issuance plus (II) the consideration, if any, received by the Company upon such Dilutive Issuance, by (2) the product derived by multiplying (I) the Applicable Price by (II) the number of shares of Common Stock Deemed Outstanding immediately after such Dilutive Issuance. For all purposes of the foregoing (including, without limitation, determining the adjusted Conversion Price and the New Issuance Price under this Section 8(a)), the following shall be applicable:

 

(i)     Issuance of Options. If the Company in any manner grants, issues or sells (or enters into any agreement to grant, issue or sell) any Options and the lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting, issuance or sale of such Option for such price per share. For purposes of this Section 8(a)(i), the “lowest price per share for which one share of Common Stock is at any time issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock upon the granting, issuance or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y) the lowest exercise price set forth in such Option for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon the exercise of any such Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof, minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person) with respect to any one share of Common Stock upon the granting, issuance or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof plus the value of any other consideration (including, without limitation, consideration consisting of cash, debt forgiveness, assets or any other property) received or receivable by, or benefit conferred on, the holder of such Option (or any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise of such Options or otherwise pursuant to the terms thereof or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.

 

 

(ii)     Issuance of Convertible Securities. If the Company in any manner issues or sells (or enters into any agreement to issue or sell) any Convertible Securities and the lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale (or the time of execution of such agreement to issue or sell, as applicable) of such Convertible Securities for such price per share. For the purposes of this Section 8(a)(ii), the “lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale (or pursuant to the agreement to issue or sell, as applicable) of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security or otherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) with respect to any one share of Common Stock upon the issuance or sale (or the agreement to issue or sell, as applicable) of such Convertible Security plus the value of any other consideration received or receivable (including, without limitation, any consideration consisting of cash, debt forgiveness, assets or other property) by, or benefit conferred on, the holder of such Convertible Security (or any other Person). Except as contemplated below, no further adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any such issuance or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of the Conversion Price has been or is to be made pursuant to other provisions of this Section 8(a), except as contemplated below, no further adjustment of the Conversion Price shall be made by reason of such issuance or sale.

 

(iii)     Change in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other than proportional changes in conversion or exercise prices, as applicable, in connection with an event referred to in Section 8(b) below), the Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate (as the case may be) at the time initially granted, issued or sold. For purposes of this Section 8(a)(iii), if the terms of any Option or Convertible Security (including, without limitation, any Option or Convertible Security that was outstanding as of the Subscription Date) are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 8(a) shall be made if such adjustment would result in an increase of the Conversion Price then in effect.

 

 

(iv)     Calculation of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with the issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Required Holders, the “Primary Security”, and such Option and/or Convertible Security and/or Adjustment Right, the “Secondary Securities”), together comprising one integrated transaction (or one or more transactions if such issuances or sales or deemed issuances or sales of securities of the Company either (A) have at least one investor or purchaser in common, (B) are consummated in reasonable proximity to each other and/or (C) are consummated under the same plan of financing), the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to be equal to the difference of (x) the lowest price per share for which one share of Common Stock was issued (or was deemed to be issued pursuant to Section 8(a)(i) or 8(a)(ii) above, as applicable) in such integrated transaction solely with respect to such Primary Security, minus (y) with respect to such Secondary Securities, the sum of (A) the Black Scholes Consideration Value of each such Option, if any, (B) the fair market value (as mutually and timely determined in good faith by the Company and such Holder) or the Black Scholes Consideration Value, as applicable, of such Adjustment Right, if any, and (C) the fair market value (as mutually and timely determined in good faith by the Company and such Holder) of such Convertible Security, if any, in each case, as determined on a per share basis in accordance with this Section 8(a)(iv). If the Company and such Holder are unable to timely agree upon any such fair market value then such dispute shall be resolved in accordance with the procedures of Section 26. If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be deemed to be the net amount of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value), will be the fair value of such consideration, except where such consideration consists of publicly traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value), will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company and the Required Holders. If the Company and such Holder are unable to timely agree upon any such fair market value then such dispute shall be resolved in accordance with the procedures of Section 26.

 

(v)     Record Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

 

 

(b)    Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision of Section 6, Section 18 or Section 8(a), if the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, stock combination, recapitalization or other similar transaction) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision of Section 6, Section 18 or Section 8(a), if the Company at any time on or after the Subscription Date combines (by any stock split, stock dividend, stock combination, recapitalization or other similar transaction) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 8(b) shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 8(b) occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.

 

(c)    Holder’s Right of Adjusted Conversion Price. In addition to and not in limitation of the other provisions of this Section 8(c), if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities (other than with respect to a Permitted Equity Line (as defined in the Securities Purchase Agreement)) (any such securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to such agreement or convertible into or exchangeable or exercisable for shares of Common Stock at a price which varies or may vary with the market price of the shares of Common Stock, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting customary anti-dilution provisions (such as share splits, share combinations, share dividends and similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”), the Company shall provide written notice thereof via electronic mail and overnight courier to each Holder on the date of such agreement and/or the issuance of such shares of Common Stock, Convertible Securities or Options, as applicable. From and after the date the Company enters into such agreement or issues any such Variable Price Securities, each Holder shall have the right, but not the obligation, in its sole discretion to substitute the Variable Price for the Conversion Price upon conversion of the Preferred Shares by designating in the Conversion Notice delivered upon any conversion of Preferred Shares that solely for purposes of such conversion such Holder is relying on the Variable Price rather than the Conversion Price then in effect. A Holder’s election to rely on a Variable Price for a particular conversion of Preferred Shares shall not obligate such Holder to rely on a Variable Price for any future conversions of Preferred Shares.

 

 

(d)    Stock Combination Event Adjustments. If at any time and from time to time on or after the Subscription Date there occurs any stock split, stock dividend, stock combination recapitalization or other similar transaction involving the Common Stock (each, a “Stock Combination Event”, and such date thereof, the “Stock Combination Event Date”) and the Event Market Price is less than the Conversion Price then in effect (after giving effect to the adjustment in Section 8(b) above), then on the sixteenth (16th) Trading Day immediately following such Stock Combination Event Date (each, a “Stock Combination Adjustment Date”), the Conversion Price then in effect on such sixteenth (16th) Trading Day (after giving effect to the adjustment in Section 8(b) above) shall be reduced (but in no event increased) to the Event Market Price. For the avoidance of doubt, if the adjustment in the immediately preceding sentence would otherwise result in an increase in the Conversion Price hereunder, no adjustment shall be made. Notwithstanding the foregoing, if a Holder requests to convert any Preferred Shares in whole or in part on any given date during a Stock Combination Measuring Period, solely with respect to such Preferred Shares being converted on such applicable Conversion Date, (a) such applicable Stock Combination Adjustment Date shall be deemed to mean such Conversion Date, (b) such applicable Stock Combination Measuring Period shall be deemed to have ended on the Trading Day immediately prior to such Conversion Date and (c) the applicable Event Market Price for such converted Preferred Shares shall be calculated pursuant to this Section 8(d). For the avoidance of doubt, following the calculation of the Event Market Price pursuant to this Section 8(d), the Company’s obligations with regard to such converted Preferred Shares shall be deemed satisfied and no additional Event Market Price shall apply to such converted Preferred Shares.

 

(e)    Other Events. In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect any Holder from dilution or if any event occurs of the type contemplated by the provisions of this Section 8 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Board shall in good faith determine and implement an appropriate adjustment in the Conversion Price so as to protect the rights of such Holder, provided that no such adjustment pursuant to this Section 8(b) will increase the Conversion Price as otherwise determined pursuant to this Section 8, provided further that if such Holder does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then the Board and such Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.

 

(f)    Calculations. All calculations under this Section 8 shall be made by rounding to the nearest cent or the nearest 1/100^th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

 

(g)    Voluntary Adjustment by Company. Subject to the rules and regulations of the Principal Market, the Company may at any time any Preferred Shares remain outstanding, with the prior written consent of the Required Holders, reduce the then current Conversion Price to any amount and for any period of time deemed appropriate by the Board.

 

 

(h)    Adjustments. If on any of (i) the tenth (10^th) Trading Day after the Applicable Date (as defined in the Securities Purchase Agreement), (ii) the thirtieth (30^th) calendar day after the Applicable Date, (iii) the sixtieth (60^th) calendar day after the Applicable Date, (iv) the ninetieth (90^th) calendar day after the Applicable Date or (v) the one hundred and eightieth (180^th) calendar day after the Applicable Date, as applicable (each, an “Adjustment Date”), the Conversion Price then in effect is greater than the Market Price then in effect (each, an “Adjustment Price”), on any such applicable Adjustment Date the Conversion Price shall automatically lower to the applicable Adjustment Price. Notwithstanding the foregoing, if a Holder requests to convert any Preferred Shares in whole or in part on any given date during a Market Price Measuring Period, solely with respect to such Preferred Shares being converted on such applicable Conversion Date, (a) such applicable Adjustment Date shall be deemed to mean such Conversion Date, (b) such applicable Market Price Measuring Period shall be deemed to have ended on the Trading Day immediately prior to such Conversion Date and (c) the applicable Adjustment Price for such converted Preferred Shares shall be calculated pursuant to this Section 8(d). For the avoidance of doubt, following the calculation of the Adjustment Price pursuant to this Section 8(d), the Company’s obligations with regard to such converted Preferred Shares shall be deemed satisfied and no additional Adjustment Price shall apply to such converted Preferred Shares.

 

(i)    Exchange Right. Notwithstanding anything herein to the contrary, if a Holder participates in a Subsequent Placement, each such Holder may, at the option of such Holder as elected in writing to the Company, satisfy the purchase price of the securities to be sold to such Holder in such Subsequent Placement, in whole or in part, with Preferred Shares valued at 120% of the Conversion Amount of the Preferred Shares delivered by such Holder as payment therefor.

 

9.            Redemption at the Company’s Election.

 

(a)    Company Optional Redemption. At any time no Equity Conditions Failure exists, the Company shall have the right to redeem all, but not less than all, of the Preferred Shares then outstanding (the “Company Optional Redemption Amount”) on the Company Optional Redemption Date (each as defined below) (a “Company Optional Redemption”). The Preferred Shares subject to redemption pursuant to this Section 9(a) shall be redeemed by the Company in cash at a price (the “Company Optional Redemption Price”) equal to 125% of the greater of (i) the Conversion Amount being redeemed as of the Company Optional Redemption Date and (ii) the product of (1) the Conversion Rate with respect to the Conversion Amount being redeemed as of the Company Optional Redemption Date multiplied by (2) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date immediately preceding such Company Optional Redemption Notice Date and ending on the Trading Day immediately prior to the date the Company makes the entire payment required to be made under this Section 9(a). The Company may exercise its right to require redemption under this Section 9(a) by delivering a written notice thereof by electronic mail and overnight courier to all, but not less than all, of the Holders (the “Company Optional Redemption Notice” and the date all of the Holders received such notice is referred to as the “Company Optional Redemption Notice Date”). The Company may deliver only one Company Optional Redemption Notice hereunder and such Company Optional Redemption Notice shall be irrevocable. The Company Optional Redemption Notice shall specify (x) the date on which the Company Optional Redemption shall occur (the “Company Optional Redemption Date”) which date shall not be less than twenty (20) Trading Days nor more than forty (40) Trading Days following the Company Optional Redemption Notice Date, (y) certify that there has been no Equity Conditions Failure and (z) the aggregate Conversion Amount of the Preferred Shares which is being redeemed in such Company Optional Redemption from such Holder and all of the other Holders of the Preferred Shares pursuant to this Section 9(a) on the Company Optional Redemption Date. Notwithstanding anything herein to the contrary, (i) if no Equity Conditions Failure has occurred as of the Company Optional Redemption Notice Date but an Equity Conditions Failure occurs at any time prior to the Company Optional Redemption Date, (A) the Company shall provide each Holder a subsequent notice to that effect and (B) unless such Holder waives the Equity Conditions Failure, the Company Optional Redemption with respect to such Holder shall be cancelled and the applicable Company Optional Redemption Notice shall be null and void and (ii) at any time prior to the date the Company Optional Redemption Price is paid, in full, the Company Optional Redemption Amount may be converted, in whole or in part, by any Holder into shares of Common Stock pursuant to Section 4. All Conversion Amounts converted by a Holder after the Company Optional Redemption Notice Date shall reduce the Company Optional Redemption Amount of the Preferred Shares of such Holder required to be redeemed on the Company Optional Redemption Date. Redemptions made pursuant to this Section 9(a) shall be made in accordance with Section 13. In the event of the Company’s redemption of any of the Preferred Shares under this Section 9, a Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for such Holder. Accordingly, any redemption premium due under this Section 9 is intended by the parties to be, and shall be deemed, a reasonable estimate of such Holder’s actual loss of its investment opportunity and not as a penalty. For the avoidance of doubt, the Company shall have no right to effect a Company Optional Redemption if any Triggering Event has occurred and continuing, but any Triggering Event shall have no effect upon any Holder’s right to convert Preferred Shares in its discretion.

 

 

10.    Equity Line Mandatory Redemption. At any time on or after such date that no shares of Series C Preferred Stock and Notes remain outstanding, if the Company sells any Common Stock (or other security) pursuant to any equity line of credit, at-the-market offering (or any similar transaction) with any Person (including, with limitation, pursuant to any Common Stock purchase agreement, by and between the Company and Keystone Capital Partners, LLC (“Keystone”) (or any of its affiliates)) (each, an “Equity Line”) (and each date the Company sells any shares of Common Stock pursuant to any such Equity Line, each an “Equity Line Trigger Date”, and each such sale, an “Eligible Equity Line Transaction”), by no later than 9:00 AM, New York City time on the first (1st) Trading Day of the immediately subsequent calendar week after any such Equity Line Trigger Date (each, a “Equity Mandatory Redemption Notice Date”), the Company shall deliver written notice to each Holder (each, an “Equity Line Mandatory Redemption Notice”) specifying (i) the aggregate gross proceeds (less any reasonable and documented legal fees and expenses) of all Eligible Equity Line Transactions in the prior calendar week (each, an “Equity Line Proceeds Amount”), (ii) the applicable Holder Pro Rata Amount of 40% of such Equity Line Proceeds Amount (each, an “Equity Line Mandatory Redemption Amount”), (iii) the applicable Equity Line Mandatory Redemption Date (as defined below) and (iv) the aggregate whole number of Preferred Shares of such applicable Holder eligible to be redeemed in such Equity Line Mandatory Redemption (as defined below) (collectively, the “Equity Line Mandatory Redemption Preferred Shares”) as calculated based upon the quotient of (x) the applicable Equity Line Mandatory Redemption Amount of such Holder divided by (y) the redemption price of a Preferred Share of such Holder (calculated based upon $1.20 per each $1.00 of Conversion Amount of such Preferred Share of such Holder then outstanding and subject to such Equity Line Mandatory Redemption) (such applicable per share redemption price, each, an “Equity Line Mandatory Redemption Per Share Price”, and the product of such applicable Holder’s Equity Line Mandatory Redemption Per Share Price and such applicable Holder’s aggregate number of applicable Equity Line Mandatory Redemption Preferred Shares, each, an “Equity Line Mandatory Redemption Price”). Unless waived in writing by an applicable Holder, on the first (1st) Trading Day after such applicable Equity Mandatory Redemption Notice Date (each, an “Equity Line Mandatory Redemption Date”), the Company shall redeem in cash (each, a “Equity Line Mandatory Redemption”) the applicable Equity Line Mandatory Redemption Preferred Shares of such Holder at the applicable Equity Line Mandatory Redemption Price, without the requirement for any notice or demand or other action by such Holder or any other Person. Redemptions required by this Section 10 shall be made in accordance with the provisions of Section 13.

 

11.        Noncircumvention. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined in the Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Certificate of Designations, and will at all times in good faith carry out all the provisions of this Certificate of Designations and take all action as may be required to protect the rights of the Holders hereunder. Without limiting the generality of the foregoing or any other provision of this Certificate of Designations or the other Transaction Documents, the Company (a) shall not increase the par value of any shares of Common Stock receivable upon the conversion of any Preferred Shares above the Conversion Price then in effect, (b) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of Common Stock upon the conversion of Preferred Shares and (c) shall, so long as any Preferred Shares are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Preferred Shares, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the conversion of the Preferred Shares then outstanding (without regard to any limitations on conversion contained herein). Notwithstanding anything herein to the contrary, if after the sixty (60) calendar day anniversary of the Initial Issuance Date, each Holder is not permitted to convert such Holder’s Preferred Shares in full for any reason (other than pursuant to restrictions set forth in Section 4(d)(i) hereof), the Company shall use its best efforts to promptly remedy such failure, including, without limitation, obtaining such consents or approvals as necessary to effect such conversion into shares of Common Stock.

 

 

12.          Authorized Shares.

 

(a)    Reservation. So long as any Preferred Shares remain outstanding, the Company shall at all times reserve at least 300% of the number of shares of Common Stock as shall from time to time be necessary to effect the conversion, including without limitation, Alternate Conversions, of all of the Preferred Shares then outstanding at the Alternate Conversion Price then in effect (without regard to any limitations on conversions and assuming the Preferred Shares remain outstanding until the Maturity Date) (the “Required Reserve Amount”). The Required Reserve Amount (including, without limitation, each increase in the number of shares so reserved) shall be allocated pro rata among the Holders based on the number of the Preferred Shares held by each Holder on the Initial Issuance Date or increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”). In the event that a Holder shall sell or otherwise transfer any of such Holder’s Preferred Shares, each transferee shall be allocated a pro rata portion of such Holder’s Authorized Share Allocation. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Preferred Shares shall be allocated to the remaining Holders of Preferred Shares, pro rata based on the number of the Preferred Shares then held by the Holders.

 

(b)    Insufficient Authorized Shares. If, notwithstanding Section 12(a) and not in limitation thereof, at any time while any of the Preferred Shares remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Preferred Shares at least a number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Preferred Shares then outstanding (or deemed outstanding pursuant to Section 12(a) above). Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal (or, if a majority of the voting power then in effect of the capital stock of the Company consents to such increase, in lieu of such proxy statement, deliver to the stockholders of the Company an information statement that has been filed with (and either approved by or not subject to comments from) the SEC with respect thereto). In the event that the Company is prohibited from issuing shares of Common Stock to a Holder upon any conversion due to the failure by the Company to have sufficient shares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the “Authorized Failure Shares”), in lieu of delivering such Authorized Failure Shares to such Holder, the Company shall pay cash in exchange for the redemption of such portion of the Conversion Amount of the Preferred Shares convertible into such Authorized Failure Shares at a price equal to the sum of (i) the product of (x) such number of Authorized Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date such Holder delivers the applicable Conversion Notice with respect to such Authorized Failure Shares to the Company and ending on the date of such issuance and payment under this Section 12(a); and (ii) to the extent such Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Holder of Authorized Failure Shares, any brokerage commissions and other out-of-pocket expenses, if any, of such Holder incurred in connection therewith. Nothing contained in Section 12(a) or this Section 12(b) shall limit any obligations of the Company under any provision of the Securities Purchase Agreement.

 

 

13.          Redemptions.

 

(a)    General. If a Holder has submitted a Triggering Event Redemption Notice in accordance with Section 5(b), the Company shall deliver the applicable Triggering Event Redemption Price to such Holder in cash within five (5) Business Days after the Company’s receipt of such Holder’s Triggering Event Redemption Notice. The Company shall deliver the applicable Equity Line Mandatory Redemption Price to such Holder in cash on the applicable Equity Line Mandatory Redemption Date. If a Holder has submitted a Change of Control Redemption Notice in accordance with Section 6(b), the Company shall deliver the applicable Change of Control Redemption Price to such Holder in cash concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and within five (5) Business Days after the Company’s receipt of such notice otherwise. If a Holder has submitted a Maturity Redemption Notice (as defined below) in accordance with Section 14 below, the Company shall deliver the applicable Maturity Redemption Price (as defined below) to such Holder in cash on the applicable Maturity Redemption Date (as defined below). The Company shall deliver the applicable Company Optional Redemption Price to each Holder in cash on the applicable Company Optional Redemption Date. Notwithstanding anything herein to the contrary, in connection with any redemption hereunder at a time a Holder is entitled to receive a cash payment under any of the other Transaction Documents, at the option of such Holder delivered in writing to the Company, the applicable Redemption Price hereunder shall be increased by the amount of such cash payment owed to such Holder under such other Transaction Document and, upon payment in full or conversion in accordance herewith, shall satisfy the Company’s payment obligation under such other Transaction Document. In the event of a redemption of less than all of the Preferred Shares, the Company shall promptly cause to be issued and delivered to such Holder a new Preferred Share Certificate (in accordance with Section 21) (or evidence of the creation of a new Book-Entry) representing the number of Preferred Shares which have not been redeemed. In the event that the Company does not pay the applicable Redemption Price to a Holder within the time period required for any reason (including, without limitation, to the extent such payment is prohibited pursuant to the DGCL), at any time thereafter and until the Company pays such unpaid Redemption Price in full, such Holder shall have the option, in lieu of redemption, to require the Company to promptly return to such Holder all or any of the Preferred Shares that were submitted for redemption and for which the applicable Redemption Price (together with any Late Charges thereon) has not been paid. Upon the Company’s receipt of such notice, (x) the applicable Redemption Notice shall be null and void with respect to such Preferred Shares, (y) the Company shall immediately return the applicable Preferred Share Certificate, or issue a new Preferred Share Certificate (in accordance with Section 21(d)), to such Holder (unless the Preferred Shares are held in Book-Entry form, in which case the Company shall deliver evidence to such Holder that a Book-Entry for such Preferred Shares then exists), and in each case the Additional Amount of such Preferred Shares shall be increased by an amount equal to the difference between (1) the applicable Redemption Price (as the case may be, and as adjusted pursuant to this Section 13, if applicable) minus (2) the Stated Value portion of the Conversion Amount submitted for redemption and (z) the Conversion Price of such Preferred Shares shall be automatically adjusted with respect to each conversion effected thereafter by such Holder to the lowest of (A) the Conversion Price as in effect on the date on which the applicable Redemption Notice is voided, (B) the greater of (x) the Floor Price and (y) 75% of the lowest Closing Bid Price of the Common Stock during the period beginning on and including the date on which the applicable Redemption Notice is delivered to the Company and ending on and including the date on which the applicable Redemption Notice is voided and (C) the greater of (x) the Floor Price and (y) 75% of the quotient of (I) the sum of the five (5) lowest VWAPs of the Common Stock during the twenty (20) consecutive Trading Day period ending and including the Trading Day immediately preceding the applicable Conversion Date divided by (II) five (5) (it being understood and agreed that all such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period). A Holder’s delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect the Company’s obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect to the Preferred Shares subject to such notice.

