Co-Diagnostics, Inc 8-K, filed Oct 13, 2026
Co-Diagnostics, Inc. (CODX)
About this 8-K
Co-Diagnostics, Inc filed this 8-K on October 13, 2026, reporting on events of October 9, 2026.
Items reported
- Item 1.01: Entered into a material agreement
- Item 2.03: New debt or off-balance-sheet obligation
- Item 3.02: Unregistered sale of equity
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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Item 1.01 Entry into a Material Definitive Agreement.
Senior Secured Convertible Loan Transaction with J.J. Astor & Co.
On October 9, 2026, Co-Diagnostics, Inc. (the “Company”) entered into a Loan Agreement (the “Loan Agreement”) with J.J. Astor & Co. (the “Lender”), pursuant to which the Lender agreed to provide loans to the Company in an aggregate principal funding amount of up to $3.1 million. At the initial closing, the Lender funded an initial loan of $2.1 million and the Company issued to the Lender a senior secured convertible installment promissory note having an original principal amount of $2.835 million (the “Initial Note”). Beginning 60 days after the date of the Loan Agreement, subject to the satisfaction of the conditions set forth in the Loan Agreement, the Company may elect to borrow an additional $1.0 million and issue an additional senior secured convertible installment promissory note having an original principal amount of $1.35 million (the “Additional Note” and, together with the Initial Note, the “Notes”). The original principal amounts of the Notes reflect a factor rate of 1.35 times the applicable funded amount. The Lender retained a 4% origination fee from the initial funded amount, resulting in initial net cash proceeds of approximately $2.016 million before other transaction expenses. Under the terms of the Loan Agreement and the Notes, the Company must maintain a minimum cash balance of $250,000 while the Notes are outstanding. The Company intends to use the net proceeds for general working capital purposes.
The Notes are payable in 30 weekly installments and are secured by a senior-priority lien on substantially all assets of the Company and its existing subsidiaries as subsidiary guarantors pursuant to a pledge and security agreement (the “Pledge and Security Agreement”) and a subsidiary guarantee (the “Subsidiary Guarantee”). The Company may prepay a Note at any time without penalty. If a Note is paid in full within 45 days after its funding date and no event of default has occurred, the repayment amount will be reduced to reflect a factor rate of 1.29 times the applicable funded amount, less all weekly installment payments previously made. Upon an event of default, the outstanding balance becomes immediately due and payable, the outstanding principal amount of the Initial Note and (if issued) the Additional Note is increased to 120% of the then-outstanding principal amount(s) and bear default interest at 19% per annum, compounded daily (the “Default Amount”) and may be converted by the Lender at the Event of Default Conversion Price (as defined in the Loan Agreement).
The Lender may convert all or any portion of the payment amount under a Note into shares of the Company’s common stock (the “Conversion Shares”) at a conversion price equal to the greater of (i) 90% of the lowest volume-weighted average price of the common stock during the 10 consecutive trading days immediately preceding the conversion date and (ii) the minimum price determined under the applicable Nasdaq listing rules, subject to a floor price equal to 20% of that Nasdaq minimum price and to customary adjustments. On the six-month anniversary of the closing date, and every six months thereafter, the floor price will be reset to the lower of (i) the floor price then in effect or (ii) 20% of the lowest volume weighted average price of the Company’s common stock during the twenty trading days preceding such reset; provided that the floor price will not be reduced below 20% of the Nasdaq minimum price unless and until the Company obtains stockholder approval.
Following an uncured event of default and acceleration, the applicable conversion price would be the greater of (i) 80% of the lowest volume-weighted average price during the same 10-trading-day period and (ii) the floor price. The conversion price is also subject to anti-dilution adjustments and may be reduced if the Company issues securities at a lower price, subject to the floor price. If the Lender does not receive the full number of shares that it would have received at the applicable VWAP-based discount price because the conversion price is limited by the floor price, the Nasdaq minimum price, the exchange cap or certain other limitations, the Company is required to pay a cash make-whole amount. Conversions are subject to a 9.99% beneficial ownership limitation, which the Lender may increase to no more than 19.99% on 61 days’ prior written notice, and to the aggregate issuance limitations under the Nasdaq listing rules unless stockholder approval is obtained.
In connection with the transaction, the Company issued the Lender 600,000 shares of common stock as commitment shares (the “Commitment Shares”) at the closing date, subject to a make-whole provision, which provides that the company will issue make-whole shares if the Commitment Shares are sold on a day when the closing price of the Company’s stock is less than $0.218. The Company also agreed to reserve shares for issuance upon conversion of the Notes and to seek stockholder approval for issuances exceeding the applicable Nasdaq issuance limitation.
The Loan Agreement requires the Company to file a preliminary proxy statement within five business days after funding of the Initial Loan, mail the definitive proxy statement within five business days after SEC clearance, and hold the stockholder meeting within 30 days after mailing.
The Company, the Lender and Maxim Group LLC, the Company’s sales agent under its existing at-the-market offering program (the “ATM Program”), also entered into an ATM Waterfall Distribution Agreement. Under that agreement, 100% of the net proceeds from sales under the ATM Program, after deduction only of the sales agent’s commissions, are to be remitted to a deposit account subject to a deposit account control agreement in favor of the Lender. The initial $1.0 million of such net proceeds is payable to the Lender. Thereafter, 80% of such net proceeds is applied to the Notes and 20% is released to the Company until the required weekly installment payments for the applicable week have been satisfied; for the remainder of that week, 25% is applied to the Notes and 75% is released to the Company. Following an event of default, 80% of such net proceeds is applied to the obligations under the Notes and 20% is released to the Company. Distributions to the Company are further limited if the market value of the registered, freely tradeable shares available under the ATM Program is less than 200% of the outstanding principal amount of the Notes. The ATM Waterfall Distribution Agreement remains in effect until all obligations under the Notes have been paid in full.
The Loan Agreement contains customary representations, warranties, affirmative and negative covenants and events of default, including covenants relating to additional indebtedness and equity issuances, maintenance and use of the ATM Program, maintenance of Nasdaq listing, timely filing of reports under the Securities Exchange Act of 1934, as amended, and maintenance of specified share reserves and ATM availability.
The Company and the Lender also entered into a registration rights agreement (the “Registration Rights Agreement”) pursuant to which, the Company file a registration statement with the SEC within 30 days from the funding date of the Initial Loan to register for resale by the Lender a number of shares of common stock equal to 200% of the Conversion Shares (including Make Whole Shares), assuming the issuance of the Additional Note, and the Commitment Shares, and cause such registration statement to become effective within 60 days of the funding date of the Initial Loan, subject to applicable Securities and Exchange Commission guidance and limitations.
Placement Agency Agreement with Maxim Group LLC
In connection with the transaction, the Company entered into a placement agency agreement (the “Placement Agency Agreement”) with Maxim Group LLC (“Maxim”), pursuant to which Maxim agreed to act as the Company’s exclusive placement agent on a reasonable best efforts basis in connection with the placement of the Notes. The Company agreed to pay Maxim a cash fee equal to 5.0% of the gross proceeds received by the Company at the initial closing and at any additional closing and to reimburse Maxim for its reasonable expenses, including fees and disbursements of its counsel, up to $5,000. Maxim also is entitled to a transaction fee equal to 5.0% of the proceeds of any public or private financing or other capital-raising transaction consummated during the 12-month period following the closing (or, if no closing occurs, termination of the engagement) with an investor actually contacted or introduced to the Company by Maxim during the term of the Placement Agency Agreement. The engagement continues until the earlier of the final closing of the placement, including any additional closings, and termination by either party upon written notice. The Placement Agency Agreement also contains customary representations, warranties, covenants, closing conditions, indemnification and contribution provisions and other terms and conditions.
The foregoing descriptions of the Loan Agreement, the Notes, the Pledge and Security Agreement, the Subsidiary Guarantee, the ATM Waterfall Distribution Agreement, the Registration Rights Agreement and the Placement Agency Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of such documents, copies of which are filed as exhibits to this Current Report on Form 8-K and are incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 above is incorporated by reference into this Item 2.03.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth under Item 1.01 above is incorporated by reference into this Item 3.02.
The Company issued the Initial Note and the Commitment Shares, and may issue the Additional Note, the Conversion Shares, and any make-whole shares, in reliance on the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(a)(2) thereof and/or Rule 506(b) of Regulation D promulgated thereunder. The Lender represented that it is an “accredited investor” as defined in Rule 501(a) of Regulation D. Neither the Notes nor the Commitment Shares were, and any Conversion Shares or make-whole shares issued absent registration will not be, registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |
| 4.1 | Form of Senior Secured Convertible Note | |
| 10.1 | Loan Agreement between Co-Diagnostics, Inc. and J.J. Astor & Co., dated October 9, 2026 | |
| 10.2 | Pledge and Security Agreement, dated October 9, 2026 | |
| 10.3 | Subsidiary Guarantee dated October 9, 2026 | |
| 10.4 | ATM Waterfall Distribution Agreement among Co-Diagnostics, Inc., J.J. Astor & Co. and Maxim Group LLC, dated October 9, 2026 | |
| 10.5 | Registration Rights Agreement between Co-Diagnostics, Inc. and J.J. Astor & Co., dated October 9, 2026 | |
| 10.6 | Placement Agency Agreement between Co-Diagnostics, Inc. and Maxim Group LLC, dated October 9, 2026 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CO-DIAGNOSTICS, INC. | ||
| October 12, 2026 | By: | /s/ Dwight H. Egan |
| Name: | Dwight H. Egan | |
| Title: | Chief Executive Officer | |
Exhibit 4.1
Senior Secured Convertible Note
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THIS SECURITY.
| Original Issue Date: October 9, 2026 | Funding Amount | $2,100,000 | ||
| Final Maturity Date: May 7, 2027 | Original Principal Amount: | $2,835,000 |
CO-DIAGNOSTICS, INC.
SENIOR SECURED CONVERTIBLE NOTE
THIS SENIOR SECURED CONVERTIBLE NOTE is a duly authorized and validly issued promissory note of Co-Diagnostics, Inc., a Utah corporation (the “Company”), designated as its original issue discount senior secured convertible installment promissory note (the “Note”).
FOR VALUE RECEIVED, the Company promises to pay to the order of J.J. Astor & Co., (the “Lender”) or any other subsequent holder of this Note (together with the Lender, the “Holder”), the Original Principal Amount of this Note as set forth above (the “Original Principal Amount”) in thirty (30) weekly installments of Ninety Four Thousand Five Hundred Dollars ($94,500) per week each (the “Weekly Installment Payments”) commencing on Wednesday, October 14, 2026 and thereafter on each Wednesday of the next succeeding twenty-nine (29) weeks until the Final Maturity Date as set forth above, or such earlier date as this Note is required to be prepaid or permitted to be repaid as provided herein (as the case may be, the “Maturity Date”). This Note is subject to the following additional provisions:
Section 1. Definitions. This Note is the Initial Note described in the Loan Agreement referred to below. For the purposes hereof, in addition to the terms defined elsewhere in this Note: (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Loan Agreement, and (b) the following terms shall have the following meanings:
“ATM,” “ATM Financing,” “ATM Coverage Requirement,” “ATM Net Proceeds,” “ATM Sales Agent,” “ATM Waterfall Distribution Agreement,” “ATM Waterfall Distributions” and “DACA Account” shall have the meanings as those terms are defined in the Loan Agreement.
“Bankruptcy Event” means any of the following events: (a) the Company or any “Significant Subsidiary” (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Subsidiary thereof, (b) there is commenced against the Company or any Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, (g) the Company or any Significant Subsidiary thereof admits in any legal proceeding that it is generally unable to pay its debts as they become due, (h) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
“Business Day” shall have the meaning as that term is defined in the Loan Agreement.
“Change of Control Transaction” means the occurrence after the date hereof of any of: (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50% of the voting securities of the Company (other than by means of conversion of Note), (b) the Company or its significant Subsidiaries merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company or its significant Subsidiaries and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction or less than 50% of the equity of its Subsidiaries, (c) the Company sells or transfers all or substantially all of its assets or the assets of its Subsidiaries to another Person and the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (c) above.
“Commitment Shares” shall have the meanings as that term is defined in the Loan Agreement.
“Common Stock” and “Common Stock Equivalents” shall have the meanings as those terms are defined in the Loan Agreement.
“Contingent Obligation” means, with respect to any Loan Party any obligation of such Loan Party guaranteeing or intended to guarantee any Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Loan Party of the obligation of a primary obligor, (b) the obligation to make take-or-pay or similar payments, if required, regardless of nonperformance by any other party or parties to an agreement, and (c) any obligation of such Loan Party, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefore, (ii) to advance or supply funds (A) for the purchase or payment of any such primary obligation or (B) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, assets, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term “Contingent Obligation” shall not include any product warranties extended in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation with respect to which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with respect thereto (assuming such Loan Party is required to perform thereunder), as determined by such Loan Party in good faith.
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“Conversion Price” shall have the meaning as that term is defined in the Loan Agreement.
“Conversion Price Formula” shall have the meaning as that term is defined in the Loan Agreement.
“Conversion Price Reductions” shall have the meaning as that term is defined in the Loan Agreement.
“Conversion Shares” shall have the meaning as that term is defined in the Loan Agreement.
“DACA” shall have the meaning as that term is defined in the Loan Agreement.
“Default Amount” means, if an Event of Default shall occur, the sum of: (1) the amount obtained by multiplying (x) the Outstanding Principal Amount of this Note by (y) 120% (the “Default Principal Amount”), plus (2) default interest on such Default Principal Amount at the rate of 19% per annum, compounded daily and calculated on the basis of a 360-day year and the actual number of days elapsed, and all other amounts, costs, expenses, and liquidated damages due under or in respect of this Note, if any.
“Equity Receipts” shall have the meaning as that term is defined in the Loan Agreement.
“Event of Default” shall have the meaning set forth in Section 5(a).
“Existing Lender” shall have the meaning as that term is defined in the Loan Agreement.
“Extraordinary Receipts” shall have the meaning as that term is defined in the Loan Agreement.
“Flow of Funds Agreement” shall mean the agreement among the Company and the Lender constituting Exhibit F annexed to the Loan Agreement.
“Funding Amount” means $2,100,000, being the amount advanced by the Lender to the Company as set forth on the first page of this Note, before deduction of the $84,000 Origination Fee retained by the Lender in accordance with the Flow of Funds Agreement.
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“Indebtedness” means, with respect to any Person, without duplication, (a) all indebtedness of such Person for borrowed money; (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables and accrued expenses or other accounts payable incurred in the ordinary course of such Person’s business); (c) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments or upon which interest payments are customarily made; (d) all reimbursement, payment or other obligations and liabilities of such Person created or arising under any conditional sales or other title retention agreement with respect to property used and/or acquired by such Person, even though the rights and remedies of the lessor, seller and/or lender thereunder may be limited to repossession or sale of such property, (e) all Capitalized Lease Obligations of such Person; (f) all obligations and liabilities, contingent or otherwise, of such Person, in respect of letters of credit, acceptances and similar facilities other than obligations and liabilities that are cash collateralized on terms reasonably satisfactory to the Lender; (g) all net obligations and liabilities, calculated on a basis reasonably satisfactory to the Lender and in accordance with accepted practice, of such Person under Hedging Agreements; (h) all monetary obligations under any receivables factoring, receivable sales or similar transactions and all monetary obligations under any synthetic lease, tax ownership/operating lease, off-balance sheet financing or similar financing; (i) all Contingent Obligations; and (j) all obligations referred to in clauses (a) through (i) of this definition of another Person secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien upon property owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, provided, however that if recourse in respect of any Indebtedness of the foregoing is limited to specific assets, then such Indebtedness shall be deemed to be equal to the lesser of (x) the aggregate unpaid amount of such Indebtedness and (y) the fair market value of the asset encumbered thereby as determined by such Person in good faith; provided further, that Indebtedness shall not include (i) purchase price holdbacks arising in the ordinary course of business in respect of a portion of the purchase price of an asset to satisfy warranties or other unperformed obligations of the seller of such asset, (ii) endorsements of checks or drafts arising in the ordinary course of business, (iii) preferred Equity Interests to the extent permitted under the Loan Agreement and (iv) any earnout or similar purchase price obligation until such obligation is required to be reflected on the balance sheet of such Person in accordance with GAAP. The Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, so long as, in the case of a joint venture, such Indebtedness is recourse to any Loan Party. For the avoidance of doubt, “Indebtedness” shall exclude operating leases.
“Loan Agreement” means the Loan Agreement, dated as of October 9, 2026, between the Company and the Lender, as the same may be further amended, modified, or supplemented from time to time in accordance with its terms.
“Make-Whole Amount” shall have the meaning as that term is defined in the Loan Agreement.
“Maturity Date” shall mean the earlier to occur of (a) the occurrence of an Event of Default, or (b) May 7, 2027.
“Maximum Conversion Shares” shall have the meaning as that term is defined in the Loan Agreement.
“Minimum Installment Payment” has the meaning set forth in Section 2(a).
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“Most Favored Nations Agreement” shall have the meaning as that term is defined in the Loan Agreement.
“Nasdaq Minimum Price” shall have the meaning as that term is defined in the Loan Agreement.
“Net Funding Amount” means $2,016,000, being the net amount advanced by the Lender to the Company on October 9, 2026, after deduction of the $84,000 Origination Fee retained by the Lender in accordance with the Flow of Funds Agreement.
“Original Issue Date” means the date of the first issuance of this Note, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Note.
“Original Principal Amount” means $2,835,000 as set forth on the first page of this Note. The Original Principal Amount of this Note includes original issue discount of $735,000, and this Note evidences the Initial Loan of $2,100,000 made pursuant to the Loan Agreement.
“Outstanding Principal Amount” means at any point in time the Original Principal Amount less all Minimum Installment Payments made or any Mandatory Prepayment(s) of this Note, if any.
“Payment Amount” means, at any point in time with respect to the Note at any time, the sum of: (a) the Original Principal Amount of this Note or the Default Amount (as applicable), at such time, less (b) all Minimum Installment Payments previously made, plus (c) all other amounts, costs, expenses, and liquidated damages due under or in respect of this Note.
“Payment Notice” means the written notice to be provided by the Lender to the Company pursuant to which the Lender shall specify the manner in which the Lender intends to receive Weekly Installment Payments, either (a) in cash paid by the Company or pursuant to the ATM Waterfall Distribution Agreement or (b) by issuance of immediately salable Conversion Shares which have been registered for resale under the Securities Act pursuant to the Registration Rights Agreement or which are otherwise exempt from the registration requirements of the Securities Act.
“Principal Amount” means, with respect to the Note at any time, the then Outstanding Principal Amount of such Note; provided that from and after the occurrence of an Event of Default the Principal Amount shall be the Default Amount.
“Registration Rights Agreement” shall have the meaning as that term is defined in the Loan Agreement.
“Scheduled Payment Date” means, on Wednesday of each week from and after the Original Issue Date, commencing with October 14, 2026 and continuing on each of the following Wednesdays for the next succeeding twenty-nine (29) consecutive weeks.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
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“Stockholder Approval” shall have the meaning as that term is defined in the Loan Agreement.
“Subsidiary Guarantors” shall have the meaning as that term is defined in the Loan Agreement.
“Trading Market” has the meaning as that term is defined in the Loan Agreement.
“Utah Courts” shall have the meaning set forth in Section 6(e).
“Commitment Shares” has the meaning as that term is defined in the Loan Agreement.
Section 2. Methods of Payment, Prepayment; Interest.
(a) Minimum Installment Payments. On each Scheduled Payment Date, the Company or the ATM Sales Agent pursuant to the ATM Waterfall Distribution Agreement shall make Weekly Installment Payments of the Outstanding Principal Amount under this Note in an amount of not less than $94,500 (each a “Minimum Installment Payment”) until the entire Payment Amount (or, if an Event of Default shall have previously occurred, the entire Default Amount) shall have been paid in full. The Company shall cause the ATM Sales Agent to remit one hundred percent (100%) of all ATM Net Proceeds directly to the DACA Account (and shall deposit any ATM Net Proceeds received by the Company into the DACA Account within one (1) Business Day of receipt), and the Lender shall apply the ATM Net Proceeds so deposited in accordance with the ATM Waterfall Distributions (including the limitation on remittances to the Company set forth therein for any period in which the ATM Coverage Requirement is not satisfied, during which the Lender shall have no obligation to distribute ATM Net Proceeds to the Company); provided that, until the DACA has been executed and delivered, such ATM Net Proceeds shall be remitted to such account as the Lender designates in writing in accordance with Section 2.04 of the Loan Agreement. On the Maturity Date, the entire then Payment Amount (or, if an Event of Default shall have previously occurred, the entire Default Amount) shall become immediately due and payable. If any Scheduled Payment Date falls on a day that is not a Business Day, the Minimum Installment Payment shall instead be due and payable on the immediately preceding Business Day.
(b) Mandatory Prepayments. All amounts received by the Lender from or on behalf of the Company or any Subsidiary Guarantor, whether in cash, from Equity Receipts or Extraordinary Receipts, or from any source (other than ATM Net Proceeds applied in accordance with the ATM Waterfall Distributions) shall be applied in the order of last maturing Indebtedness, and no such application shall relieve the Company of its obligation to pay each Weekly Installment Payment in full on its Scheduled Payment Date.
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(c) Conversion Notice; Delivery of Conversion Shares. At any time following the Closing Date of the Initial Loan, the Lender may elect to convert all or any portion of the Payment Amount of this Note and (if applicable) the Additional Note into Conversion Shares in accordance with Section 2(h). Any Conversion Shares so issued shall have been fully registered for resale under the Securities Act or shall be eligible for immediate resale pursuant to an available exemption from registration, including Rule 144, and shall in either case be immediately salable by the Lender without restrictive legend and without volume or manner-of-sale limitations. The Lender shall give the Company written notice of such election (the “Conversion Notice”). The Company shall deliver the Conversion Shares to the Lender or to the brokerage account designated by the Lender within two (2) Business Days following its receipt of the Conversion Notice. For the avoidance of doubt, if the Company fails to timely deliver the specified amount of Conversion Shares in accordance with the Conversion Notice, it shall constitute an Event of Default under this Note and (if applicable) the Additional Note. The Lender shall not be entitled to convert any portion of the Note to the extent that, after giving effect to such conversion, the Lender (together with its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Lender’s for purposes of Section 13(d) of the Exchange Act) would beneficially own in excess of 9.99% (which percentage the Holder may, at any time and from time to time, in its sole discretion and without the consent of the Company, increase to up to 19.99% upon written notice to the Company, effective on the 61st day after such notice is delivered to the Company) of the then-outstanding shares of the Company’s Common Stock (the “Beneficial Ownership Cap”). If the Company fails to cause its transfer agent to deliver the Conversion Shares to the Lender on or before the second (2nd) Business Day following its receipt of the Conversion Notice (the “Share Delivery Date”), then, in addition to any other right or remedy of the Lender, the Company shall pay to the Lender in cash, as liquidated damages and not as a penalty, $10 per Trading Day (increasing to $20 per Trading Day on the third (3rd) Trading Day after the Share Delivery Date) for each $1,000 of principal and interest being converted, for each Trading Day after the Share Delivery Date until such Conversion Shares are delivered.
(d) Change of Control. This Note shall be immediately payable in full upon a Change of Control Transaction.
(e) Equity Receipt Prepayment. In addition to the provisions of Section 2(b), the Outstanding Principal Amount of this Note, plus accrued interest hereon shall be subject to mandatory prepayment to the extent of (i) any Equity Receipts received by the Company from consummation of the sale of Common Stock or Common Stock Equivalents, upon a financing in which the ATM Sales Agent or any other investment bank shall act as underwriter or placement agent (each an “Equity Receipt Prepayment”). Any such Equity Receipt Prepayment shall be applied to the Minimum Installment Payments in the order of last maturing Indebtedness. In addition, if at any time prior to payment in full of this Note the Company consummates any financing, capital raise or sale of securities (other than sales of Common Stock pursuant to the ATM Financing), the Company shall, within one (1) Business Day of receipt thereof, apply an amount equal to one hundred percent (100%) of the net proceeds thereof to prepay the Payment Amount of this Note, and amounts so applied shall be credited against the remaining Minimum Installment Payments in the order of last maturing Indebtedness. Such amounts shall be applied first to this Note until this Note has been paid in full.
(f) Default Amount. From and after the occurrence of an Event of Default, the Outstanding Principal Amount of this Note shall increase to the Default Amount and this Note shall bear interest accruing at nineteen percent (19%) per annum, compounded daily and calculated on the basis of a 360-day year and the actual number of days elapsed, until payment in full.
(g) Stockholder Approval. The Company shall call and hold a special meeting of its stockholders (the “Stockholder Meeting”) for the purpose of obtaining Stockholder Approval.
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(h) Conversion Mechanics; Floor Price. (i) Subject to the Maximum Conversion Shares and the Beneficial Ownership Cap, the Lender may convert all or any portion of the Payment Amount into Conversion Shares. The conversion price shall not be reduced below twenty percent (20%) of the Nasdaq Minimum Price, as adjusted (the “Floor Price”). (ii) In the event the Lender converts all or any portion of the Payment Amount and the Lender does not receive the full number of Conversion Shares it would have received had the conversion been effected at the applicable VWAP-based discount price (being ninety percent (90%) of the lowest VWAP for conversions at the Conversion Price or eighty percent (80%) of the lowest VWAP for conversions at the Event of Default Conversion Price), whether because the applicable conversion price is limited by the Floor Price or the Nasdaq Minimum Price, because of the Exchange Cap or the Nasdaq Issuance Limitation, because the Company lacks sufficient authorized but unissued shares of Common Stock, or for any other reason (other than the Beneficial Ownership Cap), the Company shall pay to the Lender the Make-Whole Amount in cash within three (3) Business Days of the conversion date, calculated as provided in the Loan Agreement.
(i) Share Reservation. The Company shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon conversion of the Notes and exercise of each Warrant, a number of shares of Common Stock equal to not less than two hundred percent (200%) of the sum of (i) the number of Conversion Shares issuable upon conversion in full of the Payment Amount and the Outstanding Principal Amount of the Additional Note (including any Default Amount and accrued interest thereon) at the Floor Price then in effect, plus (ii) all of the Commitment Shares, in each case without regard to any limitation on conversion or exercise (including the Exchange Cap and the Beneficial Ownership Cap). If at any time the number of authorized but unissued and otherwise unreserved shares of Common Stock is insufficient to satisfy the reservation required by this Section 2(i), the Company shall promptly, and in any event within ninety (90) days, take all corporate action necessary to increase its authorized shares of Common Stock to a number sufficient for such purpose, including calling a meeting of its stockholders and causing its board of directors to recommend approval of such increase.
(j) Resale RegistrationStatement. Pursuant to the Registration Rights Agreement, the Company prepare and file with the SEC a registration statement registering for resale by the Holder a number of shares of Common Stock equal to not less than two hundred percent (200%) of the sum of (i) the maximum number of Conversion Sharesand Make Whole Shares issuable upon conversion in full of the then Outstanding Principal Amount of the Notes (including any Default Amount and accrued interest thereon), calculated at the Floor Price then in effect, plus (ii) the Commitment Shares, in each case without regard to any limitation on conversion or exercise (including the Exchange Cap and the Beneficial Ownership Cap), and shall use its reasonable best efforts to cause such registration statement to be declared effective by the SEC within Effective Date set forth in the Registration Rights Agreement.
(k) Optional Prepayment; Prepayment Discount. The Company may prepay this Note at any time without penalty, subject to payment of all amounts then outstanding hereunder. If the outstanding balance of this Note is paid in full within forty-five (45) days of the Original Issue Date, and there has been no prior Event of Default, the repayment amount of this Note shall be reduced to reflect a factor rate of 1.29x on the funded amount, or $2,709,000, less all Weekly Installment Payments previously made, in accordance with the Loan Agreement.
Section 3. Registration of Transfers and Exchanges.
(a) Different Denominations. This Note is exchangeable for an equal aggregate Principal Amount of Note of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.
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(b) Investment Representations. This Note has been issued subject to certain investment representations of the original Holder set forth in the Loan Agreement and may be transferred or exchanged only in compliance with the Loan Agreement and applicable federal and state securities laws and regulations.
(c) Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the official Note register of the Company as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.
Section 4. Covenants. As long as any portion of this Note remains outstanding, unless the Lender shall have otherwise given prior written consent, the Company shall not, and shall not permit any of its Subsidiaries (if any) to, directly or indirectly:
(a) violate any of the affirmative or negative covenants set forth in the Loan Agreement, this Note, the ATM Waterfall Distribution Agreement, the DACA or in the other Transaction Documents to the Loan Agreement, including the covenants set forth in Article IV of the Loan Agreement;
(b) fail to deliver the applicable number of Conversion Shares to a brokerage account specified in the Conversion Notice within two (2) Business Days from the date of such Conversion Notice;
(c) fail to notify the Lender of any proposed financing contemplated by the Most Favored Nations covenant set forth in the Loan Agreement or fail to appropriately modify the Loan Agreement and the Transaction Documents, including this Note, if reasonably requested by the Holder;
(d) amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of holders of Note;
(e) amend, restate or otherwise modify any of the existing terms of any outstanding Indebtedness for borrowed money (other than Indebtedness to the Lender or as expressly permitted by clause (d) of the definition of Permitted Indebtedness) whether or not set forth in the Company Disclosure Schedule;
(f) issue, repay, repurchase or offer to repay, repurchase or otherwise acquire shares of Common Stock or Common Stock Equivalents, except to the extent that they are expressly contemplated and permitted under the Loan Agreement;
(g) incur, repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than Permitted Indebtedness or as otherwise expressly permitted under the Loan Agreement, provided that, such payments shall not be permitted if, at such time, or after giving effect to such payment, any Event of Default exists or occurs;
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(h) grant or suffer to exist any Liens on its property or assets, other than Permitted Liens;
(i) pay cash dividends or distributions on any equity securities of the Company;
(j) enter into any transaction with any Affiliate of the Company, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval); or
(k) enter into any agreement or commitment with respect to any of the foregoing.
Section 5. Events of Default.
(a) “Event of Default” means, wherever used herein, the occurrence of any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
(i) any default in the payment of any Principal Amount, or Default Amount (as applicable) as and when the same shall become due and payable (whether on a Scheduled Payment Date, the Maturity Date, on any Mandatory Prepayment Date, upon acceleration or otherwise) which default, solely in the case of required payment of the Minimum Installment Payment on any Scheduled Payment Date, is not fully cured within two (2) Business Days (the “Grace Period”); provided, that there shall only be two (2) Grace Periods permitted under this Note;
(ii) the Company shall fail to observe or perform any other covenant or agreement contained in the Loan Agreement or this Note, which failure is not cured, if capable of cure, within the earlier to occur of (A) three (3) Business Days after notice of such failure sent by the Holder or by any other holder of this Note to the Company and (B) three (3) Business Days after the Company has become aware of such failure; and, for the avoidance of doubt, shall include the Company’s failure or refusal to promptly call a shareholders meeting within the time specified in the Loan Agreement;
(iii) a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under the Loan Agreement, the Additional Note (if issued) or this Note or any of the other Transaction Documents or under other Permitted Indebtedness; it being understood that any non-payment of Weekly Installment Payments, any failure to satisfy the terms of the ATM Waterfall Distribution Agreement, or any failure to file or cause to be declared effective any registration statement, whether arising before, on or after the date hereof, shall constitute an Event of Default under this Note;
(iv) any representation or warranty made in this Note, or any other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in any material respect as of the date when made;
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(v) the Company shall breach or violate in any respect the provisions of the ATM Waterfall Distribution Agreement, the Security Agreement, the DACA, the Registration Rights Agreement, the Warrant or the Transfer Agent Instructions;
(vi) the Company or any Subsidiary Guarantor shall be subject to a Bankruptcy Event;
(vii) the Company shall default (following the expiration of all cure or waiting periods and the provision of all notices required under the applicable agreement(s)) on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, capital lease, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any Indebtedness for borrowed money or money due under any long term leasing or factoring arrangement (but excluding the Company’s headquarters lease under which the Company is in default as of the date of this Note as disclosed in the SEC Reports) that (a) involves an obligation greater than $100,000, whether such Indebtedness now exists or shall hereafter be created, and (b) results in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;
(viii) a final non-appealable judgment by any competent court for the payment of money in an amount of at least $100,000 is rendered against the Company (to the extent not covered by independent third party insurance as to which the insurer has been notified of such judgment or order and has not denied or failed to acknowledge coverage), and the same remains undischarged and unpaid for a period of 45 days during which execution of such judgment is not effectively stayed;
(ix) the Company shall fail to timely file with the SEC its Form 10-Q Quarterly Report for the fiscal quarter ended September 30, 2026, or shall be delinquent in the filing of any of its other SEC Reports, including its Form 8-K, interim reports or Form 10-Q quarterly report or Form 10-K annual financial reports required to be filed with the SEC under the Exchange Act (beyond any period of grace granted by the SEC with respect thereto) and such failure is not remedied within 30 days of the date such filing became due;
(x) the Common Stock shall have ceased to be listed or quoted on Nasdaq, the New York Stock Exchange or the NYSE American; or
(xi) the ATM Financing shall at any time cease to be available to the Company for any reason, including any suspension or termination of the Company’s sales agreement with the ATM Sales Agent, the issuance of any stop order, or the registration statement or prospectus for the ATM Financing ceasing to be effective, or the Company shall fail to sell shares of Common Stock under the ATM Financing in amounts sufficient to generate ATM Net Proceeds, remitted to the DACA Account in accordance with the ATM Waterfall Distributions, to pay each Minimum Installment Payment in full on its Scheduled Payment Date.
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(b) Remedies Upon Event of Default. If any Event of Default occurs and is continuing, this Note shall become, at the Holder’s election, immediately due and payable in the Default Amount, and the Holder shall have the right to convert all or any portion of this Note into Conversion Shares at the Event of Default Conversion Price up to the Maximum Conversion Shares or such number of Conversion Shares based on the then Default Amount of this Note, and shall be entitled to exercise its rights and remedies in connection therewith under the other Transaction Documents, including enforcing its rights under the Subsidiary Guarantee and Security Agreement. Upon the conversion in full of the Default Amount in accordance with the terms of this Note, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration or exercise described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 5(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
(c) Event of Default Conversion Price; Make-Whole Amount. The Event of Default Conversion Price shall be equal to the greater of (a) eighty percent (80%) of the lowest VWAP of the Common Stock during the ten (10) consecutive Trading Days immediately preceding the applicable conversion date and (b) the Floor Price. In the event the Holder does not receive the full number of Conversion Shares it would have received at eighty percent (80%) of such lowest VWAP, whether because of the Floor Price or for any other reason described in the Loan Agreement (other than the Beneficial Ownership Cap), the Company shall pay to the Holder the Make-Whole Amount in cash, calculated and payable as provided in the Loan Agreement.
Section 6. Miscellaneous.
(a) Due Authorization and Stockholder Approval. The issuance of this Note, ATM Waterfall Distribution Agreement, the DACA and the Registration Rights Agreement annexed as Exhibit D to the Loan Agreement has been duly authorized by the Board of Directors of the Company and the Subsidiary Guarantors and no stockholder approval is required in connection with the issuance of such securities, other than the Stockholder Approval contemplated by the Loan Agreement.
(b) Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder shall be in writing and delivered personally, by email attachment, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth in the Loan Agreement, or such other email address or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 6(b). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number, email address or address of the Holder appearing on the books of the Company, or if no such facsimile number or email attachment or address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the Loan Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of: (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment to the email address set forth on the signature pages attached hereto prior to 5:30 p.m. (Eastern time) on any date, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment to the email address set forth on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m. (Eastern time) on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
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(c) Absolute Obligation, Security and Ranking. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company and is secured by and under the Subsidiary Guarantee and Security Agreement. This Note is a direct debt obligation of the Company, and ranks senior to all other evidence of Indebtedness of the Company or any of its Subsidiaries.
(d) Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the Principal Amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, and customary indemnity reasonably satisfactory to the Company.
(e) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of Utah, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the County of Salt Lake, Utah (the “Utah Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Utah Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, Action or Proceeding, any claim that it is not personally subject to the jurisdiction of such Utah Courts, or such Utah Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an Action or Proceeding to enforce any provisions of this Note, then the prevailing party in such Action or Proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such Action or Proceeding.
(f) Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by the Company or the Holder must be in writing.
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(g) Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall 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 or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
(h) Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and/or 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 the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the 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 the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder 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, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is reasonably requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Note.
(i) Most Favored Nation. From the date hereof and for so long as this Note or the Warrant remains outstanding, the Company shall not enter into any agreement for the sale or issuance of its securities (including securities convertible into or exercisable for Common Stock or Common Stock Equivalents) with any Person that provides such Person with rights, terms or benefits more favorable in any material respect than those granted to the Lender under the Transaction Documents, without offering such more favorable rights, terms or benefits to the Lender. The Company shall promptly provide written notice to the Lender of any such more favorable rights, terms or benefits.
(j) Preceding Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the immediately preceding Business Day.
(k) Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.
Section 7. Amendments; Waivers. Any modifications, amendments or waivers of the provisions hereof shall be subject to Section 5.05 of the Loan Agreement.
Balance of this page left blank – signature page follows
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IN WITNESS WHEREOF, the Company has caused this Senior Secured Convertible Note to be duly executed by a duly authorized officer as of the date and year first above indicated.
| CO-DIAGNOSTICS, INC. | ||
| By: | ||
| Name: | Dwight H. Egan | |
| Title: | Chief Executive Officer | |
| ACKNOWLEDGED AND AGREED: | ||
| J.J. ASTOR & CO. | ||
| By: | ||
| Name: | Michael Pope | |
| Title: | Chief Executive Officer | |
Exhibit 10.1
LOAN AGREEMENT
This Loan Agreement (this “Agreement”) is dated as of October 9, 2026 (the “Agreement Date”) and is made and entered into between Co-Diagnostics, Inc., a Utah corporation (the “Company”), and J.J. Astor & Co., a Utah corporation ( “Astor”), acting on behalf of itself and one or more participating lender or lenders to whom Astor may, in the exercise of its sole discretion, assign and transfer participations of up to fifty percent (50%) in the Loans and the Notes (together with Astor, the “Lender”).
WHEREAS, the Company wishes to borrow the sum of up to Three Million One Hundred Thousand ($3,100,000) Dollars in two tranches (the “Loans”) of Two Million One Hundred Thousand ($2,100,000) Dollars (the “Initial Loan”) and, commencing sixty (60) days after the Agreement Date, an additional One Million ($1,000,000) Dollars (the “Additional Loan”) which the Company may elect to borrow and, absent a Material Adverse Effect or an Event of Default (as defined in the Notes) the Lender shall fund;
WHEREAS, the Company wishes to enter into this Agreement and the Exhibits hereto and issue to the Lender, a Two Million Eight Hundred Thirty-Five Thousand Dollars ($2,835,000) Original Issue Amount senior secured installment promissory note in the form of Exhibit A-1 hereto reflecting a factor rate of 1.35 times the amount of the Initial Loan (the “Initial Note”);
WHEREAS, if the Company wishes to receive the net proceeds of the Additional Loan, it shall issue to the Lender, a One Million Three Hundred Fifty Thousand Dollars ($1,350,000), Original Issue Amount senior secured installment promissory note in the form of Exhibit A-2 hereto reflecting a factor rate of 1.35 times the amount of the Additional Loan (the “Additional Note”);
WHEREAS, the Company and its Subsidiary have agreed to further perfect and secure the Lender’s senior priority Lien on all of the assets and properties of the Company pursuant to the Security Agreement and the Subsidiary Guarantee to be entered into on the Initial Funding Date;
WHEREAS, in consideration for the Loans and as an inducement to the Lender entering into this Agreement and the other Transaction Documents, the Company has agreed to enter into the ATM Waterfall Distribution Agreement and issue and sell the Lender’s Shares to the Lender on the Initial Funding Date; and
WHEREAS, the Company and the Lender are executing and delivering this Agreement in reliance upon an exemption from securities registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), afforded by the provisions of Section 4(a)(2) and/or Rule 506(b) of Regulation D promulgated thereunder by the U.S. Securities and Exchange Commission.
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Lender agree as follows:
ARTICLE
I
DEFINITIONS
Section 1.01. Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Notes (as defined herein), and (b) the following terms have the meanings set forth in this Agreement.
“$” means United States Dollars.
“Acceleration Event” means the occurrence and continuation of an Event of Default (as defined in the Note) beyond the applicable grace period, if any, for cure.
“Acceleration Notice” means a written notice from the Lender that it has elected to accelerate the Loan for payment after the occurrence of an Acceleration Event.
“Action” shall have the meaning ascribed to such term in Section 3.01(k).
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Agreement Date” shall have the meaning as defined in the Recitals.
“ATM Sales Agent” means Maxim Group LLC.
“ATM Financing” means any at the market financing of $7,350,877.68 in respect of sales of Common Stock or Common Stock Equivalents that is underwritten, managed or otherwise arranged by the ATM Sales Agent.
“ATM Waterfall Distribution Agreement” means the agreement in the form of Exhibit F hereto among the Company, the ATM Sales Agent and Astor that shall continue in full force and effect throughout the entire term of the Notes and which provides that one hundred percent (100%) of the proceeds of each ATM Financing, after deduction only of the ATM Sales Agent’s sales commissions (the “ATM Net Proceeds”), shall be remitted by the ATM Sales Agent (or, to the extent received by the Company, by the Company) directly to the deposit account maintained by the Company at East West Bank and subject to the DACA (the “DACA Account”) pursuant to which ATM Waterfall Distribution Agreement, Astor shall have exclusive control of the DACA Account, and the ATM Net Proceeds deposited in the DACA Account shall be paid as follows (the “ATM Waterfall Distributions”):
(i) the initial $1,000,000 of all ATM Net Proceeds shall be paid to Astor;
(ii) Eighty Percent (80%) of all ATM Net Proceeds shall be remitted from the DACA Account and paid to each Lender and applied to the Notes, and the remaining Twenty Percent (20%) of such ATM Net Proceeds shall be remitted by the Lender from the DACA Account to the Company in accordance with clause (v) below, in each case until the applicable minimum weekly installment payments (the “Weekly Installment Payments”) that are due and payable under the Notes have been fully paid and satisfied for the relevant week;
(iii) Thereafter, for the remainder of such week, Twenty-Five Percent (25%) of all ATM Net Proceeds shall be remitted from the DACA Account and paid to each Lender and applied to the Notes, and the remaining Seventy-Five Percent (75%) of such ATM Net Proceeds shall be remitted from the DACA Account to the Company in accordance with clause (vii) below, with the allocation set forth in clause (ii) applying again at the start of each following week, in each case until the Notes are paid in full;
(iv) Upon the occurrence of an Event of Default, eighty percent (80%) of all ATM Net Proceeds shall be remitted from the DACA Account to the Lender and applied to all of the Obligations under the Notes (including any Default Amounts), and the remaining twenty percent (20%) of such ATM Net Proceeds shall be remitted from the DACA Account to the Company in accordance with clause (vi) below, in each case until the Obligations and Indebtedness under the Notes (including any applicable Default Amount) shall have been paid in full, and clauses (ii) and (iii) shall not apply during such period, and such allocation may not be rescinded, modified, or suspended without the prior written consent of Astor (acting on behalf of each Lender) notifying the Company and the ATM Sales Agent that the Notes (including any applicable Default Amount) has been paid in full or that such Event of Default has been cured to the satisfaction of the Lender;
(v) Notwithstanding the foregoing, in no event shall the amounts remitted to the Lender under clause (ii) exceed the amounts then outstanding under the Notes, and the Company agrees to utilize the ATM as required to, at minimum, make all required Weekly Installment Payments;
(vi) All ATM Net Proceeds deposited in the DACA Account in excess of the amounts remitted to the Lender pursuant to clauses (i) through (iv) above (the “Excess ATM Proceeds”) shall be released and remitted by Astor (acting on behalf of each Lender) to such operating account of the Company as the Company designates in writing, promptly and in any event within seven (7) Business Days after such ATM Net Proceeds are deposited in the DACA Account, and, except as provided in the following proviso, Astor (acting on behalf of each Lender) shall have no right to retain, withhold or apply any Excess ATM Proceeds; provided, however, that if at any time the aggregate market value of the registered, freely tradeable shares available for sale by the ATM Sales Agent under the ATM Financing (based on the closing price of the Common Stock on the immediately preceding Trading Day) is less than, or after giving effect to any remittance to the Company would be less than, Two Hundred Percent (200%) of the Outstanding Principal Amount of the Notes (the “ATM Coverage Requirement,” as set forth in Section 4.01(c)(x)), then, notwithstanding anything to the contrary in clauses (i) through (v) or this clause (vi), (A) the ATM Sales Agent or Astor (acting on behalf of each Lender) shall remit to the Company only such portion, if any, of the ATM Net Proceeds otherwise remittable to the Company as will permit the ATM Coverage Requirement to be satisfied after giving effect to the application of the balance of such ATM Net Proceeds to reduce or repay the Outstanding Principal Amount of the Notes, and the Lender shall retain and apply such balance to the Notes, and (B) neither the ATM Sales Agent nor Astor (acting on behalf of each Lender) shall have any obligation to remit or distribute any ATM Net Proceeds (including any Excess ATM Proceeds) to the Company for so long as the ATM Coverage Requirement is not satisfied; and
(vii) The ATM Waterfall Distribution Agreement shall remain in full force and effect until all Indebtedness and Obligations under the Notes shall have been paid in full, including any Default Amounts.
Prior to the execution and delivery of the DACA, all references in this definition and in the definition of “DACA” to the DACA Account shall be deemed to refer to the account designated by the Lender in writing pursuant to Section 2.04, and the ATM Waterfall Distributions (including the release of Excess ATM Proceeds to the Company under clause (vi) shall apply to all ATM Net Proceeds deposited in such account.
“Beneficial Ownership Cap” means that, notwithstanding anything to the contrary in the Notes or any other Transaction Document, the Company shall not effect any conversion of the Notes and the Lender shall not have the right to convert any portion of the Notes to the extent that, after giving effect to such conversion or issuance, the Lender (together with its Affiliates) would beneficially own in excess of 9.99% (which percentage the Lender may, at any time and from time to time, in its sole discretion and without the consent of the Company, increase to as much as 19.99% upon written notice to the Company, effective on the 61st day after such notice is delivered to the Company) of the number of shares of Common Stock outstanding immediately after giving effect to such conversion or exercise, with beneficial ownership determined in accordance with Section 13(d) of the Exchange Act. Any portion of the Notes that cannot be converted by reason of the Beneficial Ownership Cap shall remain outstanding and may be converted at such later time as permitted hereby.
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day except Saturday, Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of Utah are authorized or required by law or other governmental action to close. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action must be taken or such right must be exercised no later than the immediately preceding Business Day.
“Closing” means the closing of the transactions contemplated by this Agreement pursuant to Section 2.01.
“Closing Date” shall mean the Business Day when (i) all of the Transaction Documents have been duly executed and delivered by the applicable parties thereto, and all conditions to Funding set forth in the Transaction Documents shall have been satisfied in the reasonable judgment of the Lender, (ii) the Lender shall fund the $2,100,000 Initial Loan.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock” means the common stock, par value $0.001 per share, of the Company and any other class of securities into which such securities may hereafter be reclassified or changed.
“Common Stock Equivalent” means any convertible note, convertible preferred stock, warrant, option or other right to receive or subscribe for or purchase any additional shares of Common Stock or any Common Stock Equivalent.
“Commitment Shares” means six hundred thousand (600,000) shares of Common Stock issued to the Lender on the Closing Date of the Initial Loan in consideration for each Lender’s commitment to fund the Loans pursuant to this Agreement. The Commitment Shares shall be restricted securities which shall be unregistered and shall contain an appropriate restricted legend; provided, that if, at the time of the Lender’s sale of the Commitment Shares, the closing price of the Common Stock on the Trading Market shall be less than the Closing Price of such Common Stock on October 6, 2026 (the Trading Day immediately preceding the Closing Date of the Initial Loan), subject at all times to the Beneficial Ownership Cap, the Company shall issue to the Lender such number of additional Commitment Shares (the “Make-Whole Shares”) as may be necessary to ensure that the total proceeds from the sale of such Commitment Shares shall be the same as if all such Commitment shares had been sold on October 6, 2026. For the avoidance of doubt if the Closing Price of the Common Stock on October 6, 2026 shall be $1.00 and on the date of the sale of all of the Commitment Shares the average of the Closing Prices is $0.50 per share, the Company shall issue to the Lender 600,000 additional Make-Whole Shares.
“Company Disclosure Schedule” means the disclosure schedule submitted by the Company to the Lender as exceptions to or disclosures in respect of the representations and warranties of the Company set forth in this Agreement.
“Conversion Notice” shall have the meaning as that term is defined in the Notes.
“Conversion Right and Conversion Price” means that, at any time following the Closing Date of the Initial Loan, each Lender shall have the right at any time or from time to time, at its sole option, to convert all or any portion of the then-outstanding balance of the Initial Note and, if issued, the Additional Note into shares of the Company’s Common Stock at a conversion price equal to the greater of: (a) Ninety Percent (90%) of the lowest volume-weighted average price (“VWAP”) of the Company’s common stock over the ten (10) consecutive trading days immediately preceding the date of conversion; or (b) the Nasdaq Minimum Price (the “Conversion Price Formula”); provided, however, that:
(i) for so long as the Trading Market is Nasdaq, the “Nasdaq Minimum Price” shall mean the “Minimum Price” determined in accordance with Nasdaq Listing Rule 5635(d) as of the date the parties enter into this Agreement which, as of the date hereof, is the lower of (i) the Nasdaq Official Closing Price of the Company’s common stock immediately preceding execution of the applicable binding definitive agreement and (ii) the average Nasdaq Official Closing Price of the Company’s Common Stock for the five trading days immediately preceding execution of such agreement, in each case subject to adjustment as required by applicable Nasdaq Listing Rules (for the Initial Note, the Nasdaq Minimum Price is $1.09 per share, being the lower of (A) the Nasdaq Official Closing Price of $1.09 on October 8, 2026 and (B) the average Nasdaq Official Closing Price of $1.108 for the five (5) trading days from October 2, 2026 through October 8, 2026; and the Conversion Price shall not be reduced below twenty percent (20%) of the Nasdaq Minimum Price (the “Floor Price”), which, for the Initial Note, is $0.218 per share (20% of the Nasdaq Minimum Price ), subject to reset on each Floor Reset Date as provided below; provided, further, that on the date that is six (6) months following the Closing Date and on each date that is six (6) months after the immediately preceding Floor Reset Date, in each case until the Notes have been paid in full (each, a “Floor Reset Date”), the Floor Price shall automatically, without any further action by the Company or the Lender, be reset to equal the lesser of (x) the Floor Price then in effect and (y) twenty percent (20%) of the lowest VWAP of the Common Stock during the twenty (20) consecutive Trading Days immediately preceding such Floor Reset Date; provided, however, that no such adjustment shall reduce the Floor Price below twenty percent (20%) of the Nasdaq Minimum Price unless and until the Company has obtained any stockholder approval required by Nasdaq Listing Rule 5635 or Nasdaq has confirmed in writing that such approval is not required,
(ii) the Conversion Price shall be subject to one or more Conversion Price Reductions, and
(iii) in the event the Lender elects to convert all or any portion of the outstanding balance of the Note and the Lender does not receive the full number of Conversion Shares it would have received had the conversion been effected at the applicable VWAP-based discount price (being ninety percent (90%) of the lowest VWAP for conversions at the Conversion Price or eighty percent (80%) of the lowest VWAP for conversions at the Event of Default Conversion Price), whether because the applicable conversion price is limited by the Floor Price or the Nasdaq Minimum Price, because of the Exchange Cap or the Nasdaq Issuance Limitation, because the Company lacks sufficient authorized but unissued shares of Common Stock, or for any other reason (other than the Beneficial Ownership Cap), the Company shall pay to the Lender a make-whole amount equal to the difference between (x) the number of shares the Lender would have received had the conversion been effected at such VWAP-based discount price (without application of the Floor Price, the Nasdaq Minimum Price, the Exchange Cap or any other limitation), and (y) the number of Conversion Shares actually delivered to the Lender in respect of such conversion (if any), multiplied by the closing market price of the Common Stock on the date of conversion (the “Make-Whole Amount”). The Make-Whole Amount shall be paid in immediately available funds in cash within three (3) Business Days of the conversion date, and shall not be payable in shares of Common Stock. The portion of the Note submitted for conversion shall not be deemed satisfied until the Make-Whole Amount has been paid in full. For the avoidance of doubt, if, for example, the VWAP-based discount price shall be $2.00 per share and the Lender shall convert any Weekly Installment Payments under the Notes into 20,000 Conversion Shares when the Floor Price is $3.00 per share, and the closing market price of the Common Stock on the date of conversion is $2.20 per share, the Lender would have received 30,000 shares at the VWAP-based discount price rather than 20,000 shares at the Floor Price, and the Company shall pay to the Lender a Make-Whole Amount of 10,000 shares multiplied by $2.20, or $22,000, in cash.
Notwithstanding the foregoing, in the event of acceleration of the Obligations under the Notes upon and following the occurrence of an uncured Event of Default, the Lender shall have the right, at its sole option, to convert all or any portion of the then-outstanding balance (including any default premium) into shares of the Company’s common stock at a conversion price equal to the greater of (a) eighty percent (80%) of the lowest VWAP over the ten (10) consecutive trading days immediately preceding the date of conversion and (b) the Floor Price (the “Event of Default Conversion Price”). In the event the Lender does not receive the full number of Conversion Shares it would have received at eighty percent (80%) of such lowest VWAP, whether because of the Floor Price or for any other reason described in clause (iii) above, the Company shall pay to the Lender the Make-Whole Amount in cash, calculated and payable as provided in clause (iii) above.
“Conversion Price Reductions” in the event that, at any time while there remains an outstanding principal balance under the Notes, the Company issues, on any one or more occasions, any securities, including convertible notes or debentures, Common Stock or other Common Stock Equivalents, other than an Exempt Issuance, at a conversion price, exercise price or per share price that is lower than such Conversion Price based on the Conversion Price Formula, the Conversion Price shall be reduced to the lowest conversion price, exercise price or per share price issued by the Company and the Maximum Conversion Shares shall subject to appropriate increase as a result thereof. Notwithstanding the foregoing, the conversion price shall not be reduced below the Floor Price unless and until the Company has obtained any shareholder approval required by Nasdaq Listing Rule 5635 or Nasdaq has confirmed in writing that such approval is not required.
“Conversion Shares” shall mean the shares of Common Stock of the Company issuable upon any full or partial permitted conversion of the Notes and includes shares of Common Stock of the Company issuable if the Lender elects to accept Weekly Installment Payments in the form of Common Stock or if the Lender issues an Acceleration Notice that it elects to accelerate the Loan for payment after the occurrence and continuation of an Event of Default (as defined in the Notes) beyond the applicable grace period, if any, for cure, the Conversion Price shall be the Event of Default Conversion Price and the Conversion Shares shall be up to the Maximum Conversion Shares.
“Covenant Compliance Guarantee” means the limited guarantee agreement executed by Dwight H. Egan, the Chief Executive Officer of the Company and Daniel Bohrer, the Executive Vice President of Finance and Accounting (Principal Financial Officer) of the Company, in the form of Exhibit G attached hereto.
“DACA” shall mean the deposit account control agreement among the Company, the Lender and East West Bank, as the Company’s depository bank, in the form of Exhibit I attached hereto or such other form or with such other modifications as may be approved by Astor (acting on behalf of each Lender) in the exercise of its sole discretion, pursuant to which all ATM Net Proceeds shall be deposited by the ATM Sales Agent or the Company into the DACA Account, over which Astor (acting on behalf of each Lender) shall have exclusive control, and which the Lender shall apply and distribute in accordance with the ATM Waterfall Distributions.
“Default Amount” means if an uncured Event of Default has occurred, the outstanding balance of the Notes shall immediately become due and payable in full, shall be increased to One Hundred and Twenty Percent (120%) of the then-outstanding principal amount of the Note, including accrued interest on such increased outstanding balance of the Notes at a default interest rate of Nineteen Percent (19%) per annum, compounded daily. The Lender shall then have the right to convert the Default Amount at the Event of Default Conversion Price.
“Equity Interests” means Common Stock or Common Stock Equivalents, as applicable.
“Equity Investment” means any joint venture, partnership or other direct or indirect investments of the Loan Parties in Equity Interests.
“Equity Receipts” means the aggregate amount of cash received by the Company or any of its Subsidiaries in consideration for any issuance or sale by the Company or such Subsidiary on or after the Closing Date of (a) any of its Equity Interests or (b) any other security or instrument representing Equity Interests (or the right to obtain any Equity Interests) in such Person, excluding any cash received pursuant to an Exempt Issuance and reduced by any commissions or other transaction expenses paid by the Company in connection with any such issuance or sale.
“Exempt Issuance” means and is limited to: (i) the issuance by the Company of the Notes, Conversion Shares and the Lender’s Shares, (ii) the issuance of Common Stock or Common Stock Equivalents in connection with any ATM Financings, and (iii) the issuance by the Company of any Common Stock or standard options to purchase Common Stock to directors, officers, employees or consultants of the Company or its Subsidiary in their capacity as such pursuant to an employee benefit plan which has been approved by the Board of Directors of the Company prior to the date hereof pursuant to which Common Stock and standard options to purchase Common Stock may be issued to any employee, officer, director or consultant for services provided to the Company or its subsidiaries in their capacity as such, For the avoidance of doubt, the term “Exempt Issuance” does not mean or include the issuance of any other Indebtedness or debt securities or any other Common Stock or Common Stock Equivalents by the Company or the Subsidiary, unless otherwise approved and consented to in writing in advance by the Lender.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Existing Creditor” shall mean De Lage Landen Financial Services Inc. which has financed the purchase of certain equipment for the Company.
“Existing Subsidiaries” means DNA Logix, Inc. (a Utah corporation, 100% owned), Idaho Molecular, Inc. (an Idaho corporation, 100% owned) and Advanced Conceptions, Inc. (a Utah corporation, 100% owned)
“Extraordinary Receipts” means the aggregate amount of cash received by Company from any tax refunds, judgments, litigation settlements, indemnity payments, or other extraordinary receipts received on or after the Funding Date.
“FINRA” means the Financial Industry Regulatory Authority.
“Flow of Funds Agreement” means, with respect to the Initial Loan, the flow of funds agreement between the Company and the Lender in the form of Exhibit E annexed hereto and if the Additional Loan is made the sum of $960,000 to be reflected in a second flow of funds agreement acceptable to the Lender.
“Funding Amount” means, (a) with respect to the Initial Note, ninety-six percent (96%) of the amount of the $2,100,000 Initial Loan, after deduction of a $84,000 Origination Fee due from the Company to the Lender, representing four percent (4%) of the Initial Loan which shall be retained by the Lender at Closing of the Initial Loan for its own account, and (b) with respect to any Additional Note ninety-six percent (96%) of the amount of the $1,000,000 Additional Loan, after deduction of a $40,000 Origination Fee due from the Company to the Lender, representing four percent (4%) of the Additional Loan which shall be retained by the Lender at Closing of the Additional Loan for its own account.
“Funding Date” shall mean the Closing Date of the Initial Loan (the “Initial Funding Date”) and, if applicable, the Business Day on which the Lender funds the Additional Loan (the “Additional Funding Date”).
“knowledge of the Company” and similar statements refer to the actual knowledge of any executive officer of the Company after due inquiry of those persons employed by the Company or any Subsidiary charged with administrative or operational responsibility for such matter.
“Grace Period” has the meaning as that term is defined in the Notes.
“Indebtedness” has the meaning as that term is defined in the Notes.
“Insolvency Proceeding” means (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of any Person’s creditors generally or any substantial portion of such Person’s creditors, in each case undertaken under U.S. federal, state or foreign law.
“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.01(p).
“Irrevocable Direction Instructions” means the irrevocable instructions set forth in the ATM Waterfall Distribution Agreement from the Company to the ATM Sales Agent, acknowledged and agreed to by the ATM Sales Agent and the Lender, directing the ATM Sales Agent to remit all ATM Net Proceeds of each ATM Financing directly to the DACA Account maintained at East West Bank (or, prior to the execution and delivery of the DACA, to such account as the Lender designates in writing pursuant to Section 2.04), which direction may not be revoked, modified or terminated without the prior written consent of the Lender until all Indebtedness and Obligations under the Notes (including any Default Amounts) shall have been paid in full.
“Irrevocable Direction Letter” means the irrevocable letter agreement executed by the ATM Sales Agent and delivered to the Lender on or prior to the Closing Date, in form and substance satisfactory to the Lender, pursuant to which the ATM Sales Agent (i) acknowledges and agrees to the Irrevocable Direction Instructions, (ii) agrees to remit all ATM Net Proceeds directly to the DACA Account (or, prior to the execution and delivery of the DACA, to the account designated by the Lender pursuant to Section 2.04) within three (3) Business Days after the settlement of each sale under the ATM Financing, (iii) agrees to provide the Lender with not less than five (5) Business Days’ prior written notice of any suspension or termination of the ATM Financing or the related sales agreement, and (iv) confirms the capacity available under the ATM Financing as of the Closing Date.