 

 

(b)    Redemption by Multiple Holders. Upon the Company’s receipt of a Redemption Notice from any Holder for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 5(b) or Section 6(b), the Company shall immediately, but no later than one (1) Business Day of its receipt thereof, forward to each other Holder by electronic mail a copy of such notice. If the Company receives one or more Redemption Notices, during the seven (7) Business Day period beginning on and including the date which is two (2) Business Days prior to the Company’s receipt of the initial Redemption Notice and ending on and including the date which is two (2) Business Days after the Company’s receipt of the initial Redemption Notice and the Company is unable to redeem all of the Conversion Amount of such Preferred Shares designated in such initial Redemption Notice and such other Redemption Notices received during such seven (7) Business Day period, then the Company shall redeem a pro rata amount from each Holder based on the Stated Value of the Preferred Shares submitted for redemption pursuant to such Redemption Notices received by the Company during such seven (7) Business Day period.

 

14.         Holder Optional Redemption after Maturity Date. At any time from and after the tenth (10th) Business Day prior to the Maturity Date, any Holder may require the Company to redeem (a “Maturity Redemption”) all or any number of Preferred Shares held by such Holder at a purchase price equal to 100% of the Conversion Amount of such Preferred Shares (the “Maturity Redemption Price”) by delivery of written notice thereof (the “Maturity Redemption Notice”) to the Company. The Maturity Redemption Notice shall state the date the Company is required to pay to such Holder such Maturity Redemption Price (the “Maturity Redemption Date”), which date shall be no earlier than ten (10) Business Days following the date of delivery of such Maturity Redemption Notice. Redemptions required by this Section 14 shall be made in accordance with the provisions of Section 13.

 

 

15.         Voting Rights. Holders of Preferred Shares shall have no voting rights, except as required by law (including without limitation, the DGCL) and as expressly provided in this Certificate of Designations. To the extent that under the DGCL the vote of the holders of the Preferred Shares, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of the Required Holders of the shares of the Preferred Shares, voting together in the aggregate and not in separate series unless required under the DGCL, represented at a duly held meeting at which a quorum is presented or by written consent of the Required Holders (except as otherwise may be required under the DGCL), voting together in the aggregate and not in separate series unless required under the DGCL, shall constitute the approval of such action by both the class or the series, as applicable. Subject to Section 4(d), to the extent that under the DGCL holders of the Preferred Shares are entitled to vote on a matter with holders of shares of Common Stock, voting together as one class, each Preferred Share shall entitle the holder thereof to cast that number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible (subject to the ownership limitations specified in Section 4(d) hereof) using the record date for determining the stockholders of the Company eligible to vote on such matters as the date as of which the Conversion Price is calculated. Holders of the Preferred Shares shall be entitled to written notice of all stockholder meetings or written consents (and copies of proxy materials and other information sent to stockholders) with respect to which they would be entitled to vote, which notice would be provided pursuant to the Company’s bylaws and the DGCL.

 

16.          Covenants. For so long as any Preferred Shares are outstanding, without the prior written consent of the Required Holders:

 

(a)    Incurrence of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness (other than Permitted Indebtedness).

 

(b)    Existence of Liens. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens.

 

 

(c)    Restricted Payments and Investments. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (other than pursuant to this Certificate of Designations ) whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness or make any Investment, as applicable, if at the time such payment with respect to such Indebtedness and/or Investment, as applicable, is due or is otherwise made or, after giving effect to such payment, (i) an event constituting a Triggering Event has occurred and is continuing or (ii) an event that with the passage of time and without being cured would constitute a Triggering Event has occurred and is continuing.

 

(d)    Restriction on Redemption and Cash Dividends. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on any of its capital stock (other than as required by this Certificate of Designations).

 

(e)    Restriction on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, sell, lease, license (other than a license between the Company and AOP Health in respect of istaroxime and SERCA2a), assign, transfer, spin-off, split-off, close, convey or otherwise dispose of any assets or rights of the Company or any Subsidiary owned or hereafter acquired whether in a single transaction or a series of related transactions, other than (i) sales, leases, licenses, assignments, transfers, conveyances and other dispositions of such assets or rights by the Company and its Subsidiaries in the ordinary course of business consistent with its past practice and (ii) sales of inventory and product in the ordinary course of business.

 

(f)    Maturity of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, permit any Indebtedness of the Company or any of its Subsidiaries to mature or accelerate prior to the Maturity Date.

 

(g)    Change in Nature of Business. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, engage in any material line of business substantially different from those lines of business conducted by or publicly contemplated to be conducted by the Company and each of its Subsidiaries on the Subscription Date or any business substantially related or incidental thereto. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, modify its or their corporate structure or purpose.

 

(h)    Preservation of Existence, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its existence, rights and privileges, and become or remain, and cause each of its Subsidiaries to become or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary.

 

(i)    Maintenance of Properties, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply, and cause each of its Subsidiaries to comply, at all times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.

 

 

(j)    Maintenance of Intellectual Property. The Company will, and will cause each of its Subsidiaries to, take all action necessary or advisable to maintain all of the Intellectual Property Rights of the Company and/or any of its Subsidiaries that are necessary or material to the conduct of its business in full force and effect.

 

(k)    Maintenance of Insurance. The Company shall maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated.

 

(l)    Transactions with Affiliates. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any affiliate, except transactions in the ordinary course of business in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of its business, for fair consideration and on terms no less favorable to it or its Subsidiaries than would be obtainable in a comparable arm’s length transaction with a Person that is not an affiliate thereof.

 

(m)    Restricted Issuances. The Company shall not, directly or indirectly, without the prior written consent of the Required Holders, (i) issue any Preferred Shares (other than as contemplated by the Securities Purchase Agreement and this Certificate of Designations) or (ii) issue any other securities that would cause a breach or default under this Certificate of Designations.

 

(n)    Stay, Extension and Usury Laws. To the extent that it may lawfully do so, the Company (A) agrees that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law (wherever or whenever enacted or in force) that may affect the covenants or the performance of this Certificate of Designations; and (B) expressly waives all benefits or advantages of any such law and agrees that it will not, by resort to any such law, hinder, delay or impede the execution of any power granted to the Holders by this Certificate of Designations, but will suffer and permit the execution of every such power as though no such law has been enacted.

 

 

(o)    Taxes. The Company and its Subsidiaries shall pay when due all taxes, fees or other charges of any nature whatsoever (together with any related interest or penalties) now or hereafter imposed or assessed against the Company and its Subsidiaries or their respective assets or upon their ownership, possession, use, operation or disposition thereof or upon their rents, receipts or earnings arising therefrom (except where the failure to pay would not, individually or in the aggregate, have a material effect on the Company or any of its Subsidiaries). The Company and its Subsidiaries shall file on or before the due date therefor all personal property tax returns (except where the failure to file would not, individually or in the aggregate, have a material effect on the Company or any of its Subsidiaries). Notwithstanding the foregoing, the Company and its Subsidiaries may contest, in good faith and by appropriate proceedings, taxes for which they maintain adequate reserves therefor in accordance with GAAP.

 

(p)    Independent Investigation. At the request of any Holder either (x) at any time when a Triggering Event has occurred and is continuing, (y) upon the occurrence of an event that with the passage of time or giving of notice would constitute a Triggering Event or (z) at any time such Holder reasonably believes a Triggering Event may have occurred or be continuing, the Company shall hire an independent, reputable investment bank selected by the Company and approved by such Holder to investigate as to whether any breach of the Certificate of Designations has occurred (the “Independent Investigator”). If the Independent Investigator determines that such breach of the Certificate of Designations has occurred, the Independent Investigator shall notify the Company of such breach and the Company shall deliver written notice to each Holder of such breach. In connection with such investigation, the Independent Investigator may, during normal business hours, inspect all contracts, books, records, personnel, offices and other facilities and properties of the Company and its Subsidiaries and, to the extent available to the Company after the Company uses reasonable efforts to obtain them, the records of its legal advisors and accountants (including the accountants’ work papers) and any books of account, records, reports and other papers not contractually required of the Company to be confidential or secret, or subject to attorney-client or other evidentiary privilege, and the Independent Investigator may make such copies and inspections thereof as the Independent Investigator may reasonably request. The Company shall furnish the Independent Investigator with such financial and operating data and other information with respect to the business and properties of the Company as the Independent Investigator may reasonably request. The Company shall permit the Independent Investigator to discuss the affairs, finances and accounts of the Company with, and to make proposals and furnish advice with respect thereto to, the Company’s officers, directors, key employees and independent public accountants or any of them (and by this provision the Company authorizes said accountants to discuss with such Independent Investigator the finances and affairs of the Company and any Subsidiaries), all at such reasonable times, upon reasonable notice, and as often as may be reasonably requested.

 

 

17.          Liquidation, Dissolution, Winding-Up. In the event of a Liquidation Event, the Holders shall be entitled to receive in cash out of the assets of the Company, whether from capital or from earnings available for distribution to its stockholders (the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of Junior Stock, but pari passu with any Parity Stock then outstanding, an amount per Preferred Share equal to the greater of (A) 125% of the Conversion Amount of such Preferred Share on the date of such payment and (B) the amount per share such Holder would receive if such Holder converted such Preferred Share into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are insufficient to pay the full amount due to the Holders and holders of shares of Parity Stock, then each Holder and each holder of Parity Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such Holder and such holder of Parity Stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Preferred Shares and all holders of shares of Parity Stock. To the extent necessary, the Company shall cause such actions to be taken by each of its Subsidiaries so as to enable, to the maximum extent permitted by law, the proceeds of a Liquidation Event to be distributed to the Holders in accordance with this Section 17. All the preferential amounts to be paid to the Holders under this Section 17 shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Company to the holders of shares of Junior Stock in connection with a Liquidation Event as to which this Section 17 applies.

 

18.          Distribution of Assets. In addition to any adjustments pursuant to Section 7(a) and Section 8, if the Company shall declare or make any dividend or other distributions of its assets (or rights to acquire its assets) to any or all 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) (the “Distributions”), then each Holder, as holders of Preferred Shares, will be entitled to such Distributions as if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of the Preferred Shares (without taking into account any limitations or restrictions on the convertibility of the Preferred Shares and assuming for such purpose that the Preferred Share was converted at the Alternate Conversion Price as of the applicable record date) immediately prior to the date on which a record is taken for such Distribution or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for such Distributions (provided, however, that to the extent that such Holder’s right to participate in any such Distribution would result in such Holder and the other Attribution Parties exceeding the Maximum Percentage, then such Holder shall not be entitled to participate in such Distribution to such extent of the Maximum Percentage (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Distribution (and beneficial ownership) to such extent of any such excess) and the portion of such Distribution shall be held in abeyance for the benefit of such Holder until such time or times as its right thereto would not result in such Holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times, if any, such Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on any subsequent Distribution held similarly in abeyance) to the same extent as if there had been no such limitation).

 

 

19.          Vote to Change the Terms of or Issue Preferred Shares. In addition to any other rights provided by law, except where the vote or written consent of the holders of a greater number of shares is required by law or by another provision of the Certificate of Incorporation, without first obtaining the affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the Required Holders, voting together as a single class, the Company shall not: (a) amend or repeal any provision of, or add any provision to, its Certificate of Incorporation or bylaws, or file any certificate of designations or articles of amendment of any series of shares of preferred stock, if such action would adversely alter or change in any respect the preferences, rights, privileges or powers, or restrictions provided for the benefit of the Preferred Shares hereunder, regardless of whether any such action shall be by means of amendment to the Certificate of Incorporation or by merger, consolidation or otherwise; (b) increase or decrease (other than by conversion) the authorized number of Preferred Shares; (c) without limiting any provision of Section 2, create or authorize (by reclassification or otherwise) any new class or series of Senior Preferred Stock or Parity Stock; (d) purchase, repurchase or redeem any shares of Junior Stock (other than pursuant to the terms of the Company’s equity incentive plans and options and other equity awards granted under such plans (that have in good faith been approved by the Board)); (e) without limiting any provision of Section 2, pay dividends or make any other distribution on any shares of any Junior Stock; (f) issue any Preferred Shares other than as contemplated hereby or pursuant to the Securities Purchase Agreement; or (g) without limiting any provision of Section 9, whether or not prohibited by the terms of the Preferred Shares, circumvent a right of the Preferred Shares hereunder.

 

20.          Transfer of Preferred Shares. A Holder may transfer some or all of its Preferred Shares without the consent of the Company.

 

21.          Reissuance of Preferred Share Certificates and Book Entries.

 

(a)    Transfer. If any Preferred Shares are to be transferred, the applicable Holder shall surrender the applicable Preferred Share Certificate to the Company (or, if the Preferred Shares are held in Book-Entry form, a written instruction letter to the Company), whereupon the Company will forthwith issue and deliver upon the order of such Holder a new Preferred Share Certificate (in accordance with Section 21(d)) (or evidence of the transfer of such Book-Entry), registered as such Holder may request, representing the outstanding number of Preferred Shares being transferred by such Holder and, if less than the entire outstanding number of Preferred Shares is being transferred, a new Preferred Share Certificate (in accordance with Section 21(d)) to such Holder representing the outstanding number of Preferred Shares not being transferred (or evidence of such remaining Preferred Shares in a Book-Entry for such Holder). Such Holder and any assignee, by acceptance of the Preferred Share Certificate or evidence of Book-Entry issuance, as applicable, acknowledge and agree that, by reason of the provisions of Section 4(c)(i) following conversion or redemption of any of the Preferred Shares, the outstanding number of Preferred Shares represented by the Preferred Shares may be less than the number of Preferred Shares stated on the face of the Preferred Shares.

 

(b)    Lost, Stolen or Mutilated Preferred Share Certificate. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of a Preferred Share Certificate (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the applicable Holder to the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of such Preferred Share Certificate, the Company shall execute and deliver to such Holder a new Preferred Share Certificate (in accordance with Section 21(d)) representing the applicable outstanding number of Preferred Shares.

 

 

(c)    Preferred Share Certificate and Book-Entries Exchangeable for Different Denominations and Forms. Each Preferred Share Certificate is exchangeable, upon the surrender hereof by the applicable Holder at the principal office of the Company, for a new Preferred Share Certificate or Preferred Share Certificate(s) or new Book-Entry (in accordance with Section 21(d)) representing, in the aggregate, the outstanding number of the Preferred Shares in the original Preferred Share Certificate, and each such new Preferred Share Certificate and/or new Book-Entry, as applicable, will represent such portion of such outstanding number of Preferred Shares from the original Preferred Share Certificate as is designated in writing by such Holder at the time of such surrender. Each Book-Entry may be exchanged into one or more new Preferred Share Certificates or split by the applicable Holder by delivery of a written notice to the Company into two or more new Book-Entries (in accordance with Section 21(d)) representing, in the aggregate, the outstanding number of the Preferred Shares in the original Book-Entry, and each such new Book-Entry and/or new Preferred Share Certificate, as applicable, will represent such portion of such outstanding number of Preferred Shares from the original Book-Entry as is designated in writing by such Holder at the time of such surrender.

 

(d)    Issuance of New Preferred Share Certificate or Book-Entry. Whenever the Company is required to issue a new Preferred Share Certificate or a new Book-Entry pursuant to the terms of this Certificate of Designations, such new Preferred Share Certificate or new Book-Entry (i) shall represent, as indicated on the face of such Preferred Share Certificate or in such Book-Entry, as applicable, the number of Preferred Shares remaining outstanding (or in the case of a new Preferred Share Certificate or new Book-Entry being issued pursuant to Section 21(a) or Section 21(c), the number of Preferred Shares designated by such Holder) which, when added to the number of Preferred Shares represented by the other new Preferred Share Certificates or other new Book-Entry, as applicable, issued in connection with such issuance, does not exceed the number of Preferred Shares remaining outstanding under the original Preferred Share Certificate or original Book-Entry, as applicable, immediately prior to such issuance of new Preferred Share Certificate or new Book-Entry, as applicable, and (ii) shall have an issuance date, as indicated on the face of such new Preferred Share Certificate or in such new Book-Entry, as applicable, which is the same as the issuance date of the original Preferred Share Certificate or in such original Book-Entry, as applicable.

 

 

22.        Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Certificate of Designations shall be cumulative and in addition to all other remedies available under this Certificate of Designations and any of the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit any Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Certificate of Designations. No failure on the part of a Holder to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by such Holder of any right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. In addition, the exercise of any right or remedy of a Holder at law or equity or under this Certificate of Designations or any of the documents shall not be deemed to be an election of such Holder’s rights or remedies under such documents or at law or equity. The Company covenants to each Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by a Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). No failure on the part of a Holder to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by such Holder of any right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. In addition, the exercise of any right or remedy of any Holder at law or equity or under Preferred Shares or any of the documents shall not be deemed to be an election of such Holder’s rights or remedies under such documents or at law or equity. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holders and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, each Holder shall be entitled, in addition to all other available remedies, to specific performance and/or temporary, preliminary and permanent injunctive or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting a bond or other security. The Company shall provide all information and documentation to a Holder that is requested by such Holder to enable such Holder to confirm the Company’s compliance with the terms and conditions of this Certificate of Designations.

 

23.        Payment of Collection, Enforcement and Other Costs. If (a) any Preferred Shares are placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or a Holder otherwise takes action to collect amounts due under this Certificate of Designations with respect to the Preferred Shares or to enforce the provisions of this Certificate of Designations or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Certificate of Designations, then the Company shall pay the costs incurred by such Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements. The Company expressly acknowledges and agrees that no amounts due under this Certificate of Designations with respect to any Preferred Shares shall be affected, or limited, by the fact that the purchase price paid for each Preferred Share was less than the original Stated Value thereof.

 

24.        Construction; Headings. This Certificate of Designations shall be deemed to be jointly drafted by the Company and the Holders and shall not be construed against any such Person as the drafter hereof. The headings of this Certificate of Designations are for convenience of reference and shall not form part of, or affect the interpretation of, this Certificate of Designations. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Certificate of Designations instead of just the provision in which they are found. Unless expressly indicated otherwise, all section references are to sections of this Certificate of Designations. Terms used in this Certificate of Designations and not otherwise defined herein, but defined in the other Transaction Documents, shall have the meanings ascribed to such terms on the Initial Issuance Date in such other Transaction Documents unless otherwise consented to in writing by the Required Holders.

 

 

25.         Failure or Indulgence Not Waiver. No failure or delay on the part of a Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. This Certificate of Designations shall be deemed to be jointly drafted by the Company and all Holders and shall not be construed against any Person as the drafter hereof. Notwithstanding the foregoing, nothing contained in this Section 25 shall permit any waiver of any provision of Section 4(d).

 

26.          Dispute Resolution.

 

(a)           Submission to Dispute Resolution.

 

(i)     In the case of a dispute relating to a Closing Bid Price, a Closing Sale Price, a Conversion Price, Triggering Event Conversion Price, a VWAP or a fair market value or the arithmetic calculation of a Conversion Rate, or the applicable Redemption Price (as the case may be) (including, without limitation, a dispute relating to the determination of any of the foregoing), the Company or the applicable Holder (as the case may be) shall submit the dispute to the other party via electronic mail (A) if by the Company, within two (2) Business Days after the occurrence of the circumstances giving rise to such dispute or (B) if by such Holder at any time after such Holder learned of the circumstances giving rise to such dispute. If such Holder and the Company are unable to promptly resolve such dispute relating to such Closing Bid Price, such Closing Sale Price, such Conversion Price, such Triggering Event Conversion Price, such VWAP or such fair market value, or the arithmetic calculation of such Conversion Rate or such applicable Redemption Price (as the case may be), at any time after the second (2^nd) Business Day following such initial notice by the Company or such Holder (as the case may be) of such dispute to the Company or such Holder (as the case may be), then such Holder may, at its sole option, select an independent, reputable investment bank to resolve such dispute.

 

 

(ii)     Such Holder and the Company shall each deliver to such investment bank (A) a copy of the initial dispute submission so delivered in accordance with the first sentence of this Section 26 and (B) written documentation supporting its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5^th) Business Day immediately following the date on which such Holder selected such investment bank (the “Dispute Submission Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein as the “Required Dispute Documentation”) (it being understood and agreed that if either such Holder or the Company fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and such Holder or otherwise requested by such investment bank, neither the Company nor such Holder shall be entitled to deliver or submit any written documentation or other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation).

 

(iii)     The Company and such Holder shall cause such investment bank to determine the resolution of such dispute and notify the Company and such Holder of such resolution no later than ten (10) Business Days immediately following the Dispute Submission Deadline. The fees and expenses of such investment bank shall be borne solely by the Company, and such investment bank’s resolution of such dispute shall be final and binding upon all parties absent manifest error.

 

(b)    Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 26 constitutes an agreement to arbitrate between the Company and each Holder (and constitutes an arbitration agreement) under § 7501, et seq. of the New York Civil Practice Law and Rules (“CPLR”) and that any Holder is authorized to apply for an order to compel arbitration pursuant to CPLR § 7503(a) in order to compel compliance with this Section 26, (ii) a dispute relating to a Conversion Price includes, without limitation, disputes as to (A) whether an issuance or sale or deemed issuance or sale of Common Stock occurred under Section 8(a), (B) the consideration per share at which an issuance or deemed issuance of Common Stock occurred, (C) whether any issuance or sale or deemed issuance or sale of Common Stock was an issuance or sale or deemed issuance or sale of Excluded Securities, (D) whether an agreement, instrument, security or the like constitutes and Option or Convertible Security and (E) whether a Dilutive Issuance occurred, (iii) the terms of this Certificate of Designations and each other applicable Transaction Document shall serve as the basis for the selected investment bank’s resolution of the applicable dispute, such investment bank shall be entitled (and is hereby expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be made by such investment bank in connection with its resolution of such dispute and in resolving such dispute such investment bank shall apply such findings, determinations and the like to the terms of this Certificate of Designations and any other applicable Transaction Documents, (iv) the applicable Holder (and only such Holder with respect to disputes solely relating to such Holder), in its sole discretion, shall have the right to submit any dispute described in this Section 26 to any state or federal court sitting in The City of New York, Borough of Manhattan in lieu of utilizing the procedures set forth in this Section 26 and (v) nothing in this Section 26 shall limit such Holder from obtaining any injunctive relief or other equitable remedies (including, without limitation, with respect to any matters described in this Section 26).

 

 

27.           Notices; Currency; Payments.

 

(a)    Notices. The Company shall provide each Holder of Preferred Shares with prompt written notice of all actions taken pursuant to the terms of this Certificate of Designations, including in reasonable detail a description of such action and the reason therefor. Whenever notice is required to be given under this Certificate of Designations, unless otherwise provided herein, such notice must be in writing and shall be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide each Holder with prompt written notice of all actions taken pursuant to this Certificate of Designations, including in reasonable detail a description of such action and the reason therefore. Without limiting the generality of the foregoing, the Company shall give written notice to each Holder (i) immediately upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any grant, issuances, or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to such Holder.

 

(b)    Currency. All dollar amounts referred to in this Certificate of Designations are in United States Dollars (“U.S. Dollars”), and all amounts owing under this Certificate of Designations shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange Rate” means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Certificate of Designations, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation (it being understood and agreed that where an amount is calculated with reference to, or over, a period of time, the date of calculation shall be the final date of such period of time).

 

(c)    Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Certificate of Designations, unless otherwise expressly set forth herein, such payment shall be made in lawful money of the United States of America by wire transfer of immediately available funds pursuant to wire transfer instructions that Holder shall provide to the Company in writing from time to time. Whenever any amount expressed to be due by the terms of this Certificate of Designations is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day. Any amount due under the Transaction Documents which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount at the rate of eighteen percent (18%) per annum from the date such amount was due until the same is paid in full (“Late Charge”).

 

28.          Waiver of Notice. To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Certificate of Designations and the Securities Purchase Agreement.

 

 

29.          Governing Law. This Certificate of Designations shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Certificate of Designations shall be governed by, the internal laws of the State of Delaware, without giving effect to any provision of law or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware. Except as otherwise required by Section 26 above, the Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Wilmington, Delaware, 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 brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein (i) shall be deemed or operate to preclude any Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to such Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of such Holder or (ii) shall limit, or shall be deemed or construed to limit, any provision of Section 26 above. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS CERTIFICATE OF DESIGNATIONS OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

30.           Judgment Currency.

 

(a)    If for the purpose of obtaining or enforcing judgment against the Company in any court in any jurisdiction it becomes necessary to convert into any other currency (such other currency being hereinafter in this Section 30 referred to as the “Judgment Currency”) an amount due in U.S. dollars under this Certificate of Designations, the conversion shall be made at the Exchange Rate prevailing on the Trading Day immediately preceding:

 

(i)     the date actual payment of the amount due, in the case of any proceeding in the courts of New York or in the courts of any other jurisdiction that will give effect to such conversion being made on such date: or

 

(ii)     the date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the date as of which such conversion is made pursuant to this Section 30(a)(ii) being hereinafter referred to as the “Judgment Conversion Date”).

 

 

(b)    If in the case of any proceeding in the court of any jurisdiction referred to in Section 30(a)(ii) above, there is a change in the Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the applicable party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the Exchange Rate prevailing on the date of payment, will produce the amount of US dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Conversion Date.

 

(c)    Any amount due from the Company under this provision shall be due as a separate debt and shall not be affected by judgment being obtained for any other amounts due under or in respect of this Certificate of Designations.

 

31.          Severability. If any provision of this Certificate of Designations is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Certificate of Designations so long as this Certificate of Designations as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

32.          Maximum Payments. Without limiting Section 9(d) of the Securities Purchase Agreement, nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the applicable Holder and thus refunded to the Company.

 

33.           Stockholder Matters; Amendment.

 

(a)    Stockholder Matters. Any stockholder action, approval or consent required, desired or otherwise sought by the Company pursuant to the DGCL, the Certificate of Incorporation, this Certificate of Designations or otherwise with respect to the issuance of Preferred Shares may be effected by written consent of the Company’s stockholders or at a duly called meeting of the Company’s stockholders, all in accordance with the applicable rules and regulations of the DGCL. This provision is intended to comply with the applicable sections of the DGCL permitting stockholder action, approval and consent affected by written consent in lieu of a meeting.

 

 

(b)    Amendment. Except for Section 4(d)(i) and this Section 33(b), which may not be amended, modified or waived hereunder, this Certificate of Designations or any provision hereof may be amended by obtaining the affirmative vote at a meeting duly called for such purpose, or written consent without a meeting in accordance with the DGCL, of the Required Holders, voting separately as a single class, and with such other stockholder approval, if any, as may then be required pursuant to the DGCL and the Certificate of Incorporation.

 

34.           Certain Defined Terms. For purposes of this Certificate of Designations, the following terms shall have the following meanings:

 

(a)    “1933 Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

 

(b)     “1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

 

(c)    “Additional Amount” means, as of the applicable date of determination, with respect to each Preferred Share, all declared and unpaid Dividends on such Preferred Share.

 

(d)    “Adjusted Floor Price” means, as determined on each six month anniversary of the Issuance Date (each, an “Floor Adjustment Date”), the lower of (i) the Floor Price then in effect and (ii) 20% of the lower of (x) the Nasdaq closing price of the Common Stock as of the Trading Day ended immediately prior to such applicable Floor Adjustment Date and (y) the quotient of (I) the sum of each Nasdaq closing price of the Common Stock on each Trading Day of the five (5) Trading Day period ended on, and including, the Trading Day ended immediately prior to such applicable Floor Adjustment Date, divided by (II) five (5). All such determinations to be appropriately adjusted for any stock split, stock dividend, stock combination or other similar transaction during any such measuring period.

 

(e)    “Adjustment Right” means any right granted with respect to any securities issued in connection with, or with respect to, any issuance or sale (or deemed issuance or sale in accordance with Section 8(a)) of shares of Common Stock (other than rights of the type described in Section 7(a) hereof) that could result in a decrease in the net consideration received by the Company in connection with, or with respect to, such securities (including, without limitation, any cash settlement rights, cash adjustment or other similar rights).

 

(f)    “Affiliate” or “Affiliated” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

 

(g)    “Alternate Conversion Floor Amount” means an amount in cash, to be delivered by wire transfer of immediately available funds pursuant to wire instructions delivered to the Company by such Holder in writing, equal to the product obtained by multiplying (A) the higher of (I) the highest price that the Common Stock trades at on the Trading Day immediately preceding the relevant Alternate Conversion Date and (II) the applicable Alternate Conversion Price and (B) the difference obtained by subtracting (I) the number of shares of Common Stock delivered (or to be delivered) to such Holder on the applicable Share Delivery Deadline with respect to such Alternate Conversion from (II) the quotient obtained by dividing (x) the applicable Conversion Amount that such Holder has elected to be the subject of the applicable Alternate Conversion, by (y) the applicable Alternate Conversion Price without giving effect to clause (x) of such definition.

 

(h)     “Alternate Conversion Price” means, with respect to any Alternate Conversion that price which shall be the lower of (i) the applicable Conversion Price as in effect on the applicable Conversion Date of the applicable Alternate Conversion, and (ii) the greater of (x) the Floor Price and (y) 80% of the lowest VWAP of the Common Stock of any Trading Day during the twenty (20) consecutive Trading Day period ending and including the Trading Day immediately preceding the delivery or deemed delivery of the applicable Conversion Notice (such period, the “Alternate Conversion Measuring Period”). All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such Alternate Conversion Measuring Period.

 

(i)     “Approved Stock Plan” means any employee benefit plan or agreement which has been approved by the Board prior to or subsequent to the Subscription Date pursuant to which shares of Common Stock and standard options to purchase Common Stock may be issued to any employee, officer, consultant or director for services provided to the Company in their capacity as such.

 

(j)     “Attribution Parties” means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Initial Issuance Date, directly or indirectly managed or advised by a Holder’s investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of such Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with such Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company’s Common Stock would or could be aggregated with such Holder’s and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively such Holder and all other Attribution Parties to the Maximum Percentage.

 

 

(k)    “Black Scholes Consideration Value” means the value of the applicable Option, Convertible Security or Adjustment Right (as the case may be) as of the date of issuance thereof calculated using the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg utilizing (i) an underlying price per share equal to the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the public announcement of the execution of definitive documents with respect to the issuance of such Option, Convertible Security or Adjustment Right (as the case may be), (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option, Convertible Security or Adjustment Right (as the case may be) as of the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may be), (iii) a zero cost of borrow and (iv) 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 date of issuance of such Option, Convertible Security or Adjustment Right (as the case may be).

 

(l)    “Bloomberg” means Bloomberg, L.P.

 

(m)    “Book-Entry” means each entry on the Register evidencing one or more Preferred Shares held by a Holder in lieu of a Preferred Share Certificate issuable hereunder.

 

(n)    “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee”  or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York generally are open for use by customers on such day.

 

(o)     “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company or any of its, direct or indirect, wholly-owned Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization, recapitalization or reclassification of the shares of 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 respects, 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 or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company or any of its Subsidiaries.

 

(p)    “Change of Control Redemption Premium” means 125%.

 

 

(q)    “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices). If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by the Company and the Required Holder. If the Company and the Required Holders are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 26. All such determinations shall be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such period.

 

(r)    “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially issued the Preferred Shares pursuant to the terms of the Securities Purchase Agreement.

 

(s)     “Common Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.

 

(t)    “Common Stock Deemed Outstanding” means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock that would be issued upon conversion at such time pursuant to Sections 4(b)(i) and 4(b)(ii), but excluding any Common Stock owned or held or for the account of the Company.

 

(u)    “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

 

(v)    “Conversion Floor Price Condition” means that the relevant Alternate Conversion Price is being determined based on clause (x) of such definitions.

 

(w)    “Convertible Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.

 

 

(x)     “Eligible Market” means The New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or the Principal Market.

 

(y)     “Event Market Price” means, with respect to any Stock Combination Event Date, the quotient determined by dividing (x) the sum of the VWAP of the Common Stock for each of the five (5) Trading Days with the lowest VWAP of the Common Stock during the fifteen (15) consecutive Trading Day period ending and including the Trading Day immediately preceding the sixteenth (16th) Trading Day after such Stock Combination Event Date (such period, the “Stock Combination Measuring Period”), divided by (y) five (5). All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such applicable Stock Combination Measuring Period).

 

 

(z)    “Equity Conditions” means, with respect to an given date of determination: (i) on each day during the period beginning thirty calendar days prior to such applicable date of determination and ending on and including such applicable date of determination either (x) one or more Registration Statements filed pursuant to the Registration Rights Agreement shall be effective and the prospectus contained therein shall be available on such applicable date of determination (with, for the avoidance of doubt, any shares of Common Stock previously sold pursuant to such prospectus deemed unavailable) for the resale of all shares of Common Stock to be issued in connection with the event requiring this determination, as applicable, in the event requiring this determination at the Alternate Conversion Price then in effect (without regard to any limitations on conversion set forth herein)) (each, a “Required Minimum Securities Amount”), in each case, in accordance with the terms of the Registration Rights Agreement and there shall not have been during such period any Grace Periods (as defined in the Registration Rights Agreement) or (y) all Registrable Securities shall be eligible for sale pursuant to Rule 144 (as defined in the Securities Purchase Agreement) without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Preferred Shares, other issuance of securities with respect to the Preferred Shares) and no Current Information Failure (as defined in the Registration Rights Agreement) exists or is continuing; (ii) on each day during the period beginning thirty calendar days prior to the applicable date of determination and ending on and including the applicable date of determination (the “Equity Conditions Measuring Period”), the Common Stock (including all shares of Common Stock issued or issuable upon conversion of the Preferred Shares) is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended from trading on an Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the applicable date of determination due to business announcements by the Company) nor shall delisting or suspension by an Eligible Market have been threatened (with a reasonable prospect of delisting occurring after giving effect to all applicable notice, appeal, compliance and hearing periods) or reasonably likely to occur or pending as evidenced by (A) a writing by such Eligible Market or (B) the Company falling below the minimum listing maintenance requirements of the Eligible Market on which the Common Stock is then listed or designated for quotation, as applicable; (iii) during the Equity Conditions Measuring Period, the Company shall have delivered all shares of Common Stock issuable upon conversion of the Preferred Shares on a timely basis as set forth in Section 4 hereof and all other shares of capital stock required to be delivered by the Company on a timely basis as set forth in the other Transaction Documents; (iv) any shares of Common Stock to be issued in connection with the event requiring determination (or issuable upon conversion of the Conversion Amount being redeemed in the event requiring this determination) may be issued in full without violating Section 4(d) hereof; (v) any shares of Common Stock to be issued in connection with the event requiring determination (or issuable upon conversion of the Conversion Amount being redeemed in the event requiring this determination (without regards to any limitations on conversion set forth herein)) may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (vi) on each day during the Equity Conditions Measuring Period, no public announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (vii) the Company shall have no knowledge of any fact that would reasonably be expected to cause (1) any Registration Statement required to be filed pursuant to the Registration Rights Agreement to not be effective or the prospectus contained therein to not be available for the resale of the applicable Required Minimum Securities Amount of Registrable Securities in accordance with the terms of the Registration Rights Agreement or (2) any Registrable Securities to not be eligible for sale pursuant to Rule 144 without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of the Preferred Shares, other issuance of securities with respect to the Preferred Shares) and no Current Information Failure exists or is continuing, (viii) none of the Holders shall be in possession of any material, non-public information provided to any of them by the Company, any of its Subsidiaries or any of their respective affiliates, employees, officers, representatives, agents or the like; (ix) on each day during the Equity Conditions Measuring Period, the Company otherwise shall have been in compliance with each, and shall not have breached any representation or warranty in any material respect (other than representations or warranties subject to material adverse effect or materiality, which may not be breached in any respect) or any covenant or other term or condition of any Transaction Document, including, without limitation, the Company shall not have failed to timely make any payment pursuant to any Transaction Document; (x) there shall not have occurred any Volume Failure or Price Failure as of such applicable date of determination; (xi) on the applicable date of determination (A) no Authorized Share Failure shall exist or be continuing and the applicable Required Minimum Securities Amount of shares of Common Stock are available under the certificate of incorporation of the Company and reserved by the Company to be issued pursuant to this Certificate of Designations and (B) all shares of Common Stock to be issued in connection with the event requiring this determination (or issuable upon conversion of the Conversion Amount being redeemed in the event requiring this determination (without regards to any limitations on conversion set forth herein)) may be issued in full without resulting in an Authorized Share Failure; (xii) on each day during the Equity Conditions Measuring Period, there shall not have occurred and there shall not exist a Triggering Event or an event that with the passage of time or giving of notice would constitute a Triggering Event; or (xiii) the shares of Common Stock issuable pursuant to the event requiring the satisfaction of the Equity Conditions are duly authorized and listed and eligible for trading without restriction on an Eligible Market.

 

 

(aa)    “Equity Conditions Failure” means that on any day during the period commencing twenty (20) Trading Days prior to the applicable Company Optional Redemption Notice Date through the applicable Company Optional Redemption Date (such applicable period, the “Equity Conditions Failure Period”), the Equity Conditions have not been satisfied (or waived in writing by the applicable Holder).

 

(bb)    “Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers or employees of the Company for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that (A) all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the Subscription Date pursuant to this clause (i) do not, in the aggregate, exceed more than 5% of the Common Stock issued and outstanding immediately prior to the Subscription Date and (B) the exercise price of any such options is not lowered, none of such options are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed in any manner that adversely affects any of the Buyers (as defined in the Securities Purchase Agreement); (ii) shares of Common Stock issued upon the conversion or exercise of Convertible Securities or Options (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) issued prior to the Subscription Date, provided that the conversion price of any such Convertible Securities or Options (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) is not lowered, none of such Convertible Securities or Options (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are otherwise materially changed in any manner that adversely affects any of the Buyers; (iii) the shares of Common Stock issuable upon conversion of the Preferred Shares or otherwise pursuant to the terms of this Certificate of Designations; provided, that the terms of this Certificate of Designations are not amended, modified or changed on or after the Subscription Date (other than antidilution adjustments pursuant to the terms thereof in effect as of the Subscription Date) and (iv) shares of Common Stock issued (or issuable) pursuant to a Permitted Equity Line.

 

(cc)    “Floor Price” means $0.274 (or such lower amount as permitted, from time to time, by the Principal Market), subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events; provided that (a) if on an Adjustment Date the Floor Price then in effect is higher than the Adjusted Floor Price with respect to such Floor Adjustment Date, on such Floor Adjustment Date the Floor Price shall automatically lower to such applicable Adjusted Floor Price and (b) the Company may lower the Floor Price at any time upon written notice to each Holder.

 

 

(dd)    “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire in any transaction or series or related transactions, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entities as of the date of this Certificate of Designations calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other stockholders of the Company to surrender their shares of Common Stock without approval of the stockholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.

 

 

(ee)   “GAAP” means United States generally accepted accounting principles, consistently applied.

 

(ff)    “Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.

 

(gg)   “Holder Pro Rata Amount” means, with respect to any Holder, a fraction (i) the numerator of which is the number of Preferred Shares issued to such Holder pursuant to the Securities Purchase Agreement on the Initial Issuance Date and (ii) the denominator of which is the number of Preferred Shares issued to all Holders pursuant to the Securities Purchase Agreement on the Initial Issuance Date.

 

(hh)   “Indebtedness” means of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, including, without limitation, “capital leases” in accordance with United States generally accepted accounting principles consistently applied for the periods covered thereby (other than trade payables entered into in the ordinary course of business consistent with past practice), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with United States generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, deed of trust, lien, pledge, charge, security interest or other encumbrance of any nature whatsoever in or upon any property or assets (including accounts and contract rights) with respect to any asset or property owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above.

 

 

(ii)    “Intellectual Property Rights” means, with respect to the Company and its Subsidiaries, all of their rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, original works of authorship, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and registrations therefor.

 

(jj)    “Investment” means any beneficial ownership (including stock, partnership or limited liability company interests) of or in any Person, or any loan, advance or capital contribution to any Person or the acquisition of all, or substantially all, of the assets of another Person or the purchase of any assets of another Person for greater than the fair market value of such assets.

 

(kk)    “Liquidation Event” means, whether in a single transaction or series of transactions, the voluntary or involuntary liquidation, dissolution or winding up of the Company or such Subsidiaries the assets of which constitute all or substantially all of the assets of the business of the Company and its Subsidiaries, taken as a whole.

 

(ll)    “Market Price” means, with respect to any Adjustment Date, the greater of (x) the Floor Price and (y) 80% of the lower of (I) the Nasdaq closing price of the Common Stock as of the Trading Day ended immediately prior to such applicable Adjustment Date and (II) the quotient of (A) the sum of each Nasdaq closing price of the Common Stock on each Trading Day of the five (5) Trading Day period ended on, and including, the Trading Day ended immediately prior to such applicable Adjustment Date (each, a “Market Price Measuring Period”), divided by (B) five (5). All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock during such applicable Market Price Measuring Period)..

 

(mm)   “Material Adverse Effect” means any material adverse effect on the business, properties, assets, liabilities, operations, results of operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries, if any, individually or taken as a whole, or on the transactions contemplated hereby or on the other Transaction Documents (as defined below), or by the agreements and instruments to be entered into in connection therewith or on the authority or ability of the Company to perform its obligations under the Transaction Documents.

 

(nn)    “Maturity Date” shall mean October 29, 2026; provided, however, the Maturity Date may be extended at the option of a Holder (i) in the event that, and for so long as, a Triggering Event shall have occurred and be continuing or any event shall have occurred and be continuing that with the passage of time and the failure to cure would result in a Triggering Event or (ii) through the date that is twenty (20) Business Days after the consummation of a Fundamental Transaction in the event that a Fundamental Transaction is publicly announced or a Change of Control Notice is delivered prior to the Maturity Date, provided further that if a Holder elects to convert some or all of its Preferred Shares pursuant to Section 4 hereof, and the Conversion Amount would be limited pursuant to Section 4(d) hereunder, the Maturity Date shall automatically be extended until such time as such provision shall not limit the conversion of such Preferred Shares.

 

 

(oo)    “Notes” means (i) that certain Senior Secured Note, dated as of March 18, 2025, by and between the Company and Keystone in the original principal amount of $156,250, (ii) that certain Senior Secured Note, dated as of March 18, 2025, by and between the Company and Seven Knots, LLC (“Seven Knots”) in the original principal amount of $156,250; (iii) that certain 20% OID Senior Secured Convertible Promissory Note, dated as of April 4, 2025, by and between the Company and Keystone in the original principal amount of $156,250; and (iv) that certain 20% OID Senior Secured Convertible Promissory Note, dated as of April 4, 2025, by and between the Company and Seven Knots in the original principal amount of $156,250.