“Lender” as used in this Agreement and in each of the other Transaction Documents, the term “Lender” shall mean the individual or collective reference to Astor and any one or more participating lender or lenders to whom Astor may, in the exercise of Astor’s sole discretion, assign and transfer participations of up to fifty percent (50%) in the Loans and the Notes.
“Lender’s Shares” shall mean the Commitment Shares.
“Liens” shall mean a lien, charge, security interest, mortgage, encumbrance, right of first refusal, preemptive right or other restriction or adverse claim of a third party against property.
“Loans” shall mean the collective reference to the Initial Loan and the Additional Loan
“Loan Parties” have the meaning ascribed to such term in Section 3.01.
“Material Adverse Effect” shall have the meaning ascribed to such term in Section 3.01(a).
“Maximum Conversion Shares” means, after acceleration for payment of (a) the Initial Note following the occurrence of any Event of Default (as defined in the Initial Note) which shall not be timely cured by the Loan Parties and the Outstanding Principal Amount of the Initial Note shall automatically increase to 120% of the Original Principal Amount of the Initial Note, or (i) a maximum of $3,402,000, less (ii) all Weekly Installment Payments made under the Initial Note prior to such Event of Default, and such Initial Note shall accrue interest on the then Outstanding Principal Amount of the Initial Note at the rate of 19% per annum, compounded daily, and (b) the Additional Note following the occurrence of any Event of Default (as defined in the Additional Note) which shall not be timely cured by the Loan Parties and the Outstanding Principal Amount of the Additional Note shall automatically increase to 120% of the Original Principal Amount of the Additional Note, or (i) a maximum of $1,620,000, less (ii) all Weekly Installment Payments made under the Additional Note prior to such Event of Default, and such Additional Note shall accrue interest on the then Outstanding Principal Amount at the rate of 19% per annum, compounded daily; it being understood that, and upon the request of the Lender, all or any portion of such increased Outstanding Principal Amount of the Notes and accrued interest thereon may be converted by the Lender into that number of shares of Company Common Stock as shall be determined by (a) dividing 200% of the then increased Outstanding Principal Amount of the applicable Note(s) by (b) the Event of Default Conversion Price then in effect; provided that, (i) notwithstanding the election of the Lender to convert all or any part of the then Outstanding Principal Amount of the applicable Note(s), the Company shall have the right to pay in cash the entire then Outstanding Principal Amount of all Notes being converted following Lender’s notice of its election to convert the Notes and prior to any such conversion, and (ii) the maximum number of shares of Common Stock of the Company that may be issued pursuant to any such permitted conversion of the Notes shall be subject to the Exchange Cap set forth in the Nasdaq Issuance Limitation.
“Minimum Cash Requirement” as a condition to the Lender’s making the Initial Loan and the Additional Loan, the Company shall have available not less than $250,000 in cash reserves in bank accounts or other immediately available funds.
“Most Favored Nations Agreement” shall have the meaning as that term is defined in Section 4.02 of this Agreement.
“Nasdaq Issuance Limitation” Notwithstanding anything contained in the Notes or any other transaction document to the contrary, the Company shall not issue, and the Lender shall not have the right to receive, shares of Company common stock pursuant to the Notes, any Make-Whole Amount, anti-dilution adjustment or otherwise in connection with the transactions contemplated hereby to the extent that, after giving effect to such issuance, the aggregate number of shares issued or issuable pursuant to the transaction would equal or exceed 19.99% of the shares of Common Stock or voting power outstanding immediately prior to execution of the applicable binding definitive agreement (the “Exchange Cap”), unless
(i) the Company has obtained shareholder approval in accordance with applicable Nasdaq Listing Rules or (ii) Nasdaq has determined that such approval is not required.
All shares issued or potentially issuable pursuant to the Notes, Make-Whole provisions, anti-dilution provisions or any other Transaction Document (including the Commitment Shares and any Make-Whole Shares) shall be aggregated for purposes of the Exchange Cap to the extent required by Nasdaq.
In no event shall any issuance of Common Stock or Common Stock Equivalents be made if such issuance would violate Nasdaq Listing Rule 5635(b) or any other applicable Nasdaq Listing Rule. Accordingly, the inability of the Company to issue shares in excess of the Exchange Cap shall not constitute an Event of Default, result in acceleration of the Notes, increase the repayment amount, trigger any premium or penalty, increase the applicable conversion discount or otherwise result in any adverse economic consequence to the Company solely by reason of the Exchange Cap or (except as provided in Section 4.06) the failure to obtain shareholder approval, so long as the Company pays to the Lender in cash the Make-Whole Amount, calculated and payable as provided in clause (iii) of the definition of “Conversion Price,” for any Conversion Shares that cannot be issued by reason of the Exchange Cap. Any failure by the Company to timely pay such Make-Whole Amount shall constitute an Event of Default.
“Notes” shall mean the collective reference to the Initial Note and, if issued, the Additional Note.
“Obligations”: (a) the unpaid principal of and interest on (including interest accruing after the maturity of the Note and interest accruing after the filing of any petition in bankruptcy, or the commencement of any Insolvency Proceeding relating to any Loan Party, whether or not a claim for post-filing or post-petition interest is allowed or allowable in such proceeding) the Note and all other obligations and liabilities (including any reasonable and documented out-of-pocket fees or expenses that accrue after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Loan Party, whether or not a claim for post-filing or post-petition interest is allowed or allowable in such proceeding) of the Loan Parties to the Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Transaction Document or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, payment obligations, indemnities, reasonable and documented out-of-pocket fees, costs and expenses (including all reasonable and documented out-of-pocket fees, charges and disbursements of counsel to the Lender that are required to be paid by any Loan party pursuant any Transaction Document or otherwise). For the avoidance of doubt, the Obligations shall not include (x) any obligations arising under any Lender’s Shares or other equity instruments issued by any Loan Party to the Lender.
“Original Principal Amount” shall have the meaning as that term is defined in the applicable Note.
“Origination Fee” shall mean (a) the sum of $84,000 which shall be deducted from the Funding Amount on the Funding Date of the Initial Loan and retained by the Lender pursuant to the Flow of Funds Agreement, and (b) if applicable, $40,000 which shall be deducted from the Funding Amount on the Funding Date of the Additional Loan and retained by the Lender pursuant to the Flow of Funds Agreement.
“Outstanding Principal Amount” shall have the meaning as that term is defined in the Note.
“Payment Notice” shall have the meaning as that term is defined in the Note.
“Permitted Indebtedness” means Indebtedness of the Loan Parties consisting of: (a) Indebtedness to the Lender under the Transaction Documents; (b) Indebtedness to the Existing Creditor existing on the Closing Date and disclosed on Schedule 3.01(g) to the Company Disclosure Schedule; (c) unsecured Indebtedness to vendors, suppliers, service providers or other trade creditors incurred in the ordinary course of business and not evidenced by a promissory note; (d) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness described in clauses (b), (c) and (e), provided that, unless the Lender has given its prior written consent, (i) the principal amount thereof is not increased; (ii) the interest rate thereof is not increased, the maturity date thereof is not shortened, and no scheduled payment thereunder is accelerated or increased; (iii) no new collateral, obligors or guarantors are added; (e) purchase money Indebtedness and capital lease obligations for equipment, secured only by the equipment so financed, not to exceed $100,000 outstanding at any time; (f) ordinary-course insurance premium financing secured only by the unearned premiums; (g) Indebtedness consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (h) Subordinated Debt; (i) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds and completion guarantees and similar obligations not in connection with money borrowed, in each case provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business; (j) Indebtedness owed by a Loan Party to another Loan Party and (k) other unsecured Indebtedness (including corporate credit card obligations) not to exceed $50,000 outstanding at any time; provided, further, that (x) no Indebtedness may be incurred under clauses (d), (e), (f), or (k) if an Event of Default has occurred and is continuing or would result therefrom, and (y) Permitted Indebtedness shall not include any convertible or variable-priced Indebtedness, merchant cash advance, factoring or revenue-based financing, or any Indebtedness secured by the DACA Account or any ATM Net Proceeds.
“Permitted Liens” means (i) pledges or deposits made in the ordinary course of business to secure payment of workmen’s compensation, or to participate in any fund in connection with workmen’s compensation, unemployment insurance, old-age pensions or other social security programs, (ii) Liens of mechanics, materialmen, warehousemen, carriers, landlords or other similar Liens imposed by law for amounts not yet overdue or being contested in good faith; (iii) Liens for taxes, assessments or governmental or similar charges which are not yet delinquent or which are being diligently contested in good faith and by appropriate proceedings and adequate reserves with respect thereto are maintained on the books of the Loan Parties, (iv) Liens arising solely by virtue of any contractual or statutory or common law provisions relating to banker’s liens, rights to set off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution, (v) judgment Liens not exceeding $100,000 in the aggregate that are discharged, bonded or stayed within thirty (30) days, (vi) Liens consisting of zoning restrictions, easements or other restrictions on the use of real property, none of which materially impairs the use of such property or the value thereof, and none of which is violated in any material respect by existing or proposed structures or land use, (vii) customary anti-assignment provisions in leases and other contracts entered into in the ordinary course of business, (viii) Liens arising from the filing of precautionary UCC financing statements relating solely to personal property leased pursuant to “true” operating leases entered into in the ordinary course of business of the Loan Parties, (ix) Liens in favor of the Lender, (x) Liens in favor of the Existing Creditor existing as of the Closing Date that are disclosed in Section 3.01(o) of the Company Disclosure Schedule, attaching only to the equipment financed thereby, (xi) leases or subleases of real property granted in the ordinary course of such Loan Party’s business (or, if referring to another Person, in the ordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal property granted in the ordinary course of such Loan Party’s business (or, if referring to another Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses do not prohibit granting Lender a security interest therein, (xii) non-exclusive licenses of intellectual property granted to third parties in the ordinary course of business, (xiii) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business, (xiv) Liens in favor of customs and revenue authorities which secure payment of customs duties in connection with the importation of goods in the ordinary course of business; provided that any such Lien attaches solely to the imported goods to which such payment relates, and (xv) Liens securing Indebtedness permitted under clauses (e) and (f) of the definition of Permitted Indebtedness, limited to the equipment or unearned premiums so financed; provided, however, that no Permitted Lien (other than Liens in favor of the Lender and bank setoff rights permitted by the DACA) shall attach to the DACA Account or any ATM Net Proceeds.
“Person” means an individual or corporation, partnership, trust, incorporated or un-incorporated association, joint-venture, limited liability company, joint-stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Prepayment Discount” The Company may prepay either the Initial Note or the Additional Note at any time without penalty, subject to payment of all amounts then outstanding thereunder. If the outstanding balance of a Note is paid in full within forty-five (45) days of its funding date, and there has been no prior Event of Default, the repayment amount of such Note will be reduced to reflect a factor rate of 1.29x on the funded amount, or Two Million Seven Hundred and Nine Thousand Dollars ($2,709,000) for the Initial Note and, if funded, One Million Two Hundred Ninety Thousand Dollars ($1,290,000) for the Additional Note, less all Weekly Installment Payments previously made.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“Registration Rights Agreement” shall mean the registration rights agreement in the form of Exhibit D hereto, pursuant to which the Company shall file one or more registration statements with the SEC (each, a “Resale Registration Statement”) and thereby register, for resale under the Securities Act for the benefit of the Lender a number of shares of Common Stock equal to not less than Two Hundred Percent (200%) of the sum of (i) the maximum number of Conversion Shares issuable upon conversion in full of the then Outstanding Principal Amount of the Notes (including any Default Amount and accrued interest thereon), calculated at the Floor Price then in effect, plus (ii) the Lender’s Shares, in each case without regard to any limitation on conversion or exercise set forth in the Transaction Documents (including the Exchange Cap and the Beneficial Ownership Cap). Without limiting the foregoing, the Company shall, not later than thirty (30) days following the Closing Date of the Initial Loan, file with the SEC a Resale Registration Statement registering for resale by the Lender the number of shares of Common Stock set forth in the preceding sentence, and shall cause such Resale Registration Statement to be declared effective by the SEC as promptly as possible, and in any event not later than sixty (60) days following the Closing Date of the Initial Loan. If, following any Floor Reset Date, the number of shares of Common Stock registered for resale by the Lender is less than the number required under the first sentence of this definition (recalculated at the Floor Price as so reset), the Company shall file an additional Resale Registration Statement covering such shortfall not later than thirty (30) days following such Floor Reset Date and shall cause it to be declared effective by the SEC not later than sixty (60) days following such Floor Reset Date. The Company shall register all such shares without reduction for any reason (including any limitation under Rule 415 or SEC guidance), and shall not suspend or delay any such filing, the effectiveness of any Resale Registration Statement or the Lender’s use of any related prospectus, except as required by applicable law, in each case as more fully set forth in the registration rights agreement in the form of Exhibit D hereto.
“Required Approvals” shall have the meaning ascribed to such term in Section 3.01(d).
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
“SEC” means the Securities and Exchange Commission.
“SEC Reports” has the meaning ascribed to such term in Section 3.01(g).
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Security Agreement” means the Security Agreement between the Company, the Existing Subsidiaries and the Lender, dated as of the Closing Date, in the form of Exhibit C attached hereto.
“State Securities Laws” means the securities (or “blue sky”) rules, regulations, or other similar laws of a particular state.
“Stockholder Approval” means the approval by the Company’s stockholders, in accordance with Nasdaq Listing Rule 5635(d) and applicable law of resolutions (a) approving the issuance of all Conversion Shares, Make-Whole Shares and Commitment Shares issued or issuable pursuant to the Transaction Documents, without regard to the Exchange Cap, (b) one or more reverse stock splits to be consummated at the sole direction of the Board of Directors at ranges of up to one share of Common Stock for each 750 outstanding shares of Common Stock as set forth in a new preliminary proxy statement to be filed with the SEC within five (5) days of the Closing Date of the Initial Loan (the New Preliminary Proxy Statement”), and (c) this Agreement and all of the other Transaction Documents.
“Stockholders Meeting” means the annual or special meeting of the Company’s stockholders required to be held pursuant to Section 4.01(h) (including any adjournment or postponement thereof) for the purpose of obtaining the Stockholder Approval to be held as provided in Section 4.01(h) below; it being understood that the Lender may vote at the Stockholders Meeting all shares of Common Stock then owned by such Lender, including the Commitment Shares, other than with respect of the resolutions contemplated by clauses (a) and (c) in the definition of Stockholder Approval.
“Subordinated Debt” means any debt incurred by a Loan Party that is subordinated to the debt now or hereafter owing by the Loan Parties to Lender on terms acceptable to the Lender, pursuant to a written subordination, intercreditor, or other similar agreement, in form and substance satisfactory to the Lender, entered into between the Lender and the other creditor.
“Subsidiary” or “Subsidiaries” means, individually or collectively, the Existing Subsidiaries and any other direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“Subsidiary Guarantors” means the Existing Subsidiaries and shall, where applicable, include any other direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“Subsidiary Guarantee” means the subsidiary guarantee executed by the Subsidiary Guarantors and in the form of Exhibit B attached hereto.
“Trading Market” means, as applicable, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the NYSE American, any nationally recognized successor to any of the foregoing, or any other United States securities exchange where the Company’s Common Stock trades on the date in question.
“Transaction Documents” means the collective reference to (a) this Agreement, (b) the Notes, (c) the Subsidiary Guarantees, (d) the Security Agreement, (e) the Commitment Shares, (f) the Covenant Compliance Guarantee, (g) the Registration Rights Agreement, (h) the Transfer Agent Instructions, (i) the ATM Waterfall Distribution Agreement, (j) the Flow of Funds Agreement, (k) the DACA, (l) the Irrevocable Direction Letter, and (m) all other appendices, exhibits and schedules hereto and thereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“Transfer Agent Instructions” means an irrevocable instruction letter addressed to the Company’s transfer agent in the form of Exhibit H attached hereto, with respect to the Maximum Conversion Shares issuable upon any full or partial conversion of the Notes and the Lender’s Shares, executed by an authorized officer of the Company and acknowledged and accepted by the transfer agent of the Company’s Common Stock.
“Weekly Installment Payments” shall have the meaning given to that term in the Notes and in this Agreement.
ARTICLE II
THE LOAN
Section 2.01 Funding Dates.
(a) (i) On the initial Funding Date, upon the terms and subject to the conditions set forth herein and in the other Transaction Documents to be executed and delivered by the parties hereto and thereto, the Lender hereby agrees to make the Initial Loan of $2,100,000 and (ii) on the Additional Funding Date, the Lender shall fund the Additional Loan if all Company covenants and conditions to funding the Additional Loan of $1,000,000 have been satisfied, including (A) no Material Adverse Effect shall then exist as determined by the Lender in the exercise of its reasonable discretion, (B) evidence that the Company is current in all of its Exchange Act filings with the Commission, (C) no Default or Event of Default shall have occurred and be continuing, (D) the Common Stock shall be listed on the Trading Market in good standing, and the Company shall not have received any deficiency notice or delisting determination from the Trading Market that remains unresolved, (E) the closing price of the Common Stock on the Trading Day immediately preceding the Additional Funding Date shall be at or above $1.00 per share, (F) the representation set forth in Section 3.01(k) shall be true and correct as of the Additional Funding Date, (G) the Stockholder Approval shall have been obtained and the reverse stock splits contemplated therein shall have been effected, and (H) the Company shall complied with the Minimum Cash Requirement.
(b) On the Additional Funding Date, the Lender shall deliver to the Company, via wire transfer, of immediately available funds, an amount equal to approximately $960,000, representing the net proceeds to the Company, all set forth in the Flow of Funds Agreement.
(c) On the Initial Funding Date, the Company hereby agrees to execute and deliver to the Lender the Initial Note in $2,835,000 Original Principal Amount, the Subsidiary Guarantees, the Security Agreement, the ATM Waterfall Distribution Agreement, the Lender’s Shares and the other Transaction Documents, and the Lender hereby agrees to accept from the Company such Transaction Documents.
(d) Upon satisfaction of the conditions set forth in Sections 2.02 and 2.03, the Funding shall occur at the offices of the Lender’s counsel, or such other location as the parties shall mutually agree or may be closed remotely by electronic delivery of documents.
Section 2.02 Funding Date Deliverables.
(a) By Lender. On or prior to the initial Funding Date, the Lender shall deliver or cause to be delivered to the Company the following:
| (i) | this Agreement duly executed by the Lender; | |
| (ii) | the Security Agreement, the form of which are attached hereto as Exhibit C, duly executed by the Lender; | |
| (iii) | the Registration Rights Agreement duly executed by the Lender and in the form of Exhibit D attached hereto; | |
| (iv) | the Flow of Funds Agreement duly executed by the Lender and in the form of Exhibit E attached hereto; |
| (v) | the ATM Waterfall Distribution Agreement duly executed by the Lender and in the form of Exhibit F attached hereto; and | |
| (vi) | subject to Section 2.04(b), the DACA in the form of Exhibit I attached hereto. |
(b) Funding of the Additional Loan. If all of the conditions to funding the Additional Loan of $1,000,000 have been satisfied by the Company to the Lender’s reasonable satisfaction, on the Additional Funding Date the Lender shall fund such Additional Loan in accordance with the provisions of the Flow of Funds Agreement.
(c) By the Company. On or prior to the Initial Funding Date, the Company shall deliver or cause to be delivered to the Lender:
| i. | this Agreement, duly executed by an authorized officer on behalf of the Company; | |
| ii. | the Initial Note, the form of which is attached hereto as Exhibit A-1, registered in the name of the Lender, in the $2,835,000 Original Principal Amount calculated in accordance herewith and duly executed by an authorized officer on behalf of the Company; | |
| iii. | the Subsidiary Guarantee in the form of Exhibit B, duly executed by the Subsidiary Guarantors; | |
| iv. | the Security Agreement between the Company, the Subsidiary Guarantors and the Lender, dated as of the Closing Date, in the form of Exhibit C, duly executed by an officer of the Company; | |
| v. | in book entry form the Commitment Shares registered in the name of the Lender and included in the Transfer Agent Instructions in the form of Exhibit H attached hereto; | |
| vi. | the Registration Rights Agreement duly executed by the Company and in the form of Exhibit D attached hereto; | |
| vii. | the Flow of Funds Agreement duly executed by the Company and in the form of Exhibit E attached hereto; | |
| viii. | the ATM Waterfall Distribution Agreement duly executed by the Company and the ATM Sales Agent and in the form of Exhibit F attached hereto, which shall include the Irrevocable Direction Instructions duly executed by the Company and acknowledged by the ATM Sales Agent; and | |
| ix. | the Covenant Compliance Guarantee in the form of Exhibit G duly executed by Dwight H. Egan, as CEO of the Company, and Daniel Bohrer, as Principal Financial Officer of the Company; | |
| x. | the Irrevocable Direction Letter duly exe4cuted by the ATM Sales Agent; and | |
| xi. | an officer’s certificate of the Company and the Subsidiary Guarantors certifying its: (A) charter (or similar formation document); (B) good standing certificates in its state or jurisdiction of incorporation or formation; (C) bylaws (or similar governing document); and (D) resolutions of its Board of Directors (or similar governing body) approving and authorizing the execution, delivery and performance of the Transaction Documents to which it is (or is to be) a party. |
Section 2.03 Funding Date Conditions.
(a) The obligations of the Company hereunder in connection with the applicable Closing are subject to the following conditions being met (it being understood that the Company may waive any of the conditions for the Funding hereafter):
| (i) | the accuracy in all material respects on the applicable Funding Date of the Lender’s representations and warranties contained herein and in the Notes; | |
| (ii) | all obligations, covenants and agreements of the Lender required to be performed at or prior to the applicable Funding Date shall have been performed; and | |
| (iii) | the delivery by the Lender of the items set forth in Section 2.02(a) of this Agreement. |
(b) The obligations of the Lender hereunder in connection with the applicable Funding are subject to the following conditions being met (it being understood that the Lender may waive any of the conditions for the applicable Funding hereafter):
| (i) | the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the applicable Funding Date of the representations and warranties of the Company contained herein (unless as of a specific date therein in which case they shall be accurate in all material respects as of such date); | |
| (ii) | all obligations, covenants and agreements of the Loan Parties required to be performed at or prior to the applicable Funding Date shall have been performed; | |
| (iii) | the delivery by the Loan Parties, the Company’s bank and the ATM Sales Agent of the items set forth in Section 2.02(c) of this Agreement; | |
| (iv) | there shall have been no Material Adverse Effect with respect to the Loan Parties since the date hereof; and | |
| (v) | the Company shall furnish the Lender with the wiring instruction for the applicable Funding Amount. |
Section 2.04 Post-Closing Deliverable.
(a) On or before October 12, 2026 (or such later date as Astor (acting on behalf of each Lender) may agree in writing in the exercise of its sole discretion), the Company and V Stock Transfer LLC, the Company’s transfer agent, shall deliver to the Lender, the fully executed Transfer Agent Instructions in the form of Exhibit H attached hereto.
(b) On or before October 15, 2026 (or such later date as Astor (acting on behalf of each Lender) may agree in writing in the exercise of its sole discretion), the Company, the Lender and the Company’s bank shall execute and deliver the DACA in the form of Exhibit I attached hereto. Until the DACA has been executed and delivered by all Parties thereto, the Company shall instruct the ATM Sales Agent to remit one hundred percent (100%) of all ATM Net Proceeds, within three (3) Business Days after the settlement of each sale under the ATM Financing, to such account as Astor (acting on behalf of each Lender)designates in writing, for application in accordance with the ATM Waterfall Distribution Agreement, and any ATM Net Proceeds received by the Company shall be held in trust for the Lender and remitted to such account designated by Astor (acting on behalf of each Lender) within one (1) Business Day of receipt.
The failure of the Transfer Agent Instructions to be executed and delivered on or before October 12, 2026 or the DACA to be executed and delivered on or before October 15, 2026 (or such later date in either case as Astor (acting on behalf of each Lender) may agree in writing in the exercise of its sole discretion) shall constitute an immediate Event of Default, without any notice or cure period.
Section 2.05 Deliveries if the Additional Loan Made. In the event that the Company shall request on or after the date that is sixty (60) days following the Agreement Date the Additional Loan, on five (5) Business Days’ notice, and the conditions precedent to the Additional Loan shall have then been satisfied to the satisfaction of the Lender (including the availability of minimum cash reserves of not less than $250,000), the Additional Loan shall occur and the Company shall deliver the Additional Note to the Lender together with an updated Flow of Funds Agreement, and an amended and restated Subsidiary Guarantee and Security Agreement to include the Additional Loan.
Section 2.06 Payment in Full. In the event that all Indebtedness and other Obligations of the Loan Parties under the Notes (including any Default Amount and interest accrued thereon) shall be deemed to have been paid in full, the Notes and the other Transaction Documents shall be cancelled and deemed null and void and the Company will be authorized to file UCC-3 termination statements.
Section 2.07 Weekly Installment Payments. The Company shall pay the Weekly Installment Payments under the Initial Note in thirty (30) weekly installments of $94,500 each. Consistent with the definition of “Business Day” and notwithstanding anything to the contrary in this Agreement or the Notes, if any date on which a Weekly Installment Payment or any other payment under the Notes is scheduled to be due is not a Business Day, such payment shall instead be due and payable on the immediately preceding Business Day. If the Additional Loan is funded, the Company shall pay the Weekly Installment Payments under the Additional Note in thirty (30) weekly installments of $45,000 each in accordance with the Additional Note, subject to the same preceding-Business-Day adjustment,.
ARTICLE
III
REPRESENTATIONS AND WARRANTIES
Section 3.01 Representations and Warranties of the Company. The Company on behalf of the Company and each of its Subsidiary Guarantors (together with the Company, the “Loan Parties”) hereby represents and warrants to the Lender that, except as set forth in the applicable Section of the Company Disclosure Schedule, the following representations are true and complete as of the date hereof.
(a) Organization and Qualification. The Company and each of the Subsidiary Guarantors is duly incorporated or otherwise organized and validly existing under the laws of Utah and Idaho with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company and the Subsidiary Guarantors are not in violation or default of any of the provisions of its certificate of incorporation or bylaws, each, as amended and in effect. A complete and correct copy of the Company’s certificate of incorporation and bylaws, and the Subsidiary Guarantors’ certificate of incorporation and bylaws each as amended and in effect on the date of this Agreement and as they will be in effect on the Funding Date, is attached to the officer’s certificate referenced in Section 2.02(c)(x). There are no other organizational or charter documents of the Company or the Subsidiary Guarantors. The Company and the Subsidiary Guarantors are each duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction (other than its jurisdiction of organization) in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document; (ii) a material adverse effect on the results of operations, assets, business or financial condition of the Company and the Subsidiary Guarantors, taken as a consolidated whole; or (iii) a material adverse effect on any of the Loan Parties’ ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions, (ii) conditions generally affecting the industry in which the Loan Parties operate, (iii) any changes in financial or securities markets in general, (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof, (v) any pandemic, epidemics or human health crises, (vi) any changes in applicable laws or accounting rules, (vii) the announcement, pendency or completion of the transactions contemplated by the Transaction Documents, or (viii) any action required or permitted by the Transaction Documents or any action taken (or omitted to be taken) with the written consent of or at the written request of the Lender.
(b) Authorization; Enforcement. The Company and the Subsidiary Guarantors have the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the Subsidiary Guarantors and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and the Subsidiary Guarantor and no further action is required by the Company or the Board of Directors or stockholders thereof in connection therewith (other than the Required Approvals). Each Transaction Document to which the Company and the Subsidiary Guarantors is a party has been (or upon delivery will have been) duly executed by the Company and the Subsidiary Guarantor and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company and the Subsidiary Guarantors enforceable against the Company and/or the Subsidiary Guarantors (as applicable) in accordance with their respective terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(c) No Conflicts. The execution, delivery and performance by the Loan Parties of the Transaction Documents to which it is (or is to be) a party and the consummation by the Loan Parties of the other transactions contemplated hereby and thereby do not and will not: (i) conflict with or violate any provision of the Loan Parties’ certificate of incorporation, bylaws or other organizational or charter documents; (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Loan Parties, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, agreement or other instrument (evidencing Indebtedness of the Loan Parties, or otherwise) or other understanding to which the Loan Parties are a party or by which any property or asset of the Loan Parties are bound or affected; or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Loan Parties are subject (including federal and State Securities Laws and regulations), or by which any property or asset of the Loan Parties are bound or affected; except in the case of each of clauses (ii) and (iii), such as would not reasonably be expected to result in a Material Adverse Effect.
(d) Filings, Consents and Approvals. The Loan Parties are not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with its execution, delivery and performance of the Transaction Documents, other than: (i) such consents, waivers, or authorizations as have been obtained before the Closing; and (ii) the filing of Form D with the SEC and such filings as are required to be made under applicable State Securities Laws (collectively, the “Required Approvals”).
(e) Reservation of Common Stock. The Company has reserved from its duly authorized Common Stock, for issuance to the Lender or its Affiliates, a number of shares of Common Stock not less than the number required to be reserved under Section 4.01(c).
(f) Capitalization. The capitalization of the Company is as set forth in the most recent SEC Reports. The Loan Parties have no Indebtedness, except as otherwise disclosed in the most recent SEC Reports and in Section 3.01(g) of the Company Disclosure Schedule. Since the date of the most recently filed SEC Report, the Company has not issued any Common Stock, Common Stock Equivalents or other equity interests (other than Exempt Issuances) or (without duplication) pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date hereof. Except in instances where valid waivers have been obtained, no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as set forth in the SEC Reports, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any Common Stock, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional Common Stock or Common Stock Equivalents. The issuance and sale of the Note will not obligate the Company to issue any securities to any Person (other than the Lender) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. Except for the Required Approvals and waivers that have heretofore been obtained, no further approval or authorization of any stockholder, Board of Directors or other Person(s) is required for the issuance and sale of the Note hereunder.
(g) Indebtedness. All Indebtedness owed by the Loan Parties to all Persons are disclosed in the most recent SEC Reports and in Section 3.01(g) of the Company Disclosure Schedule, which shall specify whether such Indebtedness is secured or unsecured.
(h) SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”). As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal year-end audit adjustments.
(i) Undisclosed Liabilities. The Company has no liability, indebtedness, obligation, expense, claim, deficiency or guaranty of any type, whether accrued, absolute, contingent, matured, unmatured or otherwise, required to be reflected in financial statements in accordance with GAAP, which individually or in the aggregate: (A) has not been reflected in the latest balance sheet included in the financial statements referenced hereinabove; or (B) has not arisen: (i) in the ordinary course of business, consistent with past practices, since the date of the latest balance sheet included in such financial statements in an amount that does not exceed $25,000 in any one case or $50,000 in the aggregate, (ii) pursuant to or in connection with this Agreement or other Transaction Document, or (c) are executory performance obligations to be performed after the date hereof in the ordinary course of business pursuant to agreement(s) entered into in the ordinary course of business, consistent with past practices. The Company is not in default with respect to any Indebtedness.
(j) Material Changes. Since the date of the latest financial statements made available to Lender prior to the date hereof, other than as set forth in the SEC Reports: (A) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect; (B) the Company has not incurred any liabilities (contingent or otherwise) other than (i) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice, and (ii) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP; (C) the Company has not altered their method of accounting; (D) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock; and (E) the Company has not issued any equity securities except in favor of an officer, director or consultant pursuant to an existing Company equity incentive plans.
(k) Litigation. There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Loan Parties or any of its respective properties or assets before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which: (A) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents; or (ii) if there were an unfavorable decision, would reasonably be expected to result in a Material Adverse Effect. The Company has no outstanding Action that it believes will be material to the Loan Parties, taken as a whole. None of the Loan Parties nor any director or officer thereof is or has been the subject of any Action involving: (x) a claim of violation of or liability under the Securities Act, the Exchange Act, FINRA rules or any State Securities Laws; (y) breach of fiduciary duty; or (z) fraud (statutory or common law), embezzlement, misappropriation or conversion of property or rights, or any other crime involving deceit.
(l) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Loan Parties which would reasonably be expected to result in a Material Adverse Effect. None of the Loan Parties’ employees is a member of a union that relates to such employee’s relationship with the Loan Parties, and the Loan Parties are not a party to any collective bargaining agreement. The Company believes that its relationships with the employees of the Loan Parties are good. No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non- competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Loan Parties to any liability with respect to any of the foregoing matters. To the best of the Company’s knowledge, it is in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(m) Compliance. Except as disclosed set forth in Section 3.01(m) of the Company Disclosure Schedule, the Loan Parties: (i) is neither in default under nor in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Loan Parties under), nor has the Loan Parties received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement (whether or not such default or violation has been waived); (ii) is not in violation of any order of any court, arbitrator or governmental body; and (iii) is not and has not been in material violation of any statute, law, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(n) Regulatory Permits. The Loan Parties possesses all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct its business, except where the failure to possess such permits would not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and the Loan Parties have not received any notice of proceedings relating to the revocation or modification of any Material Permit.
(o) Title to Assets. The Loan Parties have good and marketable title in fee simple to all real property and good and marketable title in all personal property owned by it that, in each case, is material to the business of the Loan Parties, in each case free and clear of all Liens, except for Permitted Liens and Liens disclosed in Section 3.01(o) of the Company Disclosure Schedule that do not materially and adversely (x) affect the value of such property or (y) interfere with the use made and proposed to be made of such property by the Loan Parties. Any real property and facilities held under lease by the Loan Parties are held by it under valid, subsisting and enforceable leases with which the Loan Parties are in compliance except as disclosed in Section 3.01(o) of the Company Disclosure Schedule.
(p) Patents and Trademarks. (i) The Loan Parties have, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, software, websites, licenses and other intellectual property rights and similar rights as necessary or material for use in connection with its business as presently conducted (collectively, the “Intellectual Property Rights”); (ii) the Loan Parties have not received written notice that any of the Intellectual Property Rights violates or infringes upon the intellectual property rights of any other Person; (iii) all Intellectual Property Rights are enforceable by the Loan Parties, and to the knowledge of the Company there is no existing infringement by any other Person of any of the Intellectual Property Rights, except where the failure to be so enforceable or for such infringements as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (iv) the Loan Parties have taken reasonable security measures to protect the secrecy, confidentiality and value of all of its Intellectual Property Rights, except where failure to do so would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(q) Transactions with Officers, Directors and Employees. None of the officers or directors of the Loan Parties and, to the knowledge of the Company, none of the employees of the Loan Parties, is presently a party to any transaction with the Loan Parties (other than for services as employees, officers and directors and related party notes as identified in the SEC Reports), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from, any such officer, director or employee or, to the knowledge of the Company, any entity in which any such officer, director or employee has a substantial interest or is an officer, director, trustee, member or partner, in each case other than for: (x) payment of salary or fees for services rendered; (y) reimbursement for expenses incurred on behalf of the Loan Parties; and (z) other employee benefits, including stock option agreements under any stock option plan of the Loan Parties.
(q) Private Placement. Assuming the accuracy of the Lender’s representations and warranties set forth in Section 3.02, no registration under the Securities Act is required for the offer and sale of the Note by the Company to the Lender as contemplated hereby.
(r) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Note will not be or be an Affiliate of, an ‘investment company’ within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not be an “investment company” subject to registration under the Investment Company Act of 1940, as amended.
(s) Registration Rights. Other than as described in the SEC Reports, as set forth in the Registration Rights Agreement and further modified by Section 3.01(t) of the Company Disclosure Schedule, no Person has any right to demand the Company to file a registration statement under the Securities Act covering the sale of any securities of the Company.
(t) Disclosure. Except with respect to: (i) the material terms and conditions of the transactions contemplated by the Transaction Documents; and (ii) information given to the Lender, if any, which the Company hereby confirms will not constitute material non-public information, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Lender or their agents or counsel with any information that it believes constitutes or might constitute material, nonpublic information. The Company understands and confirms that the Lender will rely on the foregoing representation in effecting transactions in securities of the Company. All disclosure furnished by or on behalf of the Company to the Lender regarding the Company, its business and the transactions contemplated hereby, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading as of the time made.
(u) No Integrated Offering. Assuming the accuracy of the Lender’s representations and warranties set forth in Section 3.02, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Note to be integrated with prior offerings by the Company for purposes of the Securities Act which would require the registration of any such securities under the Securities Act.
(v) Solvency. The Loan Parties will not, after the Funding Date, incur debts beyond its ability to pay such debts (including Permitted Indebtedness) as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). Except as disclosed in its SEC Reports (including the risk factors and qualified audit opinions disclosed therein), the Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Funding Date.
(w) Tax Status. The Company has filed all material federal, state and foreign income and franchise tax returns and has paid or accrued all material taxes shown as due thereon, and the Company has no knowledge of a material tax deficiency which has been asserted or threatened against the Company.
(x) No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold the Note by any form of general solicitation or general advertising. The Company has offered the Note for sale only to the Lender.
(y) Insurance. The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company reasonably believes to be prudent and customary in the businesses in which the Company is engaged. The Company has never been refused any insurance coverage sought or applied for, and the Company has no reason to believe that it will not be able to renew all existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers.
(z) Acknowledgment Regarding Lender’s Purchase of the Note. The Company acknowledges and agrees that the Lender is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that Lender is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by Lender or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Lender’s purchase of the Note. The Company further represents to the Lender that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(aa) No Disqualification Events. With respect to the Notes to be offered and sold hereunder in reliance on Rule 506(b) under the Securities Act (“Regulation D Securities”), none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of twenty percent (20%) or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the ‘Bad Actor’ disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Lender a copy of any disclosures provided thereunder.
(bb) Other Covered Persons. The Company is not aware of any person (other than any Issuer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Regulation D Securities.
(cc) Notice of Disqualification Events. The Company will notify the Lender in writing, prior to the Funding Date of: (i) any Disqualification Event relating to any Issuer Covered Person; and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person.
(dd) Foreign Corrupt Practices. To the knowledge of the Company, neither the Company nor any agent or other person acting on behalf of the Company, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds; (iii) failed to disclose fully any contribution made by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law; or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act.
(ee) Office of Foreign Assets Control. Neither the Company nor, to the Company’s knowledge, any director or executive officer of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
(ff) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Lender’s request.
(gg) Bank Holding Company Act. Neither the Company nor any of its Affiliates is subject to the Bank Holding Company Act of 1956, as amended (“BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (“Federal Reserve”). Neither the Company nor any of its Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.
(hh) Money Laundering. The operations of the Company are and have been conducted at all times in compliance in all material respects with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(ii) Representations. The representations and warranties of the Company contained in this Agreement, and the certificate(s) furnished or to be furnished to the Lender at the Closing, when taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. The Company acknowledges and agrees that the representations contained in section 3.02 shall not modify, amend or affect Lender’s right to rely on the Company’s representations and warranties contained in this section 3.01 or elsewhere in this Agreement or any representations and warranties contained in any other Transaction Document, or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby.
(jj) ATM Capacity. The Company has an effective registration statement on Form S-3 and a prospectus supplement relating to the ATM Financing, and not less than $7,350,877.68 of Common Stock remains available for sale by the ATM Sales Agent under the ATM Financing, all of which may be sold in full in compliance with General Instruction I.B.6 of Form S-3. While any Obligations under the Notes remain outstanding, such capacity shall not be reset, reduced or otherwise decreased, other than by sales under the ATM Financing the ATM Net Proceeds of which are remitted in accordance with the ATM Waterfall Distribution Agreement.
(kk) Outstanding Common Stock Equivalents. Other than the warrants described in clauses (i) and (ii) of this Section 3.01(ll), there are no outstanding warrants, options, restricted stock units, convertible securities or other Common Stock Equivalents of the Company. (i) the inducement warrants held by Armistice Capital Master Fund Ltd. and Orca ● to purchase an aggregate of 3,404,724 shares of Common Stock have an exercise price of $1.56 per share, (ii) the remaining warrants issued in May 2026 to purchase approximately 1,590,000 shares of Common Stock have an exercise price of $1.571 per share, and (iii) none of such warrants contains any reset, ratchet or price-based anti-dilution provision. None of Armistice, Orca or any other holder of securities of the Company holds any right of participation, right of first refusal, most-favored-nation right, prohibition on variable rate transactions or other right or restriction that is or would be triggered by the transactions contemplated by the Transaction Documents, the ATM Financing or the issuance of any Conversion Shares, Make-Whole Shares or Commitment Shares.
Section 3.02 Representations and Warranties of the Lender.
The Lender, for itself and for no other Person, hereby represents and warrants as of the date hereof and as of the Funding Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):
(a) Authority; Organization. The Lender has full power and authority to enter into this Agreement and to perform all obligations required to be performed by it hereunder. The Lender is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by the Lender of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate or similar action on the part of the Lender. Each Transaction Document to which it is a party has been duly executed by the Lender, and when delivered by the Lender in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Lender, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(b) Own Account. The Lender understands that the Note, the Commitment Shares and the Conversion Shares are “restricted securities” and have not been registered under the Securities Act or any applicable State Securities Law and is acquiring the Note, the Commitment Shares and Conversion Shares as principal for its own account and not with a view to or for distributing or reselling the Note, the Commitment Shares or Conversion Shares or any part thereof in violation of the Securities Act or any applicable State Securities Law, has no present intention of distributing any of the Note, the Commitment Shares or Conversion Shares in violation of the Securities Act or any applicable State Securities Law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of the Note (this representation and warranty not limiting the Lender’s right to sell the Note, the Commitment Shares or Conversion Shares in compliance with applicable federal and State Securities Laws) in violation of the Securities Act or any applicable State Securities Law. The Lender is acquiring the Note hereunder in the ordinary course of its business.
(c) Non-Transferrable. The Lender agrees: (i) that the Lender will not sell, assign, pledge, give, transfer or otherwise dispose of the Note, the Commitment Shares or Conversion Shares or any interest therein, or make any offer or attempt to do any of the foregoing, except pursuant to a registration of the Note, the Commitment Shares and Conversion Shares under the Securities Act and all applicable State Securities Laws, or in a transaction which is exempt from the registration provisions of the Securities Act and all applicable State Securities Laws, (ii) that the certificates representing the Note will bear a legend making reference to the foregoing restrictions, and (iii) that the Company and its Affiliates shall not be required to give effect to any purported transfer of the Note, the Commitment Shares and Conversion Shares except upon compliance with the foregoing restrictions.
(d) Lender Status. The Lender is an “accredited investor” as defined in Rule 501(a) under Regulation D of the Securities Act. The undersigned agrees to furnish any additional information requested by the Company or any of its Affiliates to assure compliance with applicable U.S. federal and state securities laws in connection with the purchase and sale of the Note. Any information that has been furnished or that will be furnished by the undersigned to evidence its status as an accredited investor is accurate and complete, and does not contain any misrepresentation or material omission.
(e) Experience of The Lender. The Lender, either alone or together with its representatives, has such knowledge, sophistication, and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Note, and has so evaluated the merits and risks of such investment. The Lender is able to bear the economic risk of an investment in the Note and, at the present time, is able to afford a complete loss of such investment.
(f) No Trading Market. The Lender acknowledges that there is currently no trading market for the Note and that none is expected to develop for the Note.
(g) General Solicitation. The Lender acknowledges that neither the Company nor any other person offered to sell the Note to it by means of any form of general solicitation or advertising, including, but not limited to: (i) any advertisement, article, notice, or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar or meeting whose attendees were invited by any general solicitation or general advertising.
(h) Confidentiality. Other than to other Persons party to this Agreement and its advisors who have agreed to keep information confidential or have a fiduciary obligation to keep such information confidential, the Lender has maintained the confidentiality of all disclosures made to it in connection with the transaction (including the existence and terms of this transaction).
(i) Foreign Lender. The Lender is a United States person and not a foreign Lender.
(j) Information from Company. The Lender and its investment managers, if any, have been afforded the opportunity to obtain any information necessary to verify the accuracy of any representations or information presented by the Company in this Agreement and have had all inquiries to the Company answered, and have been furnished all requested materials, relating to the Company and the offering and sale of the Note and anything set forth in the Transaction Documents. Neither the Lender nor the Lender’s investment managers, if any, have been furnished any offering literature by the Company or any of its Affiliates, associates, or agents other than the Transaction Documents, and the agreements referenced therein.
(k) Speculative Nature of Investment; Risk Factors. THE LENDER UNDERSTANDS THAT AN INVESTMENT IN THE NOTE INVOLVES A HIGH DEGREE OF RISK. The Lender acknowledges that: (i) any projections, forecasts or estimates as may have been provided to the Lender are purely speculative and cannot be relied upon to indicate actual results that may be obtained through this investment; any such projections, forecasts and estimates are based upon assumptions which are subject to change and which are beyond the control of the Company or its management, (ii) the tax effects which may be expected by this investment are not susceptible to absolute prediction, and new developments and rules of the Internal Revenue Service, audit adjustment, court decisions or legislative changes may have an adverse effect on one or more of the tax consequences of this investment, and (iii) the Lender has been advised to consult with his own advisor regarding legal matters and tax consequences involving this investment. The Lender represents that the Lender’s investment objective is speculative in that the Lender seeks the maximum total return through an investment in a broad spectrum of securities, which involves a higher degree of risk than other investment styles and therefore the Lender’s risk exposure is also speculative. The Note offered hereby is highly speculative and involves a high degree of risk and Lender should only purchase these securities if Lender can afford to lose its entire investment.
(l) Money Laundering. The operations of the Lender are and have been conducted at all times in compliance with the Money Laundering Laws, and no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Lender with respect to the Money Laundering Laws is pending or, to the knowledge of the Lender, threatened.
The Company acknowledges and agrees that the representations contained in Section 3.02 shall not modify, amend or affect the Lender’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transaction contemplated hereby.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section 4.01 Company Affirmative and Negative Covenants. The Company on behalf of itself and any of the other Loan Parties hereby covenants and agrees that until all Obligations owed to the Lender shall have been paid in full, without the prior written approval of the Lender:
(a) the Loan Parties shall not incur any Indebtedness, other than Permitted Indebtedness or as otherwise expressly permitted by this Agreement (“Additional Indebtedness”), unless the net proceeds to the Company of such Additional Indebtedness shall be used to prepay 100% of the then Outstanding Principal Amount of the Notes (including any Default Amount and accrued interest thereon), or such Additional Indebtedness shall be approved in advance by the Lender;
(b) the Loan Parties shall not engage in the public or private sale of any securities, including convertible and non-convertible notes or debentures, Common Stock or Common Stock Equivalents, except for Exempt Issuances or as otherwise expressly permitted in this Agreement, the Note or other Transaction Documents, unless 100% of the net proceeds to the Loan Parties from such sale are used to repay the then Outstanding Principal Amount of the Notes (including any Default Amount and accrued interest thereon);
(c) the Company shall at all times (x) maintain a sufficient number of registered, freely tradeable shares available for sale by the ATM Sales Agent under the ATM Financing having an aggregate market value (based on the closing price of the Common Stock on the immediately preceding Trading Day) of not less than Two Hundred Percent (200%) of the Outstanding Principal Amount of the Notes, and (y) reserve and keep available out of its authorized and unissued Common Stock, solely for issuance to the Lender upon conversion of the Notes and issuance of the Lender’s Shares, a number of shares of Common Stock equal to not less than Two Hundred Percent (200%) of the sum of the maximum number of Conversion Shares issuable upon conversion in full of the then Outstanding Principal Amount of the Notes (including any Default Amount and accrued interest thereon), calculated at the Floor Price then in effect, plus (ii) the maximum number of Lender’s Shares issued and issuable in each case without regard to any limitation on conversion or exercise set forth in the Transaction Documents (including the Exchange Cap and the Beneficial Ownership Cap), and calculated as if the Additional Loan had been funded in full, the Additional Note had been issued in its $1,350,000 Original Principal Amount, , whether or not the Additional Loan has then been funded, and the Company shall promptly take all actions necessary (including seeking stockholder approval of an increase in its authorized shares of Common Stock) to maintain such share availability and reserve at all times;
(d) the Company shall (i) effect sales of Common Stock under the ATM Financing in amounts sufficient to generate ATM Net Proceeds sufficient to pay each Weekly Installment Payment in full when due; it being agreed that any inability of the Company to effect such sales in such amounts for any reason, including by reason of General Instruction I.B.6 of Form S-3 or any reduction in the capacity available under the ATM Financing, shall constitute an immediate Event of Default; (ii) maintain the ATM Financing in full force and effect, together with a currently effective registration statement and prospectus supplement covering such sales; (iii) not suspend, terminate or reduce the ATM Financing, or fail to instruct sales thereunder, without the prior written consent of the Lender; and (iv) cause the ATM Sales Agent to remit one hundred percent (100%) of all ATM Net Proceeds directly to the DACA Account, and only to the DACA Account, within three (3) Business Days after the settlement of each sale under the ATM Financing (or, prior to the execution and delivery of the DACA, to the account designated by Astor pursuant to Section 2.04), and the Company shall deposit any ATM Net Proceeds received by it into such account within one (1) Business Day of receipt, and not revoke, modify or countermand the ATM Waterfall Distribution Agreement or any remittance instruction given to the ATM Sales Agent thereunder without the prior written consent of the Lender, it being agreed that any such revocation, modification or countermand shall constitute an immediate Event of Default;
(e) the Company shall timely file all reports, schedules, and forms required to be filed with the SEC under the Securities Exchange Act of 1934, as amended, including all Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, within the prescribed deadlines (including any extensions pursuant to Rule 12b-25);
(f) the Company shall take all actions necessary to maintain continued listing on The Nasdaq Capital Market, including compliance with all applicable Nasdaq Listing Rules regarding minimum bid price, minimum stockholders’ equity, and continued listing standards;
(g) within five (5) Business Days from the funding of the Initial Loan, the Company shall file a new preliminary proxy statement in anticipation of the Stockholder’s Meeting which shall (i) include a full description of this Agreement and the other Transaction Documents, (ii) reflect that each Lender is voting the Lender’s Shares IN FAVOR of the proposals contained therein (other than any proposal seeking approval required under Nasdaq Listing Rule 5635(d) of the issuance of Conversion Shares upon conversion of the Notes or Make-Whole Shares), and (iii) seek Stockholder Approval of one or more reverse stock splits to be implemented by the Board of Directors within ranges of up to one share of Common Stock for each 750 shares of Common Stock then outstanding; and (iv) expressly include a proposal seeking the Stockholder Approval, with the Board of Directors recommending that the stockholders vote in favor of each all proposal submitted to the stockholders at the Stockholder Meeting;
(h) after the earlier of (A) the tenth (10th) calendar day following the filing of the preliminary proxy statement with the SEC, if the SEC has not by such date informed the Company that it will review the preliminary proxy statement, and (B) the date on which the SEC informs the Company that it has no further comments on the preliminary proxy statement, file the definitive proxy statement with the SEC and mail the same to the stockholders (including each Lender), and hold the Stockholders Meeting not later than November 10, 2026; provided, that if a quorum is not present at the Stockholders Meeting, the Company shall adjourn the Stockholders Meeting and reconvene it within ten (10) days thereafter, and shall continue to adjourn and reconvene the Stockholders Meeting every ten (10) days thereafter until a quorum is present; the Board of Directors shall recommend that the stockholders vote in favor of each proposal described in Section 4.01(g) and shall not withdraw or adversely modify such recommendation; and the Company shall engage a nationally recognized proxy solicitation firm reasonably acceptable to the Lender to solicit proxies in favor of such proposals;
(i) if, at any time while any Obligations under the Notes remain outstanding, the closing bid price of the Common Stock on the Trading Market is less than $1.00 per share for ten (10) consecutive Trading Days, the Company shall, within ten (10) Trading Days thereafter (or, if later, on the earliest date permitted under the rules of the Trading Market, including any advance notice requirement), effect a reverse stock split of the Common Stock at a ratio sufficient to cause the closing bid price of the Common Stock to equal or exceed $5.00 per share immediately following such reverse stock split, and, if the range of ratios then approved by the Company’s stockholders is insufficient for such purpose, the Company shall promptly call and hold a meeting of its stockholders to approve such additional reverse stock split authority;
(j) the Company shall promptly (and in no event later than two (2) Business Days after receipt) notify the Lender in writing of any deficiency notices, delisting determinations, hearing requests, panel decisions, or other correspondence received from Nasdaq relating to the continued listing of the Company’s securities;
(k) no payments of Indebtedness shall be paid to any Affiliate other than (i) payments on any Subordinated Debt in accordance with the subordination terms thereof, and (ii) payments of deferred compensation to members of the board of directors and employees of the Company;
(l) the Loan Parties shall not permit any Person to have a Lien of any of the assets of any of the Loan Parties, except for Permitted Liens; and
(m) the Loan Parties shall comply with all of the additional affirmative and negative covenants set forth in the Note and the Security Agreement.
(n) the Company shall at all times maintain unrestricted cash and cash equivalents of not less than Two Hundred and Fifty Thousand Dollars ($250,000) in the aggregate, excluding any amounts held in the DACA Account or in any account designated by the Lender pursuant to Section 2.04 (the “Minimum Cash Requirement”);
(o) on or before the second (2nd) Business Day of each calendar week, the Company shall deliver to the Lender a certificate signed by the Company’s Principal Financial Officer setting forth, for the immediately preceding week and cumulatively since the Closing Date, (i) the number of shares of Common Stock sold and the gross proceeds received under the ATM Financing, (ii) the ATM Net Proceeds and the remittance thereof in accordance with the ATM Waterfall Distribution Agreement, (iii) the remaining capacity available under the ATM Financing, including after giving effect to General Instruction I.B.6 of Form S-3, (iv) a calculation demonstrating compliance with the ATM Coverage Requirement set forth in Section 4.01(c)(x), and (v) compliance with the Minimum Cash Requirement;
(p) until all Obligations under the Notes have been paid in full, the Company shall not reprice, amend, modify or waive any provision of, or offer or provide any cash or other inducement for the exercise of, any warrant to purchase Common Stock outstanding on the Closing Date, including the warrants described in Section 3.01(ll);
(q) notwithstanding Section 4.01(b), until all Obligations under the Notes have been paid in full, the Company shall not issue any warrants or other Common Stock Equivalents to any Person other than the Lender, unless the net proceeds of such issuance are applied, concurrently with such issuance, to repay in full all Obligations under the Notes (including any Default Amount and accrued interest thereon); and
(r) if the depositary bank party to the DACA delivers notice of termination of the DACA, the Company shall (i) within twenty (20) days after delivery of such notice, and in any event prior to the effective date of such termination, cause a replacement deposit account control agreement, in form and substance satisfactory to the Lender, to be executed and delivered by a depositary bank acceptable to the Lender, and (ii) cause all balances in the DACA Account to be swept to Astor prior to the effective date of such termination.
The Company covenants and agrees that a breach or violation of any of the above covenants set forth in this Section 4.01 shall constitute an immediate Event of Default under this Agreement, the Note and the other Transaction Documents.
Section 4.02 Most Favored Nations Agreement. If, at any time during the term of the Note, the Company enters into any debt or equity financing transaction with any third Person on terms that in the aggregate are more favorable to such third Person than the terms set forth in this Agreement, or in the Notes, the ATM Waterfall Distribution Agreement or other Transaction Documents (as reasonably determined by the Lender), the Lender shall have the right, at its sole option, to require the Company to amend the terms of this Agreement, the applicable Notes, the ATM Waterfall Distribution Agreement or other Transaction Documents to match such more favorable terms, provided that the Conversion Price shall not be reduced below the Floor Price. The Company shall provide the Lender with written notice of any such financing within two (2) Business Days of execution of any related agreement, together with copies of all related transaction documents. The foregoing shall not apply to (i) sales under the current ATM facility; (ii) equity compensation plans; and (iii) any financing approved in advance in writing by the Lender along with a waiver of this most favored nations provision.
Section 4.03 Transfer Restrictions.
(a) The Note, Lender’s Shares and Conversion Shares may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of the Note, Lender’s Shares or Conversion Shares other than pursuant to an effective registration statement or Rule 144, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Note, Lender’s Shares and Conversion Shares under the Securities Act. As a condition of such sale or transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of Lender under this Agreement. Notwithstanding anything to the contrary herein or in any other Transaction Document, the Lender may sell, transfer, assign or grant participations in all or any portion of its rights, title and interest in this Agreement, the Notes and the other Transaction Documents to any Person without the consent of the Company, subject only to compliance with applicable federal and State Securities Laws and Section 5.06.
(b) Each Lender agrees to the imprinting, so long as is required by this Section 4.03, of a legend on any of the Note, the Lender’s Shares and Conversion Shares in the following form:
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THIS SECURITY.
Section 4.04 Use of Proceeds; Restrictions on Certain Payments. The Company shall use the net proceeds paid to it under the Flow of Funds Agreement for general working capital purposes.
Section 4.05 Future Subsidiary. Any direct or indirect Subsidiary of the Company formed or acquired after the Funding Date and before the Note shall have been repaid in full shall promptly thereafter execute and deliver (or otherwise join and agree to be bound under) the applicable Subsidiary Guarantees and Security Agreement.
Section 4.06 Stockholders Meeting. The Company’s failure to file a proxy statement or hold a Stockholders Meeting when required by Section 4.01 shall constitute an Event of Default and the failure of the Company to obtain the Stockholder Approval of the reverse stock splits described herein on or before November 10, 2026 shall constitute an Event of Default. Each Lende acknowledges and agrees that itshall not vote any shares of Common Stock held by such Lender with respect to any proposal seeking approval of the issuance of the Commitment Shares or the Conversion Shares or Make-Whole Shares upon conversion of the Notes required under Nasdaq Listing Rule 5635(d) or the issuance of Common Stock in excess of the Exchange Cap.
Section 4.07 Integration. The Company shall not sell, offer for sale, or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Note to the Lender in a manner that would require the registration under the Securities Act of the issuance and sale of the Note to the Lender.
Section 4.08 Publicity. The Company and the Lender shall consult with each other in issuing any other press releases and SEC Reports with respect to the transactions contemplated hereby, and neither the Company nor the Lender shall issue any such press release or SEC Report nor otherwise make any such public statement without the prior consent of the Company with respect to any press release of the Lender, or without the prior consent of the Lender with respect to any press release or SEC Report of the Company mentioning the Lender, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement, SEC Report or communication. The Company will publish a press release announcing this transaction approved by the Lender within 4 Business Days following the Funding Date.
Section 4.09 Indemnification of Lender. The Company shall indemnify, reimburse and hold harmless the Lender and its partners, members, shareholders, officers, directors, employees and agents (and any other persons with other titles that have similar functions) (collectively, “Indemnitees”) from and against any and all losses, claims, liabilities, damages, penalties, suits, costs and expenses, of any kind or nature, (including fees relating to the cost of investigating and defending any of the foregoing) imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from or alleged to arise from: (i) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents and (ii) any action instituted against such Indemnitee in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Indemnitee, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is based upon a breach of such Indemnitee’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Indemnitee may have with any such stockholder or any violations by such Indemnitee of state or federal securities laws or any conduct by such Indemnitee which results from the gross negligence or willful misconduct of the Indemnitee as determined by a final, non-appealable decision of a court of competent jurisdiction).
Section 4.10 Resale Registration upon Event of Default. Upon the occurrence and during the continuance of an uncured Event of Default, at the written request of the Lender, the Company shall, within thirty (30) days of such request, file with the SEC a registration statement registering for resale by the Lender a number of shares of Common Stock equal to not less than Two Hundred Percent (200%) of the sum of (i) the maximum number of Conversion Shares issuable upon conversion in full of the then Outstanding Principal Amount of the Notes (including any Default Amount and accrued interest thereon), calculated at the Floor Price then in effect, plus (ii) the Conversion Shares in each case without regard to the Exchange Cap and the Beneficial Ownership Cap and in each case calculated as if the Additional Loan had been funded in full, the Additional Note had been issued in its $1,350,000 Original Principal Amount, whether or not the Additional Loan has then been funded, and shall cause such registration statement to be declared effective by the SEC within sixty (60) days of such request, without reduction in the number of shares registered for any reason and without any suspension or delay except as required by applicable law.
ARTICLE
V
MISCELLANEOUS
Section 5.01 Termination. This Agreement may be terminated by the Lender by written notice to the Company if the Closing has not been consummated on or before the third Business Day after the date of the execution and delivery of this Agreement by both parties; provided that such termination will not affect the right of any party to sue for any breach by the other party.
Section 5.02 Fees and Expenses. The Company shall bear the reasonable and documented out-of-pocket expenses of the Company and the Lender incurred in connection with the negotiation, preparation, execution, delivery and performance of the Transaction Documents, including, without limitation, reasonable attorneys’ and consultants’ fees and expenses (including previously paid fees to Lender’s counsel of $30,000), transfer agent fees, fees for stock quotation services, fees relating to any amendments or modifications of the Transaction Documents or any consents or waivers of provisions in the Transaction Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated by the Transaction Documents. When possible, the Company must pay these fees directly, including, but not limited to, any and all wire fees, otherwise the Company must make immediate payment for reimbursement to the Lender for all fees and expenses immediately upon written notice by the Lender or the submission of an invoice by the Lender. In addition, the Company shall pay the Origination Fee to the Lender as specified hereinabove.
Section 5.03 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
Section 5.04 Notices. Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, or by email:
if to Lender:
J.J. Astor & Co.
26 S Rio Grande Street, #2072
Salt Lake City, Utah 84101
Attn: Michael Pope
Email: michael.p@jjastor.com
with a copy to:
Barton, LLP
711 Third Avenue, 14th Floor
New York, New York 10017
Attn: Stephen A. Weiss, Esq.
if to the Company:
Co-Diagnostics, Inc.