 

(pp)    “Options” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

 

(qq)    “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

 

(rr)     “Permitted Indebtedness” means (i) Indebtedness set forth on Schedule 3(s) to the Securities Purchase Agreement, as in effect as of the Subscription Date and (ii) Indebtedness secured by Permitted Liens or unsecured but as described in clauses (iv) and (v) of the definition of Permitted Liens.

 

(ss)    “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or Indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment, in either case, with respect to Indebtedness in an aggregate amount not to exceed $100,000, (v) Liens incurred in connection with the extension, renewal or refinancing of the Indebtedness secured by Liens of the type described in clause (iv) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase, (vi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the importation of goods, and (vii) Liens arising from judgments, decrees or attachments in circumstances not constituting a Triggering Event under Section 5(a)(ix).

 

 

(tt)    “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

 

(uu)    “Price Failure” means, with respect to a particular date of determination, the VWAP of the Common Stock on any Trading Day during the twenty (20) Trading Day period ending on the Trading Day immediately preceding such date of determination fails to exceed $1.00 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions occurring after the Subscription Date). All such determinations to be appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during any such measuring period. Notwithstanding the foregoing, at any time, and for any period of time, as applicable, the Holder may lower any dollar threshold specified in this definition to any lower dollar threshold, in each case, as specified by the Holder in a written notice to the Company.

 

(vv)    “Principal Market” means the Nasdaq Capital Market.

 

(ww)    “Redemption Notices” means, collectively, the Triggering Events Redemption Notices, the Equity Line Mandatory Redemption Notices, the Maturity Redemption Notice, the Company Optional Redemption Notices, and the Change of Control Redemption Notices, and each of the foregoing, individually, a “Redemption Notice.”

 

(xx)    “Redemption Premium” means 125%.

 

(yy)    “Redemption Prices” means, collectively, any Triggering Event Redemption Price, Equity Line Mandatory Redemption Price, Change of Control Redemption Price, Maturity Redemption Price, and Company Optional Redemption Price, and each of the foregoing, individually, a “Redemption Price.”

 

(zz)    “Registration Rights Agreement” means that certain registration rights agreement, dated as of the Closing Date, by and among the Company and the initial holders of the Preferred Shares relating to, among other things, the registration of the resale of the Common Stock issuable upon conversion of the Preferred Shares or otherwise pursuant to the terms of this Certificate of Designations, as may be amended from time to time.

 

(aaa)     “SEC” means the United States Securities and Exchange Commission or the successor thereto.

 

 

(bbb)    “Securities” means the Preferred Shares and the Conversion Shares (as defined in the Securities Purchase Agreement.

 

(ccc)    “Securities Purchase Agreement” means that certain securities purchase agreement by and among the Company and the initial holders of Preferred Shares, dated as of the Subscription Date, as may be amended from time in accordance with the terms thereof.

 

(ddd)    “Stated Value” shall mean $1,000 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring after the Initial Issuance Date with respect to the Preferred Shares.

 

(eee)    “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.

 

(fff)    “Subscription Date” means April 29, 2025.

 

(ggg)    “Subsidiaries” shall have the meaning as set forth in the Securities Purchase Agreement.

 

(hhh)    “Successor Entity” means the Person (or, if so elected by the Required Holders, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Required Holders, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

 

(iii)    “Trading Day” means, as applicable, (x) with respect to all price or trading volume determinations relating to the Common Stock, any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the applicable Holder or (y) with respect to all determinations other than price determinations relating to the Common Stock, any day on which The New York Stock Exchange (or any successor thereto) is open for trading of securities.

 

(jjj)    “Transaction Documents” means the Securities Purchase Agreement, this Certificate of Designations and each of the other agreements and instruments entered into or delivered by the Company or any of the Holders in connection with the transactions contemplated by the Securities Purchase Agreement, all as may be amended from time to time in accordance with the terms thereof.

 

 

(kkk)     “Volume Failure” means, with respect to a particular date of determination, if either (x) the aggregate daily dollar trading volume (as reported on Bloomberg) of the Common Stock on the Principal Market on more than five (5) Trading Days during the twenty (20) Trading Day period ending on the Trading Day immediately preceding such date of determination, or (y) the aggregate daily dollar trading volume (as reported on Bloomberg) of the Common Stock on the Principal Market on any Trading Day during the five (5) Trading Day period ending on the Trading Day immediately preceding such date of determination, as applicable, is less than $20,000. Notwithstanding the foregoing, at any time, and for any period of time, as applicable, the Holder may lower any dollar threshold specified in this definition to any lower dollar threshold, in each case, as specified by the Holder in a written notice to the Company.

 

(lll)    “VWAP” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or, if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities market on which such security is then traded), during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, as reported by Bloomberg through its “VAP” function (set to 09:30 start time and 16:00 end time) or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York time, and ending at 4:00 p.m., New York time, as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in The Pink Open Market (or a similar organization or agency succeeding to its functions of reporting prices). If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the Required Holders. If the Company and the Required Holders are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 26. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.

 

35.    Disclosure. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Certificate of Designations, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company or any of its Subsidiaries, the Company shall on or prior to 9:00 am, New York city time on the Business Day immediately following such notice delivery date, publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company so shall indicate to such Holder explicitly in writing in such notice (or immediately upon receipt of notice from such Holder, as applicable), and in the absence of any such written indication in such notice (or notification from the Company immediately upon receipt of notice from such Holder), such Holder shall be entitled to presume that information contained in the notice does not constitute material, non-public information relating to the Company or any of its Subsidiaries. Nothing contained in this Section 35 shall limit any obligations of the Company, or any rights of any Holder, under Section 4(i) of the Securities Purchase Agreement.

 

 

36.    Absence of Trading and Disclosure Restrictions. The Company acknowledges and agrees that no Holder is a fiduciary or agent of the Company and that each Holder shall have no obligation to (a) maintain the confidentiality of any information provided by the Company or (b) refrain from trading any securities while in possession of such information in the absence of a written non-disclosure agreement signed by an officer of such Holder that explicitly provides for such confidentiality and trading restrictions. In the absence of such an executed, written non-disclosure agreement, the Company acknowledges that each Holder may freely trade in any securities issued by the Company, may possess and use any information provided by the Company in connection with such trading activity, and may disclose any such information to any third party.

 

* * * * *

 

 

IN WITNESS WHEREOF, the Company has caused this Certificate of Designations of Series D Convertible Preferred Stock of Windtree Therapeutics, Inc. to be signed by its Chief Executive Officer on this 30th day of April, 2025.

 

 

	WINDTREE THERAPEUTICS, INC.
	By:	/s/ Jed Latkin
		Name:	Jed Latkin
		Title:	Chief Executive Officer

 

 

EXHIBIT I

 

WINDTREE THERAPEUTICS, INC.

CONVERSION NOTICE

 

Reference is made to the Certificate of Designations, Preferences and Rights of the Series D Convertible Preferred Stock of Windtree Therapeutics, Inc.(the “Certificate of Designations”). In accordance with and pursuant to the Certificate of Designations, the undersigned hereby elects to convert the number of shares of Series D Convertible Preferred Stock, $0.001 par value per share (the “Preferred Shares”), of Windtree Therapeutics, Inc., a Delaware corporation (the “Company”), indicated below into shares of common stock, $0.001 value per share (the “Common Stock”), of the Company, as of the date specified below.

 

Date of Conversion:

 

Aggregate number of Preferred Shares to be converted
Aggregate Stated Value of such Preferred Shares to be converted:
Aggregate accrued and unpaid Dividends and accrued and unpaid Late Charges with respect to such Preferred Shares and such Aggregate Dividends to be converted:
AGGREGATE CONVERSION AMOUNT TO BE CONVERTED:

 

Please confirm the following information:

 

Conversion Price:

 

Number of shares of Common Stock to be issued:

 

☐           If this Conversion Notice is being delivered with respect to an Alternate Conversion, check here if Holder is electing to use the following Alternate Conversion Price:

Please issue the Common Stock into which the applicable Preferred Shares are being converted to Holder, or for its benefit, as follows:

☐        Check here if requesting delivery as a certificate to the following name and to the following address:

 

 

Issue to:

 

☐         Check here if requesting delivery by Deposit/Withdrawal at Custodian as follows:
DTC Participant:
DTC Number:
Account Number:

 

 

Date: _____________ __,
Name of Registered Holder
By:
	Name:
	Title:
	Tax ID:
E-mail Address:

 

 

EXHIBIT II

 

ACKNOWLEDGMENT

 

The Company hereby (a) acknowledges this Conversion Notice, (b) certifies that the above indicated number of shares of Common Stock [are][are not] eligible to be resold by the Holder either (i) pursuant to Rule 144 (subject to the Holder’s execution and delivery to the Company of a customary 144 representation letter) or (ii) an effective and available registration statement and (c) hereby directs _________________ to issue the above indicated number of shares of Common Stock in accordance with the Transfer Agent Instructions dated _____________, 20__ from the Company and acknowledged and agreed to by ________________________.

 

 

	WINDTREE THERAPEUTICS, INC.
	By:
		Name:
		Title:

 

Exhibit 10.1

 

ASSIGNMENT AND CONDITIONAL ASSUMPTION AGREEMENT

 

THIS ASSIGNMENT AND CONDITIONAL ASSUMPTION AGREEMENT (this “Assignment”) is entered into and effective as of April 19, 2025 (the “Effective Date”), by and between WAY MAKER GROWTH FUND, LLC, a Texas limited liability company, whose address is 603 E. Broadway St., Prosper, Texas 75078 (the “Original Purchaser”) and WINT REAL ESTATE, LLC, a Delaware limited liability company, whose address is 2600 Kelly Road, Suite 100, Warrington, Pennsylvania, 18976 (the “Purchaser”).

 

WHEREAS, Original Purchaser and TBB Crescent Park Drive LLC, a Delaware limited liability company (“Seller”) are parties to a certain Purchase and Sale Agreement dated June 28, 2024 (the “Original Agreement”), as amended by that certain First Amendment to Purchase and Sale Agreement, dated December 19, 2024 (“First Amendment”) and by that certain Second Amendment to Purchase and Sale Agreement, dated March 25, 2025 (“Second Amendment” and, together with the Original Agreement and the First Amendment, and any other subsequent amendment, the “Purchase Agreement”) with respect to certain real property commonly known as The Aubrey, located at 11755 Southlake, Houston, Texas and more particularly described in the Purchase Agreement (the “Property”); and

 

WHEREAS, Original Purchaser and Seller are also parties to a certain Development Services Agreement, dated February 4, 2025, with respect to the Property (as amended by the Second Amendment, and as the same may be subsequently amended, the “Development Agreement” and, together with the Purchase Agreement, the “Assigned Agreements”); and

 

WHEREAS, Original Purchaser desires to assign the Assigned Agreements to Purchaser and Purchaser desires to assume the Assigned Agreements, subject to the conditions set forth in this Assignment;

 

WHEREAS, in anticipation of the satisfaction of the conditions set forth in this Assignment, Purchaser has advanced, on behalf of Original Purchaser, the sum of One Million Four Hundred Thousand and 00/100 Dollars ($1,400,000.00) as an addition to, and to be held as part of, the Earnest Money under the Purchase Agreement in exchange for an extension of the Closing Date (the “Additional Deposit”).

 

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.         Except as otherwise defined herein, all capitalized terms used in this Assignment (including the Recitals above) shall have the meanings given to such terms in the Purchase Agreement.

 

2.         As of the Effective Date, Original Purchaser hereby assigns, sets over and transfers to Purchaser, as of the date hereof, all of Original Purchaser’s rights, obligations and liabilities under the Assigned Agreements, and, subject to the satisfaction of the conditions set forth in Section 4 below as determined by the Purchaser in its sole and absolute discretion (the “Assumption Conditions”), Purchaser shall assume all of Original Purchaser’s rights, obligations and liabilities under the Assigned Agreements (the “Assumption”). Original Purchaser acknowledges that from and after the Effective Date, Original Purchaser shall have no further rights, of any kind or nature, with respect to the Assigned Agreements, and Purchaser shall have the sole discretion and right to exercise any or all such rights.

 

 

3.         Original Purchaser hereby assigns to Purchaser its interest in the Earnest Money. Purchaser acknowledges and agrees that (a) the Additional Deposit constitutes a portion of the Earnest Money for all purposes under the Purchase Agreement and (b) Purchaser shall have no right to receive a refund of the Earnest Money (including the Additional Deposit) from Seller or Escrow Holder, except as otherwise expressly set forth in the Purchase Agreement.

 

4.         Original Purchaser and Purchaser acknowledge and agree, that notwithstanding the funding of the Additional Deposit by Purchaser, that Purchaser shall not be deemed to have agreed to the Assumption unless and until the following are achieved to the satisfaction of Purchaser in its sole and absolute discretion:

 

(a)        The Purchase Agreement is amended as required by Purchaser.

 

(b)        Purchaser has reviewed and approved the Development Agreement.

 

(c)        Purchaser has reviewed and approved the Title Commitment and current Permitted Encumbrances.

 

(d)        Purchaser has reviewed and approved the Survey (if any).

 

(e)        Purchaser has reviewed and approved all terminated and Non-Terminable Contracts.

 

If Purchaser determines, in its sole and absolute discretion, that the Assumption Conditions have been satisfied, Purchaser shall deliver written notice to Original Purchaser and Seller confirming such satisfaction.

 

5.         Satisfaction of the Assumption Conditions shall neither constitute a condition to Closing nor result in a delay of the Closing. If the Assumption Conditions are not satisfied, Purchaser shall have no obligations or liabilities under the Purchase Agreement. The parties acknowledge, however, that notwithstanding anything herein to the contrary, if the Closing does not occur as and when required under the Purchase Agreement, Seller shall be entitled to (a) terminate the Purchase Agreement and retain the Earnest Money as set forth in Section 11.3 of the Original Agreement, and (b) exercise any and all other applicable remedies with respect to Original Purchaser (or, for the avoidance of doubt with respect to Purchaser, but only if the Assumption Conditions are satisfied) that expressly survive a termination of the Purchase Agreement.

 

6.         Purchaser’s address for notices under the Assigned Agreements is set forth in the preamble hereto.

 

 

7.         This Assignment does not in any manner modify the terms and conditions of the Assigned Agreements.

 

8.         This Assignment shall not relieve the Original Purchaser of its obligations and liabilities under the Assigned Agreements, and Original Purchaser remains liable therefor. If Purchaser agrees to the Assumption as set forth herein, Original Purchaser and Purchaser shall be jointly and severally liable for such obligations and liabilities under the Assigned Agreements, provided, however, Original Purchaser hereby agrees to indemnify and defend Purchaser against any and all loss, cost liability and expense incurred by Purchaser to Seller under the Purchase Agreement arising from actions of the Original Purchaser prior to the date of the Assumption.

 

9.         This Assignment shall be binding upon Original Purchaser and Purchaser and their respective successors and permitted assigns and shall inure to the benefit of Original Purchaser, Purchaser, Escrow Holder and Seller and their respective successors and permitted assigns. This Assignment may be executed in any number of counterparts, provided each of the parties hereto executes at least one counterpart; each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Executed counterparts of this Assignment may be exchanged by electronic mail which shall be sufficient to bind the parties. The parties further agree that counterparts of this Assignment may be signed electronically via Adobe Sign, DocuSign protocol or other electronic platform. All such signatures may be used in the place of original "wet ink" signatures to this Assignment and shall have the same legal effect as the physical delivery of an original signature.

 

[NO FURTHER TEXT ON THIS PAGE]

 

Exhibit 10.2

 

PURCHASE AND SALE AGREEMENT

 

THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made as of the Effective Date (as hereafter defined), by and between TBB CRESCENT PARK DRIVE LLC, a Delaware limited liability company ("Seller"), whose address is c/o The Bancorp Bank, National Association, 155 E. 44th Street, Suite 1015, New York, New York 10017 and WAY MAKER GROWTH FUND, LLC a Texas limited liability company, whose address is 603 E. Broadway St., Prosper, Texas 75078 and/or assigns pursuant to this Agreement ("Purchaser").

 

RECITALS:

 

WHEREAS, Seller is the owner of that certain multifamily apartment complex (the "Complex"), located at 11755 Southlake, Houston, TX and more particularly described on Exhibit A, attached hereto; and

 

WHEREAS, subject to the terms and conditions of this Agreement, Purchaser desires to acquire the Property (as hereinafter defined) from Seller and Seller desires to sell the Property to Purchaser.

 

NOW, THEREFORE, in consideration of the mutual covenants and representations herein contained, Seller and Purchaser agree as follows:

 

AGREEMENT:

ARTICLE 1.
DEFINITIONS

1.1         In this Agreement, and in the Exhibits and Schedules attached hereto, the following words and phrases shall have the following meanings:

 

"Amendment" means an amendment, renewal, supplement, modification, expansion, restatement, extension, or any other change or revision.

 

"Appurtenances" means all easements, rights-of-way, alleys, adjacent roads, drainage facilities, covenants, restrictions, tenements, strips and gores between the Land and abutting properties, all utility, access and development rights, and all other rights and appurtenances benefiting or appertaining to the Land (as defined below) and the land lying in the streets and roads in front of and adjoining the Land.

 

"Business Day" means any day other than (a) a Saturday or Sunday, (b) a federal or State of Texas banking holiday or (c) a day on which the county recorder's office in the county where the Property is located is closed.

 

"Casualty" is defined in Section 10.1.

 

"Closing" means the closing of the transactions contemplated under this Agreement.

 

"Closing Date" is defined in Section 6.1.

 

 

"Closing Documents" is defined in Section 6.2.

 

"Condemnation" is defined in Section 10.2.

 

"Contracts" means all agreements between Seller and any third party and all amendments thereof, for the furnishing of management, brokerage services, service, maintenance, repairs, construction, supplies, equipment, submetering, or other goods and services to the Property, to the extent assignable and Purchaser assumes the same as provided herein.

 

"Deposits" means all security deposits, expense deposits and/or prepaid rentals received from a Tenant under a Tenant Lease and required to be in the possession of Seller pursuant to the terms of the Tenant Leases and all applicable law.

 

"Earnest Money" shall mean the sum of the escrow deposits made by Purchaser with Escrow Holder pursuant to Section 3.2.

 

"Effective Date" means the date of execution of this Agreement by both Purchaser and Seller, whichever occurs later.

 

"Escrow Holder" means Newmark Title Services, LLC, having an address for notices at 1700 Post Oak Blvd, Suite 250, Houston, TX 77056, Attn: Leah Bokov, e-mail: leah.bokov@nmrk.com.

 

"Governmental Entity" means the United States, the State, the County, the Town or the City where the Property is located and any other State in which a party to this Agreement is incorporated or organized.

 

"Improvements" means all buildings, fixtures and other improvements located on the Land.

 

"Intangible Property" means Seller's interest, in all signs, logos, tradenames, trademarks or styles related to the Property (specifically including the names "Aubrey" and variations thereof and logos related thereto) and all other intangible property related to the Property including, without limitation, all assignable telephone numbers, the web or domain name, all social media accounts, passwords and content relating solely to the Property and not to Seller's overall operations.

 

"Land" means the real property more particularly described on Exhibit "A" attached hereto.

 

"Licenses and Permits" means all assignable building and other certificates, licenses, permits and approvals including, without limitation, certificates of occupancy, granted by any Governmental Entity, with respect to the ownership, use, occupancy or operation of all or any portion of the Property.

 

"Permitted Encumbrances" is defined in Section 4.

 

 

"Person" means an individual person, a corporation, limited liability company, partnership, trust, joint venture, proprietorship, estate, association; Governmental Entity or other incorporated or unincorporated enterprise, entity or organization of any kind.

 

"Personal Property" means Seller's right, title and interest in the furniture, fixtures, equipment, machinery, computers, printers, appliances, and personal property which are used in connection with the ownership, maintenance or operation of the Property, not including Seller's proprietary computer software or software with non-assignable licenses, or any personal property, including golf carts.

 

"Plans" means all architectural, electrical, mechanical or plumbing plans and specifications, prepared in connection with the Property or any portion thereof, which are in the possession of Seller, to the extent assignable.

 

"Property" means all of Seller's right, title and interest in and to the Land and Improvements and all Appurtenances, Personal Property, Licenses and Permits, Tenant Leases, Deposits, Contracts, Plans, Warranties and Guaranties, and Intangible Property.

 

"Tenant" means a tenant or occupant under a Tenant Lease.

 

"Tenant Lease" means all leases, rental agreements or other agreements which permit or authorize the use and occupancy of apartment units in the Property, together with any and all, if any, guaranties, security deposits, letters of credit, or other security for performance of a Tenant's obligations thereunder, and all Amendments and/or other agreements forming a part thereof.

 

"Termination Deadline" means July 15, 2024.

 

"Title Commitment" is defined in Section 4.2

"Title Company" means Newmark Title Services, as agent for Old Republic National Title Insurance Company, Stewart Title Guaranty Company or another nationally-recognized title insurance underwriter.

 

"Title Policy" is defined in section 4.2.

 

"Warranties and Guaranties" means all unexpired warranties and guaranties and payment and/or performance bonds required to be provided under the Contracts, and/or running to the benefit of Seller or its affiliates in connection with the Property and the construction, renovation and/or operation thereof, to the extent assignable without cost to Seller.

 

 

1.2         Unless specified to the contrary, references to Sections, Exhibits and Schedules mean the particular Section, Exhibit or Schedule in or to this Agreement, all of which Exhibits and Schedules are made a part hereof for all purposes the same as if set forth herein verbatim; it being expressly understood that if any Exhibit attached hereto which is to be executed and delivered at Closing contains blanks, such Exhibit attached hereto shall be deemed completed in the form executed.

 

1.3         Wherever used in this Agreement:

 

1.    the words "include" or "including" shall be construed as incorporating, also, "but not limited to" or "without limitation";

 

2.    the word "day" means a calendar day unless otherwise specified;

 

3.    the word "party" means each of Seller and Purchaser;

 

4.    the word "law" (or "laws") means any statute, ordinance, resolution, regulation, code, rule, order, decree, judgment, injunction, mandate or other legally binding requirement of a Governmental Entity;

 

5.    each reference to the Property shall be deemed to include "and/or any portion thereof'; and

 

6.    each reference to $ or dollars means United States dollars.

 

1.4         Certain other words and phrases are defined or described elsewhere in this Agreement.

 

ARTICLE 2.

PURCHASE AND SALE

 

2.1         Purchase and Sale. Subject to the terms and conditions of this Agreement, Seller hereby agrees to sell and convey to Purchaser, and Purchaser hereby agrees to purchase from Seller, the Property.

 

ARTICLE 3.

PURCHASE PRICE AND EARNEST MONEY

 

3.1         Purchase Price. Subject to the prorations and adjustments described in Article 7 below, the purchase price (the "Purchase Price") for the Property shall be Forty-Three Million Twenty-Six Thousand Two Hundred Eighty-Four and No/100 Dollars ($43,026,284.00). The Purchase Price shall be paid by Purchaser to Seller by federal funds wire transfer to the Title Company on or prior to the Closing Date.

 

 

3.2         Earnest Money.

 

(a)          Purchaser shall deliver to the Escrow Holder the following amounts on the following dates: (i) $125,000.00 on July 16, 2024; (ii) $125,000.00 on August 29, 2024; (iii) $125,000.00 on October 14, 2024; and (iv) $125,000.00 on November 28, 2024 (total deposits will equal $500,000.00), by federal funds wire transfer (the "Earnest Money"). The Earnest Money shall be non-refundable to Purchaser, except as otherwise expressly set forth in this Agreement. The Earnest Money shall be held in escrow and invested by the Escrow Holder in an interest-bearing account. Purchaser shall be responsible for paying all taxes on any interest earned on the Escrow Money, which obligation shall survive the Closing or earlier termination of this Agreement. Interest earned from the depository on the Earnest Money shall belong to the party entitled to receive the Earnest Money in accordance with this Agreement and shall be disbursed by the Escrow Holder to the party entitled to receive the Ernest Money in accordance with this Agreement. The Earnest Money, to the extent deposited in accordance herewith, shall be applied toward the Purchase Price at Closing, and shall otherwise be paid or applied in accordance with this Agreement. In the event that any portion of the Earnest Money is not timely paid, notwithstanding any other provision of this Agreement such failure shall constitute an immediate default hereunder, and Seller shall have the right to terminate this Agreement by giving written notice to Purchaser, whereupon Seller shall be entitled to retain all portions of the Earnest Money theretofore paid, and neither party shall have any further obligation to the other hereunder, subject only to such matters as may be specifically stated in this Agreement to survive the termination hereof.

 

(b)          The Escrow Holder shall hold the Earnest Money in escrow pursuant to the following provisions:

 

(i)    The Escrow Holder is not a party to, and is not bound by, or charged with notice of any agreement out of which this escrow may arise, other than the terms and provisions of this Section 3.2.

 

(ii)    Escrow Holder shall deliver the Earnest Money to Seller (A) upon the Closing hereunder or (B) in the event that Seller makes a written demand therefor stating that Seller is entitled to the Earnest Money pursuant to the provisions of this Agreement. Escrow Holder shall return the Earnest Money to Purchaser in the event that Purchaser makes a written demand therefor stating that Purchaser is entitled to the Earnest Money pursuant to the provisions of this Agreement. In the event that Escrow Holder intends to release the Earnest Money to either party pursuant to this Section 3.2(b)(ii), then Escrow Holder shall give to the other party not less than five (5) Business Days prior written notice of such fact and if Escrow Holder actually receives written notice during such five (5) Business Day period that such other party objects to the release, then Escrow Holder shall not release the Earnest Money and any such dispute shall be resolved as provided herein.

 

(iii)    The Escrow Holder is acting solely as a stakeholder and depository as an accommodation to Purchaser and Seller, and is not responsible or liable for any matter or loss arising out of the Escrow Holder's conduct hereunder, except for its gross negligence or willful misfeasance. The Escrow Holder shall not be responsible or liable for the sufficiency, correctness, genuineness, or validity of the subject matter of this Agreement, or for the identity or authority of any person executing any documents or instruments in connection herewith.

 

 

(iv)    Notwithstanding the foregoing, as between Purchaser and Seller, the non-prevailing party in any dispute shall be solely responsible for payment of Escrow Holder's expenses incurred in connection therewith. The Escrow Holder may, at its own expense, consult with legal counsel in the event of any dispute or questions as to the construction of any provisions hereof or its duties hereunder, and it shall be fully protected in acting in accordance with the written opinion or instructions of such counsel.

 

(v)    The Escrow Holder shall be entitled to act or rely upon, and the Escrow Holder shall be protected in acting or relying upon the genuineness and validity of any written notice, request, waiver, consent, certificate, receipt, authorization, power of attorney or other document the Escrow Holder shall receive from any party hereto.

 

(vi)    In the event that (a) the Escrow Holder receives contradictory instructions from the parties hereto, or (b) there shall be any dispute between Seller and Purchaser as to any matter arising under this Agreement or (c) there shall be any uncertainty as to the meaning or applicability of the provisions hereof or any written instructions received by the Escrow Holder pursuant hereto, the Escrow Holder shall continue to hold the Earnest Money pending resolution of the matter if so instructed by written notification from both Seller and Purchaser or if not so instructed shall deposit the Earnest Money with a court of competent jurisdiction at the cost and expense of Purchaser and Seller jointly and severally, and, upon making such deposit, the Escrow Holder shall thereupon be discharged and released from any and all liability with respect to the Earnest Money. The Escrow Holder may dispose of the escrowed funds in accordance with a court order, and shall be fully protected if it acts in accordance with any such court order.

 

(vii)    Deposits made pursuant to these instructions may be invested on behalf of any party or parties hereto, provided that any direction to the Escrow Holder for such investment shall be in writing and contain the consent of all other parties to this Agreement together with a completed, signed W-9 Form. The Escrow Holder is not to be held responsible for the loss of principal or interest on any investment made pursuant to the aforesaid instruction or in the redemption thereof except in instances of gross negligence or willful misfeasance.

 

(viii)    Upon delivery of the Earnest Money in accordance with the terms hereof, the Escrow Holder shall be discharged and released from any and all liability with respect to the Earnest Money.

 

(ix)    Escrow Holder may resign as Escrow Holder hereunder at any time upon written notice to Purchaser and Seller, provided that such resignation shall not be effective unless and until a replacement escrow agent acceptable to Purchaser and Seller shall have been identified and such replacement escrow agent shall have agreed in writing to serve as Escrow Holder hereunder pursuant to the terms and conditions of this Agreement and the Earnest Money has been transferred to the replacement escrow agent.

 

 

(x)    Purchaser and Seller may jointly terminate the services of Escrow Holder hereunder at any time upon written notice to Escrow Holder, provided that such termination shall not be effective unless and until a replacement escrow agent acceptable to Purchaser and Seller shall have been identified and such replacement escrow agent shall have agreed in writing to serve as Escrow Holder hereunder pursuant to the terms and conditions of this Agreement and the Earnest Money has been transferred to the replacement escrow agent.

 

ARTICLE 4.

DELIVERY OF DOCUMENTS

 

4.1         If not already provided to Purchaser, Seller shall, within three (3) Business Days after the Effective Date, deliver or make available to Purchaser and its employees for inspection at such place or places as such items may be located (provided any such inspections shall be conducted in the presence of Seller or its representative) all books and records maintained by Seller relating to the Property, except, however, that notwithstanding any provision hereof to the contrary, Seller shall have no obligation to deliver or otherwise make available any appraisals, budgets, internal company communications and other information which is privileged or confidential.

 

4.2         On or before the Effective Date, Seller has delivered to Purchaser an existing title report covering the Property ("Existing Title Report") and an existing survey of the Property ("Existing Survey"). Prior to the Termination Deadline, Purchaser (a) shall obtain a current commitment for an Owner's Policy of Title Insurance issued by the Title Company covering the Property (the "Title Commitment"), whereby said Title Company commits to issue such title policy to Purchaser (the "Title Policy"); and/or (b) if it elects to do so, shall obtain a current survey of the Property ("Survey"), provided that Purchaser's failure to obtain a Survey prior to the Termination Deadline shall be deemed its election to accept title to the Property subject to the state of facts that would be shown on a current, accurate survey of the property. Any items or exceptions to title that are set forth on the Existing Title Report, Title Commitment, Existing Survey and/or Survey or any updates thereto, together with the matters set forth on Exhibit B attached hereto, are referred to as "Permitted Encumbrances".

 

4.3         On or before the date that is three (3) days after delivery to Purchaser any update to the Title Commitment, or update to the Survey obtained prior to the Termination Deadline (but in no event later than the Closing Date), which includes exception matters not included on the Title Commitment or Survey, as applicable (collectively the "Updates") or on any prior Update, Purchaser shall give written notice (the "Objection Notice") to Seller of any conditions contained in the Update which materially adversely affects the value or current use and operation of the Property and which Purchaser is unwilling to take title subject to (the "Objections"), separately specifying and setting forth each of such Objections. Seller shall be entitled to reasonable adjournments of the Closing Date to cure the Objections, not to exceed fifteen (15) days in the aggregate. If Purchaser gives Seller an Objection Notice within the timeframe set forth above, then all matters disclosed on such Update which are not objected to in such Objection Notice shall be deemed to be additional Permitted Encumbrances. If Purchaser fails to give Seller an Objection Notice within the periods set forth above, then all matters disclosed shall be deemed to be Permitted Encumbrances.

 

 

4.4         Seller shall not be required to expend any money or bring any action or proceeding to cure such Objections, except with respect to Monetary Liens. Notwithstanding any other provision to the contrary contained herein, all mortgages, deeds of trust or other encumbrances evidencing or securing indebtedness of Seller voluntarily executed and recorded against the Property by Seller after the Effective Date including ("Monetary Liens") shall not constitute Permitted Encumbrances and shall be satisfied by Seller at or prior to Closing. Within two (2) days after an Objection Notice is given ("Seller's Response Period"), Seller shall give Purchaser notice (the "Response Notice") if Seller is unable or unwilling to cure any of Purchaser's Objections at or prior to Closing. If Seller does not give a Response Notice within the Seller's Response Period, Seller shall be deemed to have given a Response Notice indicating that Seller is unable or unwilling to cure any of Purchaser's Objections except to the extent obligated to do so pursuant to the other provisions of this Article 4. If Seller's Response Notice indicates (or is deemed to indicate) that Seller is unwilling or unable to cure Purchaser's Objections, then Purchaser may, as its exclusive remedy, elect by written notice given to Seller within one (1) day after the Seller's Response Period, either (a) to accept such title as Seller is able to convey without any reduction or abatement of the Purchase Price, in which event the Objections shall be Permitted Encumbrances or (b) to terminate this Agreement, in which event the Earnest Money and all interest thereon shall be returned to Purchaser (and if Purchaser fails to timely deliver any such notice, Purchaser shall be deemed to have elected to proceed pursuant to clause (a) of this sentence). The Closing Date shall be automatically extended by up to three (3) days following delivery of an Objection Notice, if and to the extent necessary to allow the time periods set forth in this Section 4.4 to fully elapse.

 

4.5         Seller shall deliver to Purchaser, without representation or warranty, an existing environmental site assessment performed with respect to the Property, and Purchaser may, if it chooses, endeavor to obtain, at Purchaser's sole cost an expense, a reliance letter addressed to Purchaser for its use of such site assessment; provided, however, Purchaser shall not be entitled to perform any invasive testing at the Property without Seller's prior written consent, which may be granted or withheld in Seller's sole discretion.

 

ARTICLE 5.

CONDITIONS TO CLOSING

 

5.1         Conditions to Obligations of Purchaser. The obligations of Purchaser to execute and deliver the applicable Closing Documents, to pay the Purchase Price and to perform Purchaser's other obligations at the Closing under this Agreement are and shall be subject to the satisfaction of each of the following conditions at or prior to the Closing, unless otherwise specified:

 

(a)          Seller shall have executed (where applicable) and delivered to the Title Company the Closing Documents to be executed and delivered by Seller.

 

(b)          Title to the Property shall be free and clear of all matters other than the Permitted Encumbrances.

 

 

(c)          All of the representations and warranties of Seller contained in this Agreement shall have been true and correct in all material respects when made, and shall be true and correct in all material respects on the Closing Date with the same effect as if made on and as of such date, subject to such changes permitted under this Agreement due to the ordinary course of operations of the Property.

 

(d)          Seller shall have performed, observed, and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed, observed, and complied with on Seller's part prior to or as of the Closing Date.

 

If at any time prior to or at Closing Purchaser receives knowledge that any of the foregoing conditions has not or will not be satisfied, then Purchaser shall so notify Seller with specificity within five (5) Business Days after Purchaser first receives such knowledge. If Seller fails to cure such condition on or before the Closing Date and such occurrence is not waived by Purchaser in writing (in its sole discretion), then this Agreement shall terminate, the Earnest Money and any interest thereon shall be paid to Purchaser, and neither party shall have any further obligation to the other hereunder, subject only to such matters as may be specifically stated in this Agreement to survive the termination hereof.

 

5.2         Conditions to Obligations of Seller. The obligations of Seller to execute and deliver the applicable Closing Documents and to perform Seller's other obligations at the Closing under this Agreement are and shall be subject to the satisfaction of each of the following conditions at or prior to the Closing:

 

(a)          Purchaser shall have delivered the balance of the Purchase Price due at Closing to the Title Company for delivery to Seller at the Closing pursuant to the terms of this Agreement.

 

(b)          Purchaser shall have executed (where applicable) and delivered to the Title Company the Closing Documents to be executed and delivered by Purchaser.

 

(c)          Purchaser shall have performed, observed, and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed, observed, and complied with on Purchaser's part prior to or as of the Closing Date.

 

In the event that any one of the above conditions precedent to the obligations of Seller shall not occur by the Closing Date and the occurrence is not waived by Seller (in its sole discretion), then upon written notice from Seller to Purchaser and Escrow Agent delivered on or prior to the Closing Date, and Purchaser fails to cure such default within (5) days of such notice, this Agreement shall terminate, the Earnest Money and any interest thereon shall be paid to the Seller, and neither party shall have any further obligation to the other hereunder, subject only to such matters as may be specifically stated in this Agreement to survive the termination hereof. The foregoing shall not be deemed to limit the provisions of Section 11.3 with respect to a default governed thereby.

 

 

ARTICLE 6.
CLOSING

 

6.1         Closing. The Closing shall occur on or before December 20, 2024 ("Closing Date"), TIME BEING OF THE ESSENCE, through an escrow with the Title Company, unless the parties mutually agree in writing upon another place or another earlier date. The parties will deliver required closing documents and funds to the Title Company by overnight delivery service, fax, email and wire transfers.

 

6.2         Seller's Obligations at Closing. At the Closing, Seller shall deliver to the Title Company the following documents (the "Closing Documents"):

 

(a)          a Special Warranty Deed (herein so called), in form and substance as set forth on Exhibit "C" attached hereto, duly executed and acknowledged by Seller, conveying fee simple title to the Land and Improvements located thereon, subject only to the Permitted Encumbrances;

 

(b)          an Assignment and Assumption of Leases (herein so called), in form and substance as set forth on Exhibit "D" attached hereto, duly executed by Seller and Purchaser, conveying the Tenant Leases and Deposits for the Property to Purchaser;

 

(c)          a Bill of Sale (herein so called), in form and substance as set forth on Exhibit "E" attached hereto, duly executed by Seller, conveying the Personal Property owned by Seller for the Property to Purchaser;

 

(d)          a General Assignment and Assumption (herein so called), in form and substance as set forth on Exhibit "F" attached hereto, duly executed by Seller and Purchaser, conveying the Licenses and Permits, Contracts and Warranties and Guaranties, and Intangible Property owned by Seller for the Property to Purchaser;

 

(e)          A form of Notice Letter (herein so called) originally executed by Seller and addressed to Tenants under the Tenant Leases, in form and substance as set forth in Exhibit "G" attached hereto;

 

(f)          A FIRPTA and Owner's Affidavit in form and substance substantially as set forth in Exhibit "H" attached hereto;

 

(g)          evidence of the authorization of the execution and delivery of the Closing Documents to be executed and delivered by Seller pursuant to this Agreement, as may be reasonably and customarily required by the Title Company;

 

(m)         a counterpart of a closing statement showing the Purchase Price and all adjustments contemplated herein approved by Purchaser and Seller ("Closing Statement"), executed by Seller;

 

(n)         an updated rent roll reflecting the Tenant Leases in effect at the Property, dated not more than three (3) days prior to the Closing Date; and

 

 

(o)         such other instruments and documents which shall be necessary in connection with the transaction contemplated herein and which do not impose any liability upon Seller not expressly agreed to in this Agreement.

 

6.3         Purchaser's Oblitations at Closing. At Closing, Purchaser shall deliver to the Title Company the following:

 

(a)          the balance of the Purchase Price, by wire transfer of immediately available funds to the account of the Title Company;

 

(b)          executed counterparts of the Assignment and Assumption of Leases and General Assignment and Assumption, originally executed and acknowledged (where applicable) by Purchaser;

 

(c)          a certificate of an authorized officer, general partner or managing member of Purchaser, as applicable, reflecting the authorization of (i) the actions to be taken by Purchaser under this Agreement, (ii) the execution and delivery of this Agreement, the Closing Documents and all other documents to be executed and delivered by Purchaser pursuant to this Agreement and/or as customarily required by the Title Company, and (iii) the payment of the Purchase Price;

 

(d)          a counterpart of the Closing Statement;

 

(e)          such other instruments and documents which shall be necessary in connection with the transaction contemplated herein and which do not impose any liability upon Purchaser not expressly agreed to in this Agreement.

 

6.4         Closing Costs. Purchaser shall pay (i) all recording charges for the deed, (ii) all escrow fees and other charges of the Escrow Holder and/or Title Company (if any), (iii) all costs related to the issuance of any Title Commitment and Title Policy that are not Seller's obligation pursuant to the immediately following sentence, including (A) one half (1/2) of the premium for a basic owner's Title Policy in the amount of the Purchase Price and (B) the cost of any extended coverage or other endorsements or additional coverage of the Title Policy obtained by Purchaser and all title search and examination fees related thereto, (iv) mortgage recording taxes, (v) the cost of any updated survey obtained by Purchaser, and (vi) all other items normally paid by purchasers in real estate transactions in Houston, Texas. Seller shall pay one half (1/2) of the premium for a basic owner's Title Policy in the amount of the Purchase Price. Each party shall pay its own attorneys' fees incurred in connection with the negotiation of this Agreement and the Closing. All other costs and expenses incident to this transaction and the Closing shall be paid by the party incurring same.

 

 

ARTICLE 7.
PRORATIONS

 

7.1         The following shall be apportioned and adjusted between Seller and Purchaser as of 12:01 a.m. (Texas time) on the day of the Closing Date, with the portion applicable to the periods beginning as of such time credited or charged to Purchaser and the portion applicable to periods ending prior to such time credited or charged to Seller, except as otherwise specified:

 

(a)          rents and additional rents under or in respect of the Tenant Leases, as, when and to the extent actually collected, on the basis of the period for which payable under the applicable Tenant Lease and apportioned on the basis of the actual number of days in such period. Prepaid rents for periods following the Closing Date shall be credited to Purchaser at Closing. Uncollected rent will not be prorated;

 

(b)          real property taxes and other like and similar municipal taxes and charges against the Property, each on the basis of the fiscal year or other period for which assessed, and apportioned upon the basis of the actual number of days in such year or period;

 

(c)          subject to Section 7.5, electric, gas, steam, water, sewer and other public utility charges for services furnished to the Property, on the basis of the actual number of days in any period covered by the charge being apportioned (except that no apportionment shall be made for any of such items as are furnished and charged by the applicable utility company directly to Tenants under the Tenant Leases); and

 

(d)          charges under the Contracts to be assigned by Seller to Purchaser in accordance with Section 14.4, on the basis of the actual number of days in any period covered by the charge being apportioned. Seller shall pay, at or prior to the Closing, all installments or amounts of items which are being apportioned under this Section which became due and payable prior to the Closing Date. Any upfront cable or laundry bonus, commissions or similar payments paid to Seller under any Contracts that are being assigned to Purchaser at Closing shall not be prorated.

 

7.2         Seller shall pay all unpaid commissions, fees and other charges due on or prior to the Closing to real estate brokers or other Persons with respect to any Tenant Lease beginning prior to the Closing Date. If the Closing occurs, then Purchaser shall be responsible for commissions, fees, or other charges due to real estate brokers not employed by or affiliated with Seller with respect to Tenant Leases due from and after Closing.