2401 S. Foothill Drive, Suite D
Salt Lake City, Utah 84109
Attn: Dwight H. Egan, CEO
Email: d.egan@codiagnostics.com
Attn: Daniel Bohrer, Executive VP of Finance and Accounting
Email: d.bohrer@codiagnostics.com
with a copy to:
Dorsey & Whitney LLP
111 S Main St #2100,
Salt Lake City, UT 84111
Attn: Dan Lyman
Email: lyman.dan@dorsey.com
Phone: (801) 933-7360
or to such other Persons or addresses as may be designated in writing by the party to receive such notice as provided above.
Section 5.05 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented, or amended except in a written instrument signed, in the case of an amendment, by the Company and the Lender or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
Section 5.06 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Lender (other than by merger). The Lender may assign any or all of its rights under this Agreement to any Person to whom the Lender assigns or transfers the Note, and/or participate any of such rights in connection with granting of any participation of the Note, provided that such transfer or participation complies with all applicable federal and State Securities Laws and that any such transferee or participant agrees in writing by the provisions of the Transaction Documents that apply to the Lender.
Section 5.07 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
Section 5.08 Governing Law.
All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents, shall be governed by and construed and enforced in accordance with the internal laws of the State of Utah, without regard to the principles of conflict of laws thereof. Each Party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a Party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents), shall be commenced exclusively in the federal and state courts sitting in Salt Lake County, Salt Lake City, Utah (the “Utah Courts”). Each Party hereto hereby irrevocably submits to the exclusive jurisdiction of the Utah Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, Action or Proceeding, any claim that it is not personally subject to the jurisdiction of such Utah Courts, or that such Utah Courts are improper or inconvenient venue for such proceeding or that such Party may obtain an exemption from Utah law based on any public policies or principles of any other State or jurisdiction. Each Party hereby irrevocably waives personal service of process and consents to process being served in any such suit, Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such Party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each Party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to the Transaction Documents or the transactions contemplated hereby. If any Party shall commence an Action or Proceeding to enforce any provisions of the Transaction Documents, then the prevailing Party in such Action or Proceeding shall be reimbursed by the other Party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such Action or Proceeding.
Section 5.09 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Notes.
Section 5.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page was an original thereof.
Section 5.11 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
Section 5.12 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever the Lender exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then the Lender may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.
Section 5.13 Replacement of the Note. If any certificate or instrument evidencing the Note is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Note.
Section 5.14 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Lender and the Company will be entitled to seek specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
Section 5.15 Payment Set Aside. To the extent that the Company makes a payment or payments to the Lender pursuant to any Transaction Document or the Lender enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
Section 5.16 Construction. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement. All interest (including default interest) payable under any Transaction Document shall be computed on the basis of a 360-day year and the actual number of days elapsed.
Section 5.17 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
Section 5.18 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed by their respective authorized signatories as of the Agreement Date.
| Company: | ||
| CO-DIAGNOSTICS, INC. | ||
| By: | /s/ Dwight H. Egan | |
| Name: | Dwight H. Egan, | |
| Title: | Chief Executive Officer | |
| By: | /s/ Daniel Bohrer | |
| Name: | Daniel Bohrer | |
| Title: | Executive Vice President of Finance and Accounting (Principal Financial Officer) | |
| Lender: | ||
| J.J. ASTOR & CO. | ||
| By: | /s/ Michael Pope | |
| Name: | Michael Pope | |
| Title: | Chief Executive Officer | |
Exhibit 10.2
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (as amended, restated, supplemented or otherwise modified from time to time, this “Agreement”) dated as of October 9, 2026, is made and entered into by and among (x) Co-Diagnostics, Inc., a Utah corporation (the “Company”); (y) DNA Logix, Inc., a Utah corporation, Idaho Molecular, Inc., an Idaho corporation and Advanced Conceptions, Inc., a Utah corporation (collectively, the “Existing Subsidiaries”),(z) each other Person who becomes a party to this Agreement by execution of a joinder in the form of Exhibit A attached hereto, which shall include all other direct or indirect Subsidiaries of the Company hereafter formed or acquired after the date hereof for so long as this Agreement remains in effect (the “Additional Subsidiaries” and together with the Company and the Existing Subsidiaries hereinafter sometimes referred to individually as a “Debtor” and, collectively, as the “Debtors”), on the one hand, and J.J. Astor & Co., a Utah corporation (“Astor”) acting on behalf of itself and each of the other participating lenders (together with Astor individually and collectively the “Lender”) and Astor in its capacity as collateral agent (in such capacity, the “Collateral Agent”) for the benefit of itself as the Lender and each other Lender (if any), on the other hand (each Lender, together with its respective successors and assigns, a “Secured Party,” and collectively the “Secured Parties”).
W I T N E S S E T H:
WHEREAS, on October 9, 2026 the Company and the Lender entered into a loan agreement (the “Loan Agreement”), pursuant to which the Company wishes to borrow the sum of $2,100,000 (the “Initial Loan”), and on the Agreement Date the Company issued to the Lender, the Two Million Eight Hundred and Thirty-Five Thousand ($2,835,000) Dollar Original Issue Amount senior secured convertible installment promissory note in the form of Exhibit A-1 attached to the Loan Agreement (the “Initial Note”) and
WHEREAS, the Company may elect, commencing sixty (60) days after the Agreement Date, to borrow an additional $1,000,000 (the “Additional Loan”) and may issue to the Lender, the One Million Three Hundred and Fifty Thousand ($1,350,000) Dollar Original Issue Amount senior secured convertible installment promissory note in the form of Exhibit A-2 attached to the Loan Agreement (the “Additional Note”)
WHEREAS, the Company is the owner of 100% of the Equity Interests of the Existing Subsidiaries, and the Company has agreed to secure the Obligations of the Company under the Initial Note and, if issued, the Additional Note (collectively, the “Notes”) by (a) having the Existing Subsidiaries guaranty all Obligations of the Company under the Loan Agreement and the Notes pursuant to a guaranty agreement in the form of Exhibit B attached to the Loan Agreement (the “Subsidiary Guarantee”), and (b) perfecting and securing the Lender’s senior lien on and security interest in substantially all of the assets and properties of the Company and the Existing Subsidiaries, all pursuant to this Pledge and Security Agreement to be executed on the Initial Funding Date (the “Security Agreement”); and
WHEREAS, capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Loan Agreement and in the Notes; and
WHEREAS, each Debtor will derive substantial benefit and advantage from the financial accommodations provided by the Lender to the Company set forth in the Loan Agreement and the Notes, and it will be to each such Debtor’s direct interest and economic benefit to obtain said financial accommodations from Lender; and
WHEREAS, to induce Lender to enter into the Loan Agreement and make the Loans, and Lender as security for its Obligations for the benefit of the Lender and any other Secured Parties, and their respective successors and assigns, each Debtor has agreed to pledge and grant to the Lender a first priority Lien and security interest in all of Debtors’ right, title and interest in and to the Collateral (as hereinafter defined).
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 hereto agree as follows:
Section 1. Definitions. Unless otherwise defined in this Agreement, all capitalized terms, when used herein shall have the same meaning as they are defined in the Loan Agreement and the Notes. In addition, as used herein:
“Accounts” means any “account,” as such term is defined in the UCC, and, in any event, shall include, without limitation, “supporting obligations” as defined in the UCC.
“ATM Waterfall Distribution Agreement” shall have the meaning as that term is defined in the Loan Agreement.
“Chattel Paper” means any “chattel paper,” as such term is defined in the UCC.
“Collateral” shall have the meaning ascribed thereto in Section 3 hereof.
“Commercial Tort Claims” means “commercial tort claims”, as such term is defined in the UCC.
“Contracts” means all contracts, undertakings, or other agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which a Debtor may now or hereafter have any right, title or interest, including, without limitation, with respect to an Account, any agreement relating to the terms of payment or the terms of performance thereof.
“Copyrights” means any copyrights, rights and interests in copyrights, works protectable by copyrights, copyright registrations and copyright applications, including, without limitation, the copyright registrations and applications listed on Schedule III attached hereto (if any), and all renewals of any of the foregoing, all income, royalties, damages and payments now and hereafter due and/or payable under or with respect to any of the foregoing, including, without limitation, damages and payments for past, present and future infringements of any of the foregoing and the right to sue for past, present and future infringements of any of the foregoing.
“DACA” shall have the meaning as that term is defined in the Loan Agreement.
“Documents” means any “documents,” as such term is defined in the UCC, and shall include, without limitation, all documents of title (as defined in the UCC), bills of lading or other receipts evidencing or representing Inventory or Equipment.
“Equipment” means any “equipment,” as such term is defined in the UCC and, in any event, shall include, Motor Vehicles.
“Event of Default” shall have the meaning set forth in the Notes.
| 2 |
“Excluded Assets” means each of the following: (i) any lease, license or other agreement or any property subject to a capital lease, purchase money security interest or similar arrangement, to the extent that a grant of a Lien thereon in favor of Secured Parties would violate or invalidate such lease, license, agreement or capital lease, purchase money security interest or similar arrangement or create a right of termination in favor of any other party thereto (other than the Debtors), so long as such provision exists and so long as such lease, license or agreement was not entered into in contemplation of circumventing the obligation to provide Collateral hereunder or in violation of the Loan Agreement, other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law including the bankruptcy code, or principles of equity.
“General Intangibles” means any “general intangibles,” as such term is defined in the UCC, and, in any event, shall include, without limitation, all right, title and interest in or under any Contract, models, drawings, materials and records, claims, literary rights, goodwill, rights of performance, Copyrights, Trademarks, Patents, warranties, rights under insurance policies and rights of indemnification.
“Goods” means any “goods”, as such term is defined in the UCC, including, without limitation, fixtures and embedded Software to the extent included in “goods” as defined in the UCC.
“Governmental Authority” means the government of the United States of America or any other nation, or any political subdivision thereof, whether state or local, or any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administration powers or functions of or pertaining to government over any Debtor or any of its subsidiaries, or any of their respective properties, assets or undertakings.
“Instruments” means any “instrument,” as such term is defined in the UCC, and shall include, without limitation, promissory notes, drafts, bills of exchange, trade acceptances, letters of credit, letter of credit rights (as defined in the UCC), and Chattel Paper.
“Intellectual Property” means the collective reference to all of Debtors’ Patents, Copyrights, Trademarks, Software, know how, trade secrets and proprietary confidential information.
“Inventory” means any “inventory,” as such term is defined in the UCC.
“Investment Property” means any “investment property”, as such term is defined in the UCC.
“Loan Agreement” means the loan agreement, dated as of October 9, 2026 between the Company and the Lender.
“Lien” has the meaning set forth in the Loan Agreement.
“Motor Vehicles” shall mean motor vehicles, tractors, trailers and other like property, whether or not the title thereto is governed by a certificate of title or ownership.
“Obligations” means all obligations, liabilities and indebtedness of every nature of Debtors from time to time owed or owing under or in respect of this Agreement, the Loan Agreement, the Notes, the Subsidiary Guarantee, the other Transaction Documents, as the case may be, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing, due or payable whether before or after the filing of a bankruptcy, insolvency or similar proceeding under applicable federal, state, foreign or other law and whether or not an allowed claim in any such proceeding.
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“Patents” means any patents, pending patents and patent applications, including, without limitation, the inventions and improvements described and claimed therein, all patentable inventions and those patents and patent applications listed on Schedule IV attached hereto (if any), and the reissues, divisions, continuations, renewals, extensions and continuations-in-part of any of the foregoing, and all income, royalties, damages and payments now or hereafter due and/or payable under or with respect to any of the foregoing, including, without limitation, damages and payments for past, present and future infringements of any of the foregoing and the right to sue for past, present and future infringements of any of the foregoing.
“Permitted Indebtedness” has the meaning as that term is defined in the Loan Agreement.
“Permitted Liens” has the meaning as that term is defined in the Loan Agreement.
“Pledged Collateral” means all shares of the capital stock or membership interest equity of the Existing Subsidiaries, any Additional Subsidiaries and all Instruments and Investment Property whether or not physically delivered to the Collateral Agent according to this Agreement.
“Proceeds” means “proceeds,” as such term is defined in the UCC and, in any event, includes, without limitation, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any person acting under color of Governmental Authority), and (c) any and all other amounts from time to time paid or payable under, in respect of or in connection with any of the Collateral.
“Representative” means any Person acting as agent, representative or trustee on behalf of the Secured Parties from time to time.
“Security Documents” means this Agreement and any other documents securing the Liens of the Secured Parties hereunder.
“Software” means all “software” as such term is defined in the UCC, now owned or hereafter acquired by a Debtor, other than software embedded in any category of Goods, including, without limitation, all computer programs and all supporting information provided in connection with a transaction related to any program.
“Trademarks” means any trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, other business identifiers, prints and labels on which any of the foregoing have appeared or appear, all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, the trademarks and applications listed in Schedule V attached hereto (if any) and renewals thereof, and all income, royalties, damages and payments now or hereafter due and/or payable under or with respect to any of the foregoing, including, without limitation, damages and payments for past, present and future infringements of any of the foregoing and the right to sue for past, present and future infringements of any of the foregoing.
“Transaction Documents” has the meaning as that term is defined in the Loan Agreement.
“UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of Utah; provided, that to the extent that the Uniform Commercial Code is used to define any term herein and such term is defined differently in different Articles or Divisions of the Uniform Commercial Code, the definition of such term contained in Article or Division 9 shall govern
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Section 2. Representations, Warranties and Covenants of Debtors. Each Debtor represents and warrants to, and covenants with, the Secured Parties as follows:
(a) Such Debtor has or will have rights in and the power to transfer the Collateral in which it purports to grant a security interest pursuant to Section 3 hereof (subject, with respect to after acquired Collateral, to such Debtor acquiring the same) and no Lien other than Permitted Liens exists or will exist upon such Collateral at any time.
(b) This Agreement is effective to create in favor of Secured Parties a valid security interest in and Lien upon all of such Debtor’s right, title and interest in and to the Collateral, and upon (i) the filing of appropriate UCC financing statements in the jurisdictions listed on Schedule I attached hereto, and (ii) the delivery to the Secured Parties of the Pledged Collateral together with assignments in blank, such security interest will be a duly perfected security interest (subject to Permitted Liens) in all of the Collateral.
(c) All of the Equipment, Inventory and Goods owned by such Debtor are located at the places as specified on Schedule I attached hereto. Except as disclosed on Schedule I, none of the Collateral is in the possession of any bailee, warehousemen, processor or consignee. Schedule I discloses such Debtor’s name as of the date hereof as it appears in official filings in the state or province, as applicable, of its incorporation, formation or organization, the type of entity of such Debtor (including corporation, partnership, limited partnership or limited liability company), organizational identification number issued by such Debtor’s state of incorporation, formation or organization (or a statement that no such number has been issued), such Debtor’s state or province, as applicable, of incorporation, formation or organization and the chief place of business, chief executive office and the office where such Debtor keeps its books and records and the states in which such Debtor conducts its business. Such Debtor has only one state or province, as applicable, of incorporation, formation or organization. Such Debtor does not do business and has not done business during the past five years under any trade name or fictitious business name except as disclosed on Schedule II attached hereto.
(d) No Copyrights, Patents or Trademarks listed on Schedules III, IV and V, respectively, if any, and no other Intellectual Property have been adjudged invalid or unenforceable or have been canceled, in whole or in part, or are not presently valid and enforceable. Each of such Copyrights, Patents and Trademarks (if any) and other Intellectual Property is valid and enforceable. Subject to the Permitted Liens, such Debtor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each of such Copyrights, Patents and Trademarks, identified on Schedules III, IV and V, as applicable, and other Intellectual Property as being owned by such Debtor, free and clear of any liens (subject to Permitted Liens), charges and encumbrances, including without limitation licenses, shop rights and covenants by such Debtor not to sue third persons. Such Debtor has adopted, used and is currently using, or has a current bona fide intention to use, all of such Patents, Trademarks, Copyrights and other Intellectual Property. Such Debtor has no notice of any suits or actions commenced or threatened with reference to the Copyrights, Patents or Trademarks and other Intellectual Property owned by it.
(e) Each Debtor agrees to deliver to the Secured Parties an updated Schedule I, II, III, IV and/or V within five Business Days of any material change thereto.
(f) Such Debtor does not own any Commercial Tort Claim except for those disclosed on Schedule II hereto (if any).
(g) All Equipment (including, without limitation, Motor Vehicles) owned by a Debtor and subject to a certificate of title or ownership statute is described on Schedule VII hereto.
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(h) The Company and the Existing Subsidiaries do not have any interest in real property except as disclosed on Schedule VIII (if any). Each Debtor shall deliver to Secured Parties a revised version of Schedule VIII showing any material changes thereto within 10 Business Days of any such change. Except as otherwise agreed to by Secured Parties, all such interests in real property are or shall be subject to a mortgage and deed of trust (in form and substance reasonably satisfactory to the Collateral Agent) in favor of Secured Parties (hereinafter, a “Mortgage”).
Section 3. Collateral. As collateral security for the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Obligations, each Debtor hereby pledges and grants to the Collateral Agent, for the benefit of itself and each Secured Party, a first priority Lien on and security interest in and to all of such Debtor’s assets, including all right, title and interest in the following properties and assets of such Debtor, whether now owned by such Debtor or hereafter acquired and whether now existing or hereafter coming into existence and wherever located (all being collectively referred to herein as “Collateral”).
The Collateral consists of:
(a) all Instruments, together with all payments thereon or thereunder;
(b) all Accounts;
(c) all Inventory;
(d) all General Intangibles (including payment intangibles (as defined in the UCC) and Software);
(e) all Equipment;
(f) all Documents;
(g) all Contracts;
(h) all Goods;
(i) all Pledged Collateral, including all of the Common Stock of the Existing Subsidiaries, owned by the Company and all of the Equity Interests of any Additional Subsidiary;
(j) all Commercial Tort Claims specified on Schedule VI;
(k) all Trademarks, Patents, Copyrights and other Intellectual Property;
(l) all rights of the Company to receive cash payments under the ATM Waterfall Distribution Agreement;
(m) all books and records pertaining to the other Collateral;
(n) all Software;
(o) all Deposit Accounts (as defined in the UCC), including the DACA Account, and all Investment Property; and
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(p) all other tangible and intangible property and other assets of such Debtor, including, without limitation, Proceeds, tort claims, products, accessions, rents, profits, income, benefits, substitutions, additions and replacements of and to any of the property of such Debtor described in the preceding clauses of this Section 3 (including, without limitation, any proceeds of insurance thereon, insurance claims and all rights, claims and benefits against any Person relating thereto), other rights to payments not otherwise included in the foregoing, and all books, correspondence, files, records, invoices and other papers, including without limitation all tapes, cards, computer runs, computer programs, computer files and other papers, documents and records in the possession or under the control of such Debtor, or any computer bureau or service company from time to time acting for such Debtor.
Notwithstanding anything to the contrary contained herein or in any Transaction Document, in no event shall the security interest granted herein or therein attach to any Excluded Assets.
Section 4. Covenants; Remedies. In furtherance of the grant of the pledge and security interest pursuant to Section 3 hereof, each Debtor hereby agrees with the Secured Parties as follows (subject to the Permitted Liens):
4.1 Delivery and Other Perfection; Maintenance, etc.
(a) Other Documents and Actions. Each Debtor shall give, execute, deliver, file and/or record any financing statement, registration, notice, instrument, document, agreement, or other papers that may be necessary or desirable (in the reasonable judgment of the Secured Parties or their Representative) to create, preserve, perfect or validate the security interest granted pursuant hereto (or any security interest or mortgage contemplated or required hereunder, including with respect to Section 2(h) of this Agreement) or to enable the Secured Parties or their Representative to exercise and enforce the rights of the Secured Parties hereunder with respect to such pledge and security interest, provided that notices to account debtors in respect of any Accounts or Instruments shall be subject to the provisions of clause (d) below. Notwithstanding the foregoing each Debtor hereby irrevocably authorizes the Secured Parties at any time and from time to time to file in any filing office in any jurisdiction any initial financing statements (and other similar filings or registrations under other applicable laws and regulations pertaining to the creation, attachment, or perfection of security interests) and amendments thereto that (a) indicate the Collateral (i) as all assets of such Debtor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including whether such Debtor is an organization, the type of organization and any organization identification number issued to such Debtor. Each Debtor agrees to furnish any such information to the Secured Parties promptly upon request. Each Debtor also ratifies its authorization for the Secured Parties to have filed in any jurisdiction any like initial financing statements or amendments thereto if filed prior to the date hereof.
(b) Books and Records. Each Debtor (or a Company on behalf of a Debtor) shall maintain at its own cost and expense complete and accurate books and records of the Collateral, including, without limitation, a record of all payments received and all credits granted with respect to the Collateral and all other dealings with the Collateral. Upon the occurrence and during the continuation of any Event of Default, each Debtor shall deliver and turn over any such books and records (or true and correct copies thereof) to the Secured Parties or their Representative at any time on demand. Each Debtor shall permit any Representative of the Secured Parties, to inspect such books and records at any time during reasonable business hours upon at least five Business Days’ prior notice (and in no event, more frequently than twice during each 12-month period, unless an Event of Default has occurred and is continuing) and will provide photocopies thereof at such Debtor’s expense to the Secured Parties upon request of any Secured Party.
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(c) Motor Vehicles. Each Debtor shall, promptly upon acquiring same, cause the Secured Parties to be listed as a lienholder on each certificate of title or ownership covering any items of Equipment, including Motor Vehicles, having a value in excess of $100,000 individually or in the aggregate for all such items of Equipment of the Debtor, or otherwise comply with the certificate of title or ownership laws of the relevant jurisdiction issuing such certificate of title or ownership in order to properly evidence and perfect Secured Parties’ security interest in the assets represented by such certificate of title or ownership.
(d) Notice to Account Debtors; Verification. (i) Upon the occurrence and during the continuance of any Event of Default (or if any rights of set-off (other than set-offs against an Account arising under the Contract giving rise to the same Account) or contra accounts may be asserted, upon request of any Secured Party or their Representative, each Debtor shall promptly notify (and each Debtor hereby authorizes the Secured Parties and their Representative so to notify) each account debtor in respect of any Accounts or Instruments or other Persons obligated on the Collateral that such Collateral has been assigned to the Secured Parties hereunder, and that any payments due or to become due in respect of such Collateral are to be made directly to the Secured Parties and (ii) the Secured Parties and their Representative shall have the right at any time or times (but in no event more than once during each 12-month period and acting through a Debtor and not independently, unless an Event of Default has occurred and is continuing) to make direct verification with the account debtors or other Persons obligated on the Collateral of any and all of the Accounts or other such Collateral.
(e) Intellectual Property. Each Debtor represents and warrants that the Copyrights, Patents and Trademarks listed on Schedules III, IV and V, respectively (if any), constitute all of the registered Copyrights and all of the Patents and Trademarks now owned by such Debtor and that are used or are useful in their business. Each Debtor represents and warrants that it owns all right, title and interest in and to the listed Copyrights, Patents and Trademarks and the other Intellectual Property, free and clear of all liens or rights of others, except to the extent set forth in license agreement in which the Debtors are licensors and except for Permitted Liens. If such Debtor shall (i) obtain rights to any new patentable inventions, any registered Copyrights or any Patents or Trademarks or other Intellectual Property, or (ii) become entitled to the benefit of any registered Copyrights or any Patents or Trademarks or other Intellectual Property or any improvement on any Patent, the provisions of this Agreement above shall automatically apply thereto and such Debtor shall give to Secured Parties prompt written notice thereof. Each Debtor hereby authorizes Secured Parties to modify this Agreement by amending Schedules III, IV and V, as applicable, to include any such registered Copyrights or any such Patents and Trademarks. Each Debtor shall have the duty (i) to prosecute diligently any patent, trademark, or service mark applications pending as of the date hereof or hereafter to the extent the Debtor reasonably believes they are material to the operation of the business of such Debtor, (ii) to preserve and maintain all rights in the Copyrights, Patents and Trademarks, to the extent the Debtor reasonably believes they are material to the operations of the business of such Debtor and (iii) to ensure that the Copyrights, Patents and Trademarks are and remain enforceable, to the extent the Debtor reasonably believes they are material to the operations of the business of such Debtor. Any expenses incurred in connection with such Debtor’s obligations under this Section 4.1(e) shall be borne by such Debtor. Except for any such items that a Debtor reasonably believes (using prudent industry customs and practices) are no longer necessary for the on-going operations of its business, no Debtor shall abandon any material right to file a patent, trademark or service mark application, or abandon any pending patent, trademark or service mark application or any other Copyright, Patent or Trademark without the prior written consent of Secured Parties, which consent shall not be unreasonably withheld.
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(f) Further Identification of Collateral. Each Debtor will, when and as often as reasonably requested by the Secured Parties or their Representative, furnish to the Secured Parties or such Representative, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Secured Parties or their Representative may reasonably request, all in reasonable detail.
(g) Investment Property. Each Debtor will take any and all actions required or requested by the Secured Parties, from time to time, to (i) cause the Secured Parties to obtain exclusive control of any Investment Property owned by such Debtor in a manner acceptable to the Secured Parties, and (ii) obtain from any issuers of Investment Property and such other Persons, for the benefit of the Secured Parties, written confirmation of the Secured Parties’ control over such Investment Property. For purposes of this Section 4.1(g), the Secured Parties shall have exclusive control of Investment Property if (i) such Investment Property consists of certificated securities and a Debtor delivers such certificated securities to the Secured Parties (with appropriate endorsements if such certificated securities are in registered form); (ii) such Investment Property consists of uncertificated securities and either (x) a Debtor delivers such uncertificated securities to the Secured Parties or (y) the issuer thereof agrees, pursuant to documentation in form and substance satisfactory to the Secured Parties, that it will comply with instructions originated by the Secured Parties without further consent by such Debtor, and (iii) such Investment Property consists of security entitlements and either (x) the Secured Parties become the entitlement holders thereof or (y) the appropriate securities intermediary agrees, pursuant to the documentation in form and substance satisfactory to the Collateral Agent, that it will comply with entitlement orders originated by the Secured Parties without further consent by any Debtor. Notwithstanding any pledge of Investment Property by any Debtor hereunder that constitutes equity securities, unless an Event of Default has occurred and is continuing, such Debtor shall retain any voting or consent rights applicable thereto.
(h) Commercial Tort Claims. Each Debtor shall promptly notify Secured Parties of any Commercial Tort Claim acquired by it that concerns a claim in excess of $50,000 and unless otherwise consented to by Secured Parties, such Debtor shall enter into a supplement to this Agreement granting to Secured Parties a Lien on and security interest in such Commercial Tort Claim.
4.2 Other Liens. Other than Permitted Liens, Debtors will not create, permit or suffer to exist, and will defend the Collateral against and take such other action as is necessary to remove, any Lien on the Collateral except Permitted Liens, and will defend the right, title and interest of the Secured Parties in and to the Collateral and in and to all Proceeds thereof against the claims and demands of all Persons whatsoever, other than Permitted Liens.
4.3 Preservation of Rights. Whether or not any Event of Default has occurred or is continuing, the Secured Parties and their Representative may, but shall not be required to, take any steps the Secured Parties or their Representative deems reasonably necessary or appropriate to preserve any Collateral or any rights against third parties to any of the Collateral (other than Permitted Liens), including obtaining insurance for the Collateral at any time when such Debtor has failed to do so, and Debtors shall promptly pay, or reimburse the Secured Parties for, all reasonable expenses incurred in connection therewith.
4.4 Formation of Subsidiaries; Name Change; Location; Bailees.
(a) No Debtor shall form or acquire any subsidiary unless (i) such Debtor pledges all of the stock or equity interests of such subsidiary to the Secured Parties pursuant to an agreement in a form agreed to by the Collateral Agent, (ii) such subsidiary becomes a party to this Agreement and all other applicable Security Documents and (iii) the formation or acquisition of such subsidiary is not prohibited by the terms of the Transaction Documents.
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(b) No Debtor shall (i) reincorporate or reorganize itself under the laws of any jurisdiction other than the jurisdiction in which it is incorporated or organized as of the date hereof, or (ii) otherwise change its name, identity or corporate structure, in each case, without prior written notice to Collateral Agent. Each Debtor will notify Secured Parties promptly in writing prior to any such change in the proposed use by such Debtor of any tradename or fictitious business name other than any such name set forth on Schedule II attached hereto.
(c) Except for the sale of Inventory in the ordinary course of business and other sales of assets expressly permitted by the terms of the Loan Agreement, each Debtor will keep the physical Collateral at the locations specified in Schedule I. Each Debtor will give Secured Parties thirty (30) days prior written notice of any change in such Debtor’s chief place of business or of any new location for any of the Collateral.
(d) If any Collateral is at any time in the possession or control of any warehousemen, bailee, consignee or processor, such Debtor shall, upon the request of Secured Parties or their Representative, notify such warehousemen, bailee, consignee or processor of the Lien and security interest created hereby and shall instruct such Person to hold all such Collateral for Secured Parties’ account subject to Collateral Agent’s instructions.
(e) Each Debtor authorizes the Lender to file Form UCC-1 financing statements against the Debtors listing the Collateral in the State of Utah with respect to the Company, DNA Logix, Inc. and Advanced Conceptions, Inc., and in the State of Idaho with respect to Idaho Molecular, Inc., and in any other jurisdiction the Collateral Agent deems necessary or advisable Each Debtor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without the prior written consent of Collateral Agent and agrees that it will not do so without the prior written consent of Collateral Agent, subject to such Debtor’s rights under Section 9-509(d)(2) of the UCC.