 

7.3         If the Closing occurs before a new real property or other applicable tax rate or charge of a Governmental Entity is fixed, then the apportionment of such tax or charge at the Closing shall be based upon the basis of (i) the assessed value of the Property for the year of the Closing, if known, or the assessed value of the Property for the year before the Closing, if such value is not known, multiplied by (ii) the tax rates for the year of the Closing, if known, or the rates for the year before the Closing, if not known. Seller shall be responsible for the payment of any such real estate and personal property taxes that are delinquent before Closing. Promptly after the new tax rate has been fixed, the apportionment of such tax or charge made at the Closing shall be recalculated and any reimbursement owed by Purchaser to Seller or Seller to Purchaser, as the case may be, shall be paid promptly after such recalculation. If there is an appeal by Seller or Seller's agent with respect to any real property or other applicable tax pending as of the Closing Date relating to such amounts during the current calendar year, then Seller shall control such appeal after Closing, subject to Purchaser's right to consent to any settlement. If Purchaser appeals the real property or other applicable tax (or controls a tax protest) and is successful, Purchaser agrees to pay Seller the portion of such award applicable to Seller's period of ownership (after deducting Purchaser's and Seller's reasonable out of pocket costs and expenses, and reimburse Seller for Seller's costs). If there are any pending appeals relating to prior calendar years, then Seller shall be entitled to control such appeals and all proceeds relating to any such prior calendar year appeals.

 

 

7.4         If any Tenant under a Tenant Lease is in arrears in the payment of rent, or other charges, payments received from such Tenant after the Closing shall be applied in the following order of priority: first, to current rents and other sums due Purchaser, including those incurred by Purchaser in collection of such arrears, as the current owner of the Property and landlord under the Tenant Leases, and the balance to any delinquent sums owing to Seller under the Tenant Leases. If any payments from a Tenant received by Purchaser or Seller after the Closing are payable to the other party by reason of this Section, then the appropriate sum shall be promptly paid to the other party. After the Closing, Seller may bring, in Seller's name and at Seller's expense, an action against any delinquent Tenant to collect rent, additional rent, or other payments due Seller for a period prior to the Closing Date, together with the cost of collection thereof; but in no event shall Seller seek any remedy other than collection of funds from the particular Tenant. Seller shall not interfere with other Tenants of the Property and shall comply with all applicable laws in connection with its collection of delinquent sums pursuant to the terms of this paragraph. Notwithstanding anything contained herein to the contrary, nothing shall prevent Purchaser from commencing eviction proceedings against any Tenant for non-payment of current rents as they become due or for non-payment of rents due to Seller prior to Closing. All rights and obligations with regard to delinquent rents shall expire sixty (60) days following the Closing.

 

7.5         The apportionment of utility charges shall be made upon the basis of charges shown on the latest available bills of such utilities. The charges shown on such available bills for periods prior to the Closing Date shall be paid by Seller, and for the period from the date of each such last available utility bill to the Closing Date an apportionment shall be made based on the amount charged for the period covered by such last available bill. Notwithstanding the foregoing, Seller will endeavor to cause the respective utility companies to read their meters or fix their charges to the Closing Date, in which event Seller shall pay such charges, when billed, to the Closing Date, and Purchaser shall pay such charges from and after the Closing Date and/or promptly reimburse Seller for any such charges paid by Seller for any period subsequent to the Closing Date.

 

7.6         At the Closing, Seller shall be entitled to the return of all deposits or escrows held for Seller's account at or by any public utility company in connection with utility services furnished to the Property, and shall receive a credit against the Purchase Price for any such amounts remaining on deposit or in escrow after Closing, provided such Seller's right to such deposits are assigned to Purchaser at Closing. Prior to the Closing Date, Purchaser shall notify all such public utilities in writing of the applicable transfer of service.

 

 

7.7         If any item covered by this Article cannot be apportioned because the same has not been (or cannot be) fully ascertained on the Closing Date, or if any error has been made with respect to any apportionment, then such item shall be apportioned (or corrected, as applicable) as soon as the same is fully ascertained, but no later than ninety (90) days after the Closing Date (or if later and only with respect to the proration of taxes no later than thirty (30) days after the fmal tax rates and values are provided by the applicable Governmental Entity), and shall be paid within ten (10) Business Days thereafter by the appropriate party. Any Property-related bills received after Closing related to the period prior to Closing shall be promptly paid by Seller.

 

7.8         Subject to the provisions of Section 7.3, real estate tax refunds and credits received after the Closing which are attributable to the fiscal tax year during which the Closing Date occurs shall be apportioned between Seller and Purchaser, pursuant to this Article.

 

7.9         If, as of the Closing Date, the Property shall be (or shall have become) subject to a special or local assessment or charge of any kind (whether or not yet a lien), then Seller shall pay all installments thereof attributable to periods prior to the Closing Date or due and payable prior to the Closing Date; provided, however, any installment thereof attributable to a period from and after the Closing Date shall be apportioned at the Closing in the same manner as for taxes under Section 7.1(b). Purchaser shall be responsible for all installments of such assessment attributable to the period from and after the Closing Date. However, if such an assessment or assessments shall be due in one lump sum payment, then to the extent such assessment(s) is for improvements in place as of the Effective Date, then such assessment(s) shall be paid by Seller, but if such assessment(s) is for improvements to be made subsequent to the Effective Date, then the same shall be paid by Purchaser.

 

7.10          In the event either Purchaser or Seller shall owe the other any money as a result of the terms of this Article 7 (whether at Closing or thereafter), then the party owing such money shall pay the other party such money within ten (10) Business Days after the amount is fmally determined.

 

7.11          At Closing, Purchaser shall receive a credit against the Purchase Price equal to the amount of refundable Deposits required under the Tenant Leases in effect as of the Closing Date. Seller will not use any Deposits for rent or any other defaults by Tenants after the Effective Date, unless the applicable Tenant Lease has been terminated by Seller in the ordinary course and consistent with how Seller has operated the Property.

 

7.12          This Article 7, and all rights and duties of the parties hereunder, shall survive the Closing.

 

 

ARTICLE 8.

REPRESENTATIONS AND WARRANTIES OF SELLER

 

8.1         (a) PURCHASER ACKNOWLEDGES AND AGREES THAT EXCEPT AS TO THE REPRESENTATIONS AND WARRANTIES OF SELLER EXPRESSLY SET FORTH IN THIS AGREEMENT AND IN THE DOCUMENTS DELIVERED AT CLOSING, SELLER IS NOT MAKING, AND HEREBY SPECIFICALLY DISCLAIMS MAKING ANY WARRANTY, GUARANTY OR REPRESENTATION, OF ANY KIND OR CHARACTER, WHETHER EXPRESS, IMPLIED, STATUTORY OR ARISING BY OPERATION OF LAW, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, OR CONCERNING THE PROPERTY, INCLUDING, WITHOUT LIMITATION, (I) THE PHYSICAL AND ENVIRONMENTAL NATURE AND CONDITION OF THE PROPERTY, INCLUDING, WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY, AND THE SUITABILITY THEREOF AND OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY ELECT TO CONDUCT THEREON, AND THE EXISTENCE OF ANY ENVIRONMENTAL HAZARDS OR CONDITIONS THEREON (INCLUDING THE PRESENCE OF ASBESTOS OR OTHER HAZARDOUS MATERIALS) OR THE COMPLIANCE OF THE PROPERTY WITH ANY AND ALL APPLICABLE ENVIRONMENTAL LAWS, RULES OR REGULATIONS; (II) THE NATURE AND EXTENT OF ANY RIGHT OF WAY, LEASE, POSSESSION, LIEN, ENCUMBRANCE, LICENSE, RESERVATION, CONDITION OR OTHER MATTER AFFECTING TITLE; (III) THE COMPLIANCE OF THE PROPERTY OR ITS OPERATION WITH ANY LAWS, STATUTES, ORDINANCES, RULES, REQUIREMENTS OR REGULATIONS OF ANY GOVERNMENT OR OTHER BODY; (IV) THE ECONOMIC VIABILITY OR MARKETABILITY OF THE PROPERTY; (V) TAX MATTERS PERTAINING TO THE TRANSACTION CONTEMPLATED HEREBY; (VI) THE ACCURACY OR COMPLETENESS OF ANY REPORTS OR OTHER INFORMATION FURNISHED BY SELLER TO PURCHASER WITH RESPECT TO THE PROPERTY, INCLUDING, WITHOUT LIMITATION, ENGINEERING, FINANCIAL, ENVIRONMENTAL OR OTHER REPORTS, STUDIES OR INVESTIGATIONS, IF ANY; (VII) VALUATION; (VIII) HABITABILITY; (IX) MERCHANTABILITY; OR (X) SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER EXPRESSLY SET FORTH IN THIS AGREEMENT AND IN THE DOCUMENTS TO BE DELIVERED AT CLOSING, PURCHASER HEREBY EXPRESSLY ACKNOWLEDGES AND AGREES THAT ITS PURCHASE OF THE PROPERTY IS BEING MADE ON AN "AS IS" BASIS, "WITH ALL FAULTS", AND UPON CLOSING, PURCHASER SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING, WITHOUT LIMITATION, ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY EXIST WITH RESPECT TO THE PROPERTY AND WITH FULL KNOWLEDGE AND ACCEPTANCE BY PURCHASER OF ALL INFORMATION AND MATTERS DISCLOSED IN ANY AND ALL REPORTS, STUDIES, ASSESSMENTS, INVESTIGATIONS, PROPOSALS AND DOCUMENTS FURNISHED TO, OR OBTAINED BY, PURCHASER WITH RESPECT TO THE PROPERTY. FURTHER, PURCHASER ACKNOWLEDGES AND AGREES THAT THERE ARE NO ORAL (1) AGREEMENTS, (2) WARRANTIES OR (3) REPRESENTATIONS, COLLATERAL TO OR AFFECTING THE TRANSACTION CONTEMPLATED HEREBY WHICH HAVE BEEN MADE BY SELLER OR ANY THIRD PARTY.

 

 

(b)          EXCEPT AS TO THE REPRESENTATIONS AND WARRANTIES OF SELLER EXPRESSLY SET FORTH IN THIS AGREEMENT AND IN THE DOCUMENTS DELIVERED AT CLOSING, FACTUAL INFORMATION RELATED TO PROPERTY TAXES, UTILITY INFORMATION, FINANCIAL PROJECTIONS, PROPERTY DIMENSIONS, SQUARE FOOTAGE, OR SKETCHES SHOWN TO PURCHASER OR SET FORTH HEREIN ARE OR MAY BE APPROXIMATE. PURCHASER REPRESENTS TO SELLER THAT, PURCHASER HAS OR SHALL HAVE, PRIOR TO THE END OF THE TERMINATION DEADLINE, INSPECTED AND VERIFIED SUCH FACTS AND INFORMATION TO PURCHASER'S SATISFACTION, AND THAT NO LIABILITY FOR ANY INACCURACIES, ERRORS OR OMISSIONS WITH RESPECT THERETO IS ASSUMED BY SELLER OR OTHER AGENTS OR REPRESENTATIVES OF SELLER.PURCHASER UNDERSTANDS AND ACKNOWLEDGES THAT SALES BROCHURES AND OTHER DOCUMENTS, IF ANY, DELIVERED TO PURCHASER (THE "PROPERTY DOCUMENTS") BOTH PRIOR TO AND FOLLOWING THE DATE OF THIS AGREEMENT, MAY HAVE BEEN PREPARED BY PARTIES OTHER THAN SELLER AND THAT SELLER MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, AS TO THE COMPLETENESS, CONTENT OR ACCURACY OF THE PROPERTY DOCUMENTS.

 

(c)          IN THE EVENT THAT FROM AND AFTER THE CLOSING ANY INVESTIGATION, REMOVAL, ABATEMENT, REMEDIATION, OR OTHER CORRECTIVE ACTION IS AT ANY TIME REQUIRED IN CONNECTION WITH THE PROPERTY AS A RESULT OF THE PRESENCE OF ANY ENVIRONMENTAL PROBLEMS, HAZARDOUS MATERIALS, OR ENVIRONMENTAL CONTAMINATION (AS EACH SUCH TERM IS DEFINED IN ANY AND ALL APPLICABLE ENVIRONMENTAL LAWS) AT OR ON THE PROPERTY, INCLUDING, WITHOUT LIMITATION, ASBESTOS AND PETROLEUM PRODUCTS AND BYPRODUCTS AND ANY CONSTITUENTS THEREOF, WHICH OCCURS AFTER THE DATE OF THIS AGREEMENT, PURCHASER ACKNOWLEDGES AND AGREES THAT SELLER HAS NO DUTY OR OBLIGATION TO PERFORM OR CAUSE TO BE PERFORMED ANY SUCH INVESTIGATION, REMOVAL, REMEDIATION, OR CORRECTIVE ACTION.

 

(d)          "ENVIRONMENTAL LAWS" INCLUDES, BUT IS NOT LIMITED TO, THE RESOURCE CONSERVATION AND RECOVERY ACT (42 U.S.C. §6901, ET SEQ.), THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980, AS AMENDED BY THE SUPERFUND AMENDMENTS AND REAUTHORIZATION ACT (42 U.S.C. §9601, ET SEQ.); THE CLEAN AIR ACT (42 U.S.C. §4701, ET SEQ.); THE EMERGENCY PLANNING AND COMMUNITY RIGHT-TO-KNOW ACT (42 U.S.C. §1101, ET SEQ.); THE HAZARDOUS SUBSTANCE TRANSPORTATION ACT OF 1974 (49 U.S.C. §1801, ET SEQ.); THE FEDERAL WATER POLLUTION CONTROL ACT (33 U.S.C. §1251, ET SEQ.); THE FEDERAL INSECTICIDE, FUNGICIDE AND RODENTICIDE ACT (7 U.S.C. §137, ET SEQ.); THE SAFE DRINKING WATER ACT (42 U.S.C. §3001, ET SEQ.); AND THE TOXIC SUBSTANCE CONTROL ACT (15 U.S.C. §2601, ET SEQ.), AS ANY OF THE SAME MAY BE AMENDED FROM TIME TO TIME, AND ANY COMPARABLE OR SUCCESSOR PROVISIONS OF FEDERAL, STATE OR LOCAL LAW, AND ANY REGULATIONS, ORDERS, RULES, PROCEDURES, GUIDELINES AND THE LIKE PROMULGATED IN CONNECTION THEREWITH.

 

 

(e)          PURCHASER ACKNOWLEDGES AND AGREES THAT ANY AND ALL REPORTS, STUDIES, ASSESSMENTS AND OTHER DOCUMENTS FURNISHED BY SELLER AND PREPARED BY THIRD PARTIES ("THIRD PARTY REPORTS"), EVEN IF AT THE DIRECTION OF SELLER, ARE PROVIDED TO PURCHASER AS AN ACCOMMODATION, WITHOUT ANY REPRESENTATION OR WARRANTY REGARDING THE COMPLETENESS OR CORRECTNESS OF SAME. PURCHASER SHALL NOT HOLD SELLER LIABLE FOR ANY INACCURACIES OR INCOMPLETION OF THIRD PARTY REPORTS.

 

(f)          ADDITIONALLY, SUBJECT TO THE REPRESENTATIONS, WARRANTIES AND COVENANTS EXPRESSLY SET FORTH IN THIS AGREEMENT AND IN THE DOCUMENTS DELIVERED AT CLOSING, NO PERSON ACTING ON BEHALF OF SELLER IS AUTHORIZED TO MAKE, AND BY EXECUTION HEREOF, PURCHASER ACKNOWLEDGES THAT NO PERSON HAS MADE ANY REPRESENTATION, AGREEMENT, STATEMENT, WARRANTY, GUARANTY OR PROMISE REGARDING THE PROPERTY OR THE TRANSACTION CONTEMPLATED HEREIN; AND NO SUCH REPRESENTATION, WARRANTY, AGREEMENT, GUARANTY, STATEMENT OR PROMISE, IF ANY, MADE BY ANY PERSON ACTING ON BEHALF OF SELLER SHALL BE VALID OR BINDING UPON SELLER UNLESS EXPRESSLY SET FORTH HEREIN.

 

(g)          THE PROVISIONS OF THIS SECTION 8.1 ARE MATERIAL AND INCLUDED AS A MATERIAL PORTION OF THE CONSIDERATION GIVEN TO SELLER BY PURCHASER IN EXCHANGE FOR SELLER'S PERFORMANCE HEREUNDER, AND SPECIFICALLY INCLUDING NEGOTIATION OF THE AMOUNT OF THE PURCHASE PRICE SET FORTH HEREIN.

 

(h)          THE PROVISIONS OF THIS SECTION 8.1 SHALL SURVIVE CLOSING.

 

8.2         Representations and Warranties of Seller. Seller represents and warrants to Purchaser as follows, which representations and warranties shall be true and correct as of the date hereof and as of the Closing Date:

 

(a)          Authority, Actions of Seller, Authorization and Consents.

 

(i)          Seller is a limited liability company duly organized and validly existing under the laws of the State of Delaware. There are no other approvals, authorizations, consents or other actions by or filings with any Person which are required to be obtained or completed by Seller in connection with the execution and delivery of this Agreement or any of the Closing Documents (or any other agreement or instrument required hereunder) or the sale or assignment of the Property or in connection with any other action required to be taken by Seller hereunder that will not be received prior to the Closing.

 

 

(ii)          Neither the execution and delivery of this Agreement or the Closing Documents by Seller nor the consummation of the transaction contemplated hereby will: (A) violate any provision of Seller's certificate of formation, limited liability company agreement or any other governing documents of Seller; (B) violate, conflict with or result in a breach or termination of, or give any other party the right to terminate, or constitute a default under the terms of, any agreement to which Seller is a party or by which it is bound; (C) violate any judgment, order, injunction, award or decree of any Governmental Entity against or binding upon Seller or upon the Property or business of Seller; or (D) constitute a violation by Seller of any applicable law or regulation to which Seller is subject.

 

(b)          Bankruptcy. Seller has not: (i) filed any voluntary or to its knowledge had involuntarily filed against it in any court or with any governmental body pursuant to any statute either of the United States or of any State, a petition in bankruptcy or insolvency or seeking to effect any plan or other arrangement with creditors, or seeking the appointment of a receiver; (ii) had a receiver, conservator or liquidating agent or similar person appointed for all or a substantial portion of its assets; (iii) suffered the attachment or other judicial seizure of all, or substantially all of its assets; (iv) given notice to any person or governmental body of insolvency; or (v) made an assignment for the benefit of its creditors or taken any other similar action for the protection or benefit of its creditors. Seller is not insolvent and will not be rendered insolvent by the performance of its obligations under this Agreement.

 

(c)          Employees. Purchaser shall not have any obligation with respect to any persons employed by Seller in connection with the Property including to employ any such persons or to make any payment to them.

 

(d)          Rent Roll. To Seller's knowledge (i) as of the Effective Date, the rent roll delivered to Purchaser pursuant to Section 4.1 ("Rent Roll") is a true and correct copy, in all material respects, of the rent roll that Seller utilizes in the ordinary course of owning and operating and the Property. To Seller's knowledge, there are no leases, subleases or other rental or occupancy agreements with respect to or affecting the Property, other than the Leases listed on the Rent Roll, included in the lease files delivered to Purchaser pursuant to Section 4.1 or expressly disclosed as a part of the Property information delivered or made available to Purchaser pursuant to Section 4.1 and (ii) as of the Closing Date, the rent roll delivered to Purchaser in connection with the Closing shall be a true and correct copy, in all material respects, of the rent roll that Seller utilizes in the ordinary course of owning and operating and the Property.

 

(d)         Documents Delivered. Seller has not and will not intentionally alter any of the information delivered or made available to Purchaser pursuant to Section 4.1 so as to render same materially misleading or materially incorrect.

 

(e)          No Notice of Violations. Solely as of the Effective Date, to Seller's knowledge, except as set forth on Schedule 8.2(e) Seller has not received from any Governmental Entity any written notice of a violation of any ordinances, rules, laws or regulations applicable to the Property that remain uncured.

 

 

8.3         Survival. The representations and warranties of Seller set forth in subsections 8.2(a)-(c) shall survive the Closing of the transaction contemplated in this Agreement and the delivery of the Special Warranty Deed from Seller to Purchaser for a period of six (6) months from and after the Closing Date, and any claim against Seller for a violation or alleged violation of such representations and warranties shall be asserted in writing within such time period in a written notice to Seller giving reasonable details of the claims and if not so asserted within such time, Purchaser shall be deemed to have waived all such claims and Seller shall have no further liability with respect thereto. The representations and warranties of Seller set forth elsewhere in the Article 8 and anywhere else in this Agreement (unless expressly stated otherwise) shall not survive the Closing of the transaction contemplated in this Agreement. Notwithstanding anything to the contrary contained herein, if prior to Closing Purchaser has knowledge that any representation or warranty of Seller set forth in this Agreement is not true, and nevertheless Purchaser proceeds to close the transaction contemplated by this Agreement, then Purchaser shall be deemed to have irrevocably and unconditionally waived any right to assert any claim against Seller after the Closing with respect to any misrepresentation of which it had knowledge prior to the Closing. Notwithstanding anything to the contrary contained in this Agreement, the maximum liability of Seller following the Closing with respect to any provisions hereof that survive Closing and under any documents executed and delivered by Seller at, or in anticipation of, the Closing shall not exceed the aggregate sum of one half of one percent (0.5%) of the Purchase Price, provided that Purchaser shall not assert any claim(s) against Seller following the Closing with respect to the initial Twenty Thousand and No/100 Dollars ($20,000.00) in claims which shall be Purchaser's obligation. The provisions of this Section 8.3 shall survive the Closing.

 

8.4         Seller's Knowledge. Terms such as "to Seller's knowledge," "to the best of Seller's knowledge" or like phrases mean the actual present and conscious awareness or knowledge of Jason Shukofsky ("Seller's Representative"), without any duty of inquiry or investigation; provided that so qualifying Seller's knowledge shall in no event give rise to any personal liability on the part of Seller's Representative or any other officer or employee of Seller, on account of any breach of any representation or warranty made by Seller herein. The provisions of this Section 8.4 shall survive the Closing or sooner termination of this Agreement.

 

ARTICLE 9.