4.5 Events of Default, Etc. During the period during which an Event of Default shall have occurred and be continuing:
(a) each Debtor shall, at the request of the Secured Parties or their Representative, assemble the Collateral and make it available to Secured Parties or their Representative at a place or places designated by the Secured Parties or their Representative which are reasonably convenient to Secured Parties or their Representative, as applicable, and such Debtor;
(b) the Secured Parties or their Representative may make any reasonable compromise or settlement deemed desirable with respect to any of the Collateral and may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, any of the Collateral;
(c) the Secured Parties shall have all of the rights and remedies with respect to the Collateral of a secured party under the UCC (whether or not said UCC is in effect in the jurisdiction where the rights and remedies are asserted) and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted, including, without limitation, the right, to the maximum extent permitted by law, to: (i) exercise all voting, consensual and other powers of ownership pertaining to the Collateral as if the Secured Parties were the sole and absolute owner thereof (and each Debtor agrees to take all such action as may be appropriate to give effect to such right) and (ii) the appointment of a receiver or receivers for all or any part of the Collateral or business of a Debtor, whether such receivership be incident to a proposed sale or sales of such Collateral or otherwise and without regard to the value of the Collateral or the solvency of any person or persons liable for the payment of the Obligations secured by such Collateral. Each Debtor hereby consents to the appointment of such receiver or receivers, waives any and all defenses to such appointment and agrees that such appointment shall in no manner impair, prejudice or otherwise affect the rights of Secured Parties under this Agreement;
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(d) the Secured Parties or their Representative in its discretion may, in the name of the Secured Parties or in the name of a Debtor or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for any of the Collateral, but shall be under no obligation to do so;
(e) the Secured Parties may, upon reasonable notice (such reasonable notice to be determined by Collateral Agent in its sole and absolute discretion, which shall not be less than ten (10) days), with respect to the Collateral or any part thereof which shall then be or shall thereafter come into the possession, custody or control of the Secured Parties or their Representative, sell, lease, license, assign or otherwise dispose of all or any part of such Collateral, at such place or places as the Collateral Agent deems best, and for cash or for credit or for future delivery (without thereby assuming any credit risk), at public or private sale, without demand of performance or notice of intention to effect any such disposition or of the time or place thereof (except such notice as is required above or by applicable statute and cannot be waived), and the Secured Parties or anyone else may be the purchaser, lessee, licensee, assignee or recipient of any or all of the Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale) and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise), of Debtors, any such demand, notice and right or equity being hereby expressly waived and released. The Secured Parties may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the sale may be so adjourned; and
(f) the rights, remedies and powers conferred by this Section 4.5 are in addition to, and not in substitution for, any other rights, remedies or powers that the Secured Parties may have under any Transaction Document, at law, in equity or by or under the UCC or any other statute or agreement. The Secured Parties may proceed by way of any action, suit or other proceeding at law or in equity and no right, remedy or power of the Secured Parties will be exclusive of or dependent on any other. The Secured Parties may exercise any of their rights, remedies or powers separately or in combination and at any time.
The proceeds of each collection, sale or other disposition under this Section 4.5 shall be applied in accordance with Section 4.8 hereof.
4.6 Deficiency and Surplus. If the proceeds of sale, collection or other realization of or upon the Collateral are insufficient to cover the costs and expenses of such realization and the payment in full of the Obligations, Debtors shall remain jointly and severally liable for any deficiency. If the proceeds of sale, collection or other realization of or upon the Collateral exceed the costs and expenses of such realization and the payment in full of the Obligations, the Collateral Agent shall promptly remit any such surplus to the Debtors.
4.7 Private Sale. Each Debtor recognizes that the Secured Parties may be unable to effect a public sale of any or all of the Collateral consisting of securities by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the “Act”), and applicable state securities laws, but may be compelled to resort to one or more private sales thereof to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such Collateral for their own account for investment and not with a view to the distribution or resale thereof. Each Debtor acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale and each Debtor agrees that it is not commercially unreasonable for Secured Parties to engage in any such private sales or dispositions under such circumstances. The Secured Parties shall be under no obligation to delay a sale of any of the Collateral to permit a Debtor to register such Collateral for public sale under the Act, or under applicable state securities laws, even if Debtors would agree to do so. The Secured Parties shall not incur any liability as a result of the sale of any such Collateral, or any part thereof, at any private sale provided for in this Agreement conducted in a commercially reasonable manner, and so long as Secured Parties conduct such sale in a commercially reasonable manner each Debtor hereby waives any claims against any Secured Party arising by reason of the fact that the price at which the Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the Obligations, even if the Secured Parties accepts the first offer received and does not offer the Collateral to more than one offeree.
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Each Debtor further agrees to do or cause to be done all such other acts and things as may be necessary to make such sale or sales of any portion or all of any such Collateral valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at such Debtor’s expense. Each Debtor further agrees that a breach of any of the covenants contained in this Section 4.7 will cause irreparable injury to the Secured Parties, that the Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant contained in this Section 4.7 shall be specifically enforceable against Debtors, and each Debtor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred and is continuing.
4.8 Application of Proceeds. The proceeds of any collection, sale or other realization of all or any part of the Collateral, and any other cash at the time held by the Secured Parties under this Agreement, shall be applied to the Obligations based on the then outstanding Default Amount due under the Notes, in the order of priority set forth in Section 5.10(c). Notwithstanding the foregoing, following an Event of Default under the Note, the Lender or other Holder may sell Conversion Shares (up to the Maximum Conversion Shares) and apply the net proceeds of such sale(s) to the reduction and payment of the Obligations.
4.9 Attorney-in-Fact. Each Debtor hereby irrevocably constitutes and appoints the Collateral Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Debtor and in the name of such Debtor or in its own name, from time to time in the discretion of the Collateral Agent, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute and deliver any and all documents and instruments which may be necessary or desirable to perfect or protect any security interest granted hereunder, to maintain the perfection or priority of any security interest granted hereunder, or to otherwise accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, hereby gives the Collateral Agent the power and right, on behalf of such Debtor, without notice to or assent by such Debtor (to the extent permitted by applicable law), to do the following, upon the occurrence and during the continuation of an Event of Default under the Note:
(a) to take any and all appropriate action and to execute and deliver any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement;
(b) to ask, demand, collect, receive and give acquittance and receipts for any and all moneys due and to become due under any Collateral and, in the name of such Debtor or its own name or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other Instruments for the payment of moneys due under any Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Secured Parties for the purpose of collecting any and all such moneys due under any Collateral whenever payable;
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(c) to pay or discharge charges or liens levied or placed on or threatened against the Collateral, to effect any insurance called for by the terms of this Agreement and to pay all or any part of the premiums therefor;
(d) to direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due, and to become due thereunder, directly to the Secured Parties or as the Secured Parties shall direct, and to receive payment of and receipt for any and all moneys, claims and other amounts due, and to become due at any time, in respect of or arising out of any Collateral;
(e) to sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with accounts and other Documents constituting or relating to the Collateral;
(f) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to enforce any other right in respect of any Collateral;
(g) to defend any suit, action or proceeding brought against a Debtor with respect to any Collateral;
(h) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as the Secured Parties may deem appropriate;
(i) to the extent that a Debtor’s authorization given in Section 4.1(a) of this Agreement is not sufficient to file such financing statements with respect to this Agreement, with or without such Debtor’s signature, or to file a photocopy of this Agreement in substitution for a financing statement, as the Secured Parties may deem appropriate and to execute in such Debtor’s name such financing statements and amendments thereto and continuation statements which may require such Debtor’s signature;
(j) generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Secured Parties were the absolute owners thereof for all purposes; and
(k) to do, at the Secured Parties option and at such Debtor’s expense, at any time, or from time to time, all acts and things which the Secured Parties reasonably deems necessary to protect or preserve or, upon the occurrence and during the continuation of an Event of Default, realize upon the Collateral and the Secured Parties’ lien therein, in order to effect the intent of this Agreement, all as fully and effectively as such Debtor might do.
Each Debtor hereby ratifies, to the extent permitted by law, all that such attorneys lawfully do or cause to be done by virtue hereof provided the same is performed in a commercially reasonable manner. The power of attorney granted hereunder is a power coupled with an interest and shall be irrevocable until the Obligations are indefeasibly paid in full in cash and this Agreement is terminated in accordance with Section 4.11 hereof.
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Each Debtor also authorizes the Secured Parties, at any time from and after the occurrence and during the continuation of any Event of Default, (x) to communicate in its own name with any party to any Contract with regard to the assignment of the right, title and interest of such Debtor in and under the Contracts hereunder and other matters relating thereto and (y) to execute, in connection with any sale of Collateral provided for in Section 4.5 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral.
4.10 Perfection. Prior to or concurrently with the execution and delivery of this Agreement, each Debtor shall:
(a) file such financing statements, assignments for security and other documents in such offices as may be necessary or as the Secured Parties or their Representative may request to perfect the security interests granted by Section 3 of this Agreement;
(b) at any Secured Party’s request, deliver to the Secured Parties or their Representative the originals of all Instruments together with, in the case of Instruments constituting promissory notes, allonges attached thereto showing such promissory notes to be payable to the order of a blank payee;
(c) deliver to the Secured Parties or their Representative the originals of all Motor Vehicle Titles, duly endorsed indicating the Secured Parties’ interest therein as a lienholder, together with such other documents as may be required consistent with Section 4.1(c) hereof to perfect the security interest granted by Section 3 in all such Motor Vehicles (if any).
(d) If the Debtor has not done so, the Collateral Agent may do so at any later time at the sole cost of the Debtors.
4.11 Termination; Partial Release of Collateral. This Agreement and the Liens and security interests granted hereunder shall not terminate until the full and complete performance and payment in full in cash of all such Obligations to Secured Parties, but excluding any inchoate and unasserted indemnity obligations (i) in respect of the Transaction Documents, and (ii) with respect to which claims have been asserted by Collateral Agent and/or Lender, whereupon the Secured Parties shall forthwith cause to be assigned, transferred and delivered, against receipt but without any recourse, warranty or representation whatsoever, any remaining Collateral to or on the order of Debtors. The Secured Parties shall also execute and deliver to Debtors upon such termination and at Debtors’ expense such UCC termination statements, certificates for terminating the liens on the Motor Vehicles (if any) and such other documentation as shall be reasonably requested by Debtors to effect the termination and release of the Liens and security interests in favor of the Secured Parties affecting the Collateral. Notwithstanding anything to the contrary in this Agreement, upon full and complete satisfaction of the Obligations, Debtors’ obligations under this Agreement shall terminate and any Liens shall thereupon be void.
4.12 Further Assurances. At any time and from time to time, upon the written request of the Secured Parties or their Representative, and at the sole expense of Debtors, Debtors will promptly and duly execute and deliver any and all such further instruments, documents and agreements and take such further actions as the Secured Parties or their Representative may reasonably require in order for the Secured Parties to obtain the full benefits of this Agreement and of the rights and powers herein granted in favor of the Secured Parties, including, without limitation, using Debtors’ commercially reasonable efforts to secure all consents and approvals necessary or appropriate for the assignment to the Secured Parties of any Collateral held by Debtors or in which a Debtor has any rights not heretofore assigned, the filing of any financing or continuation statements under the UCC with respect to the liens and security interests granted hereby, transferring Collateral to the Secured Parties’ possession, (if a security interest in such Collateral can be perfected by possession), placing the interest of the Secured Parties as lienholder on the certificate of title of any Motor Vehicle, and obtaining waivers of liens from landlords and mortgagees. Each Debtor also hereby authorizes the Secured Parties and their Representative to file any such financing or continuation statement without the signature of such Debtor to the extent permitted by applicable law.
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4.13 Limitation on Duty of Secured Parties and Collateral Agent. The powers conferred on the Secured Parties and/or Collateral Agent under this Agreement are solely to protect the Secured Parties’ interest on behalf of themselves in the Collateral and shall not impose any duty upon Secured Parties and/or the Collateral Agent to exercise any such powers. The Secured Parties and/or Collateral Agent shall be accountable only for amounts that they actually receive as a result of the exercise of such powers and neither the Secured Parties, their Representative, the Collateral Agent nor any of their respective officers, directors, employees or agents shall be responsible to Debtors for any act or failure to act, except for gross negligence or willful misconduct. Without limiting the foregoing, the Secured Parties, and/or Collateral Agent and any Representative shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in their possession if such Collateral is accorded treatment substantially equivalent to that which the relevant Person, in its individual capacity, accords its own property consisting of the type of Collateral involved, it being understood and agreed that neither the Secured Party, the Collateral Agent nor any Representative shall have any responsibility for taking any necessary steps (other than steps taken in accordance with the standard of care set forth above) to preserve rights against any Person with respect to any Collateral.
Also without limiting the generality of the foregoing, neither the Secured Party, the Lender and/or Collateral Agent nor any Representative shall have any obligation or liability under any Contract or license by reason of or arising out of this Agreement or the granting to the Secured Parties of a security interest therein or assignment thereof or the receipt by the Secured Parties, the Collateral Agent or any Representative of any payment relating to any Contract or license pursuant hereto, nor shall the Secured Parties, the Collateral Agent nor any Representative be required or obligated in any manner to perform or fulfill any of the obligations of Debtors under or pursuant to any Contract or license, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any Contract or license, or to present or file any claim, or to take any action to collect or enforce any performance or the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.
Section 5. Miscellaneous.
5.1 No Waiver. No failure on the part of any Secured Party, the Collateral Agent or any of its Representatives to exercise, and no course of dealing with respect to, 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 the Secured Parties, the Collateral Agent or any Representative of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The rights and remedies hereunder provided are cumulative and may be exercised singly or concurrently and are not exclusive of any rights and remedies provided by law.
5.2 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Utah, without regard to the principles of conflict of laws thereof. Each Debtor agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the federal and state courts sitting in the County of Salt Lake, Utah (the “Utah Courts”). Each Debtor hereby irrevocably submits to the exclusive jurisdiction of the Utah Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, Action or Proceeding, any claim that it is not personally subject to the jurisdiction of such Utah Courts, or such Utah Courts are improper or inconvenient venue for such proceeding. Each Debtor hereby irrevocably waives personal service of process and consents to process being served in any such suit, Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each Debtor hereby irrevocably waives, to the fullest extent permitted by applicable law, (a) any right to assert any claim of public policy of any state or jurisdiction to contest the actions of the Secured Party and (b) any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If any party shall commence an Action or Proceeding to enforce any provisions of this Agreement, then the prevailing party in such Action or Proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such Action or Proceeding.
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5.3 Notices. All notices, approvals, requests, demands and other communications hereunder shall be delivered or made in the manner set forth in, and shall be effective in accordance with the terms of, the Loan Agreement. Debtors and Collateral Agent may change their respective notice addresses by written notice given to each other party five (5) days prior to the effectiveness of such change.
5.4 Amendments, Etc. The terms of this Agreement may be waived, altered or amended only by an instrument in writing duly executed by the Debtor sought to be charged or benefited thereby and the Lender. Any such amendment or waiver shall be binding upon the Secured Parties and the Debtor sought to be charged or benefited thereby and their respective successors and assigns.
5.5 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of each of the parties hereto, provided, that no Debtor shall assign or transfer its rights hereunder without the prior written consent of each of the Secured Parties. Any Secured Party, including the Collateral Agent in its capacity as Collateral Agent, may assign its rights hereunder in accordance with the requirements of Section 4.03(a) of the Loan Agreement, in which event such assignee shall be deemed to be Secured Parties and/or Collateral Agent, as applicable, hereunder with respect to such assigned rights.
5.6 Counterparts; Headings. This Agreement may be authenticated in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may authenticate this Agreement by signing any such counterpart. This Agreement may be authenticated by manual signature or facsimile, .pdf or similar electronic signature, all of which shall be equally valid. The headings in this Agreement are for convenience of reference only and shall not alter or otherwise affect the meaning hereof.
5.7 Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (a) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Secured Parties and their Representative in order to carry out the intentions of the parties hereto as nearly as may be possible and (b) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.
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5.8 WAIVER OF RIGHT TO TRIAL BY JURY. EACH DEBTOR AND SECURED PARTIES WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH DEBTOR AND SECURED PARTIES AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION 5.8 AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
5.9 Joint and Several. The obligations, covenants and agreements of Debtors hereunder shall be the joint and several obligations, covenants and agreements of each Debtor, whether or not specifically stated herein without preferences or distinction among them.
5.10 Collateral Agent and Secured Party Indemnification.
(a) Each Secured Party has pursuant to the Loan Agreement designated and appointed the Lender as Collateral Agent and as the administrative agent of such Secured Party under this Agreement and the related agreements.
(b) Nothing in this Section 5.10 or elsewhere in this Agreement shall be deemed to limit or otherwise affect the rights of Secured Parties or Lender to exercise any remedy provided in this Agreement or any other Transaction Document.
(c) If pursuant to any related agreement Secured Parties are given the discretion to allocate proceeds received by Secured Parties pursuant to the exercise of remedies under the related agreements or at law or in equity (including without limitation with respect to any secured creditor remedies exercised against the Collateral and any other collateral security provided for under any related agreement), Secured Parties shall apply such proceeds to the then outstanding Obligations in the following order of priority (with amounts received being applied in the numerical order set forth below until exhausted prior to the application to the next succeeding category and each of the Lender or other Persons entitled to payment shall receive an amount equal to its pro rata share of amounts available to be applied pursuant to clauses second, third and fourth below):
first, to payment of fees, costs and expenses (including reasonable attorney’s fees) owing to the Secured Parties;
second, to payment of all accrued unpaid interest and fees (other than fees owing to Collateral Agent) on the Obligations;
third, to payment of principal of the Obligations;
fourth, to payment of any other amounts owing constituting Obligations; and
fifth, any remainder shall be for the account of and paid to whoever may be lawfully entitled thereto.
5.11 No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.
5.12 ENTIRE AGREEMENT; AMENDMENT. THIS AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS, SUPERSEDES ALL OTHER PRIOR ORAL OR WRITTEN AGREEMENTS BETWEEN SECURED PARTIES, THE DEBTORS, THEIR AFFILIATES AND PERSONS ACTING ON THEIR BEHALF WITH RESPECT TO THE MATTERS DISCUSSED HEREIN, AND THIS AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION DOCUMENTS AND THE OTHER INSTRUMENTS REFERENCED HEREIN AND THEREIN, CONTAIN THE ENTIRE UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE MATTERS COVERED HEREIN AND THEREIN AND, EXCEPT AS SPECIFICALLY SET FORTH HEREIN OR THEREIN, NEITHER THE SECURED PARTIES NOR ANY DEBTOR MAKES ANY REPRESENTATION, WARRANTY, COVENANT OR UNDERTAKING WITH RESPECT TO SUCH MATTERS. AS OF THE DATE OF THIS AGREEMENT, THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS DISCUSSED HEREIN. NO PROVISION OF THIS AGREEMENT MAY BE AMENDED, MODIFIED OR SUPPLEMENTED OTHER THAN BY AN INSTRUMENT IN WRITING SIGNED BY THE DEBTORS AND THE SECURED PARTIES.
Signature pages follow
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IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be duly executed and delivered as of the day and year first above written.
| DEBTORS: | ||
| Co-Diagnostics Inc. | ||
| By: | /s/ Dwight H. Egan | |
| Name: | Dwight H. Egan | |
| Title: | Chief Executive Officer | |
| By: | /s/ Daniel Bohrer | |
| Name: | Daniel Bohrer | |
| Title: | Executive Vice President of Finance and Accounting (Principal Financial Officer) | |
| DNA Logix, Inc. | ||
| By: | /s/ Dwight H. Egan | |
| Name: | Dwight H. Egan | |
| Title: | Chief Executive Officer | |
| Idaho Molecular, Inc. | ||
| By: | /s/ Dwight H. Egan | |
| Name: | Dwight H. Egan | |
| Title: | Chief Executive Officer | |
| Advanced Conceptions, Inc. | ||
| By: | /s/ Dwight H. Egan | |
| Name: | Dwight H. Egan | |
| Title: | Chief Executive Officer | |
| LENDER AND COLLATERAL AGENT: | ||
| J.J. Astor & Co. | ||
| By: | /s/ Michael R. Pope | |
| Michael R. Pope, CEO |
Exhibit 10.3
SUBSIDIARY GUARANTEE
THIS SUBSIDIARY GUARANTEE, dated as of October 9, 2026 (this “Guarantee”), is made by each of DNA Logix, Inc., a Utah corporation, Idaho Molecular, Inc., an Idaho corporation and Advanced Conceptions, Inc., a Utah corporation (collectively, the “Existing Subsidiaries”), each a direct subsidiary of Co-Diagnostics Inc., a Utah corporation (the “Company”) and any other Person who is formed or acquired by the Company or any of the Existing Subsidiaries (together with any other entity that may become a party hereto as an Additional Subsidiary Guarantor as provided in Annex 1 hereto) (individually a “Subsidiary Guarantor” and collectively the “Subsidiary Guarantors”), in favor of J.J. Astor & Co., a Utah corporation (acting for itself and together with its participating lender or lender, each the “Lender”).
W I T N E S S E T H:
WHEREAS, on October 9, 2026 the Company and the Lender entered into a loan agreement (the “Loan Agreement”), pursuant to which the Company wishes to borrow the sum of $2,100,000 (the “Initial Loan”), and on the Agreement Date the Company issued to the Lender, the Two Million Eight Hundred Thirty-Five Thousand ($2,835,000) Dollar Original Issue Amount senior secured convertible installment promissory note in the form of Exhibit A-1 attached to the Loan Agreement (the “Initial Note”) and
WHEREAS, the Company may elect, commencing sixty (60) days after the Agreement Date, to borrow an additional $1,000,000 (the “Additional Loan”) and may issue to the Lender, the One Million Three Hundred and Fifty Thousand ($1,350,000) Dollar Original Issue Amount senior secured convertible installment promissory note in the form of Exhibit A-2 attached to the Loan Agreement (the “Additional Note”)
WHEREAS, the Company is the owner of 100% of the Equity Interests of the Existing Subsidiaries, and the Company has agreed to secure the Obligations of the Company under the Initial Note and, if issued, the Additional Note (collectively, the “Notes”) by (a) having the Existing Subsidiaries guaranty all Obligations of the Company under the Loan Agreement and the Notes pursuant to this guaranty agreement in the form of Exhibit B attached to the Loan Agreement (the “Subsidiary Guarantee”), and (b) perfecting and securing the Lender’s senior lien on and security interest in substantially all of the assets and properties of the Company and the Existing Subsidiaries, all pursuant to the Pledge and Security Agreement to be executed on the Initial Funding Date in the form of Exhibit C attached to the Loan Agreement (the “Security Agreement”); and
WHEREAS, the Subsidiary Guarantors will directly benefit from the extension of the Initial Loan and if made the Additional Loan to the Company represented by the issuance of the Notes;
NOW, THEREFORE, in consideration of the premises and to induce the Lender to enter into the Loan Agreement and to carry out the transactions contemplated thereby; the Subsidiary Guarantors hereby agree with the Lender as follows:
1. Definitions. Unless otherwise defined herein, terms defined in the Loan Agreement and the Notes, when used herein, shall have the meanings given to them in the Loan Agreement and the Notes. The words “hereof,” “herein,” “hereto” and “hereunder” and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and Section and Schedule references are to this Guarantee unless otherwise specified. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. The following terms shall have the following meanings:
“Guarantee” means this Subsidiary Guarantee, as the same may be amended, supplemented or otherwise modified from time to time.
“Obligations” means, in addition to all other costs and expenses of collection incurred by Lender in enforcing any of such “Obligations” (as defined in the Security Agreement) and/or this Guarantee, all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become due, or that are now or may be hereafter contracted or acquired, or owing to, of the Company or any Subsidiary Guarantors to the Lender under the Loan Agreement, this Guarantee, the Notes, the Security Agreement and/or any other Transaction Documents, instruments, agreements or other documents executed and/or delivered in connection herewith or therewith, in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any part of such payment is avoided or recovered directly or indirectly from the Lender as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified from time to time. Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation: (i) principal of, and interest on the Notes and the Loan extended pursuant thereto (including the Default Amount), (ii) any and all other fees, indemnities, costs, obligations and liabilities of the Company or any Subsidiary Guarantors from time to time under or in connection with the Loan Agreement, this Guarantee, the Notes, the Security Agreement, the other Transaction Documents and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith, (iii) all covenants and agreements of the Loan Parties under the Transaction Documents and (iv) all amounts (including but not limited to post-petition interest) in respect of the foregoing that would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Company or any Subsidiary Guarantors.
2. Guarantee.
(a) Guarantee Terms.
(i) Each of the undersigned Subsidiary Guarantors does hereby unconditionally and irrevocably jointly and severally guarantee to the Lender and its Affiliates, successors, endorsees, transferees and assigns, the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations.
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(ii) Each of the Subsidiary Guarantors agrees that the Obligations may at any time and from time to time exceed the amount of the liability of such Subsidiary Guarantors hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of the Lender hereunder.
(iii) The guarantee contained in this Section 2 shall remain in full force and effect until all the Obligations and the obligations of the Subsidiary Guarantors under the guarantee contained in this Section 2 shall have been satisfied by indefeasible payment in full.
(iv) No payment made by the Company, the Subsidiary Guarantors, any other guarantor or any other Person or received or collected by the Lender from the Company, the Subsidiary Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Subsidiary Guarantors hereunder which shall, notwithstanding any such payment (other than any payment made by such Subsidiary Guarantors in respect of the Obligations or any payment received or collected from such Subsidiary Guarantors in respect of the Obligations), remain liable for the Obligations up to the maximum liability of such Subsidiary Guarantors hereunder until the Obligations are indefeasibly paid in full.
(v) Notwithstanding anything to the contrary in this Guarantee, with respect to any defaulted non-monetary Obligations the specific performance of which by the Subsidiary Guarantors is not reasonably possible (e.g., the issuance of the Company’s Common Stock), the Subsidiary Guarantors shall only be liable for making the Lender whole on a monetary basis for the Company’s failure to perform such Obligations in accordance with the Transaction Documents.
(vi)
(b) Right of Contribution. Subject to Section 2(c), each of the Subsidiary Guarantors agrees that to the extent that a Subsidiary Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Subsidiary Guarantor shall be entitled to seek and receive contribution from and against any of the other Subsidiary Guarantors hereunder which has not paid its proportionate share of such payment. The Subsidiary Guarantors’ right of contribution shall be subject to the terms and conditions of Section 2(c). The provisions of this Section 2(b) shall in no respect limit the obligations and liabilities of any Subsidiary Guarantors to the Lender and the Subsidiary Guarantors shall remain liable to the Lender for the full amount guaranteed by such Subsidiary Guarantors hereunder until the indefeasible repayment in full of all amounts owed under the Loan Agreement, the Notes and the other Transaction Documents.
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(c) No Subrogation. Notwithstanding any payment made by any Subsidiary Guarantors hereunder or any set-off or application of funds of any Subsidiary Guarantors by the Lender, none of the Subsidiary Guarantors shall be entitled to be subrogated to any of the rights of the Lender against the Company or any Subsidiary Guarantors or any collateral security or guarantee or right of offset held by the Lender for the payment of the Obligations, nor shall any Subsidiary Guarantors seek or be entitled to seek any contribution or reimbursement from the Company or any Subsidiary Guarantors in respect of payments made by such Subsidiary Guarantors hereunder, until all amounts owing to the Lender by the Company on account of the Obligations are indefeasibly paid in full. If any amount shall be paid to any Subsidiary Guarantors on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Subsidiary Guarantors in trust for the Lender, segregated from other funds of such Subsidiary Guarantors, and shall, forthwith upon receipt by such Subsidiary Guarantors, be turned over to the Lender in the exact form received by such Subsidiary Guarantors (duly indorsed by such Subsidiary Guarantors to the Lender, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Lender may determine.
(d) Amendments, Etc. With Respect to the Obligations. The Subsidiary Guarantors shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Subsidiary Guarantors and without notice to or further assent by any Subsidiary Guarantors, any demand for payment of any of the Obligations made by the Lender may be rescinded by the Lender and any of the Obligations continued, and the Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, or surrendered by the Lender, and the Loan Agreement and the other Transaction Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Lender may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. The Lender shall have no obligation to protect, secure, perfect or insure any Lien at any time held by them as security for the Obligations or for the guarantee contained in this Section 2 or any property subject thereto.
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(e) Guarantee Absolute and Unconditional. Each of the Subsidiary Guarantors waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Lender upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2; and all dealings between the Company and the Subsidiary Guarantors, on the one hand, and the Lender, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. Each Subsidiary Guarantor waives to the extent permitted by law diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Company or the Subsidiary Guarantors with respect to the Obligations. Each Subsidiary Guarantor understands and agrees that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment and performance without regard to: (a) the validity or enforceability of the Loan Agreement or any other Transaction Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance or fraud by Lender) which may at any time be available to or be asserted by the Company or any other Person against the Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Company or such Subsidiary Guarantors) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Company for the Obligations, or of such Subsidiary Guarantors under the guarantee contained in this Section 2, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Subsidiary Guarantors, the Lender may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as they may have against the Company, any Subsidiary Guarantors or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Lender to make any such demand, to pursue such other rights or remedies or to collect any payments from the Company, any Subsidiary Guarantors or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Company, any Subsidiary Guarantors or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Subsidiary Guarantors of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Lender against any Subsidiary Guarantors. For the purposes hereof, “demand” shall include the commencement and continuance of any legal proceedings.
(f) Reinstatement. The guarantee contained in this Section 2 shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Company or any Subsidiary Guarantors, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Company or any Subsidiary Guarantors or any substantial part of its property, or otherwise, all as though such payments had not been made.
(g) Payments. The Subsidiary Guarantors hereby guarantee that payments hereunder will be paid to the Lender without set-off or counterclaim in U.S. dollars at the address set forth or referred to in the Loan Agreement.
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3. Representations and Warranties. Each of the Subsidiary Guarantors hereby makes the following representations and warranties to Lender as of the date hereof:
(a) Organization and Qualification. Such Subsidiary Guarantor is duly organized, validly existing and in good standing under the laws of the applicable jurisdiction of its incorporation or other organization, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Subsidiary Guarantors is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not, individually or in the aggregate,(x) adversely affect the legality, validity or enforceability of any of this Guarantee in any material respect, (y) have a material adverse effect on the results of operations, assets, prospects, or financial condition of the Subsidiary Guarantors, or (z) adversely impair in any material respect the Subsidiary Guarantors’ ability to perform fully on a timely basis its obligations under this Guarantee (a “Material Adverse Effect”).
(b) Authorization; Enforcement. Each of the Subsidiary Guarantors has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Guarantee, and otherwise to carry out its obligations hereunder. The execution and delivery of this Guarantee by the Subsidiary Guarantors and the consummation by it of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of the Subsidiary Guarantors. This Guarantee has been duly executed and delivered by each of the Subsidiary Guarantors and constitutes the valid and binding obligation of each of the Subsidiary Guarantors enforceable against such Subsidiary Guarantors in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.
(c) No Conflicts. Except as disclosed in the Company Disclosure Schedule to the Loan Agreement, the execution, delivery and performance of this Guarantee by the Subsidiary Guarantors and the consummation by the Subsidiary Guarantors of the transactions contemplated thereby do not and will not: (i) conflict with or violate any provision of its Certificate of Incorporation, other organizational documents or By-laws or (ii) conflict with, constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Subsidiary Guarantors is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Subsidiary Guarantors is subject (including Federal and State securities laws and regulations), or by which any material property or asset of the Subsidiary Guarantors is bound or affected, except in the case of each of clauses (ii) and (iii), such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as could not, individually or in the aggregate, have or result in a Material Adverse Effect. The business of the Subsidiary Guarantors is not being conducted in violation of any law, ordinance or regulation of any governmental authority, except for violations which, individually or in the aggregate, do not have a Material Adverse Effect.
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(d) Consents and Approvals. Except as disclosed in the Company Disclosure Schedule to the Loan Agreement, none of the Subsidiary Guarantors is required to obtain any consent, waiver, authorization or order of, or make any filing or registration with, any court or other federal, state, local, foreign or other governmental authority or other person in connection with the execution, delivery and performance by the Subsidiary Guarantors of this Guarantee.
(e) Loan Agreement. The representations and warranties of the Company set forth in the Loan Agreement as they relate to such Subsidiary Guarantors, each of which is hereby incorporated herein by reference, are true and correct as of each time such representations are deemed to be made pursuant to such Loan Agreement, and the Lender shall be entitled to rely on each of them as if they were fully set forth herein, provided that each reference in each such representation and warranty to the Company’s knowledge shall, for the purposes of this Section 3, be deemed to be a reference to such Subsidiary Guarantors’ knowledge.
4. Covenants.
(a) Each of the Subsidiary Guarantors covenants and agrees with the Lender that, from and after the date of this Guarantee until the Obligations shall have been indefeasibly paid in full, such Subsidiary Guarantors shall take, and/or shall refrain from taking, as the case may be, each commercially reasonable action that is necessary to be taken or not taken, as the case may be, so that no Event of Default (as defined in the Notes) is caused by the failure to take such action or to refrain from taking such action by such Subsidiary Guarantors.
(b) So long as any of the Obligations are outstanding, unless the Lender shall otherwise consent in writing in advance, none of the Subsidiary Guarantors shall directly or indirectly on or after the date of this Guarantee:
i. other than Permitted Indebtedness (as defined in the Loan Agreement and the Notes), enter into, create, incur, assume or suffer to exist any Indebtedness for borrowed money of any kind, including but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; other than Permitted Liens, enter into, create, incur, assume or suffer to exist any liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;
ii. amend its certificate of incorporation, bylaws or other organizational documents without the prior written consent of the Lender in the exercise of its sole discretion;
iii. repay, repurchase or offer to repay, repurchase or otherwise acquire shares of its securities or debt obligations, except as expressly permitted in the Loan Agreement or the Notes;
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iv. pay cash dividends on any equity securities of such Subsidiary Guarantors other than dividends paid to another Subsidiary Guarantors or to the Company;
v. except as disclosed in the Loan Agreement, enter into any transaction with any Affiliate of the Subsidiary Guarantors which would be required to be disclosed in any public filing of the Company with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by the Lender and a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval); or
vi. enter into any agreement with respect to any of the foregoing.
5. Miscellaneous.
(a) Amendments in Writing. None of the terms or provisions of this Guarantee may be waived, amended, supplemented or otherwise modified except in writing signed by the Lender.
(b) Notices. All notices, requests and demands to or upon the Lender or any Subsidiary Guarantors hereunder shall be effected in the manner provided for in the Loan Agreement, provided that any such notice, request or demand to or upon any Subsidiary Guarantors shall be addressed to such Subsidiary Guarantors in care of the Company at the Company’s notice address set forth in the Loan Agreement.
(c) No Waiver By Course Of Conduct; Cumulative Remedies. The Lender shall not by any act (except by a written instrument pursuant to Section 5(a)), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any default under the Transaction Documents or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Lender would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.
(d) Enforcement Expenses; Indemnification.
(i) Each Subsidiary Guarantor agrees to pay, or reimburse the Lender for, all its costs and expenses incurred in collecting against such Subsidiary Guarantors under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Guarantee and the other Transaction Documents to which such Subsidiary Guarantors is a party, including, without limitation, the reasonable fees and disbursements of counsel to the Lender.
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(ii) Each Subsidiary Guarantor agrees to pay, and to save the Lender harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable in connection with any of the transactions contemplated by this Guarantee.
(iii) Each Subsidiary Guarantor agrees to pay, and to save the Lender harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Guarantee to the extent the Company would be required to do so pursuant to the Loan Agreement.
(iv) The agreements in this Section shall survive repayment of the Obligations and all other amounts payable under the Loan Agreement and the other Transaction Documents.
(e) Successor and Assigns. This Guarantee shall be binding upon the successors and assigns of the Subsidiary Guarantors and shall inure to the benefit of the Lender and their respective successors and assigns; provided that no Subsidiary Guarantors may assign, transfer or delegate any of its rights or obligations under this Guarantee without the prior written consent of the Lender.
(f) Set-Off. Each Subsidiary Guarantor hereby irrevocably authorizes the Lender at any time and from time to time while an Event of Default under any of the Transaction Documents shall have occurred and be continuing, without notice to such Subsidiary Guarantors or any Subsidiary Guarantors, any such notice being expressly waived by the Subsidiary Guarantors, to set-off and appropriate and apply any and all deposits, credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender to or for the credit or the account of such Subsidiary Guarantors, or any part thereof in such amounts as such Lender may elect, against and on account of the obligations and liabilities of such Subsidiary Guarantors to the Lender hereunder and claims of every nature and description of such Lender against such Subsidiary Guarantors, in any currency, whether arising hereunder, under the Loan Agreement, any other Transaction Document or otherwise, as such Lender may elect, whether or not such Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Lender shall notify such Subsidiary Guarantors promptly of any such set-off and the application made by such Lender of the proceeds thereof, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Lender may have.
(g) Counterparts. This Guarantee may be executed by one or more of the parties to this Guarantee on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
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(h) Severability. Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
(i) Section Headings. The Section headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
(j) Integration. This Guarantee and the other Transaction Documents represent the agreement of the Subsidiary Guarantors and the Lender with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Lender relative to subject matter hereof and thereof not expressly set forth or referred to herein or in the other Transaction Documents.
(k) Governing Laws. All questions concerning the construction, validity, enforcement and interpretation of this Guarantee shall be governed by and construed and enforced in accordance with the internal laws of the State of Utah, without regard to the principles of conflict of laws thereof. Each Subsidiary Guarantor agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the federal and state courts sitting in the County of Salt Lake, Utah (the “Utah Courts”). Each Subsidiary Guarantor hereby irrevocably submits to the exclusive jurisdiction of the Utah Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of this Guarantee), and hereby irrevocably waives, and agrees not to assert in any suit, Action or Proceeding, any claim that it is not personally subject to the jurisdiction of such Utah Courts, or such Utah Courts are improper or inconvenient venue for such proceeding. Each Subsidiary Guarantor hereby irrevocably waives personal service of process and consents to process being served in any such suit, Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Guarantee and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each Subsidiary Guarantor hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Guarantee or the transactions contemplated hereby. If any party shall commence an Action or Proceeding to enforce any provisions of this Guarantee, then the prevailing party in such Action or Proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such Action or Proceeding.
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(l) Acknowledgements. Each of the Subsidiary Guarantors hereby acknowledges that:
(i) it has been advised by counsel in the negotiation, execution and delivery of this Guarantee and the other Transaction Documents to which it is a party;
(ii) the Lender has no fiduciary relationship with or duty to any Subsidiary Guarantors arising out of or in connection with this Guarantee or any of the other Transaction Documents, and the relationship between the Subsidiary Guarantors, on the one hand, and the Lender, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and
(iii) no joint venture is created hereby or by the other Transaction Documents or otherwise exists by virtue of the transactions contemplated hereby among the Subsidiary Guarantors and the Lender.
(m) Additional Subsidiary Guarantors. The Company shall cause each of its subsidiaries formed or acquired on or subsequent to the date hereof to become a Subsidiary Guarantor for all purposes of this Guarantee by executing and delivering an Assumption Agreement in the form of Annex 1 hereto. In addition, upon the occurrence and during the continuation of an Event of Default under the Transaction Documents, any Subsidiary of the Company that is not then a Subsidiary Guarantor shall become Subsidiary Guarantors for all purposes of this Guarantee and shall execute and deliver the Assumption Agreement in the form of Annex 1 hereto.
(n) Release of Subsidiary Guarantors. The Subsidiary Guarantors will be released from all liability hereunder concurrently with the indefeasible repayment in full of all amounts owed under the Loan Agreement, the Notes and the other Transaction Documents.
(o) Seniority. The Obligations of each of the Subsidiary Guarantors hereunder rank senior in priority to any other Indebtedness (as defined in the Loan Agreement) of such Subsidiary Guarantors, except Permitted Indebtedness owed to the Existing Lender (as defined in the Loan Agreement).
(p) WAIVER OF JURY TRIAL. EACH SUBSIDIARY GUARANTOR AND, BY ACCEPTANCE OF THE BENEFITS HEREOF, THE LENDER, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY COUNTERCLAIM THEREIN.
(q) Completeness. By its execution of this Guarantee, the Company represents, warrants and covenants that the undersigned entities designated as Subsidiary Guarantors are all of the Subsidiaries of the Company.
(Signature Pages Follow)
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IN WITNESS WHEREOF, each of the undersigned Subsidiary Guarantor has caused this Guarantee to be duly executed and delivered as of the date first above written.
| SUBSIDIARY GUARANTORS: | ||
| DNA Logix, Inc. | ||
| By: | /s/ Dwight H. Egan | |
| Name: | Dwight H. Egan | |
| Title: | Chief Executive Officer | |
| Idaho Molecular, Inc. | ||
| By: | /s/ Dwight H. Egan | |
| Name: | Dwight H. Egan | |
| Title: | Chief Executive Officer | |
| Advanced Conceptions, Inc. | ||
| By: | /s/ Dwight H. Egan | |
| Name: | Dwight H. Egan | |
| Title: | Chief Executive Officer | |
| CONFIRMED: | ||
| Co-Diagnostics Inc. | ||
| By: | /s/ Dwight H. Egan | |
| Name: | Dwight H. Egan | |
| Title: | Chief Executive Officer | |
| By: | /s/ Dwight H. Egan | |
| Name: | Daniel Bohrer | |
| Title: | Executive Vice President of Finance and Accounting (Principal Financial Officer) | |
Exhibit 10.4
THIS ATM WATERFALL DISTRIBUTION AGREEMENT (“Agreement”) is made and entered into as of October 9, 2026 by and among Co-Diagnostics, Inc., a Utah corporation (the “Company”), J.J. Astor & Co., a Utah corporation (“Astor” or the “Lender”) and Maxim Group LLC (the “ATM Sales Agent”). The Company, the Lender and the ATM Sales Agent are hereinafter sometimes individually referred to as a “Party” and collectively as the “Parties.”
R E C I T A L S:
WHEREAS, the Company and the Lender have entered into a loan agreement dated as of October 9, 2026 (the “Loan Agreement”). Any capitalized terms used but not defined in this Agreement shall have the meanings ascribed thereto in the Loan Agreement;
WHEREAS, the Company wishes to borrow up to Three Million One Hundred Thousand ($3,100,000) Dollars in two tranches, consisting of Two Million One Hundred Thousand ($2,100,000) Dollars (the “Initial Loan”) and, commencing sixty (60) days after the Agreement Date, an additional One Million ($1,000,000) Dollars (the “Additional Loan” and together with the Initial Loan, the “Loans”) which the Company may elect to borrow and, absent a Material Adverse Effect or an Event of Default, the Lender shall fund;
WHEREAS, pursuant to the Loan Agreement, (a) the Company shall issue to the Lender the Two Million Eight Hundred Thirty-Five Thousand Dollars ($2,835,000) Original Issue Amount senior secured installment promissory note in the form of Exhibit A-1 to the Loan Agreement (the “Initial Note”) and (b) if the Company wishes to receive the net proceeds of the Additional Loan, it shall issue to the Lender the One Million Three Hundred Fifty Thousand Dollars ($1,350,000), Original Issue Amount senior secured installment promissory note in the form of Exhibit A-2 to the Loan Agreement reflecting a factor rate of 1.35 times the amount of the Additional Loan (the “Additional Note”);
WHEREAS, the ATM Sales Agent will arrange, as underwriter, placement agent or deal manager, for an at the market financing of approximately $7,350,877.68 in respect of sales of Common Stock for the Company (the “ATM Financing”);
WHEREAS, the ATM Financing was established under a prospectus filed with the SEC on July 27, 2026 pursuant to Form S-3 (File No. 333-295803) registering for sale approximately $7,901,383.00 of Common Stock (the “ATM Offering Capacity”);
WHEREAS, as of October 7, 2026, the Company has approximately $7,350,877.68 in remaining ATM Offering Capacity (the “Available ATM Capacity”). During the term of the Loans, the Company covenants and agrees that the ATM Financing will not be suspended or terminated.
WHEREAS, the Parties to this Agreement hereby mutually agree that the Company shall direct the appropriate Parties to notify the Lender within two (2) Business Days following each sale of shares of Common Stock or Common Stock Equivalents sold in the ATM Financing of such number of shares of Common Stock or Common Stock Equivalents sold in the ATM Financing and the net proceeds received or receivable for the Company from such sale; such notices (the “Payment Notices”) shall be delivered by electronic mail to jarom.h@jjastor.com and michael.p@jjastor.com.
WHEREAS, the Company hereby irrevocably agrees to direct appropriate Parties to cause one hundred percent (100%) of all ATM Net Proceeds (as defined in Section 3 below) to be remitted directly to the DACA Account maintained by the Company at East West Bank (the “Bank”). The Company will cause the appropriate Parties to facilitate this direction of ATM Net Proceeds pursuant to a blocked deposit account control agreement (the “DACA”) which shall be substantially in the form attached as Exhibit I to the Loan Agreement and shall otherwise be acceptable in all respects to the Lender, and which shall be entered into on or before October 15, 2026 in accordance with Section 2.04(b) of the Loan Agreement. Until the DACA has been executed and delivered, the ATM Net Proceeds shall be remitted to the Interim Account as provided in Section 3 below. Pursuant to the DACA, the Lender shall distribute the funds in the DACA Account in accordance with the ATM Waterfall Distribution set forth in Section 3 below.
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NOW, THEREFORE, in consideration of the mutual covenants and agreements of the Parties contained herein it is hereby mutually agreed as follows:
| 1. | Definitions. This Agreement is the ATM Waterfall Distribution Agreement referred to in the Loan Agreement. Unless otherwise defined in this Agreement, all capitalized terms when used herein shall have the same meaning as they are defined in the Loan Agreement and the Notes. The Company has furnished to ATM Sales Agent a true copy of the Loan Agreement and Exhibits thereto, including the Notes and the ATM Waterfall Distribution Agreement. |
| 2. | Incorporation by Reference. All of the statements set forth in the above Recitals are deemed to be representations and agreements of the relevant Party or Parties and are incorporated by this reference into the body of this Agreement. |
| 3. | Payments to Lender. |
This Agreement is irrevocable and shall continue in full force and effect until the entire Outstanding Principal Amount of the Notes (including any Default Amount and interest thereon) shall have been paid in full. One hundred percent (100%) of the proceeds of each ATM Financing, after deduction only of the ATM Sales Agent’s sales commissions (the “ATM Net Proceeds”), shall be remitted by the ATM Sales Agent within three (3) Business Days after the settlement date of the applicable sale directly to the deposit account maintained by the Company at East West Bank and subject to the DACA (the “DACA Account”), pursuant to which Astor shall have exclusive control of the DACA Account, and the ATM Net Proceeds deposited in the DACA Account shall be applied by the Lender to the Weekly Installment Payments and the other amounts due under the Notes, with the balance released to the Company, as follows (the “ATM Waterfall Distributions”):
(i) the initial $1,000,000 of all ATM Net Proceeds shall be paid to Astor;
(ii) Eighty Percent (80%) of all ATM Net Proceeds shall be remitted from the DACA Account and paid to the Lender and applied to the Notes, and the remaining Twenty Percent (20%) of such ATM Net Proceeds shall be remitted by the Lender from the DACA Account to the Company in accordance with clause (vi) below, in each case until the applicable minimum weekly installment payments (the “Weekly Installment Payments”) that are due and payable under the Notes have been fully paid and satisfied for the relevant week;
(iii) Thereafter, for the remainder of such week, Twenty-Five Percent (25%) of all ATM Net Proceeds shall be remitted from the DACA Account and paid to the Lender and applied to the Notes, and the remaining Seventy-Five Percent (75%) of such ATM Net Proceeds shall be remitted from the DACA Account to the Company in accordance with clause (vi) below, with the allocation set forth in clause (ii) applying again at the start of each following week, in each case until the Notes are paid in full;
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(iv) Upon the occurrence of an Event of Default, eighty percent (80%) of all ATM Net Proceeds shall be remitted from the DACA Account to the Lender and applied to all of the Obligations under the Notes (including any Default Amounts), and the remaining twenty percent (20%) of such ATM Net Proceeds shall be remitted from the DACA Account to the Company in accordance with clause (vi) below, in each case until the Obligations and Indebtedness under the Notes (including any applicable Default Amount) shall have been paid in full, and clauses (ii) and (iii) shall not apply during such period, and such allocation may not be rescinded, modified, or suspended without the prior written consent of Astor (acting on behalf of the Lender) notifying the Company and the ATM Sales Agent that the Notes (including any applicable Default Amount) have been paid in full or that such Event of Default has been cured to the satisfaction of the Lender;
(v) Notwithstanding the foregoing, in no event shall the amounts remitted to the Lender under clause (ii) exceed the amounts then outstanding under the Notes, and the Company agrees to utilize the ATM Financing as required to, at minimum, make all required Weekly Installment Payments;
(vi) All ATM Net Proceeds deposited in the DACA Account in excess of the amounts remitted to the Lender pursuant to clauses (i) through (iv) above (the “Excess ATM Proceeds”) shall be released and remitted by Astor (acting on behalf of the Lender) to such operating account of the Company as the Company designates in writing, promptly and in any event within seven (7) Business Days after such ATM Net Proceeds are deposited in the DACA Account, and, except as provided in the following proviso, Astor (acting on behalf of the Lender) shall have no right to retain, withhold or apply any Excess ATM Proceeds; provided, however, that if at any time the aggregate market value of the registered, freely tradeable shares available for sale by the ATM Sales Agent under the ATM Financing (based on the closing price of the Common Stock on the immediately preceding Trading Day) is less than, or after giving effect to any remittance to the Company would be less than, Two Hundred Percent (200%) of the Outstanding Principal Amount of the Notes (the “ATM Coverage Requirement,” as set forth in Section 4.01(c)(x) of the Loan Agreement), then, notwithstanding anything to the contrary in clauses (i) through (v) or this clause (vi), (A) the ATM Sales Agent or Astor (acting on behalf of the Lender) shall remit to the Company only such portion, if any, of the ATM Net Proceeds otherwise remittable to the Company as will permit the ATM Coverage Requirement to be satisfied after giving effect to the application of the balance of such ATM Net Proceeds to reduce or repay the Outstanding Principal Amount of the Notes, and the Lender shall retain and apply such balance to the Notes, and (B) neither the ATM Sales Agent nor Astor (acting on behalf of the Lender) shall have any obligation to remit or distribute any ATM Net Proceeds (including any Excess ATM Proceeds) to the Company for so long as the ATM Coverage Requirement is not satisfied; and
(vii) The ATM Waterfall Distribution Agreement shall remain in full force and effect until all Indebtedness and Obligations under the Notes shall have been paid in full, including any Default Amounts.
Prior to the execution and delivery of the DACA, all references in this Agreement to the DACA Account shall be deemed to refer to the account designated by the Lender in writing pursuant to Section 2.04(b) of the Loan Agreement (the “Interim Account”), and the ATM Waterfall Distributions (including the release of Excess ATM Proceeds to the Company under clause (vi)) shall apply to all ATM Net Proceeds deposited in such account. If the Company receives any ATM Net Proceeds (whether by mistake or otherwise), the Company shall hold such ATM Net Proceeds in trust for the Lender and shall turn them over to the DACA Account (or, prior to the execution and delivery of the DACA, the Interim Account) within one (1) Business Day after receipt.
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| 4. | DACA. All ATM Net Proceeds shall be directed to the DACA Account (or, prior to the execution and delivery of the DACA, the Interim Account), which shall be subject to the DACA in form and substance acceptable in all respects to the Lender. The Lender shall receive funds in the DACA Account according to the ATM Waterfall Distribution set forth in Section 3 above. |
| 5. | Maintenance of Minimum ATM Shares. The Company shall at all times maintain a sufficient number of registered, freely tradeable shares of Common Stock or Common Stock Equivalents available for sale under the ATM Financing (the “Minimum ATM Shares”) in an amount equal to not less than Two Hundred Percent (200%) of the Outstanding Principal Amount of the Notes and the Company shall promptly take all actions necessary to maintain such share availability at all times. If the Company shall violate this covenant or another Event of Default under the Notes or Loan Agreement shall have occurred, eighty percent (80%) of the ATM Net Proceeds of the Minimum ATM Shares shall be paid to the Lender until the Notes (including any applicable Default Amount) have been paid in full. For so long as the Minimum ATM Shares requirement is not satisfied, remittances of ATM Net Proceeds to the Company shall be limited as provided in Section 3(vi), and the Lender shall have no obligation to distribute any ATM Net Proceeds to the Company. |
| 6. | Required Consents. This Agreement is irrevocable and unconditional and cannot and shall not be changed, modified or amended without the prior written consent of the Lender. In addition, the Company acknowledges and agrees not to revoke, change, modify or amend the payment arrangements in the Agreement without the prior written consent of the Lender. In addition, the Company agrees not to attempt to revoke, change, modify or amend the DACA without the prior written consent of the Lender. |
| 7. | Binding Agreement. The Company covenants and agrees that it has approved this Agreement in all respects and acknowledges that the Lender would not make the Loans if this Agreement had not been executed by the Parties and does not remain in full force and effect. This Agreement is binding upon the Company, and enforceable in accordance with its terms. |
| 8. | Irrevocable Payment Direction. By their execution of this Agreement, each of the Company and the ATM Sales Agent hereby irrevocably covenants and agrees that, from and after the Closing Date, all ATM Net Proceeds from the sale of Common Stock in the ATM Financing shall be paid and remitted solely to the DACA Account (or, prior to the execution and delivery of the DACA, the Interim Account) within three (3) Business Days after the settlement date of the applicable sale, until such time as all Indebtedness and Obligations to the Lender under the Notes (including any applicable Default Amount) shall have been paid in full. Without limiting the foregoing, the ATM Sales Agent agrees that (a) it shall wire all ATM Net Proceeds within three (3) Business Days after the settlement date of the applicable sale solely to the DACA Account (or, prior to the execution and delivery of the DACA, the Interim Account) and shall not remit any ATM Net Proceeds to any other account of the Company, and (b) it shall give the Lender not less than five (5) Business Days’ prior written notice before any suspension or termination of the ATM Financing or of the sales agreement between the Company and the ATM Sales Agent governing the ATM Financing. |
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| 9. | Authorization. Each of the Parties has the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement, and otherwise to carry out its obligations hereunder. The execution and delivery of this Agreement by the Parties and the consummation by each of them of the transactions contemplated hereby have been duly authorized by all requisite action on the part of the respective Parties. This Agreement has been duly executed and delivered by the respective Parties and constitutes the valid and binding obligation of the respective Parties enforceable against them in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application. |
| 10. | Miscellaneous. |
| (a) | In the event that the Company amends, restates or otherwise modifies the ATM Financing with the Lender’s consent, this Agreement shall continue to be applied to such amended, restated or modified ATM Financing. |
| (b) | This Agreement shall be binding upon the successors and assigns of the Parties and shall inure to the benefit of the Lender and their respective successors and assigns; provided that the Company may not assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Lender. |
| (c) | This Agreement may be executed by one or more of the Parties to this Agreement on any number of separate counterparts (including by facsimile, .pdf or other electronic signature), and all said counterparts taken together shall be deemed to constitute one and the same instrument. |
| (d) | Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. |
| (e) | All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Utah, without regard to the principles of conflict of laws thereof. The Parties agree that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the federal and state courts sitting in the County of Salt Lake, Utah (the “Utah Courts”). Each Party hereby irrevocably submits to the exclusive jurisdiction of the Utah Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, Action or Proceeding, any claim that it is not personally subject to the jurisdiction of such Utah Courts, or such Utah Courts are improper or inconvenient venue for such proceeding. Each Party hereby irrevocably waives personal service of process and consents to process being served in any such suit, Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. |
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| (f) | Each Party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If any party shall commence an Action or Proceeding to enforce any provisions of this Agreement, then the prevailing party in such Action or Proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such Action or Proceeding. |
| (g) | Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, or by email: |
If to the Lender
J.J. Astor & Co.
26 S Rio Grande Street, #2072
Salt Lake City, Utah 84101
Attn: Michael Pope, CEO
Email: michael.p@jjastor.com
If to the Company:
Co-Diagnostics, Inc.
2401 S. Foothill Drive, Suite D
Salt Lake City, Utah 84109
Attn: Dwight H. Egan, CEO
Email: d.egan@codiagnostics.com
Attn: Daniel Bohrer, Executive VP of Finance and Accounting
Email: d.bohrer@codiagnostics.com
If to the ATM Sales Agent
Maxim Group LLC
300 Park Avenue
16th floor
New York, New York 10022
Attn: Ratesh Vera
Signature page follows
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IN WITNESS WHEREOF, each of the Parties has executed this Agreement the date and year first above written.
| CO-DIAGNOSTICS, INC. | ||
| By: | /s/ Dwight H. Egan | |
| Name: | Dwight H. Egan | |
| Title: | Chief Executive Officer | |
| By: | /s/ Daniel Bohrer | |
| Name: | Daniel Bohrer | |
| Title: | Executive Vice President of Finance and Accounting (Principal Financial Officer) | |
| J.J. ASTOR & CO. | ||
| By: | /s/ Michael Pope | |
| Name: | Michael Pope | |
| Title: | Chief Executive Officer | |
| MAXIM GROUP LLC | ||
| By: | ||
| Name: | ||
| Title: | ||
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Exhibit 10.5
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this “Agreement”) is made and entered into as of October 9, 2026 (the “Agreement Date”) by and between Co-Diagnostics, Inc., a Utah corporation (the “Company”), and J.J. Astor & Co., a Utah corporation (“Astor”), acting on behalf of itself and each participating lender (individually and collectively with Astor, the “Lender”).
This Agreement is made pursuant to the Loan Agreement, dated as of the date hereof, between the Company and the Lender (the “Loan Agreement”).
The Company and the Lender hereby agree as follows:
| 1. | Definitions. |
Capitalized terms used and not otherwise defined herein that are defined in the Loan Agreement or the Notes shall have the meanings given such terms in the Loan Agreement or the Notes. As used in this Agreement, the following terms shall have the following meanings:
“Closing Date” shall mean the Closing Date of the Initial Loan as defined in the Loan Agreement.
“Commission” means the United States Securities and Exchange Commission.
“Commission Guidance” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.
“Effectiveness Date” means, with respect to:
(a) the Registration Statement, means the 60th calendar day after the Closing Date ; provided, however, that in the event the Company is notified by the Commission that the Registration Statement will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date as to the Registration Statement shall be the third (3rd) Trading Day following the date of such notification by the Commission, and
(b) any additional Registration Statement which may be required pursuant to Section 3(c), no later than the 60th calendar day after the need for such additional Registration Statement arises (determined as provided in clause (b) of the definition of Filing Date), whether or not such additional Registration Statement is reviewed by the Commission; provided, however, that in the event the Company is notified by the Commission that the one or more of the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date as to the Registration Statement shall be the third (3rd) Trading Day following the date of such notification by the Commission.
“Effectiveness Period” shall have the meaning set forth in Section 2(a).
“Event” shall have the meaning set forth in Section 2(c).
“Event Date” shall have the meaning set forth in Section 2(c).
“Filing Date” means, with respect to
(a) the Registration Statement, the 30th calendar day following the Closing Date; and
(b) any additional Registration Statements which may be required to be filed pursuant to Section 3(c), no later than the 14th calendar day after the need for such additional Registration Statement arises (which, for any additional Registration Statement required under the last sentence of Section 3(c), shall be the applicable Floor Reset Date or the date of issuance of the applicable Make-Whole Shares).
“Funding Date” shall have the meaning set forth in the Loan Agreement.
“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.
“Indemnified Party” shall have the meaning set forth in Section 5(c).
“Indemnifying Party” shall have the meaning set forth in Section 5(c).
“Losses” shall have the meaning set forth in Section 5(a).
“Notes” shall have the meaning set forth in the Loan Agreement.
“Plan of Distribution” shall have the meaning set forth in Section 2(a).
“Prospectus” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.
“Registrable Securities” shall mean all Conversion Shares, Commitment Shares and Make-Whole Shares (as defined in the Loan Agreement); provided that the Registration Statement shall register, for resale under the Securities Act for the benefit of the Lender a number of shares of Common Stock equal to not less than Two Hundred Percent (200%) of the sum of (i) the maximum number of Conversion Shares issuable upon conversion in full of the then Outstanding Principal Amount of the Notes (including any Default Amount and accrued interest thereon), calculated at the Floor Price then in effect, plus (ii) the Commitment Shares and any Make-Whole Shares then issued or issuable, in each case without regard to any limitation on conversion or exercise set forth in the Transaction Documents (including the Exchange Cap and the Beneficial Ownership Cap).For purposes of the foregoing, the Outstanding Principal Amount of the Notes and the Conversion Shares shall be calculated as if the Additional Loan had been funded in full, and the Additional Note had been issued in its $1,350,000 Original Principal Amount, whether or not the Additional Loan is ever funded.
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Such Registration Statement shall include any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (i) the Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (ii) such Registrable Securities have been previously sold in accordance with Rule 144, or (iii) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent and the affected Holders (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company), as reasonably determined by the Company, upon the advice of counsel to the Company.
“Registration Statement” means the Registration Statement required to be filed with the Commission on Form S-3 or if not available on Form S-1 hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 3(c), including (in each case) the Prospectus, amendments and supplements to any the Registration Statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any Registration Statement.
“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Selling Stockholder Questionnaire” shall have the meaning set forth in Section 3(a).
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“Trading Day” shall mean any Business Day on which the Common Stock trades on the Trading Market.