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

9.1         Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to Seller as follows, which representations and warranties shall be true and correct as of the date hereof and as of the Closing Date:

 

(a)         Authority, Actions of Purchaser and Authorization. Purchaser is a limited liability company duly organized and validly existing under the laws of Texas. Purchaser has all necessary power and lawful authority to own and operate its assets and properties, including, but not limited to the Property, and to carry on its business (including all business contemplated under this Agreement and the Closing Documents). The execution and delivery by Purchaser of this Agreement and the Closing Documents, and the consummation by Purchaser of the transactions contemplated thereby, have been duly authorized by all necessary action of Purchaser. There are no other approvals, authorizations, consents or other actions by or filings with any Person which are required to be obtained or completed by Purchaser in connection with the execution and delivery of this Agreement or any of the Closing Documents (or any other agreement or instrument required hereunder) or the sale or assignment of the Property or in connection with any other action required to be taken by Purchaser hereunder at or before the Closing.

 

 

(b)          Consents. Neither the execution and delivery of this Agreement or the Closing Documents by Purchaser nor the consummation of the transaction contemplated hereby will: (i) violate, conflict with or result in a breach or termination of, or give any other party the right to terminate, or constitute a default under the terms of, any agreement to which Purchaser is a party or by which it is bound; (ii) violate any judgment, order, injunction, award or decree of any Governmental Entity against or binding upon Purchaser or upon the property or business of Purchaser; or (iii) constitute a violation by Purchaser of any applicable law or regulation to which Purchaser is subject.

 

(c)         Anti-Terrorism Laws. Purchaser is not, and will not be, a person or entity with whom Seller is restricted from doing business with under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, H.R. 3162, Public Law 107-56 (commonly known as the "USA Patriot Act") and Executive Order Number 13224 on Terrorism Financing, effective September 24, 2001 and regulations promulgated pursuant thereto (collectively, "Anti-Terrorism Laws"), including without limitation persons and entities named on the Office of Foreign Asset Control Specially Designated Nationals and Blocked Persons List.

 

(d)         Authority. Purchaser and the individual signing this Agreement on behalf of Purchaser, has the full legal power, authority and right to execute and deliver, and to perform their legal obligations under this Agreement. Purchaser's performance hereunder and the transactions contemplated hereby have been duly authorized by all requisite action on the part of Purchaser, and no remaining action is required to make this Agreement binding on Purchaser.

 

9.2         Survival. The representations and warranties of Purchaser set forth in this Article 9 and anywhere else in this Agreement (unless expressly stated otherwise) shall survive the Closing of the transaction contemplated in this Agreement and delivery of the Special Warranty Deed from Seller to Purchaser for a period of six (6) months from and after the Closing Date.

 

 

ARTICLE 10.
RISK OF LOSS

 

10.1          Casualty. Seller assumes all risks for damage to or injury occurring to the Property by fire, storm, accident, or any other casualty or cause (a "Casualty") until the Closing. Promptly after Seller has received notice of the occurrence of any Casualty between the date hereof and the Closing, Seller shall give Purchaser written notice thereof (a "Casualty Notice"), which Casualty Notice shall state the type, location and amount of damage to any of the Property and Seller's good faith estimate of the cost to complete repairs of such Casualty.

 

(a)          Subject to subsection (c) hereof, if prior to the Closing such a Casualty shall occur and the estimated cost to complete repairs of such Casualty shall equal $10,000,000.00 or more, then in any such event, Purchaser may, at its sole option, terminate this Agreement by written notice to Seller (the "Casualty Termination Notice") within ten (10) Business Days after Purchaser has received the Casualty Notice (provided, however, if the Closing is scheduled for a date which is less than ten days after Purchaser's receipt of the Casualty Notice the Closing shall be postponed until ten (10) Business Days after Purchaser's receipt of the Casualty Notice), in which event if Purchaser so elects to terminate, this Agreement shall be null and void, the Earnest Money shall be returned to Purchaser and neither party shall have any further liability or obligations to the other (except as specifically provided in this Agreement). If Purchaser does not timely deliver a Casualty Termination Notice, Purchaser shall be deemed to have elected to proceed to Closing.

 

(b)          If (i) Purchaser does not elect to terminate this Agreement if the cost to complete repairs to such Casualty shall equal $10,000,000.00 or more, or (ii) the cost to complete repairs of such Casualty shall be less than $10,000,000.00, then the Closing shall take place as provided herein, and at the Closing there shall be assigned to Purchaser all of Seller's right, title and interest in and to any insurance policies covering such Casualty (including rental interruption insurance for the period from and after the Closing Date, to the extent assignable) and all proceeds to be paid thereunder, and Seller shall credit against the Purchase Price, at Closing, an amount equal to the deductible under such policy applicable to such casualty. Seller shall not amend its insurance coverage of the Property without Purchaser's prior consent, which consent shall not be unreasonably withheld or delayed.

 

(c)          If Purchaser delivers a Casualty Termination Notice pursuant to Section 10.1(a) above, Seller shall have the option to negate such Casualty Termination Notice by delivering to Purchaser, within ten (10) Business Days after receipt of such Casualty Termination Notice, a written notice whereby Seller elects to repair the damage described in the Casualty Notice (a "Seller Casualty Repair Notice"). Following delivery of a Seller Casualty Repair Notice, Seller shall proceed to repair such damage before the Closing in a good and workmanlike manner and if necessary, Seller may extend the Closing Date up to 180 days to complete such repairs. If Seller delivers a Casualty Repair Notice, Seller shall retain all insurance proceeds related to such casualty.

 

10.2          Condemnation. If, prior to the Closing, an action is threatened in writing or initiated to take or condemn any portion of the Property by eminent domain proceedings or by deed in lieu thereof ("Condemnation"), Seller, upon receipt of written notice of such action from any Governmental Entity, shall promptly give Purchaser written notice of such Condemnation stating the amount, type and location of such Condemnation (a "Condemnation Notice"), and if such Condemnation shall be a Material Taking, Purchaser may, at its sole option, either (a) terminate this Agreement by written notification to Seller ("Condemnation Termination Notice"), within ten (10) Business Days after Purchaser has received the Condemnation Notice (provided, however, if the Closing is scheduled for a date which is less than ten (10) Business Days after Purchaser's receipt of the Condemnation Notice the Closing shall be adjourned until ten (10) Business Days after Purchaser's receipt of the Condemnation Notice) in which event if Purchaser so elects to terminate, this Agreement shall be null and void, the Earnest Money shall be returned to Purchaser and neither party shall have any further liability or obligations to the other (except as specifically provided in this Agreement), or (b) consummate the Closing. In the event that Purchaser elects to proceed under clause (b) of the immediately preceding sentence, or in the event of a Condemnation that is not a Material Taking, the award of the condemning authority shall be assigned to Purchaser at the Closing, in form and substance reasonably satisfactory to Seller and Purchaser. If Purchaser does not timely deliver a Condemnation Termination Notice, Purchaser shall be deemed to have elected to proceed to Closing. So long as this Agreement has not been terminated, Seller shall not consent to any condemnation award concerning the Property without first having obtained Purchaser's consent, which consent shall not be unreasonably withheld or delayed. A "Material Taking" means a Condemnation that could result in the permanent taking of any rentable square feet of improvements at the Property or the permanent closure of any street access point to the Property without reasonable replacement thereof.

 

 

ARTICLE 11.
DEFAULT

 

11.1          Permitted Termination. If this Agreement is terminated by either party pursuant to a right expressly given to it hereunder (a "Permitted Termination"), neither party shall have any further obligation to the other party except as expressly provided in the Agreement.

 

11.2          Default Remedies of Purchaser.

 

(a)          Seller shall be in default hereunder upon the occurrence of any one or more of the following events:

 

(i)    any of Seller's warranties or representations set forth herein are untrue or inaccurate in any material respect and Seller fails to cure the condition rendering such warranty or representation untrue or inaccurate within ten (10) days after notice from Purchaser of such untruth or inaccuracy; or

 

(ii)    Seller shall fail to meet, comply with or perform in any material respect any covenant, agreement, or obligation on its part required, within the time limits and in the manner required in this Agreement or, if no such time limits are set forth, within ten (10) days after notice from Purchaser of such failure, for any reason other than a Permitted Termination.

 

(b)          In the event of a default by Seller under this Section 11.2, Purchaser may, at Purchaser's sole option, do any of the following:

 

(i)         terminate this Agreement by written notice delivered to Seller and Escrow Agent at or prior to the Closing, in which event the Earnest Money and all interest earned thereon shall be returned to Purchaser, and neither party shall have any rights, duties or obligations hereunder other than the obligations and rights set forth herein and those that expressly survive the termination of this Agreement; or

 

(ii)         enforce specific performance of this Agreement against Seller, provided that any action for specific performance must be brought no later than sixty (60) days after the last scheduled Closing Date.

 

 

11.3          Default Remedies of Seller.

 

(a)          Purchaser shall be in default hereunder upon the occurrence of any one or more of the following events:

 

(i)    any of Purchaser's warranties or representations set forth herein are untrue or inaccurate in any material respect and Purchaser fails to cure the condition rendering such representation or warranty untrue or inaccurate within ten (10) days after notice from Seller of such untruth or inaccuracy; or

 

(ii)    Purchaser shall fail to meet, comply with or perform in any material respect any covenant, agreement, or obligation on its part required, within the time limits and in the manner required in this Agreement, or, if no such time limits are set forth, within ten (10) days after notice from Seller of such failure, for any reason other than a Permitted Termination, except that notwithstanding the foregoing, it shall constitute an immediate default if Purchaser fails to fulfill its obligation to timely consummate the Closing as and when required hereunder.

 

(b)          In the event of a default by Purchaser under this Section 11.3, Seller may, as its sole and exclusive remedy, terminate this Agreement by written notice delivered to Purchaser at or prior to the Closing, in which event Seller shall retain all of the Earnest Money actually deposited and any interest thereon, it being agreed between Purchaser and Seller that such sum shall be liquidated damages for a default by Purchaser hereunder because of the difficulty, inconvenience and uncertainty of ascertaining actual damages for such default and thereafter neither Seller nor Purchaser shall have any obligations to the other under this Agreement, except as specifically set forth herein. SELLER EXPRESSLY WAIVES ALL OF ITS OTHER RIGHTS OR REMEDIES, AT LAW OR IN EQUITY FOR BREACH OF THIS AGREEMENT BY PURCHASER PRIOR TO CLOSING, INCLUDING BUT NOT LIMITED TO A SUIT TO ENFORCE SPECIFIC PERFORMANCE AND DAMAGES (EXCEPT THAT SELLER MAY BRING A LEGAL ACTION TO ENFORCE ANY INDEMNIFICATION BY PURCHASER AS EXPRESSLY PROVIDED HEREIN).

 

11.4          Exculpation. Notwithstanding anything to the contrary in this Agreement, none of Purchaser's or Seller's members, partners, or shareholders, as the case may be (or their constituent members, partners, or shareholders, as the case may be) or any director, officer, employee or shareholder of any of the foregoing, shall be liable under this Agreement, and each party shall look solely to the assets of Purchaser or Seller, as applicable, for the payment of any claim or the performance of any obligation by the other party. In no event shall either Purchaser or Seller be entitled to seek or obtain any other damages of any kind, including, without limitation, consequential, indirect or punitive damages.

 

 

ARTICLE 12.

FUTURE OPERATIONS

 

12.1          Operations. Seller hereby agrees and covenants that from the date hereof through the Closing or earlier termination of this Agreement that Seller will:

 

1.    not enter into any contract, agreement or other arrangement with regards to the Property which will be binding on Purchaser or the Property after the Closing, other than leasing of units at the Property at market rents and in accordance with past practices and customs, without the prior written approval of Purchaser; provided that all new leases shall be on the form of lease currently used or such other form as may be approved by Purchaser in its reasonable discretion, and any move-in incentives granted to tenants shall be consistent with those customarily provided in the ordinary course of Seller's business in accordance with past practices and customs;

 

2.    operate and maintain the Property in substantially the same manner in which it operated and maintained the Property prior to the execution of this Agreement; and

 

3.    not voluntarily subject the Property to any liens, deeds of trust, mortgages, encumbrances, covenants, conditions, restrictions, easements or other title matters or seek any zoning changes without Purchaser's prior written consent, which consent shall not be unreasonably withheld or delayed.

 

12.2.          Further Marketing; Termination. During the pendency of this transaction between the Parties, Seller shall have the right to cause the Property to continue to be marketed, to cause the Property to be shown to other third parties for purchase, and to solicit other purchasers while this Agreement is in effect. Seller shall have the right to terminate this Agreement by written notice to Purchaser at any time prior to Closing, including to facilitate the sale of the Property to a third party. In the event that Seller terminates this Agreement pursuant to this Section 12.2, Purchaser shall be entitled to receive the Earnest Money and any interest thereon, whereupon neither party shall have any further obligation to the other hereunder, subject only to such matters as may be specifically stated in this Agreement to survive the termination hereof.

 

ARTICLE 13.
BROKERS

 

13.1          Seller represents and warrants to Purchaser, and Purchaser represents warrants to Seller, each for itself, that it knows of no broker or finder who has claimed or who has the right to claim any fee, commission or other similar compensation in connection with the transaction contemplated by this Agreement, and that it has taken no actions which would form the basis for such a claim.

 

13.2         Seller shall indemnify, hold harmless and defend Purchaser against all liability, loss, cost, claim or expense arising out of any breach of Seller's obligations or representations in Section 13.1. Purchaser shall indemnify, hold harmless, and defend Seller against all liability, loss, cost, claim or expense arising out of any breach of Purchaser's obligations or representations in Section 13.1.

 

 

13.3         This Article 13 shall survive the Closing (or, if the Closing does not occur, the earlier termination of this Agreement).

 

ARTICLE 14.

DUE DILIGENCE REVIEW

 

14.1          Purchaser's Right to Inspect the Property. Purchaser, at Purchaser's sole cost and expense, shall be entitled, during the term of this Agreement, at reasonable times and following reasonable notice to Seller, to inspect and review the Property and all matters relating to the Property (the "Due Diligence Review"), including without limitation the physical condition of the Property, Contracts, Leases, plans, surveys, title examinations and all other materials in Seller's possession concerning the Property as Purchaser may reasonably request, provided that they are not confidential, proprietary or privileged. During the Due Diligence Review, Purchaser, at Purchaser's sole cost, shall also have the right to make such inspections, investigations and tests and make photocopies of such materials as Purchaser may elect to make or obtain, subject to the Tenants' rights and excluding matters which are confidential, privileged or proprietary. Seller will arrange access to Purchaser and Purchaser's agents to the Property at reasonable times following reasonable notice. Purchaser and Purchaser's representatives, agents, designees and contractors have the right during the term of this Agreement upon not less than two (2) Business Days prior written notice to Seller, at Purchaser's sole cost, to enter the Property to conduct any environmental, soils, seismic, hydro geologic, geologic and engineering tests and studies with respect to the Property (each, an "Environmental Investigation"), provided that notwithstanding any other provision hereof, Purchaser shall not perform any invasive testing without Seller's prior written approval, which approval shall be granted or withheld in Seller's sole discretion. Through Closing, Purchaser shall have the right to physically inspect the Property; provided, however, that Purchaser shall not have any right to terminate this Agreement on account of the results of any inspections after the Termination Deadline.

 

14.2          Termination of This Agreement. Purchaser, at its sole discretion, may elect to terminate this Agreement for any reason or no reason at all, by giving written notice thereof prior to the Termination Deadline ("Termination Notice") to Seller and the Escrow Holder. If Purchaser timely gives a Termination Notice, then Purchaser shall be entitled to receive the Earnest Money from Escrow Holder, and neither party shall have any further obligation to the other hereunder, subject only to such matters as may be specifically stated in this Agreement to survive the termination hereof. If the Termination Notice is not timely given, (i) this Agreement shall remain in full force and effect and all obligations of each party hereunder shall continue, and (ii) except as otherwise expressly provided in this Agreement, the Earnest Money shall be non-refundable to Purchaser.

 

 

14.3          Purchaser's Responsibility and Indemnity. Purchaser's right to inspect the Property and conduct the tests referred to in Section 14.1 is subject to the condition that such inspection and tests shall not materially interfere with the operation of the Property or with the use and occupancy of any Tenant at the Property. Purchaser shall obtain and/or shall require all consultants and third-party designated representatives to obtain and maintain, with an insurance company or insurance companies reasonably satisfactory to Seller and on a primary and non‐contributory basis, (a) a policy of commercial general public liability insurance, with a broad form contractual liability endorsement covering Purchaser's indemnification obligations hereunder, and with a combined single limit of not less than $1,000,000 per occurrence for bodily injury and property damage, all of which insurance shall be written on an "occurrence form", and (b) a policy of business automobile liability insurance with a minimum limit of $1,000,000, each insuring Seller and its affiliates as additional insureds and waiving all rights of subrogation (certificates of which shall be given to Seller prior to the first entry by Purchaser or its consultants and/or representatives on the Property). Purchaser shall be responsible for and shall indemnify Seller against all damages or loss which may arise as a result of or in connection with any tests or inspections conducted by Purchaser or its representatives or agents, excluding the mere discovery of any pre-existing condition(s) on or about the Property (unless discovered as a result of any testing performed in violation of this Agreement) and the extent of any loss caused by the negligence or misconduct of Seller or any agent, contractor or employee of Seller. Purchaser shall promptly repair any such damage and restore the Property to the condition that the Property was in immediately prior to such inspections and tests and shall not allow any liens to attach to the Property in connection with any such inspections and tests. The provisions of this Section 14.3 shall survive the Closing or sooner termination of this Agreement.

 

14.4          Termination of Contracts. Purchaser may, by notice given to Seller on or prior to the Termination Deadline, request that Seller terminate one or more of the Contracts effective as of the Closing Date; provided, however, that Purchaser shall not be entitled to cause Seller to terminate any contracts that are non-terminable by their terms (whether or not such contract has a provision for a termination fee)(collectively, the "Non-Terminable Contracts"). Seller shall so terminate such Contracts (other than the Non-Terminable Contracts), provided that Seller shall not be obligated to pay any fee, amount or penalty incurred as a result of such termination, and Purchaser shall indemnify Seller against any such costs. All Contracts not so terminated shall be assigned at Closing by Seller to Purchaser pursuant to the General Assignment and Assumption Agreement, except for any such Contracts that are non-assignable, in which event, it shall be deemed that Purchaser requested that same be terminated in accordance herewith. Notwithstanding anything to the contrary in this Agreement, the property management agreement in place for the Property shall be terminated at Closing at Seller's sole cost and expense.

 

14.5          Confidentiality. Purchaser shall not disclose the contents of any documents delivered to Purchaser pursuant to Sections 4.1 or 14.1 hereof, any results from Purchaser's Due Diligence Investigation, including but not limited to the results of any Environmental Investigation to any Person or Governmental Entity without the prior written consent of Seller, except as Purchaser may otherwise be required by any applicable law, rule or regulation, and except as may be reasonably necessary to third parties assisting Purchaser with analyzing and investigating such information in connection with this transaction, including Purchaser's current or prospective agents, attorneys, representatives, advisors, consultants, engineers, contractors, direct or indirect owners (and their respective family members), lenders and investors and their respective current or prospective agents, attorneys, representatives, advisors, consultants, engineers, contractors, direct or indirect owners (and their respective family members), lenders and investors (collectively "Purchaser's Representatives"). Purchaser and Purchaser's Representatives may disclose, any information or documentation that (i) is readily ascertainable by the general public, or (ii) is deemed advisable by Purchaser to disclose to its officers, directors, members, managers, employees, agents, consultants, members of professional firms serving it or potential lenders, investors, consultants and brokers and others who need to know such information or review such documentation for the purpose of assisting Purchaser in connection with the transaction contemplated by this Agreement so long as such persons agree in writing to the confidential nature of such information and the non-disclosure obligations hereunder. Purchaser consents to the disclosure of information regarding the status of this Agreement and its performance of its obligations hereunder with any affiliate of Purchaser as more particularly described on Exhibit I attached hereto or any other loan made by The Bancorp Bank, N.A. or any affiliate of The Bancorp Bank, N.A. to any affiliate of Purchaser (the "Affiliate Loans"). This Section 14.5 shall survive the termination of this Agreement.

 

 

14.6         Seller Cooperation. Subject to Section 14.1 and 14.5 , Seller agrees to cooperate with and furnish any information reasonably requested by Purchaser's appraiser, lender and other third party consultants, to the extent in Seller's possession.

 

14.7          Non-solicitation. Purchaser shall not solicit or employ any of Seller's or Seller' management company employees after the Effective Date. This covenant shall survive Closing for a twelve (12) month period.

 

ARTICLE 15.

INTENTIONALLY DELETED

 

ARTICLE 16.

MISCELLANEOUS

 

16.1          Notices. All notices, demands and requests which may be given or which are required to be given by either party to the other, and any exercise of a right of termination provided by this Agreement, shall be in writing and shall be deemed effective (a) on the date when personally delivered to the address of the party to receive such notice set forth below, (b) on the date when transmitted if sent via electronic mail, (c) the next succeeding Business Day after deposit with a nationally recognized overnight courier service (e.g., Federal Express) and addressed to the party as set forth below, or (d) three days after when deposited in any post office or mail receptacle regularly maintained by the United States Government, certified or registered mail, return receipt requested, postage prepaid, (with a confirmation copy sent by email the day said certified or registered mail is mailed) addressed as follows:

 

If to Seller:

TBB Crescent Park Drive LLC c/o The Bancorp Bank, National Association 155 E. 44th Street, Suite 1015 New York, NY 10017 Attention: Olek DeRowe E-mail: oderowe@thebancorp.com

 

 

With a copy to:	Sills Cummis & Gross P.C. One River-front Plaza Newark, New Jersey 07102 Attention: Robert Hempstead and Clint Kakstys E-mail: rhempstead@sillscummis.com and ckakstys@sillscummis.com
With a copy to:	Sills Cummis & Gross P.C. One River-front Plaza Newark, New Jersey 07102 Attention: Robert Hempstead and Clint Kakstys E-mail: rhempstead@sillscummis.com and ckakstys@sillscummis.com

 

 

or such other place as Seller or Purchaser, respectively, may from time to time designate by written notice to the other. A copy of any notice sent by email shall contemporaneously be sent by one of the other methods set forth in this Section 16.1 unless the recipient acknowledges receipt of such notice by reply email. A notice may be given by a party or by a party's attorney at law.

 

16.2          Entire Agreement. This Agreement embodies the entire agreement between the parties relative to the subject matter hereof, and there are no oral or written agreements between the parties, nor any representations made by either party relative to the subject matter hereof, which are not expressly set forth herein. The parties hereto do not intend to confer any benefit hereunder on any Person other than the parties hereto.

 

16.3          Amendment. This Agreement may be amended only by a written instrument executed by the party or parties to be bound thereby.

 

16.4          Headings. The captions and headings used in this Agreement are for convenience only and do not in any way limit, amplify, or otherwise modify the provisions of this Agreement.

 

16.5          Governing Law. This Agreement shall be governed by the laws of the State of Texas. Venue in any litigation commenced in connection with this Agreement shall be proper in Han^-is County, Texas, and the parties agree to submit to personal jurisdiction in such venue.

 

16.6          Successors and Assigns. This Agreement shall bind and inure to the benefit of Seller, Purchaser, and their respective successors and permitted assigns.

 

 

16.7          Invalid Provision. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement; and, the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by such illegal, invalid, or unenforceable provision or by its severance from this Agreement.

 

16.8          Multiple Counterparts. This Agreement may be executed in a number of identical counterparts, each of which for all purposes is deemed an original, and all of which constitute collectively one agreement; but in making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart. This Agreement may be executed by facsimile transmission or by email via .pdf (or its equivalent) format or other electronic means (e.g., DocuSign), in each case, with the same force and effect as originals.

 

16.9          Construction. The words "herein" "hereof "hereunder" and other similar compounds of the words "here" when used in this Agreement shall refer to the entire Agreement and not to any particular provision or section. Whenever used in this Agreement, the singular shall include the plural, the plural the singular, and the use of any gender shall be applicable to all genders. Marginal notes are inserted for convenience only and shall not form part of the text of this Agreement. This Agreement shall not be construed as if it had been prepared by one of the parties, but rather as if both parties had prepared the same.

 

16.10          Waivers. No waiver of any breach of any covenant or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof, or of any other covenant or provision herein contained. No extension of time for performance of any obligation or act shall be deemed an extension of the time for performance of any other obligation or act.

 

16.12          No Joint Venture. This Agreement shall not create a partnership or joint venture relationship between Purchaser and Seller.

 

16.13          Assignment. Except as provided in this Section, this Agreement may not be assigned by Purchaser. The foregoing sentence to the contrary notwithstanding, Purchaser may assign this Agreement to one or more entities owned or controlled (either directly or indirectly) by Purchaser or its principals or members. Purchaser shall, no later than five (5) Business Days prior to the Closing Date, provide to Seller written notice of such assignment together with an executed assignment and assumption agreement reasonably acceptable to Seller. No assignment of this Agreement shall relieve the Purchaser named herein of its obligations and liabilities hereunder.

 

16.14          Time of the Essence. Time is important to both Seller and Purchaser in the performance of this Agreement, and both parties have agreed that time is of the essence with respect to all dates set forth in this Agreement, including the Closing Date.

 

16.15          Timing. If the final date of any period which is set out in any provision of this Agreement falls on a Saturday, Sunday or legal holiday under the law of the United States or the State of Texas, in such event, the time of such period shall be extended to the next day which is not a Saturday, Sunday or legal holiday.

 

 

16.16          Attorney's Fees. In the event of any dispute between the parties concerning this Agreement, the non-prevailing party in such dispute shall reimburse the prevailing party for its attorney's fees incurred in connection with such dispute.

 

16.17          Section 1031 Exchange. The parties acknowledge that each other may elect to effect the acquisition or disposition of the Property pursuant to this Agreement as a like-kind exchange pursuant to Section 1031 of the United States Internal Revenue Code (an "Exchange"). Each party agrees to cooperate with the other in all respects in effecting such Exchange, including, without limitation, by executing and delivering such documents as may be customarily required in such exchange transactions, provided that the other party shall not be required to incur any expense or additional obligation or liability in connection therewith nor shall any such Exchange delay the Closing Date.

 

16.18          Purchase Price Allocation. Purchaser and Seller shall use reasonable efforts to agree upon the allocation of the Purchase Price between real property, intangible personal property, and tangible personal property for state and local tax purposes no later than five (5) days prior to the Closing Date. Such allocation shall be based on a report prepared by an independent accounting firm reasonably acceptable to Purchaser and Seller, which shall be engaged by Purchaser at Purchaser's sole cost and expense. If, for any reason, such report is not completed prior to Closing, there shall be no agreed upon allocation of the Purchase Price pursuant to this Section 16.18. Purchaser and Seller acknowledge that state and local tax allocations may differ significantly from federal tax reporting.

 

16.19          Survival. No provisions of this Agreement shall survive such termination of this Agreement or the Closing, unless expressly stated to so survive. Except for Section 16.17, this Article 16 shall survive the Closing or sooner termination of this Agreement.

 

16.20          No Offer. Submission of this form of this Agreement for examination shall not bind Seller in any manner nor be construed as an offer to sell, and no contract or obligations of Seller shall arise until this instrument is executed by both Seller and Purchaser and delivery is made to each.

 

[Signature Page follows]

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written.

 

	SELLER:	TBB CRESCENT PARK DRIVE LLC, a Delaware limited liability company
		By:
		Name:
		Title:
	PURCHASER:	WAY MAKER GROWTH FUND, LLC, a Texas limited liability company
		By: WAY MAKER FUND MANAGER, LLC, a Texas limited liability company
		By:
		Name:
		Title:
	ESCROW HOLDER:	NEWMARK TITLE SERVICES, INC.
		By:
		Name:
		Title:

 

Exhibit 10.3

 

FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT

 

THIS FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT (“Amendment”) is made as of the 19th day of December, 2024 (“Effective Date”) by and between TBB CRESCENT PARK DRIVE LLC, Delaware limited liability company (the "Seller"), whose address is c/o The Bancorp Bank, National Association, 155 E. 44th Street, Suite 1015, New York, New York 10017, and WAY MAKER GROWTH FUND, LLC a Texas limited liability company, whose address is 603 E. Broadway St., Prosper, Texas 75078 and/or assigns pursuant to this Agreement (the "Purchaser").

 

BACKGROUND

A.    Seller and Purchaser are parties to a certain Purchase and Sale Agreement dated June 28, 2024 (the “Agreement”) with respect to certain real property located at 11755 Southlake, Houston, Texas and more particularly described in the Agreement.

 

B.    The Seller and Purchaser desire amend the Agreement as set forth herein.

 

C.    Any capitalized term used herein and not defined herein shall have the meaning ascribed thereto in the Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows:

 

1.    Closing. The first sentence of Section 6.1 of the Agreement is hereby deleted and replaced with the following: “The Closing shall occur on or before March 21, 2025 (“Closing Date”), TIME BEING OF THE ESSENCE, through an escrow with the Title Company, unless the parties mutually agree in writing upon another place or another earlier date.”

 

2.    Additional Deposit. On or before December 20, 2024, Purchaser shall pay to the Escrow Holder the sum of One Million One Hundred Thousand and No/100 Dollars ($1,100,000.00) (the “Additional Deposit”). Upon receipt, the Additional Deposit shall constitute a part the Earnest Money for all purposes under the Agreement and shall be held and disbursed by Escrow Holder in accordance with the provisions of the Agreement. Time shall be of the essence with respect to the date on which the Additional Deposit is due and payable. In the event the Additional Deposit is not timely paid, Seller shall have the right to terminate the Agreement by giving written notice to Purchaser, and the Agreement shall be deemed terminated and of no further force and effect, except for any provisions thereof that expressly survive termination, whereupon Seller shall be entitled to receive and retain all portions of the Earnest Money.

 

3.    Continued Force and Effect. Purchaser and Seller acknowledge and agree that except as amended by this Amendment, the Agreement is and remains unchanged and in full force and effect.

 

4.    Counterparts. This Amendment may be executed in any number of counterparts, provided each of the parties hereto executes at least one counterpart; each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Executed counterparts of this Amendment may be exchanged by electronic mail which shall be sufficient to bind the parties. The parties further agree that counterparts of this Amendment may be signed electronically via Adobe Sign, DocuSign protocol or other electronic platform. All such signatures may be used in the place of original "wet ink" signatures to this Amendment and shall have the same legal effect as the physical delivery of an original signature.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written.

 

	SELLER:
	TBB CRESCENT PARK DRIVE LLC, a Delaware limited liability company
	By:
	Name:
	Title:
	PURCHASER
	WAY MAKER GROWTH FUND, LLC, a Texas limited liability company
	By: WAY MAKER FUND MANAGER, LLC, a Texas limited liability company
	By:
	Name:
	Title:
	ACKNOWLEDGED AND AGREED BY:
	ESCROW HOLDER:
	NEWMARK TITLE SERVICES, LLC
	By:
	Name:
	Date:

 

Exhibit 10.4

 

SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT

 

THIS SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT (“Amendment”) is made as of the 25^th day of March, 2025 (“Effective Date”) by and between TBB CRESCENT PARK DRIVE LLC, Delaware limited liability company (the "Seller"), whose address is c/o The Bancorp Bank, National Association, 155 E. 44th Street, Suite 1015, New York, New York 10017, and WAY MAKER GROWTH FUND, LLC, a Texas limited liability company, whose address is 603 E. Broadway St., Prosper, Texas 75078, or its assigns (the "Purchaser").

 

BACKGROUND

 

A.    Seller and Purchaser are parties to a certain Purchase and Sale Agreement dated June 28, 2024 (the “Original Agreement”) and that certain First Amendment to Purchase and Sale Agreement, dated December 19, 2024 (“First Amendment” and, together with the Original Agreement, the “Agreement”) with respect to certain real property located at 11755 Southlake, Houston, Texas and more particularly described in the Agreement (the “Property”).

 

B.    Seller and Purchaser are also parties to a certain Development Services Agreement, dated February 4, 2025, with respect to the Property (the “Development Agreement”).

 

C.    The Seller and Purchaser desire amend the Agreement and the Development Agreement as set forth herein.

 

D.    Any capitalized term used herein and not defined herein shall have the meaning ascribed thereto in the Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows:

 

1.        Closing.

 

(a)    The first sentence of Section 6.1 of the Original Agreement, as amended by the First Amendment, is hereby deleted and replaced with the following: “The Closing shall occur on or before May 23, 2025 (“Closing Date”), TIME BEING OF THE ESSENCE, through an escrow with the Title Company, unless the parties mutually agree in writing upon another place or another earlier date.”

 

(b)    Purchaser and its assigns shall have two (2) options to adjourn the Closing Date by thirty (30) days each, exercisable by paying the sum of One Million Dollars ($1,000,000.00) per thirty (30) day extension (each, an “Extension Deposit”) to the Escrow Holder on or before the then-scheduled Closing Date, time being of the essence. Upon receipt, the Extension Deposit(s) shall constitute a part the Earnest Money for all purposes under the Agreement and shall be held and disbursed by Escrow Holder in accordance with the provisions of the Agreement.

 

 

2.        Additional Deposit. On or before April 7, 2025, Purchaser or its assigns shall pay to the Escrow Holder the sum of One Million Four Hundred Thousand and No/100 Dollars ($1,400,000.00) (the “Additional Deposit”). Upon receipt, the Additional Deposit shall constitute a part the Earnest Money for all purposes under the Agreement and shall be held and disbursed by Escrow Holder in accordance with the provisions of the Agreement. Time shall be of the essence with respect to the date on which the Additional Deposit is due and payable. In the event the Additional Deposit is not timely paid, Seller shall have the right to terminate the Agreement by giving written notice to Purchaser, and the Agreement shall be deemed terminated and of no further force and effect, except for any provisions thereof that expressly survive termination, whereupon Seller shall be entitled to receive and retain all portions of the Earnest Money.

 

3.        Insurance. No later than March 31, 2025, Purchaser or its assigns shall, at its sole cost and expense, pay the invoice provided by Sutika Insurance LLC dated March 14, 2025 (or any subsequent invoice provided by Sutika Insurance LLC), for the insurance covering the Property.

 

4.        Development Agreement. Purchaser or its assigns shall continue to perform its duties under the Development Agreement; provided, however, that notwithstanding any provision of the Development Agreement to the contrary, Seller shall not be obligated to pay any costs or expenses incurred in connection with the Project (as defined in the Development Agreement), including without limitation any Allowable Development Costs (as defined in the Development Agreement), that are incurred from and after March 21, 2025, and all such costs and expenses shall be timely paid by Purchaser to WMA Construction Management, LLC in an amount not to exceed One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) (“Purchaser Project Costs Cap”). Purchaser and its assigns agrees that from and after March 21, 2025, (a) Purchaser shall not permit Project costs to be incurred in excess of the Purchaser Project Costs Cap and (b) Seller shall have the right to terminate, or halt all work under, the Development Agreement if Project costs equal to the Purchaser Project Costs Cap are incurred, except to the extent that Purchaser agrees in writing to pay for costs in excess of the Purchaser Project Costs Cap.

 

5.        Permitted Assignee. Seller agrees that Purchaser may assign the Agreement and Development Agreement (provided that both such agreements must be assigned contemporaneously to the same assignee) to Windtree Therapeutics Inc. or an entity owned or controlled by or under common control with Windtree Therapeutics Inc. (either directly or indirectly). Purchaser shall, no later than five (5) Business Days prior to the Closing Date, provide to Seller written notice of such assignment together with an executed assignment and assumption agreement reasonably acceptable to Seller. No assignment of the Agreement or the Development Agreement shall relieve the Purchaser named herein of its obligations and liabilities thereunder.

 

6.        Continued Force and Effect. Purchaser and Seller acknowledge and agree that except as amended by this Amendment, the Agreement and the Development Agreement are and remain unchanged and in full force and effect.

 

7.        Counterparts. This Amendment may be executed in any number of counterparts, provided each of the parties hereto executes at least one counterpart; each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Executed counterparts of this Amendment may be exchanged by electronic mail which shall be sufficient to bind the parties. The parties further agree that counterparts of this Amendment may be signed electronically via Adobe Sign, DocuSign protocol or other electronic platform. All such signatures may be used in the place of original "wet ink" signatures to this Amendment and shall have the same legal effect as the physical delivery of an original signature.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first above written.

 

	SELLER:
	TBB CRESCENT PARK DRIVE LLC, a Delaware limited liability company
	By:
	Name:
	Title:
	PURCHASER
	WAY MAKER GROWTH FUND, LLC, a Texas limited liability company
	By: WAY MAKER FUND MANAGER, LLC, a Texas limited liability company
	By:
	Name:
	Title:

 

Exhibit 99.1

 

Windtree Announces Strategic Transaction to Drive Revenue Generation in Support of Ongoing Therapeutic Pipeline Development

 

Initial transaction provides the right to buy the target asset which may provide consistent revenue to Windtree while it continues to develop its biotech pipeline drug candidates

 

 

WARRINGTON, PA – May 1, 2025 – Windtree Therapeutics, Inc. (“Windtree” or the “Company”) (NasdaqCM: WINT), a biotechnology company focused on becoming a revenue generating company and advancing early and late-stage innovative therapies for critical conditions and diseases, is pleased to announce that it has entered an Assignment and Conditional Assumption Agreement with a seasoned real estate investment group pursuant to which it has gained the rights to purchase a 436 unit, multifamily residential property in Houston, Texas. The property is expected to contribute consistent rental revenue to the Company while it continues to develop its therapeutic pipeline. The planned acquisition would be effectuated through a separate wholly owned subsidiary division of the Company with the anticipated addition of certain new management. The acquisition is expected to be funded primarily from non-recourse secured mortgage financing, with the balance of the purchase price coming from proceeds of the issuance of preferred stock. The Company’s obligation to purchase the property is contingent upon the satisfactory completion of standard property due diligence and finalization of acceptable terms of the financing. The initial planned closing date is May 23, 2025, however, the Company has the option to extend the closing date for two periods of no greater than thirty days each.

 

The Company’s new corporate strategy seeks to acquire assets that contribute revenue including the acquisition of small biotech companies with FDA approved products. Windtree will continue to develop its pipeline of unique drug candidates in the cardiovascular and oncology disease spaces.

 

“Windtree is expected to become a revenue generating company and these additional assets are intended to diversity and stabilize the Company,” said Jed Latkin, Chief Executive Officer of Windtree. “By identifying opportunities to bring in stable revenue, we believe the Company can reduce its need for capital that could be dilutive to the stock price. We are actively looking at multiple acquisition candidates that could provide near term revenue and profits. We will continue in our mission to help patients in need with our existing unique drug candidates in cardiogenic shock, heart failure and cancer. We believe that this new approach will allow the Company to grow and limit future stockholder dilution.”

 

About Windtree Therapeutics, Inc.

Windtree Therapeutics, Inc. is a biotechnology company focused on becoming a revenue generating biotech and advancing early and late-stage innovative therapies for critical conditions and diseases. Windtree’s portfolio of product candidates includes istaroxime, a Phase 2 candidate with SERCA2a activating properties for acute heart failure and associated cardiogenic shock, preclinical SERCA2a activators for heart failure and preclinical precision aPKCi inhibitors that are being developed for potential in rare and broad oncology applications. Windtree also has a licensing business model with partnership out-licenses currently in place.

 

 

Forward Looking Statements

This press release contains statements related to the acquisition of the real estate property discussed above; rental revenue if such property is acquired; potential clinical effects of istaroxime; the potential benefits and safety of istaroxime; the clinical development of istaroxime; and our research and development program for treating patients in early cardiogenic shock due to heart failure. Such statements constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. The Company may, in some cases, use terms such as “predicts,” “believes,” “potential,” “proposed,” “continue,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Such statements are based on information available to the Company as of the date of this press release and are subject to numerous important factors, risks and uncertainties that may cause actual events or results to differ materially from the Company’s current expectations. Examples of such risks and uncertainties include, among other things: the Company could lose its deposit on the real estate property discussed above; the Company may fail to acquire such real estate property; the Company’s ability to acquire revenue generating subsidiaries; the market’s reaction to potential acquisitions by the Company; the Company’s ability to secure significant additional capital as and when needed; the Company’s ability to achieve the intended benefits of the aPKCi asset acquisition with Varian Biopharmaceuticals, Inc.; the Company’s risks and uncertainties associated with the success and advancement of the clinical development programs for istaroxime and the Company’s other product candidates, including preclinical oncology candidates; the Company’s ability to access the debt or equity markets; the Company’s ability to manage costs and execute on its operational and budget plans; the results, cost and timing of the Company’s clinical development programs, including any delays to such clinical trials relating to enrollment or site initiation; risks related to technology transfers to contract manufacturers and manufacturing development activities; delays encountered by the Company, contract manufacturers or suppliers in manufacturing drug products, drug substances, and other materials on a timely basis and in sufficient amounts; risks relating to rigorous regulatory requirements, including that: (i) the U.S. Food and Drug Administration or other regulatory authorities may not agree with the Company on matters raised during regulatory reviews, may require significant additional activities, or may not accept or may withhold or delay consideration of applications, or may not approve or may limit approval of the Company’s product candidates, and (ii) changes in the national or international political and regulatory environment may make it more difficult to gain regulatory approvals and risks related to the Company’s efforts to maintain and protect the patents and licenses related to its product candidates; risks that the Company may never realize the value of its intangible assets and have to incur future impairment charges; risks related to the size and growth potential of the markets for the Company’s product candidates, and the Company’s ability to service those markets; the Company’s ability to develop sales and marketing capabilities, whether alone or with potential future collaborators; the rate and degree of market acceptance of the Company’s product candidates, if approved; the impacts of political unrest, including as a result of geopolitical tension, including the conflict between Russia and Ukraine, the People’s Republic of China and the Republic of China (Taiwan), and the evolving events in the Middle East, and any sanctions, export controls or other restrictive actions that may be imposed by the United States and/or other countries which could have an adverse impact on the Company’s operations, including through disruption in supply chain or access to potential international clinical trial sites, and through disruption, instability and volatility in the global markets, which could have an adverse impact on the Company’s ability to access the capital markets. These and other risks are described in the Company’s periodic reports, including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, filed with or furnished to the Securities and Exchange Commission and available at www.sec.gov. Any forward-looking statements that the Company makes in this press release speak only as of the date of this press release. The Company assumes no obligation to update forward-looking statements whether as a result of new information, future events or otherwise, after the date of this press release.

 

 

Contact Information:

Eric Curtis

ecurtis@windtreetx.com

 

v3.25.1

Document And Entity Information	Apr. 30, 2025
Document Information [Line Items]
Entity, Registrant Name	Windtree Therapeutics, Inc.
Current Fiscal Year End Date	--12-31
Document, Type	8-K
Document, Period End Date	Apr. 30, 2025
Entity, Incorporation, State or Country Code	DE
Entity, File Number	001-39290
Entity, Tax Identification Number	94-3171943
Entity, Address, Address Line One	2600 Kelly Road, Suite 100
Entity, Address, City or Town	Warrington
Entity, Address, State or Province	PA
Entity, Address, Postal Zip Code	18976
City Area Code	215
Local Phone Number	488-9300
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock
Trading Symbol	WINT
Security Exchange Name	NASDAQ
Entity, Emerging Growth Company	false
Amendment Flag	false
Entity, Central Index Key	0000946486

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