“Transfer Agent Instructions” shall have the meaning set forth in the Loan Agreement and shall represent Exhibit I to the Loan Agreement.
| 2. | Registration Statement. |
| (a) | The Company shall prepare and file with the Commission the Registration Statement covering the resale of all of Registrable Securities which shall contain substantially the “Plan of Distribution” attached hereto as Annex A and substantially the “Selling Stockholder” section attached hereto as Annex B; provided, however, that the Lender or any assignee of the Conversion Shares, Commitment Shares and any Make-whole Shares (together with the Lender, a “Holder”) shall not be required to be named as an “underwriter” without such Holder’s express prior written consent. Subject to the terms of this Agreement, the Company shall cause each Registration Statement filed under this Agreement (including, without limitation, under Section 3(c)) to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the Effectiveness Date, and shall keep such Registration Statement continuously effective under the Securities Act until the date that all Registrable Securities covered by such Registration Statement (i) have been sold, thereunder or pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Holders (the “Effectiveness Period”). The Company shall request effectiveness of a Registration Statement as of 5:00 p.m. (New York City time) on a Trading Day. The Company shall promptly notify the Holders via facsimile or by e-mail of the effectiveness of a Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which shall be the date requested for effectiveness of such Registration Statement. The Company shall, by 9:30 a.m. (New York City time) on the Trading Day after the effective date of such Registration Statement, file a final Prospectus with the Commission as required by Rule 424. Failure to so notify the Holder within one (1) Trading Day of such notification of effectiveness or failure to file a final Prospectus as foresaid shall be deemed an Event under Section 2(c). |
| (b) | The Company shall register all of the Registrable Securities for resale on the Registration Statement (and on any additional Registration Statement required under Section 3(c)) and shall not reduce the number of Registrable Securities registered thereon for any reason, including any limitation under Rule 415 or Commission Guidance. |
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| (c) | If: (i) a Registration Statement is not filed on or prior to the Filing Date, or (ii) the Company fails to file with the Commission a request for acceleration of a Registration Statement in accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act, within five Trading Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review, or (iii) prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of the Registration Statement within fifteen (15) calendar days after the receipt of comments by or notice from the Commission that such amendment is required in order for the Registration Statement to be declared effective (unless such comments include a request for additional information concerning a Holder whose shares are registered for resale in the Registration Statement and the Holder fails to supply information in response to such comments(s) in sufficient time to enable the Company to respond within the prescribed time frame), or (iv) the Registration Statement registering for resale all of the Registrable Securities is not declared effective by the Commission by the Effectiveness Date of the Registration Statement, (v) after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities; or (vi) if the Registration Statement is not effective for any reason or the prospectus contained therein is not available for use for any reason, , and either (x) the Company fails for any reason to satisfy the requirements of Rule 144(c)(1), including, without limitation, the failure to satisfy the current public information requirement under Rule 144(c), or (y) the Company has ever been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer in the future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) as a result of which any Holder is unable to sell Registrable Securities without restriction under Rule 144 (including, without limitation, volume restrictions) (any such failure or breach being referred to as an “Event”, and for purposes of clauses (i), (iv) and (vi), the date on which such Event occurs, and for purpose of clause (ii) the date on which such five (5) Trading Day period is exceeded, and for purpose of clause (iii) the date which such fifteen (15) calendar day period is exceeded being referred to as “Event Date”), then, in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of 1.0% multiplied by the aggregate Outstanding Principal Amount of the Holder’s Notes (including any Default Amount) plus accrued interest thereon, subject to an aggregate cap of 5.0% of such Outstanding Principal Amount of the Holder’s Notes (including any Default Amount) plus accrued interest thereto and provided that such Holder shall have complied with its obligations hereunder with respect to such Registration Statement. If the Company fails to pay any partial liquidated damages pursuant to this Section in full within seven days after the date payable, the Company will pay interest thereon at a rate of 12% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event. |
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| (d) | If Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on Form S-1 or another appropriate form and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as the Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the Commission. |
| (e) | Notwithstanding anything to the contrary contained herein, in no event shall the Company be permitted to name any Holder or affiliate of a Holder as an Underwriter or placement agent without the prior written consent of such Holder. |
| 3. | Registration Procedures. |
In connection with the Company’s registration obligations hereunder, the Company shall:
| (a) | Not less than ten (10) Trading Days prior to the filing of the Registration Statement and not less than two (2) Trading Days prior to the filing of any related Prospectus or any amendment or supplement thereto (excluding any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to each Holder copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Holders of a majority of the Registrable Securities shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than two (2) Trading Days after the Holders have been so furnished copies of a Registration Statement or one (1) Trading Day after the Holders have been so furnished copies of any related Prospectus or amendments or supplements thereto. Each Holder agrees to furnish to the Company a completed questionnaire in the form attached to this Agreement as Annex C (a “Selling Stockholder Questionnaire”) on a date that is not less than two (2) Trading Days prior to the Filing Date or by the end of the second (2nd) Trading Day following the date on which such Holder receives draft materials in accordance with this Section. |
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| (b) | (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities , (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company shall excise any information contained therein which would constitute material non-public information regarding the Company or any of its Subsidiaries), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by such Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented. |
| (c) | If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of shares of Common Stock then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the Filing Date, an additional Registration Statement covering the resale by the Holders of not less than the number of such Registrable Securities. In addition, if, as of any Floor Reset Date or any date on which Make-Whole Shares are issued, the number of shares of Common Stock then registered in the Registration Statements is less than the number of shares required to be registered pursuant to the definition of Registrable Securities, recalculated at the Floor Price then in effect (as reset on any applicable Floor Reset Date), the Company shall file an additional Registration Statement covering the resale of such shortfall on or prior to the applicable Filing Date. |
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| (d) | Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of clause (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, and (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, ; provided, however, that in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its Subsidiaries. |
| (e) | Use its reasonable best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment. |
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| (f) | Furnish to each Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission, provided that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form. |
| (g) | Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(d). |
| (h) | Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the Registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or “Blue Sky” laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement, provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction. |
| (i) | If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Loan Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request. |
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| (j) | Upon the occurrence of any event contemplated by Section 3(d), as promptly as reasonably possible under the circumstances, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (iii) through (v-) of Section 3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. No such suspension shall relieve the Company of its obligation to pay partial liquidated damages pursuant to Section 2(c). |
| (k) | Otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission under the Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities Act, file any final Prospectus, including any supplement or amendment thereof, with the Commission pursuant to Rule 424 under the Securities Act, promptly inform the Holders in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Holders are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder . |
| (l) | At such time as the Company becomes eligible to use of Form S-3 the Company shall use commercially reasonable efforts to maintain such eligibility to use Form S-3 (or any successor form thereto) for the registration of the resale of Registrable Securities . |
| (m) | The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock of the Company beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because any Holder fails to furnish such information within three (3) Trading Days of the Company’s request, any liquidated damages that are accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to such Holder only, until such information is delivered to the Company. |
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| (n) | Notwithstanding anything to the contrary contained herein, the Company shall not, at any time, suspend or delay its obligation to file or seek effectiveness of any Registration Statement, or suspend the Holders’ use of any Registration Statement or Prospectus, other than to the extent required by applicable law as a result of an event described in Section 3(d)(iii) through (v), and no such suspension shall relieve the Company of its obligation to pay partial liquidated damages pursuant to Section 2(c). Notwithstanding anything to the contrary contained in this Section 3(n), the Company shall cause its transfer agent to deliver shares of Common Stock free of restrictive legends to a transferee of a Holder in connection with any sale of Registrable Securities 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, in each case prior to such Holder’s receipt of any notice pursuant to Section 3(d) and for which the Holder has not yet settled. |
| 4. | Registration Expenses. |
All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which shares of Common Stock of the Company are then listed for trading, and (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities ), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities ), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.
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| 5. | Indemnification. |
| (a) | Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of shares of Common Stock of the Company), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)–(vi), the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder. The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by any of the Holders in accordance with Section 6(f). |
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| (b) | Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company expressly for inclusion in a Registration Statement or such Prospectus or (ii) to the extent, but only to the extent, that such information relates to such Holder’s information provided in the Selling Stockholder Questionnaire or the proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement thereto. In no event shall the liability of a selling Holder be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue statement or omission) received by such Holder upon the sale of the Registrable Securities included in a Registration Statement giving rise to such indemnification obligation. |
| (c) | Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof, provided that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party. |
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An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.
Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party, provided that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.
| (d) | Contribution. If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. |
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The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. In no event shall the contribution obligation of a Holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.
The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.
| 6. | Miscellaneous. |
| (a) | Remedies. In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. Each of the Company and each Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate. |
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| (b) | No Piggyback on Registrations; Prohibition on Filing Other Registration Statements. Neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in the Registration Statements other than the Registrable Securities . The Company shall not file any other registration statements until all Registrable Securities are registered pursuant to the Registration Statement that is declared effective by the Commission, provided that this Section 6(b) shall not prohibit the Company from (i) filing amendments to registration statements filed prior to the date of this Agreement or (ii) filing any registration statement, prospectus or prospectus supplement (and any amendment thereto) required in connection with the ATM Financing. |
| (c) | Piggy-Back Registrations. [Reserved] |
| (d) | Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of 50.1% or more of the then outstanding Registrable Securities (for purposes of clarification, this includes any Registrable Securities issuable upon conversion of the Notes), provided that, if any amendment, modification or waiver disproportionately and adversely impacts a Holder (or group of Holders), the consent of such disproportionately impacted Holder (or group of Holders) shall be required. If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given only by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 6(d). No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement. |
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| (e) | Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Loan Agreement. |
| (f) | Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all Holders of the then outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under Section 5.06 of the Loan Agreement. |
| (g) | Termination. Notwithstanding anything to the contrary herein, this Agreement shall terminate and be of no further force or effect on the later of such date as (i) there are no remaining Registrable Securities or (ii) the Loans and all other Obligations under the Notes have been paid in full. |
| (h) | No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any of its Subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full. |
| (i) | Execution and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a PDF format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or PDF signature page were an original thereof. |
| (j) | Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the applicable provisions of the Loan Agreement. |
| (k) | Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law. |
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| (l) | Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. |
| (m) | Headings. The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof. |
| (n) | Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holders are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement or any other matters, and the Company acknowledges that the Holders are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or transactions. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or decision of any Holder, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Holder. It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Holder, solely, and not between the Company and the Holders collectively and not between and among Holders. |
[Signature pages follow.]
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IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.
| CO-DIAGNOSTICS, INC. | ||
| By: | /s/ Dwight H. Egan | |
| Name: | Dwight H. Egan | |
| Title: | Chief Executive Officer | |
[Signature page of Holders follows.]
[Signature Page of Holder to Registration Rights Agreement – Co-Diagnostics, Inc.]
Name of Holder: J.J. Astor & Co.
Signature of Authorized Signatory of Holder: /s/ Michael Pope_________________
Name of Authorized Signatory: Michael Pope
Title of Authorized Signatory: Chief Executive Officer
[Signature pages continue.]
Exhibit 10.6
PLACEMENT AGENCY AGREEMENT
October 9, 2026
Co-Diagnostics, Inc.
2401 S. Foothill Dr., Suite D
Salt Lake City, Utah 84109
Attention: Dwight H. Egan, Chief Executive Officer
Dear Mr. Egan:
This letter (the “Agreement”) constitutes the agreement between Maxim Group LLC (“Maxim” or the “Placement Agent”) and Co-Diagnostics, Inc., a Utah corporation (collectively with its owned or controlled subsidiaries, the “Company”), that Maxim shall serve as the exclusive placement agent for the Company in connection with the proposed placement (the “Placement”) of a senior secured convertible note (the “Note”). The Placement Agent agrees to solicit offers to purchase the Note on a “reasonable best efforts” basis. The terms of the Placement shall be mutually agreed upon by the Company, Maxim and the purchasers of the Note (each, a “Purchaser” and collectively, the “Purchasers”) and nothing herein shall be construed as Maxim having the power or authority to bind the Company or any Purchaser or shall constitute an obligation of the Company to issue any securities or complete the Placement. This Agreement and the documents executed and delivered by the Company and the Purchasers in connection with the Placement, including, but not limited to, the Purchase Agreement (as hereinafter defined), shall be collectively referred to herein as the “Transaction Documents.” The date of the closing of the Placement shall be referred to herein as the “Closing Date.” The Placement may also extend to additional issuances of the Securities to occur after the Closing Date (the “Additional Closings”). The Company expressly acknowledges and agrees that Maxim’s obligations hereunder are on a reasonable best efforts basis only and that the execution of this Agreement does not constitute a legal or binding commitment by Maxim to purchase the Securities or introduce the Company to investors and does not ensure the successful placement of the Securities or any portion thereof or the success of Maxim with respect to securing any other financing on behalf of the Company. The Placement Agent may retain other brokers or dealers to act as sub-agents or selected-dealers on its behalf in connection with the Placement. The sale of the Note to any Purchaser will be evidenced by a purchase agreement (a “Purchase Agreement”) between the Company and such Purchaser in a form reasonably acceptable to the Company and Maxim. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Purchase Agreement.
SECTION 1. COMPENSATION. As compensation for the services provided by Maxim
hereunder, the Company agrees to pay to Maxim:
| (A) | A cash fee payable in dollars equal to five percent (5%) of the gross proceeds received by the Company from Purchasers on the Closing Date (the “Cash Compensation”) and additionally, and in each instance, payable in dollars equal to five percent (5%) of the gross proceeds received by the Company from Purchasers in connection with Additional Closings. The Cash Compensation shall be paid to Maxim by wire transfer on the Closing Date and each of the closing dates in connection with Additional Closings of the Placement from the gross proceeds of the Securities sold. |
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| (B) | The Company also agrees to reimburse Maxim on the Closing Date for all of Maxim’s reasonable expenses, including, without limitation, fees and disbursements of Maxim’s counsel, incurred by Maxim in connection with the Placement up to $5,000. |
| (C) | Maxim shall be entitled to a transaction fee of 5.0% with respect to any public or private financing of equity, equity-linked, convertible securities or debt or other capital-raising activity (“Tail Financing”) to the extent such financing or capital is provided to the Company by any of the investors contacted or introduced by Maxim to the Company during the term of this Agreement if such Tail Financing is consummated at a time within the twelve (12) month period following the Closing Date, or, if no Closing occurs, the termination of the engagement contemplated hereby. Upon the Company’s written request following the Closing Date, Maxim shall, within ten (10) business days, provide to the Company by electronic mail a written list of such persons or entities that Maxim actually contacted or introduced to the Company during the term of this Agreement. |
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Each of the representations and warranties (together with any related disclosures in any disclosure schedules appended thereto) made by the Company to the Purchasers in the Transaction Documents, is hereby incorporated herein by reference (as though fully restated herein) and is, as of the date of this Agreement, hereby made to, and in favor of, the Placement Agent. In addition to the foregoing, the Company represents and warrants to the Placement Agent that:
(A) (i) the Company has full right, power and authority to enter into this Agreement and the Transaction Documents and to perform all of its obligations hereunder and thereunder; (ii) each of this Agreement and the Transaction Documents has been duly authorized and executed and constitutes a legal, valid and binding agreement of such party enforceable in accordance with its terms, except (a) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (b) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (c) insofar as indemnification and contribution provisions may be limited by applicable law; and (iii) the execution and delivery of this Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby and thereby does not conflict with or result in a breach of, (y) the Company’s certificate of incorporation or by-laws or other charter documents or (z) any agreement to which the Company is a party or by which any of its property or assets is bound.
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(B) All disclosure provided by the Company to the Placement Agent regarding the Company, its business and the transactions contemplated hereby, taken together with all filings the Company has made with the Securities and Exchange Commission, is true and correct in all material aspects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Each filing made by the Company with the Securities and Exchange Commission did not at the time of release contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. To the best of the Company’s knowledge and belief, other than the current capital raising (of which this Agreement relates), no event or circumstance has occurred or information exists with respect to the Company or its business, properties, prospects, operations or financial conditions, which, under the applicable laws, rules or regulations, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.
(C) The Company has not taken and will not take any action, directly or indirectly, so as to cause the Placement to fail to be entitled to rely upon the exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Act”). In effecting the Placement, the Company agrees to comply in all material respects with applicable provisions of the Act and any regulations thereunder and any applicable laws, rules, regulations and requirements (including, without limitation, all U.S. state law and all national, provincial, city or other legal requirements).
(D) The Company has the power to submit, and pursuant to Section 9 of this Agreement, has legally, validly, effectively and irrevocably submitted, to the non-exclusive personal jurisdiction of any New York State or United States federal court located in the City of New York, Borough of Manhattan, (each, a “New York Court”). The Company has the power to designate, appoint and authorize, and pursuant to Section 9 of this Agreement, has legally, validly, effectively and irrevocably designated, appointed an authorized agent for service of process in any action arising out of or relating to this Agreement or the Placement in any New York Court, and service of process effected on such authorized agent will be effective to confer valid personal jurisdiction over the Company as provided in Section 9 of this Agreement.
SECTION 3. REPRESENTATIONS OF MAXIM. Maxim represents and warrants that it (i) is a member in good standing of FINRA, (ii) is registered as a broker/dealer under the Securities Exchange Act of 1934, as amended, (iii) is licensed as a broker/dealer under the laws of the states applicable to the offers and sales of the Notes by Maxim, (iv) is and will be a corporate body validly existing under the laws of its place of incorporation; (v) has full power and authority to enter into and perform its obligations under this Agreement, (vi) has not taken and will not take any action, directly or indirectly, so as to cause the Placement to fail to be entitled to rely upon the exemption from registration afforded by Section 4(a)(2) of the Act; (vii) in effecting the Placement, the Placement Agent agrees to comply in all material respects with applicable provisions of the Act and any regulations thereunder and any applicable laws, rules, regulations and requirements (including, without limitation, all U.S. state law and all national, provincial, city or other legal requirements), (viii) this Agreement has been duly authorized and executed and constitutes a legal, valid and binding agreement of Maxim enforceable in accordance with its terms, and (ix) neither the Placement Agent, any person compensated for soliciting investors in the Placement, nor any general partner, managing member, executive officer, director or officer of the Placement Agent participating in the Placement is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2). Maxim will immediately notify the Company in writing of any change in its status as such. Maxim covenants that it will use its reasonable best efforts to conduct the Placement hereunder in compliance with the provisions of this Agreement and the requirements of applicable law.
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SECTION 4. INDEMNIFICATION. The Company agrees to the indemnification and other
agreements set forth in the Indemnification Provisions (the “Indemnification”) attached hereto as Addendum A, the provisions of which are incorporated herein by reference and shall survive the termination or expiration of this Agreement.
SECTION 5. ENGAGEMENT TERM. The Placement Agent’s engagement hereunder shall be until the earlier of (i) the final Closing Date of the Placement, which shall include the Additional Closings, and (ii) the date a party terminates the engagement by providing written notice to the other party (the period of time during which this Agreement remains in effect is referred to herein as the “Term”). Notwithstanding anything to the contrary contained herein, the provisions concerning confidentiality and indemnification and contribution contained herein and the Company’s obligations contained in the Indemnification Provisions will survive any expiration or termination of this Agreement. The Placement Agent agrees not to use nor disclose any confidential information concerning the Company provided to the Placement Agent by the Company for any purposes other than those contemplated under this Agreement.
SECTION 6. MAXIM INFORMATION. The Company agrees that any information or advice rendered by Maxim in connection with this engagement is for the confidential use of the Company only in their evaluation of the Placement and, except as otherwise required by law, the Company will not disclose or otherwise refer to the advice or information in any manner without Maxim’s prior written consent.
SECTION 7. NO FIDUCIARY RELATIONSHIP; SECURITIES AND OTHER LAW COMPLIANCE.
(A) This Agreement does not create, and shall not be construed as creating, rights enforceable by any person or entity not a party hereto, except those entitled hereto by virtue of the Indemnification Provisions hereof. The Company acknowledges and agrees that Maxim is not and shall not be construed as a fiduciary of the Company and shall have no duties or liabilities to the equity holders or the creditors of the Company or any other person by virtue of this Agreement or the retention of Maxim hereunder, all of which are hereby expressly waived.
(B) The Company, at its own expense, will use its reasonable best efforts to obtain any registration, qualification or approval required to sell any Securities under the laws (including U.S. state “blue sky” laws) of any applicable jurisdictions (including those of Canada or any instrumentality thereof).
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SECTION 8. CLOSING. The obligations of the Placement Agent hereunder and the Closing of the sale of the Securities pursuant to the Purchase Agreement are subject to the accuracy, when made and on the Closing Date, of the representations and warranties on the part of the Company and its subsidiaries contained herein and in the Purchase Agreement, to the accuracy of the statements of the Company and its subsidiaries made in any certificates pursuant to the provisions hereof, to the performance by the Company and its subsidiaries of their obligations hereunder, and to each of the following additional terms and conditions, except as otherwise disclosed to and acknowledged by the Placement Agent:
(A) All corporate proceedings and other legal matters incident to the authorization, form, execution, delivery and validity of each of this Agreement, the Securities and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Placement Agent, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.
(B) (i) Neither the Company nor any of its subsidiaries shall have sustained, since the date of the latest audited or unaudited financial statements included or incorporated by reference in its reports publicly filed with the Securities and Exchange Commission, any material loss or interference with its business from fire, explosion, flood, terrorist act or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth in or contemplated by the Purchase Agreement and disclosure schedules thereto and (ii) since such date there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the business, general affairs, management, financial position, stockholders’ equity or results of operations or prospects of the Company and its subsidiaries, otherwise as set forth in or contemplated by the Purchase Agreement and disclosure schedules thereto, the effect of which, in any such case described in clause (i) or (ii), is, in the reasonable judgment of the Placement Agent, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Securities on the terms and in the manner contemplated by the Purchase Agreement and disclosure schedules thereto.
(C) Subsequent to the execution and delivery of this Agreement and up to the Closing Date, there shall not have occurred any of the following: (i) trading in the Company’s securities generally on the applicable trading market shall have been suspended or minimum or maximum prices or maximum ranges for prices shall have been established on any such exchange or such market by the Securities and Exchange Commission or by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a banking moratorium shall have been declared by federal or state authorities or a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States, (iii) the United States shall have become engaged in hostilities in which it is not currently engaged, the subject of an act of terrorism, there shall have been an escalation in hostilities involving the United States, or there shall have been a declaration of a national emergency or war by the United States, or (iv) there shall have occurred any other calamity or crisis or any change in general economic, political or financial conditions in the United States or elsewhere, if the effect of any such event in clauses (i)-(iv) makes it, in the sole and reasonable judgment of the Placement Agent, impracticable or inadvisable to proceed with the sale or delivery of the Securities on the terms and in the manner contemplated by the Purchase Agreement.
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(D) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would, as of the Closing Date, prevent the issuance or sale of the Securities or materially and adversely affect the business or operations of the Company; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Securities or materially and adversely affect the business or operations of the Company.
(E) The Company shall have entered into a Purchase Agreement with each of the Purchasers and such agreements shall be in full force and effect and shall contain representations, warranties and covenants of the Company as agreed between the Company and the Purchasers.
(F) On or prior to the Closing Date, the Company shall have furnished to the Placement Agent such further information, certificates and documents as the Placement Agent may reasonably request, including a secretary certificate and officer certificate in form and substance reasonably acceptable to the Placement Agent.
All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Placement Agent.
SECTION 9. GOVERNING LAW. This Agreement will be governed by, and construed in accordance with, the laws of the State of New York applicable to agreements made and to be performed entirely in such State. This Agreement may not be assigned by either party without the prior written consent of the other party. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns. Any right to trial by jury with respect to any dispute arising under this Agreement or any transaction or conduct in connection herewith is waived. Each of the Placement Agent and the Company: (i) agrees that any legal suit, action or proceeding arising out of or relating to this Agreement and/or the transactions contemplated hereby shall be instituted exclusively in New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, (ii) waives any objection which it may have or hereafter have to the venue of any such suit, action or proceeding, and (iii) irrevocably consents to the jurisdiction of the New York Supreme Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding. Each of the Placement Agent and the Company further agrees to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York and agrees that service of process upon the Company mailed by certified mail to the Company’s address shall be deemed in every respect effective service of process upon the Company, in any such suit, action or proceeding, and service of process upon the Placement Agent mailed by certified mail to the Placement Agent’s address shall be deemed in every respect effective service of process upon the Placement Agent, in any such suit, action or proceeding. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If either party shall commence an action or proceeding to enforce any provisions of a Transaction Document, the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
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SECTION 10. ENTIRE AGREEMENT/MISC. This Agreement (including the attached Indemnification Provisions) embodies the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings, relating to the subject matter hereof. If any provision of this Agreement is determined to be invalid or unenforceable in any respect, such determination will not affect such provision in any other respect or any other provision of this Agreement, which will remain in full force and effect. This Agreement may not be amended or otherwise modified or waived except by an instrument in writing signed by both Maxim and the Company. The representations, warranties, agreements and covenants contained herein shall survive the closing of the Placement and delivery of the Securities, as applicable. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or a .pdf format file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or .pdf signature page were an original thereof. The Company agrees that the Placement Agent may rely upon, and is a third party beneficiary of, the representations and warranties, and applicable covenants set forth in the Purchase Agreement.
SECTION 11. NOTICES. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is sent to the email address specified on the signature pages attached hereto prior to 6:30 p.m. (New York City time) on a business day, (b) the next business day after the date of transmission, if such notice or communication is sent to the email address on the signature pages attached hereto on a day that is not a business day or later than 6:30 p.m. (New York City time) on any business day, (c) the third business day following the date of mailing, if sent by U.S. internationally recognized air courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages hereto.
SECTION 12. PRESS ANNOUNCEMENTS. The Company agrees that the Placement Agent
shall, from and after any Closing, have the right to reference the Placement and the Placement Agent’s role in connection therewith in the Placement Agent’s marketing materials and on its website and to place advertisements in financial and other newspapers and journals, in each case at its own expense after prior notice to the Company.
SECTION 13. SECURITIES AND OTHER LAW COMPLIANCE. The Company, at its own expense, will use its best efforts to obtain any registration, qualification or approval required to sell any securities under the laws (including U.S. state “blue-sky” laws) of any applicable jurisdictions or any instrumentality thereof.
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Please confirm that the foregoing correctly sets forth our agreement by signing and returning to Maxim the enclosed copy of this Agreement.
| Very truly yours, | ||
| MAXIM GROUP LLC | ||
| By: | /s/ Ritesh Veera | |
| Name: | Ritesh Veera | |
| Title: | Co-Head, Investment Banking | |
| Address for notice: | |
| 300 Park Avenue | |
| New York, NY 10022 | |
| Attention: James Siegel | |
| Email: jsiegel@maximgrp.com |
Accepted and Agreed to as of
the date first written above:
CO-DIAGNOSTICS, INC.
| By: | /s/ Dwight H. Egan | |
| Name: | Dwight H. Egan | |
| Title: | CEO |
Address for notice:
2401 S. Foothill Dr., Suite D
Salt Lake City, Utah 84109
Attention: Dwight H. Egan
Email: d.egan@codiagnostics.com
ADDENDUM A
INDEMNIFICATION PROVISIONS
Capitalized terms used in this Addendum shall have the meanings ascribed to such terms in the Agreement to which this Addendum is attached:
In addition to and without limiting any other right or remedy available to the Placement Agent and the Indemnified Parties (as hereinafter defined), the Company agrees to indemnify and hold harmless Placement Agent and each of the other Indemnified Parties from and against any and all losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements, and any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise (including, without limitation, the reasonable costs, expenses and disbursements, as and when incurred, of investigating, preparing, pursuing or defending any such action, suit, proceeding or investigation (whether or not in connection with litigation in which any Indemnified Party is a party)) (collectively, “Losses”), directly or indirectly, caused by, relating to, based upon, arising out of, or in connection with, the transactions contemplated by the Agreement, including, without limitation, any breach by the Company of any representation, warranty, covenant or agreement contained in the Agreement (or in any instrument, document or agreement relating thereto, including any agency agreement), or the enforcement by Placement Agent of its rights under the Agreement or these indemnification provisions, except to the extent that any such Losses are found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from the gross negligence, willful misconduct or bad faith of the Indemnified Party seeking indemnification hereunder.
The Company also agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company for or in connection with the engagement of Placement Agent by the Company or for any other reason, except to the extent that any such liability is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from such Indemnified Party’s gross negligence, willful misconduct or bad faith.
These Indemnification Provisions shall extend to the following persons (collectively, the “Indemnified Parties”): Placement Agent, its present and former affiliated entities, managers, members, officers, employees, legal counsel, agents and controlling persons (within the meaning of the federal securities laws), and the officers, directors, partners, stockholders, members, managers, employees, legal counsel, agents and controlling persons of any of them. These indemnification provisions shall be in addition to any liability, which the Company may otherwise have to any Indemnified Party.
If any action, suit, proceeding or investigation is commenced, as to which an Indemnified Party proposes to demand indemnification, it shall notify the Company with reasonable promptness; provided, however, that any failure by an Indemnified Party to notify the Company shall not relieve the Company from its obligations hereunder unless the Indemnified Party’s ability to defend such action, suit, proceeding or investigation is impaired by such failure. If counsel for an Indemnified Party reasonably determines that it would be inappropriate under the applicable rules of professional responsibility for the same counsel to represent both the Company and the Indemnified Party, the Indemnified Party shall have the right to retain a separate counsel of its own choice to represent it, and the fees, expenses and disbursements of no more than one such separate counsel shall be borne by the Company. Any such counsel shall, to the extent consistent with its professional responsibilities, cooperate with the Company and any counsel designated by the Company. The Company shall be liable for any settlement of any claim against any Indemnified Party made with the Company’s written consent. The Company shall not, without the prior written consent of Placement Agent, settle or compromise any claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent (i) includes, as an unconditional term thereof, the giving by the claimant to all of the Indemnified Parties of an unconditional release from all liability in respect of such claim, and (ii) does not contain any factual or legal admission by or with respect to an Indemnified Party or an adverse statement with respect to the character, professionalism, expertise or reputation of any Indemnified Party or any action or inaction of any Indemnified Party.
In order to provide for just and equitable contribution, if a claim for indemnification pursuant to these indemnification provisions is made but it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that such indemnification may not be enforced in such case, even though the express provisions hereof provide for indemnification in such case, then the Company shall contribute to the Losses to which any Indemnified Party may be subject (i) in accordance with the relative benefits received by the Company and its stockholders, subsidiaries and affiliates, on the one hand, and the Indemnified Party, on the other hand, and (ii) if (and only if) the allocation provided in clause (i) of this sentence is not permitted by applicable law, in such proportion as to reflect not only the relative benefits, but also the relative fault of the Company, on the one hand, and the Indemnified Party, on the other hand, in connection with the statements, acts or omissions which resulted in such Losses as well as any relevant equitable considerations. No person found liable for a fraudulent misrepresentation shall be entitled to contribution from any person who is not also found liable for fraudulent misrepresentation. The relative benefits received (or anticipated to be received) by the Company and its stockholders, subsidiaries and affiliates shall be deemed to be equal to the aggregate consideration payable or receivable by such parties in connection with the transaction or transactions to which the Agreement relates relative to the amount of fees actually received by Placement Agent in connection with such transaction or transactions. Notwithstanding the foregoing, in no event shall the amount contributed by all Indemnified Parties exceed the amount of fees previously received by Placement Agent pursuant to the Agreement.
Neither termination nor completion of the Agreement shall affect these Indemnification Provisions which shall remain operative and in full force and effect. The Indemnification Provisions shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Indemnified Parties and their respective successors, assigns, heirs and personal representatives.